AI Drafter 
TaxTMI 
TaxTMI 
2025 (4) TMI 262
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.... take up St. Joseph's Institute of Science and Technology Trust appeal in ITA No.1618/Chny/2024 for assessment year 2018-2019 as lead case. Our decision on this issue will equally apply to appeal Nos. 1619 & 1620/Chny/2024 for assessment years 2020-2021 also. 2. Sans unnecessary details, brief facts of the case are that the assessee/appellant "M/s. St. Joseph Institute of Science and Technology Trust" is registered public charitable trust under section 12AA of the Income Tax Act, 1961 ('Act' in short) since its inception and have been running an engineering college under the name and style "St. Joseph's College of Engineering" and "St. Joseph's Institute of Technology" respectively. A search was conducted in the premises of the assessees on 07.11.2019 and certain excel sheets containing details about receipts in the form of DD and cash were seized from the electronic devices used by the employees of the Trust, namely, Mr.Xavier and Mr.Selvaraj as under :- Name AY DD Cash Total St. Joseph Institute of Science and Technology Trust 2018-19 Nil 6,78,55,600 6,78,55,600 St. Joseph Institute of Science and Technology Trust 2020-21....
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..... Counsel for the assessee referred the notice dated 14.09.2021 u/s 142(1) of the Act in all three appeals which are as under :- For AY 2018-19, St Josephs Institute of Science and Technology Trust [DIN & Notice No. ITBA/AST/F/142(1)/2021-22/1035548990(1)]: Annexure ST.JOSEPHE INSTITUTE OF SOTERICE AND TECHNOLOGY TRUST 1.Please furnish the registration certificate issued u/s.12AA, computation of total income statement, audit report, income and expenditure account, balance sheet for the asst. years 2014-15 to 2020-21. 2. Please produce relevant material to show that an amount of Rs.1,02,75,000/- declared as unaccounted fees collected by St. Joseph's Educational Trust for the asst. year 2020-21 has been offered in the respective asst. year. 3. Please produce relevant receipts in connection with corpus donations claim of Rs.5,88,60,300/- for the asst. year 2018-19 and Rs.24,00,000/- for the asst. year 2020-21. Also, furnish the following details in connection with corpus donation received for the asst. years 2014-15 to 2020-21: S. No Asst. year Name & Address of donor(s) Contact No. Amount of donation Corpus donation Date....
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....ion/corpus donation JAYARAMAN SARAVANAN DC/ACIT CENT CIR 1(3) CHENNAΙ 5. A letter to the AO filed during search assessment proceedings u/s 153A pursuant to notice u/s 142(1) dated 23.09.2021 which reads as under :- September 23, 2021 To, The Assistant Commissioner of Income Tax, Central Circle 1(3), Chennai-600 034. Respected Sir, Sub: Proceedings initiated u/s 153A of the Income-tax Act, 1961 (the Act) for the Assessment year('AY) 2018-19 in the case of M/s. St. Joseph's Institute of Science and Technology Trust -PAN: AAHTS9943B. Ref: Notice issued under section 153A of the Act dated 07-07-2021- ITBA/AST/S/153A/2021-22/1034055618(1) Notice issued under section 142(1) of the Act dated 14-09-2021- ITBA/AST/F/142(1)/2021-22/1035548990(1) :- reg We are the authorized representatives of the abovementioned assessee. We wish to bring it your attention that your assessee has still been facing certain difficulties in filing the return of Income electronically through the IT portal in pursuance to the notice issued under section 153A of the Act dated 07-07-2021. We hav....
