LAKSHMI VIDYA SANGHAM,MADURAI vs. CIT(EXEMPTIONS), CHENNAI

This appeal by the assessee is directed against the order of ld. CIT(E), Chennai vide order No. ITBA/COM/F/17/2020- 21/1031953954(1) dated 30.03.2021 passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) for A.Y. 2015-16.

The assessee has taken as many as six grounds of appeal by which it has challenged the assumption of jurisdiction for invoking the revisionary proceedings u/s. 263 of the Act and passing of the impugned order thereon.

Brief facts as culled out from records are that assessee is a charitable trust and is registered u/s. 12AA of the Act vide order in circular no. 212(572)/75 dated 31.03.1975. Assessee filed its return of income on 29.09.2015 reporting total income at Rs. Nil. Case was selected for limited scrutiny for which statutory notices were issued and served on the assessee. Assessee complied with notices and the Lakshmi Vidya Sangham, A.Y: 2015-16 assessment so completed by the Ld. AO after examining the submissions made held that assessee had applied more than 85% of the total income and granted the exemption u/s. 11 of the Act.

Ld. CIT(E) was of the considered view that the shortfall of Rs.40,43,430/- ought to have been brought to tax as it fell short of 85% of application of gross receipts towards the objects of the trust. Assessee vide its reply dated 13.02.2020 explaining its case that even though these provisions have been claimed as application, the expenditure actually incurred against these provisions, if taken into consideration, would amount to application of the gross receipts at the percentage prescribed i.e. 85% or more and, therefore, there is no short fall in the application as alleged by the Ld. CIT(E). In the reply submitted before

Ld. Counsel for the assessee reiterated the submissions made before the Ld. CIT(E) which have been referred in the facts stated above. The same are not repeated to avoid duplicacy. Per contra, Ld. CIT, DR relied on the order of the Ld. CIT(E).

We have heard rival submissions and gone through the facts and circumstances of the case. Admittedly, it is a fact that revised working in respect of application of income was placed on record after excluding the three provisions mentioned in the show cause notice issued by the Ld. CIT(E) for invoking revisionary proceedings u/s. 263 of the Act. The revised computation in respect of application of income has not been controverted by the Ld. CIT(E) nor any material brought on record to demonstrate anything against the said computation. Ld. Sr. DR also could not bring out anything contrary to the revised working reported by the Ld. Counsel when the said working was confronted to him. We thus find that in the course of proceeding u/s. 263 of the Act before the Ld. CIT(E), the assessee had furnished the relevant details factually demonstrating that the application of income excluding the three provisions is at 85.27% and explained the issue raised in the show cause notice by relevant documentary evidence and judicial precedents. We note that it is a well settled law that for invoking the provisions of section 263 of the Act, both the conditions that the order must be erroneous insofar as prejudicial to the interest of the revenue needs to be satisfied as held by Hon’ble Supreme Court in the case of Malabar Industrial Company Ltd. Vs. CIT (2000) 109 taxman 66 (SC). The ratio laid-down by the Hon’ble Supreme Court in this decision has been followed by various Hon’ble courts. Accordingly, consideration arrived at by the Ld. CIT(E) invoking the provisions of section 263 of the Act on the issue recorded by him is not justified and cannot be sustained in Lakshmi Vidya Sangham, A.Y: 2015-16 the facts and circumstances of the present case. We, therefore, quash the impugned order u/s. 263 of the Act and allow the grounds of appeal raised by the assessee.

In the result, the appeal of the assessee is allowed.