KALINGA INSTITUTE OF INDUSTRIAL TECHNOLOGY (KIIT),BHUBANESWAR vs. COMMISSIONER OF INCOME TAX (EXEMPTION), HYDERABAD

This is an appeal filed by the assessee against the order of the This is an appeal filed by the assessee against the order of the This is an appeal filed by the assessee against the order of the Pr. CIT(E), Hyderabad Hyderabad u/s.263 of the Act dated 30.3.2021 dated 30.3.2021 for the assessment yea 2016-17 . .

The assessee has raised the following grounds: The assessee has raised the following grounds:

Facts of this case are that the Assessing Officer completed the assessment u/s.143(3) of the Act on 13.12.2018. Thereafter, the Pr. CIT called for the assessment records and observed that the assessment order is erroneous and prejudicial to the interest of the revenue. Accordingly, notice u/s.263 of the Act was issued to the assessee to show cause as to why the assessment order will not be revised. In the notice, the Pr. CIT asked to show on the following issues:

In response to show cause notice u/s.263 of the Act, with regard to first issue i.e. the assessee had received anonymous donation of Rs.70,19,70,931/-, it was submitted that the assessee had not received any donations from anybody in the impugned assessment year. It was submitted that the alleged amount of Rs.70,19,70,931/- comprises of Rs.62,03,872/- received from different government departments as non- recurring grants and Rs.69,57,67,059/- as development fees from different students studying in the institution, as per the guidelines of AICTE/UGC/DTET/NCVT, therefore, the provisions of section 115BC is not applicable. With regard to second point raised in the notice, the assessee submitted that the assessee maintains the different bank accounts in different banks. On 31.3.2016, as per the bank statement, the balance in SB A/.c No.514010110000001 maintained in Bank of India is Rs.1,52,256,630.89 and in SB A/.c No.514010110000203 maintained in Bank of India is Rs.9,49,545.12. A cheque of Rs.5,00,00,000 had been issued from the A/c No. 514010110000203 and cleared at the year end. Thus, the closing balance is Rs.4,90,50,516/- which had been disclosed in the balance sheet and the balance in bank account is Rs.(-)4,90,50,516/-. It was submitted that both the account cannot be mixed as they are separate account. It was in this backdrop and in view of the clinching

After considering the submissions of the assessee and also due to audit objection on the points, the Commissioner observed as under: “(i) The Statement of income shows that the assessee trust has received voluntary contributions including anonymous donations of Rs. 70,19,70,931/-. In respect of the said donation, no record showing identity of donors, relationship between donors and trust worthiness of donors to donate, date and mode of payment of donation and genuineness of donation etc., has been furnished. This issue has not been verified during the course of scrutiny assessment though the case was selected for complete scrutiny. In view of the above, the voluntary contributions including anonymous donations of Rs. 70,19,70,931/- is required to be treated as anonymous donation and taxable at the rate of 30% u/s.115BBC. . (ii) The closing balance of the assessee trust as on 31.03.2016 in savings bank account bearing a/c no. 514010110000001 of Bank of India is Rs. 1,52,26,630.89. But the assessee shows in note-2.13 forming part of balance sheet under the head that closing balance as on 31.03.2016 in savings bank account of Bank of India is Rs. (-) 4,90,50,516/-. Hence, Rs. 6,42,77,146/- (Rs. 1,52,26,630 - (-) Rs. 4,90,50,516) was required to be added to the income as undisclosed income of the assessee u/s 69A of the Act. Section 115BBE(1) of the IT Act provides that where the total income of an assessee includes any income referred to in section 68 or 69 of the Act, the income tax payable shall be the aggregate of the amount of income tax calculated on income referred to in section 68 or 69 at the rate of 30% and the amount of income tax chargeable on the remaining income determined under normal provisions..”

The Ld CIT(E) held that the AO has failed to make proper enquires on the above issues before passing the assessment order, therefore, the order passed u/s.143(3) is erroneous and prejudicial to the interest of the revenue and, therefore, set aside the assessment order with the direction to P a g e 5 | 18 the AO examine the issues and redo the assessment after verification of the issues in accordance with law.

Hence, the assessee is in appeal before the Tribunal.

We have heard the arguments of both sides and carefully considered the materials placed on record of the Tribunal, Inter alia, two paper books filed by the assessee spread over 177 and 475 pages. Ld A.R. drew our attention towards notice vide dated 24.3.2021 u/s.263 of the Act Paras 5 & 6, and submitted that the Commissioner of Income Tax (Exemption), Hyderabad ( in short ‘CIT(E)’ has pointed out two discrepancies in the impugned scrutiny assessment order dated 13.12.2018 passed u/s.143(3) of the Act. He further pointed out that as per para 6 (i) of the said notice, the CIT(E) alleges that the statement of income shows that the assessee trust has received voluntary contributions including anonymous donations of Rs. 70,19,70,931/- and In respect of the said donation, no record showing identity of donors, relationship between donors and trust worthiness of donors to donate, date and mode of payment of donation and genuineness of donation etc., has been furnished by the assessee before the AO. Ld A.R. pointed out that the CIT(E) after making this incorrect observation, further observed that this issue has not been verified though the case was selected for complete scrutiny and, therefore, the voluntary contributions including anonymous donations of Rs. 70,19,70,931/- is required to be treated as anonymous donation and taxable at the rate of 30% u/s.115BBC

