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Facts
The assessee, a charitable trust, filed its return of income for AY 2018-19. Due to a delay in filing Form 10, a deduction of Rs. 1,50,05,051/- under section 11(1)(a) was rejected, and this amount was added back to the total income. The CIT invoked Section 263, treating the assessment order as erroneous and prejudicial to revenue, citing the assessee's 'Goa Fest' activity as commercial in nature.
Held
The Tribunal held that the CIT had appropriately invoked Section 263 of the Act as the assessment order was erroneous and prejudicial to the interests of revenue concerning the 'Goa Fest' activity. The tribunal found that the AO had not sufficiently verified this issue.
Key Issues
Whether the CIT was justified in invoking Section 263 of the Income Tax Act to revise the assessment order concerning the 'Goa Fest' activity, considering it potentially commercial rather than charitable?
Sections Cited
263, 143(3), 144B, 11(1)(a), 11, 2(15)
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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI PRASHANT MAHARISHI & SHRI ANIKESH BANERJEE
Instant appeal of the assessee is preferred against the order of the Learned Commissioner of Income-tax, Exemption, Mumbai[for brevity, ‘Ld.CIT’] passed under section 263 of the Income-tax Act, 1961 (in short, ‘the Act’), for Assessment Year 2018-19, passed on dated 06.03.2024. The impugned order was emanated from the order of theNational e-Assessment Centre, Delhi(in
The assessee has taken the following grounds: -
“1.1 In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Exemptions), Mumbai ["the CIT" for short] erred in revising the assessment order u/s 143(3) r.w.s. 144B of the Income Tax Act, 1961 passed by the National E-Assessment Centre, Delhi, ["the AO" or "the NeAC" for short] by invoking the provisions of section 263 of the Income Tax Act,1961 ["the Act" for short] in violation of principles of Natural Justice. 2.1. In the facts and circumstances of the case and in law, the CIT erred in revising the assessment order passed by the A0/ NeAC u/s 143(3) r.w.s. 144B of the Act by invoking the provisions of section 263 of the Act. 2.2. While doing so the Ld. CIT failed to appreciate: (a) The necessary pre-conditions for initiation and completion of a revision u/s 263 of the Act were not fulfilled in the present case; (b) The order sought to be revised by the CIT in the present case was neither erroneous nor prejudicial to the interests of the Revenue and in fact the entire exemption u/s 11 has been denied by the Ld. AO and therefore there is no question of any prejudice caused to the Revenue in this regard; (c) The order sought to be revised by the CIT was passed by the Ld. AO after making the necessary enquiries and due application of mind to the facts and evidences so produced by the Appellant and therefore the invocation of section 263 in the present case is unwarranted; (d) The Order sought to be revised was already challenged in appeal before the Learned Commissioner of Income Tax (Appeals) and the issues forming part of revision [exemption u/s 11] were considered and decided in the said appeal and therefore the CIT had no jurisdiction u/s 263 to revise such an order; (e) The Ld. CIT had no power to revise the assessment order passed by the National E-Assessment Centre; and; (f) In any case, the impugned order u/s 263 is based on incorrect facts and is contrary to the judgement of the Hon'ble Tribunal in the case of the Appellant for earlier years (AY 2011-12 in ITA 2076/M/2016 and AY 2012-13 in ITA 6687/ M/ 2016). 2.3 It is therefore submitted that the order passed by the CIT deserves to be quashed on the above grounds.
3 Advertising Agencies Association of India 3. The Appellant craves leave to add, amend, alter, delete or modify all or any of the grounds of appeal
.”
3. Tersely, we advert the fact of the case. The assessee is a charitable trust and registered under section 12Aof the Act. The assessee filed the return of income (in short ROI) for the impugned assessment year 2018-19. The assessee is bound to submit the form 10with the ROI. But the assessee was in delay for one year for filling the form 10for impugned assessment year with the ROI.The assessee claimed deduction under section 11(1)(a) amount of Rs.1,50,05,051/- for non-utilisation of profit accumulated in earlier years and total income of ROI was NIL. The assessment was framed under section 143(3)r.w.s. 144B of the Act. Due to delay in filing requisite form the deduction U/s 11 was rejected and the amount of Rs.1,50,05,051/- was added back with total income of the assessee. The ld. AO only rejected the deduction under section 11 and completed the assessment without taking any other view in the assessment order. The ld CIT by invoking provision 263 of the Acttreatedthe assessment order as erroneous and prejudicial to the revenue. The ld. CIT on perusal of assessment record it is found that the assesseehad conducted“Goa Fest” in Goa annuallywherein the leader of advertising industries are invited to deliver their presentation on the industry. The participation in this event is through subscription only. The ld. CIT has treated this activity as business activity and not in charitable nature. The issue was never adjudicated by the ld.AO in the assessment order. So, the expenses of “Goa Fest” is directed to further verification and setting aside the assessment order as erroneous & prejudicial to the revenue. Being aggrievedon revision order U/s 263 the assessee filed an appeal before us.
