Tribunal quashes revision order under Income Tax Act, citing procedural irregularity and COVID-19 impact.

The Tribunal allowed the appeal, quashing the revision order under Section 263 of the Income Tax Act. It held that the delay in filing the appeal was condoned due to the COVID-19 pandemic. The Tribunal found that the Commissioner of Income Tax (Exemptions) passed the revision order without providing a fair opportunity of hearing to the assessee, constituting a procedural irregularity. Additionally, it determined that the Assessing Officer conducted adequate enquiries during the assessment proceedings and that the claim of depreciation by the assessee was permissible under the law.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of the revision order under Section 263 of the Income Tax Act, 1961.
3. Examination of whether the Assessing Officer (AO) made adequate enquiries during the assessment proceedings.
4. Allowability of depreciation as an application of income under Section 11 of the Income Tax Act, 1961.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal filed by the assessee was barred by a delay of 198 days. The assessee contended that the delay was due to the COVID-19 pandemic, which led to the State Government declaring the Institute to run a 400-bedded Covid care facility, restricting entrance and thus delaying the filing of the appeal. The Tribunal, after hearing the submissions and noting that the Revenue did not object, condoned the delay, stating that the assessee was prevented by sufficient cause from filing within the stipulated period.

2. Validity of the Revision Order under Section 263 of the Income Tax Act, 1961:
The sole grievance of the assessee was that the Commissioner of Income Tax (Exemptions) [CIT(E)], Hyderabad, passed the revision order under Section 263 in a hurried manner without providing a reasonable opportunity of hearing to the assessee. The Tribunal noted that Section 263(1) requires the Commissioner to give the assessee an opportunity of being heard and to make or cause to be made such inquiry as deemed necessary. The Tribunal found that the CIT(E) passed the order without giving the assessee adequate opportunity, which constituted a procedural irregularity and a violation of the principles of natural justice.

3. Examination of Whether the AO Made Adequate Enquiries During the Assessment Proceedings:
The Tribunal observed that during the assessment proceedings, the AO issued a notice under Section 142(1) with a detailed questionnaire, including questions about the depreciation claimed. The assessee responded through e-proceedings, and the AO, after considering the replies, completed the assessment. The Tribunal held that the AO made sufficient and adequate enquiries, and the CIT(E) was not justified in alleging that the AO did not make any proper enquiry. The Tribunal emphasized that if the CIT(E) believed the AO did not undertake any enquiry, it was incumbent on the CIT(E) to conduct such an enquiry himself.

4. Allowability of Depreciation as an Application of Income under Section 11 of the Income Tax Act, 1961:
The Tribunal examined whether the claim of depreciation by the assessee as an application of income was allowable. Citing various judgments, including the ITAT Chennai decision in the case of ACIT vs Grama Vidiyal Trust, the Tribunal noted that if the cost of the asset was allowed under Section 11 as an application of income in the year of purchase, the assessee would not be entitled to claim depreciation on the same asset in subsequent years. However, in the present case, the assessee demonstrated that it did not claim the cost of the asset as an application of income at the time of purchase, but only claimed depreciation in subsequent years. The Tribunal found that this practice was permissible and consistent with the rule of consistency in tax proceedings.

Conclusion:
The Tribunal concluded that the CIT(E) passed the revision order without giving the assessee a fair opportunity to be heard, violating the principles of natural justice. The AO made adequate enquiries during the assessment proceedings, and the assessee's claim of depreciation was in accordance with the law. Thus, the revision order under Section 263 was quashed, and the appeal of the assessee was allowed.

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