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Facts
The assessee, a charitable trust, filed an appeal against the order of the CIT(Exemption) who invoked revisionary powers under Section 263 of the Income Tax Act, 1961. The CIT(Exemption) held that the Assessing Officer (AO) had not properly verified donations made by the assessee to other trusts and the utilization of accumulated income.
Held
The Tribunal held that the AO had failed to verify whether the donations were corpus donations or revenue expenditure and whether the donee trusts were engaged in charitable activities. However, regarding the utilization of accumulated income, the Tribunal found that the assessee had complied with the provisions of Section 11(3) of the Act and there was no prejudice caused to the revenue.
Key Issues
Whether the CIT(Exemption) correctly exercised revisionary powers under Section 263 for inadequate verification of donations and accumulation of income by the assessee.
Sections Cited
263, 143(3), 11(2), 11(3), 12A, 80G, 69-C, 11
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
Assessment Year: 2020-21 Shri Multanchand Bora Trust, V The Assistant/Deputy 132B/2A, Ganeshkhind Road, s. Commissioner of Income Pune – 411007. Tax, Exemption Circle, Aurangabad. PAN: AAFTS3329F Appellant/ Assessee Respondent / Revenue Assessee by Shri Shrenik Gandhi Revenue by Shri Amit Bobde –CIT(DR) Date of hearing 11/09/2025 Date of pronouncement 09/12/2025 आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal is filed by the Assessee against the order of ld.Commissioner of Income Tax(Exemption), Pune at Nashik passed under section 263 of the Income Tax Act, 1961 for A.Y.2020-21, dated 30.03.2025 emanating from Assessment Order u/s.143(3) of the I.T.Act, dated 20.09.2022. The assessee has raised following grounds of appeal :
1. Ground No. 1: The Learned CIT (Exemption) seriously erred on the facts and law, in exercising the revisionary powers under Section 263 of the Income-tax Act, 1961 (“IT Act”) and without satisfying the jurisdictional conditions, laid down under Section 263 of the IT Act viz. the Assessment Order is erroneous and prejudicial to the interests of the revenue and thus the impugned Order deserves to be quashed and set aside.
2. Ground No. 2: The Learned CIT (Exemption) seriously erred on not recording any prima facie findings as to how the Assessment Order was erroneous and prejudicial to the interests of the revenue. The Learned CIT (Exemption) erred in adopting a “cherry-picking” approach and ignored certain critical submissions/documents of the Appellant available on record and thus the impugned Order is liable to be quashed and set aside on this ground alone.
3. Ground No. 3: The Learned CIT (Exemption) seriously erred in passing the impugned Order and that without appreciating that the revisionary powers under Section 263 of the IT Act cannot be exercised merely because there is a “change of opinion”. The Learned CIT (Exemption) ought to have appreciated that, the case was not a case of lack of enquiry and that a detailed enquiry was conducted by the Assessing Officer and all the relevant documents and details were available before the Assessing Officer before the Assessing Officer formed his view and then Assessment Order was passed. Thus, the impugned Order is erroneous and deserves to be quashed set aside.
4. Ground No. 4: The Learned CIT (Exemption) failed to appreciate that the Assessing Officer had adopted one plausible/possible view and the impugned Order cannot be sustained merely because Learned CIT (Exemption) desired to peruse additional documents and make some additional enquiries. Thus, the impugned Order deserves to be quashed and set aside on this ground alone.
The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal
herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing.” Submission of ld.AR :
2. Ld.Authorised Representative(ld.AR) for the Assessee submitted a legal paper book and factual paper book. Ld.AR submitted that during the scrutiny proceedings, Assessing 2 Officer(AO) had asked the specific details regarding donation made to Amar Prerana Trust and Bhausaheb Firodia Vriddhashram Sanstha. The Assessee submitted copy of the receipts issued by Amar Prerana Trust and Bhausaheb Firodia Vriddhashram Sanstha which are at page no.123, 125 and 127 of the paper book. Ld.AR further submitted that nowhere in these receipts it is mentioned that the donation was for “CORPUS”. Thus, the donation made was general donation. Ld.AR further submitted that at page no.126 of the paper book is the copy of the order of the ld.CIT(Exemption)- Pune, dated 05.03.2009 issuing certificate u/s.80G of the Act. Ld.AR submitted that this explains that Amar Prerana Trust is a Charitable Trust doing charitable activities. Ld.AR further submitted that copy of the activities of Bhausaheb Firodia Vriddhashram Sanstha are also charitable in nature. They are running old age home.