Ld counsel further pointed out that in para 6 of the notice, the CIT(E) has alleged that the closing balance of assessee trust as on 31.3.2016 in SB A/c No.xxxx001 of Bank of India is Rs.1,52,26,630.89 but the assessee shows in the note of account No.2.13 forming part of balance sheet under the head, the closing balance as on 31.3.2016 in SB A/c. of Bank of India if (-) Rs.4,90,50,516/-, hence, Rs.6,42,77,146 was required to be added as income in the hands of the assessee as undisclosed income u/s.69A of the Act. Ld counsel further pointed out that in this para, the CIT(E) has also alleged that the provisions of section 115BBE(1) is also applicable to the case of the assessee. Ld A.R. further drew our attention towards pages 122 to 124 of APB-1 and submitted that during original scrutiny assessment proceedings, the AO issued notice u/s.142(1) of the Act dated 4.7.2018, alongwith questionnaire asking 19 questions, wherein, in Q No.4, the AO asked to furnish the individual ledger account of all income & expenditure and in Q. No.12, to furnish the detail of specific grants/corpus fund alongwith documentary evidences, if any. In compliance to said notice and Q. Nos.4 & 12, the assessee submitted copy of statement showing development fees received from the students, copy of statement showing grant-in-aid, for the financial year 2015-16, which was examined and verified by the AO and after being satisfied allowed the explanation of the assessee that the impugned amount of Rs.70,19,70,931/- is nothing but grant-in-aid and amount of development fees received from the students.

Ld A.R. further drew our attention towards copy of statement showing the closing balance of the assessee in SB A/c. No.XXX203 and other five current accounts including current A./c No.XXXX001 and submitted that in para 6, the CIT(E) has taken wrong facts pertaining to assessee’s current a/c No.XXX001 with Bank of India as per balance sheet of Rs.1,52,26,630.89 and picked up closing balance of S.B A/c No.XXXX203 (-) Rs.4,90,50,516 to allege that on account of this discrepancy, addition u/s.69A is to be taxed u/s.115BBE(1) of the Act as undisclosed income of the assessee. Ld A.R. again drew our attention towards statement of Bank of India SB A/c No.XXXX203 and closing balance pertaining to current account No.XXXX001 and submitted that the AO has mixed up the A/c No. and closing balance and made wrong allegation that due to closing balance show in the balance sheet and as per bank statement is different and differential amount has to be treated as undisclosed income of the P a g e 9 | 18 assessee. Ld A.R. finally pointed out that the closing balance of SB A/c No.XXXX203 was actually Rs.9,49,454.12 after issuing cheque for Rs.5,00,000/- on 31.3.2016, which was presented for payment with the bank and the closing balance of current A/c No.xxxx001 was Rs.1,52,26,630.89. Therefore, the allegation made by the CIT(E) in para 6 of the notice and relevant part of the impugned revisionary order are based on incorrect assumption of facts, which are not sustainable and clearly established that these allegations are not in consonance with the factual position and closing balance of the assessee’s SB A/c No.XXXX203 and current A./c No.XXXX001. As the closing balance of (-) Rs.4,90,50,,516/- belong to SB Account No.XXXX203, whereas the closing balance further picked up by the CIT(E) Rs.1,52,26,630.89 pertaining to current A/c No.XXXX001. Ld counsel submitted that copy of the current A./c with BOI XXXX001 was placed before the AO in compliance to notice u/s.142(1) of the Act dated 4.7.2018. Thus, it is to be presumed that the AO has made detailed examination and verification of the audit report and all relevant statements during the course of scrutiny assessment proceedings, therefore, the allegation of no enquiry cannot be made against the AO for alleging the impugned scrutiny assessment order as erroneous and prejudicial to the interest of the revenue. Placing reliance on the decision of Hon’ble P&H High Court in the case of CIT vs Reita Biscuits Co. (P) Ltd.,, 309 ITR 154 (P&H), ld counsel submitted that once the issue has been P a g e 10 | 18 decided against the revenue on the same issue during subsequent year, there is no need to take a different view on a technical reason and thus, the notice and revisionary order u/s.263 of the Act is not valid and bad in law.

Replying to above, ld CIT DR pointed out that there is no plausible and reliable proof that the copy of statement with regard to development fees received from the students by the assessee contained in PB-2 pages 475 was furnished before the AO. He further pointed out that no bank statement and details of development fees was submitted before the AO and this fact has been noted by the CIT(E) in para 6 of revisionary order u/s.263 of the Act, wherein, he categorically held that the AO failed to make proper enquiry in this regard on both the issues, therefore, he was right in holding that the alleged scrutiny assessment order is erroneous and prejudicial to the interest of the revenue. Ld CIT DR pointed out that it is a clear case of no enquiry, therefore, revisionary order u/s.263 of the Act may kindly be upheld. Ld CIT DR pointed out that in compliance to notice u/s.142(1) of the Act, the AO raised 19 questions and the assessee replied only four questions leaving 15 questions unanswered, therefore, the enquiry made by the AO was not sufficient and adequate on both points, which have been raised by the ld CIT(E) in the notice u/s.263 of the Act and in para 6 of revisionary order u/s.263 of the Act, there was no enquiry by the AO, therefore, the assessment has been rightly treated as erroneous and P a g e 11 | 18 prejudicial to the interest of the revenue and the order u/s.263 of the Act be upheld.