4. The ld. AR argued and filed written submission which is kept in the record. The ld.ARargued that the assessee is covered it’s own case 4 ITA No. 2370-Mum-2024 Advertising Agencies Association of India MUM/2016 date of pronouncement 01.03.2019. So, the invoking Section 263 of the Act is unjustified. The ld. ARrespectfully reliedon different judgements and submitted his submission which is reproduced as below: - Sr. No. Particulars Ex. Nos. 1. PROPOSITIONS 1: At the outset, it is submitted that no prejudice is caused to the revenue pursuant to the assessment order u/s 143(3) passed by the Assessment Unit, National Faceless Assessment Centre [NFAC" for short] because the entire exemption u/s 11 as claimed by the Assessee [the Appellant herein] has been denied by the Assessing Officer.
2. PROPOSITION 2: The issue on which the Ld. CIT invoked section 263 (allowance of claim of exemption u/s 11) was pending before the Hon'ble Tribunal and already considered and decided by the Ld. CIT(A). On such an issue no revision u/s 263 can be made [Ref. Clause (c) of Explanation I to section 263(1)].
5 Advertising Agencies Association of India 3. PROPOSITION 3: Further the order of the NFAC merged into the order of the CIT(A) which was in further appeal before the Hon'ble Tribunal on the date of invoking jurisdiction u/s 263 and therefore the CIT had not power to revise such an order and the action u/s 263 is bad in law even on this count (Ref. Oil India Ltd. v/s CIT– (1982) 138 ITR 836 (Calcutta), PCIT Vs Oil India Ltd. – (2019) 103 Taxmann.com 339 (Gauhati), Smt. Renuka Philip vs ITO -(2018) 409 ITR 567 (Madras), et. al.] In this case, the purpose of revision u/s 263 is to deny the exemption u/s 11 on another ground though the exemption u/s 11 has been denied by the Ld. AO in his order w/s 143(3) albeit on a different ground. It is a settled law that once a matter is decided bythe Ld. CIT(A), the CIT cannot invoke the power u/s 263 to setaside another aspect of the same matter [Ref. CIT Vs SlumRehabilitation Authority - (2019) 421 ITR 521 (Bombay), Oillndia Ltd. v/s CIT- (1982) 138 ITR 836 (Calcutta) (supra), et.al.].
PROPOSITION 4: The issue on merit has been considered and decided in favour of the Assessee by holding that the activity of Goa fest is not hit by the proviso to section 2(15) and is not in the nature of trade, commerce or business or any activity ancillary or related thereto [Ref. Order of the Hon'ble ITAT in ITA 2072 / M/ 16 for AY 2011-12 and in ITAT 6687 /M/ 16 for AY 2012-13, copies furnished at the time of hearing]. Further even Departmental Representative has categorically agreed on this aspect at the time of hearing before the Hon'ble Tribunal.
5. PROPOSITION 5: Section 263 cannot be invoked on the basis of a subsequent Supreme Court judgement [Ref. CIT vs G. M. Mittal Stainless Steel P. Ltd. - (2003) 263 ITR 255 (SC)] 6 Advertising Agencies Association of India 6. PROPOSITION 6: CIT cannot hold an order to be erroneous merely because he could have written a better assessment order. A perfect assessment is a myth. The Power of review is not invocable to cover up the alleged deficiencies in the assessment order [Ref. Salora International Ltd. v/s Addl. CIT (2005) 2 SOT 705 (Delhi) (Trib.) wherein it was held that, "Merely because from a perfectionist point of view, it is felt that some more enquiries and verifications could have been made by Assessing Officer while making assessment/assessment order cannot be declared to be erroneous and prejudicial to interest of revenue..."] In fact, it has been held that, "Where an Assessing Officer acting in accordance with law passes some order, same cannot be branded as erroneous by the Commissioner if he is of other view or in the opinion of the Commissioner the order passed by the Assessing Officer is weak or should have made detailed order. Section 263 does not visualize a case of substitution of judgement of Commissioner for that the Assessing Officer who passed the order, unless the order of Assessing Officer is held to be erroneous causing prejudice to the interest of revenue..." [Ref. Allied Engineers v/s CIT (Karnal) - (2009) 180 Taxman 70 (Del) (Mag)].
