2021 (2) TMI 680 - HC - Income Tax

Revision u/s 263 - order passed by the Assessing Officer u/s 143(3) rws 147 was erroneous in so far as it is prejudicial to the interest of the Revenue - Disallowance of expenditure on account of the accumulation under Section 11(1)(a) in respect of the car purchased in the name of the trustee - appellate tribunal directed the Assessing Officer to restrict the disallowance to the extent of ₹ 9,56,175 00 and not disallow the entire accumulation as held by the CIT(E) - HELD THAT - As decided by tribunal we consider that in the case of the assessee on violation of Section 13(1) (c)(ii)/13(2) r.w.s. 13(3), the disallowance u/s. 11 is limited only to the amount which the assessee trust has diverted for purchase of a car in the name of trust, i.e. ₹ 9,56,175/-. Considering the above, we direct the Assessing Officer to restrict the disallowance to the extent of ₹ 9,56,175/- and not to disallow the entire accumulation as held by the Ld. CIT(A). We are of the view that no error, not to speak of any error of law, could be said to have been committed by the Tribunal in passing the impugned order.

Issues:
1. Appeal under Section 260A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal for the Assessment Year 2011-12.
2. Substantial questions of law proposed by the Revenue for consideration.
3. Disallowance of accumulation under Section 11(1)(a) and invocation of revisional powers under Section 263 of the Act 1961 by the CIT (Exemptions).
4. Assessment proceedings, disallowance of expenditure, and reopening of the case under Section 147 of the Act 1961.
5. Decision of the appellate tribunal to restrict the disallowance of accumulation.
6. Interpretation of provisions of Section 13(1)(c)(ii) and Section 13(2) of the Act 1961.
7. Tax effect involved and exception clause under Circular No.17 of 2019 issued by the CBDT.
8. Consideration of errors in the impugned order by the Tribunal.
9. Analysis of judicial pronouncements by the Karnataka High Court and Bombay High Court.

Analysis:

1. The appeal before the Gujarat High Court under Section 260A of the Income Tax Act, 1961, challenged the order of the Income Tax Appellate Tribunal relating to the Assessment Year 2011-12.

2. The Revenue proposed substantial questions of law concerning the Appellate Tribunal's directions on disallowances and the invocation of Section 263 of the Act by the CIT (Exemptions).

3. The CIT (Exemptions) invoked revisional powers under Section 263 of the Act 1961 due to discrepancies in the disallowance of accumulation under Section 11(1)(a) related to a car purchase by the trustee.

4. The assessment proceedings involved the reopening of the case under Section 147 of the Act 1961, leading to the finalization of the reassessment with a revised total income after disallowing specific expenditures.

5. The appellate tribunal directed the Assessing Officer to limit the disallowance of accumulation, differing from the CIT (Exemptions) decision.

6. Interpretation of Section 13(1)(c)(ii) and Section 13(2) of the Act 1961 was crucial in determining the eligibility for exemption under Section 11 for the trust.

7. The tax effect and the exception clause under Circular No.17 of 2019 were considered due to the appeal falling within the prescribed monetary limits.

8. The High Court analyzed the errors, if any, in the Tribunal's order and examined the legal aspects of the case.

9. Judicial pronouncements by the Karnataka High Court and Bombay High Court were cited to support the Tribunal's decision, emphasizing limitations on disallowances under Section 11 based on specific violations.

This detailed analysis covers the various issues raised in the legal judgment, providing a comprehensive overview of the case and the High Court's decision.

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