2024 (10) TMI 180 - HC - Income Tax

Revision u/s 263 - disallowing the exemption u/s 11(1) for the grant received by the assessee Trust from the Government - ITAT came to the conclusion that the order passed by the Principal CIT u/s 263 reveals that he has not applied his mind by calling for the office records and independently taking a view that the assessment order passed by the AO is erroneous and prejudicial to the interest of the Revenue, but the Principal CIT has acted only on the proposal sent by the Assessing Officer to initiate proceedings u/s 263, thus liable to be set aside HELD THAT - ITAT on the basis of the principle of consistency and in absence of any change of facts to the effect that the assessee Trust was in receipt of the government grant in the earlier years which has been accepted by the Revenue to be considered for being eligible for exemption under Section 11 of the Act. In view of such finding of fact arrived at by the Tribunal, it cannot be said that the assessment order passed u/s 143(3) of the Act was erroneous or prejudicial to the interest of the Revenue. We are, therefore, of the opinion that no question of law much less any substantial question of law would arise from the impugned order of the Tribunal. The appeal is, accordingly, dismissed.

Summary

Issues:
Tax Appeal under Section 260A of the Income Tax Act, 1961 challenging order of the Income Tax Appellate Tribunal for the Assessment Year 2015-16 regarding government grant received by the assessee Trust and exemption under Section 11(1) of the Act.

Analysis:
The Tax Appeal was filed by the Revenue challenging the Tribunal's order regarding the grant received by the assessee Trust from the State Government. The Revenue proposed substantial questions of law questioning the Tribunal's decision on the treatment of the grant under Sections 11(1) and 12 of the Act. The Tribunal considered whether the Assessing Officer had applied his mind to the issue of the grant receipt and found that the AO had raised the issue during assessment proceedings, indicating consideration. The Tribunal also noted that the Revenue had accepted similar grants in previous years as income eligible for accumulation under Section 11 of the Act.

The Tribunal further analyzed the initiation of proceedings under Section 263 of the Act by the Principal CIT, finding that the Principal CIT did not independently apply his mind but acted on the proposal from the Assessing Officer. Citing relevant case law, the Tribunal concluded that the order under Section 263 lacked independent assessment and set it aside. Additionally, the Tribunal considered the principle of consistency, noting that the grant issue had not changed from previous years where it was accepted by the Revenue. Relying on the doctrine of consistency, the Tribunal held that the assessment order was not erroneous or prejudicial to the Revenue's interest.

Based on the Tribunal's findings on the application of the Assessing Officer's mind, lack of independent assessment by the Principal CIT under Section 263, and the principle of consistency regarding the grant issue, the Tribunal dismissed the appeal, stating that no substantial question of law arose from the Tribunal's order. The appeal was therefore dismissed.