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2022 (5) TMI 96 - AT - Income TaxRevision u/s 263 - Existence of corpus fund and investments in land and buildings - HELD THAT - CIT DR has not controverted the fact that during the financial period the assessee did not receive any corpus donation and did not purchase or acquire any land therefore no enquiry was required to be made in this regard and thus the observations made by the CIT in the notice u/s. 263 of the Act and in the impugned order are clearly irrelevant and incorrect factual position of the assessee case. In view of CBDT Circular dated 14.9.1990 (supra) the corpus donation cannot be treated as income of the trust. This proposition has been rendered by Hon ble Supreme Court in the case of Mata Amrithanandamayi Math Amritapuri 2018 (5) TMI 1028 - SC ORDER therefore the observation of Ld. CIT(E) in the notice u/s. 263 of impugned order are clearly an outcome of consideration of irrelevant and incorrect factual position keeping aside Board Circular (supra). We also observe that CIT(E) submitted that the assessee has not submitted any reply either to show cause notice or in response to the opportunity accorded to it. AR has successfully demonstrated that the assessee filed reply to the show cause notice dated 26.3.2021 and no further opportunity beyond 30.3.2021 was given to the assessee. Therefore these observations of the CIT(E) are also not sustainable in law. CIT is required to direct the AO only after coming the conclusion that the earlier finding of the ITO was erroneous and prejudicial to the interests of the revenue. In the present case the Ld. CIT(E) has taken into consideration the incorrect and irrelevant facts to allege that there is no enquiry by the AO and thus the impugned assessment order is erroneous and prejudicial to the interest of the revenue without considering the reply of the assessee to show cause notice u/s. 263 of the Act and keeping aside the basic principles of tax jurisprudence relevant for assessing income of a charitable trust. We therefore in view of foregoing discussion reach to a logical conclusion and compelled to hold that the revisionary order passed u/s. 263 of the Act by the Ld. CIT(E) is not sustainable and valid. - Decided in favour of assessee.
Issues Involved:
1. Exercise of revisionary powers by CIT(E) under Section 263 of the Income Tax Act. 2. Adequacy of the Assessing Officer's (AO) enquiry during the assessment proceedings. 3. Consideration of the assessee's reply to the show cause notice. 4. Treatment of corpus fund, investments in land and buildings, and charitable expenses. Issue-wise Detailed Analysis: 1. Exercise of Revisionary Powers by CIT(E) under Section 263 of the Income Tax Act: The assessee filed an appeal against the order of the CIT(E), Hyderabad, who exercised his revisionary power under Section 263 of the Act, treating the assessment order as erroneous and prejudicial to the interest of the revenue. The CIT(E) issued a show cause notice on 26.3.2021, identifying several issues where he believed the AO had not conducted proper enquiries, leading to an underassessment. 2. Adequacy of the Assessing Officer's (AO) Enquiry During the Assessment Proceedings: The CIT(E) noted that the AO did not sufficiently investigate the corpus fund, investments in land and buildings, and the expenses on charity during the assessment proceedings. The AO had called for documents on 12.02.2018, but the new incumbent did not pursue further details, which the CIT(E) believed helped the assessee. The CIT(E) concluded that the AO's lack of proper enquiry resulted in an erroneous assessment order prejudicial to the revenue's interest. 3. Consideration of the Assessee's Reply to the Show Cause Notice: The assessee argued that the CIT(E) passed the order without considering their reply to the show cause notice. The reply was submitted on 30.3.2021, but the CIT(E) issued the order the next day, 31.3.2021, without further opportunity for the assessee to respond. The Tribunal noted that the CIT(E) wrongly stated that the assessee did not submit any reply, which was contrary to the evidence presented. 4. Treatment of Corpus Fund, Investments in Land and Buildings, and Charitable Expenses: The CIT(E) suggested that the entire corpus fund, investments in land and buildings, and charitable expenses should be added to the assessee's total income due to insufficient details. The assessee contended that there was no receipt of corpus donation or purchase of land during the relevant financial period, making these observations irrelevant. The Tribunal found that the CIT(E)'s observations were based on incorrect and irrelevant facts, and the principles of accountancy and tax jurisprudence were not applied correctly. Conclusion: The Tribunal concluded that the CIT(E) passed the revisionary order without proper consideration of the assessee's reply and based on incorrect facts. The AO had made sufficient and adequate enquiries during the assessment proceedings, and the CIT(E)'s order was not sustainable. The Tribunal quashed the revisionary order dated 31.3.2021 under Section 263 of the Act and all consequential proceedings and orders. Result: The appeal of the assessee was allowed, and the revisionary order was quashed. The order was pronounced on 7.4.2022.
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