During the 263 proceedings, all these details were again filed before ld.CIT(Exemption). Ld.Authorised Representative(ld.AR) for the Assessee further submitted that ld.CIT(Exemption) has recorded this fact in the order. Thus, the main allegation of the
Ld.Authorised Representative(ld.AR) for the Assessee took us through the details of accumulation submitted by Assessee during the Assessment Proceedings along with copy of Form-10. Ld.AR submitted that at page no.270 is the copy of Form-10 which explains the accumulation. Then, page 268 is another Form-10. Ld.AR submitted that as per the provisions of the Act, the amount has been used in the sixth year. Ld.AR therefore submitted that the order u/s.263 is bad in law.
4.1 Ld.AR relied on following case laws : i. Commissioner of Income-tax, Mumbai vs.Amitabh Bachchan [2016] 384 ITR 200(SC) ii. Commissioner of Income-tax, Shimla Vs. Greenworld Corporation [2009] 314 ITR 81 (SC) iii. Commissioner of Income-tax Vs. Future Corporate Resources Ltd. [2022] 284 Taxman 122 (Bombay) iv. Bajaj Housing Finance Ltd. Vs. Principal Commissioner of Income-tax [2024] 161 taxmann.com 213(Pune Tribunal) Submission of ld.DR : 5. Ld.Departmental Representative(ld.DR) for the Revenue relied on the order of ld.CIT(Exemption). 4 Findings & Analysis : 6. We have heard both the parties and perused the records. In this case, Return of Income was filed by Assessee for A.Y.2020-21 electronically on 13.02.2021 declaring NIL Income. The Assessee’s case was selected for scrutiny for following reasons : i. Expenditure for Charitable or Religious Purposes. ii. Accumulation of Income by Trust Credit of Brought Froward TDS iii.
It is specifically mentioned in the Assessment Order that Assessee is a Public Charitable Trust duly registered u/s.12A of the Act and also registered with Charity Commissioner, Ahmednagar vide Registration No.E-130 dated 07.09.1964. It is also mentioned in the assessment order that assessing officer issued notices dated 29.06.2021, 27.11.2021 and 09.12.2021. The Assessing Officer passed an assessment order dated 20.09.2022 accepting the returned income.
7.1 The ld.CIT(Exemption) on verification of records, issued notice u/s.263 of the Act, dated 29.01.2025. In response to the notice u/s.263 of the Act, Assessee filed submission. Assessee’s 7.2 The relevant paragraph 8.1 of the order u/s.263 is reproduced as under : “8.1 There is no discussion in the assessment order regarding any verification or inquiry carried out on the treatment of donations as corpus or revenue application. Also, the objects of the donee trusts should be similar to the charitable objects of the donor trust, to ensure that donations serve the intended charitable objectives as provided in the trust deed of the donor trust i.e. the assessee. However, no such documentary evidence like trust deeds or other documents were sought and examined to establish the similarity of objects between the assessee Trust and the done trusts. The AO has failed to examine this issue as well. Similar is the case regarding the issue of utilization of accumulated income beyond the prescribed period under section 11(2) of the Income-tax Act, 1961. Therefore, absence of any detailed inquires or verification of these crucial aspects rendered the assessment order erroneous and prejudicial to the interest of revenue within the meaning of section 263 of the Income-tax Act, 1961.”
7.3 Thus, ld.CIT(Exemption) set-aside the Assessment Order to the Assessing Officer to reframe the assessment order after considering the issues mentioned.
The contention of the ld.CIT(Exemption) is that during Assessment Proceedings, Assessing Officer has failed to verify 6 Amar Prerana Trust and Bhausaheb Firodia Vriddhashram Sanstha were Corpus Donation or Revenue Expenditure! Ld.CIT(Exemption) has also stated that AO has not verified activity of Donee Trusts and not made any inquiry to verify whether the Activities of Donee trust was charitable or not!Ld.CIT(Exemption) also observed that accumulation of income was not applied within five years as per section 11(2) of the Act.
In this case, we have carefully studied the paper book filed by the Assessee. We have gone through notices issued by Assessing Officer and the reply filed by the Assessee. In the Paper Book filed by the Assessee the Assessee has filed copies of reply filed during Assessment Proceedings dated 13/07/2021, 06/12/2021 and 17/12/2021. On perusal of these replies, it is noted that during the Assessment Proceedings the Assessee has not filed any evidence regarding Activities of the Trusts to whom Assessee has given donations during the year. During the Assessment Proceedings the Assessee has not proved that the Trusts to whom Assessee has given donations are engaged in Charitable Activities. Therefore, to this extend the allegations levied by Commissioner of Income (exemption) in the order u/s 263 are correct. It is essential for the 7 Assessee to prove by documentary evidence that the Trusts to whom Assessee has given donations were engaged in Charitable Activities. We derive strength from the Order of the Hon’ble Bombay High Court.
