Tribunal Quashes Revision Order; Adequate AO Inquiries & Exemption Rule Out Prejudice; Procedural Violations Cited.

The ITAT set aside the revision order issued by the CIT(Exemptions) u/s 263 for the assessment year 2017-18. The Tribunal determined that the AO conducted adequate inquiries into unsecured loans, thus quashing the revision on that ground. Additionally, the Tribunal found the depreciation issue non-prejudicial due to income exemption u/s 10(23C)(iiiad). The Tribunal also quashed the revision order due to procedural violations, including lack of a show cause notice for new issues raised by the Commissioner. Consequently, the appeal by the assessee was allowed.

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Issues Involved:
The judgment involves the revision order passed by the Commissioner of Income-tax (Exemptions) u/s 263 of the Income-tax Act, 1961, pertaining to the assessment year 2017-18.

Revision Order u/s 263 - Unsecured Loans:
The Commissioner sought revision based on unexamined unsecured loans of Rs. 13,50,000 and eligibility for depreciation on assets as an application of income. The assessee provided detailed documentation to prove creditworthiness of lenders. The Tribunal found that the Assessing Officer had conducted sufficient inquiries regarding the loans, hence quashing the revision on this ground.

Revision Order u/s 263 - Depreciation on Assets:
Regarding depreciation on assets, the Tribunal acknowledged the ineligibility post-amendment in 2015. However, as the income was exempt u/s 10(23C)(iiiad), the order was not prejudicial to revenue. The Tribunal quashed the revision on this issue as well.

Additional Issues Raised by PCIT:
The Commissioner raised new issues of mess expenditure and salary verification without providing a show cause notice to the assessee, violating principles of natural justice. The Tribunal quashed the revision order on these grounds.

Observation on Gross Receipts:
Although the Commissioner made an observation on potential gross receipts exceeding Rs. 1 crore due to unsecured loan inclusion, it was not a basis for the revision order. The Tribunal refrained from commenting on this observation.

Conclusion:
The Tribunal allowed the grounds raised by the assessee, ultimately allowing the appeal and setting aside the revision order passed by the Commissioner of Income-tax (Exemptions) u/s 263 for the assessment year 2017-18.

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