Income Tax Appellate Tribunal Cannot Sustain Tax Revision Order on Grounds Not Raised by Commissioner: Kerala HC [Read Order]

The Kerala High Court has ruled that the Income Tax Appellate Tribunal (ITAT) overstepped its jurisdiction by sustaining a tax revision order on grounds not originally raised by the Commissioner.

A Division Bench of Justice A. Muhamed Mustaque and Justice Harisankar V. Menon allowed the appeal filed by the charitable trust, Save A Family Plan (India), setting aside the Tribunal's order.

Save A Family Plan (India), the petitioner is a registered charitable trust, challenged an order of the ITAT which had upheld a revision order passed by the Commissioner of Income Tax (Exemptions) under Section 263 of the Income Tax Act for the assessment year 2014-15.

The Commissioner had initiated the revision, setting aside the original assessment, primarily on the ground that the trust had made donations to institutions without a similar categorization under the Foreign Contribution (Regulation) Act (FCRA). The trust appealed this order to the ITAT.

While the ITAT correctly found that the donations constituted an application of income for charitable purposes and that the Commissioner's original reasoning concerning the FCRA was flawed, it then proceeded to uphold the revision order on an entirely new ground. The ITAT held that the revision was still valid because the Assessing Officer had not verified if the donations were consistent with the trust's own objects an issue that was not raised by the Commissioner in his original revision order.

The Division Bench of the Kerala High Court relied on its own precedent in Commissioner of Income Tax v. Chandrika Educational Trust. The court said that when an appeal is filed against a Commissioner's order under Section 263, the Tribunal's role is limited to examining if the order is sustainable on the specific grounds relied upon by the Commissioner. The Tribunal cannot go beyond those grounds and sustain the order on a different basis.

Consequently, the High Court allowed the appeal, answering the questions of law in favor of the assessee and against the Revenue. The court set aside the ITAT's order, which in turn nullified the Commissioner's revision order.

The original assessment order passed in favor of the trust was thus restored, as the Tribunal was found to have acted without jurisdiction by introducing a new reason to justify the revision.

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