M/S. DEVI SHAKUNTALA THKARAL CHARITABLE FOUNDATION,BHOPAL vs. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION), BHOPAL

आदेश / O R D E R PER KUL BHARAT, J.M: This appeal by the assessee is directed against order of

the Ld. CIT(Exemption) dated 21.3.2018 pertaining to the

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assessment year 2013-14. The assessee has raised

following grounds of appeal:

proceedings u/s 263 of the Income Tax Act, 1961

(hereinafter called as ‘the Act’). The brief facts are that in

this case assessment u/s 143(3) of the Act was framed vide

order dated 3.3.2016. The A.O. accepted the return filed

by the assessee. However, Ld. CIT set aside this order and

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directed the A.O. to reframe the assessment order de-novo.

Against this, the assessee has preferred present appeal.

Ld. Counsel for the assessee vehemently argued that the

Ld. CIT was not justified in revising the order. He

submitted that the A.O. had examined the issue. He

further submitted that the Ld. CIT failed to appreciate the

fact of the case in right perspective. Ld. Counsel reiterated

the submissions as made in the written submissions. The

submissions of the assessee are reproduced as under:

“Submission : A. Provisions of section 263 can be invoked only when the twin conditions are satisfied i.e. order should be both erroneous and prejudicial to the interest of the Revenue.

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Claus Condition as per the relevant Fulfilment of the conditions e of section clause of section 11(2) mentioned by section 11(2) 11(2) (a) Statement in prescribed form is Form 10 has been submitted to the submitted to assessing officer stating Assessing Officer stating the purpose for the purpose for which the income is which the income is being accumulated or set being accumulated or set apart AND apart. Period for which the income is The income so accumulated or set to be accumulated or set apart which apart shall be so kept till 31.03.2018. (i.e. shall in no case exceed five years within 5 years from 31.03.2013 – impugned year) [PB 34] (b) The money so accumulated or The money so accumulated or set set apart is invested or deposited in the apart has been invested in FDR with Oriental forms or modes specified in section Bank of Commerce. [PB 18] 11(5) (c) The statement referred to in Form 10 has been submitted on clause (a) is furnished on or before the 20.09.2013. Due date of furnishing of return due date specified u/s 139(1) for of income for A.Y. 2013-14 (impugned year) furnishing the return of income was 30.09.2013.

From the above table it is evident that all the three conditions as mentioned in section 11(2) have been fully satisfied by the assessee. Thus, the claim of assessee u/s 11(2) is in accordance to law and validly claimed by assessee.

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a. Hon’ble Jurisdictional High Court of Madhya Pradesh in the case of H.H. Maharaja Raja Pawer Dewas – [1983] 15 Taxman 363 – order pronounced on 13.11.1981 – Para 10 – “However, the first argument, viz., that an assessment order without compliance with the procedure laid down in section 144B is erroneous but not prejudicial to the interests of the revenue conferring revisional jurisdiction on the Commissioner under section 263(1), has force. Under section 263(1) two pre-requisites must be present before the Commissioner can exercise the revisional jurisdiction conferred on him. First is that the order passed by the ITO must be erroneous. Second is that the error must be such that it is prejudicial to the interests of the revenue. If the order is erroneous but it is not prejudicial to the interests of the revenue, the Commissioner can not exercise the revisional jurisdiction under section 263(1)………………..There cannot be any prejudice to the revenue on account of the ITO's failure to follow the procedure prescribed under section 144B, and unless the prejudice to the interests of the revenue is shown, the jurisdiction under section 263(1) cannot be exercised by the Commissioner, even though the order is erroneous. The argument that such an order may possibly be challenged in appeal by the assessee, and for this reason it is prejudicial to the interests of the revenue, has no merit. Section 263(1) clearly contemplates that the order of assessment itself should be prejudicial to the interests of the revenue and this prejudice has to be proved by reference to the assessment order only. It cannot be argued that there is some possibility of the assessment order being challenged or revised in appeal and, therefore, on account of this contingency, the order becomes prejudicial to the interests of the revenue.” [emphasis supplied]

