THE NIMAR EDUCATIONAL SOCIETY,KHANDWA vs. THE CIT (EXEMPTION), BHOPAL, BHOPAL
Facts
The assessee, The Nimar Educational Society, filed its return for AY 2017-18, which was assessed. Subsequently, based on information of a cash deposit of Rs. 17,00,000, the AO reopened the case, and after finding the explanation unsatisfactory, made an addition under section 68. The CIT(E) later initiated revision proceedings under section 263, alleging that the assessment orders were erroneous and prejudicial to revenue as the assessee claimed exemption under section 10(23C)(iiiad) for institutions whose receipts exceeded Rs. 1 crore.
Held
The Tribunal held that the CIT(E) wrongly invoked revisionary powers under section 263 because the issue of exemption under section 10(23C)(iiiad) was not the subject matter of the reassessment proceedings initiated by the AO. However, the Tribunal also noted that the second assessment order, which did not make an addition for the Rs. 17,00,000 deposit, was erroneous, agreeing with the CIT(E)'s direction to verify cash deposits.
Key Issues
Whether the CIT(E) could invoke revisionary powers under section 263 on an issue that was beyond the scope of the AO's reassessment proceedings. Whether the second assessment order, which omitted an addition made in the first assessment order regarding cash deposits, was erroneous.
Sections Cited
10(23C)(iiiad), 263, 147, 144/144B, 68, 115BBE, 139, 148, 142(1), 11, 12A, 12AA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by revision-order dated 13.03.2024 passed by learned Commissioner of Income-Tax (Exemption), Bhopal [“CIT(E)”] u/s 263 of Income-tax Act, 1961 [“the Act”] which in turn arises out of two separate assessment-orders, one dated 30.03.2022 passed by NFAC, Delhi and other dated 16.05.2023 passed by Assessment Unit [“AO”], both assessment- orders having been passed in the proceedings of section 147 r.w.s. 144/144B of the Act and both relating to Assessment-Year [“AY”] 2017-18,
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the assessee has filed this appeal on the grounds raised in Appeal-Memo
(Form No. 36).
The precise facts relating to case are noted as under:
2.1 The assessee-society, engaged in educational activity, filed its original
return of income of relevant AY 2017-18 u/s 139 on 07.11.2017 declaring a
total income of Rs. 1,16,505/- (rounded off to Rs. 1,16,510/-) which was
duly assessed.
2.2 Subsequently, based on an information of cash deposit of Rs.
17,00,000/- having been made by assessee in its bank a/c during the
relevant year, the AO re-opened assessee’s case through notice dated
31.03.2021 u/s 148. During proceeding, the AO asked assessee to explain
the source of impugned deposit. In response, the assessee submitted that its
runs 6 educational institutions and the only source of income was the fee
received from students. It was also submitted that the fee received from
students in cash was deposited in bank a/c. The assessee also furnished
cash-book. The AO, however, rejected assessee’s submission and ultimately
made an addition of Rs. 17,00,000/- u/s 68 r.w.s. 115BBE on account of
unexplained bank deposits and determined total income at Rs. 18,16,510/-
in assessment-order dated 30.03.2022 u/s 147.
2.3 Subsequently, the AO once again re-opened assessee’s case vide
another notice dated 28.06.2022 u/s 148 for the very reason of cash deposit
of Rs. 17,00,000/- in bank a/c but this time the AO accepted assessee’s
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very same explanation and did not make any addition, accordingly he
determined total income of Rs. 1,16,510/- in assessment-order dated
16.05.2023 u/s 147.
2.4 Subsequently, Ld. CIT(E) examined the case record of assessee and
viewed that the impugned assessment-orders dated 30.03.2022 and
16.05.2023 passed by AO were erroneous in so far it they were prejudicial to
the interest of revenue which attracted revisionary-jurisdiction u/s 263.
Accordingly, the CIT(E) issued show-cause notice dated 04.10.2023 and
finally passed revision-order dated 13.03.2024. Aggrieved by such revision-
order, the assessee has come in this appeal before us.
