2022 (4) TMI 179 - AT - Income Tax

Revision u/s 263 by CIT - entitlement u/s 10(23C)(iiiab) - assessment were culminated without inquiry and verification of donation, building fund and expenditure incurred by the appellant trust and set aside for framing fresh assessment de-nova after conducting necessary inquiries and providing due opportunity of being hard to the appellant trust - HELD THAT - Where an order passed under the provision of the Act, is unsustainable in the eyes of law, then the said invalid or illegal order cannot be subject matter of revision u/s 263 of the Act in terms of ration laid down in CIT Vs Jet Airways India Ltd 2010 (4) TMI 431 - HIGH COURT OF BOMBAY - Thus the contention of the Ld AR that, since the assessee trust is enjoying blanket exemption u/s 10(23C)(iiiab) whereby all income received are exempt and hence cannot be subjected to revision u/s 263, is blatantly perverse under the settled law. Per se, the nature, amount and type of claim in the return vis- -vis order passed does not decide the revisionary jurisdiction, but the validity of order does, consequently in the present case, the orders of assessment were passed u/s 143(3) irrespective of claims allowed thereby are undisputedly valid and legal orders and thus are subject matter of revision u/s 263. PCIT vouching the assessment records observed that, post culmination of assessments, a survey action u/s 133A was carried out on the assessee establishing on records that, the appellant trust for the assessment years under consideration was in receipt of voluntary donations and donation towards building funds etc., however no proper records were found maintained in showcasing the genuineness thereof, further the survey team also observed that, there were cash expenditure incurred without due supporting in the form of tax invoices / bills etc., substantiating the correctness and genuineness thereof and in the opinion of PCIT these were neither inquired into nor verified by the Ld AO during the course of regular assessment proceedings, which eventually triggered the invocation of revisionary jurisdiction On our careful perusal of paper books it revealed that, the paper book submitted by the appellant during the course of this hearing is not in consonance with rule 18 of the Income Tax Appellate Tribunal Rules. On a perusal of the written submission made in response to SCN issued u/s 263, from point number 7 titled Factual matrix it transpired that, the appellant claimed to have submitted the details of donation and building funds received by it along-with full list of doners with their full address and PAN before the AO during the course of assessment proceedings, per contra the appellant in its submission before the regular assessment proceedings We see that, the appellant neither during the assessment proceeding nor during revisionary proceeding submitted any details in relation to the donations showcasing its genuineness and further no evidential material found placed in substantiating the genuineness of cash expenditure incurred, for the reason we hold the conclusion drawn by the Ld PCIT is irresistible and find force in the action of PCIT within the ration laid by the Hon ble lordship in a celebrated case of Malabar Industrial Co Ltd 2000 (2) TMI 10 - SUPREME COURT Thus the action of Ld PCIT is perfectly sustainable in law, to the effect holding the order of assessment as erroneous prejudicial to the interest of revenue, ergo we find no infirmity with the direction of 263 revisionary order, thus the legal grounds of the appellant are dismissed.

Summary

Issues Involved:
1. Whether the orders passed by the assessing officer under section 143(3) were erroneous and prejudicial to the interest of the revenue within the purview of section 263 of the Income-tax Act, 1961.
2. Whether the revisionary jurisdiction under section 263 is applicable when the assessee claims exemption under section 10(23C)(iiiab) of the Act.
3. Whether the assessment orders suffered from infirmity triggering the section 263 revisionary action.

Detailed Analysis:

Issue 1: Erroneous and Prejudicial Orders under Section 143(3)
The appellant, a charitable trust registered under the Bombay Trust Act, 1950, and claiming exemption under section 10(23C)(iiiab), filed returns of income for AY 2015-2016 and 2016-2017, which were assessed under section 143(3) accepting the returned income as "NIL". The Principal Commissioner of Income Tax (PCIT) invoked revisionary powers under section 263, citing lapses in the original assessment, and directed the assessing officer to reframe the assessment de novo after conducting inquiries into the genuineness of donations, expenditure incurred, and correctness of application of provisions of section 11.

The Tribunal noted that the assessment orders were passed without proper inquiry and verification of donations and expenditures, leading to the conclusion that the orders were erroneous and prejudicial to the interest of the revenue. The Tribunal emphasized that an incorrect assumption of facts or law, or passing an order without application of mind or principle of natural justice, suffices to hold the order as erroneous.

Issue 2: Applicability of Section 263 with Exemption under Section 10(23C)(iiiab)
The appellant contended that since the trust enjoys exemption under section 10(23C)(iiiab), it cannot be subjected to revision under section 263. The Tribunal rejected this argument, stating that the nature, amount, and type of claim in the return do not decide the revisionary jurisdiction; rather, the validity of the order does. The Tribunal held that the orders of assessment passed under section 143(3) are valid and legal and thus are subject to revision under section 263.

Issue 3: Infirmity in Assessment Orders Triggering Section 263 Action
The PCIT observed that the trust received voluntary donations and building fund donations without maintaining proper records to showcase genuineness, and there were cash expenditure vouchers without supporting documents. The Tribunal found that the appellant failed to submit details of donations and expenditures during both the assessment and revisionary proceedings. The Tribunal upheld the PCIT's conclusion that the assessment orders were erroneous and prejudicial to the revenue, as they were passed without proper inquiry and verification.

In conclusion, the Tribunal applied the principles laid down by the Hon'ble Supreme Court in "Malabar Industrial Co Ltd. Vs CIT" and found the PCIT's action sustainable in law. The Tribunal dismissed the appeals of the appellant, holding the assessment orders as erroneous and prejudicial to the interest of revenue, and upheld the direction for fresh assessment. The appeals in both ITA.No.30/NAG/2021 and ITA.No.31/NAG/2021 were dismissed with no order as to cost.