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....ion Memo and Financials for AY 2013-14 to AY 2019-20: B.Babu Manoharan-Refer Annexure 1 M/s St Joseph's Institute of Science and Technology Trust Refer Annexure 2 M/s. St. Joseph's Educational Trust-Refer Annexure 3 2. Details of Sale of plots for Trinity Promoter of AY 2020-21-Refer Annexure 4 3. Details of Sale of plots and Statement of income for AY 2019-20 - Refer Annexure 5 4. Details of Corpus donors for St.Josephs Institute of Science and Technology Trust for FY 2017-18-Refer Annexure 6 With regards to the other details asked for by your goodself, we wish to state that we are in the process of collating the required documents and we request you to provide us time till in order to enable us to submit the same. We shall gladly furnish any further information your good self may require in this regard. Thanking you Yours truly, For V. NARAYANAN & CO Chartered Accountants Partner 7. The ld. Counsel for the assessee further took us through the search assessment passed u/s.153A r.w.s.144 of the Act dated 28.09.2021 and stated that the assessee has recomputed the total incom....
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....of clause (a) of Explanation to section 263 of the Act, the PCIT only wants to re-verify or re-verification which has been done in search assessment u/s 153A. Before us ld. Counsel for the assessee further argued that for invoking the powers under Section 263 of the Act, the twin conditions specified therein shall have to be satisfied i.e the order passed by the Ld. AO must be "erroneous" and so far "prejudicial to interest of the revenue". He placed reliance on the decisions of the Supreme Court in the case of CIT Vs Malabar Industrial Co Ltd (2000) 243 ITR 83 (SC) and CIT v. Max India Limited [2007] 295 ITR 282 (SC). The ld. Counsel for the assessee argued that there is no mentioning of the description about the nature of those receipts in those seized materials and it is the allegation of the investigation department that it is purportedly capitation fees. The Id. Counsel for the assessee argued that it is not a case of 'lack of inquiry', since it is a search assessment, the details of donors were called for and examined by the investigation team and also by the AO during the assessment proceedings by issuing the notice u/s 142(1) of the Act on 14.09.2021 and hence the a....
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.... argued that the AO has taken one of the plausible views and hence the order of the AO cannot be termed as "erroneous" in view of the decision of the Supreme Court in the case of Malabar Industrial Co Ltd and Max India Ltd (supra). The ld. Counsel for the assessee argued that since the appellant has paid the taxes u/s 115BBC of the Act on cash receipts and also paid the taxes on receipts in the form of DD under section 11 of the Act to the extent it is not applied for the charitable purpose of the Trust, there is no loss of revenue to the department and hence, the order of the AO cannot be regarded as "prejudicial to the interest of the revenue" and hence the PCIT cannot invoke jurisdiction u/s 263 of the Act. The ld. Counsel for the assessee further argued that the PCIT ought to have made some independent inquiry to ascertain whether the decision of the Madras High Court in the case of MAC Public Charitable Trust would be applicable to the facts of the appellant, before directing the AO to deny exemption u/s 11 of the Act by blindly following the decision of the MAC Public Charitable Trust without bringing any prima facie evidence on record to prove that those alleged receipts are....
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....ion 263(d) of the Act hence not binding. He relied upon the Jurisdictional High Court judgment in the case of Mac Charity (supra) and contended that the ld. PCIT rightly invoked jurisdiction u/s 263 of the Act. He further contended that the AO did not inquire the seized material. 10. We have heard rival contentions and gone through the record, paper books and impugned order. We may refer recent judgment of the Hon'ble Delhi High Court dated 01.03.2024 passed in ITA No.1428/2018 in the case of Pr. Commissioner of Income Tax -2, Delhi Vs M/s Clix Finance India Pvt. Ltd. which after considering section 263 of the Act and various settled judgments of the Hon'ble Supreme Court and Hon'ble High Courts held as under: "15. We have heard the learned counsel appearing on behalf of the parties and perused the record. 16. Vide order dated 06.11.2019, this Court framed the following question of law :- A. Whether, in the facts and circumstances of the case, the Hon'ble ITAT was justified in quashing the order under Section 263 of the Income Tax Act? 17. The brief controversy involved in the present appeal pertains to the invocation of revisi....
