VIDHYAVIHAR APARTMENTS OWNERS ASSOCIATION,AHMEDABAD vs. THE PR.CIT, AGHMEDABAD-1, AHMEDABAD

The present appeal has been preferred by the Assessee against the Order, dated 27/03/2025, passed by the Learned Principal Commissioner of Income Tax, Ahmedabad-1 [hereinafter referred to as the ‘PCIT’] for the Assessment Year 2020-2021 in terms of Section 263 of Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) whereby the Assessment Order, dated 08/09/2022, passed under Section 143(3) read with Section 144B of the Act was set aside.

The Assessee has raised following grounds of appeal:

Your Appellant submits that in view of Asst. Order of ITO referred above, Sec.263 does not apply and the order of Ld. Pr. CIT dated 27- 3-2025 be treated as cancelled and it and be set aside.

We have heard both the sides. On perusal of record it emerges that it is admitted position that in the present case assessment was framed on the Assessee for the Assessment Year 2020-2021 by way of the Assessment Order, dated 08/09/2022, passed under Section 143(3) read with Section 144B of the Act. The aforesaid assessment order was subsequently set-aside by the Learned PCIT in exercise of powers under Section 263 of the Act holding that the same was erroneous in so far as prejudicial to the interest of Revenue. The Learned PCIT relied upon the provision contained in Explanation 2 to Section 263(1) of the Act while concluding that Assessing Officer had failed to carry out necessary enquiry/verification in relation to deduction of INR.53,46,465/- claimed under Section 57 of the Act while passing the Assessment Order. Being aggrieved the Assessee has preferred the present appeal before this Tribunal on the grounds reproduced in Paragraph 2 above.

During the course hearing it submitted by the Learned Authorised Representative for the Assessee that the Assessing Officer had passed the Assessment Order after taking into consideration the document and details furnished by the Assessee in support of deduction of INR.53,46,465/- claimed under Section 57 of the Act. The conclusion drawn by the Learned PCIT that the aforesaid claim of deduction was neither enquired into nor verified by Assessing Officer during the assessment proceedings was factually incorrect. During the assessment proceedings, the Assessee had furnished replies in response to specific queries raised by the Assessing Officer in relation to expenses of INR.53,46,465/- debited to the Profit & Loss Account of the relevant previous year. The aforesaid replied formed part of the assessment record. It was further submitted that Assessment Order cannot be regarded as prejudicial to the interest of Revenue as the assessee is an association governed by the principles of mutuality and the surplus, if any, is not taxable. In support, reliance was placed on documents forming part of the paper-book.

Per Contra the Learned Departmental Representative contended that the exercise of power of revision under Section 263 of the Act by the Learned PCIT did not warrant any interference. In support, the Learned Departmental Representative placed strong reliance upon the findings returned by the Learned PCIT and Explanation 2 to Section 263(1) of the Act.

We have given thoughtful consideration to the rival submissions and have perused the material on record.

We note that the Assessing Officer had issued notice under Section 142(1) of the Act on 26/10/2021 specifically asking for details of Income from Other Sources amounting to INR.29,51,468/- and deductions of INR.53,46,465/- claimed under Section 57 of the Act. The aforesaid notice was complied with by the Assessee by way of reply Letter, dated 09/12/2021. Thereafter, another notice under Section 142(1) of the Act was issued to the Assessee on 22/03/2022 which was also complied with vide Reply Letter, dated 03/04/2022. 3 After considering the details, documents and submission furnished by the Assessee, the Assessing Officer accepted the ‘Nil’ returned income without making any variation.

From the above, it is clear that during assessment proceeding specific queries were raised by Assessing Officer in relation to income and expenditure disclosed under the head ‘Income from Other Sources’. This is also apparent from the fact that the case of the Assessee was selected for limited scrutiny on the issue of - ‘Deduction from Income from Other Sources’. Therefore, clearly, the case before us is not one where no enquiries/verification was out by Assessing Officer in relation to - ‘Deduction from Income from Other Sources’ amounting to INR.53,46,465/- claimed by the Assessee. From the material on record it is clear that the notice, dated 26/10/2021, and 22/03/2022, were responded to by the Assessee vide Reply Letter, dated 09/12/2021, and 03/04/2022, respectively. The Assessee had filed before the Assessing Officer (a) Statement of Income along with Audited Income & Expenditure Account and Balance Sheet; and (b) Details/Nature of Expenses aggregating to INR.53,46,464/- debited to the Income & Expenditure Account to corroborate the nature of expenses and claim for deduction. In view of the aforesaid, we hold that the Assessing Officer carried out necessary inquiry/verification before accepting the contention of the Assessee. Therefore, we hold that the Learned PCIT could not have invoked the provisions contained in Explanation 2 to Section 263(1) of the Act in the facts and circumstances of the present case and the reliance of the said provisions by the Learned PCIT was clearly misplaced. Further, according to Explanation 1(b) to Section 263(1) of the Act, ‘record’ includes all documents and materials available at the time of examination by the Learned PCIT. While the Assessment Order is silent on the issue of deduction claimed under Section 57 of the Act, the queries raised during the assessment proceedings and the reply filed by the Assessee support the contention of the Assessee that requisite inquiry/verification was carried out by the Assessing Officer before accepting Assessee’s claim for deduction under Section 57 of the Act. In our view, the Learned PCIT was required to examine Assessment Order as well as material forming part of the assessment record. We have already noted that the material forming part of the assessment records supported the stand taken by the Assessee that requisite inquiry/verification was carried out by the Assessing Officer. In our view the Assessing Officer has taken a plausible view. We note that for the Assessment Year 2020- 2021 also, the Assessing Officer had completed the regular scrutiny assessment under Section 143(3) of the Act vide Assessment Order, dated 08/09/2022, without making any disallowance in respect of deduction claimed by the Assessee under Section 57 of the Act.

In view of the above, we conclude that in the facts and circumstances of the present case the Learned PCIT could not have assumed jurisdiction under Section 263 of the Act to revise the Assessment Order. Therefore, we set-aside the impugned Order, dated 27/03/2025, passed by the Learned PCIT and reinstate the Assessment Order, dated 08/09/2022, passed by the Assessing Officer under Section 143(3) of the Act for the Assessment Year 2020-2021. 10. Before parting, we would like to observe that in response to notice issued to the Assessee under Section 263(1) of the Act, the Assessee had contended on a without prejudice basis that the Assessee was a non-trading corporation and was governed by principles of mutuality and the surplus, if any, did not have any bearing on computing taxable income. The aforesaid contention was again raised during the course of hearing. Since we have set aside the impugned order, we decline to adjudicate the aforesaid contentions raised by the Assessee and the same is left open.

In view of the above, all the grounds raised by the Assessee are allowed.

In result, the appeal preferred by the Assessee is allowed.

""यथ"/ The Respondent. 3. संबंिधतआयकरआयु"/ Concerned CIT 4. आयकरआयु"(अपील) / The CIT(A) 5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण/ DR, ITAT, 6. गाड"फाईल /Guard file. आदेशानुसार/BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.