9.1 The Hon’ble Bombay High Court in the case of Commissioner of Income-Tax, Bombay Vs. Trustees of The Jadi Trust [1982] 133 ITR 494 (BOM) vide order dated 21/04/1981 observed as under : Quote, “ 13. The real question which requires to be decided is whether it is possible to read the provisions of the first part of cl. (a) of s. 11(1) as requiring that, in order to avail of the benefit of s. 11(1)(a) the trustees who hold a property under trust wholly for charitable or religious purposes, must themselves conduct directly a charitable or religious activity or whether it is permissible for the trustees to donate that income to another trust which is established for a charitable or religious purpose and which applies its income from whatever sources received, for charitable or religious purposes………………….
14………………….There is thus a clear indication in s. 12 of the Act that the trust to which s. 11 applies can make a voluntary contribution to another to which also s. 11 is made applicable subject, of course to the satisfaction of the conditions in s. 11……………………
15.…………………..But apart from the present case, it appears to us that for the purposes of s. 11 of the Act, it would be enough for the donor-trust to show that the donation of the income of the donor trust had been handed over to the donee-trust which is itself created for 8 [A] charitable purposes, but, asalready pointed out, a rider will have to be added to this that it may be necessary in a given case toascertain whether the funds are deliberately being diverted to non-charitable purpose through the medium of the donee-trust.”Unquote. (emphasis supplied)
9.2 The Hon’ble High Court has specifically stated that it is necessary to ascertain that funds were not diverted for non- charitable purpose.
9.3 The CBDT vide Instruction Number 1582 dated 19/10/1984 stated that Assessing Officer should satisfy himself that the funds donated to the donee trust would be utilized only for charitable purpose. It is mandatory for the Assessing Officer to follow the CBDT Instructions/Circulars. In this case by not conducting the inquiry regarding activities of the DONEE trusts the Assessing Officer has violated the CBDT instruction.
9.4 In this context, we will like to refer to the decision of Hon’ble Supreme Court of India in the case of Commissioner of Income Tax Mumbai vs Amitabh Bachchan (2016) 384 ITR 200. Hon’ble Supreme Court has held as under : Quote,“19. The learned C.I.T. took the view that notwithstanding the withdrawal of the claim by the assessee, in view of the earlier stand 9 Officer ought to have proceeded with the matter as the assessee was following the cash system ofaccounting and the filing of the re-revised return, prima facie, indicated that the additional expenses claimedhad been incurred. In this regard, the following findings/reasons recorded by the learned C.I.T. in the orderdated 20th March, 2006 would be of particular relevance:
"Withdrawal of claim by assessee can be for variety of reasons and this does not mean that AssessingOfficer should abandon enquiries regarding sources for incurring expenses. Assessee follows cash systemof accounting and the claim regarding additional expenses was made through duly verified revised return.The claim was pressed during assessment proceedings carried on by A.O. after filing revised return and itwas specially stated in letter dated 13.02.2004 that expenses were for security purposes and that paymentshave been made out of cash balances available etc. Under the circumstances, the Assessing Officer wasexpected to examine the matter further to arrive at a definite finding whether assessee incurred expenses ornot and in case, actually incurred, then what were sources for incurring these expenses. Assessing Officerwas satisfied on withdrawal of the claim and in my view, his failure to decide the matter regarding actualincurring of additional expenses and sources thereof resulted into erroneous order which is prejudicial to the interest of revenue." 10
An argument has been made on behalf of the assessee that notice under Section 69-C was issued by theAssessing Officer and thereafter on withdrawal of the claim by the assessee the Assessing Officer thought thatthe matter ought not to be investigated any further. This, according to the learned counsel for the assessee, is a possible view and when two views are possible on an issue, exercise of revisional power under Section 263would not be justified. Reliance in this regard has been placed on a judgment of this Court in MalabarIndustrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 which has been approved in CIT v. Max IndiaLtd. [2007] 295 ITR 282/[2008] 166 Taxman 188 (SC).
There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the sameought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground thatthere is another possible view of the matter. Permitting exercise of revisional power in a situation where twoviews are possible would really amount to conferring some kind of an appellate power in the revisionalauthority. This is a course of action that must be desisted from. However, the above is not the situation in thepresent case in view of the reasons stated by the learned C.I.T. on the basis of which the said authority felt thatthe matter needed further investigation, a view with which we wholly agree. Making a claim which wouldprima facie 11 disclose that the expenses in respect of which deduction has been [A] claimed has been incurred and thereafter abandoning/ withdrawing the same gives rise to the necessity of further enquiry in the interest of theRevenue. The notice issued under Section 69-C of the Act could not have been simply dropped on the groundthat the claim has been withdrawn. We, therefore, are of the opinion that the learned C.I.T. was perfectlyjustified in coming to his conclusions insofar as the issue No. (iii) is concerned and in passing the impugnedorder on that basis. The learned Tribunal as well as the High Court, therefore, ought not to have interfered withthe said conclusion.” Unquote.
