The order of the Bench was delivered by
1. B. Ramakotaiah (Accountant Member).-These two Revenue appeals are for the assessment years (AY) 2001-02 and 2003-04 against the common order of the Commissioner of Income-tax (Appeals)-IV, Hyderabad dated December 13, 2013, allowing the assessee's appeal on the orders under section 154 of the Income-tax Act, 1961 (Act).
2. Briefly stated, the assessee is a society formed with the main objective of promoting education among muslims in particular and other communities in general. The assessee was granted registration under section 12A with effect from June 18, 1985. Consequent to search and seizure operations on October 27, 2006 and on the report of the authorities that the assessee has violated provisions of section 13 of the Act, the learned Commissioner of Income-tax (Central), Hyderabad has cancelled the registration under section 12AA(3) vide order dated November 6, 2008. This matter was the subject-matter of appeal before the Income-tax Appellate Tribunal and the Income-tax Appellate Tribunal in I. T. A. No. 71/Hyd/2009 dated September 30, 2009 noted that the registration granted under section 12A cannot be cancelled for violation of the provisions of section 13(1)(c) and 13(3) and therefore, section 12AA(3) does not empower the Commissioner of Income-tax to cancel the registration. The order of the Commissioner of Income-tax was accordingly set aside. In the mean time, the Assessing Officer (AO) by his common order in various assessment years has listed out various so called violations of section 13 and in the impugned years also came to the conclusion that registration under section 12 was cancelled, therefore the assessee was not entitled for exemption under section 11 of the Act. He accordingly brought to tax the entire amount claimed as exemption by the assessee in the impugned assessment years. He however, did not quantify the amount pertaining to violation of the provisions of section 13 in the order. The learned Commissioner of Income-tax (Appeals) on the appeals by the assessee however, noted that the Income-tax Appellate Tribunal has set aside the cancellation of registration and accordingly, the assessee is eligible for exemption under section11. Since the main reason for denying the deduction was the cancellation of registration, he directed the Assessing Officer to implement the order of the Income-tax Appellate Tribunal, in his appellate order dated November 10, 2009. Consequent to that, the Assessing Officer gave effect to the order of the Income-tax Appellate Tribunal dated November 21, 2012 holding that since the Income-tax Appellate Tribunal restored the registration under section 12A, the assessee is eligible for exemption under section 11 of the Act. He determined the total income at nil and granted exemption to the assessee under section 11. However, the very same Assessing Officer by a notice under section 154 dated March 27, 2013 proposed that the above orders dated November 21, 2012 were erroneously passed and proposed to modify the orders. The assessee objected to the rectifications proposed. The Assessing Officer however, rejected the assessee's objections and passed orders under section 154 on April 25, 2013 holding that the assessee had violated the provisions of section 13 and therefore not eligible for exemption under section 11. In the order under section 154, the Assessing Officer repeated the contentions of the Assessing Officer under section 143(3) and brought to tax the same amount as was done under section 143(3).
3. The assessee contested before the learned Commissioner of Income-tax (Appeals) holding that there were neither violations of section 13 during the impugned assessment years nor the Assessing Officer has quantified any amount for the so called violations listed out by him and further the matter was already decided by the Commissioner of Income-tax (Appeals) in his appellate orders under section 143(3). Therefore, the Assessing Officer cannot modify the orders under section 154 after giving effect to the order of the Income-tax Appellate Tribunal allowing the exemptions to the assessee. With reference to the so called violations of section 13, the assessee made detailed submissions which were recorded by the Commissioner of Income-tax (Appeals) in paras 2.9 and 2.10. Considering the assessee's detailed submissions and perusing the orders of the Income-tax Appellate Tribunal and the predecessor Commissioner of Income-tax (Appeals) on the issue, the learned Commissioner of Income-tax (Appeals) did not approve the modification orders by stating as under :
"5.1 I have considered the facts on record and the submissions of the authorised representative. A perusal of the assessment order dated December 31, 2008 shows that while the Assessing Officer did discuss both the issues, viz., use of the appellant's vehicles for the personal use of the Chairman and his family and the purchase of property using the appellant's funds in the name of the wife and son of the chairman, the concluding and operative part of the assessment order merely record the cancellation of registration as the reason for denial of exemption under section 11.
