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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL, JM:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Exemption) (in short “Ld. CIT(E)”), Ahmedabad vide order dated 07.12.2023 passed for the Assessment Year 2018-19.
The assessee has raised the following grounds of appeal:-
“1. The Learned C.LT.(Exemption) [CIT) erred in law and on facts in invoking the provisions of section 263 of the Act in respect of the order passed by the learned Assessing Officer w/s. 147 r.w.s. 1448 of the Act. It is submitted that the order passed by the learned Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue, and hence, the provisions of section 263 should not have been invoked qua such order. It is submitted that the order passed by the learned CIT be quashed.
Gujarat Medical Education And Research Society vs. CIT(E) Asst. Year –2018-19 - 2 - 2(i). The Learned CIT erred in holding that the order passed by the learned Assessing Officer is erroneous and prejudicial to the interest of Revenue since the receipt of Rs.718.87 crore received by the Appellant, which has admittedly been from the State Government of Gujarat, Health and Family Welfare Department as grant, was eligible for exemption of its total income under the Income Tax Act vide sections 10(23C)(iiiab) and 10(23C)(iiiac) of the Act. It is submitted that since the receipts are enjoying the exemptions, there is no prejudice caused to the Revenue, and hence, the order passed by the learned Assessing Officer cannot be termed as erroneous or prejudicial.
(ii) The Learned CIT failed to appreciate that necessary evidences to corroborate the claim of exemption u/s.10(23C)(iiiab) and 10(23C)(iiiac) were furnished before him in response to his show cause notice, which clearly evidenced that such receipts from the State Government being more than 50% of the total revenue makes the Appellant eligible for exemption u/s.10(23C) (iiiab) and 10(23C)(iiiac) of the Act. It is submitted that, it be so held now and the order passed by the learned CIT be quashed.”
The brief facts of the case are that Gujarat Medical Education and Research Society (GMERS), the assessee trust, did not file its return of income for the Assessment Year (A.Y.) 2018-19. Thereafter, the Assessing Officer observed that the assessee had undertaken certain transactions, the source of which remained unexplained. The Assessing Officer issued notice u/s issued notice u/s 148 of the Act. of the Act, in response to which the assessee filed return of income declaring NIL income. Subsequently, the Assessing Officer completed assessment in which certain additions and disallowances were made. These additions included income from contractual receipts, rental income, cash deposits, interest income, fee for technical/professional services, and time deposits.
Subsequently the Principal Ld. CIT(Appeals), upon reviewing the assessment records, noted that the assessee had claimed an exemption of Rs. 718,87,11,813 under Section 10(23C)(iiiab) of the Income Tax Act, but failed to provide the necessary supporting documentation or justification for this Gujarat Medical Education And Research Society vs. CIT(E) Asst. Year –2018-19 - 3 - claim during the course of assessment proceedings. Principal CIT observed that the assessing officer, during the course of assessment proceedings had specifically taken note of the fact that assessee had claimed exemption of Rs. 718,87,11,813 under Section 10(23C)(iiiab) and had also noted in the assessment order that the necessary details in support of the aforesaid exemption were not filed by the assessee during the course of assessment proceedings. However, despite the specific finding/noting is in the assessment order to the effect that the assessee did not file the necessary details/supporting documents in support of the aforesaid claim of exemption, the assessing officer still did not make any disallowance with regards to the claim of aforesaid exemption under Section 10(23C)(iiiab) of the Act claimed by the assessee, its return filed in response to notice under section 148 of the Act. Accordingly, Principal CIT held that there was an under-assessment of income amounting to Rs. 718,87,11,813, as this amount had not been included in the total income. The assessment order passed under Section 147 read with Section 144B seemed to be prima facie erroneous and prejudicial to the interests of Revenue under Section 263 of the Income Tax Act. The Principal CIT observed that while the assessee had claimed the exemption of Rs. 718,87,11,813 under Section 10(23C)(iiiab), the necessary supporting documentary evidence was not produced during the assessment process, despite several opportunities being given. This was evident from the assessment order itself, which stated that no supporting documents or explanations were provided by the assessee, making it impossible to verify the transactions or the claim for exemption. The order also mentioned that the assessee failed to submit any proof of its registration as a charitable educational institution. The assessment order was deemed erroneous because, Gujarat Medical Education And Research Society vs. CIT(E) Asst. Year –2018-19 - 4 - despite the absence of documentation, the Assessing Officer allowed the exemption of Rs. 718,87,11,813. The assessee also argued before Principal CIT that it was entitled to the exemption under Section 10(23C)(iiiab) and also under Section 10(23C)(iiac) of the Act. However, Principal CIT noted that the assessee had only made a claim under Section 10(23C)(iiiab) and did not file the necessary details to support this claim. Additionally, Section 10(23C)(iiiab) and Section 10(23C)(iiac) are separate provisions and the assessee is not permitted to make simultaneous claims under both the two sections, since they are are distinct, with the word "OR" between them. Principal CIT was also of the view that the assessee’s claim of being substantially financed by the State Government, with Rs. 665.58 crore received from the State Government, did not address other necessary conditions, such as the institution’s sole existence for educational purposes, which could not be verified in the absence of supporting evidence. In view of these issues, Principal CIT held that the assessment order was both erroneous and prejudicial to the interests of Revenue. As a result, the order was set aside on the issue of examination on whether the exemption under Section 10(23C)(iiiab) was allowable to the assessee. The Assessing Officer was directed to provide an opportunity of hearing to the assessee and to reconsider the exemption claim based on the necessary verification. Any alternative claims made by the assessee were also directed by Principal CIT to be heard and decided on merits. Accordingly, the Assessing Officer was directed to reassess the claim, after verifying the facts, and the Principal CIT directed the Assessing Officer not to allow exemption after due proper verification/ substantiation.
