2024 (11) TMI 145 - AT - Income Tax

Revision u/s 263 - Eligibility of the assessee for exemption u/s 11 - as per CIT AO inadvertently allowed exemption u/s 11 but the assessee filed return of income during reassessment proceedings only, thus exemption would not be available to the assessee HELD THAT - The impugned revision of the order u/s 263 is certainly bad-in-law. It is undisputed fact that the assessee is enjoying the exemption as applicable to a charitable trust since 1954. It has been granted this exemption in scrutiny assessment for AYs 1980-81, 1987-88 and 1988-89. The issue of exemption has been decided in assessee s favor by the Tribunal for AYs 2002-03, 2007-08 and 2010-11. Assessee has not filed the return of income as mandated u/s 139(1) - The circumstances under which the return of income could not be filed have not been considered in the required perspective. Due to efflux of time and change in office bearers of the assessee trust, the grant of registration by the CIT-TN III could not be traced and hence the reference thereto by way of identification as C. No. could not be furnished in the returns of income for AY 1997-98. In the era of electronic filing of return of income w.e.f. 01-04-2013, the mentioning of this information became mandatory and the assessee was unable to e- file the returns for AYs 2013-14 to 2015-16. Ultimately, the assessee sought fresh registration which was granted on 09-06-2016. To ensure compliance of Sec.139(1), the assessee made efforts to file the returns of income in physical mode and unfortunately, in the absence of such information, the same was also not accepted at Tapal center of the department. Left with no option, the assessee dispatched the returns through registered post which is evidenced by postal acknowledgements. The Ld. CIT(A), though admitted receipt of post on 03-10-2013, doubted the contents of the same without verifying the submissions of the assessee. Therefore, revision of the order could not be upheld in the eyes of law. Assessee appeal allowed.

Summary

Issues:
Invocation of revisionary jurisdiction u/s 263 by CIT(E) regarding assessment order passed by AO u/s. 147 r.w.s 144B; Eligibility of the assessee for exemption u/s 11; Allegation of delayed filing of return of income; Validity of revisionary power exercised by CIT(E).

Analysis:
The judgment revolves around the invocation of revisionary jurisdiction u/s 263 by CIT(E) concerning an assessment order passed by the AO u/s. 147 r.w.s 144B. The AO reopened the case as the assessee did not file a return of income, leading to the issuance of notice u/s 148. The assessee declared nil income, which was accepted after various details were provided during assessment proceedings. However, CIT(E) noted that the exemption u/s 11 was erroneously allowed as the return was filed late, rendering the exemption unavailable. The assessee claimed to be a registered trust since 1954, regularly filing returns and enjoying exemption, but CIT(E) found insufficient evidence to support this claim.

The judgment delves into the historical context of the trust's registration and exemption under different provisions of the Income Tax Act. The trust faced challenges due to changes in registration requirements post the introduction of Sec. 12AA in 1997. Despite favorable appellate orders, the trust encountered resistance from the department due to the absence of a specific registration number, leading to the need for fresh registration in 2016. The trust's attempts to comply with filing requirements were hindered by the unavailability of the registration number, forcing physical filing through registered post.

The court considered the circumstances leading to the delayed filing of returns and the inability to comply with electronic filing requirements. The judgment highlighted the efforts made by the trust to ensure compliance, including physical filing and dispatch through registered post. The court found the revision of the order u/s 263 to be legally flawed, emphasizing the trust's consistent exemption history and the challenges faced in complying with changing filing requirements. Consequently, the revision was quashed, and the original assessment by the AO was restored.

In conclusion, the judgment addresses the complexities of compliance faced by the trust, the historical context of its registration and exemption, and the legal validity of the revisionary powers exercised by CIT(E). The court's decision to quash the revision underscores the importance of considering the practical challenges faced by taxpayers in meeting evolving regulatory requirements.