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b. Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. – [2000] 243 ITR 83 – order pronounced on 10.02.2000 – HEAD NOTE – "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1983-84 - Whether in order to invoke section 263 Assessing Officer's order must be erroneous and also prejudicial to revenue and if one of them is absent, i.e., if order of Income-tax Officer is erroneous but is not prejudicial to revenue or if it is not erroneous but is prejudicial to revenue, recourse cannot be had to section 263(1) - Held, yes - Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue - Held, yes - Assessee-company entered into agreement for sale of estate of rubber plantation - As purchaser could not pay instalments as scheduled in agreement, extension of time for payment of instalments was given on condition of vendee paying damages for loss of agricultural income and assessee passed resolution to that effect - Assessee showed this receipt as agricultural income - Resolution passed by assessee was not placed before Assessing Officer - Assessing Officer accepted entry in statement of account filed by assessee and accepted same - Commissioner under section 263 held that said amount was not connected with agricultural activities and was liable to be taxed under head 'Income from other sources' - Whether, where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263(1) was justified - Held, yes

c. Hon’ble Gujarat High Court in the case of Smt. Minalben S. Parikh – [1995] 215 ITR 81 – order pronounced on 17.10.1994 – Para 12 – “From the aforesaid, it can well be said that the well-settled principle in considering the question as to whether an order is prejudicial to the interests of the revenue or not is to address oneself to the question whether the legitimate revenue due to the exchequer has been realised or not or can be realised or not if his orders under consideration are allowed to stand. For arriving at this conclusion, it

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becomes necessary and relevant to consider whether the income in respect of which tax is to be realised, has been subjected to tax or not or if it is subjected to tax, whether it has been subjected to tax at a rate at which it could yield the maximum revenue in accordance with law or not. If income in question has been taxed and legitimate revenue due in respect of that income had been realised, though as a result of erroneous order having been made in that respect, in our opinion, the Commissioner cannot exercise powers for revising the order under section 263 merely on the basis that the order under consideration is erroneous. If the material in that regard is available on the record of the assessee concerned, the Commissioner cannot exercise his powers by ignoring that material which links the income concerned with the tax realization made thereon. The two questions are inter-linked and the authority exercising powers under section 263 is under an obligation to consider the entire material about the existence of income and the tax which is realizable in accordance with law and further what tax has in fact been realised under the alleged assessment orders.[emphasis supplied]

d. Hon’ble Karnataka High Court in the case of V. G. Krishnamurthy – [1985] 20 Taxman 65 – order pronounced on 19.03.1984 – Para 10 – “Section 263 can be invoked by the Commissioner only when he prima facie finds that the order made by the ITO was erroneous and was prejudicial to the interests of the revenue. Both these factors must simultaneously exist. An order that is erroneous must also have resulted in loss of revenue or prejudicial to the interests of the revenue. Unless both these factors co-exist or exist simultaneously, the Commissioner cannot invoke or resort to section 263. It cannot be exercised to correct every conceivable error committed by an ITO. Before the suo moto power of revision can be exercised, the Commissioner must at least prima facie find both the requirements of section 263, namely, that the order sought to be revised is prima facieerroneous and prejudicial to the interests of the revenue. If one of the other factor was absent, the

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Commissioner cannot exercise the suo moto power of revision under section 263.” [emphasis supplied]

Claus Condition as per the relevant Fulfilment of the conditions e of section clause of section 11(3) when income mentioned by section 11(3) 11(3) referred to in section 11(2) is a Applied to purposes other than Income referred to in section 11(2) charitable or religious purposes as has been utilised by assessee itself for aforesaid or ceases to accumulated or purchase of land at Village Baghmugalliya, set apart for application thereto Patwari Halka no. 42, Hosangabad Road, Bhopal. b Ceases to remain invested or Income referred to in section 11(2) deposited in any of the forms as has been invested in FDR mentioned in section 11(5) c Is not utilized for the purpose Income referred to in section 11(2) for which it is so accumulated or set has been utilised for purpose of purchase of apart during the period referred to in land and construction of school building by section 11(2)(a) or in a year the assessee itself, at Bhopal. A registered immediately following the expiry agreement to sale has been entered in the thereof name of assessee d is credited or paid to any trust Income referred to in section 11(2) or institution registered u/s 12AA or to has been credited to a third party – ‘M/s. any fund or institution or trust or any Girija Colonizers’ from whom land has been university or other educational purchased by the assessee in its own name institution or any hospital or other for construction of school building. The medical institution referred to in payment is not credited to any trust or section 10(23C)(iv), 10(23C)(v), institution as mentioned in section 11(3)(d) 10(23C)(vi) or 10(23C)(via)