Gujarat Medical Education And Research Society vs. CIT(E) Asst. Year –2018-19 - 5 - 5. The assessee is in appeal before us against the aforesaid order passed by Principal CIT under section 263 of the Act. During the course of hearing, the counsel for the assessee primarily relied upon/reiterated the arguments taken by the assessee during the course of 263 proceedings. One of the primary contentions of the counsel for the assessee before us was that the assessee was mostly in the receipt of funds from the State Government and therefore the claim of exemption under section Section 10(23C)(iiiab) of the Income Tax Act should be allowed to the assessee. Accordingly, it was taking into consideration the above facts that the assessing officer did not disallow the claim of the assessee under Section 10(23C)(iiiab) of the Income Tax Act. The assessee also placed reliance on several judicial precedents in support of claim of the aforesaid exemption.
In response, DR placed reliance on the observations made by Principal CIT in the 263 order.
We have heard the rival contentions and perused the material on record. It would be useful to reproduce the relevant extracts of the assessment order for ready reference:
“Apart from the above reply and copy of ITR no other information has been submitted by the assessee. In spite of numerous opportunities given, no other information was submitted by the assessee. Although assessee has furnished its ITR in response to 148 notice, the explanation/details of the above transactions has not been submitted. If the assessee gives his explanation along with relevant supporting documents with regard to the transactions, then the same can be verified and considered accordingly. How can the exemption be accepted in the absence of any details or evidence? There is no clarity regarding the status of the institution and the grant it receives. Also, as seen from the ITR. the assessee has claimed exemption of Rs.718,87,11,813 /, the details of which are unexplained. Unless the assessee gives his explanation with relevant Gujarat Medical Education And Research Society vs. CIT(E) Asst. Year –2018-19 - 6 - necessary documents, the transactions as stated in the above table cannot be verified. Finally, one more opportunity was given to the assessee on 07.03.2023 calling for explanation. However, the assessee has remained non-responsive till date. In the absence of details/proof, it is not possible to verify the above transactions. The assessee has also not submitted any proof of its registration as Charitable Educational Institution.”
On going through the contents of the assessment order, we observe that the assessing officer had specifically observed that the assessee had claimed exemption of ₹ 718, 87, 11, 813/-, the details of which remained unexplained. From the perusal of the assessment order, it is observed that the assessee was given as many as seven opportunities of hearing and despite the same, the assessee remained non-compliant. The assessing officer despite noting specifically that in absence of any details/proof filed by the assessee, it is not possible to verify the above transactions, while finalising the assessment order, did not make any additions with respect to the aforesaid claim of exemption of a sum of ₹ 718.87 crores in the assessment order. The judicial precedents cited by the assessee during the course of proceedings before us would be of no assistance in absence of any supporting documents/details filed by the assessee in support of the aforesaid claim during the course of assessment proceedings. Accordingly, looking into the instant facts, we are of the considered view that Principal CIT has correctly observed that despite having given/afforded several opportunities of hearing, and despite the assessing officer having taken note of the fact that the assessee had failed to give any material in support of claim of exemption for a sum of ₹ 718.87 crores, since the assessing officer did not make any disallowance with respect to the above claim of exemption in absence of any supporting Gujarat Medical Education And Research Society vs. CIT(E) Asst. Year –2018-19 - 7 - documents/materials, the assessment order was liable to be set aside as being erroneous and prejudicial to the interests of the Revenue.
Looking into the instant facts, we find no infirmity in the order of Principal CIT so as to call for any interference.
In the result, the appeal of the assessee is dismissed.
This Order pronounced in Open Court on 04/12/2024
Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 04/12/2024 Sr. PS TRUE COPY आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent. 2. 3. संबं�धत आयकर आयु�त / Concerned CIT आयकर आयु�त(अपील) / The CIT(A)- 4. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,