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TMI Blog2025 (4) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal in ITA No.1618/Chny/2024 for assessment year 2018-2019 as lead case. Our decision on this issue will equally apply to appeal Nos. 1619 & 1620/Chny/2024 for assessment years 2020-2021 also. 2. Sans unnecessary details, brief facts of the case are that the assessee/appellant "M/s. St. Joseph Institute of Science and Technology Trust" is registered public charitable trust under section 12AA of the Income Tax Act, 1961 ('Act' in short) since its inception and have been running an engineering college under the name and style "St. Joseph's College of Engineering" and "St. Joseph's Institute of Technology" respectively. A search was conducted in the premises of the assessees on 07.11.2019 and certain excel sheets containing details about receipts in the form of DD and cash were seized from the electronic devices used by the employees of the Trust, namely, Mr.Xavier and Mr.Selvaraj as under :- Name AY DD Cash Total St. Joseph Institute of Science and Technology Trust 2018-19 Nil 6,78,55,600 6,78,55,600 St. Joseph Institute of Science and Technology Trust 2020-21 2,35,33,650 4,45,31,350 6,80,65,000 St. Joseph Education Trust 2020-21 24,00,000 78,75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under :- For AY 2018-19, St Josephs Institute of Science and Technology Trust [DIN & Notice No. ITBA/AST/F/142(1)/2021-22/1035548990(1)]: Annexure ST.JOSEPHE INSTITUTE OF SOTERICE AND TECHNOLOGY TRUST 1.Please furnish the registration certificate issued u/s.12AA, computation of total income statement, audit report, income and expenditure account, balance sheet for the asst. years 2014-15 to 2020-21. 2. Please produce relevant material to show that an amount of Rs.1,02,75,000/- declared as unaccounted fees collected by St. Joseph's Educational Trust for the asst. year 2020-21 has been offered in the respective asst. year. 3. Please produce relevant receipts in connection with corpus donations claim of Rs.5,88,60,300/- for the asst. year 2018-19 and Rs.24,00,000/- for the asst. year 2020-21. Also, furnish the following details in connection with corpus donation received for the asst. years 2014-15 to 2020-21: S. No Asst. year Name & Address of donor(s) Contact No. Amount of donation Corpus donation Date of receipt of donation/corpus donation JAYARAMAN SARAVANAN DC/ACIT CENT CIR 1(3) CHENNAΙ For AY 2020-21, St Josephs Institute of Science and Technolo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant Commissioner of Income Tax, Central Circle 1(3), Chennai-600 034. Respected Sir, Sub: Proceedings initiated u/s 153A of the Income-tax Act, 1961 (the Act) for the Assessment year('AY) 2018-19 in the case of M/s. St. Joseph's Institute of Science and Technology Trust -PAN: AAHTS9943B. Ref: Notice issued under section 153A of the Act dated 07-07-2021- ITBA/AST/S/153A/2021-22/1034055618(1) Notice issued under section 142(1) of the Act dated 14-09-2021- ITBA/AST/F/142(1)/2021-22/1035548990(1) :- reg We are the authorized representatives of the abovementioned assessee. We wish to bring it your attention that your assessee has still been facing certain difficulties in filing the return of Income electronically through the IT portal in pursuance to the notice issued under section 153A of the Act dated 07-07-2021. We have already informed your goodself about the difficulties in the IT portal for filing the return of income for the subject AY 2018-19 vide our letter dated 17-09- 2021. Your assessee has also been issued a notice under section 142(1) of the Act dated 14-09-2021 requiring them to furnish certain details. We are furnishing the following documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FY 2017-18-Refer Annexure 6 With regards to the other details asked for by your goodself, we wish to state that we are in the process of collating the required documents and we request you to provide us time till in order to enable us to submit the same. We shall gladly furnish any further information your good self may require in this regard. Thanking you Yours truly, For V. NARAYANAN & CO Chartered Accountants Partner 7. The ld. Counsel for the assessee further took us through the search assessment passed u/s.153A r.w.s.144 of the Act dated 28.09.2021 and stated that the assessee has recomputed the total income treating the cash donations as anonymous donations and corpus donations collected in DD. The AO in his search assessment order u/s 153A r.w.s.144 in para 3 and 4 had noted the same as under :- ''3. Unaccounted capitation fee of Rs.6.78.55,600/- received in cash added to the aggregate of income: During the course of search in the case of the assessee trust on 07.11.2019, it was noticed from the seized material Ann/JCE/ANJ/ED/S-1 that the assessee had collected capitation fees by way of cash which was not accounted in the books of account. The trustee of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d [2007] 295 ITR 282 (SC). The ld. Counsel for the assessee argued that there is no mentioning of the description about the nature of those receipts in those seized materials and it is the allegation of the investigation department that it is purportedly capitation fees. The Id. Counsel for the assessee argued that it is not a case of 'lack of inquiry', since it is a search assessment, the details of donors were called for and examined by the investigation team and also by the AO during the