5.2 Indeed, this view also finds support in the order of the Commissioner of Income-tax (Appeals) dated November 10, 2009, extracted above where the Commissioner of Income-tax (Appeals) observed that the denial of exemption under section 11 actually emanated from the cancellation of registration under section 12AA(3). It is also noteworthy that the Commissioner of Income-tax (Appeals) went on to observe that since the Income-tax Appellate Tribunal, Hyderabad had already adjudicated the issue related to the exemption and since the Assessing Officer had to give effect to the order of the Income-tax Appellate Tribunal, no separate finding was required to be given in respect of the claim of exemption. In other words, the Commissioner of Income-tax (Appeals) did not consider it fit to adjudicate on the issue of violation of section 13.
5.3. The cancellation of registration was set aside by the Income- tax Appellate Tribunal. While giving effect to the Income-tax Appellate Tribunal's order, the Assessing Officer allowed exemption to the appellant under section 11, thereby accepting that there were no violations of section 13.
5.4 The question whether or not the appellant has violated section 13 is not a mistake apparent from record ; it is a complex issue requir ing detailed examination of facts and circumstances in the light of the legal provisions. Therefore, the Assessing Officer having impliedly held in his modification orders dated November 21, 2012 that the appellant had not violated section 13, it cannot be said that this was a mistake apparent from record open to rectification under section 154."
4. The Revenue is aggrieved and raised various grounds, inter alia, contending that the learned Commissioner of Income-tax (Appeals) was not justified in holding that the orders cannot be modified under section 154, whereas the Assessing Officer was giving effect to the orders of the Income-tax Appellate Tribunal/Commissioner of Income-tax (Appeals) in the order under section 154.
5. The learned Commissioner of Income-tax-Departmental representative explained the chronology of the events and referring to the orders of the Income-tax Appellate Tribunal submitted that the Assessing Officer has not implemented the order of the Income-tax Appellate Tribunal in its correct perspective as he was supposed to examine the violations of section13 while granting exemption. While admitting that the Income-tax Appellate Tribunal has cancelled the order of the Commissioner of Income-tax cancelling the registration, he referred to the order of the Income-tax Appellate Tribunal to submit that the Income-tax Appellate Tribunal specifically observed that violation of the provisions of section 13 are to be examined by the Assessing Officer while considering the exemption under section 11. He referred to the consequential order passed by the Assessing Officer wherein on the presumption that registration was granted to the assessee, the entire amount was allowed without examining the violations under section 13. Therefore, the Assessing Officer was within his jurisdiction to modify the order to comply with the observations/directions of the Income-tax Appellate Tribunal. It was submitted that since the Assessing Officer has passed the order allowing the exemption without considering the violation of the provisions of section 13, the Assessing Officer was only following the directions of the Income-tax Appellate Tribunal and modified the orders under section 154. He justified the orders of the Assessing Officer.
6. Learned counsel in reply, made two propositions. One that the Assessing Officer was correct in allowing the exemption in the consequential order as registration was restored to the assessee by the order of the Income-tax Appellate Tribunal. He pointed out that the Assessing Officer did not quantify any of the so called violations nor rejected the assessee's contentions that there are no violations in the impugned assessment years. He also referred to the order of the Commissioner of Income-tax (Appeals) to submit that the entire exemption was denied only on the basis of cancellation of registration, which was later restored by the Income-tax Appellate Tribunal. Therefore, there was no mistake apparent from record in the consequential orders passed by the Assessing Officer. Second proposition is on the merits of the so called violations under section 13 of the Act. It was submitted that nowhere in the statements recorded from the managing trustee there was any personal usage of cars, which have been listed for these impugned assessment years. The assessee-society has indeed owned many cars which were used for the objects of the society and no vehicles were used for the personal benefit of the trustees. He referred to various statements recorded during the course of search and the context in which the questions were asked to submit that trustee was replying in the capacity of a managing trustee of the assessee-society which the Revenue authorities interpreted to be that of an individual, therefore, misinterpreted the usage of cars to be of personal nature. With reference to the second allegation that properties were purchased in the name of two former members of the managing trustee, it was submitted that they are secretary and trustee of the assessee-society and the properties though held in their names were recorded in the books of account of the assessee, invested out of the funds of the assessee and subsequently, when these were sold, the capital gains were also offered in the returns of the assessee which was also accepted by the Assessing Officer. In view of this, there are no violations of section 13 and therefore, even on merits, the orders cannot be modified under the provisions of section 154 without examining the merits. Since the issues were already finalised by the order of the Commissioner of Income-tax (Appeals) in the quantum appeal, the Assessing Officer cannot restore the issues to the level of an order under section143(3) in the guise of order under section 154. He supported the orders of the Commissioner of Income-tax (Appeals).
