2022 (7) TMI 257 - AT - Income Tax

Revision u/s 263 - Entitlement to exemption u/s 11 - accumulation of income made u/s.11(2) - HELD THAT - Entire details of accumulation of income made u/s.11(2) of the Act together with utilization thereon for each of the years commencing from A.Yrs. 2006-07 to 2015-16 are enclosed as filed before us. While this is so, it could be safely concluded that all the requisite enquiries were duly carried out by the ld. AO in the assessment proceedings itself, before accepting the returned income of the assessee. CIT is not even conscious of the fact that form FC3 annual return has been changed to form FC4. This categorically goes to prove the complete non-application of mind on the part of the ld. PCIT before invoking his revision jurisdiction u/s.263 of the Act. We hold that the ld. AO had made requisite enquiries before concluding the assessment and hence, there could not be any revision proceeding on the ground that proper enquiries were not carried out by the ld. AO in the course of assessment proceedings. The law is very well settled that revision jurisdiction u/s.263 of the Act could be invoked only in the event of lack of enquiry and not for inadequate enquiry; even though, in the instant case, there is no inadequate enquiry. From the perusal of the order of the ld. PCIT, we find that the ld. PCIT nowhere points out as to how the order of the ld. AO is erroneous or prejudicial to the interest of the Revenue. On this ground also, the revision order passed by the ld. PCIT deserves to be quashed. Moreover the activities of the assessee Institution had not changed from earlier years and the ld. AO had the benefit of scrutiny assessment orders framed for A.Y. 2012-13 u/s.143(3) of the Act dated 03/02/2015 and for A.Y. 2013-14 framed u/s.143(3) of the Act dated 28/03/2016 before him, while framing the assessment for A.Y.2015-16 i.e. the year under consideration. In view of the above, we have no hesitation in quashing the revision order passed by the ld. PCIT u/s.263 of the Act as it is bad in law for more than one reason as detailed hereinabove. Accordingly, the grounds raised by the assessee are allowed.

Summary

Issues:
Challenge to jurisdiction of PCIT under section 263 of the Income Tax Act and adjudication on merits.

Detailed Analysis:

Jurisdiction of PCIT under Section 263:
The PCIT sought to revise the assessment order passed by the AO, claiming it to be erroneous and prejudicial to the interest of revenue. The PCIT directed the AO to conduct a fresh assessment focusing on various issues, including verification of expenses, foreign donations, and accumulation of funds. However, the Tribunal found that the AO had already made necessary inquiries during the assessment proceedings. The Tribunal noted that the PCIT did not consider crucial details provided by the assessee, such as expenses incurred, foreign donations received, and accumulation of funds. The Tribunal held that the PCIT's revision order lacked proper application of mind and concluded that the AO had conducted sufficient inquiries before finalizing the assessment. As a result, the Tribunal quashed the revision order passed by the PCIT under section 263.

Merits of the Assessment:
The Tribunal analyzed the computation of income for the relevant year and found that the assessee had a deficit due to higher expenditure than income. This situation did not prejudice the revenue's interest, as no tax liability arose. The Tribunal emphasized that for invoking revision jurisdiction under section 263, two conditions must be met: the order must be erroneous and prejudicial to revenue. The PCIT failed to demonstrate how the AO's order met these criteria. Additionally, the Tribunal considered the consistency of the assessee's activities with previous years and the availability of past assessment orders to the AO. Consequently, the Tribunal concluded that the PCIT's revision order was legally flawed and quashed it. As the relief was granted on legal grounds, the Tribunal did not address the other grounds raised on merits, deeming them academic.

In conclusion, the Tribunal allowed the appeal of the assessee, highlighting the lack of merit in the PCIT's revision order and the adequacy of inquiries conducted by the AO during the assessment proceedings.