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 proceedings based on the proposal by the Assessing Officer was impermissible and that the conditions under Section 13(9) were met. Emphasizing adherence to legal principles, the Tribunal highlighted the importance of satisfying the requirements for jurisdiction under Section 263.

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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.

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