From the above table it is evident that none of the conditions as mentioned in section 11(3) have been triggered in the instant case. Even if it had been so, addition if any would have been made in the year in which the any of the above mentioned clauses of section 11(3) are not

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satisfied. In the instant case, none of the clauses of section 11(3) have been triggered.

a. Applied – The expression ‘applied’ is a broader term that comprises not only the amount spent but also extends to amount laid out and accumulated for future spending. This expression upholds all expenditure incurred for the purposes of charitable or religious.

b. Accumulated – In common parlance it means surplus carried forward for future spending. It means the income is set apart during the year for future spending for charitable or religious purposes.

c. Spent – signifies actually paid. There must be an outgoing expenditure to qualify this.

B. Basis to invoke the provisions of section 263 vis-à-vis direction given in the order passed u/s 263

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passed by Ld. CIT(Exemption). It will be against the principle of natural justice that an assessee who has not been confronted with any ground be saddled with the liability thereof.

Hon’ble Apex Court in the case of Toyo Engg. India Limited [2006] 7 SCC 592 had noted that the Department cannot travel beyond the show cause notice.

a. Hon’ble Delhi High Court in the case of Contimeters Electricals (P.) Limited – [2009] 178 taxman 422 – order pronounced on 02.12.2008 – Para 10 –“ Te Tribunal considered the rival contentions and referred to the Supreme Court's decision in the case of Commissioner of Customs v. Toyo Engg. India Ltd. [2006] 7 SCC 592 wherein the Supreme Court noted that the department cannot travel beyond the show-cause notice. The Tribunal was of the view that the ground that the assessee had not fulfilled the conditions laid down under section 80-IA did not form part of the show-cause notice. The Tribunal accepted the argument of the assessee that the Commissioner of Income-tax did not even call for any explanation on this issue and, therefore, the assessee did not have any opportunity to meet this ground. The Tribunal was of the view that it would be against the principles of natural justice that a person who has not been confronted with any ground be saddled with the liability thereof. Consequently the Tribunal held that as the said issue did not form part of the show-cause notice and the assessee was not even confronted with it, even before the CIT, it cannot form the basis for revision of the assessment order under section 263”

Para 11 – “On this aspect of the matter also, we are satisfied with the findings and the approach taken by the Income-tax Appellate Tribunal. No substantial question of law arises for our consideration.” [emphasis supplied]

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C. Application of mind by Ld. AO vis-à-vis Ld. CIT(Exemption)

In the assessment proceedings a specific question was raised on admissibility of claim made by assessee u/s 11(2). In response to which necessary documents and submission was made. Ld. AO after considering and examining all these documents allowed the claim of assessee. Assessment order was passed u/s 143(3) on 03.03.2016 accepting the returned income as assessed income.

Reply to the above mentioned show cause notice was submitted on 19.03.2018. In this assessee submitted that accumulation of fund u/s 11(2) has been correctly allowed by Ld. AO after examining the said claim during the assessment proceedings.

Ld. CIT(Exemption) rejected the submission of assessee and passed the order u/s 263 on 21.03.2018 setting aside the assessment order passed u/s 143(3) on 03.03.2016. Ld. CIT(Exemption) directed assessing officer to reframe the assessment order denovo and after

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verifying the method of accounting actually followed on year to year basis. [Order u/s 263 page 5]

Ld. CIT(Exemption) issued show cause notice u/s 263 on 13.03.2018 and passed order u/s 263 on 21.03.2018.

a. Hon’ble Jurisdictional High Court of Madhya Pradesh in the case of Ratlam Coal Ash Co. – [1987] 34 taxman 443 – order pronounced on 17.08.1987 – HELD – “It is well settled that where the ITO made the assessment in undue hurry, accepting what the assessee states in the return without making any enquiries in the circumstances of the case, the Commissioner would be justified in holding the order of the ITO to the erroneous. However, in the instant case, the Tribunal had found that the assessee had furnished all the requisite information and that the ITO considering all the facts had completed the assessment. It was further held that in the circumstances of the case it could not be held that the ITO had made assessment without making proper enquiries. Accordingly, the Tribunal was justified in reversing the order passed by the Commissioner.” [emphasis supplied]

b. Hon’ble Delhi High Court in the case of Anil Kumar Sharma – [2010] 194 Taxman 504 – order pronounced on 24.04.2010 – Para 7 – “In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not

