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2022 (7) TMI 669 - AT - Income TaxRevision u/s 263 - Benefit u/s 11 - foreign contribution and other donations were received - HELD THAT - We note that audited financial statements, statement of computation of income, details of non-corpus donations received during the year, income expenditure account, receipt payment account etc. were available with AO during the assessment proceedings. A perusal of the same shows that all the necessary facts required for adjudication of the claim of the Appellant were already on record. In response to notice dated 24.01.2017 issued by the AO, the Appellant had filed reply dated 29.06.2017 giving details of the trust its objects and providing other information/details sought for by the AO. As brought to the notice of AO that opening balance of INR 70.55 Crores of the receipt and payments account consisted of corpus donations of INR 65 Crores received by the trust in the earlier years which has been applied for the objects of the trust as is clear from bare reading of the receipts and payments account. Since the claim made by the Appellant as well as all the facts were apparent and clearly on record, we do not agree with the CIT(E) that any further inquiry/verification was warranted in the facts of the present case. There was nothing on record to invite further enquiry into the matter in view of the disclosures already made. According to CIT(E), AO fell in error by not enquiring about the source of money applied by the Appellant towards the objects of the trust since the foreign contribution was deposited in escrow account. See CHOTANAGPUR DIOCESAN TRUST. VERSUS INCOME TAX OFFICER. 1986 (7) TMI 210 - ITAT PATNA As Appellant had submitted that the assessment order is not erroneous and in support thereto had highlighted that the amendments to Section 10(23C) and 11 of the Act which provide that applications out of corpus shall not be considered as application for charitable purposes have been introduced w.e.f. 01.04.2022, and are not applicable to Assessment Year 2015-16. Ld. Authorised Representative for the Appellant has contended that the view taken by the AO is correct. According to us it is certainly a plausible view, if not the correct view, which cannot be disturbed by CIT(E) in exercise of powers of revision under Section 263 of the Act. We set aside the order, passed by the CIT(E) under Section 263 of the Act and restore the Assessment Order, dated 08.12.2017. Appeal of assessee allowed.
Issues Involved:
1. Legality of the order under Section 263 dated 26th March 2021. 2. Retrospective amendment under the FCRA Act, 2010 regarding foreign contributions. 3. Procedural and factual grounds raised by the appellant. Issue-wise Detailed Analysis: 1. Legality of the Order Under Section 263: The appellant challenged the order dated 26.03.2021, passed by the CIT(E) under Section 263 of the Income Tax Act, 1961, which set aside the assessment order dated 08.12.2017. The appellant argued that the CIT(E) erred in setting aside the assessment order for further enquiries, as the Assessing Officer (AO) had already verified the movement of funds and application of income during the original assessment proceedings. The CIT(E) noted that the appellant had received foreign contributions amounting to INR 63,21,92,771/- during the previous year 2014-15, which were held in an escrow account due to pending FCRA approval. The CIT(E) argued that since these funds were not applied for charitable purposes as per Section 11 of the Act, they should have been treated as income for the Assessment Year 2015-16. The CIT(E) believed that the AO failed to carry out basic verification of these transactions, making the assessment order prejudicial to the interest of Revenue. The tribunal found that the AO had indeed called for all relevant details during the assessment proceedings, including audited financial statements, computation of income, and details of non-corpus donations. The tribunal noted that the funds in the escrow account were disclosed in the balance sheet and that the appellant had applied INR 65.75 Crores towards the objects of the trust from general corpus funds. The tribunal concluded that the AO had made necessary enquiries and that the assessment order was not erroneous. 2. Retrospective Amendment Under FCRA Act, 2010: The appellant argued that the retrospective amendments to the FCRA Act, 2010, introduced by the Finance Act, 2016, and the Finance Act, 2018, stated that donations amounting to INR 63,18,46,554/- should not be classified as foreign contributions received by the trust. The tribunal acknowledged that the amendments to Section 10(23C) and 11 of the Act, which provide that applications out of corpus shall not be considered as application for charitable purposes, were brought into force w.e.f. 01.04.2022 and are applicable from Assessment Year 2022-23 onwards. Therefore, these amendments were not relevant to the Assessment Year 2015-16. 3. Procedural and Factual Grounds Raised by the Appellant: The appellant submitted that all necessary documents and details were furnished during the assessment proceedings, and the AO had verified the application of funds. The tribunal noted that the AO had access to all relevant documents, including details of non-corpus donations, income & expenditure account, and receipts & payments account. The tribunal found that the AO had made sufficient enquiries and that the assessment order was not erroneous. The tribunal also addressed the appellant's contention that the CIT(E) had passed the revision order on grounds other than those for which the revision proceedings were initiated. The tribunal agreed that the CIT(E) had invoked Explanation 2 to Section 263(1) without proper reference in the notice, which was contrary to the judgment of the Hon’ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. Conclusion: The tribunal concluded that the AO had made necessary enquiries and that the assessment order was not erroneous. It set aside the order dated 26.03.2021, passed by the CIT(E) under Section 263 of the Act, and restored the assessment order dated 08.12.2017. The appeal was allowed, and the order was pronounced on 20.05.2022.
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