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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: Shri Rama Kanta Panda & Shri Laliet Kumar
Per Shri Rama Kanta Panda, A.M. This appeal filed by the assessee is directed against the order dated 30.03.2021 passed under section 263 of the I.T.Act by the Learned Commissioner of Income Tax (Exemptions), Hyderabad relating to AY 2015-16.
There is a delay of ‘362’ days in filing of this appeal by the assessee for which a condonation application along with an affidavit has been filed explaining the reasons for such delay which is due to the pandemic. After hearing both the sides and following the decision of Hon’ble Supreme Court in the case of suo moto proceedings in the case of M.A.No 21 of 2022 and in M.A.665 of 2021 in suo moto writ petition (c) No. 3 of 2020 vide order dated 10.1.2022, the delay in filing of this appeal by the assessee is condoned and the appeal is admitted for adjudication.
2 ITA 220/Hyd/2022 3. Facts of the case, in brief, are that the assessee is a society registered u/s. 12AA of the I.T.Act vide order of the Director of Income Tax (Exemptions), Hyderabad in F.No.DIT(E)/Hyd/12A/36(11)/08-09, dated 13.03.2009. It filed its return of income on 26.09.2015 claiming exemption u/s. 11 of the Act and declaring total income of Rs.Nil. The case was selected for scrutiny and statutory notices u/s. 143(2) of the Act was served on the assessee. The AR of the assessee appeared from time to time and filed the necessary details.
3.1 During the course of assessment proceedings the AO noted that assessee trust has advanced loan to trustees Shri. D.Ravi and Shri D.Jagdish Prasad of Rs.1,50,000/- and Rs.3,36,114/- respectively. However, in the balance sheet it was shown as other sundry debtors. He noted that under identical circumstances, in the previous assessment year i.e. 2014-15 on the similar issue, exemption was denied and the same is pending before the ld.CIT(A). He, therefore, confronted the same to the assessee. Rejecting the various explanations given by the assessee and observing that assessee trust has utilized its funds by giving advances to interested parties u/s. 13(3) of the I.T.Act, the AO held that the assessee trust is ineligible for exemption u/s. 11 and 12 of the I.T.Act. The AO thereafter proceeded to compute the income of the assessee on commercial principles and brought to tax the excess of income over expenditure for calculating the taxable income. He accordingly rejected the claim of exemption u/s. 11 of the I.T.Act, 1961 and brought the income to tax by treating the assessee as AOP and taxed at Maximum Marginal Rate (MMR).
Subsequently, the ld.CIT(E) on examination of the record noted that the order passed by the AO is erroneous and prejudicial to the interest of the revenue and therefore, issued a
3 ITA 220/Hyd/2022 notice u/s. 263 of the I.T.Act, the contents of which are as under:-
Office of the Commissioner of Income Tax (Exemptions) 2nd Floor, Aayakar Bhavan, Basheer Bagh, Hyderabad-500 004. Telephone No. 040-23426031/23426032 Fax: 040-23426033 Emai_id: hyderabad.cit.exmp@incometax.gov.in
F.No.CIT(E)/Hyd/263/AABTP5178R/2019-20 Date:- 12.03.2020
To
Mis. Panineeya Sanskrit College . 16-227, Vivekananda Nagar Dilsukh Nagar Hyderabad
Sir,
Sub: Assessment order passed u/s 143(3) of the IT Act, 1961 dt. 22.12.2017, for the A Y 2015-16, erroneouS being prejudicial to the interest of Revenue - Requiring revision u/s 263 of the IT Act, 1961 of the said assessment order - Show cause notice u/s 263 of the IT Act - Furnishing of explanation - Reg
Please refer to the subject mentioned above.
Consequent upon the CBDTs notification No. 65/2014 dt. 13.11.2014 (F. No. 187/38/2014 ITA -I) U/S 120 (1) & (2) of the Income Tax Act, 1961 (So No. 2754(E) published in Gazette of India, extraordinary part - II, sec 3(11) on 22-10-2014 & subsequent notification in this regard, jurisdiction over your case, stands assigned to CIT(E), Hyderabad.
In the mean time, I have called for and examined the assessment record for the A Y 2015-16, in your case and found that the assessment order dated 22.12.2017 passed u/s 143(3) of the IT Act, 1961 ("the Act" in short) in your case, by the ITO (Exemptions)-3 , Hyderabad, is erroneous, in so for as, it is prejudicial to the interest of the revenue.
It is stated that for the A Y 2015-16, you had filed return of income on 26.09.2015 declaring income at 'NIL', after claiming exemption u/s 11 of the Act. The AO had completed the assessment u/s 143(3) of the Act on 22.12.2017 by making addition of excess of expenditure over income as per income and expenditure account and assessed income taxable at MMR at RS.NIL
4 ITA 220/Hyd/2022 5. In the assessment order the AO has discussed brought out the facts that the trust has advanced loans to its trustees who covered under specified persons u/s 13(3) of the Act. Further, the AO finalized the assessment with a conclusion that the assessee is not eligible for exemption u/s. 11 of the Act as claimed by your trust and exemption claimed has been denied. However, the AO has not taken into consideration the revised computation of income submitted during the course of scrutiny proceedings. The AO while completing the assessment not considered income from business of R5.68,74,854/- and income from other Sources of Rs.20,95,897/ -
For the failure on part of the AO in not making the above, the assessment made by him vide that order dt. 22.12.2019 passed u/s 143(3) of the Act, for the A Y 2015-16, in your case, is thus erroneous, in so for as it is prejudicial to the interest of revenue. Hence, it is proposed to revise the said assessment made by the AO u/s 263 of the Act. However, before proceeding to revise the said assessment, you are hereby given an opportunity to furnish your explanation on the said matter on 18.03.2020 when your case is fixed for hearing on the said date at 11.30 AM.