PROPOSITION 7: An Assessee cannot be worse off by approaching the Honourable Tribunal. Further, the Honourable Tribunal cannot improve upon the order of the commissioner passed u/s 263.
7 Advertising Agencies Association of India 8. PROPOSITION 8: In the present case, the exemption u/s 11 is totally denied on one of the grounds by the Ld. AO. The only reason why the learned CIT has invoked section 263 is to deny the same exemption u/s 11 in the order of the AO. This exercise cannot be done by invoking on another ground, which, according to him was not incorporated in the order of the AO. This exercise cannot be done by invoking section 263. On a similar set of facts, on an order u/s 263 seeking to revise the assessment order denying exemption u/s 11 which was a subject matter of appeal before CIT(A), the Hon'ble Jurisdictional High Court has affirmed the quashing of an order of revision u/s 263 by the Hon'ble Tribunal in the case of CIT v/s Slum Rehabilitation Authority-(2019) 421 ITR 521 (Bombay)
PROPOSITION 9: In the present case, the CIT has nowhere stated in his order that there is any loss of Revenue. In the absence of any finding as regards loss of revenue, the revision u/s 263 is not justified [Ref. CIT v/s Thangamaligai - (2003) 259 ITR 129 (Madras) last but one paragraph]
10. PROPOSITION 10: An order passed by the national faceless assessment Centre is not subject to revision since the same is a result of team- based assessment. Ref: M/s Agrani Buildestate v/s PCIT-ITA 205/JP/2023 8 Advertising Agencies Association of India 11. PROPOSITION 11: While exercising powers of revision u/s 263 of the Act, the CIT is not empowered to direct the AO to frame an assessment in a particular manner or to give specific directions as regards the taxability of certain items. Ref: Shri Kirit Vrajlal Babaria vs. DCIT – ITA No. 2939/M/09 ACIT vs. Manas Salt Iodosation Industries P. Ltd. – (2015) 38 ITR (Trib) (Gauhati) Development Construction and Allied Services (India) P. Ltd. v/s ITO – (2011) 132 ITD 118 (Mumbai)
The ld. DR vehemently argued and relied on the revisional order passed U/s 263 of the Act. The relevant part of the revisional order is annexed herewith: - “9. A perusal of the assessment order passed u/s 143(3) r.w.s 144B dtd.23.04.2021 for AY 2018-19 indicates that the ÁO has not verified the issue of surplus income availing out of the activity of Goa Fest conducted by the assessee trust every year. Further the activities conducted by the assessee it can be understood that they are not charitable in nature as the receipts for the Goa Fest are divided into members and non-members subscriptions whereas the expenditure is not identified as such attributable to members and non-members. Therefore, the assessee's case is to be considered as that of an entity engaged in commercial/business activity and the receipts are to be brought to tax accordingly. Further the claim of exemption u/s 11 need to be examined by the AO in light of the nature of activity undertaken by the assessee.
In view of the facts and circumstances on record, I am satisfied that the AO has not verified the impugned issues. This non verification renders the assessment order dated 23.04.2021 is erroneous in so far as it was prejudicial to the interest of revenue within the meaning of Explanation 2 to Section 263 of the Act reproduced above.
Hence, by virtue of powers vested in the undersigned vide the provisions of Section 263 of the Income Tax Act, the assessment order u/s 143(3) r.w.s. 144B of the 9 Advertising Agencies Association of India Act dated 23.04.2021 is set aside for denovo assessment. The assessing officer is hereby directed to conduct the assessment proceedings and examine the issue of applicability of provisions of section 2(15) of the Act and allowability of expenditure claimed by the assesse against the receipts. It is further directed that AO should give sufficient opportunity to assessee to present its case, and pass a speaking order carefully enumerating facts, circumstances, verifications and findings.”
