2022 (12) TMI 751 - AT - Income Tax

Revision u/s 263 by CIT - taxation being anonymous donation received in cash u/s 115BBC - Assessee is an AOP for the impugned assessment year, but not a charitable trust - difference in recording of reasons for revision - whether the assessment order passed by the learned assessing officer, though holding that an anonymous donation is chargeable to tax u/s 115BBC of the act, can he set off the deficit claimed by the trust - HELD THAT - In the income and expenditure account interest on fixed deposit was included which was reduced from the business income and offered to tax as interest on fixed deposit Under the head income from other sources. Accordingly, the net income was offered at rupees nil. However, in the end of the computation statement. It claimed the carry forward of the depreciation however, did not claim the carry forward of the losses. Thus according to the computation, the assessee has carried forward the depreciation comprising of depreciation for assessment year 2011 12 and pertaining to assessment year 2010 11 and a business loss pertaining to assessment year 2009 10. This is so because the due date of filing of the return of income was 30 September 2011 whereas the assessee filed its return of income only on 17/4/2012. Therefore, as per the assessee, the carry forward of losses is not allowable. The learned assessing officer has started. The computation of total income by showing the deficit of ₹ 5,30,22,672 and made an addition thereto of any anonymous donation of ₹ 55,204,903. There is no error in the computation because, the losses can be set-off for the same assessment year, even if the return of income is filed late. Therefore, to that extent. There is no error in the order of the learned AO. According to the provisions of Section 115BBC, on anonymous donation tax is required to be charged at the rate of 30% subject to certain deductions. The learned CIT did not invoke the provisions of Section 263 of the act for this reason. The only reason stated by the PCIT is that the learned assessing officer has granted set off deficit of the assessee trust against the anonymous donation. We are of the view that both these things are different. One is the manner of computation of total income and 2nd is manner of chargeability of tax on the total income. The 2nd aspect is not at all a reason stated by the ld CIT for upsetting the order of the learned AO. We do not find any reason to uphold the order of the learned PCIT passed u/s 263 of the act as there is no error which is prejudicial to the interest of the revenue pointed out in his order dated 22/3/2021. Hence same cannot be sustained and therefore, quashed. Appeal filed by the assessee is allowed.

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Validity of invoking Section 263 in a casual and mechanical manner.
3. Consideration of submissions made by the appellant.
4. Claim of loss or deficit by an "AOP" under the head Income from business and profession.
5. Filing of incorrect ITR form and its implications.
6. Applicability of Section 115BBC to the appellant.
7. Filing of Receipt and Payment account instead of Profit and Loss account.
8. Non-application of mind and mechanical passing of Notice and Order under Section 263.

Detailed Analysis:

1. Jurisdiction under Section 263 of the Income Tax Act:
The appellant challenged the jurisdiction of the CIT under Section 263, arguing that the conditions for invoking this power were not met. The Tribunal noted that the CIT invoked Section 263 on the grounds that the assessment order was erroneous and prejudicial to the interest of revenue. The Tribunal examined whether the AO had conducted the necessary inquiries and verifications during the assessment proceedings and found that the AO had indeed examined the issues in detail, particularly the anonymous donations.

2. Validity of Invoking Section 263 in a Casual and Mechanical Manner:
The appellant argued that the CIT invoked Section 263 in a casual and mechanical manner without applying his mind to the assessment records. The Tribunal found that the CIT's order lacked specific details on what constituted the error in the AO's order and how it was prejudicial to the revenue. The Tribunal emphasized that the CIT must provide a clear rationale for invoking Section 263, which was missing in this case.

3. Consideration of Submissions Made by the Appellant:
The appellant contended that the CIT did not consider the submissions made in response to the show-cause notice under Section 263. The Tribunal noted that the CIT's order did not adequately address the appellant's submissions and explanations, which indicated a lack of proper consideration and application of mind.

4. Claim of Loss or Deficit by an "AOP" under the Head Income from Business and Profession:
The CIT held that an "AOP" cannot claim a loss or deficit if the income is computed under the head Income from business and profession. The Tribunal found that the AO had allowed the deficit claimed by the appellant after proper verification and that the CIT's order did not provide sufficient grounds to challenge this aspect of the assessment.

5. Filing of Incorrect ITR Form and Its Implications:
The CIT argued that the appellant filed the wrong ITR form (ITR-7) and hence could not claim the benefits of losses or deficits. The Tribunal noted that the AO had accepted the return and conducted a detailed assessment. The Tribunal emphasized that procedural defects, such as filing the wrong form, should not be grounds for denying legitimate claims if the substantive requirements are met.

6. Applicability of Section 115BBC to the Appellant:
The CIT held that Section 115BBC, which deals with the taxation of anonymous donations, applied to the appellant. The Tribunal found that the AO had already made an addition under Section 115BBC for the anonymous donations received by the appellant. The Tribunal noted that the AO had followed the correct procedure and that the CIT's order did not provide new grounds for invoking Section 263.

7. Filing of Receipt and Payment Account Instead of Profit and Loss Account:
The CIT argued that the filing of a Receipt and Payment account instead of a Profit and Loss account was erroneous and prejudicial to the revenue. The Tribunal found that the AO had accepted the financial statements filed by the appellant and conducted a detailed assessment. The Tribunal held that the CIT's order did not provide sufficient grounds to challenge the AO's acceptance of the financial statements.

8. Non-application of Mind and Mechanical Passing of Notice and Order under Section 263:
The appellant argued that the notice and order under Section 263 were passed without proper application of mind. The Tribunal found that the CIT's order lacked specific details and a clear rationale for invoking Section 263. The Tribunal emphasized that the CIT must provide a detailed explanation of the errors in the AO's order and how they are prejudicial to the revenue.

Conclusion:
The Tribunal quashed the CIT's order under Section 263, finding that the AO had conducted a detailed assessment and that the CIT's order lacked specific details and a clear rationale for invoking Section 263. The Tribunal allowed the appeal filed by the appellant.

← Previous Next →