2023 (11) TMI 793 - AT - Income Tax

Revision u/s 263 - claim of exemption u/s. 11 12 - Revision based on the decision of Supreme Court in another case - allegation of violation as per proviso to the provision of section 2(15) - HELD THAT - CIT(Exemption) while passing revision order has not at all examined the aspect of violation of the proviso to provision of section 2(15) of the Act and moreover the AO while framing assessment u/s. 143(3) of the Act has examined the claim of exemption u/s. 11 of the Act, as is evident from the above computation reproduced from the assessment order. We noted that the Hon ble Supreme Court while delivering judgment in the case of Ahmedabad Urban Development Authority, 2022 (10) TMI 948 - SUPREME COURT has elaborately laid down certain principles and legal position was interpreted vis-a-vis the claim of exemption u/s. 11 12 r.w.s. 2(15) of the Act. But subsequently vide order 2022 (11) TMI 255 - Supreme Court it is clearly clarified that interpreting charity under section 2(15) by holding that law declared in its judgment had to be understood in context that they were applicable for assessment years in question, however, future applications had to be understood in context for assessment years which were not called upon and accordingly law declared in said judgment would be applicable, as per facts of each such assessment year. Hence simply on the judgment of Hon ble Supreme Court in the case of Ahmedabad Urban Development Authority, supra, the revision is not possible. We also noted from the revision order apart from that the CIT(Exemption) has not at all deliberated how the assessee has violated the proviso to the provision of section 2(15) of the Act and how the AO has not examined the issue. We could not find anything which proves that there is violation of the proviso to provision of section 2(15) of the Act. Hence, we quash the revision order and allow the appeal of assessee.

Summary

Issues involved:
The only issue in this appeal concerns the revision order passed by CIT(Exemptions) u/s. 263 of the Act revising the assessment order passed by AO for assessment year 2018-19 u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 04.02.2021 allowing the claim of exemption u/s. 11 & 12 of the Act.

Details of the Judgment:

Issue 1: Revision Order by CIT(Exemptions)
The CIT(Exemption) issued a show cause notice proposing to revise the assessment order passed by the AO, allowing the claim of exemption u/s. 11 of the Act. The CIT(Exemption) directed the AO to conduct an in-depth inquiry with reference to the application of the provisions of section 2(15) of the Act, in light of the decision of the Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority. The CIT(Exemption) concluded that the AO's order was erroneous and prejudicial to the interest of Revenue under section 263 of the Act. The CIT(Exemption) directed the AO to make detailed inquiries regarding the nature of activities and receipts of the assessee based on the recent Supreme Court decision.

Issue 2: Assessee's Arguments
The assessee argued that the AO had already examined the claim of exemption u/s. 11 of the Act while framing the assessment. The assessee contended that the CIT(Exemption) solely relied on the Supreme Court's decision in the case of Ahmedabad Urban Development Authority without considering other aspects of the claim of exemption. The assessee presented the Supreme Court's judgment clarifying the interpretation of section 2(15) of the Act and emphasized that the revision was not solely based on this judgment.

Issue 3: CIT-DR's Position
The CIT-DR argued that the CIT(Exemption) had independently found violations of the proviso to section 2(15) of the Act in the assessee's activities, leading to the denial of exemption u/s. 11 for the assessment year 2018-19. The CIT-DR highlighted that the CIT(Exemption) did not solely rely on the Supreme Court's decision but made independent findings regarding the applicability and violation of the Act's provisions.

Conclusion
The Tribunal noted that the CIT(Exemption) did not examine the violation of the proviso to section 2(15) of the Act in the revision order. The Tribunal observed that the AO had already considered the claim of exemption u/s. 11 of the Act during the assessment. The Tribunal referred to the Supreme Court's clarification on the application of its judgment and found that the revision solely based on the Ahmedabad Urban Development Authority case was not sufficient. As the CIT(Exemption) did not provide evidence of the violation of the Act's provisions, the revision order was quashed, and the appeal of the assessee was allowed.

This judgment highlights the importance of thorough examination of legal provisions and factual aspects before revising assessment orders, especially in cases involving claims of exemption under the Income Tax Act.