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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Waseem Ahmed, AccountantMemberand Shri Soundararajan K., JudicialMember
Appellant by: Shri Surendranath Rao, CA Respondent by: Shri Sanjit Kumar Das, CIT-DR Date of Hearing: 24.09.2024 Date of Pronouncement: 30.09.2024 O R D E R Per Bench This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Exemptions), Kochi dated 03.03.2023 passed under section 263 of the Act for Assessment Year (AY)2018-19.
The only issue raised by the assessee is that the learned CIT (Exemptions) erred in holding the assessment order passed by the AO under sections 143(3), 143(3A) and 143(3B) of the Income Tax Act, 1961 (“the Act”) dated 09.03.2021 is erroneous in so far as prejudicial to the interest of Revenue.
The learned CIT (Exemptions) u/s 263 of the Act observed that the Assessing Officer (AO) in the assessment framed under sections 143(3), 143(3A) and 143(3B)
Geevarghese Yohannan Charitable Trust of the Acthas made addition to the tune of Rs. 8,95,62,201/-, representing the capital expenditure shown as application of income,to the total income of the assessee treating the same as bogus in nature. According to the CIT (Exemptions) such addition should have been brought to tax at the special rate as provided u/s 69C r.w.s. 115BBE of the Act. But the AO in the assessment framed u/s 143(3) of the Act has not invoked the provisions of section 115BBE of the Act. Therefore the order passed by the AO is erroneous in so far prejudicial to the interest of Revenue.
Likewise, the learned CIT (E) has also observed that the assessee has claimed revenue expenditure to the tune of Rs.17,19,69,963/- as application of income which have also not been verified by the AO during the assessment proceedings. Accordingly, the CIT (E) held that the assessment framed by the AO under sections 143(3), 143(3A) and 143(3B) of the Act as erroneous in so far prejudicial to the interest of Revenue.
Being aggrieved by the order of the CIT(E) under section 263 of the Act, the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 117 and contended that the addition made by the AO qua the capital expenditure claimed by the assessee as application of income of Rs. 8,95,62,201/- cannot be made subject to tax at special rate u/s 115BBE of the Act. According to the learned AR the provisions of section 69C of the Act can be invoked where the assessee fails to offer any explanation about the source of such expenditure. In the present case, there is no iota of doubt raised by the Revenue about the source of expenditure. As such the source of expenditure is out of the normal activities of the assessee. Accordingly the impugned addition is out of the purview of section 69C of the Act and consequently the provisions of section 115BBE of the Act cannot be invoked.
Geevarghese Yohannan Charitable Trust 7. The learned A.R. further submitted that there was no whisper in the notice issued u/s. 263 about the non-verification of revenue expenditure incurred by the assessee. However, the learned CIT(E) u/s 263 of the Act while passing the order has widened the scope by including the revenue expenditure by holding that the same has not been verified. As per the learned A.R. such action of the CIT(E) is beyond the provisions of law. The learned A.R. in support of his contention drawn our attention to the order of the ITAT Cochin Bench in the case of M/s Kairali Jewellers vs. ITO in dated 14-03-2022.
On the other hand, the ld. CIT-DR vehemently supported the order of the authority below.
We have heard the rival contentions of both the parties and perused the materials available on record. It is the settled position of law that the addition can be made u/s 69C of the Act if the assessee fails to explain the source of cash with respect to the unexplained expenditure. Undeniably, the assessee in the present case is engaged in providing educational activities and the source of the impugned expenditure has not been denied by the AO in his order. Accordingly, we hold that the provisions of section 69C of the Act cannot be attracted and consequently the addition made by the AO cannot be made subject to tax at a special rate provided u/s 115BBE of the Act.
Moving further, on a perusal of the notice issued u/s 263 of the Act, we note that there is no whisper about non-verification of application of expenditures which are revenue in nature. Therefore, we hold that the CIT(E) u/s 263 of the Act has exceeded his jurisdiction by widening the scope of the issue raised in the show cause notice while passing the order u/s. 263 of the Act. The ITAT in the case of M/s Kairali Jewellers vs. ITO in dated 14-03-2022 has held as under:
Geevarghese Yohannan Charitable Trust “5. We have considered the rival contentions. Admittedly a perusal of the consequential order shows that no additions have been made on the issues raised by the learned Pr. CIT in his 263 order. Admittedly when setting aside assessment order the Pr. CIT has widened the scope of Section 263 of the Act by giving further directions which were not raised when issuing specific show cause notice to the assessee also. This admittedly is not permissible. Consequently the widening as done by the Pr. CIT in the order under Section 263 of the Act is unsustainable and stands quashed. In respect of the issues raised by the Pr. CIT in para 5 of his order no addition itself has been made in the consequential order which clearly shows that there is no error, much less, an error prejudicial to the interest of Revenue in respect of the original assessment order. Consequently the order under Section 263 of the Act is unsustainable and the same stand quashed.”
Respectfully following the above order, we hold that the learned CIT(E) u/s 263 of the Act has exceeded his jurisdiction. In view of the above, we hold that the order passed by the CIT(E) u/s 263 of the Act is unsustainable and accordingly we quash the same. Hence, the ground of appeal of the assessee is hereby allowed.