TaxTMI 
TaxTMI 
2023 (12) TMI 1383
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the circumstances of the case, Ld. CIT has erred in invoking the proceedings since the assessment order dated 04.04.2022 was passed accepting the return and exemption claim of the appellant based on their earlier revision proceedings completed by the Ld. CIT vide order dated 05.03.2021. 3. On facts and circumstances of the Case, Ld. CIT conveniently misinterpreted provisions of Sec. 10(21) of the Act when language of said provision is plain and unambiguous and any income of the "Research Association" is exempt from Income Tax. 4. The Ld. CIT failed to understand that the Legislature has given exemption to "Any income" as per said expression used at beginning of Sec. 10(21) and failed to understand that the exemption to Income from Tax is not restricted to particular class or category of Income nor based on source of income. 5. The Ld. CIT misinterpreted provisions of Sec. 10(21) of the Act that the Legislature has treated 'Research Association' as separate class and only for limited purpose provisions of Sec. 11 of the Act are made applicable mutatis mutandis. 6. The Ld. CIT erred in holding that the income derived from Auditorium Hire ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fter "First CIT(Exemption)"), Mumbai on perusal of the assessment recorded noticed that the assessee's income includes the following amounts which have been considered for the purpose of claiming exemption under section 10(21) of the Act: Auditorium Hire Charges Rs. 36,14,729/- Hoarding Site and Service Charges Rs. 79,84,044/- Licence Fee / Rent Rs. 1,19,81,018/- Total Rs. 2,35,79,791/- 5. The First CIT (Exemption) was of the view that the above income is not eligible for exemption under section 10(21) of the Act and that the AO has allowed the deduction without verification of the above transactions. To this extent the First CIT (Exemption) considered the order of the AO passed under section 143(3) r.w.s 147 of the Act to be erroneous and prejudicial to the interest of the Revenue and issued a show-cause notice under section 263 of the Act dated 17.02.2021. The assessee submitted before the First CIT (Exemption) that the impugned receipts are generated out of incidental activities of the Trust and are fully utilized for attainment of the objective of the Trust which is research and development activities carried out with the view to make contribution....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee at Nil. The relevant observation of the AO is as extracted below: "4. Thereafter, vide order u/s 263 of the Act dated 05/03/2021, the CIT(Exemptions), Mumbai has set aside the assessment order dated 14/11/2018. 5. Accordingly, notice u/s 142(1) of the IT. Act dated 17.08 2021 was issued to the assessee to furnish details as per the annexure enclosed therein on or before the date specified therein However, the assessee has not submitted any details. Thereafter, another notice u/s 142(1) of the IT Act dated 15 01 2022 was issued to the assessee to furnish details as per the annexure enclosed therein on or before the date specified therein and the same was delivered on the However, the assessee has not submitted any details. 6. Considering the return of income filed, data available on records, the assessment is finalised as per the returned income of Rs. NIL. 7. Assessed u/s 144 r.ws 263 & 144B of the I.T. Act, 1961 as above Give credit for prepaid taxes, Charge interest u/s 234A. 234B. 234C, 234D and u/s 244A Issue demand notice & Challan accordingly." 8. Accordingly the assessee withdrew the appeal filed before the Tribunal against the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. The Ld. AR also drew our attention to the submission made before the First Revisionary proceedings under section 263 wherein the assessee had made submissions with regard to the impugned income which is the subject matter of the current proceedings also. The ld. AR therefore, argued that the data available on record as mentioned in the order under section 144 r.w.s. 263 contain all the relevant details which have been perused by the AO and that the AO has applied his mind while allowing the claim of exemption under section 10(21) of the Act assessing the income at Nil. It is submitted by the ld. AR that the second CIT (Exemptions) is not correcting invoking Explanation 2 to section 263 since none of the conditions as stipulated under section Explanation 2 is applicable to the order passed by the AO under section 144 r.w.s. 263. The ld. AR further submitted that when the impugned income which were subject matter of the original revisionary proceedings were duly considered and held to be eligible for exemption under section 10(21) of the Act, initiating revisionary proceedings once again on the same issue is only a change of opinion by the Revenue and not sustainable. On merits th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT(Exemptions) has correctly invoked the provisions of Explanation 2 to section 263 and prayed that the order under section 263 should be upheld. On merits, the ld. DR submitted that for the purpose of claiming exemption the theory of source and application cannot be used to claim that the income has been used for the objects of the Trust. 13. We have heard the parties and perused the material on record. The assessee is a Public Charitable Trust having registration under section 12A of the Act and is also certified as a research organisation under section 35(1)(ii) of the Act. The assessee had filed the original return of income claiming deduction under section 11. The case was re-opened based on the re-assessment done in assessee's case for AY 2010-11 wherein the assessee was denied the benefit of deduction under section 11. From the perusal of records it is noticed that the AO while passing the order for AY 2010-11 had held that the assessee being a certified research organisation under section 35(1)(ii) ought to have claimed exemption under section 10(21) instead of deduction under section 11 and since the assessee has not made such a claim under section 10(21) the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s he deems necessary, pass such order thereon as the circumstances of the case justify, 2[including,- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. Explanation 1. - ***** Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal 95[Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed." 16. We notice that the second CIT (Exemptions) has drawn support from newly inserted Explanation 2 below section 263(1) of the Act introduced by Finance Act, 2015 w.e.f. 1-6-2015 for his action. The Explanation 2 inter alia provides that the order passed without making inquiries or verification 'which should have been made' will be deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue. It is on this basis, the assessment order passed by the AO under section 144 r.w.s. 263 of the Act has been set aside with a direction to the AO to pass a fresh assessment order. It will be therefore imperative to dwell upon the impact of Explanation 2 for the purposes of section 263 of the Act. The aim and object of introduction of aforesaid Explanation by Finance Act, 2015 was explained in CBDT Circular No. 19/2015 [F.NO.142I14/2015T PL], Dated 27-11-2015 which is reproduced hereunder: "53. Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue. 53.1 The provisions ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the tax payer concerned and this is not intended by the legislation by the insertion of the Explanation 2. 18. When we examine the facts of the present case in the context of the above legal position, we notice that entitlement of the assessee for exemption under section 10(21) has been the core issue in entire proceedings for the year under consideration. In the original return the assessee had claimed deduction under section 11 and it was only during the reassessment proceedings under section 147 of the Act, the alternate claim of exemption under section 10(21) is made by the assessee. From the perusal of records all the details pertaining to the alternate claim of the assessee have been submitted and are part of the records. Therefore there is merit in the claim of the ld AR that the order under section 144 r.w.s. 263, though the assessee did not make any fresh submissions, all the details pertaining to eligibility of the assessee for exemption under section 10(21) have been examined by the AO and he has taken a possible view that the impugned incomes are correctly included for the purpose of exemption. In this context it is relevant to notice that in the celebrated decisio....