7. We have considered the issues and examined the records. We are of the opinion that the Assessing Officer exceeded his powers under section 154 in restoring the order under section 143(3) which was also the subject- matter of appeal before the Commissioner of Income-tax (Appeals) earlier. The powers of rectification under section 154 are restricted and as rightly pointed out by the Commissioner of Income-tax (Appeals), issues which require detailed examination and analysis cannot be undertaken under section 154 of the Act. We are of the opinion that action of the Assessing Officer in restoring the order of the Assessing Officer under section 143(3) which was also the subject-matter of appeal before the Commissioner of Income-tax (Appeals) cannot be done. Moreover, as seen from the original assessment order under section 143(3), one violation which the Assessing Officer alleges is with reference to usage of cars. However, the Assessing Officer has not quantified the extent of amount spent on behalf of the personal usage of the trustees in the order. As seen from the statement also the context in which the statements were given do indicate that the trustee has stated that the cars were utilised for the objects of the society, more particularly for transporting the dignitaries of Medical Council of India and others to the premises of the assessee-society, i.e., various colleges. In view of the clear statement of the managing trustee, we do not see any personal usage of the cars of the society. The fact that the Assessing Officer did not quantify any amount of personal use also indicate that the Assessing Officer has raised this issue without any evidence, so as to deny the exemption to the assessee.
8. The next objection was with reference to purchase of properties in the name of family members of the managing trustee. There is no dispute with reference to the fact that the properties were purchased by the assessee-society, held by it in the books of account and when ultimately sold the capital gains were also assessed in the assessee's hands. In the course of arguments it explained that the properties were held in the name of the individuals as the properties are purchased in the Jubilee Hills Co-operative Society for establishing schools/colleges for the objects of the society. Being a co-operative society, the members' names were included rather than the assessee's name and the fact that the properties were shown in the books of account and funds were utilised from the society were also established before the authorities in earlier years. It is also on record that the so called family members in whose name the properties were registered were also secretary and trustee of the society. It was also submitted that as the properties were proximate to the then Chief Minister's residential premises they could not obtain necessary permissions for establishing educational institutions and subsequently the properties were sold and the resultant capital gain was offered in the hands of the assessee. Considering these facts, we are of the opinion that there seems to be no violation of section 13 in the impugned years. This fact was also established by the order of the Commissioner of Income-tax (Appeals) dated November 10, 2009, wherein the learned Commissioner of Income-tax (Appeals) has given a finding as under in para 4.1 :
"4.1 I have gone through the issue and the submission of the appellant. I find that the denial of exemption under section 11 by the Assessing Officer actually emanated from the cancellation of registration under section 12AA(3) by the Commissioner of Income- tax (Central), Hyderabad which was challenged by the appellant before the Income-tax Appellate Tribunal. Since the Assessing Officer was bound by the order passed by the Commissioner of Income-tax (Central) cancelling the registration it was but natural that the claim of exemption under section 11 by the appellant was denied by the Assessing Officer. I therefore find no infirmity in the order of the Assessing Officer denying the exemption claimed by the appellant under section 11 of the Income-tax Act at the time of passing the assessment order. As submitted by the appellant the hon'ble Income-tax Appellate Tribunal Hyderabad 'A' Bench has already adjudicated the issue relating to exemption. Since the Assessing Officer is to give effect to the order of the Income-tax Appellate Tribunal no separate finding is required to be given in respect of the claim of exemption. In other words, the first effective ground of appeal is dismissed."
9. In view of the above, if the Revenue has any grievance on the issue, they should have preferred an appeal on the orders of the Commissioner of Income-tax (Appeals), but the Assessing Officer has no powers to restore the original assessment order under section 143(3) in the guise of modification under section 154, having allowed the exemption consequent to the orders of the Income-tax Appellate Tribunal. In view of this, we do not find any merit in the Revenue's appeals. Accordingly the grounds are rejected.
10. In the result, both appeals of the Revenue are dismissed.
11. The order pronounced in the open court on the 19th June, 2015.