Facts of the Case

The present appeal pertains to Assessment Year 2012–13 and arises from an order passed by the Income Tax Appellate Tribunal dated 06.09.2019.

The respondent/assessee, a registered charitable society, had obtained registration under Section 12A and approval under Section 80G(5)(vi) of the Income Tax Act, 1961. It filed its return declaring nil income, supported by audit reports and financial statements.

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

Subsequently, the Commissioner of Income Tax (Exemptions) [CIT(E)] invoked revisionary jurisdiction under Section 263, alleging that the AO had passed the order in a hurried and casual manner without proper application of mind, particularly regarding funds initially received as unsecured loans from a trustee and later treated as contributions.

The Tribunal set aside the CIT(E)’s order, leading to the present appeal before the Delhi High Court.

 Issues Involved

  1. Whether revision under Section 263 can be invoked when the Assessing Officer has already examined the issue and taken a plausible view.
  2. Whether conversion of unsecured loans from a trustee into contribution justified revisionary action.
  3. Whether an assessment order can be termed erroneous and prejudicial to the interests of revenue merely due to alleged inadequate inquiry.

 Petitioner’s Arguments (Revenue)

  • The AO failed to properly examine the nature of funds received from the trustee.
  • The assessment order was passed in a hurried and casual manner without due verification.
  • There was inconsistency (“flip-flop”) in earlier years regarding the nature of such funds.
  • Therefore, the CIT(E) rightly exercised powers under Section 263.

 Respondent’s Arguments (Assessee)

  • The AO had conducted proper inquiry and applied his mind before passing the assessment order.
  • Similar issues had already been decided in favour of the assessee in earlier assessment years.
  • The Tribunal had consistently allowed exemption under Section 11, even where alleged violations under Sections 13(1)(c) and 13(3) were raised.
  • Merely because the CIT(E) disagrees with the AO’s view, Section 263 cannot be invoked.

 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 revenue.
  • The AO had considered the material and taken a conscious view, hence the order could not be termed erroneous.
  • Merely because the CIT(E) holds a different opinion does not justify revision under Section 263.
  • Past Tribunal decisions in assessee’s own case consistently allowed exemption under Section 11, reinforcing the validity of the AO’s approach.
  • No substantial question of law arose in the present case.

Final Order:
The appeal filed by the Revenue was dismissed.

 Important Clarification

  • Section 263 cannot be invoked for inadequate inquiry if inquiry was actually conducted.
  • A “possible view” taken by the AO is legally sustainable, even if the Commissioner disagrees.
  • Revisionary powers are not meant for substituting judgment of the AO.
  • Consistency in earlier years' rulings plays a significant role in limiting revisionary jurisdiction.

 Sections Involved

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

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

 

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