2024 (7) TMI 131 - AT - Income Tax

Revision u/s 263 - assessee has claimed exemption under wrong section i.e. Section 10(23C)(iiiae) which AO failed to examine and disallow and hence the order is erroneous - assessee during the revision proceedings vide various submissions submitted that the assessee being wholly and substantially funded by Government and existing solely for philanthropic purposes, its income is exempt under section 10(23C)(iiiac) - primary contention of the counsel for the assessee , since the assessee is a Govt. funded organization exiting solely for philanthropic purposes, in the instant case, the assessee is eligible for exemption under section 10(23)(iiac) of the Act and there is no prejudice caused to the Revenue in the instant facts. HELD THAT - While passing the order, CIT has not commented upon various alternate arguments taken by the assessee while passing the 263 order. The assessee is a Govt. funded organization for philanthropic purposes. During the course of 263 proceedings, the assessee submitted that in the instant facts, the assessee is eligible for deduction u/s. 10(23)(iiiac) and also u/s. 11 of the Act. Admittedly, the assessee incorrectly and inadvertently filed incorrect claim u/s. 10(23)(iiiae) of the Act. However, owing to this mistake, no prejudice is caused to the Revenue since the assessee is a wholly Government funded organization existing solely for philanthropic purposes and is eligible for exemption u/s. 11 and 10(23C)(iiiac) of the Act. We observe that while passing the order, CIT did not comment on the alternate claim u/s. 11 r.w.s 10(23C)(iiiac) of the Act and simply set aside the assessment order without giving any specific finding whether the assessment order passed is prejudicial to the interest of the Revenue. In our considered view, the CIT should have considered the submissions filed by the assessee (along with supporting documents) with regard to the claim of exemption u/s. 10(23C)(iiiac) and thereafter after looking into the claim of the assessee and written submission filed by the assessee CIT should have given a specific finding as to whether in the instant facts any prejudice has been caused to the Revenue i.e. whether any loss has been caused to the Revenue in the instant facts before setting aside the order u/s. 263. Appeal of the assessee is allowed.

Summary

Issues:
1. Revisionary proceedings initiated under section 263 of the Income-tax Act, 1961.
2. Correct classification of exemption amount under different sections.
3. Failure to consider alternate contentions raised by the assessee.
4. Lack of specific finding on prejudice to the interest of revenue in the order under section 263.

Analysis:

Issue 1 - Revisionary Proceedings under Section 263:
The appeal was filed against the order of the Commissioner of Income Tax, CIT(Exemption), Ahmedabad, initiated under section 263 of the Income-tax Act, 1961. The assessee contested the revisionary proceedings, arguing that they were not in accordance with the law and should be struck down. The primary contention was that the order passed by the Assessing Officer was not erroneous and did not cause any loss to revenue.

Issue 2 - Correct Classification of Exemption Amount:
The case involved the correct classification of the exemption amount under different sections of the Income-tax Act. The assessee, operating a civil hospital campus for philanthropic purposes, had inadvertently reported the exemption amount in the wrong section in the return of income. Despite this error, the assessee was eligible for exemption under section 10(23C)(iiiac) and section 11 of the Act. The contention was that since the assessee was government-funded and operated solely for philanthropic purposes, there was no prejudice to the revenue.

Issue 3 - Failure to Consider Alternate Contentions:
During the revision proceedings, the assessee raised alternate contentions regarding eligibility for exemptions under different sections of the Act. The assessee argued that the CIT failed to consider these alternate contentions while passing the order under section 263. It was emphasized that the CIT should have examined the submissions and supporting documents provided by the assessee regarding the claim of exemption under section 10(23C)(iiiac) and section 11 before deeming the order as erroneous.

Issue 4 - Lack of Specific Finding on Prejudice to Revenue:
One of the crucial aspects highlighted was the lack of a specific finding by the CIT on whether the assessment order was prejudicial to the interest of revenue. The failure to assess whether any loss of revenue occurred to the tax authorities due to the incorrect classification of the exemption amount under a different section raised concerns about the validity of the order under section 263. The absence of a specific finding on the prejudice to the revenue rendered the order liable to be set aside.

In conclusion, the Appellate Tribunal, ITAT Ahmedabad, allowed the appeal of the assessee, emphasizing the importance of considering alternate contentions, correctly classifying exemption amounts, and ensuring a specific finding on the prejudice to the revenue in orders under section 263 of the Income-tax Act, 1961.