We heard the rival submission unconsidered the documents available in the record. The ld. AR respectfully relied on the order of the coordinate bench bearing has also dealt with the expenses of“Goa Fest 2010” and determined this activityas charitable in nature within the ambit of Section 2(15) of the Act. The ld. AR also relied on the order of theHon’ble High Court at Calcutta in the case of Oil India Ltd (supra) all the cases are distinguishable.The ld. AR relied on assessee’s own case where the “Goa fest 2010” is taken as charitable in nature U/s 2(15) of the Act. The grievance is raised by the ld. CIT that the verification of “Goa Fest”in impugned assessment is not adjudicated or verified by ld.AO during passing of impugned assessment order.Every assessment year is separate in the eye of Income tax Act. But the moot question in this appeal is that weather section 263 is applicable in case of assessee related to impugned assessment order. The impugned assessment order was passed only to rejection of claim U/s 11 for delay in submission of Form 10 in impugned assessment year during filing of ROI. The ld. AR was unable to bring any evidence that during the assessment proceeding the issue of “Goa Fest” was duly verified or adjudicated by the ld. AO. The ld.AR further respectfully relied on the order of the coordinate bench of ITAT-Jaipur in the case of M/s AgraniBuildestate(supra). We are unable to convince ourselves in view of any specific provision U/s 263 of the Act. Further, that case is also distinguishable in view of the fact that it has case of incorrect assumption of fact. Further, in that case there was adequate details furnished on whom the 10 ITA No. 2370-Mum-2024 Advertising Agencies Association of India mind was applied by the ld. AO. Considering the power of the ld. CIT in Section 263 the order of Hon’ble High Court of Delhi is discussed for clear understanding, in the case of BSES Rajdhani Power Ltd. v. Principal Commissioner of Income-tax, Delhi-2, [2017] 88 taxmann.com 25 (Delhi). The relevant paragraphs are reproduced as below: - “15. As far as the first aspect with respect to exercise of power under Section 263 is concerned, the issue stands concluded, in the light of the amendment with effect from 1989, by insertion of Explanation (c) to Section 263 (1). The non-consideration of the larger claim for Rs. 298.93 crores as depreciation and the consideration of only a part of it (Rs. 644,81,091) by the assessing officer, who did not go into the issue with respect to the whole amount, was an error, that could be corrected under Section 263. Aruba (supra) is decisive, in that the provision of Section 263 (1) Explanation (c) was introduced to cater to precisely this kind of mischief.
On the aspect of show cause notice, i.e., the second and third questions framed, the court is of the opinion that the ruling in Amitabh Bachhan (supra) is decisive; it upholds the power of the Commissioner to consider all aspects which were the subject matter of the AO's order, if in his opinion, they are erroneous, despite the assessee's appeal on that or some other aspect. The Court held that: "Reverting to the specific provisions of Section 263 of the Act what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the Revenue is the basic pre-condition for exercise of jurisdiction under Section 263 of the Act. Both are twin conditions that have to be conjointly present. Once such satisfaction is reached, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportunity of being heard. It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause. In fact, Section 263 has been understood not to require any specific show cause notice to be served on the assessee. Rather, what is required under the said provision is an opportunity of hearing to the assessee. The two requirements are different; the first would comprehend a prior notice detailing the specific grounds on which revision of the assessment order is tentatively being proposed. Such a notice is not required. What is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would 11 Advertising Agencies Association of India render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice. Reference in this regard may be illustratively made to the decisions of this Court in Gita Devi Aggarwal vs. Commissioner of Income Tax, West Bengal and others [1] and in The C.I.T., West Bengal, II, Calcutta v. M/s Electro House [2]. Paragraph 4 of the decision in The C.I.T., West Bengal, II, Calcutta v. M/s Electro House (supra) being illumination of the issue indicated above may be usefully reproduced hereunder: "This section unlike Section 34 does not prescribe any notice to be given. It only requires the Commissioner to give an opportunity to the assessee of being heard. The section does not speak of any notice."
This Court is of the opinion that the revisional order, to the extent that it did not provide any pre-decisional opportunity to address the issues it dealt with, could not be sustained; the ITAT has granted relief of a limited nature on that score. However, we do not agree that those issues were incapable of consideration as they were gone into by the AO. Accordingly, the CIT, in exercise of his power under Section 263 will proceed to consider the assessee's submissions only on those two aspects, before making his order.” The said order of the Hon’ble High Court of Delhi is challenged by the assessee before the Hon’ble Apex Court& the SLP is dismissed, [2023] 152 taxmann.com 139 (SC).
We have duly considered all other judgments cited by the ld. AR, finding them distinguishable.It is our finding that the ld. CIT appropriately invoked Section 263 of the Act concerning the impugned assessment order. We conclude that the impugned assessment order was erroneous and prejudicial to the interests of revenue, for the application of "Goa Fest." Therefore, the assessee's appeal is dismissed.