TaxTMI 
TaxTMI 
2023 (3) TMI 975
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....ting the income returned by the assessee. 3. Subsequently, the CIT(Exemption) [CIT(E)] perused the assessment records and notice that the assessee had made a turnover from milk, milk cream, etc. to the tune of rs.111,87,70,264 and that the AO did not examine the claim of the assessee for an exemption u/s. 11 of the Act. Accordingly, the CIT(E) issued a show cause notice u/S. 263 of the Act which reads as under:- ""2. In your case, for the AY 2017-18, assessment was completed on 11/10/2019 accepting the return of income filed at 'NIL' income. On perusal of the details /documents available on records, it is noticed that your activities falls within the residual clause of Section 2(15) of the Income Tax Act, i.e advancement of any other object of General public Utility. You are engaged in the business of the trade of purchase and sale of milk and milk products thereby incurring a profit. As per the proviso to Section 2(15) of the Act, any activity other than General public Utility shall not be for charitable purpose if gross income includes income derived from profit and gains of business unless the business is incidental to the attainment of its objectives. ....
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....e any inquiry by the assessing officer while passing a briefs cryptic and non-speaking order the assessment order is held to be erroneous and prejudicial to the interest of revenue. The assessing officer has passed a stereo-typed order which simply accepts what the assessee has stated in its return and failed to make any inquiries which are called for in the circumstances of the case. In this regard, the judicial precedents are relied upon as held in the cases of Rampyari Devi Saraogi v. CIT, (1988) 67 ITR 84(SC), Tara Devi Aggarwal v. C1T, (1973) 88 ITR 232(SC), Gee Vee Enterprises v. Addl.C1T, (1975) 991TR 375 386(Del)." 6. The assessee is in appeal against the order of the CIT(E) before the Tribunal. 7. The ld. AR submitted that the AO during the course of assessment proceedings specifically enquired about the applicability of section 2(15) and directed the AR of the assessee to file a reply in this regard. The assessee filed reply dated 11.10.2019 along with Circular No.11/2008 and other details called for such as statement of income, assessment orders of earlier years, etc. The ld AR therefore submitted that the AO after perusing the said details has applied his mind to ....
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....its objectives which include assistance in various forms to the farmers. During the Year your appellant spent a sum of Rs.15,24,75,259/- for its objectives, ie for the welfare of the small and marginal farmers. (details enclosed Page No.70) The sales of the appellant are not in the nature of commercial receipts in the course of advancement of any other object of public utility as laid down in the proviso to Sec. 2(15), but these are receipts within the meaning of Sec. Ii4A). The net surplus from the above activity is used for relief of poor, which mentioned as 1st limb of Sec. 2(15). The Hon'ble Income Tax Appellate Tribunal, Hyderabad Bench A, in the case of DCIT, Circle 1(1) Hyderabad vs A.P State Civil Supplies Corporation Ltd (2016)160 ITD 117, held that, providing essential commodities to the people at subsidized rates should be considered to be providing relief to poor and, thus eligible for exemption under section 11. Your appellant is also doing the same activity, mentioned in the above decision, in a different way. The Society is purchasing milk from the small & marginal farmers at a reasonably high price, as compared to other organizations w....
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....imilarly, entities whose object is 'education' or 'medical relief' would also continue to be eligible for exemption as charitable institutions even if they incidentally carry on a commercial activity subject to the conditions mentioned above." The Hon'ble Income Tax Appellate Tribunal - Kolkata in the case of ITO(E), Kolkota Vs. Sasha Association for Craft Producers (ITA NO 439¬441. Kat 201 7. held that "The newly Inserted Proviso to Section 2(15) will not apply in respect of the First Three limbs of Sec.2(15), ie relief of poor, education or medical relief. Consequently where the purpose of a trust or institution is relief of poor, education or medical relief it will constitute Charitable Purpose even if it incidentally involves the carrying on of commercial activities." The above Sasha Association for craft producers is engaged in uplifting indigent artisans, which is covered within the definition of relief of poor. The object of the appellant society is to protect the small and marginal fawn from the exploitation and betterment of the small and marginal farmers, and hence the activities are coming under the definition of relief ....
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....n 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." 11. Thus, from close scrutiny of the provisions of section 263, it is evident that twin conditions are required to be satisfied for exercise of revisional jurisdiction under section 263 of the Act i.e., firstly, the order of the Assessing Officer is erroneous; and secondly, it is prejudicial to the interests of the revenue on account of error in the order of assessment. The Bombay High Court in the case of Gabriel India Ltd. (1993) 203 ITR 108 has explained as to when an order can be termed as erroneous as follows:- "From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an income tax officer acting in accordance with the law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment ....