Income Tax Appellate Tribunal - Delhi
Transactional Analytic Centre For ... vs Income-Tax Officer on 13 November, 1987
Equivalent citations: [1988]24ITD400(DELHI)
ORDER
S.K. Chander, Accountant Member
1. These appeals by the assessee are directed against the consolidated order made Under Section 263 of the Income-tax Act, 1961 by the Commissioner of Income-tax, Delhi-VI regarding the assessment years 1984-85 and 1985-86. By this order, the Commissioner of Income-tax set aside the assessments with the directions to the ITO, "to examine the evidence afresh and reframe the assessments in accordance with law.
2. At the time of hearing, the 1d. counsel for the assessee made a preliminary grievance that the impugned proceedings have been taken up at the instance of someone whose wavelength is different than that at which the objects of the assessee institution are carried on because complaints have been filed against the assessee making allegations. Be as it may, we are not concerned with such matters because we have to decide the issues before us on the facts and in the circumstances of the case and the law applicable thereto.
3. The 1d. counsel for the assessee submitted that the consolidated order of the Commissioner made Under Section 263 is untenable both on facts and in law. He emphasised that both the assessments had been framed by the ITO after making thorough enquiries as revealed by the inspection of the record by him and the hearing that the ITO gave to the persons concerned before finalising the assessments but the Commissioner had not shown that the impugned orders of the Income-tax Officer were erroneous so as to be prejudicial to the interests of revenue because he has not shown any basis for any such conclusion that he arrived at while issuing notice Under Section 263 and while making an order thereafter. He submitted that the objects of the institution were laudable and the persons managing the institution are devoting their whole time and energy in the furtherance of these objects even at the cost of personal inconvenience and loss of personal time by working at odd hours. He relied upon the ratio decidendi of the following judgment:
1. CIT v. Govindram Saksariya Charity Trust [1984] 145 ITR 253 (MP).
2. CIT v. Trustees Anupam Charitable Trust [1987] 167 ITR 129 (Raj.).
He, therefore, concluded that the Trust being registered under the Societies Registration Act and also being registered with the Commissioner of Income-tax and the assessments having been made after proper enquiries and application of law, the order of the CIT is without jurisdiction. It may be cancelled.
4. The revenue, on the other hand, opposed these submissions with the contentions that the CIT can regard the order as erroneous on the ground that in the circumstances of the case, the ITO should have made further enquiries. The failure on the part of the Income-tax Officer to make further enquiries would, therefore, make the order erroneous so as to be prejudicial to the interests of revenue. It was submitted that this was the case where it was necessary to make further enquiries and, therefore, the CIT assumed jurisdiction lawfully. Since, he had set aside the assessments with directions to the ITO to make them de novo, his order may be upheld and the appeals of the assessee dismissed. Reliance was placed, for these submissions, on the following judgments :
R. Dalmia v. Union of India [1972] 84 ITR 616 (Delhi).
Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi).
5. We have given careful consideration to the rival submissions and have also considered the authorities cited. It is now well settled that in passing an order of revision Under Section 263 of the Act, it is necessary for the Commissioner to state in what manner, he considered that the order of the ITO was erroneous and prejudicial to the interests of revenue and what the basis was for such a conclusion. The error envisaged by Section 263 is not one which depends upon possibility or guess work but it should be actually an error either of fact or of law. From this clear position of law, we have to examine the order of the CIT, whether it is justified either on facts or on law or on both.
6. We find that the impugned assessments are framed Under Section 143(3) of the Act respectively on 28-3-1986 and 31-3-1986. In each assessment order, the ITO has recorded that notice Under Section 143(2) was served and complied with. He has also recorded that Ms. Pearl Drego, President of the Society attended the proceedings before him from time to time and filed necessary details which have been examined and discussed. The ITO has also taken note of the fact that the society is registered under the Income-tax Act with the Commissioner of Income-tax Under Section 12A(a) and the aims and objects of the society are charitable within the meaning of Section 2(15) of the Act. The orders of the ITO also show that he considered the other relevant provisions of law while making these assessments. He also made necessary enquiries before finalisation thereof.
