2021 (7) TMI 881 - AT - Income Tax

Revision u/s 263 - assessee was selected for scrutiny assessment as per the Computer Aided Scrutiny Selection ( CASS ) for two fold reasons, viz. (i). that the assessee trust had received substantial amount of foreign donations;and (ii). that the assessee trust had claimed to have incurred huge amounts on charity - HELD THAT - We hold a strong conviction that in a case where the A.O in order to satisfy himself about the genuineness and veracity of a claim raised by the assessee had raised a query and called for certain details/information, then, the acceptance of such claim dehors furnishing of the reply and the requisite details that were called for by the A.O, can only be stamped as acceptance of the claim without making any verification. It can safely or in fact inescapably be gathered that it is not a case of an inadequate verification as had been canvassed by the ld. A.R, but a case where the assessee s claim had been accepted without carrying out any verification. We are unable to persuade ourselves to subscribe to the claim of the ld. A.R that the CIT had exceeded his jurisdiction, and thus, had wrongly observed that as the A.O had accepted the assessee s claim for expenditure of ₹ 11.88 crores without making necessary verifications, therefore, the order passed by him u/s 143(3), dated 28.06.2017 was erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Sec. 263. A.O had failed to carry out verifications as regards the expenditurer claimed by the assessee to have been incurred towards furtherance of its objects, therefore, the order passed by him u/s 143(3), dated 28.06.2017 was erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Sec. 263. We shall deal with the contention of the ld. A.R that now when the A.O had recognized the assessee s right to exemption of income being a charitable institution, thus, in the absence of any prejudice cause to the revenue, the CIT was precluded from exercising his revisional jurisdiction. We have given a thoughtful consideration to the sad contention of the ld. A.R and are unable to persuade ourselves to subscribe to the same. As the assessee s claim of having incurred the expenses towards furtherance of its charitable objective; and also its claim of having received donations, both local and foreign, had been accepted by the A.O without carrying out necessary verifications, therefore, the aforesaid contention of the assessee is devoid and bereft of any merit, and thus, cannot be accepted. No infirmity in the order passed by the CIT under Sec. 263 of the Act, wherein he had after rightly observing that the assessment order u/s 143(3), dated 28.06.2017 had been passed by the A.O in a perfunctory and routine manner without any verification, cross checks or test checks, had thus, set-aside the order with a direction to the A.O to conduct a fresh assessment, uphold his order - Decided against assessee.

Issues Involved:
1. Validity of the CIT's assumption of jurisdiction under Sec. 263 of the Income Tax Act.
2. Whether the Assessing Officer (A.O) conducted necessary verifications regarding donations and expenditures.
3. Whether the A.O's order was erroneous and prejudicial to the interest of the revenue.

Detailed Analysis:

1. Validity of the CIT's Assumption of Jurisdiction under Sec. 263:
The assessee contended that the CIT erred in law and facts by assuming jurisdiction under Sec. 263, arguing that the A.O had duly examined the issues during the assessment proceedings under Sec. 143(3). The CIT, however, observed that the assessment was completed in a perfunctory and routine manner without any verification, cross-checks, or even test checks. The CIT issued a 'Show Cause' notice, stating that the assessment order was erroneous and prejudicial to the interest of the revenue due to the lack of verification of expenditures and donations.

2. Verifications Conducted by the A.O Regarding Donations and Expenditures:
The assessee argued that the A.O had made necessary verifications regarding the donations and expenditures. The A.O had called for details of donations and expenditures during the assessment proceedings. However, the CIT found that the A.O had accepted the expenditures and foreign contributions without proper verification. The assessee provided details of foreign donations in 'Form FC-6,' but the CIT noted that this form did not provide complete details of the donors, such as addresses and PAN numbers. Similarly, the local donations were accepted without verifying the addresses and PAN numbers of the donors. The A.O had also failed to verify the expenditures of ?11.88 crores.

3. Erroneous and Prejudicial to the Interest of the Revenue:
The CIT observed that the A.O's order was erroneous and prejudicial to the interest of the revenue as it was passed without proper verification of the donations and expenditures. The assessee argued that the CIT could not assume jurisdiction under Sec. 263 merely because he was not satisfied with the A.O's view. However, the CIT noted that the A.O had failed to carry out even the most basic investigations regarding the foreign and local donations and expenditures. The tribunal upheld the CIT's view that the A.O had failed to carry out necessary verifications, making the assessment order erroneous and prejudicial to the interest of the revenue.

Conclusion:
The tribunal dismissed the appeal filed by the assessee, upholding the CIT's order under Sec. 263. The tribunal agreed with the CIT that the A.O had failed to carry out necessary verifications regarding the donations and expenditures, making the assessment order erroneous and prejudicial to the interest of the revenue. The tribunal found no infirmity in the CIT's order and upheld the direction to conduct a fresh assessment.

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