CIT Vs Vellore Institute of Technology (Madras High Court)
The Revenue filed an appeal challenging the order of the Income Tax Appellate Tribunal (ITAT) dated 17.04.2015 for Assessment Year (AY) 2009-10. The appeal questioned whether the Commissioner had validly exercised jurisdiction under Section 263 of the Income Tax Act, whether the Assessing Officer (AO) was required to record all details in the assessment order, and whether the Commissioner’s conclusion that the assessment was erroneous and prejudicial to the interests of the Revenue had to be based on the materials available on record.
The assessee, an educational institution, filed its return declaring nil income and claimed exemption under Sections 11 and 12 of the Act. Before completing the assessment under Section 143(3), the AO issued a questionnaire under Section 142(1) containing 34 questions on various issues. The assessee replied to the questionnaire and furnished the required documents, following which the AO completed the assessment accepting the claimed exemption.
Subsequently, the Commissioner issued a notice under Section 263 stating that various receipts, including special fees, bus pass collections, hostel establishment charges, hostel admission fees, mess maintenance charges, electricity charges, water charges, and miscellaneous receipts, appeared to be business receipts. According to the Commissioner, the AO had granted exemption under Section 11 without verifying whether these receipts affected the assessee’s eligibility for exemption. The Commissioner therefore treated the assessment order as prima facie erroneous and prejudicial to the interests of the Revenue and proposed revision under Section 263.