7. In this regard, we find that the assessee has placed on our record abstract from the order sheet of the ITO for these years. The orders of the ITO show that the returns for both the years were filed simultaneously on 24-6-1985. The ITO issued notices Under Section 143(2) and the President of the Society attended before the ITO on 24-1-1986 and on four different occasions thereafter up to 27-2-1986. On these occasions diverse enquiries were made. The ITO was apparently not taking the evidence submitted before him on its face value by mere acceptance. On 5-2-1986 and 6-2-1986 we find orders recorded by the ITO, abstracts of which were filed by the DR at our directions. The order dated 5-2-1986 directs, the Inspector of Income-tax to visit the premises M-70, Greater Kailash-I and report as to whether the premises is being used entirely for the residence of Ms. Pearl Drego, President of the Society. He has been directed in this order to give a correct picture of the matter. It is apparent that the Inspector, one Shri S.P. Saluja made a report and the Income-tax Officer has recorded on 6-2-1986 that the report is received and placed on file and, "it depicts that house No. M-70, is not being used solely for her residence but it is being used for the furtherance of aims and objects of the Society". As pointed out above, the impugned assessments were made on 28-3-1986 and 31-3-1986. These assessments are apparently made after the ITO not only convened the assessee a number of times but after satisfying himself on making spot enquiries on the claims made before him through his Inspector.
8. The Commissioner of Income-tax in his order Under Section 263 has recorded that it appeared from an examination of the assessment records that the ITO did not conduct proper enquiries in completing these assessments. According to him, the records indicated that the ITO did not examine as to whether salary and honorarium paid to the category of persons referred to in Section 13(3) of the IT Act were in conformity with and commensurate to the services rendered. According to him, the ITO did not appreciate violation of Section 13 in respect of the use of the ground floor of house No. M-70, Greater Kailash-I, New Delhi for Ms. Pearl Drego's own residence. Thus, on these two grounds, the CIT thought the orders made by the ITO for these years were erroneous as well as prejudicial to the interests of the revenue.
9. The CIT has recorded that in response to show-cause notice issued by him on 2-9-1986 necessary details and documents were furnished before him, which he examined. Thereafter, in paras 5 and 6 of his impugned order, he has recorded his findings. We find that with regard to his objections that the ITO did not examine as to whether salary and honorarium paid to the category of persons referred to in Section 13(3) of the Act were in conformity with and commensurate to the services rendered, he has not recorded any discussion or findings of his own. Apparently, this objection, therefore, cannot form either the basis for initiation of action Under Section 263 or for making an order thereunder. The CIT has held that on going through the programmes conducted by the institution during the year, it was clear to him that there was constant use of the premises for the residence to the President of the institution partly or wholly without payment of rent which seems to violate Section 13(1)(c) of the Act, On this basis alone, he held that the asseesments made by the ITO were clearly passed on wrong appreciation of the facts and improper implication of provisions of Section 13(1)(c).
10. However, in view of what is stated above, it becomes very clear that the ITO had, in fact, gone as far as directing his Inspector to make a spot inspection and report to him whether the property was used for the residence of the President of the Society. We have indicated supra how after an enquiry was made by the Inspector and report submitted to him, the ITO was satisfied that the claim made before him by the society was correct. The conclusions drawn by the CIT are in the nature of conjectures and surmises that the building was meant for the residence of the President of the Institution, Ms. Pearl Drego mainly. There is no evidence to show that the orders of the ITO which were made after necessary enquiries and on proper appraisal of the facts of the case and the law applicable thereto were erroneous so as to be prejudicial to the interests of revenue. In fact, even the order made Under Section 263, if we may say so, will itself show that on one of the grounds on which the CIT initiated the proceeding's, in fact, did not exist for such purposes because the Commissioner has not to dealt with it in his impugned order as pointed out by us supra.
11. Thus, when we consider the entirety of the facts and circumstances of the case, we find that the CIT had no jurisdictional facts to assume lawful jurisdiction Under Section 263. The impugned consolidated order made by him for assessment years 1984-85 and 1985-86, therefore, is bad in law. It is cancelled and in its place orders of the ITO for these two years are restored. We order accordingly.
12. Before we close, however, we would like to record that much has been made of the various amenities being available at the premises of the institution and their possible use by the persons conducting this institution. This has been, in our considered opinion, blown out of proportion in the impugned order because occupation and use of the premises by its President is not in seeking personal comforts of life and privacy, but the use comes incidental in rendering services to the institution at the sacrifice of the type of privacy that may seek after hard day's job. The stature of the institution can be judged by the type of institutions where programmes have been conducted in transactional analysis. To mention some of these institutions, they are as under:
1. Lal Bahadur Shastri Academy of Public Administration, Mussoorie.
2. Railway Staff College, Baroda.
3. Postal Staff College, New Delhi.
4. Bharat Heavy Electricals Ltd., New Delhi.
5. Indian Oil Management Academy, Haldia.
6. Industrial Development Bank of India, New Delhi, etc. The claim of the assessee that the services are rendered around the clock cannot be washed away in the manner done in the impugned order. Therefore, any portion of the premises of the assessee having been used by Ms. Pearl Drego would not tantamount to use of the premises in a manner that would entitle the CIT to invoke the provisions Under Section 263 particularly when he had himself recognized the institution after considering everything Under Section 12A. of the Act.
13. We, therefore, allow the appeals.