You are requested to attend hearing on the said date at stipulated time and furnish your explanation. In case of failure to comply with this notice, issued u/s 263 of the Act, it will be presumed that you have nothing to say in the matter, and I shall proceed to pass necessary order in accordance with law.
4.1 The AR of the assessee appeared before the ld.CIT(E) from time to time and filed the requisite details. However, the ld.CIT(E) was not satisfied with the arguments advanced by the assessee. He observed that the assessee during the course of scrutiny proceedings has submitted revised computation of income showing income from business of Rs.68,74,854/- and income from other sources of Rs.20,95,897/-. The AO, while denying the claim of exemption u/s. 11 as discussed in paragraphs 5 to 14 of the order passed u/s.143(3) dated 22.12.2017, failed to consider the revised computation of income submitted by the assessee during the scrutiny proceedings to arrive at the assessed income to be taxed at MMR. He observed that the AO has not properly examined these aspects and has not applied his mind while passing the assessment order.
5 ITA 220/Hyd/2022 5. Rejecting the various explanations given by the assessee and relying on various decisions, the ld.CIT(E) held that the order passed by the AO is erroneous and prejudicial to the interest of the revenue. He, therefore, set aside the same with direction to the AO to examine the issues mentioned by him, in addition to the issues on which, the AO has already made addition and re-do the assessment after verification of the issues in accordance with law.
Aggrieved with such order of the Ld.CIT(E), the assessee is in appeal before the Tribunal by raising the following grounds.
On the facts and in the circumstances of the case, the revision order dated 30.03.2021 passed by the Id. commissioner of Income Tax (Exemptions), Hyderabad, is erroneous and unsustainable in law.
The Id. commissioner of Income Tax (Exemptions) erred in holding that the Assessing officer while passing assessment order dated 22.12.2017 has not considered the revised computation allegedly flied by the Appellant much later 16.01.2020.
On the facts and in the circumstances of the case, the basis on which the revision order is passed is non-existent, and therefore, the revision order dated 30.03.2021 under section 263 of the Act by the Id. commissioner of Income Tax (Exemptions) cannot be sustained on facts and in law
on the facts and in the circumstances of the case, the Id. commissioner of Income Tax (Exemptions) has not pointed out any error or prejudice in the show cause notice or in the order impugned and therefore the order impugned cannot be sustained and deserves to be quashed for these and other grounds that may be urged, it is prayed that the appeal may be allowed.
The ld. Counsel for the assessee, referring to the order of the ld.CIT(E) at page ‘5’ of the order drew the attention of the Bench to the reply of the assessee dated 16.01.2020 to the rectification proceedings u/s. 154 against order passed u/s. 143(3) for AY 2015-16. He submitted that the ld.CIT(E) came to know about the details from the letter addressed by the assessee and during the course of original proceedings, it was not an issue before the AO.
6 ITA 220/Hyd/2022 He accordingly submitted that the PCIT is not justified in assuming jurisdiction u/s. 263 of the I.T.Act. Relying on various decisions, he submitted that the order passed u/s. 263 of the I.T.Act should be quashed and the grounds raised by the assessee should be allowed.
The ld. DR on the other hand, strongly supported the order of the ld.CIT(E). He submitted that when admittedly the AO has not taken into consideration the income from business of Rs.68,74,854/- and income from other sources of Rs.20,95,897/- to arrive at the income to be assessed, the order has become erroneous as well as prejudicial to the interest of the revenue and therefore, the ld.CIT(E) was fully justified in invoking the provisions of section 263 of the I.T.Act and thereby setting aside the assessment.
We have heard the rival arguments made by both the sides, perused the orders of the AO and ld.CIT(E) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited by both the sides. We find the AO in the instant case rejected the claim of exemption u/s. 11 and 12 of the I.T.Act, on the ground that assessee trust has advanced loan to trustees Shri D.Ravi and Shri D.Jagdish Prasad of Rs.1,50,000/- and Rs.3,36,114/- respectively in violation of provisions of section 13(1)(c) of the I.T.Act. It is also an undisputed fact that the AO while completing the assessment did not consider the income form business of Rs.68,74,854/- and income from other sources of Rs.20,95,897/- to arrive at the income to be assessed. It is not the case of the assessee that the assessee trust has not earned the business income of Rs.68,74,854/- and income from other sources of Rs.20,95,897/-. Thus, the AO while completing the assessment u/s. 143(3) and denying the exemption u/s. 11 of the I.T.Act has failed to consider the above two items to arrive at the
7 ITA 220/Hyd/2022 correct income to be assessed and taxed at Maximum Marginal Rate. Under these circumstances, the order passed by the AO in our opinion has become erroneous as well as prejudicial to the interest of the revenue and therefore, the ld.CIT(E), in our opinion was fully justified in invoking the provisions of section 263 of the I.T.Act. Accordingly, the order passed by the ld.CIT(E) is upheld and the grounds raised by the assessee are dismissed.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the Open Court on 20th December, 2022.
Sd/- Sd/- (LALIET KUMAR) (RAMA KANTA PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated 20th December, 2022. Thirumalesh/sps Copy to: S.No Addresses 1 Panineeya Sanskrit College Trust Sy.No.103, Vivekananda Nagar Dilsukhnagar Hyderabad-500 060 2 ITO(Exemptions)-3 Aaykar Bhawan Basheerbagh Hyderabad-500 004 3 CIT€, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File
By Order