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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 fell 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 as inadequate, following the decision in Sunbeam Auto Ltd.'s case (supra), "that would not by itself give occasion to the Commissioner to pass orders under section 263 of the said Act, merely because he has a different opinion in the matter". No substantial question of law arises for our consideration. Consequently, the appeal is dismissed.” [emphasis supplied]

c. Hon’ble Jurisdictional High Court of Madhya Pradesh in the case of Mehrotra Brothers – [2004] 270 ITR 157 – “Section 263 of the Income-tax Act, 1961 – Revision – Of orders prejudicial to interest of revenue - Commissioner invoked provision of section 263 against assessment order passed in case of assessee-firm on ground that Assessing Officer did not make proper enquiry regarding genuineness of certain cash credits found in books of firm – However, Tribunal held that since assessee had explained satisfactorily cash credit in books of account and discharged burden and Department had not brought out material or evidence to rebut same, cash credits were not income of assessee-firm and, accordingly, set aside order of Commissioner passed under section 263 – Whether in view of finding of fact recorded by Tribunal, no substantial question of law arose out of impugned order – Held, yes – Whether, therefore, instant appeal was to be dismissed – Held, yes” [emphasis supplied]

d. Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. – [2000] 243 ITR 83 – order pronounced on 10.02.2000 – HEAD NOTE – "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1983-84 - Whether in order to invoke section 263 Assessing Officer's order must be erroneous and also prejudicial to revenue and if one of them is 13

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absent, i.e., if order of Income-tax Officer is erroneous but is not prejudicial to revenue or if it is not erroneous but is prejudicial to revenue, recourse cannot be had to section 263(1) - Held, yes - Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue - Held, yes - Assessee-company entered into agreement for sale of estate of rubber plantation - As purchaser could not pay instalments as scheduled in agreement, extension of time for payment of instalments was given on condition of vendee paying damages for loss of agricultural income and assessee passed resolution to that effect - Assessee showed this receipt as agricultural income - Resolution passed by assessee was not placed before Assessing Officer - Assessing Officer accepted entry in statement of account filed by assessee and accepted same - Commissioner under section 263 held that said amount was not connected with agricultural activities and was liable to be taxed under head 'Income from other sources' - Whether, where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263(1) was justified - Held, yes” [emphasis supplied]

e. Hon’ble Delhi High Court in the case of Sunbeam Auto Limited – [2010] 189 Taxman 436 – order pronounced on 11.09.2009 – HEAD NOTE – “Section 263 of the Income-tax Act, 1961 - Revision - Of order prejudicial to interest of revenue - Assessment year 2001-02 - Whether if while making assessment, Assessing Officer has made an inadequate enquiry , that would not, by itself, give occasion to Commissioner to pass order under section 263, merely because he has different opinion in matter, it is only in cases of 'lack of inquiry' that such a course of action would be open - Held, yes - Assessee- company was engaged in business of manufacturing and supplying auto parts - In assessment for relevant assessment year, it had been allowed deduction of expenditure incurred on tools and dyes as revenue expenditure - Commissioner, however, set aside assessment order in exercise of his powers under section 263 on ground that

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Assessing Officer had allowed aforesaid expenditure without making proper enquiry - He, accordingly, remitted matter back to Assessing Officer to re-examine issue - Whether when facts clearly showed that Assessing Officer had undertaken exercise of examining as to whether expenditure incurred by assessee in replacement of dyes and tools was to be treated as revenue expenditure or not and on being satisfied with assessee's explanation, he accepted same, it could be said to be a case of lack of inquiry - Held, no - Whether further, on facts and law, view taken by Assessing Officer was one of possible views and, therefore, assessment order passed by Assessing Officer could not be held to be prejudicial to interest of revenue - Held, yes - Whether, therefore, Tribunal was justified in setting aside order of Commissioner - Held, yes” [emphasis supplied]

f. Hon’ble Delhi High Court in the case of Hindustan Marketing & Advertising Co. Limited – [2011] 196 Taxman 368 – order pronounced on 21.09.2010 – HEAD NOTE – “Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment years 1983-84 and 1984-85 - Assessee- company was incorporated with an object of carrying on business of marketing agents and to render marketing services, etc. - For relevant assessment years, assessee filed its returns and assessments were framed - Commissioner set aside assessment orders holding that ITO had not made adequate and detailed investigations/enquiries in respect of a major area of assessee-company’s operation and source of its income - Tribunal quashed revisional order passed by Commissioner - Whether in view of fact that ITO had made reasonably detailed enquiries, had collected relevant material and discussed various facets of case with assessee, order of Commissioner to direct fresh assessment by going deeper into matter would not form a valid or legal basis to exercise jurisdiction under section 263 - Held, yes - Whether, therefore, impugned order of Tribunal was to be upheld - Held, yes” [emphasis supplied]

