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Facts
The assessee, a trust registered under section 12A, claimed exemption under section 11. The AO determined the assessee's income after excluding mutual receipts but taxing other income and capital gains. The CIT initiated revision proceedings under section 263, viewing the AO's order as erroneous.
Held
The Tribunal held that the AO had not granted exemption under section 11 at all, despite a confusion in the tax computation sheet. Therefore, the assessment order could not be considered erroneous and prejudicial to the revenue's interests.
Key Issues
Whether the CIT's revision order under section 263 was justified when the AO had not granted the claimed exemption under section 11, and if the assessment order was erroneous and prejudicial to the revenue.
Sections Cited
263, 11, 12A, 2(15), 11(1)(a), 11(2), 154
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI “A” BENCH : MUMBAI
Before: SHRI B.R. BASKARAN & SHRI ANIKESH BANERJEE
O R D E R PER B.R. BASKARAN, A.M :
The assessee has filed this appeal challenging the revision order dated 06-03-2024 passed by the Ld CIT(Exemptions), Mumbai u/s 263 of the Income tax Act and it relates to the Assessment Year (AY.) 2018-19. The assessee is challenging the validity of revision order so passed by Ld CIT(E).
The appeal is barred by limitation by 229 days. The assessee has filed an affidavit explaining the reasons for the delay. It is stated that the earlier tax consultant had advised the assessee against filing appeal and hence the assessee, acting upon that advice, did not prefer the appeal. When the new tax consultant noticed this fact, he advised them to file appeal and the same has resulted in delay in filing the present appeal. We notice that the assessee had acted as per the advice given by the earlier tax consultant and hence did not file appeal in time. Accordingly, we are of the view that there was reasonable cause for the assessee in not filing appeal in time. Accordingly, we condone the delay and admit the appeal of the assessee.
The facts relating to the case are discussed in brief. The assessee is a trust and it is registered u/s 12A of the Act. It is an association of advertisement agencies regulating the advertisement practices in India. It also functions as a dispute/complaint mediatory agency to monitor the various complaints and to maintain sanctity of advertisements in various media. It filed its return of income declaring NIL income after claiming exemption u/s 11 of the Act. During the course of assessment proceedings, the AO took the view that activities of the assessee are commercial in nature and hence it cannot be considered as a charitable institution. Accordingly, he rejected the claim for exemption u/s 11 of the Act. However, the AO agreed that the assessee should be considered as a “mutual association”. Accordingly, the AO excluded the receipts and expenses covered by mutuality principles. He brought to tax remaining amount without granting exemption u/s 11 of the Act. The amount brought to tax by the AO were Interest income, E learning fees, Monitoring website, rent and miscellaneous income, all aggregating to Rs.89,87,372/-. Thus, the total income of the assessee was determined by the AO at Rs.89,87,370/- in the body of the order. However, in the tax computation sheet, the AO has shown gross receipts, the deduction u/s 11(1)(a), 11(2) etc and shown total income as NIL. However, the AO brought to tax the above said amount of Rs.89,87,370/- and also long term capital gains of Rs.1,62,20,500/-.
The Ld CIT(E), upon examination of assessment record, took the view that the AO has allowed exemption u/s 11 of the Act to the assessee, after having held that it is not a charitable institution. Accordingly, he took the view that the assessment order is rendered erroneous and prejudicial to the interests of revenue. Accordingly, he initiated revision proceedings u/s 263 of the Act. After hearing the assessee, the Ld CIT(E) set aside the assessment order and directed the AO to carry out assessment de-novo and examine the allowability of the various deductions and expenditure as claimed by the assessee in light of the provisions of sec.2(15) of the Act. The assessee is aggrieved.
We heard the parties and perused the record. The contention of the assessee is that the AO did not grant exemption u/s 11 at all and hence there was no scope for the Ld CIT(E) to revise the assessment order. However, as noticed by us earlier, the AO has mentioned about the deductions claimed u/s 11 in the tax computation sheet and it appears, the same has created confusion. We notice from the body of the assessment order that the AO has categorically held that the assessee is not eligible for exemption u/s 11 of the Act, but excluded the receipts/expenditure which is covered by the mutuality principle. Thus, the reasoning given by the Ld CIT(E) for revising the assessment order, in our view, does not exist as per the discussions made in the body of the assessment order.
As noticed earlier, the confusion has arisen on account of the data entered in the “tax computation sheet”. It is not discernible as to why the AO had incorporated the tax computation made by the assessee by claiming exemption u/s 11 of the Act, after having held that the assessee is not eligible for exemption u/s 11 of the Act. The Ld A.R submitted that the computation so mentioned in the tax computation is a matter of rectification u/s 154 of the Act and we agree with it. We also noticed that the AO has brought to tax the long term capital gains and other income, which are not covered by the mutuality principle. As such, we notice that the AO did not grant exemption u/s 11 of the Act, even though the computation made by the assessee was incorporated in the tax computation sheet.
Accordingly, we are of the view that the impugned assessment order cannot be termed as erroneous and prejudicial to the interests of revenue, since the AO did not grant exemption u/s 11 at all. Accordingly, we set aside the impugned revision order passed by Ld CIT(E).
In the result, the appeal filed by the assessee is allowed.