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TMI Blog2022 (7) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the trust results into a deficit and hence it cannot be said that any prejudice is caused to the revenue. We do not find any force in this argument because the movement the corpus donation is taken as a voluntary contribution, the quantum of deficit will definitely come down. Therefore, for subsequent years such deficit would be available of lesser amount for set of. Therefore, non-treating of corpus donation as voluntary contribution is definitely prejudicial to the interest of revenue. AR has also stated that the CIT has failed to show that how the order of the AO is erroneous. This argument does not merit the consideration for the simple reason that, the learned assessing officer in the assessment order has categorically held that the donation received towards the corpus is not eligible for exemption u/s 11 (1)(d) of the act therefore naturally he should not have granted this exemption to the assessee - CIT has merely directed the AO to take his findings to the logical conclusion in the computation of income. Therefore, giving a finding in the assessment order and not including the same in the computation of total income makes the order passed by the AO is erroneous. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at respective assessment orders passed by the learned Assessing Officer u/s 143 (3) of The Act are erroneous so far as prejudicial to the interest of the Revenue. The reasons given by the LD CIT for these years are identical therefore, these appeals were argued by the parties raising similar arguments for both the years, and hence, we disposed those appeal by this consolidated order. 02. We first state the facts for AY 2016-17. For that year revisionary order u/s 263 of the Act says that the order passed under Section 143(3) of the Income-tax Act, 1961 (the Act) on 31st December, 2017, by the Dy. Commissioner of Income-tax, Circle 2(1), Mumbai (The Learned AO) is erroneous and so far prejudicial to the interest of the Revenue. 03. Assessee has raised following grounds of appeal:- 1. That the order under section 263 is without jurisdiction unwarranted and bad in law Tax effect-Nil 2. That assumption of jurisdiction by CIT under section 263 is based on misinterpretation of the order of the Assessing Officer Tax effect-Nil 3. That CIT has misdirected himself by treating the reasons given by AO as conclusions and by substituting his opinion to that of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son for denial of the credit was that assessee has shown corpus donation with specific direction of ₹101,20,54,000/- and claimed on it exemption under Section 11(1) (d) of the Act. Assessee has also loan of ₹ 90 crores from Dawat E _ Hadiyaah, Kolkata and Mumbai. Assessee has meager income of rent of ₹72,000/- and assessee has claimed application of income of ₹140,62,55,570/-. Thus, the deficit of ₹140 Cr. was carried forward by the assessee. The learned Assessing Officer denied the same stating that assessee is getting unusual high corpus donation with specific direction and also raising use loans, utilizing the above sum and showing application of income of huge sum and claiming huge deficit. He tabulated a chart at page no. 26 of his order and stated that for A.Y. 2010-11 to 2016-17, assessee has applied funds towards the object of the trust of ₹1090 Cr, and has meager income but corpus donations of ₹758 Cr and loans of ₹417 Cr. Thus, trust has carried forward deficit of ₹1087 Cr. 06. With respect to corpus donation received by the assessee trust, AO noted that major portion of the corpus donation was received from Daw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is eligible for deduction u/s 11 (1) (d) of the act even if it comes from donors with a direction that the donation should be treated as corpus, despite the fact that it is allowed to be part of the trust fund of about nature. After analyzing the object of the trust, the utilization of the trust fund, income and expenditure account submitted Under foreign contribution regulation act and receipt and payment account, he held that the entire donation by way of a foreign contribution is actually in the nature of regular voluntary contribution rather than corpus donation, which is evident for the purpose for which it has been received as an specified in FC-4 as well as its utilization. In the end in paragraph number 5.1.4 he reached at a conclusion that corpus donation claimed exempt u/s 11 (1) (d) is actually regularly voluntary contribution and does not qualify for exemption under that Section. 07. With respect to the loan received by the assessee trust, he held that the amount received by the assessee trust shown as a loan are also quite unusual because (1,) these are interest free loans taken without any security, (2) borrowing is from a related party Under unified control from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a detailed paper book containing 37 pages. His argument was that the order passed by the learned CIT is not sustainable, as it has given finding to the learned Assessing Officer to include the corpus donation and loan as income of the assessee for the purpose of computation. 014. He also submitted that the order is not prejudicial to the interest of the Revenue as even if the corpus donation were treated as voluntary donation there would be nil income. Therefore, he submitted that the order is not sustainable in law. He also submitted two different paper books wherein identical 20 pages submission was attached therein. Therefore, he submitted that the order is not sustainable in law. He also submitted two different paper books wherein identical 20 pages submission was attached therein. Therefore, he submitted that the order deserves to be set aside. 015. The learned CIT Departmental Representative vehemently supported the order of the learned CIT. It was stated that before CIT, despite proper notice the assessee did not submit anything and neither perused his adjournment request and therefore, now assessee does not have any say to contest the order of the CIT. Even on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue and therefore no infirmity can be found in the order of the learned Commissioner of income tax. 016. We have carefully considered the rival contention and perused the orders of the lower authorities. We have also carefully gone through the paper book submitted by the assessee. 017. On perusing the order of the learned CIT and learned assessing officer, with respect to the loan amount and corpus donation, CIT has given a clear-cut finding that the learned assessing officer based on his own finding in the assessment order should have denied the exemption u/s 11 (1) (d) of the act with respect to the corpus donation and should have included the loan amount as voluntary contribution for the reason that these are received from entities controlled by same authority. We find that after giving the conclusive decision by the learned assessing officer that the corpus donation as well as the loan is voluntary contribution, allowing the exemption u/s 11 (1) (d) of the act with respect to the corpus donation and not including the loan amount as income derived from the property, makes the order passed by the learned assessing officer erroneous and prejudicial to the interest of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of passing assessment order u/s 143 (3) read with Section 263 of the act, It would also be necessary for the learned assessing officer to verify what kind of specific direction the donor has given stating the object of utilizing corpus donation. With respect to the loan, there is a specific claim by the learned authorised representative that there is no utilization of loan received by the assessee against the application of income claimed in the computation of income. The AO also needs to verify the same before reaching any conclusion with respect to the above two receipts. The assessee may be granted an opportunity of hearing as the order of the learned CIT was passed wherein assessee did not avail such opportunity. The AO may decide about inclusion of both these receipts and its taxability in accordance with the law. 023. Accordingly, appeal of the assessee for assessment year 2016 17 is partly allowed with above direction. 024. The facts relating to assessment year 2017 18 are also identical. Therefore, for the similar reasons we also uphold the action of the learned CIT u/s 263 of the act, however, while passing the order u/s 143 (3) read with Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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