2020 (5) TMI 337 - AT - Income Tax

Revision u/s 263 - Exemption u/s 80P - HELD THAT - Order passed by the Prin. CIT is bad in law as it does not satisfy the twin conditions, and emphasized that the assessee is entitled for exemption under Section 80P and in the scrutiny proceedings, AO has conducted enquiries in respect of income and claims. On perusal of the assessment order, find that the AO has issued Notice u/s 142(1) of the Act along with questionnaire, but there are no findings or observations of the AO that he has conducted enquiries in respect of income and claims made by the assessee. In the course of hearing, the Bench wanted the Ld AR to furnish details filed in response to notice under Section 142(1) of the Act and questionnaire, the learned Authorized Representative could not substantiate with material evidences filed in the Assessment proceedings. The fact remains that the order passed by the AO prima facie, is without conduct of Enquiry. Assessing Officer could not conduct enquiry into income and claims made by the assessee nor the assessee could demonstrate with evidences that the Assessing Officer has conducted the enquiry. AO has passed the order without conducting enquiries or verifications, and CIT has set aside the order passed u/s 143(3) by the AO and directed the A.O for fresh examination in respect of incomes and claims. Accordingly, we are not inclined to interfere with the order of CIT and of the view that there is no infirmity in the revision order of Pr CIT and upheld the same and dismissed the grounds of appeal of assessee.

Summary

Issues:
Appeal against orders of Pr. CIT under Section 263 of the Income Tax Act, 1961 regarding exemption u/s 80P - Examination of eligibility for exemption - Conduct of enquiry by Assessing Officer - Revision of order by Pr. CIT - Twin conditions for Revision under Section 263 - Jurisdiction of ITAT - Dismissal of appeals.

Analysis:
1. The appeals were filed against orders of Pr. CIT under Section 263 of the Income Tax Act, 1961, regarding exemption u/s 80P. The Tribunal consolidated the appeals as the issues were identical. The assessee contended that the eligibility for exemption u/s 80P was examined during assessment, and the AO had allowed the exemption based on judicial decisions. However, Pr. CIT set aside the order and directed fresh examination. The Tribunal examined whether the order was erroneous and prejudicial to the revenue's interest.

2. The assessee, a society registered under Karnataka Societies Act, filed for exemption u/s 80P, utilized for the benefit of employees. The AO conducted scrutiny, but Pr. CIT issued a Revision Notice under Section 263, directing fresh examination. The Tribunal noted that the AO did not conduct a proper enquiry into the income and claims made by the assessee, as required by law. Citing relevant judicial decisions, the Tribunal emphasized the importance of the AO's enquiry in such cases.

3. The Tribunal considered the twin conditions for Revision under Section 263 - the assessment order should be erroneous and prejudicial to revenue. It was observed that the AO did not conduct necessary enquiries, making the order erroneous. The Tribunal referred to specific cases where lack of enquiry by the AO justified the invocation of Section 263. Explaining the provisions of the Act, the Tribunal upheld Pr. CIT's decision to set aside the AO's order and direct a fresh examination of incomes and claims.

4. The Tribunal concluded that the AO's failure to conduct proper enquiries rendered the order erroneous and prejudicial to revenue. As per the provisions of Section 263 and relevant judicial decisions, the Tribunal upheld Pr. CIT's revision order. The Tribunal dismissed the grounds of appeal by the assessee for both the Assessment Years, as the issues and decisions were found to be identical. Consequently, both appeals were dismissed by the Tribunal.

In summary, the Tribunal upheld the Revision Orders by Pr. CIT under Section 263, emphasizing the importance of the AO conducting proper enquiries into income and claims to determine eligibility for exemption u/s 80P. The Tribunal found the AO's failure to conduct such enquiries as erroneous and prejudicial to revenue, leading to the dismissal of the assessee's appeals for both Assessment Years.