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2024 (9) TMI 685 - AT - Income TaxRevision u/s 263 - CIT Setting aside the issue of rent recovered from the specified persons to the file of the AO - Treatment of foreign contribution as income in the Income Expenditure Account - HELD THAT - Instant case was selected for the limited scrutiny on the two points Income or property of the Trust /Institution lent to the specified persons and Land /building or other property pf the Trust /Institution made available for the use of the specified persons. AO has made the adequate enquiry and accepted the return of the assessee. The Ld CIT (Exemption) could not impose their views, when the plausible view has been taken by the AO. Every loss of Revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of Revenue. Foreign contribution the case was not selected for scrutiny for that point because the case of assessee was selected only for limited scrutiny - AO had no jurisdiction to discuss this issue in the assessment proceedings. The AO has no power to extend the scope of scrutiny under limited scrutiny. When the two views were possible and AO has taken one view with which the CIT(Exemption) may not agree the said order cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by AO is unsustainable. The view taken by the AO was not erroneous and prejudicial to the revenue - Decided in favour of assessee.
Issues:
1. Validity of order passed under Section 263 of the Income Tax Act. 2. Consideration of rent recovered from specified persons. 3. Treatment of foreign contribution as income in the Income & Expenditure Account. Issue 1 - Validity of order under Section 263: The appeal challenged the order passed by the Ld. CIT(A) under Section 263 of the Income Tax Act. The appellant contended that the assessment order was not erroneous or prejudicial to the interest of Revenue, thus questioning the basis for the revision. The appellant argued that the CIT cannot substitute the opinion of the Assessing Officer (AO) and that the AO had conducted adequate inquiries during the assessment. The appellant further contended that the power to revise can only be invoked in cases of lack of inquiry, not inadequate inquiry. Issue 2 - Rent recovered from specified persons: The Ld. CIT(A) set aside the issue of rent recovered from specified persons to the file of the Ld. AO, citing inadequate verification and inquiries by the AO. The CIT observed that the fair market rent of the property should have been ascertained to determine if the specified persons benefitted. The AO's failure to verify the reasonableness of the rent recovered was deemed erroneous and prejudicial to the interest of Revenue. Issue 3 - Treatment of foreign contribution: Regarding foreign contributions, the Ld. CIT(A) held that they should be taken as income in the Income & Expenditure Account. However, the appellant argued that foreign grants should be treated as a liability at the time of receipt, as per the law. The appellant contended that grant money received is not voluntary contributions but project grants with specific conditions, making them ineligible to be treated as income. The appellant provided evidence of grant agreements to support this argument. The appellant relied on various judicial decisions to support their contentions, emphasizing that the AO had conducted adequate inquiries and accepted the return of the assessee. The appellant argued that the CIT(A) could not impose their views when the AO had taken a plausible view. The Tribunal ultimately allowed the appeal, stating that the AO's view was not erroneous or prejudicial to the revenue, especially since the case was selected for limited scrutiny and the issue of foreign contribution was not within the scope of scrutiny. In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the AO's decision was not erroneous or prejudicial to the revenue. The judgment highlighted the importance of adequate inquiry by the AO and the limitations on the CIT's power to revise assessments based on differing opinions.
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