2019 (9) TMI 1179 - AT - Income Tax

Revisionary powers misuse by PCIT overturned for lack of evidence

Smt. Santosh Garg, Sh. Tarsem Garg, Maharishi Markandeshwar University Trust Versus Pr. CIT, Central, Gurugram

Smt. Santosh Garg, Sh. Tarsem Garg, Maharishi Markandeshwar University Trust Versus Pr. CIT, Central, Gurugram - TMI Issues Involved:1. Revisionary powers under Section 263 of the Income Tax Act.2. Alleged siphoning of money by booking bogus expenditures.3. Alleged diversion of trust money to trustees and their relatives.4. Compliance with Medical Council of India (MCI) guidelines.5. Payments for vehicle purchases.6. Salary payments to teachers.7. Other benefits to trustees.8. Construction payments.9. Rent paid to trustees.10. Interest paid to trustees.11. Salary paid to trustees.12. Use of Santosh Hostel funds.13. Bogus expenditure on mess charges.14. Pledging of Fixed Deposit Receipts (FDRs) for loans.Detailed Analysis:1. Revisionary Powers under Section 263 of the Income Tax Act:The Principal Commissioner of Income Tax (PCIT) exercised revisionary powers under Section 263, alleging that the assessment orders were erroneous and prejudicial to the interests of the revenue. The PCIT claimed that the Assessing Officer (AO) did not conduct proper inquiries or verification, leading to potential revenue loss. However, it was found that the AO had made necessary inquiries, and the PCIT did not provide substantial evidence of any revenue leakage or erroneous assessment. As a result, the Tribunal held that the invocation of Section 263 was not justified.2. Alleged Siphoning of Money by Booking Bogus Expenditures:The PCIT alleged that the assessee siphoned money by booking bogus expenditures in the form of mess charges and payments to contractors. The Tribunal found that the AO had issued show cause notices and examined the details of mess expenses and contractor payments. The Tribunal concluded that the PCIT's allegations were based on suspicions and conjectures without concrete evidence. Therefore, the Tribunal held that the AO's assessment was not erroneous or prejudicial to the revenue.3. Alleged Diversion of Trust Money to Trustees and Their Relatives:The PCIT alleged that the assessee diverted trust money to trustees and their relatives through salaries, interest, and rent payments. The Tribunal found that the AO had examined these payments and found them to be reasonable and in line with the trust's activities. The Tribunal held that the PCIT's allegations were not supported by evidence, and the AO's assessment was not erroneous or prejudicial to the revenue.4. Compliance with Medical Council of India (MCI) Guidelines:The PCIT alleged that the assessee trust violated MCI guidelines in admitting students under the NRI quota. The Tribunal found that the AO had examined the details of NRI admissions and found them to be in compliance with MCI guidelines. The Tribunal held that the PCIT's allegations were based on suspicions without concrete evidence, and the AO's assessment was not erroneous or prejudicial to the revenue.5. Payments for Vehicle Purchases:The PCIT alleged that vehicle purchases in the name of trustees were used to siphon funds from the trust. The Tribunal found that the AO had examined the vehicle purchases and found them to be used for trust purposes. The Tribunal held that the PCIT's allegations were not supported by evidence, and the AO's assessment was not erroneous or prejudicial to the revenue.6. Salary Payments to Teachers:The PCIT alleged that the AO did not conduct proper inquiries regarding salary payments to teachers. The Tribunal found that the AO had issued show cause notices and examined the details of salary payments. The Tribunal held that the PCIT's allegations were based on suspicions without concrete evidence, and the AO's assessment was not erroneous or prejudicial to the revenue.7. Other Benefits to Trustees:The PCIT alleged that trustees obtained other benefits in the form of services of employees of the trust. The Tribunal found that the AO had examined these benefits and found them to be reasonable and in line with the trust's activities. The Tribunal held that the PCIT's allegations were not supported by evidence, and the AO's assessment was not erroneous or prejudicial to the revenue.8. Construction Payments:The PCIT alleged that construction payments to Tarsem Garg were not properly examined by the AO. The Tribunal found that the AO had examined the construction payments and found them to be reasonable. The Tribunal held that the PCIT's allegations were not supported by evidence, and the AO's assessment was not erroneous or prejudicial to the revenue.9. Rent Paid to Trustees:The PCIT alleged that rent payments to trustees were excessive and not properly examined by the AO. The Tribunal found that the AO had examined the rent payments and found them to be reasonable. The Tribunal held that the PCIT's allegations were not supported by evidence, and the AO's assessment was not erroneous or prejudicial to the revenue.10. Interest Paid to Trustees:The PCIT alleged that interest payments to trustees were excessive and not properly examined by the AO. The Tribunal found that the AO had examined the interest payments and found them to be reasonable. The Tribunal held that the PCIT's allegations were not supported by evidence, and the AO's assessment was not erroneous or prejudicial to the revenue.11. Salary Paid to Trustees:The PCIT alleged that salary payments to trustees were excessive and not properly examined by the AO. The Tribunal found that the AO had examined the salary payments and found them to be reasonable. The Tribunal held that the PCIT's allegations were not supported by evidence, and the AO's assessment was not erroneous or prejudicial to the revenue.12. Use of Santosh Hostel Funds:The PCIT alleged that funds from Santosh Hostel were diverted to trustees and their relatives. The Tribunal found that the AO had examined the hostel funds and found them to be used for trust purposes. The Tribunal held that the PCIT's allegations were not supported by evidence, and the AO's assessment was not erroneous or prejudicial to the revenue.13. Bogus Expenditure on Mess Charges:The PCIT alleged that mess charges were bogus and used to siphon funds from the trust. The Tribunal found that the AO had examined the mess charges and found them to be reasonable. The Tribunal held that the PCIT's allegations were not supported by evidence, and the AO's assessment was not erroneous or prejudicial to the revenue.14. Pledging of Fixed Deposit Receipts (FDRs) for Loans:The PCIT alleged that FDRs were pledged to secure loans for personal use by trustees. The Tribunal found that the AO had examined the FDRs and found them to be used for trust purposes. The Tribunal held that the PCIT's allegations were not supported by evidence, and the AO's assessment was not erroneous or prejudicial to the revenue.Conclusion:The Tribunal concluded that the PCIT's invocation of revisionary powers under Section 263 was not justified in the absence of concrete evidence of any revenue leakage or erroneous assessment. The AO had conducted necessary inquiries and verifications, and the PCIT's allegations were based on suspicions and conjectures without substantial proof. Therefore, the Tribunal set aside the PCIT's orders under Section 263 for all the assessment years involved.