2023 (12) TMI 622 - AT - Income Tax

Revision u/s 263 - exemption u/s 11(2) - as per CIT purpose of accumulation u/s 11(2) not mentioned - HELD THAT - It is observed that issue relating to accumulation under section 11(2) of the Act has been specifically enquired by the Assessing Officer and duly responded by the assessee also. We do not see any lack of enquiry at the end of the Assessing Officer and justification of the same at the end of the assessee. The only objection of the learned Commissioner of Income-tax (Exemptions) is with regard to this accumulation is that exact purpose not specified. The assessee has placed on record form 10 furnished before the AO specifying the purpose, amount and period of accumulation. The purpose for accumulation has been specified as charitable purpose . In any case, the purpose of accumulation cannot be beyond the objects of the assessee. In this regard, the legal position is in favour of the assessee, i. e., the assessee is not suppose to mention the exact purpose of accumulation. Thus it can be safely concluded that all the technical requirements were duly fulfilled by the assessee along with satisfactory response to the queries raised through notice under section 142(1). The only objection raised by the learned Commissioner of Income-tax (Exemptions) through notice issued u/s 263 was that the assessee has not specifically mentioned the purpose of accumulation, is not a valid objection for which proceedings u/s 263 cannot be carried out. As the facts discussed above and considering various judicial pronouncements, we find the merits in contentions of the assessee. We find no error in order passed under section 143(3) of the Act. In view of this ground Nos. 2 and 3 raised by the assessee are allowed and order passed under section 263 of the Act is set aside. Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the Commissioner of Income-tax (Exemptions) erred in exercising powers under section 263 of the Income-tax Act, 1961 for revising the order dated February 13, 2021.
2. Whether the assessee satisfied the conditions mentioned in section 11 of the Income-tax Act for setting aside an amount of Rs. 16,15,000.
3. Whether the provisions of section 11 require the exact purpose for which the amount is set aside to be specified for claiming exemption.

Summary:

The appeal by the assessee challenges the order of the Commissioner of Income-tax (Exemptions) dated March 20, 2023, under section 263 of the Income-tax Act, 1961, for the assessment year 2018-19. The assessee raised several grounds of appeal, primarily arguing that the Commissioner of Income-tax (Exemptions) erred in exercising powers under section 263 for revising the order dated February 13, 2021, and that the conditions mentioned in section 11 of the Act were duly satisfied.

The brief facts of the case reveal that the assessee, a trust registered under sections 12A and 80G, filed its return of income declaring total income at Rs. 8,66,050. The case was selected for complete scrutiny on issues including receipts of trusts, approval under section 80G, and receipt of voluntary contributions. The Assessing Officer completed the assessment on February 13, 2021, accepting the returned income. However, notices under section 263 were issued by the Commissioner of Income-tax (Exemptions), who ultimately passed an order under section 263, leading to the present appeal by the assessee.

Upon reviewing the order of the Assessing Officer, notices issued under section 263, and submissions of the assessee, it was observed that the issues relating to accumulation under section 11(2) of the Act were specifically enquired by the Assessing Officer and duly responded by the assessee. The Commissioner of Income-tax (Exemptions) objected on the grounds that the "exact purpose" for accumulation was not specified. However, the assessee had specified the purpose as "charitable purpose" in form 10, and it was noted that the purpose of accumulation cannot be beyond the objects of the assessee.

The Tribunal referred to several judicial precedents, including decisions by the Karnataka High Court and the Delhi High Court, which supported the view that as long as the objects of the trust are charitable, and the purpose mentioned in form 10 aligns with the trust's objectives, the exemption under section 11(2) should not be denied merely due to lack of detailed specification.

In conclusion, the Tribunal found no error in the order passed under section 143(3) of the Act and held that the objection raised by the Commissioner of Income-tax (Exemptions) was not valid for initiating proceedings under section 263. Consequently, the appeal of the assessee was allowed, and the order under section 263 was set aside.

Order pronounced in the open court on August 7, 2023.