Placing rejoinder to above, ld A.R. submitted that the assessee has filed all the required details, explanation and documentary evidences including the audit report for the financial year 2015-16, copies of bank statement and copy of the statement showing development fees received from the students, wherein, all details including name of the students, his class, roll no., amount, which is clearly discernible that same was placed before the AO during the scrutiny assessment proceedings. Ld A.R. submitted that for taking action u/s.263 of the Act, the CIT(E) must have called relevant assessment records including all papers filed by the assessee before the AO during the assessment proceedings and this action clearly reveals the closing balance of all the bank account of the assessee but the CIT(E) has picked up incorrect and irrelevant facts and figures for alleging the scrutiny assessment order as erroneous and prejudicial to the interest of the revenue, which clearly shows non-application of mind for revising the assessment order against the assessee, therefore, the impugned revisionary order u/s.263 of the Act may kindly be quashed.

Ld counsel for the assessee submitted that if the CIT (E) was under impression that the AO has not verified the relevant records, then, the Ld CIT (E) should have made enquiry himself to know the facts. For this proposition, he relied on the following decisions:

On the first issue, after considering the rival submissions of both the sides and keeping in view the documentary evidences submitted by the assessee in paper book Vol. I & II, we clearly note that case of the assessee was selected for complete scrutiny and the AO has issued notice u/s.142(1) of the Act on 4.7.2018 alongwith questionnaire, wherein, the assessee was asked to furnish individual ledger account of income and expenditure and to furnish details of specific grant-in-aid alongwith documentary evidence. The said notice was replied by the assessee vide letter dated 15.11.2018 and copy of ledger account and income and expenditure account were submitted by the assessee before the AO. From ‘E’ filing compliance to the said notice u/s.142(1) of the Act dated 4.7.2018, we note that the assessee has submitted copy of the statement pertaining to development fees received from the student containing 475 pages, which has also been produced before this Bench as PB Vol-II of the assessee.

Further, from the issue raised by the CIT(E) in para 6(ii) of impugned revisionary order, as has been reproduced in earlier para 3 of this order, we clearly observe that the AO has mixed up the facts to allege difference in the closing balance shown by the assessee in the balance sheet, wherein, the CIT(E) while considering the account in XXXX 001 Bank of India noted that as on 31.3.2016, the closing balance of the trust was Rs.1,52,26,630.89 but this was not SB account and was a current account with Bank of India operated by the assessee. Thereafter, the CIT (E) further alleges that the closing balance as on 31.3.2016 in the said bank account (-) Rs.4,90,50,516/-, which was closing balance of SB Account No.XXXX203 and thereafter, mixing these irrelevant facts, the CIT (E) held that the addition is required to be made u/s.69A of the provisions of section 115BBE(1) of the Act are also applicable. From the reply of the assessee available at pages 21 to 25 at para 4 to 4.2, which is clearly discernible that the assessee submitted all the relevant details pointing out incorrect assumption of facts regarding saving and current bank account of the assessee and also submitted copies of the bank statement alongwith reconciliation as Annexure-7 before the CIT(E) but in the revisionary order, there is no discussion and deliberation by the CIT(E) in this regard about the reply of the assessee to notice u/s.263 of the Act and documentary

In the case of Delhi Airport Metro Express Pvt Ltd., (supra), the CIT remanded the matter back to the file of the AO without exercising his power for conducting enquiry himself. The Hon’ble High Court held that the Pr. CIT should have exercised his power after undertaking an enquiry himself. Similar view has been taken by the Hon’ble Delhi High Court in the case of DG Housing Projects Ltd., (supra).

In the case before us, the Pr. CIT without conducting any enquiry, has set aside the assessment order and directed the AO make further enquiry on both the issues and redo the assessment. 18. Therefore, we are compelled to hold that the impugned revisionary order u/s.263 of the Act has been passed by taking into consideration incorrect, irrelevant wrong facts and without application of mind and the same has also been passed in violation of principles of natural justice because the CIT(E) has not considered reply of the assessee to notice u/s.263 of the Act and documents submitted alognwith the said reply. At the cost of repetition, we may point out that since in the earlier part of this order, we have reached the conclusion that the AO has made adequate, sufficient and proper enquiry on both the issues during scrutiny assessment proceedings by way of issuing notice u/s.142(1) of the Act and taking all course of action, reply and documentary evidence furnished by the assessee. Therefore, the allegation of no enquiry as contended by ld CIT

In the result, appeal of the assessee is allowed. Order pronounced on 08/4/2022.