assessment proceedings by issuing the notice u/s 142(1) of the Act on 14.09.2021 and hence the allegation of the PCIT that the matter was not examined by the AO is totally incorrect. Further, the ld. Counsel for the assessee argued that the PCIT cannot invoke jurisdiction under section 263 of the Act merely if he believes that the inquiries made by the AO are inadequate or insufficient and only if AO has not made any inquiry at all. Hence, the order of the AO cannot be regarded as "erroneous" for the purpose of invoking jurisdiction u/s 263 of the Act. For this proposition, the ld. Counsel for the assessee argued relied upon the decision of the Delhi High Court in the case of CIT v. Sunb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arded as "prejudicial to the interest of the revenue" and hence the PCIT cannot invoke jurisdiction u/s 263 of the Act. The ld. Counsel for the assessee further argued that the PCIT ought to have made some independent inquiry to ascertain whether the decision of the Madras High Court in the case of MAC Public Charitable Trust would be applicable to the facts of the appellant, before directing the AO to deny exemption u/s 11 of the Act by blindly following the decision of the MAC Public Charitable Trust without bringing any prima facie evidence on record to prove that those alleged receipts are not donations but "capitation fee" as held in the case of MAC Public Charitable Trust. The ld. Counsel for the assessee further argued that the PCIT ought to have applied his mind before passing the order directing the AO to deny exemption u/s 11 of the Act on the entire receipts when the appellant has already paid the taxes on cash receipts u/s 115BBC of the Act and holds valid registration u/s 12AA of the Act and neither the AO or PCIT has power to deny the exemption u/s 11 of the Act nor to cancel the registration u/s 12AA of the Act by the CIT (Exemptions). For this proposition, the ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g section 263 of the Act and various settled judgments of the Hon'ble Supreme Court and Hon'ble High Courts held as under: "15. We have heard the learned counsel appearing on behalf of the parties and perused the record. 16. Vide order dated 06.11.2019, this Court framed the following question of law :- A. Whether, in the facts and circumstances of the case, the Hon'ble ITAT was justified in quashing the order under Section 263 of the Income Tax Act? 17. The brief controversy involved in the present appeal pertains to the invocation of revisional jurisdiction under Section 263 of the Act by the CIT to set aside the original assessment order dated 30.03.2005. 18. Before adverting to the merits of the case, it is apposite to refer to the power of the revisional authority of the CIT envisaged as per Section 263 of the Act. For the sake of clarity, the relevant extract of Section 263 of the Act is reproduced as under: "263. Revision of orders prejudicial to revenue (1) The [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner] may call for and examine the record of any proceeding under this Act, and if he considers that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition laid down in Explanation 2 does not warrant recording of the said enquiry or verification in its entirety in the assessment order. 21. Admittedly, in the instant case, the questionnaire dated 02.11.2004, which has been annexed and brought on record in the present appeal, would manifest that the AO had asked for the allowability of the claims with respect to the issues in question. Consequently, the respondent-assessee duly furnished explanations thereof vide replies dated 09.12.2004, 20.12.2004 and 06.01.2005. Thus, it is not a case where no enquiry whatsoever has been conducted by the AO with respect to the claims under consideration. However, this leads us to an ancillary question? whether the mandate of law for invoking the powers under Section 263 of the Act includes the cases where either an adequate enquiry has not been made and the same has not been recorded in the order of assessment or the said authority is circumscribed to only consider the cases where no enquiry has been conducted at all. 22. Reliance can be placed on the decision of this Court in the case of CIT v. Sunbeam Auto Ltd. [2009 SCC OnLine Del 4237], wherein, it was held that if the AO has not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a different opinion. Paragraph 8 of the said decision reads as under :- 8. In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Once such application of mind is discernible from the record, the proceedings under section 263 would fall into the area of the Commissioner having a different opinion. We are of the view that the findings of facts arrived at by the Tribunal do not warrant interference of this court. That being the position, the present case would not be one of "lack of inquiry" and, even if the inquiry was termed inadequate, following the decision in Sunbeam Auto Ltd. (2011) 332 ITR 167 (Delhi) (page 180) : "that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter." No substantial question of law arises for our consideration. 24. In Ashish Rajpal as well, this Court was of the view that the fact that a query was raised durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue, 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. