CIT should make detailed enquiry at revision stage if he wants to take a different view and give finding how assessment order is erroneous and prejudicial to the interests of Revenue
ABCAUS Case Law Citation:
ABCAUS 3264 (2020) (02) ITAT
Important case law relied upon by the parties:
Malabar Industrial Company Limited vs., CIT 243 ITR 83 (SC)
DIT vs., Jyoti Foundation 357 ITR 388 (Del.)
Pr. CIT vs. Delhi Airport Metro Express Private Limited 398 ITR 8 (Del.)
Daniel Merchants Pvt., Ltd. vs. ITO
Rajmandir Estates Pvt., Ltd., vs. PCIT 287 CTR 512 (Cal.) confirmed by Supreme Court
DIT(E) vs. Keshav Social and Charitable Foundation [2005] 278 ITR 152 (Del.)
In the instant case, appeal had been filed by the assessee against the Order of CIT(Exemption) u/s 263 of Income Tax Act 1961 (the Act).
The assessee was a Charitable Trust registered under section 12A of the Act and was running a school.
The assessee had filed return of income declaring ‘NIL’ income. HIs return was processed under section. 143(1) of the Act. Subsequently, the case was selected for scrutiny.
During the course of the scrutiny proceedings, the assessee filed the requisite details which were examined. The books of accounts, were also produced and same were examined on test-check basis.
The activities of the assessee-Trust were charitable in nature and within the meaning of Section 2(15) of the Act.
The A.O. gave a finding that the income of the Trust from various sources, expenditure and surplus was to the extent of 15% only. Thus, the net taxable income was assessed at NIL u/s 143(3) of the Act.
Later, the CIT(E) on examination of the assessment record found the assessment order to be erroneous insofar as prejudicial to the interests of revenue for the purpose of Section 263 of the Act.
A show cause notice was issued to the assessee under section 263 in which the CIT(E) had noted that copy of the ITS details of the assessee were not available on record and had not been verified.
Further the CIT(E) stated that cash deposit in Bank had not been verified and details were not on record. Further as per the AIR information two entries had also not been verified by the A.O. The assessee had received interest income which had not been verified by the A.O.
In the show cause notice, assessee was also directed to explain why the cost of acquisition of the assets should not be disallowed and not considered as income of the assessee.
The CIT(E), however, did not accept the contention of assessee and noted that AO had not verified all these items, therefore, Explanation-2 to Section 263 of the Actwas attracted. The assessment order was found erroneous and prejudicial to the interests of the revenue.
Therefore, the assessment order was cancelled and A.O. was directed to pass the assessment order refresh, in the light of observations made in the impugned order.
Before the Tribunal, the assessee submitted that with respect to all the queries raised by the A.O. on all the issues complete details were filed before A.O. at original assessment stage, which were supported by documentary evidenced and accepted by the A.O.
It was submitted the CIT(E) had not examined any issue in detail and had not pointed-out as to how the assessment order was erroneous and prejudicial to the interests of revenue.
He submitted that the AO had taken one of the possible views in the matter, therefore, invoking proceedings under section 263 of the Act is invalid and relied upon Judgment of the Hon’ble Supreme Court.
He further submitted that it is well settled Law where revisional authority opined that further enquiry was required, such enquiry should have been conducted by revisional authority himself to record findings that assessment order passed by the A.O. was erroneous and prejudicial to the interests of revenue.
The Tribunal observed opined that the CIT(E) in the show cause notice had mentioned some incorrect facts which were not part of the record and all the issues had been examined by the A.O. and has specifically mentioned in assessment order.
To take a different view, CIT should make detailed enquiry at revision stage
The Tribunal opined that if CIT(E) wanted to take a different view than the view taken by the AO , then he should have made a detailed enquiry at revision stage and should have come to the finding as to how the assessment order was erroneous and prejudicial to the interests of Revenue. However, the CIT(E) merely mentioned that since these issues have not been enquired into by the A.O, therefore, Explanation-2 to Section 263 of Income Tax Act, 1961, would apply against the assessee. Further, the assessee had explained all the issues at original assessment stage as well as before CIT(E) in proceeding under section 263 of the Act. Therefore, it was not fit case of invocation of jurisdiction under section 263 of the Act.
Considering the totality of the facts and circumstances of the case, the Tribunal opined that order under section 263 of Act was wholly unjustified and was liable to be set aside.
Accordingly, the Tribunal set aside the impugned order under section 263 of Income Tax Act, 1961 and quashed the same.
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