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TMI Blog2023 (5) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. The Ld CIT(E), upon examination of assessment record, noticed that the assessee had claimed deduction towards accumulation of income u/s 11(2) of the Act in the immediately preceding year, i.e., in AY 2016--17 for an amount of Rs.14.51 crores. And during the year under consideration [AY 2017-18], the assessee has claimed to have spent a sum of Rs.6.00 crores out of the above said accumulated amount and has duly reported the same in Schedule 1 of the return of income. The Ld CIT(E) noticed that the assessee has not submitted the details or any documentary evidence in support of claim of utilization of above said amount of Rs 6 crores. Accordingly, he took the view that the AO has not verified the issue at all and the same has rendered the assessment order erroneous and prejudicial to the interests of revenue. Accordingly, the Ld CIT(E) initiated revision proceedings u/s 263 of the Act. 3. Before Ld CIT(E), the assessee contended that the assessment order is neither erroneous nor prejudicial to the interests of revenue. In this regard, the assessee relied upon hosts of case laws. The Ld CIT(E) rejected the said contentions by taking support of Explanation 2 to sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s dated 30--01--2019 and 03--12--2019. The assessee has furnished the details of accumulation of funds made u/s 11(2) of the Act in the earlier years, details of utilization of funds, copy of Form no.10 and board resolutions. The Ld A.R submitted that the AO was satisfied with the details furnished by the assessee and accordingly accepted the same. He submitted that the assessee has used the accumulated funds only for the purposes for which it was accumulated. Accordingly, he submitted that the AO has taken a possible view of the matter and it is not a case of non--enquiry as alleged by Ld CIT(E). 6. The Ld A.R further submitted that the funds accumulated during the year ending 31.3.2016 could be utilized by the assessee within next five years. Hence the question of non-utilization of funds and the consequences thereon should be examined in the assessment year 2022--23. He further submitted that the Ld CIT(E) has not found fault with the submission of the assessee. He submitted that the assessee has furnished all the relevant details before Ld CIT(E) also. However, the Ld CIT(E) has proceeded to hold that the assessment order is erroneous without considering the fact that the AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interests of the Revenue", the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote) : "The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income--tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income--tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income--tax Officer is unsustainable in law." The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282." The principles laid down by the courts are that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss the Ld. CIT(E) himself conducts enquiry on the issue and recording a finding which would show that AO's view despite enquiry was erroneous/unsustainable in law. 9. And we note that even before Ld CIT(E), the assessee has furnished the specific details of utilization of funds. The case of the Ld CIT(E) is that the AO has failed to examine the break--up of the details of the said expenditure in order to satisfy himself that the said amount of Rs.6.00 crores was indeed used for the purpose for which it was accumulated. However, the question is whether the Ld CIT(E) can hold such a view when the AO has enquired about the issue and that too without pointing out the error, if any, in the assessment order in the revision proceeding u/s 263 of the Act?. According to us, the Ld. CIT(E) cannot do so, because AO has enquired about it and in such an event the Ld. CIT(E) himself has to enquire about the issue and point out that AO's view was erroneous/un-sustainable in law. 10. In this context, it would be gainful to refer to case-law in the case of Gabriel India Ltd. (supra) wherein their Lordship answered the question as to when an order can be termed as "erroneous" which was explained a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be erroneous because the order is not sustainable in law and the said finding must be recorded. The Commissioner of Income tax cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner of Income tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income tax and he is able to establish and show the error or mistake made by the Assessing officer, making the order unstainable in law. In some cases possibly though rarely, the Commissioner of Income tax can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded. Explanation.--Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub--section (1), read with the Explanation to that sub--section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub--clause (iv) or sub--clause (v) or sub--clause (vi) or sub--clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter. (3) Any income referred to in sub--section (2) which-- (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub--section (5), or (c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub--section or in the year immediately following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen in such an event [when there is violation of clause (a)], then, the amount so applied shall be deemed to be the income of the previous year in which it is so applied ; or as per clause (d) of sec 11 (3) of the Act, if the amount is credited or paid to any Trust or Institution as stated therein, then the amount so credited or paid to the Trust or Institution shall be deemed to be the income of assessee of the previous year in which it is so credited or paid. Therefore, according to us, the AO is duty bound to enquire about the accumulated amount which has been claimed to have been expended and examine whether it has violated clause (a), or (b) or (d) of sec. 11(3) of the Act because in the event there is any breach then it shall be deemed to be the income of the previous year in which it is so applied or ceases to be invested or credited/paid as the case may be. So in the event if there is any expenditure of accumulated amount within the set-apart period and if there is any violation of clause (a), or (b) or (d) of sec. 11(3) of the Act, then in such a factual situation only, the tax liability could be imposed upon the assessee. Therefore the contention of Ld AR that the expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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