Tribunal upholds revision under section 263, orders reassessment for tax lapses.

The Tribunal found the assessment orders passed by the assessing officer under section 143(3) to be erroneous and prejudicial to the interest of revenue. It upheld the Principal Commissioner of Income Tax's decision to invoke revisionary powers under section 263, directing a re-assessment after identifying lapses in the original assessment related to donations, expenditures, and application of tax provisions. The Tribunal clarified that the nature of the exemption claimed by the appellant under section 10(23C)(iiiab) does not preclude the applicability of section 263. The appeals were dismissed, affirming the need for a fresh assessment.

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Issues Involved:
1. Whether the orders passed by the assessing officer under section 143(3) were erroneous and prejudicial to the interest of the revenue within the purview of section 263 of the Income-tax Act, 1961.
2. Whether the revisionary jurisdiction under section 263 is applicable when the assessee claims exemption under section 10(23C)(iiiab) of the Act.
3. Whether the assessment orders suffered from infirmity triggering the section 263 revisionary action.

Detailed Analysis:

Issue 1: Erroneous and Prejudicial Orders under Section 143(3)
The appellant, a charitable trust registered under the Bombay Trust Act, 1950, and claiming exemption under section 10(23C)(iiiab), filed returns of income for AY 2015-2016 and 2016-2017, which were assessed under section 143(3) accepting the returned income as "NIL". The Principal Commissioner of Income Tax (PCIT) invoked revisionary powers under section 263, citing lapses in the original assessment, and directed the assessing officer to reframe the assessment de novo after conducting inquiries into the genuineness of donations, expenditure incurred, and correctness of application of provisions of section 11.

The Tribunal noted that the assessment orders were passed without proper inquiry and verification of donations and expenditures, leading to the conclusion that the orders were erroneous and prejudicial to the interest of the revenue. The Tribunal emphasized that an incorrect assumption of facts or law, or passing an order without application of mind or principle of natural justice, suffices to hold the order as erroneous.

Issue 2: Applicability of Section 263 with Exemption under Section 10(23C)(iiiab)
The appellant contended that since the trust enjoys exemption under section 10(23C)(iiiab), it cannot be subjected to revision under section 263. The Tribunal rejected this argument, stating that the nature, amount, and type of claim in the return do not decide the revisionary jurisdiction; rather, the validity of the order does. The Tribunal held that the orders of assessment passed under section 143(3) are valid and legal and thus are subject to revision under section 263.

Issue 3: Infirmity in Assessment Orders Triggering Section 263 Action
The PCIT observed that the trust received voluntary donations and building fund donations without maintaining proper records to showcase genuineness, and there were cash expenditure vouchers without supporting documents. The Tribunal found that the appellant failed to submit details of donations and expenditures during both the assessment and revisionary proceedings. The Tribunal upheld the PCIT's conclusion that the assessment orders were erroneous and prejudicial to the revenue, as they were passed without proper inquiry and verification.

In conclusion, the Tribunal applied the principles laid down by the Hon'ble Supreme Court in "Malabar Industrial Co Ltd. Vs CIT" and found the PCIT's action sustainable in law. The Tribunal dismissed the appeals of the appellant, holding the assessment orders as erroneous and prejudicial to the interest of revenue, and upheld the direction for fresh assessment. The appeals in both ITA.No.30/NAG/2021 and ITA.No.31/NAG/2021 were dismissed with no order as to cost.

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