2022 (2) TMI 317 - AT - Income Tax

Revision u/s 263 by CIT - second round before the ITAT - claim of exemption by the assessee under S. 10(23)(iiiac) denied - HELD THAT - As per Income Tax Act, powers of ITAT are dealt with second appeal on all matters of direct tax including appeals against revisional order of the Administrative Commissioner as well as order denying the registration under S.12AA or 80G of the Act etc. Tribunal has been entrusted with the responsibility of deciding intricate question of law and facts and in case of facts, Tribunal is a final finding authority. Tribunal has categorically directed learned AO to examine the claim of the assessee under S. 10(23)(iiiac) of the Act and therefore decide as per law. In our considered opinion, learned PCIT has exceeded has power wherein ITAT has categorically given instruction to the AO. In such circumstances, the order under S.263 of the Act cannot be sustained. Thus, appeal of the assessee is allowed.

Summary

Issues:

1. Validity of passing order under section 263 of the Income Tax Act, 1961.
2. Justification for initiating proceedings under section 263.
3. Eligibility of the society for exemption under section 10(23C) of the Act.

Issue 1: Validity of passing order under section 263 of the Income Tax Act, 1961

The assessee filed appeals against the order of the Principal Commissioner of Income Tax-1 passed under section 263 of the Income Tax Act. The grounds of appeal challenged the validity of the order under section 263, claiming it to be bad-in-law, void ab initio, and contrary to the facts and circumstances of the case. The assessment order under section 153(C) was deemed erroneous and prejudicial to the interest of the society by the Principal Commissioner of Income Tax. The Tribunal noted that the order passed by the Assessing Officer was pursuant to its directions, and the Principal Commissioner had exceeded their power by passing the order under section 263. The Tribunal held that the Principal Commissioner's order under section 263 could not be sustained, and thus, the appeal of the assessee was allowed.

Issue 2: Justification for initiating proceedings under section 263

The Principal Commissioner initiated proceedings under section 263, contending that the assessment order was erroneous and prejudicial to the interest of the revenue. The assessee argued that the order of the Assessing Officer was not erroneous or prejudicial to the revenue's interest, as it was passed based on the directions of the Tribunal. The Tribunal emphasized that the Assessing Officer was directed to examine the claim of the assessee under section 10(23)(iiiac) of the Act and decide accordingly. It was noted that the Principal Commissioner had exceeded their power by passing the order under section 263, as the Tribunal had already provided specific instructions to the Assessing Officer. Consequently, the appeals filed by the assessee against the orders under section 263 were allowed.

Issue 3: Eligibility of the society for exemption under section 10(23C) of the Act

The society in question was formed as a Public Charitable Society with objectives related to education and public welfare. The society claimed exemption under section 10(23C)(iiiac) of the Act, which was not allowed by the Assessing Officer due to the failure of the assessee to file a regular return of income and claim the exemption. The Tribunal highlighted that the Assessing Officer's failure to verify the claim of exemption under section 10(23)(iiiac) led to the order being considered prejudicial to the revenue's interest. The Tribunal reiterated that the Assessing Officer was directed to examine the claim of exemption by the assessee under section 10(23)(iiiac) of the Act. As a result, the orders under section 263 were cancelled, and the orders of the Assessing Officer were upheld, allowing the appeals filed by the assessee.

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