DCIT, CENTRAL CIRCLE 1(1), CHENNAI vs. VELLORE INSTITUTE OF TECHNOLOGY, VELLORE

This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) 18, Chennai dated 28.06.2017 relevant to the assessment year 2009-10. The only effective ground raised by the Revenue is that the ld. CIT(A) has erred in holding the assessment order passed by the Assessing Officer giving effect to order under section 263 of the Income Tax Act, 1961 [“Act” in short] as infructuous.

Brief facts of the case are that the assessee is a registered public charitable trust assessed to income tax from assessment year 1985-86 onwards. The assessee was granted registration under section 12A of the Act. Although the trust was registered under section 12A of the Act, it was claiming and has been allowed exemption under section 10(22) of the Act as an “Educational institution existing solely for educational purposes and not for purposes of profit” upto assessment year 1988-89 until the omission of section 10(22) of the Act. Thereafter the trust had been claiming and been allowed exemption under section 11 of the Act. Although in the return filed, the trust had claimed that the income will also be exempt under section 10(23C)(vi) of the Act, it was ascertained that the trust had not even made an application for notification before the prescribed authority and has therefore, not been notified, as such, for any year. A search and seizure operation was carried out at the premises of the trust and at the residences of its founder and managing trustee on 06.06.2007. Assessment under section 143(3) r.w.s. 153A of the Act was made for the relevant assessment years.

Against the assessment order giving effect to order under section 263 of the Act dated 30.03.2015, the assessee preferred further appeal before the ld. CIT(A). After considering the submissions of the assessee as well as facts of the case, the ld. CIT(A) allowed the appeal filed by the assessee.

Aggrieved, the Revenue is in appeal before the Tribunal and the ld. DR has contended that against the order of the Tribunal quashing the order passed under section 263 of the Act, the Revenue preferred further appeal before the Hon’ble Madras High Court and the matter has not attained finality and pleaded that the order of the ld. CIT(A) should be reversed.

On the other hand, the ld. Counsel for the assessee strongly supported the order passed by the ld. CIT(A).

We have heard both sides, perused the materials available on record and gone through the orders of authorities below. In this case, the assessment order passed under section 143(3) of the Act was quashed by passing order under section 263 of the Act holding that the assessment is erroneous and prejudicial to the interest of Revenue. Based on the directions of the ld. CIT vide his order under section 263 of the Act, the Assessing Officer passed assessment giving effect to order under section 263 of the Act. On appeal, the ld. CIT(A) has observed as under: “4. I have gone through the giving effect to order, the grounds raised by the appellant and the order of the ITAT cited supra. After going through the same, in as much as the order passed by the CIT u/s. 263 itself had been quashed, the order giving effect to passed by the AO have no legs to stand. Hence, the instant order, passed by the AO is hereby becomes infructuous. This ground of appeal is therefore allowed.” We find that the above findings of the ld. CIT(A) is duly fortified by the order of the Mumbai Benches of the Tribunal in the case of ACIT v. Sweet Industries Ltd. in dated 22.10.2010 for the assessment year 2004-05. Further, the ld. DR could not furnish any order of higher forum having reversed the order passed by the Tribunal in quashing the order passed by the ld. CIT under section 263 of the Act. Under the above facts and circumstances, we find no infirmity in the order passed by the ld. CIT(A) and thus, the ground raised by the Revenue stands dismissed.

In the result, the appeal filed by the Revenue is dismissed. Order pronounced on the 31st January, 2018 at Chennai.