TMI Blog2023 (3) TMI 975X X X X Extracts X X X X X X X X Extracts X X X X ..... of the PCIT with regard to the issue of setting aside the order of AO u/s.143(3) with regard to this issue is quashed. Appeal of assessee allowed. - ITA Nos. 632 & 633/Coch/2022 - - - Dated:- 8-3-2023 - SHRI GEORGE GEORGE K. , JUDICIAL MEMBER AND Ms. PADMAVATHY S. , ACCOUNTANT MEMBER For the Assessee : Shri Jose Kappan , CA For the Revenue : Shri Prashant V. K. , CIT ( DR ) ORDER Per Padmavathy S , Accountant Member : These appeals are by two assessees viz., Malanadu Farmers Society Malanadu Milk Producers Society against the separate orders of the CIT, Exemption, Kochi at Trivandrum dated 21.3.2022 passed u/s. 263 of the Income-tax Act, 1961 [the Act] for the assessment year 2017-18. ITA No.632/Coch/2022 2. The assessee is a charitable institution approved u/s. 12A of the Act. The assessee filed return of income for AY 2017-18 on 31.10.2017 returning NIL income. The case was selected for scrutiny under CASS and notice u/s 143(2) was duly served on the assessee. The AO called for various details and based on the same completed the assessment accepting the income returned by the assessee. 3. Subsequently, the CIT(Exemption) [CIT(E)] per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ryptic order of three short paragraphs wherein the assessee's claim of being eligible for exemption u/s 11 has not been examined. It is pertinent to mention here that w.e,f 01.04,2009 as per proviso to section 2(15) of Income Tax Act 1961, the advancement of any other object of general public utility shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade, commerce or business for a cess or fees or any other consideration irrespective of nature of use or application. In the backdrop of the specific provision, the AO was duty bound to verify and examine the claim of the assessee as to whether its activities falls under the first limb of section 2(15) i.e. Relief to poor as claimed by the assessee. Alternatively, the AO was duty bound to examine as to whether the assessee s case falls under the proviso to section 2(15). However, the AO has neither verified/examined the assessees claim under relief to the poor' nor it is examined from the perspective of proviso to section 2(15). 8. In view of the utter failure to make any inquiry by the assessing officer while passing a briefs cryptic and non-speaking order the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed herewith. (Page No. 58-68) As part of its objective, your appellant has established a model cattle farm at Theni. The Society is also educating and promoting farmers especially in the kcal areas of Tamilnadu, Viz. Surandai, Perayoor, Dindigul, Theni, about the benefits of milk farming for their betterment and as a means for their livelihood. The society is procuring milk generated by these farmers, by giving the best price and after chilling and basic processing, the same is sold to the pasteurization centres. The farmers are deriving a price benefit in the range of Rs. 2.94 to Rs.3.47 per litre based on the quality of milk provided by them, in comparison with the rice of Aavin (Tamilnadu Cooperative Milk Producers' Federation Ltd, a Govt. of Tamilnadu undertaking). Comparison chart showing benefit derived by lie farmers is enclosed herewith. (Page No. 84-86) This gives a great relief to is small and marginal farmers to meet their regular need for livelihood. The surplus generated from the activity is utilised for achieving its objectives which include assistance in various forms to the farmers. During the Year your appellant spent a sum of Rs.15,24, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly, where the purpose of a trust or institution is relief of the poor, education or medical relief it will constitute 'charitable purpose' even if it incidentally involves the carrying on of commercial activities. 'Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the mod. disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under section 11(4A) or the seventh proviso to section 10(23C) which are that (i) the business should be incidental to the attainment of the objectives of the entity, and (ii) separate books of account should be maintained in respect of such business. Similarly, entities whose object is 'education' or 'medical relief' would also continue to be eligible for exemption as charitable institutions even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, 90[including, **** Explanation 2. For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 94[or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal 95[Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner, (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have the power to set aside the assessment order and send the matter for a fresh assessment if he is satisfied that further enquiry is necessary and the assessment order is prejudicial to the interests of the Revenue. However, in doing so, the PCIT must have some material which would enable to form a prima facie opinion that the order passed by the AO is erroneous, insofar as it is prejudicial to the interests of the Revenue. In the present case, the PCIT has not brought out any material on record to substantiate that the activities of the assessee are covered under the proviso to section 2(15). We notice that the AO during the course of hearing has raised a query with regard to the applicability of proviso to section 2(15) and the assessee has filed a detailed reply in this regard (page 39 to 41 of paper book). The PCIT in his order has stated that further enquiry should have been done to verify the applicability of proviso to section 2(15) in assessee s case. This view of the ld. PCIT, in our opinion, is not the right reason for exercising revisionary powers u/s. 263 of Act, for the reason that the assessee in response to AO s specific query has substantiated by submitting vario ..... X X X X Extracts X X X X X X X X Extracts X X X X
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