2020 (11) TMI 618 - AT - Income Tax

Tribunal quashes CIT(E) order under Section 263, stresses jurisdiction requirements.

The Tribunal allowed the appeal of the assessee, quashing the order passed under Section 263 by the CIT(E). The Tribunal held that the initiation of ... Revision u/ 263 - A.O. default in allowing accumulation u/s 11 (2) in the case of a late return - return of income a well as Form-10 have been filed belatedly - delay in filing of form 10 only has been condoned in exercise of powers delegated to the undersigned. It however, does not mean that the delay in filing of return of income also stands condoned. - as per CIT-A in the absence of condonation of delay in filing of return of income. the claim of exemption u/s 11(2) cannot be allowed in the facts of the present case - HELD THAT:- AO in his order passed u/s 143(3) of the Act on 31/10/2018 had considered each and every aspect of this issue. In fact, the return of income was filed on 20/10/2016 declaring Nil income and this was in time. The assessee filed the revised return of income on 29/11/2017 and this was selected for scrutiny. The ld. CIT(E) while condoning the delay in filing of Form 10 vide his order dt. 20/11/2017, u/s 119(2)(b) of the Act, was aware of all these circumstances. As the original return was filed in time and delay in filing of Form 10 was condoned by the ld. CIT(E), we are of the view that the twin conditions mentioned u/s 13(9) of the Act was satisfied. It is not the case of the revenue that the original return of income was not filed within the due date of filing as specified u/s 139(1) - AO has considered the legal position and has taken a possible view after application of mind. Assessing Officer was bound to consider the original return of income which was filed in time as well as the Form 10 filed after condonation of delay by the ld. CIT(E) and grant exemption to the assessee. He did so in the assessment order passed u/s 143(3) of the Act on 31/10/2018. He took a possible view. Such view cannot be considered as an order which causes prejudice to the revenue - the order passed u/s 263 is bad in law and without jurisdiction - Decided in favour of assessee. Issues Involved:1. Delay in filing the appeal by the assessee.2. Condonation of delay in filing Form No. 10.3. Validity of the initiation of proceedings under Section 263 based on the proposal by the Assessing Officer.4. Examination of the merits of the case regarding the filing of Form No. 10 and the return of income.5. Legal principles governing the exercise of jurisdiction under Section 263.Detailed Analysis:1. Delay in Filing the Appeal by the Assessee:The Tribunal noted that there was a delay of 26 days in filing the appeal by the assessee. After reviewing the petition for condonation, the Tribunal was convinced that the assessee was prevented by sufficient cause from filing the appeal on time. Hence, the delay was condoned, and the appeal was admitted.2. Condonation of Delay in Filing Form No. 10:The assessee, a premier national law school, filed its original return of income for the Assessment Year 2016-17 on 20/10/2016. The assessee obtained registration under Section 12A on 09/12/2016 and subsequently filed a petition for condonation of delay in filing Form No. 10, which was granted by the CIT(E) on 20/11/2017. The CIT(E) condoned the delay in filing Form No. 10 for the Assessment Years 2014-15, 2015-16, and 2016-17, allowing the assessee to claim the benefit of setting apart funds for future utilization.3. Validity of the Initiation of Proceedings under Section 263:The CIT(E) initiated proceedings under Section 263 based on a proposal from the Assessing Officer, which suggested that the order passed under Section 143(3) was erroneous and prejudicial to the interests of the revenue. The Tribunal cited the case of M/s. Rupayan Udyog vs. Pr. CIT, where it was held that the initiation of proceedings under Section 263 based on a proposal by the Assessing Officer is not permissible in law. The Tribunal quashed the order passed under Section 263, stating that the jurisdiction under Section 263 must originate from the Commissioner of Income Tax after examining the records.4. Examination of the Merits of the Case:The Tribunal examined whether the conditions under Section 13(9) were satisfied. It was noted that the original return of income was filed within the due date, and the delay in filing Form No. 10 was condoned by the CIT(E). The Tribunal held that the twin conditions mentioned under Section 13(9) were satisfied, and the Assessing Officer had taken a possible view after a detailed inquiry. The Tribunal referred to the case of Swajan Pariwar Trust vs. ADIT(E), where it was held that procedural defects, such as late filing of Form No. 10B, should not prevent the granting of exemptions if the defect is later rectified.5. Legal Principles Governing the Exercise of Jurisdiction under Section 263:The Tribunal reiterated the principles laid down by the Hon’ble Andhra Pradesh High Court in the case of Spectra Shares and Scrips Pvt. Ltd. V CIT, which include:- The Commissioner must be satisfied that the order is both erroneous and prejudicial to the interests of the revenue.- Every loss of revenue is not necessarily prejudicial to the interests of the revenue.- The Commissioner must provide adequate reasons for invoking Section 263.- The Commissioner cannot initiate proceedings for fishing and roving inquiries.The Tribunal concluded that the order passed by the CIT(E) under Section 263 was without jurisdiction and quashed the order, allowing the appeal of the assessee.Conclusion:The Tribunal allowed the appeal of the assessee, quashing the order passed under Section 263 by the CIT(E) on the grounds that the initiation of proceedings based on the proposal by the Assessing Officer was not permissible and that the conditions under Section 13(9) were satisfied. The Tribunal emphasized the importance of adhering to legal principles governing the exercise of jurisdiction under Section 263.