The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT), while quashing an order passed under section 263 of the Income Tax Act, 1961 has held that the order has not stated any specific reason why the assessment order allowing an exemption of 15% for the income from Government grants is erroneous or prejudicial to the Revenue.
The assessee, Society For Gujarat Dental Health Education And Research had filed its return of income for the impugned assessment year i.e. 2014-15 declaring NIL income after claiming its income exempt under section 11 of the Act. Thereafter the case was selected for scrutiny assessment and the income assessed at Rs. 96,24,705/-. The Ld. CIT(E) on verification of records thereafter found that the assessing officer had not properly assessed the income, for the reason that the assessee had been granted excess exemption of 15% of its income on grants from state government of Rs. 4.72 crores. Accordingly, an order under section 263 of the Income Tax Act, 1961 was passed against the assessee.
The Tribunal bench comprising Ms. Madhumita Roy (JM) and Ms. Annapurna Gupta (AM) held that the jurisdiction under section 263 of the Act was assumed by the CIT(E) on finding that the assessment order was erroneous in granting exemption to the assessee @ 15% of the State government grants.
“But why the assessee was not entitled to the exemption and which provisions of law disentitled it to the same finds no mention in the show cause notice and for that matter in the findings of the CIT(E) also while holding the assessment order as erroneous so as to cause prejudice to the Revenue. There is nothing in the entire show cause notice bringing out how and why the assessee was not eligible, as per the provisions of law, to claim exemption of 15% of the grants received,” the Tribunal said.
While concluding, the Tribunal held that “In view of the above, it is abundantly clear that there was no basis with the Ld. CIT(E) at all for arrive at his finding that the assessment order passed in the present case was in error by allowing the assessee exemption of 15% of its income from Government grants. We therefore hold that the CIT(E) has failed to find any error causing prejudice to the Revenue in the present case. The order passed by the CIT(E) u/s. 263 of the Act is therefore not sustainable in law and is accordingly set aside.”
Advocate K. C. Thaker appeared for the appellants.
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