2024 (7) TMI 959 - AT - Income Tax

Revision u/s 263 - as per CIT AO had not examined the issue of accumulation in depth and AO had also not examined the actual difference between the interest income earned by the assessee and as accrued by the assessee as to whether the assessee was liable to be taxed in respect of differential amount HELD THAT - A perusal of the facts in the present case clearly shows that both the issues which have been raised by ld CIT(E) have been specifically queried to by the AO in the course of original assessment proceedings. These queries have also been answered substantiated with documentary evidence. AO in the course of Face Less Assessment would have obviously had this documentary evidence verified by the Verification Unit. There is no allegation by ld CIT(E) that these documents and evidences were not verified by the Verification Unit of the FaceLess Assessment Proceedings. The issues which have been raised by ld CIT(E) in his order u/s. 263 have clearly been examined by the AO in the course of assessment proceedings, it cannot be said that there has been no application of mind by the AO. A perusal of the order of the ld CIT(E) does not show as to what is the specific error which has been done by the AO has led to prejudice the interest of the revenue. Now, if at all, the interest income is also considered as income still the application would stand at 85% and the exemption of 15% would still cover this income of Rs. 19,15,625/- and income itself would be exempt. The amount of Rs. 5,00,00,000/- admittedly have been clearly shown to be held in fixed deposit and in Flexi account with scheduled bank. Thus, order passed u/s. 263 is only a fishing enquiry which has already been examined in depth by the AO in the course of assessment, which is not permissible in the proceedings u/s. 263 - Decided in favour of assessee.

Summary

Issues:
Appeal against order under section 263 of the Income Tax Act for assessment year 2018-19.

Detailed Analysis:
1. Background and Submission by Assessee:
The appeal was filed by the assessee against the order of the ld CIT(Exemption), Hyderabad dated 29.3.2023 under section 263 of the Act for the assessment year 2018-19. The assessee, a charitable society providing engineering studies, had filed its return of income for the relevant year. The Assessing Officer issued notices under sections 143(2) and 142(1) of the Act, seeking clarifications and details regarding the accumulation of income by the Trust. The assessee responded to these queries with relevant documents and bank accounts. The assessment was completed under section 143(3) of the Act, accepting the returned income. However, the ld CIT(E) initiated revision proceedings under section 263, alleging that the Assessing Officer did not examine the accumulation of Rs. 5,00,00,000 and the difference in interest income of Rs. 19,15,625.

2. Arguments by Assessee and Revenue:
The assessee contended that both issues were examined by the Assessing Officer during the Faceless Assessment and were duly responded to with supporting evidence. The ld CIT(E) was accused of not considering the evidence submitted during the assessment proceedings, making the revisionary proceedings invalid. On the other hand, the ld CIT DR supported the order of the ld CIT(E), claiming that the Assessing Officer did not delve deeply into the accumulation issue and the difference in interest income.

3. Tribunal's Decision:
The Tribunal analyzed the submissions and noted that the Assessing Officer had specifically queried the issues raised by the ld CIT(E) during the original assessment proceedings. The documentary evidence provided by the assessee was likely verified by the Verification Unit. The Tribunal found that there was no evidence to suggest that the documents were not verified. It was observed that the ld CIT(E) failed to point out any specific error by the Assessing Officer that prejudiced the revenue's interest. Even if the interest income was considered taxable, the exemption would still cover it. The amount of Rs. 5,00,00,000 was shown to be in fixed deposits and a Flexi account, as confirmed by the bank. Therefore, the Tribunal concluded that the order under section 263 was a fishing enquiry on an issue already examined by the Assessing Officer, rendering it impermissible. Consequently, the order under section 263 for the assessment year was quashed, and the appeal of the assessee was allowed.

4. Conclusion:
The Tribunal's decision highlighted the importance of thorough examination during assessment proceedings and the need for substantial evidence to support revisionary actions under section 263 of the Income Tax Act. The judgment emphasized the significance of documentary verification and the requirement for specific errors to be identified to justify revision orders.