Ld. AR for assessee firstly carried us to following paras of show-cause
notice issued by CIT(E) u/s 263:
During the proceedings it is found that the trust is not registered u/s 12A/12AA of the Act and also did not file Form 10B for claiming exemption u/s 11 or 12 of the Income-tax Act, 1961. The assessee trust claimed exemption u/s 10(23C)(iiiiad) of the Act, however, on going through the audited balance sheet submitted by the assessee it was observed that the receipts of Arvind Kumar Nitin Kumar Montessori English School was Rs. 1,02,34,110/- and receipt of Poonamchand Gupta Vocational College School was Rs. 2,28,15,358 during the year. The receipts of both institutes are more than Rs. One crore which is more than the prescribed limit to, claim benefit of exemption u/s 10(23C)(iiiad) of the Act. Thus, the assessee Trust was not eligible for claim of exemption on the above referred two institutions u/s 10(23C)(iiiad) of the Act. The exemption claimed for two institutions
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whose receipts were more than one crore was to be disallowed at the time of the assessment. The details are as under :-
S.No. Name of the Total receipt Net surplus Institute Arvind Kumar 1,02,34,110/- 55,20,110 1. Nitin Kumar Montessori English School Poonamchand 2,28,15,358 1,11,40,108 2. Gupta Vocational College Total Surplus 1,66,60,218
On the basis of above facts, it is crystal clear that Net surplus amount Rs. 1,66,60,218/- ( Rs. 55,20,110 + 1,11,40,108/-_ had escaped from assessment during the course of assessment proceedings for the year under consideration. This fact is evident from the record available. The Faceless AO passed the assessment order without mentioning the above details of receipts of the institutes. “
Referring to same, Ld. AR submitted that there is one single issue for which
the Ld. CIT(E) undertook revision. The CIT(E) has noted that the assessee
claimed exemption u/s 10(23C)(iiiad) of the Act but on going through
audited Balance-Sheet submitted by assessee, it was found that the receipts
of 2 institutions run by assessee, namely (i) Arvind Kumar Nitin Kumar
Montessori English School and (ii) Poonam Chand Gupta Vocational
Educational College, were Rs. 1,02,34,110/- and Rs. 2,28,15,358/-
respectively which had exceeded the prescribed limit of Rs. 1 Crore as per
section 10(23C)(iiiad). Therefore, the net surplus of Rs. 55,20,110/- and Rs.
1,11,40,108/- earned respectively by those 2 institutions, aggregating to Rs.
1,66,60,218/- was taxable for which no enquiry was made by AO while
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passing assessment-orders. Therefore, the assessment-orders passed by AO
were rendered erroneous-cum-prejudicial to the interest of revenue
warranting invocation of revision u/s 263.
Thereafter, the Ld. AR drew us to the final para of revision-order
passed by CIT(E) reading as under:
“7- Decision – As per the discussion made above, it is crystal clear that the orders of both the AO’s were erroneous as well as prejudicial to the interests of revenue as per section 263 of the Act. The claim of the assessee regarding exemption u/s 11/12 of the Act is not found acceptable and the assessee is not eligible to claim exemption u/s 10(23C)(iiiad) of the Act. However, the claim for benefit of revenue expenses is hereby allowed subject to verification of genuineness of expenses by the AO. The AO is hereby directed to verify the cash deposits as per the assessment order dated 30.03.2022 and also to verify the genuineness of expenses claimed by the assessee. Hence, both the assessment orders passed earlier on 30.03.2022 and 16.05.2023 is hereby set aside for de-novo assessment.” 5. Having explained above, Ld. AR raised following contentions to assail
the impugned revision-order:
(i) That the CIT(E) initiated revision proceeding on the basis of alleged
wrong claim of exemption u/s 10(23)(iiiad) in respect of 2 institutions
run by assessee but ultimately passed revision-order directing the AO
to verify the source of cash-deposits. Therefore, the revision-order is
bad in law.
(ii) That, during assessment-proceeding, the AO raised a specific query
No. 12 in notice u/s 142(1) dated 10.02.2023 qua the deposit of Rs.
17,00,000/- made in assessee’s bank a/c and in reply-letter dated
28.02.2023, the assessee filed a complete explanation regarding
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source of such deposit. The assessee submitted not only the complete
details of various colleges/institutions run by it but also explained
that the fee received from students was deposited in bank a/c. The AO
was satisfied with the source explained by assessee and therefore
passed assessment-order dated 16.05.2023 without making any
addition.