D. Lack of enquiry versus inadequate enquiry conducted by Ld. AO:

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a. Hon’ble Allahabad High Court in the case of Krishna Capbox (P) Ltd – [2015] 60 taxmann.com 243 – order pronounced on 23.02.2015 – HEAD NOTE – “Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue (erroneous order) - Assessment year 2008-09 - Assessee filed its return - Case was selected for scrutiny and statutory notice was issued - Assessing Officer made certain queries, which were replied by assessee and after inquiry, being satisfied in respect to queries replied by assessee, Assessing Officer accepted declared income and passed assessment order - Commissioner, however, issued a notice under section 263 on ground that Assessing Officer had not made inquiry on

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certain aspects and accepted version of assessee without making any inquiry or verification, which was substantially prejudicial to revenue - Accordingly, he partly set aside assessment - Tribunal held that once inquiry was made, a mere non-discussion or non-mention thereof in assessment order could not lead to assumption that Assessing Officer did not apply his mind or that he had not made inquiry on subject and this would not justify interference by Commissioner by issuing notice under section 263 - Whether since department could not place anything to show that findings recorded by Tribunal were perverse or contrary to record, invoking of revision proceedings was unjustified - Held, yes [Para 13] [In favour of assessee]” [emphasis supplied]

b. Hon’ble Delhi High Court in the case of Vikas Polymers – [2010] 194 Taxman 57 – order pronounced on 16.08.2010 – HEAD NOTE – “Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1982-83 - Whether for exercising power under section 263, it is a prerequisite that Commissioner must give reasons to justify exercise of suo motu revisional powers by him to reopen a concluded assessment and exercise of power being quasi-judicial in nature, reasons must be such as to show that enhancement or modification of assessment or cancellation of assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to conclusion that order of Assessing Officer was not only erroneous but was also prejudicial to interest of revenue - Held, yes - Whether before exercising revisional powers, assessee must be called, his explanation sought for and examined by Commissioner, and thereafter, if Commissioner still feels that order is erroneous and prejudicial to interest of revenue, Commissioner may pass revisional orders - Held, yes - Whether if a query was raised during course of scrutiny by Assessing Officer, which was answered to satisfaction of Assessing Officer, but neither query nor answer was reflected in assessment order, that would not, by itself, lead to conclusion that order of Assessing Officer called for interference and revision - Held, yes” [emphasis supplied]

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c. Hon’ble Delhi High Court in the case of Ashish Rajpal – [2009] 320 ITR 674 – order pronounced on 14.05.2009 – HEAD NOTE – “Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2002-03 - Whether merely because an assessment order does not refer to queries raised by Assessing Officer during course of scrutiny and response of assessee thereto, it can be said that there has been no enquiry and, hence, assessment is erroneous and prejudicial to interest of revenue - Held, no - Whether it is requirement of section 263 that assessee must have an opportunity of being heard in respect of those errors which Commissioner proposes to revise - Held, yes - Whether to accord such an opportunity after setting aside assessment order would meet mandate of section 263 - Held, no - Whether where notice issued by Commissioner before commencing proceedings under section 263 referred to four issues and final order passed referred to nine issues, revisional proceedings were vitiated as a result of breach of principles of natural justice - Held, yes” [emphasis supplied]

d. Hon’ble Mumbai Bench of ITAT in the case of Anil Shah – [2007] 162 Taxman 39 – order pronounced on 21.01.2006 – HEAD NOTE – “Section 263, read with section 80HHC, of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2000-01 - Whether if all relevant details have been filed by assessee and Assessing Officer allows assessee’s claim, decision of Assessing Officer cannot be held to be erroneous simply because in his order he does not make any elaborate discussion in that regard - Held, yes” [emphasis supplied]

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a. Hon’ble Jurisdictional Bench of Indore ITAT in the case of Narottam Mishra – [2015] 25 ITJ 206 - “Even this is not the case of the Ld. CIT that certain evidences were overlooked which were very much on record or in the knowledge of the AO. Even this is not the case of Ld. CIT that certain new facts or evidences were brought to the notice of the Revenue Department which were having a direct impact on the income assessed by the AO. Neither there was an escapement of evidence nor there was any evidence now brought to the notice of the revenue department, therefore if that was not the position, then we are not inclined to give our approval to such directions.”

