The Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) set aside the order of the Commissioner of Income Tax ( Exemption ) [CIT(E)] assessment order passed under section 263 of the Income Tax Act, 1961 as Assessing Officer ( AO ) made thorough scrutiny.
Shri S. Sridhar appeared for the appellant and Shri R. Clement Ramesh Kumar appeared for the respondent.
Narada Gana Sabha Trust, the assessee challenged the order of the Commissioner of Income Tax ( Exemptions ), Chennai passed under section 263 of the Income Tax Act, 1961 and pertains to the assessment year 2018-19.
The assessee’s Trust is a registered charitable Trust under section 12AA of the Income Tax Act, 1961 ( “the Act” ) from AY 1976-77 onwards. The main objects of the Trust as per its Trust Deed dated 11.10.1973 are to promote science, literature, fine arts and useful knowledge and organize competitions, debates, examinations, etc.
The assessee has filed its return of income for AY 2018-19 on 01.10.2018 admitting ‘nil’ total income by claiming exemption under section 11 of the Act. The assessee had also filed Form No.10 on 29.09.2018 and had accumulated an amount of Rs.7,62,339/- for subsequent years to be applied for charitable purposes as per the objects of the Trust. The case has been subjected to scrutiny assessment and the assessment has been completed under section 143(3) r.w.s.143(3A) & 143(3B) of the Act, on 16.03.2021 and assessed the total income at Rs.NIL.
The case has been taken up for revision proceedings by CIT ( Exemptions ), Chennai and accordingly, show cause notice under section 263 of the Act was issued and called upon the assessee to explain ‘as to why’ the assessment order passed by the AO under section 143(3) dated 16.03.2021, shall not be revised.
Although, the assessee’s objects and activities are like GPU Trust, the AO while completing the assessment under section 43(3) of the Act, has allowed exemption under section 11 of the Act as claimed by the assessee without invoking provisions of Sec.2(15) of the Act, which rendered the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue.
The provisions of Sec.263 of the Act deal with the revision powers of the Commissioner. As per said provisions, if the CIT ( Exemptions ) satisfies that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue, then, the CIT ( Exemptions ) can set aside the assessment order passed by the AO with a direction to re-do the assessment afresh
Unless the conditions prescribed are not satisfied, the CIT ( Exemptions ) cannot assume their jurisdiction and set aside the assessment order passed by the AO. The CIT ( Exemptions ) assumed jurisdiction under section 263 of the Act, on the ground that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue.
The Assessing Officer ( AO ) denied exemption under section 11 of the Act, to the assessee’s Trust for earlier assessment years, but the AO while completing the assessment for the impugned assessment year, has failed to take note of relevant facts, but has simply allowed exemption without proper application of mind which rendered the assessment order to be erroneous in so far as it is prejudicial to the interest of the Revenue.
A two-member bench comprising Shri Manjunatha G, Accountant Member and Shri Manomohan Das, Judicial Member that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue. The AO has considered the issue of exemption under section 11 of the Act, while completing assessment under section 143(3) of the Act, which is evident from the assessment proceedings, where, the AO has called for various details.
The ITAT held that the CIT ( Exemptions ) erred in invoking their jurisdiction and set aside the assessment order passed by the Assessing Officer under section 263 of the Act.
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