(iii) That the AO’s twin assessment-orders u/s 147 dated 30.03.3022 and
16.05.2023 were concerned with the issue of cash deposit in bank a/c
whereas the CIT(E) has initiated revisionary-action on the issue of
non-allowability of exemption u/s 10(23C)(iiiad). Thus, the issue
raised by CIT(E) was beyond the scope of assessment done by AO.
Hence, the CIT(E) has wrongly invoked the provision of section 263 for
an issue which was not the subject-matter of re-assessment
proceeding by and before AO. In support of this contention, Ld. AR
placed a heavy reliance upon CIT Vs. Usha Martin Ventures Ltd.
(2023) 150 taxmann.com 491 (Calcutta) holding as under:
“4. The short issue involved in the instant case is whether the Commissioner of Income-tax (Appeals) [CIT(A)] could have assumed jurisdiction u/s 263 of the Act on the issue which was never the subject matter of the assessment in a proceeding initiated u/s 147 of the Act. On facts, the ld. Tribunal found that the issue of loss/expenditure incurred in respect of newly undertaken software product development project as capital as capital loss/expenditure was not touched by the AO in the reassessment proceedings u/s 147 of the Act. Therefore, the ld. Tribunal found that the Ld. CIT(A) was not justified in invoking the provisions of section 263 of the Act on an issue which was not the subject matter of the reassessment of the proceedings. The decision rendered by the Tribunal takes note of the correct legal position and, therefore, does not call for any interference.
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[Emphasis supplied]
Another decision relied by Ld. AR is by ITAT Pune Bench ‘A’ in Gulab
Badujar (HUF) vs. CIT (Central), Nagpur (I.T.A. Nos. 798 and
799/Pun/2015) holding thus:
“9. The question which arises is the exercise of revisionary jurisdiction by the CIT u/s 263 of the Act against the order passed u/s 143(3) r.w.s. 147 of the Act, wherein the assessment proceedings were re-opened on specific reasons recorded for re-opening. We have already referred to the additions made on the aforesaid reasons in the hands of assessee in the Para above. Once, the re-assessment proceedings are initiated on a specific issue and the addition is made in the hands of the assessee then the CIT is precluded from exercise of jurisdiction u/s 263 of the Act on a ground which is not covered by the reasons during the reopening of the assessment since the time for completing the assessment u/s 143(3) of the Act had expired. Hence, we find no merit in the exercise of revisionary power by the CIT u/s 263 of the Act in the present facts and circumstances. 10. We find support from the ratio laid down by the Hon'ble Bombay High Court in the case of M/s. Ashoka Buildcon Ltd. Vs. ACIT reported in (2010) 191 Taxman 29 wherein also the question was of revisionary proceedings initiated u/s 263 of the Act against the assessment made which was re-opened u/s 147 of the Act. The Hon'ble Bombay High Court noted that the re-assessment proceedings were in relation to a particular ground was and subsequent thereto of passing of the re-assessment and exercise of jurisdiction u/s 263 of the Act with reference to the issues, which did not form subject of re-opening of assessment cannot be exercised.
………………..
Taking strength from the order of Hon'ble Bombay High Court in Ashoka Buildcon Limited (supra), we hold that the order of revision passed in the present case, on issues which did not form subject of re-opening of the assessment or order of reassessment, cannot be upheld. Therefore, the revisionary proceedings exercised by the CIT is not correct. Hence, the said order of CIT is set-aside.” (iv) Lastly, Ld. AR also submitted that the assessee has not claimed any
exemption u/s 10(23)(iiiad) as alleged by PCIT. To show this, Ld. AR
firstly carried us to Page 36 of Paper-Book where a computation-sheet
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of total income is placed and page 35 of Paper-Book where
acknowledgement of income-tax return filed by assessee is placed.
Referring to these documents, Ld. AR claimed that the assessee has
declared a net income of Rs. 1,16,505/- chargeable under the head
“Income from Other Sources” without claiming any exemption u/s
10(23C)(iiiad).
With above contentions, Ld. AR strongly prayed that the revision-order
passed by CIT(E) is not sustainable and must be quashed and the AO’s
assessment-orders must be restored.
Per contra, Ld. DR for revenue raised following contentions to oppose
the submissions of Ld. AR:
(i) The assessee in present case is a society under Societies’ Act but it has obtained PAN number as AOP(Trust). According to Ld. DR, there is no exemption limit for a society and the first tax-slab of a society itself is 10% for total income of Rs. 10,000/- whereas the assessee is availing exemption limit as applicable to an individual by obtaining PAN number of AOP (Trust). Therefore, the decision in Usha Martin (supra) is not applicable to assessee’s case.