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. (See 'Rampyari Devi Saraogiv CIT[(1968) 67 ITR 84(SC)] and in "Tara Devi Aggarwalv.CIT[(1973) 3 SCC 482:1973 SCC (Tax) 318:(1973) 88 ITR 323].) [Emphasis supplied] 26. Recently, the Hon'ble Supreme Court in the case of CIT v. Paville Projects (P) Ltd. [2023 SCC OnLine SC 371], while relying upon Malabar Industrial Co. Ltd., has discussed the sanctity of two-fold conditions for the purpose of invoking jurisdiction under Section 263 of the Act. The relevant paragraph of the said decision reads as under :- L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds second issue it was noted that interest rate swap was an actual loss and only the net loss of Rs. 114.05 lacs after setting of gain of interest rate swap was claimed as deduction. However, we find that both these issues were duly examined by the AO vide Questionnaire dated 2.11.2004 (Page 1-2 of the Paper Book) to which replies dated 9.12.2004, 20.12.2004 and 6.1.2005 (Page No. 3-39 of Paper Book-1) were furnished and, therefore, the finding of the Ld. CIT that the issues were not examined properly was not correct. Even the Ld. CIT has not pointed out the definite and specific error in the original assessment order and observed that the inquiry made by the AO was inadequate or improper without first pointing out the error in the original assessment order passed by the AO, particularly because both the aforesaid issues were duly examined at the stage of the original assessment proceedings, hence, the impugned order is beyond jurisdiction, bad in law and void-ab-initio". 29. It is discernible from the aforenoted findings of the ITAT that both the claims were duly examined during the original assessment proceedings itself and neither there was any error nor the same was prejudici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be erroneous insofar as prejudicial to the interest of revenue. The ld.counsel for the assessee drew our attention to the decision of Hon'ble High Court of Delhi in the case of PCIT vs. Clix Finance India Pvt. Ltd., ITA No.1428/2018, order dated 01.03.2024 and drew our attention to paras 19 & 20 explaining the provisions and particularly Explanation 2(a) as under :- 19. A bare reading of sub-Section (1) of Section 263 of the Act makes it abundantly clear that the said provision lays down a two- pronged test to exercise the revisional authority i.e., firstly, the 17:06:54 assessment order must be erroneous and secondly, it must be prejudicial to the interests of the Revenue. Further, Explanation 2 to Section 263 of the Act delineates certain conditions and circumstances when the order passed by the AO can be said to be erroneous and prejudicial to the Revenue. 20. Clause (a) of Explanation 2 to Section 263 of the Act further stipulates that if an order is passed without making an enquiry or verification which should have been made, the same would bestow a revisional power upon the Commissioner. However, the said Clause or any other condition laid down in Explanation 2 doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The ld. PCIT should have made preliminary enquiry about the applicability of the judgment of the Hon'ble Madras High Court prior to issue of notice u/s 263 of the Act. We find that the judgment of the Hon'ble jurisdictional High Court was not in existence when AO passes the order u/s 153A r.w.s. 144 of the Act. We also find that the Hon'ble Supreme Court vide order dated 04.12.2023 in the case of M/s MAC PUBLIC CHARITABLE TRUST [SLP (C) Nos.21782-21783/2022] has already passed the following order: UPON hearing the counsel the court made the following ORDER "Issue notice to the respondent (s). Having regard to the order dated 24.11.2023 passed in SLP(C) Nos.22564- 22567/2022 arising from the same batch of cases disposed of by the Madras High Court on 31.10.2022 and following the same, there shall be interim stay of further proceedings of the impugned judgment and order in these matters also." IV. Therefore, by the order of the Hon'ble Supreme Court that judgment of the Hon'ble jurisdictional High Court in the case of M/s MAC PUBLIC CHARITABLE TRUST was already stayed by the Supreme Court prior to issue of notice dated 04.03.2024 u/s 263 of the Act itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Selvaraj and Babu Manoharan. Even such queries were answered by the assessee in reply to questionnaire issued along with notice u/s.142(1) of the Act dated 14.09.2021 while completing reassessment. Hence, it is a full verification case and AO has verified complete facts and after verification took one of view and completed the search assessment. IX. The revenue cannot invoke clause (d) of Explanation 2 of section 263 of the Act and say that search assessment order u/s 153A dated 28.09.2021 is erroneous in the light of the Hon'ble Jurisdictional High Court delivered in the case of MAC Public Charitable Trust dated 31.10.2022 for the reason that when search assessment order u/s 153A was passed the judgment of the Hon'ble Jurisdictional High Court in the case of MAC Public Charitable Trust was not at all in existence. X. Hence, we find no reason to hold that the search assessment order dated 28.09.2021 u/s 153A r.w. section 144 of the Act is erroneous insofar as prejudicial to the interest of revenue on this very jurisdictional issue. Hence, we quash the revision order passed by PCIT dated 31.03.2024 and allow this appeal of assessee. 16. Since, the facts and circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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