Saurashtra Trust Janmabhoomi Bhavan Vs CIT (ITAT Mumbai)
ITAT Mumbai held that plausible view of AO cannot be held as erroneous by ld. CIT(E) without conducting necessary enquiries or verification. Accordingly, initiated of revision jurisdiction u/s 263 on mere conjectures, suspicions and surmises, which is not permitted.
Facts- This is an appeal preferred by the assessee trust against the order of the Ld. Commissioner of Income Tax (Exemptions) [CIT(E)] passed u/s. 263 of the Income Tax Act, 1961. The main grievance of the assessee is against invocation of revisional jurisdiction by Ld. CIT(E) without satisfying the essential condition precedent as required under Section 263 of the Act.
Notably, post completion of assessment u/s 143(3), the Ld. CIT(E), desired to exercise his revisional jurisdiction u/s 263 of the Act and noted that even though the AO has denied exemption u/s 11 of the Act and assesseed the total income at Rs.6,67,42,920, he found fault with the action of the AO accepting the service charges received by it as rental income. According to Ld. CIT(E), the assessee trust has claimed deduction of Rs.74,73,225/-under section 24(a) of the Act on “service charges” received by it to the tune of Rs.2,49,10,751/- during the year. And wondered as to how the “service charge” can be included in property income and standard deduction can be claimed and allowed by AO, which action of AO was erroneous and that the assessment order has been passed without basic verification about the allowability of claim under section 24(a) of the Act which is erroneous in so far as it was prejudicial to the interest of revenue. And so, he issued notice u/s 263 of the Act.
Conclusion- Since the AO view after enquiring is plausible view it could not have been interfered with unless the Ld CIT(E) has conducted during revisional proceedings enquiry or verified the facts in order to come to a conclusion that AO’s view was erroneous/un-sustainable in law. As noticed (supra) once AO has conducted enquiry (on an issue) then the Ld Pr. CIT before holding the order of AO to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given by the AO on that issue is erroneous/unsustainable in law.
We have found that AO has discharged the duty of investigator (on the issue of deduction claimed u/s 24(a) of the Act which included amenities charges), then before Ld. CIT(E) holds the view of AO as erroneous, it was imperative on the part of Ld CIT(E) to have made necessary enquiries or verification and should have arrived at a conclusion that the view of AO was unsustainable in law. Admittedly, in the instant case, the Ld CIT(E) has not conducted any such enquiry or verification. In such a scenario, we have to hold that he has initiated revision jurisdiction on mere conjectures, suspicions and surmises, which is not permitted.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This is an appeal preferred by the assessee trust against the order of the Ld. Commissioner of Income Tax (Exemptions) [hereinafter referred to as the “CIT(E)”], Mumbai dated 23.03.2022 for assessment year 2017-18 passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2. The main grievance of the assessee is against invocation of revisional jurisdiction by Ld. CIT(E) without satisfying the essential condition precedent as required under Section 263 of the Act.
3. Brief facts is that the assessee trust and is a Charitable Organization Registered u/s 12A of the Act (vide registration no. TR/3007) and filed its return of income on 01.11.2017. The assessee claimed to be engaged in activities of education of the people of India by conducting and/or providing booklets, pamphlets, newspaper, magazines, or in any other manner. The AO noted that in the return of income along with income and expenditure account, the assessee had filed the balance-sheet and audit report in Form 10B declaring total income at Rs.2,20,03,230/-. In the assessment order, the AO acknowledges that he had issued notices u/s 142(1) of the Act on 01.02.2019 & 20.08.2019 calling for relevant details and raised queries. And pursuant to which the assessee had filed answers to queries and furnished details as requisitioned by him. After examining the details filed by the assessee, the AO admits to have examined the books of account and he notes that the assessee is engaged in the publication which included publication of newspaper and magazine as well as carried out various commercial activities. According to AO, assessee even though has section 12A registration , it wont be able to enjoy the exemption u/s 11 of the Act because it’s case was hit by proviso to section 2(15) of the Act and thus it lost its charitable character within the meaning of section 2(15) and u/s 13(8) of the Act for the assessment year in question and the AO held “therefore reject this claim of the assessee and hold that the assessee trust is not eligible for any benefit and/or exemption u/s 11 and accordingly tax the entire income of the assessee trust denying the benefit of exemption u/s 11 of the Act.’ And thus he rejected the claim exemption u/s 11 of the Act. The AO at para 3.10 noted that the assessee has offered rental income; and interest on investment as business income. And therefore the AO at para 3.11 concluded that taxable income from house property profit and gain from business and income from other sources was calculated as under: –
