REGIONAL COLLEGE OF MANAGEMENT TRUST,KHURDA vs. CIT(EXEMPTION) HYDERABAD, AT- BHUBANESWAR, BHUBANESWAR

It was submitted by the ld. AR that the assessee is a trust, which is running a management college. It was the submission that the assessee had a total receipt of Rs.6,18,78,090/- during the relevant assessment year and had expended Rs.6,20,32,848/-. The assessment in the case of the assessee came to be completed u/s.143(3) of the Act on 25.01.2021 accepting the returned income/loss. It was the submission that the said assessment order was a subject matter of revision u/s.263 of the Act by the ld. CIT(E) on the ground that the assessee had filed Form No.10BB in place of Form No.10B. It was the submission that consequently the ld. CIT(E) directed the AO to revise the assessment. It was the submission that the entire expenditure claimed by the assessee has been disallowed. It was the submission that the information sought in Form No.10B and Form No.10BB were the same except for the fact that Form No.10BB was filed when the assessee is claiming exemption u/s.10(23C) of the Act and Form No.10B is filed when the assessee is registered u/s.12A of the Act. It was the submission that the Hon’ble Delhi High Court in the case of Petroleum Sports Promotion Board, reported in [2014] 362 ITR 235 (Delhi) had also categorically held that when an assessee is having registration u/s.12A of the Act on the denial of registration as charitable institution, the entire expenditure cannot be disallowed and the expenditure incurred for earning the income would have to be allowed u/s.57(iii) of the Act. It was the submission that the assessee had registration u/s.12A of the Act and the denial of the registration on account of non-filing of the Form No.10B could have maximum led to the Sections 11, 12 & 13 of the Act. It does not mean that the entire expenditure could be disallowed. It was the submission that the expenditure of Rs.6,20,32,848/- had been considered by the AO in the course of original assessment as against the total receipt of Rs.6,18,78,090/-. It was, thus, the submission that the order passed u/s.263 of the Act is liable to be quashed, insofar as all the information as sought for the purpose of the assessment was available and just because the form No.10BB had been uploaded in place of the Form No.10B, the entire expenditure could not be disallowed.

In reply, ld. CIT-DR submitted that Form No.10BB was in relation to assessee’s claim for exemption u/s.10(23C) of the Act. Form No.10B was for assessee, who is claiming exemption u/s.12A of the Act. It was the submission that under Section 10(23C) of the Act, the entire income of assessee is to be exempted whereas in respect of assessee’s claiming exemption u/s.12A of the Act, the issue of application of the income was to be considered. It was, however, fairly agreed by the ld.CIT-DR that all the information required for the assessment was available in Form No.10BB and Form No.10B. It was the submission that when the statute provides for the filing of a particular Form, non-filing of the same would have implications on the assessment. It was the submission that the order u/s.263 of the Act is liable to be upheld.

It was further submitted by the ld. CIT-DR that the consequential assessment order has already been passed in the case of the assessee giving effect to the order passed u/s.263 of the Act by the ld. CIT(E) and the assessee must also have filed appeal against the said order to the ld. CIT(A). It was the submission that regarding the quantum of the addition as to whether the entire expenditure is liable to be disallowed or not was the subject matter of the appeal before the ld. CIT(A) and only the validity of the order u/s.263 of the Act was liable to be considered by the Tribunal in the present proceedings.

We have considered the rival submissions. At the outset, what is to be understood is that the purpose of Section 263 of the Act is to correct any mistakes which are done by the AO which has caused prejudice to the interest of revenue. It is also a well recognized concept that when technicality is pitted against substantial justice, substantial justice would prevail. This view is supported by the decision of the Hon’ble Supreme Court in the case of Collector, Land Acquisition Vs. Mst. Katiji & Ors, reported in [1987] 167 ITR 471 (SC). A perusal of the order passed u/s.263 of the Act clearly shows that on the mere technicality that the assessee has uploaded Form No.10BB in place of Form No.10B the proceedings u/s.263 of the Act has been initiated. How this has caused prejudice to the revenue does not come out of the order passed u/s.263 of the Act. A perusal of the Form No.10BB and Form No.10B clearly shows that both the forms contain all the information required for a proper assessment, either it is u/s.10(23C) of the Act or under the provisions of Sections 11, 12 & 13 of the Act. The order passed u/s.263 of the Act by the ld. CIT(E) does not point out any shortfall in the information which was required. In fact, the ld. CIT(E) has not pointed out any factual error in the order of the ld. AO, which is erroneous and prejudicial to the interest of revenue. Though the assessee has categorically brought out about the ld. CIT(E) that the exemptions available u/s.10(23C) of the Act and Section 12AA of the Act are similar in nature. The ld. CIT(E) has not pointed out anywhere as to what is the error which has caused prejudice to the interest of revenue on account of filing of Form 10BB in place of Form 10B by the assessee. The argument of the ld. CIT-DR that the consequential order has already been passed and the quantum of the addition can be argued before the appellate authority in the first appellate proceedings the same cannot be exceeded to as this would be nothing but frivolous litigation especially when the order passed u/s.263 of the Act per se invalid. This being so, as no factual error in regard to the facts and figures as determined by the AO has been pointed out by the ld. CIT(E) in his order u/s.263 of the Act which could be said to be erroneous and prejudicial to the interest of revenue, the order passed u/s.263 of the Act by the ld. CIT(E), Hyderabad at Bhubaneswar stands quashed.

In the result, appeal of the assessee is allowed. Order dictated and pronounced in the open court on 20/06/2024.