Facts of the Case

The present case pertains to Assessment Year 2012–13, where the assessee, a registered charitable society, filed its return declaring nil income after claiming exemption under the Income Tax Act.

The assessee was duly registered under Section 12A and had also obtained approval under Section 80G(5)(vi). The return was supported with audit report in Form 10B, along with financial statements.

The Assessing Officer (AO), after examining the records, passed an assessment order under Section 143(3) accepting the returned income.

Subsequently, the Commissioner of Income Tax (Exemptions) [CIT(E)] invoked revisional jurisdiction under Section 263, alleging that the assessment order was passed in a hurried and casual manner without proper application of mind.

The revision was primarily based on the issue that funds initially received as unsecured loans from a trustee and later converted into contributions required deeper scrutiny.

 Issues Involved

  1. Whether the exercise of revisional jurisdiction under Section 263 was justified in the absence of an erroneous and prejudicial order.
  2. Whether the conversion of unsecured loans into contributions warranted revision of the assessment.
  3. Whether a different opinion by CIT(E) can be a ground to invoke Section 263 when the AO has taken a plausible view.

 Petitioner’s (Revenue) Arguments

  • The Revenue contended that the AO passed the assessment order in a hurried and casual manner, without proper verification.
  • It was argued that there had been inconsistency in earlier years regarding the nature of funds provided by the trustee.
  • Therefore, this was a fit case for invoking Section 263 to protect the interest of the revenue.

 Respondent’s (Assessee) Arguments

  • The assessee submitted that the AO had duly examined all materials, including replies and supporting documents.
  • It was emphasized that in earlier assessment years, similar issues had been decided in favour of the assessee by the Tribunal, allowing exemption under Section 11.
  • The assessee argued that mere disagreement with the AO’s view does not justify invocation of Section 263.

 Court’s Findings / Order

The Delhi High Court upheld the Tribunal’s decision and dismissed the Revenue’s appeal, holding:

  • For invoking Section 263, two conditions must be satisfied:
    1. The order must be erroneous, and
    2. It must be prejudicial to the interests of the revenue
  • The Court observed that the AO had considered the material on record and taken a conscious decision.
  • It reiterated that:

Where the AO adopts a possible view after due inquiry, Section 263 cannot be invoked merely because the Commissioner holds a different opinion.

  • The Court also noted that similar issues in earlier years had been consistently decided in favour of the assessee.
  • Consequently, it held that no substantial question of law arises, and the appeal was dismissed.

 Important Clarifications

  • Section 263 cannot be invoked for inadequate inquiry if some inquiry has already been conducted.
  • Difference of opinion ≠ Error for the purpose of revision.
  • The concept of “possible view” doctrine was reaffirmed.
  • Prior favourable decisions in assessee’s own case strengthen the position against revision.

 Sections Involved

  • Section 11 – Income from property held for charitable purposes
  • Section 12A – Registration of charitable trust
  • Section 13(1)(c) read with Section 13(3) – Benefit to specified persons
  • Section 143(3) – Assessment
  • Section 263 – Revision of orders prejudicial to revenue
  • Section 80G(5)(vi) – Deduction for donations

 Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/RAS02052023ITA2482023_175209.pdf

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