Assessment set aside as AO Failed to Enquire into ₹90.89L Payments: ITAT upholds Revision u/s 263, Making Order Erroneous and Prejudicial to Revenue [Read Order]
ITAT upheld the revision u/s 263 and held that the AO’s failure to enquire into ₹90.89 lakh payments via Aarti Enterprises to Dr. Hiremath made the assessment order erroneous and prejudicial to Revenue.
Revision - order - Taxscan
Revision - order - Taxscan
The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the revisionary order under section 263 of the Income Tax Act, 1961, and held that the Assessing Officer (AO) failed to enquire into payments of ₹90.89 lakh, rendering the assessment order erroneous and prejudicial to the interest of the Revenue.
The assessee-appellant, Grant Medical Foundation, a registered trust under the Societies Registration Act, 1860, Bombay Public Trust Act, 1950, and section 12AA of the Income Tax Act, also had an exemption under section 10(23C)(via), had filed its return of income on 08.10.2018 declaring Nil income.
The Assessing Officer(AO) passed the order u/s 143(3) on 08.04.2021, determining Nil taxable income after making additions of ₹7 crore towards non corpus donations and also disallowed the depreciation of ₹33,00,69,972, but allowed the accumulation u/s 11(1)(a) of the Act.
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The Commissioner of Income Tax (Exemption) (CIT(E)) examined the records and information received from the National Faceless Assessment Centre (NaFAC) in the case of Aarti Enterprises.
Aarti Virendra Shah, proprietor of Aarti Enterprises, had entered into a tripartite Memorandum of understanding (MoU) with Grant Medical Foundation and Dr. M.S. Hiremath for managing medical equipment owned by Dr. Hiremath and installed at Ruby Hall Clinic.
The CIT(E) found that Grant Medical Foundation paid ₹90,89,134 to Aarti Enterprises, out of which ₹53,45,118 was passed on to Dr. Hiremath. The MoU was merely notarised, not registered, and the payments made through Aarti Enterprises were unexplained.
Since the AO had not examined this information or made any enquiry into the money trail or the role of Aarti Enterprises, the CIT(Exemption) held the order to be erroneous and prejudicial to Revenue, set aside the assessment, and directed reframing under section 263 of the Act.
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On appeal, the assessee contended that Dr. Hiremath was not an employee, that the payments were genuine, and that as it enjoyed exemptions u/s 12AA and 10(23C)(via), the order could not be prejudicial to Revenue.
The Tribunal, however, observed that the AO had received specific information regarding the ₹90,89,134 payments but had not conducted any enquiry.
The Bench comprising R.K. Panda (Vice President) and Astha Chandra (Judicial Member) held that failure to investigate rendered the assessment order erroneous and prejudicial to the interests of the Revenue under Section 263 of the Income Tax Act.
Accordingly, the ITAT upheld the order of the CIT(Exemption) and dismissed the appeal of the assessee.
The assessee was represented by Rahul Khare, while Amol Khairnar appeared for the Revenue.
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