(ii) In first assessment-order dated 30.03.2022, the AO made addition of Rs. 17,00,000/- but in second assessment-order dated 16.05.2023, the AO has not made such addition. Therefore, the second assessment-order dated 16.05.2023 is erroneous being contrary to the first assessment-order as well as prejudicial to the interest of revenue.
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We have considered rival contentions of both sides and perused the
impugned order as well as the material held on record to which our
attention has been drawn. At first, we take note of two vital aspects of the
proceeding done by Ld. CIT(E). The first aspect is such that the CIT(E)
initiated revisionary action on the basis that the AO had not examined that
the gross-receipts of 2 institutions run by assessee exceeded the prescribed
limit of Rs. 1 Crore and therefore exemption u/s 10(23C)(iiiad) was not
allowable in relation to those 2 institutions. The second aspect is such that
the CIT(E) has ultimately passed revision-order with a finding that the
assessee is not eligible to claim exemption u/s 10(23C)(iiiad) but the benefit
of revenue expenses is allowable to assessee subject to verification of
genuineness of expenses and directing the AO to verify cash deposits as
deposit as per assessment-order dated 30.03.2022 and also to verify the
genuineness of expenses claimed by assessee, thus setting aside both of the
assessment-orders dated 30.03.2022 and 16.05.2023. Having taken note of
these aspects, we find that the CIT(E) has revised the twin assessment-
orders dated 30.03.2022 and 16.05.2023 which were passed by AO u/s 147.
Admittedly, both of those assessment-orders were passed by AO in the
proceeding of reassessments u/s 147 r.w.s. 144/144B on the issue of
deposit of Rs. 17,00,000/- in bank a/c whereas the CIT(E) has initiated
revisionary-action by alleging AO’s lack of examination qua the issue of
exemption u/s 10(23C)(iiiad). Thus, the issue raised by CIT(E) is clearly
beyond the scope of re-assessment proceeding in which the impugned
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assessment-orders dated 30.03.2022 and 16.05.2023 were passed by AO.
When it so, the CIT(E) is not justified in invoking revision u/s 263 qua an
issue which was not subject-matter before AO and it is for this reason that
the decisions of Usha Martin and Gulab Badgujar relied by Ld. AR are
directly applicable to assessee’s case. Ld. DR for revenue has raised a
contention that the decision in Usha Martin is not applicable to assessee
for the reason that the assessee has obtained PAN number as AOP(Trust) for
availing basic exemption limit as applicable to an individual whereas a
society has no exemption limit, the first tax-slab of a society is 10% for total
income of Rs. 10,000/-. This contention raised by Ld. DR is not valid for the
reason that the assessee is a society existing for advancement of education
and not a ‘co-operative society’. The first tax-slab of 10% for total income of
Rs. 10,000/- is applicable only to a ‘co-operative society’ and not to
assessee-society which is engaged in educational activity. It is also a fact
that the revenue has always assessed the assessee as AOP(Trust) without
raising any such objection as pointed by Ld. DR. Moreover, the decision of
Usha Martin is on the point that the revisionary-action u/s 263 cannot be
taken by PCIT/CIT for an issue which was not subject-matter of re-
assessment before AO and exactly same point is involved in assessee’s
present case. Therefore, we agree that the decisions in Usha Martin and
Gulab Badgujar as relied by Ld. AR are applicable to assessee’s case.
Accordingly, following the view taken in those decisions, we too agree that
the revision-order passed by CIT(E) for the issue of exemption u/s
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10(23)(iiiad), which was not a subject-matter of re-assessment proceeding
before AO, is not valid. However, we agree to the contention raised by Ld. DR
for revenue that in first assessment-order dated 30.03.2022, the AO made
addition of Rs. 17,00,000/- but in second assessment-order dated
16.05.2023, the AO has not made such addition. Therefore, the second
assessment-order dated 16.05.2023 is erroneous being contrary to the first
assessment-order as well as prejudicial to the interest of revenue. Being so,
we uphold the direction given by Ld. CIT(E) to AO qua the issue of cash
deposit in bank a/c.
Resultantly, this appeal is partly allowed.
Order pronounced in open court on 20.09.2024.
Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 20.09.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore
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