2016 (6) TMI 177 - AT - Income Tax

Revision u/s 263 - entitlement of assessee u/s 11(1)(a) allowed by AO - Held that - Unable to agree that the A.O. has not made any independent inquiry or verification of details and documentary evidences furnished by the assessee during the course of assessment proceedings. A perusal of the copies of documentary evidences filed by the assessee as placed by it in the paper book show that the A.O. accepted the claim of corpus donations on the basis of confirmations and documentary evidences which contained the complete names, addresses, PAN numbers, copies of account payee cheques, audited accounts, audit reports and other documents proving the identity and credit worthiness of all the donors. The genuineness of the donation is also proved from the specific direction in each of the confirmation that the amount has been paid by them towards corpus donation and the Assessing Officer has therefore correctly allowed exemption u/s 11(1)(d) of the Act by making a specific note thereof in the assessment order passed by him. In view of the voluminous documentary evidences filed by the assessee in support of the claim on corpus donation, it cannot be said that the fact of corpus donation has been accepted by the Assessing Officer without verification, more so when the learned CIT(E) has not pointed out any specific discrepancy in the documentary evidences in respect of any donor. It is a settled law that once the quasi judicial power vested in A.O. has been exercised by him in accordance with law and in exercise of such power he has arrived at a conclusion, then merely because the CIT does not feel satisfied with the conclusion it cannot be said that the assessment order is erroneous. In the instant case the A.O. has required the assessee to furnish confirmations of each of the donors along with their PAN number and addresses and the assessee has complied with by filing documentary evidences to prove the identity and credit worthiness of the donors as also the genuineness of the corpus donations given by them. Therefore it cannot be said that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue on this issue. Regarding the issue of room rents, it is found that the assessee society is engaged in the activity of providing education and therefore the provision of hostel to the students is an incidental activity and therefore the room rent receipts from hostel are found to be covered by section 2(15) of the Act and the order of assessment cannot be said to be erroneous and prejudicial to the interests of Revenue when the claim of the assesse was accepted only after making inquiry on this point. It is also seen that such room rent receipts have been earned by the assessee society in all the earlier years also and exemption u/s 11 of the Act has always been allowed. Accordingly even as per the rule of consistency no adverse inference can be drawn against the assessee society on this issue. The investment made by the assessee society in this land is duly included in the fixed assets schedule forming part of the audited accounts which are drawn from the books of accounts examined by the Assessing Officer during the course of assessment proceedings. Therefore we are unable to agree with the contention of the D.R. that the source of acquisition of land has not been verified. In our opinion the conclusion of the Assessing Officer cannot be held to be erroneous and prejudicial to the interests of the Revenue as he has accepted the same on the basis of registered sale deed in favour of the assessee society and this cannot be said to be unsustainable in law, more so when no material on record has been brought on record by the CIT(E) to prove the contrary. Similarly the expenditure on Statue is found to have been incurred as per the Aims & Objects of the assessee society stated in its Memorandum of Association. We agree with the contention of the learned A.R. that the assessment order cannot be said to be erroneous and prejudicial to the interests of Revenue on this ground as the expenditure has been incurred as per the Aims & Objects of the assessee society to perpetuate the memory of Shri Surajmal in whose name the assessee society was set up and the Assessing Officer has accepted the expenditure on statue only after examination of all bills and vouchers of this expenditure. Thus the assessment order passed u/s 143(3) of the Act by the A.O. in this case cannot be said to be erroneous in so far as it is prejudicial to the interests of the revenue. CIT(A) order u/s 263 quashed - Decided in favour of assessee.

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Erroneous and prejudicial assessment order under Section 143(3).
3. Specific discrepancies and inquiries by the Assessing Officer.
4. Validity of the order passed by the Commissioner of Income Tax (Exemptions) (CIT(E)).

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 263 of the Income Tax Act:
The assessee contested the CIT(E)'s invocation of jurisdiction under Section 263, arguing that the CIT(E) erred in holding the assessment order as erroneous and prejudicial to the interest of the Revenue. The Tribunal examined whether the CIT(E) had valid grounds to invoke Section 263. It was noted that the CIT(E) issued a notice under Section 263 based on four issues, which were similar to those raised in the previous assessment year and had been quashed by the ITAT. The Tribunal found that the CIT(E) did not provide a valid basis for invoking Section 263, as all necessary inquiries were conducted by the Assessing Officer (AO).

2. Erroneous and Prejudicial Assessment Order under Section 143(3):
The Tribunal evaluated whether the assessment order passed under Section 143(3) was erroneous and prejudicial to the Revenue's interest. The AO had conducted inquiries and verified details regarding corpus donations, room rent receipts, capital work in progress, and expenses on a statue. The Tribunal noted that the AO had made all necessary inquiries and accepted the assessee's claims based on documentary evidence. The CIT(E) did not point out any specific discrepancies in the documentary evidence provided by the assessee.

3. Specific Discrepancies and Inquiries by the Assessing Officer:
The Tribunal examined the four issues raised by the CIT(E):
- Corpus Donations: The AO had verified the corpus donations with confirmations, PAN numbers, cheques, and other documents. The CIT(E) did not find any discrepancies in these documents.
- Room Rent Receipts: The AO had inquired about the hostel fees received by the assessee, which were incidental to its educational activities. The CIT(E) did not provide any material evidence to counter the AO's findings.
- Capital Work in Progress: The AO had verified the addition to land at Bahadurgarh through a registered sale deed, which included payment details. The CIT(E) did not present any contrary evidence.
- Expenses on Statue: The AO had examined the bills and vouchers for the statue expenses, which were in line with the assessee's aims and objects. The CIT(E) did not find any issues with the documentary evidence.

4. Validity of the Order Passed by the Commissioner of Income Tax (Exemptions):
The Tribunal held that the CIT(E) did not conduct any independent inquiry or verification to demonstrate that the AO's findings were erroneous. The CIT(E) merely expressed dissatisfaction with the AO's inquiries and directed a fresh assessment, which the Tribunal deemed as an impermissible fishing and roving inquiry. The Tribunal cited precedents, including the Supreme Court's judgment in Malabar Industrial Company Ltd., to support its conclusion that the assessment order was neither erroneous nor prejudicial to the Revenue's interest.

Conclusion:
The Tribunal quashed the notice and order under Section 263 issued by the CIT(E), holding that the assessment order passed under Section 143(3) was not erroneous or prejudicial to the Revenue's interest. The appeal filed by the assessee was allowed.

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