TaxTMI 
TaxTMI 
2022 (5) TMI 936
X X X X Extracts X X X X
X X X X Extracts X X X X
....roduce grounds assailed by the appellant assessee as; "1. Validity of Oder under section 263 : 1.1 The learned Commission of Income Tax (Exemption) Bangalore (l'd. CIT') erred in passing an order under section 263 of the Income Tax Act, 1961 ('Act') 1.2 The ld. CIT failed to appreciate that the condition precedent to passing an order under section were not satisfied and hence the order under section 263 of the Act is illegal, bad in law and ought to be quashed. 1.3 The ld. CIT erred in holding that the assessment order dated February 26, 2016 passed by the Assistant Commissioner of Income Tax (Exemption), Circle-1, Mangalore ('ld. AO') is erroneous and prejudicial to the interest of revenue. 1.4 The Appellant submits that considering the facts and circumstances of its case, and the law prevailing on the subject, the assessment framed by the ld. AO was after due consideration of the facts and hence, the setting aside of the same by the ld. CIT under section 263 of the Act is erroneous, in excess of jurisdiction and bad in law. 1.5 The Appellant submits that the impugned order passed under section 263 of the Act by the ld. CIT be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion in writing in Form No 10 and resultantly set-aside the same with a direction to pass fresh assessment order considering the facts of the case and after giving sufficient opportunity of being heard to the assessee. 4.3 Acting on such direction the Ld. AO carried out the fresh assessment and determined the taxable income at Rs.7,47,17,940/- by an order dt. 10/12/2018 which is subject matter before FAA. The appellant assessee opposed the revisionary action of Ld. CIT(Exemption) before this Tribunal for justice on the grounds assailed at foregoing para 3. 5. After hearing to the rival contentions of both the parties to the appeal; perused material placed on records and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant society assessee as well the respondent revenue. 6. It is evidently discernible form the records are that; 6.1 The assessee is a registered Society under the Societies Registration Act, 1860 and holding a certificate registration u/s 12A of the Act as charitable institution / organisation eligible for exemption u/s 11 of the Act. In terms thereof, the appellant manually filed "NIL" r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and prejudicial to the interest of revenue insofar as the claim is concerned. In reply of SCN the, appellant filed written submissions, and insofar as the merits of the case is concern, it is contending that, the society indeed exercised its option in writing before the due date of furnishing the return of income by way of disclosure in the (i) Computation of Income (ii) Form No 10B filed with the return of income and (iii) in the Return of income filed at the appropriate part thereof. The appellant further contended before the Ld. CIT(Exemption) that, clause 2(i) of explanation 1 to section 11(1) of the Act is procedural requirement and since there was no prescribed format in force, the exercise was duly communicate to the income tax department by way of disclosure in aforestated in places, and the Ld. AO culminated the original assessment after due application of mind considering the facts & submission. Further adverting the plethora of judicial precedents, the appellant challenged the assumption of revisionary jurisdiction. However the submission of the appellant did not please the mind of Ld. CIT(Exemption), consequently the deemed application of income u/s 11(1), Explanation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is abundantly clear that, if the legal ground is adjudicated in favour of the assessee, the ground number 2 and all its counterpart would become academic, hence we would address the legal grievance first and for doing so, it is necessary to reproduce the relevant portion of the applicable provision of law to reach to adjudication; 8.1 "263. Revision of orders prejudicial to revenue - (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." [Explanation 1] . . . . . . . [Explanation 2] -For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the inte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the principle of natural justice. In the light of provision of law, it is of paramount importance to note that, an incorrect assumption of facts or an incorrect application of law or passing an order without application of mind or without applying the principle of natural justice, shall discretely be sufficient to hold the order being erroneous. Albeit the term prejudicial to the interests of the revenue is not at all defined in the Act, but is needs to be understood in its ordinary meaning and it is of wide import and is not confined to mere loss to ex-chequer. 9. In the light of aforestated discussion of law and considering the judicial precedents, upon careful consideration of factual matrix as enumerated in the proceeding paragraphs, it is evident that, 9.1 in response to notices issued u/s 143(2), the appellant made written submission inter-alia copy of income tax return accompanying statement of computation of total income, audited financial statements, copy of audit report issued in form No 10B r.w.r. 17B of the Act etc. And after considering the same, the claim of exemption u/s 11 was worked out by the Ld. AO. Insofar as the exercise of option is concern, the disc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... mind, consider impartially the objections raised by the aggrieved party, and decide the dispute according to procedure consistent with the principles of natural justice; he cannot permit his judgment to be influenced by matters not disclosed to the assessee, nor by dictation of another authority." (Emphasis supplied) 9.4 In no case, mere audit information renders the order of assessment erroneous, and the very absence of material before the revisionary authority itself sufficient to hold the action as unsustainable in law and our view is invigorated by the Hon'ble Kolkata High Court in "Jeewanlal limited Vs ACIT" reported in 108 ITR 407 (Cal). Further the Hon'ble High of Court of Bombay in "CIT Vs Gabriel India Ltd" reported in 203 ITR 108 has also taken similar view that, unless the revisionary authority forms a conclusion on the basis of concrete evidential material, it cannot reach to the conclusion rendering the order of assessment erroneous and prejudicial to the interests of the Revenue. In the light of aforestated reasoning, since the Ld. CIT(Exemption) solely acted upon the audit objection in absentia of contrary material, we neither find any infirmity with the order of....