TMI Blog2023 (5) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoked jurisdiction u/s 263 of the Act only after enquiring himself, which we have already noticed that he has omitted to do so. In such a scenario, his impugned action of finding the action of AO to accept the claim of expenditure of Rs.6 crores as erroneous and prejudicial to the interests of revenue is untenable. The impugned revision order passed by Ld PCIT is not sustainable in law and assessee succeeds on the legal issue raised before us. Accordingly, we quash the impugned revision order passed by Ld CIT(E). Appeal filed by the assessee is allowed. - I.T.A. No.931/Mum/2022 - - - Dated:- 2-1-2023 - SHRI B. R. BASKARAN, AM AND SHRI ABY T. VARKEY, JM For the Assessee : Shri Vijay Mehta For the Revenue : Shri Purushottam Tripuri (Sr. AR) ORDER PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Ld CIT (Exemptions), Mumbai passed u/s 263 of the Income tax Act, 1961 (hereinafter the Act ) dated 24.03.2022 for assessment year 2017 18. The assessee is challenging the validity of invocation of jurisdiction by Ld CIT(E) u/s 263 of the Act. 2. The facts relating to the issue are discussed in brief. The assessee he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... September, 2016 5,28,52,691 b. For strengthening civil society in India and enhancing management capacities of Indian NGOs etc. (Sr. No.6 of Board Resolution dated 29th September, 2016) 71,47,309 6,00,00,000 The Ld CIT(E), however, took the view that the assessee has furnished utilization of accumulated amounts under broad heads. He took the view that the AO should have called for break-up details, examined them with supporting evidences that the said utilization is as per the objects of the assessee. He also expressed the view that the AO was expected to have made test check third party verifications in order to satisfy himself of the correctness of assessee s claim. Since the AO has not verified the issue on the above said line, the Ld CIT(E) held that the assessment order is rendered erroneous and prejudicial to the interests of revenue. Accordingly, he set aside the assessment order for the limited purpose of examining the details of utilization of the amount of Rs.6.00 crores. The assessee is aggrieved by the impugned action of Ld CIT(E) and has challenged the valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterests of revenue. 8. We have heard rival contentions and perused the record. The scope of revision proceedings initiated under section 263 of the Act was examined by Hon'ble Bombay High Court, in the case of Grasim Industries Ltd. V CIT (321 ITR 92) by taking into account the law laid down by the Hon'ble Supreme Court. The relevant observations are extracted below: Section 263 of the Income--tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be erroneous in so far as it is prejudicial to the interests of the Revenue . This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already concluded unless he is able to hold that AO s view on the issue is unsustainable in law. 8. In the instant case, it has been brought to our notice that the AO during assessment proceedings has asked specific queries on the details of accumulation of funds. The copies of replies filed by the assessee are given in the paper book. Vide letter dated 30--01--2019, the assessee has furnished the details of accumulation of income made u/s 11(2) of the Act for the past 6 years along with details of utilization. The same was annexed as Annexure 12 along with the copy of Form 10 and board resolution for the subject years. The details are available at pages 14 and 15 of the paper book. The assessee has specifically stated that the amount of Rs.6.00 crores have been utilized for the specified purposes of accumulation. Further, vide letter dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income tax officer. That would not vest the Commissioner with power to examine the accounts and determine the income himself at a higher figure. It is because the Income tax officer has exercised the quasi judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion . There must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed 11. In the case of Nages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the Ld Pr. CIT before holding an order to be erroneous, should conduct necessary enquiries or verification in order to show that the finding given by the AO on that issue is erroneous/unsustainable in law. 13. At this juncture, we may refer to the provisions of sec. 11(2) and 11(3) of the Act, which is extracted below:-- 11(2) Where eighty--five per cent of the income referred to in clause (a) or clause (b) of sub--section (1) read with the Explanation to that sub--section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely: (a) such person furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid or, as the case may be, of the previous year immediately following the expiry of the period aforesaid. 14. Sec. 11(3) deals with the situation, when the assessee fails to utilize the income accumulated u/s 11(2) of the Act. Before us, the Ld A.R made reference to clause (c) of sec. 11(3) and submitted that the taxability of the accumulated income u/s 11(2) of the Act if any, is required to be examined only in the year immediately following the expiry of period of accumulation is not correct in the facts of this case because clause (c) of sec. 11(3) is attracted only in the event assessee fails to utilize the accumulated income within the period for which it is set-apart as per sec. 11(2)(a) of the Act; and that is not relevant to be considered. As far as the relevant facts of the present case are concerned, a perusal of Form 10 would reveal that the accumulated amount in AY 2016-17 was to the tune of Rs 14.51 crores up to 31.03.2021 i.e, AY 2021-22; and therefore non-utilization of accumulated amount as per clause (c) of sec 11(3) will attract taxation in the previous year immediately following the expiry of the period i.e, in AY 2022-23. However, it has to be taken note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 263 of the Act. Hence, in the facts of the present case, it is possible to show that there was violation of clause (a) of sec. 11(3) which would attract tax liability, which may cause prejudice to the interests of revenue. 15. Though the perusal of the impugned revision order passed by Ld CIT(E) it is not clear, we infer that the case of Ld CIT(E) is that the assessee might have violated the provisions of clause (a) of Section 11(3) of the AO and the AO has failed to examine the same. However, we cannot countenance such a view of Ld. CIT(E) because, we have already taken note (supra) that AO has enquired about the accumulation of income of Rs. 6 crores and utilization thereof for the purpose for which it was accumulated and have allowed it, which is a plausible view 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) by Hon ble High Courts had made it clear that 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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