“It is well settled that if the same inquiry by the Assessing Officer in all original proceedings even if it inadequate that cannot flout the Commissioner with jurisdiction u/s 263 merely because he can form another opinion.” [emphasis supplied]

E. Enquiry to be conducted by Pr.CIT before making an order under section 263 of the Income Tax Act, 1961:

“.....................after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify...............”

To invoke provisions of section 263, Pr. CIT is required to conduct such enquiries as he deems to be necessary.

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to which relevant documents were submitted. No enquiry was conducted by Ld. CIT(Exemption) to ascertain the claim made u/s 11(2) and its actual utilization. Ld. CIT(Exemption) chose to invoke the provisions of section 263 on the basis of documents which were already on record and dealt with by Ld. AO in the assessment proceedings.

Reliance is placed on the decision of Raghav Chandra ITA No. 425/Ind/2014 (Indore Trib) dated 04.08.2015

Considering the above facts and circumstances of the case, submissions made, documents on record and judicial precedents, appeal of the assessee be allowed and the order passed u/s 263 be quashed.”

us through the various provisions of law. Ld. CIT(DR)

submitted that the A.O. failed to take note of the provisions

in vogue. He has drawn our attention to the provisions of

section 11(2)&(3) of the Act to buttress his arguments.

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materials available on record and gone through the orders

of the authorities below. For the sake of clarity, section

11(2) & 11(3) of the Act are reproduced as under:

“(2) Where eighty-five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:—

(a) such person furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years;

(b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5);

(c) the statement referred to in clause (a) is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year:

Provided that in computing the period of five years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded.

Explanation.—Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution

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registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub- clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter.

(3) Any income referred to in sub-section (2) which—

(a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or

(b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5), or

(c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof,

(d) is credited or paid to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub- clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or, as the case may be, of the previous year immediately following the expiry of the period aforesaid.”

in the show cause notice, which is as under:

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assessee submitted that show cause notice was issued on

13.3.2018 and fixing the date of hearing on 16.3.2018. He 24

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submitted that the Ld. CIT has not carried out the

enquiries as per the provisions of section 263 of the Act.

Ld.D.R. has not rebutted this submission. As per the

records, it is evident that the show cause notice was issued

on 16.3.2018 and the impugned order was passed on

21.3.2018. Therefore, the issue of initiation of the

proceedings is concerned, we do not see any infirmity in to

the same as the A.O. failed to take note of the provisions of

section 11(2) & 11(3) of the Act. The contention of the

assessee is that the provisions of section 11(3) sub clause

(d) of the Act speaks that “is credited or paid to any trust or

institution registered u/s 12AA or to any fund or

institution or trust or any university or other educational

institution or any hospital or other medical institution

referred to in sub clause (4) or sub clause (5) or sub clause

(6) or sub clause (6A) of clause (23C) of section 10 of the

Act. In the present case, no such sum was credited or paid

[ITA No.322/Ind/2018] [M/s. Devi Shakuntala Thakral Charitable Foundation, Bhopal]

to any trust or institution. It is contended that amount

was merely set apart but not in fact credited or paid to any

trust or institution registered u/s 12AA of the Act. We find

merit into this contention of the assessee. Therefore, set

aside the impugned order and restore the same to the file

of the Ld. CIT to decide it afresh after considering the

submissions of the assessee and examining the records.

Grounds raised by the assessee are allowed for statistical

purposes.

allowed for statistical purposes.

Order was pronounced in the open court on 20 .02.2020.

Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore; �दनांक Dated : 20/02/2020 VG/SPS

[ITA No.322/Ind/2018] [M/s. Devi Shakuntala Thakral Charitable Foundation, Bhopal]

Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order

Assistant Registrar, Indore