2020 (5) TMI 628 - AT - Income Tax

Revision u/s 263 - applicability of the provisions of section 2 (15) - exemption u/s. 11 - Proof of charitable activities - Assessee providing virtual education - organizing innovative IT Education and training program - HELD THAT - If the activities carried out by the assessee are visualized Assessee is not engaged in any other activity other than education. Therefore, for this reason, we are of the view and hold so that the learned CIT E is not correct in holding that assessee is not engaged in educational activities covered under section 2 (15) of the Act. No evidences have been put forth by the revenue except merely an allegation of violation of the provisions of section 13 (1) (C) - It has not been shown that how the assessee has conferred any benefit directly or indirectly on any person. It is also not shown that who are those persons who are fulfilling the criteria of section 13 (3) of the act. Thus, the order of the learned CIT exemptions so far as this issue is involved is not supported by any evidence. It is apparent from the assessment order and the communication made by the assessee during the course of assessment proceedings before the assessing officer it is apparent that all and every aspect of the assessment of the income of the assessee have been examined by him. AO has in detailed look into the activities, object, the functions, nature of receipts, nature of expenditure, applicability of service tax, applicability of tax deduction at source credit and above all the applicability of the provisions of section 2 (15) of the act. Thereafter, AO has granted assessee the benefit of being an educational Institute. It is not required for the assessing officer to examine how the payer of an income has dealt with receipt of an income in the hands of the assessee. This cannot be a general law but in the specific facts of the case where the payment made by the parties are subjected to tax deduction at source under section 194J of the income tax act cannot go against the assessee. The learned CIT exemption has not in substance held that any due enquiry which should have been made by the assessing officer has not been made by him. Perhaps at the level of enquiry and the manner of enquiry may be different because of change in perception. However, that does not make the order erroneous. Assessee is carrying on educational activities which are covered by the provisions of section 2 (15) of the income tax act and it is neither business nor profession of the assessee. It definitely constitute a charitable activity as it does not charge the fees at the level of market rate and even otherwise the surplus generated is also used for charitable activities of education. This is the finding of the learned assessing officer for assessment year 14 15 and for earlier assessment years. In view of this, the order passed by the assessing officer is not at all erroneous. Education is no exception. Naturally, classrooms have no bricks and mortar, no benches and blackboards. Blackboard Collaborate and digital white boards have replaced blackboards. Teachers and students do not assemble at one place but they reach each other on cloud through Meets, Teams, WebEx and Zoom Such cloud classes have wide representation of students across the globe blurring the geographies of traditional classrooms. Attendances are also virtual instead of physical. Chat boxes are medium of group discussion. Strikingly, Timings are 24 7. Still it has all the essential of a classroom . It definitely covers process of training, developing the knowledge, skill, mind and character of students like normal schooling. Thus, in true sense the activities performed by the assessee are no different from classrooms. Therefore, we set aside and quash the order passed by the learned CIT exemption under section 263 - Decided in favour of assessee.

Issues Involved:
1. Natural Justice
2. Show Cause Notice Scope
3. Opportunity of Rebuttal
4. Validity of Section 263 Invocation
5. Nature of Activities (Education vs. Business)
6. Commercial Nature of Activities

Issue-wise Detailed Analysis:

1. Natural Justice:
The assessee argued that the CIT (Exemptions) violated the principles of natural justice by passing the order u/s 263 without giving a fair and reasonable opportunity of hearing. The Tribunal noted that the CIT (Exemptions) should have given the assessee an opportunity to explain and rebut the points raised, especially since new issues were introduced in the final order which were not part of the initial show cause notice.

2. Show Cause Notice Scope:
The assessee contended that the CIT (Exemptions) exercised jurisdiction under section 263 based on issues not referred to in the show cause notice. The Tribunal found merit in this argument, emphasizing that any new issues or reasons for revision should have been communicated to the assessee to provide an opportunity for rebuttal.

3. Opportunity of Rebuttal:
The assessee argued that the CIT (Exemptions) invoked provisions of Section 263 based on alleged facts and allegations without giving an opportunity for rebuttal, thus violating the principles of natural justice. The Tribunal agreed, noting that the CIT (Exemptions) should have provided the assessee with a chance to counter the new points raised.

4. Validity of Section 263 Invocation:
The CIT (Exemptions) invoked Section 263, stating that the assessment order was erroneous and prejudicial to the interest of the revenue. The Tribunal held that the CIT (Exemptions) did not demonstrate how the assessment order was erroneous or what specific inquiries were lacking. The Tribunal emphasized that the AO had made detailed inquiries during the assessment proceedings, and the CIT (Exemptions) failed to show any specific lapse or error.

5. Nature of Activities (Education vs. Business):
The CIT (Exemptions) argued that the activities carried out by the assessee did not qualify as "education" under Section 2(15) of the Act and were more in the nature of trade, commerce, or business. The Tribunal, however, found that the assessee was engaged in educational activities, operating various educational and development centers, and providing training to underprivileged youths. The Tribunal noted that the courses were conducted in a structured manner, with fixed curricula, compulsory attendance, and examinations, thus qualifying as education.

6. Commercial Nature of Activities:
The CIT (Exemptions) contended that the receipts from different corporate houses, subjected to TDS u/s 194J, indicated a commercial nature. The Tribunal disagreed, stating that the nature of the payment from the payer's perspective does not necessarily determine the nature of the receipt for the recipient. The Tribunal found that the assessee's activities were charitable, aimed at providing education and training to economically weaker sections, and the fees charged were heavily subsidized.

Conclusion:
The Tribunal concluded that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. It quashed the order passed by the CIT (Exemptions) under Section 263, holding that the assessee was engaged in educational activities qualifying for exemption under Sections 11 and 12 of the Act. The Tribunal allowed the assessee's appeal, emphasizing the need for proper communication and opportunity for rebuttal in revision proceedings.

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