2022 (5) TMI 1452 - AT - Income Tax

Revision u/s 263 - exemption u/s 11 - HELD THAT - As subsequently, the assessee, vide letter dated 27th April 2022, submitted the copy of order dated 26th March 2022 passed by the AO u/s 143(3) r/w section 263 of the Act, wherein the assessee s total income has been assessed at Rs. Nil and no disallowance has been made on the issue on which proceedings under section 263 of the Act were initiated. As the Assessing Officer has now passed the order pursuant to directions issued by CIT vide impugned order, the present appeal filed by the assessee challenging the order passed by the learned CIT under section 263 of the Act is rendered academic in nature and therefore, is dismissed as infructuous. Appeal by the assessee is dismissed.

Summary

Issues:
Challenge to order under section 263 of the Income Tax Act for the assessment year 2016-17.

Analysis:

1. Grounds raised by the assessee:
The assessee challenged the order passed under section 263 of the Income Tax Act, contending that the notice issued was not valid due to no delay in intimation and undisputed development fund allocation. The purpose of accumulation under section 11(2) was not disputed, and the Board of Directors' meeting minutes were submitted without dispute. The reference to "Ledger Extracts" did not relate to the CIT's claims. The CIT was criticized for setting aside the order without provisions to verify project-wise fund utilization in subsequent years.

2. Assessment and appeal:
The assessee, a charitable organization, claimed exemption under section 11 of the Act. The Assessing Officer accepted the total income as Nil after examining the expenditure. Subsequently, a notice was issued under section 263, setting aside the assessment order as prejudicial to revenue interests. The CIT directed the AO to re-examine the details provided by the assessee. The assessee appealed against this decision.

3. Outcome of the appeal:
During the appeal hearing, the AO passed an order assessing the total income at Nil without any disallowance. As the AO's new order aligned with the directions from the CIT's impugned order, the appeal was deemed academic and dismissed as infructuous. Consequently, the appeal challenging the CIT's order under section 263 was dismissed.

This judgment highlights the importance of procedural compliance and the authority of the CIT to set aside assessment orders deemed prejudicial to revenue interests. The case also underscores the significance of providing accurate documentation and explanations to support claims made under the Income Tax Act.