TMI Blog2022 (4) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 263 - allowability of the claim on account of donation to another charitable trust is also subjected to the outcome of issue of denial of the exemption under section 11 in totality which is pending before the CIT(A). Therefore, even if the Assessing officer has to consider this issue of allowability of the claim of donation given to another trust, the same has to be finally decided as per the outcome of the appeal filed by the assessee. Sofar as objection raised by the assessee that the Commissioner of Income-tax (Exemption) cannot invoke the provisions of section 263 when the issue is pending before the CIT(A), we find that when the Assessing Officer has allowed the claim of donation without even without even examining such claim despite denial of benefit of exemption under section 11 in totality then the said issue cannot be said to have been pending in the appeal before the CIT(A). Even otherwise, as per clause (c) of Explanation 1 of section 263(1), the Commissioner has the power to such matter which has not been considered and decided in the appeal. Accordingly, we do not find any merit or substance in this contention and the issue raised by the assessee. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal. 3. The assessee is a charitable trust and was granted registration under section 12A of the Income-tax Act, 1961. The assessee filed return of income on 30/09/2016 for the assessment year under consideration declaring total income at Nil after claiming exemption under sections 11 12 of the Incometax Act, 1961. The assessment was completed under section 143(3) on 14/12/2018 at the total income of ₹ 11,64,89,840/-. Thereafter, the Commissioner of Income-tax (Exemption) noticed that the assessment order passed by the Assessing Officer under section 143(3) dated 14/12/2018 is erroneous sofar as it is prejudicial to the interest of Revenue as the Assessing Officer has allowed the claim of expenditure on account of donation made by the assessee to another trust after holding the assessee as not eligible for exemption under section 11 of the Income-tax Act, 1961, due to violation of provisions of section 13(2) of the Income-tax Act. The Commissioner of Income-tax (Exemption) issued a show cause notice under section 263 on 09/02/2021 raising following issues:- (a) During the assessment proceedings the Assessing Officer had invoked provisions of section 13(2) to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. The AO, in the assessment proceedings has allowed expenses aggregating to ₹ 3,13,09,693/-that included donation of ₹ 2,75,00,000/- to M/s. Sind Education Trust. Since exemption under Section 11 of the Act was not available to the assessee foundation as per the AO, there was no question of deduction of this donation. The AO has allowed this claim of the assessee on account of donation of ₹ 2,75,00,000/- which was not allowable in view of the stand taken by the AO himself in the assessment proceedings. I am not convinced by the reply of the assessee trust, and after due consideration, find that the assessment framed by the AO is erroneous in insofar as it is prejudicial to the interests of the revenue within the meaning of Section 263 of the Act. 4. In view of the facts and circumstances and legal precedence as narrated above, and by virtue of the powers vested in the undersigned vide provisions of Section 263 of the I.T. Act, 1961, the assessment order dated 14/12/2018 is set aside with a direction to AO to undertake assessment proceedings de novo. The assessment proceedings shall be completed after proper examination of all the relevant issues, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgement of Hon ble Supreme Court in case of Malabar Industries Ltd vs CIT 243 ITR 83(SC) as well as in case of CIT vs Max India Ltd 295 ITR 282 (SC) and submitted that the Hon ble Apex Court has held that on every loss of revenue as a consequence of an order of Assessing Officer, cannot be treated as prejudicial to the interest of the Revenue. If Assessing Officer has adopted one of the course permissible in law and it has resulted in loss of revenue or where two views are possible and Assessing Officer has taken one view with which the Commissioner of Income-tax does not agree, it cannot be treated as an erroneous order prejudicial to the interest of Revenue, unless the view taken by the Assessing Officer is unsustainable in law. He has also referred various other decisions of Hon ble High Courts on this point to substantiate his argument. The Ld.AR has also contended that the provisions of section 13 of Income-tax Act are not applicable in the case of the assesse and violation of provisions of section 13(1)(c) does not tantamount to denial of total exemption under section 11 of the Act. Thus, the Ld.AR has submitted that the impugned revision order passed by the Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he held the assessee trust is not eligible for any exemption under section 11 and consequently taxed the entire income of the assessee trust by denying the benefit of exemption under section 11 in totality. The Assessing Officer added the entire surplus to the income of the assessee. Therefore, the issue of claim of donation is directly consequential to the decision taken by the Assessing Officer on the eligibility of exemption under section 11 of the Act. Thus, the claim of donation allowed by the Assessing Officer while passing the assessment order is contradictory to the decision taken by the Assessing Officer as referred in para 4.3 of the assessment order. To that extent we do not find any error or illegality in the impugned order of the Commissioner of Income-tax (Exemption) as well as invoking the provisions of section 263 of the Act. However, the allowability of the claim on account of donation to another charitable trust is also subjected to the outcome of issue of denial of the exemption under section 11 in totality which is pending before the CIT(A). Therefore, even if the Assessing officer has to consider this issue of allowability of the claim of donation given t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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