2025 (4) TMI 262 - AT - Income Tax

PCIT's revision order under Section 263 quashed as search assessment under Section 153A was proper

St. Joseph’s Institute of Science and Technology Trust, St. Joseph’s Educational Trust, Versus The Principal Commissioner of Income Tax, Chennai

ITAT Chennai quashed PCIT's revision order u/s 263 challenging search assessment u/s 153A. The assessee had offered income including taxes on anonymous ... Revision u/s 263 - validity of Assessment u/s 153A - income offered by the assessee, which included taxes paid on anonymous donations u/s 115BBC and corpus donations u/s 11 - HELD THAT:- As cash donations as anonymous donations and corpus donations have been considered by the AO during search assessment proceedings u/s 153A, where is error in search assessment order so as to make the same prejudicial to the interest of revenue, the ld.CIT-DR could not controvert the above fact situation except supporting the revision order passed by the PCIT. Taking guidance from the various judgments referred in this case twin conditions of Section 263 are not satisfied, as there is no lack of inquiry by the AO, and the AO has taken a plausible view and there is no prejudice to the interest of the revenue since the assessee has paid taxes on the income chargeable to tax in accordance with the provisions of section 11 of the Act and section 115BBC of the Act; Assessee had an occasion to face search & seizure under a rigorous provision of Section 132 Chapter XIVB and the assessing officer took a particular view on same material, same figures and taxed the assessee. The very issue was raised in the search assessment u/s.153A of the Act, Further, it is noted that the complete details were examined by the AO in the search assessment proceedings and framed assessment u/s.153A r.w.s. 144 of the Act. During search assessment, AO explicitly records details like seized material, sworn statements. Even such queries were answered by the assessee in reply to questionnaire issued along with notice u/s.142(1) of the Act dated 14.09.2021 while completing reassessment. Hence, it is a full verification case and AO has verified complete facts and after verification took one of view and completed the search assessment. The revenue cannot invoke clause (d) of Explanation 2 of section 263 of the Act and say that search assessment order u/s 153A dated 28.09.2021 is erroneous in the light of the Hon'ble Jurisdictional High Court delivered in the case of MAC Public Charitable Trust [2022 (11) TMI 137 - MADRAS HIGH COURT] for the reason that when search assessment order u/s 153A was passed the judgment of the Hon'ble Jurisdictional High Court in the case of MAC Public Charitable Trust was not at all in existence. Hence, we find no reason to hold that the search assessment order dated u/s 153A r.w. section 144 of the Act is erroneous insofar as prejudicial to the interest of revenue on this very jurisdictional issue. Hence, we quash the revision order passed by PCIT and allow this appeal of assessee. ISSUES PRESENTED and CONSIDEREDThe core issues considered in this judgment are:Whether the Principal Commissioner of Income Tax (PCIT) was justified in invoking the jurisdiction under Section 263 of the Income Tax Act, 1961, to revise the assessment orders passed under Section 153A read with Section 144 of the Act.Whether the assessment orders passed by the Assessing Officer (AO) were erroneous and prejudicial to the interests of the revenue, thereby justifying the revision under Section 263.Whether the seized materials and the subsequent treatment of receipts as anonymous donations and corpus donations were correctly handled by the AO during the search assessment proceedings.Whether the PCIT could rely on the decision of the Madras High Court in the case of MAC Public Charitable Trust, which was stayed by the Supreme Court, to justify the revision under Section 263.Whether the AO's assessment order was erroneous due to lack of inquiry or inadequate inquiry, as contended by the PCIT.ISSUE-WISE DETAILED ANALYSIS1. Jurisdiction under Section 263 of the ActThe legal framework for invoking Section 263 requires the order to be both erroneous and prejudicial to the interests of the revenue. The Court examined whether these twin conditions were satisfied. The Court noted that the AO had conducted inquiries during the assessment proceedings and had accepted the income offered by the assessee, which included taxes paid on anonymous donations under Section 115BBC and corpus donations under Section 11. The Court emphasized that the PCIT could not invoke Section 263 merely based on inadequacy of inquiry or a different opinion.2. Treatment of Seized Materials and DonationsThe Court analyzed the treatment of receipts as anonymous donations and corpus donations. The AO had accepted the assessee's treatment of these receipts after conducting inquiries and obtaining necessary details. The Court found that the AO had taken a plausible view, and there was no lack of inquiry. The PCIT's contention that the AO failed to examine the seized materials was not supported by evidence, as the AO had considered these materials during the assessment proceedings.3. Reliance on MAC Public Charitable Trust DecisionThe PCIT relied on the Madras High Court's decision in MAC Public Charitable Trust to justify the revision under Section 263. However, the Court noted that this decision was stayed by the Supreme Court, and therefore, could not be used as a basis for revision. The Court emphasized that the PCIT should have conducted an independent inquiry to ascertain the applicability of this decision to the assessee's case before directing the AO to deny exemption under Section 11.4. Adequacy of Inquiry by the AOThe Court considered whether the AO's inquiry was adequate. It referred to precedents indicating that inadequacy of inquiry does not justify revision under Section 263 unless there is a complete lack of inquiry. The Court found that the AO had conducted a thorough inquiry by issuing notices and obtaining necessary details from the assessee. The PCIT's order was based on a different opinion rather than a lack of inquiry.SIGNIFICANT HOLDINGSThe Court held that the PCIT's invocation of Section 263 was not justified as the twin conditions of the section were not satisfied. The AO had conducted a proper inquiry and had taken a plausible view, which could not be termed as erroneous or prejudicial to the interests of the revenue. The Court quashed the revision order passed by the PCIT, allowing the appeals filed by the assessee.The Court reiterated the principle that inadequacy of inquiry does not warrant revision under Section 263. It emphasized the need for independent inquiry by the PCIT before invoking jurisdiction under this section, especially when relying on a judicial decision that has been stayed by a higher court.The judgment reinforced the principle that an AO's order cannot be considered erroneous if it is based on one of the permissible views in law, even if the PCIT disagrees with that view.