In the case of the Amitabh Bachchan (supra) the Commissioner of Income Tax has invoked 263 on the ground that the AO has not verified whether the particular expenditure was incurred or not and what was the source of expenditure. Hon’ble Supreme Court has upheld the order u/s.263 upholding the view that inquiry was necessary on that particular issue.
In the case of the assessee Shri Multanchand Bora Trust, we have already observed that AO had not conducted inquiry, hence the decision of Hon’ble Supreme Court is applicable to the Assessee.
In these facts and circumstances of the case, respectfully following the decision of Hon’ble Supreme Court(supra) the 12 Discussion on the case law filed by the ld.AR : 13. The case laws relied by the Ld.AR are distinguishable on facts hence not applicable to the case of the assessee.
13.1 Ld.AR has relied on the case law for the proposition that when two plausible views are possible and AO adopts one view then the assessment order cannot be termed as erroneous. However, the case laws relied by the Ld.AR are not applicable to the assessee as in this case we have already mentioned that AO has failed to verify basic facts hence the Assessment Order is erroneous and prejudicial to the interest of revenue.
The Commissioner of Income Tax(Exemption) in the Order u/s.263 has also stated that AO has not verified whether the Donations given were Corpus Donations or not ! 14.1 We have observed that during assessment proceedings the Assessee had filed copies of the receipts issued by the Donee .These receipts are scanned and reproduced here under : 13 14.2 These receipts are at page 123, 125 and 127 of the paper book filed by the assessee.
No where in these above receipts it is mentioned that the Donation is Corpus Donation. These receipts were filed by the Assessee before the Assessing Officer. Therefore, the observation of the ld.CIT(E) in the order u/s.263 that the AO has not verified whether the donations are corpus or not, is factually incorrect.
16. As far as the issue of application of accumulated amount is concerned, ld.CIT(Exemption) has observed as under in para 7.1 of his order : “7.1 On the issue of application of accumulated and set apart amount of Rs.3,86,13,367/- in F.Y. 2013-14 during the previous year 2019-20 i.e. beyond the permitted period, the assessee contended that during the FY 2019-20, it spent Rs.4,00,00,000/- out of accumulated amount for purchase of medical equipment which were delivered to Grant Medical Foundation. The assessee further contended that as per the provisions of sec. 11(3) of the Income-tax Act, 1961, the amount was applied on objects within six years from the year of its accumulation was made.”
16.1 Thus, ld.CIT(Exemption) has stated that Assessee pleaded that Rs.4 crores were spent for purchase of medical equipment which were delivered to Grant Medical Foundation and Lata Mangeshkar Medical Foundation. We have perused the submission filed by the Assessee before the Assessing Officer and it is noted that during assessment proceedings, Assessee has submitted the copies of the invoices along with deliver challans which are at page no.129 to 133 of the paper book and at page no.210 to 226 of the paper book. As per the said invoice, Assessee has purchased certain medical equipment from Wipro GE Healthcare Pvt. Ltd., and were delivered to Grant Medical Foundation. Similarly, Assessee has purchased certain medical equipment from Getinge Medical India Pvt. Ltd., 17 Lata Mangeshkar Med Foundation’s Deenanath Mangeshkar Hospital. These invoices were submitted during assessment proceedings. The ld.CIT(Exemption) has not doubted veracity of these documents. Ld.CIT(Exemption) has also not made any observation regarding these documents. It means Assessing Officer has verified these documents. The ld.CIT(Exemption)’s only concern is that the amount was spent in sixth(6th) year. However, ITAT Ahmedabad in the case of GMDC Science and Research Centre Vs. ITO(Exemption) 176 taxmann.com 746(Ahd Tribunal) order dated 18.07.2025 has held as under : “9.1 As per the sub-clause (c) of Section 11(3), the accumulated amount shall be deemed to be the income of the assessee, if it was not utilized within the period of five years as mentioned in Section 11(2)(a) of the Act, or “in the year immediately following the expiry thereof”. Thus, the assessee had time limit of five years and on additional year to utilize the accumulated funds.”
In these facts and circumstances of the case on the issue of accumulation we do not find any prejudice caused to the revenue. Hence, the order u/s.263 qua the issue of Accumulation is unsustainable in law.
18. Accordingly, qua only the issue of Accumulation the Order u/s.263 is set aside and qua the issue of Donationsas discussed in earlier paragraphs the Order u/s.263 is upheld.
In the result, the Appeal of the assessee is partly allowed. Order pronounced in the open Court on 09 December 2025.