2022 (11) TMI 190 - AT - Income Tax

Revision u/s 263 - Exemption u/s 11 - Assessment of trust - application of current year s income - CIT ( E ) has alleged that the assessee has wrongly claimed expenditure out of the accumulation fund, the claim of which has already been allowed to the assessee in the past - HELD THAT - To examine the correctness of this observation, we, on perusal of the audited financial statement notice that in the receipt and payment the assessee has shown application of accumulated fund during the year at Rs. 53,52,500/-. In the income and expenditure account two amounts have been shown as expenditure towards building renovation construction purchase of assets. Now we would like to examine the application of accumulated fund. We find that the assessee in the balance sheet under SCHEDULE-B has reduced the said sum from opening balance of accumulated fund. We find that the assessee trust furnished details of each and every amount forming part of total amount - The sum which the ld. CIT ( E ) mentioned in the show cause notice issued u/s. 263 of the Act, is also part of the list of amount spent - On perusal of the details show that the assessee has accumulated the fund in the past as per provisions of section 11(2) and has rightly applied the accumulated fund for the purpose it was meant for. On perusal of the financial statements clearly shows that the assessee has not claimed the alleged sum of Rs. 53,52, 501/- as application of income during the year. It seems that the ld. CIT ( E ) has inadvertently considered the figures of expenditure shown under the head building renovation construction purchase of assets as part of sum of Rs.53,52,501/-, which in our considered view is not correct. We, therefore, under the given facts and circumstances of the case, are of the considered view that since the reason for which the jurisdiction u/s. 263 of the Act has been invoked/initiated/assumed does not have legs to stand and the facts of the case clearly indicate that the assessee has not claimed the alleged sum of Rs.53,52,501/- towards application of current year s income, we fail to find any merit in the finding of the ld. CIT ( E ) s order passed u/s.263 of the Act. Therefore, the same is hereby quashed. Accordingly, the assessment order dt. 02- 08-2018 framed u/s. 143(3) of the Act is restored. The grounds raised by the assessee are allowed.

Summary

Issues:
Appeal against order passed under section 263 of the Income Tax Act for Assessment Year 2016-17.

Analysis:
1. The appeal filed by the assessee challenges the order passed under section 263 of the Income Tax Act for the Assessment Year 2016-17, alleging that the assessment order was erroneous and prejudicial to the revenue's interest.
2. The assessee, a trust engaged in activities under the Protection of Women from Domestic Violence Act, 2005, declared nil income in the return for the AY 2016-17. The Assessing Officer assessed the trust's income at nil, but the CIT (E) found discrepancies, specifically regarding the application of funds, leading to the initiation of revisionary proceedings under section 263.
3. During the revisionary proceedings, the CIT (E) contended that certain expenditures from the accumulated fund were wrongly allowed, which the assessee disputed, stating that the amounts were not claimed as application of income but were directly debited to the accumulated fund account. The CIT (E) held that the assessment order was erroneous and prejudicial to revenue's interest.
4. The Tribunal examined the details of the accumulated fund application and found that the amounts in question were correctly utilized for their intended purposes and were not claimed as application of income during the year. The Tribunal observed discrepancies in the CIT (E)'s findings and concluded that the revisionary proceedings lacked merit, quashing the CIT (E)'s order under section 263 and restoring the original assessment order.
5. The Tribunal's decision was based on a thorough examination of the financial statements and details provided by the assessee, highlighting that the alleged discrepancies pointed out by the CIT (E) were unfounded. The Tribunal allowed the appeal, setting aside the CIT (E)'s order and restoring the original assessment order under section 143(3) of the Income Tax Act for the AY 2016-17.

This detailed analysis outlines the key points and findings of the judgment, highlighting the discrepancies in the CIT (E)'s assessment and the Tribunal's decision to quash the order under section 263, ultimately ruling in favor of the assessee.