ITAT allows trust's appeal against revision order under section 263, finds assessment not erroneous

ITAT Delhi allowed the trust's appeal against PCIT's revision order u/s 263. The tribunal found that identical issues were previously decided in assessee's favor by ITAT and Delhi HC, which held the trust's activities as charitable. The AO had conducted adequate inquiries during faceless assessment proceedings and followed judicial discipline by adhering to prior decisions. PCIT cannot initiate revision merely to substitute views on matters already on record or for inadequate inquiry when sufficient inquiry was conducted. The assessment order was not erroneous.

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Issues Involved:
1. Legality of the Revision Order under Section 263.
2. Adequacy of inquiries and verification by the National e-Assessment Centre (NeAC).
3. Applicability of proviso to Section 2(15) of the Income-tax Act, 1961.

Issue 1: Legality of the Revision Order under Section 263
The assessee contested that the Revision Order dated 19.10.2022 under Section 263 by the Commissioner of Income Tax (Exemptions) was "bad in law" and should be quashed. The assessee argued that the Assessment Order by NeAC was framed after considering various decisions from past years and making required inquiries and verification. The Tribunal found that the issues raised by the Principal Commissioner of Income Tax (PCIT) were already decided in favor of the assessee in earlier years by both the Tribunal and the Hon'ble Jurisdictional High Court. Therefore, the Tribunal held that the order of the Assessing Officer (AO) cannot be treated as erroneous merely because the view taken by the AO was not acceptable to the PCIT.

Issue 2: Adequacy of Inquiries and Verification by NeAC
The PCIT claimed that NeAC failed to make requisite inquiries and verification. The Tribunal noted that sufficient inquiries were indeed made by various assessing officers during the assessment proceedings under the faceless regime. Notices under Section 142(1) were issued multiple times, and the assessee had filed complete details regarding the queries raised. The Tribunal concluded that the AO had made specific inquiries on the issues raised by the PCIT and that the assessment was completed after a thorough review process. Therefore, the Tribunal held that revision proceedings under Section 263 cannot be initiated for inadequate inquiry but only for lack of inquiry.

Issue 3: Applicability of Proviso to Section 2(15) of the Income-tax Act, 1961
The PCIT argued that the assessee's activities fell within the ambit of proviso to Section 2(15) of the Act, treating the Indian International Centre (IIC) as a commercially run hotel. The Tribunal observed that the assessee's case had already been decided in its favor on merits by the Tribunal and the Hon'ble Jurisdictional High Court in earlier years. The Tribunal noted that the AO had followed judicial discipline by accepting the assessee's contentions and completing the assessment accordingly. The Tribunal held that the PCIT's revision order was not justified as the issues on merits were already settled in favor of the assessee.

Conclusion:
The Tribunal quashed the revision order passed by the PCIT under Section 263, holding that the AO's order was neither erroneous nor prejudicial to the interests of the revenue. The appeal of the assessee was allowed.

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