KUTCHI SARVODAYA NAGAR,GOVANDI vs. CIT(EXEMPTIONS), CUMBALA HILL

ITA 4203/MUM/2026Status: DisposedITAT Mumbai08 October 2026AY 2022-239 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessment order could not be regarded as erroneous and prejudicial to the interests of the revenue to warrant the exercise of revisional jurisdiction under Section 263. The Tribunal found that the issue of exemption under Section 11, including capital expenditure, was specifically examined by the AO. Notices under Sections 143(2) and 142(1) were issued, and a specific show-cause notice dated 07.03.2024 was sent regarding capital expenditure, to which the assessee provided replies and supporting documents. Therefore, it was not a case where the AO accepted the claim without inquiry. The Tribunal also noted that the CIT(E) referred to earlier assessment years, but the subsequent appellate history for those years, including a Bombay High Court decision for AY 2011-12 and an ITAT decision for AY 2012-13, were in favour of the assessee. The AO had followed the view emerging from these appellate orders. Consequently, the prerequisite conditions for Section 263 jurisdiction were not met, and Explanation 2 to Section 263 was not applicable. The Tribunal set aside the CIT(E)'s revisional order and restored the AO's assessment order.

What were the facts?

The assessee, Kutchi Sarvodaya Nagar, filed an appeal against an order passed by the Commissioner of Income Tax (Exemptions), Mumbai, under Section 263 of the Income Tax Act, 1961, for Assessment Year 2022-23. The impugned order was based on the assessment order passed by the Assessing Officer (AO) under Section 143(3) r.w.s. 144B. The assessee claimed exemption under Section 11, declaring nil income. The AO completed the assessment with nil income after scrutiny. The CIT(E) initiated revision proceedings, observing that the AO had not duly verified the expenses, including capital expenditure of Rs. 12,87,46,614/-. The CIT(E) set aside the assessment order, deeming it erroneous and prejudicial to the revenue.

What were the issues?

1. Whether the order passed by the CIT(Exemptions) under Section 263 of the Income Tax Act, 1961, is invalid due to incorrect facts and lack of application of mind, and whether the AO's order was erroneous or prejudicial to the revenue? - Assessee's contention: The AO applied his mind, made detailed inquiries, and the order was neither erroneous nor prejudicial. The exemption claim under Section 11 was consistent and confirmed in the past and future. Explanation 2 to Section 263 was wrongly applied. - Revenue's contention: The AO had not made proper verification of expenditure, justifying the invocation of Explanation 2 to Section 263 by the CIT(E). 2. Whether the CIT(Exemptions) violated principles of natural justice by disregarding evidence and failing to appreciate the assessee's submissions during the Section 263 proceedings? - Assessee's contention: The CIT(E) ignored evidence and submissions, treating the AO's order as erroneous without material evidence. - Revenue's contention: Not recorded. 3. Whether the assessee correctly claimed exemption under Section 11 of the Income Tax Act, 1961, and if the AO's acceptance of this claim should be disturbed? - Assessee's contention: The exemption claim was in accordance with the Act and accepted by the AO, and should not be disturbed.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 144B,Section 11,Section 143(2),Section 142(1),Section 2(15)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI VIKRAM SINGH YADAV & SHRI ANIKESH BANERJEE

For Respondent: Smt. Amrita Singh, CIT DR

PER: SHRI ANIKESH BANERJEE, (JM): The instant appeal of the assessee filed against the order of the Ld. Commissioner of Income Tax (Exemptions), Mumbai [for brevity “Ld. CIT(A)”], order passed under Section 263 of the Income Tax Act, 1961 (for brevity ‘the Act’), for Assessment Year 2022-23 date of order 27.03.2026. The impugned order emanated from the order of the Assessment Unit, Income Tax

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