KERALA INDUSTRIAL INFRASTRUCTURE DEVELOPMENT CORPORATION,THIRUVANANTHAPURAM vs. COMMISSIONER OF INCOME TAX (E), KOCHI

Brief facts of the case are that the appellant is a wholly owned company of State Government of Kerala. It is formed under the statutory body setup under the Kerala State Legislative Act, 1993. It is formed with the object of industrial infrastructure development in Kerala Industrial Infrastructure Development Corportion the state of Kerala. The return of income for AY 2021-22 was filed on 11.02.2022 declaring Nil income after claiming exemption u/s. 11 of the Act. Against the said return of income, the assessment was completed by the AO vide order dated 30.12.2022 passed u/s. 143(3) r.w.s. 144B of the Act accepting the returned income.

Subsequently, on examination of assessment records, the learned Commissioner of Income Tax (Exemption), formed an opinion that exemption u/s. 11 was wrongly allowed to the appellant society as it was engaged in commercial activities falling outside the ambit of charitable purposes as defined u/s. 2(15) of the Act. Accordingly, the ld. Commissioner of Income Tax (Exemption), formed an opinion that the assessment order passed u/s. 143(3) r.w.s. 144B is erroneous and prejudicial to the interests of Revenue. Accordingly, a show cause notice u/s. 263 of the Act was issued on 21.02.2025 proposing revision of the assessment order. In response to the show cause notice, it is submitted that the assessment was completed after the AO made detailed enquiry on eligibility of exemption u/s. 11 of the Act. It is submitted that the issues raised in the show cause notice were subject matter of enquiry made during the course of assessment proceedings through questionnaire. The assessee’s representative appeared in person on 04.03.2025 and filed submissions. After considering the submissions made by the assessee the AO took a plausible view that the appellant is entitled Kerala Industrial Infrastructure Development Corportion for exemption u/s. 11 of the Act. However, the ld. Commissioner of Income Tax (Exemption) had proceeded to hold that since the income from the activities other than charitable purposes exceeds 20% of the total activity, disqualifies the entity from claiming deduction u/s. 11 of the Act placing reliance on the decision of the Hon'ble Supreme Court in the case of Ahmadabad Urban Development Authority [2022] 449 ITR 1. Accordingly, set aside the assessment and remanded to the AO to conduct fresh examination keeping in view the findings of the Hon'ble Kerala High Court in its order dated 15.12.2016 wherein the Hon'ble High Court remanded the issue to the ITAT Cochin Bench. The Tribunal in turn restored the matter to the AO. Thus, the order passed by the Commissioner of Income Tax (Exemption) was set aside to the AO.

Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.

The learned counsel for the assessee submits that the ld. Commissioner of Income Tax (Exemption) grossly erred in exercising the power of revision to set aside the assessment order which was passed after due enquiry of the issues raised in the show cause notice u/s. 263 of the Act.

On the other hand, the learned Sr. DR submits that the order passed by the ld. Commissioner of Income Tax (Exemption) is in light of the earlier order passed by the Hon'ble High Court.

We heard the rival submissions and perused the material on record. The Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of Revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) and in the case of CIT vs. Max India Ltd., 295 ITR 282 (SC). The error in the assessment order should be one that it is not debatable or plausible view. In a case where the Assessing Officer examined the claim took one of the plausible views, the assessment order cannot be termed as an “erroneous”.

In the present case it is the contention of the appellant that the AO, during the course of assessment proceedings, had examined all the issues which ware raised in the show cause notice u/s. 263 of the Act. It is the contention of the appellant that after considering the detailed submission made by the appellant the assessing authority took a plausible view that the income of the appellant is entitled for Kerala Industrial Infrastructure Development Corportion exemption u/s. 11 of the Act. However, the material on record clearly indicates that in the earlier years the matter was restored to the file of the AO by the ITAT consequent to the remand order passed by the Hon'ble Kerala High Court to the ITAT. When the assessment was made the jugement of the Hon'ble Supreme Court in the case of Ahmadabad Urban Development Authority (supra) was not available to the AO. Therefore, on principles of consistency we are of the considered opinion that the present assessment also requires remand to the file of the assessing authority to make fresh assessment keeping in view the ratio of the decision of the Hon'ble Supreme Court in the case of Ahmadabad Urban Development Authority (supra). Therefore, we are of the considered opinion that the ld. Commissioner of Income Tax (Exemption) rightly exercised the power of revision. We do not find any illegality or perversity in the order of the ld. Commissioner of Income Tax (Exemption) passed u/s. 263 of the Act.

In the result, the appeal filed by the assessee stands dismissed.