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....clear that the said provision lays down a two-pronged test to exercise the revisional authority i.e., firstly, the assessment order must be erroneous and secondly, it must be prejudicial to the interests of the Revenue. Further, Explanation 2 to Section 263 of the Act delineates certain conditions and circumstances when the order passed by the AO can be said to be erroneous and prejudicial to the Revenue. 20. Clause (a) of Explanation 2 to Section 263 of the Act further stipulates that if an order is passed without making an enquiry or verification which should have been made, the same would bestow a revisional power upon the Commissioner. However, the said Clause or any other condition laid down in Explanation 2 does not warrant recording of the said enquiry or verification in its entirety in the assessment order. 21. Admittedly, in the instant case, the questionnaire dated 02.11.2004, which has been annexed and brought on record in the present appeal, would manifest that the AO had asked for the allowability of the claims with respect to the issues in question. Consequently, the respondent-assessee duly furnished explanations thereof vide replies dated 09.12.200....
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....there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. In Gabriel India Ltd. (1993) 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113) ** 23. A similar view was taken by this Court in the case of CIT v. Anil Kumar Sharma [2010 SCC OnLine Del 838], wherein, it was held that once it is inferred from the record of assessment that AO has applied its mind, the proceedings under Section 263 of the Act would fall in the category of Commissioner having a different opinion. Paragraph 8 of the said decision reads as under :- 8. In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Once such application of mind is discernible from the record, the proceedings under section 2....
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....missioner might think to be prejudicial to the interests of Revenue Administration". In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. 10. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income Tax Officer is unsustainable in law. It has been held by this C....
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....ined the aforesaid two issues properly and, therefore, set aside the issues for further inquiries to be conducted by the AO. As regards the first issue is concerned, we note that out of total provision of Rs. 1114.68 lacs, a sum of Rs. 7,60,76,105/- was suo moto added back in the computation of income and a further sum of Rs. 73,46,160- was disallowed by the AO in the original assessment order dated 30.3.2005. Therefore, out of Rs. 1114.68 lacs Rs. 834.22 lacs already stood disallowed in the original assessment order. The balance amount represented actual write off which was palpably clear from page 2 of the impugned order itself. No deduction on account of any such provision was, therefore, allowed to the assessee. Hence, there is no error or prejudice to the interest of revenue. As regards second issue it was noted that interest rate swap was an actual loss and only the net loss of Rs. 114.05 lacs after setting of gain of interest rate swap was claimed as deduction. However, we find that both these issues were duly examined by the AO vide Questionnaire dated 2.11.2004 (Page 1-2 of the Paper Book) to which replies dated 9.12.2004, 20.12.2004 and 6.1.2005 (Page No. 3-39 of Paper Bo....
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....ssessee has responded to that query, it would necessarily follow that the AO has accepted the assessee's submission, so as to not deal with that issue in the assessment order. 13. The Hon'ble High Court of Bombay considering another decision of the same High Court in the case of GKN Sinter Metals Ltd., vs. ACIT reported in 371 ITR 225 has categorically pointed out that an assessment order passed u/s.143(3) of the Act does not reflect any consideration of the issue, it must follow that no opinion was formed by the AO in the regular assessment proceedings. This submission was negatived by the Hon'ble Bombay High Court and the relevant paras 10 & 11 reads as under :- "Another aspect argued by Id.counsel that in term of clause (a) to Explanation 2 to section 263 of the Act, reassessment order is deemed to be erroneous insofar as prejudicial to the interest of revenue. The ld.counsel for the assessee drew our attention to the decision of Hon'ble High Court of Delhi in the case of PCIT vs. Clix Finance India Pvt. Ltd., ITA No.1428/2018, order dated 01.03.2024 and drew our attention to paras 19 & 20 explaining the provisions and particularly Explanation 2(a) as....
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....ing reasons :- I. When these factual situation that the cash donations as anonymous donations and corpus donations have been considered by the AO during search assessment proceedings u/s153A, where is error in search assessment order dated 28.09.2021 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. II. Taking guidance from the various judgments referred supra, 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; III. The ld. PCIT should have made preliminary enquiry about the applicability of the judgment of the Hon'ble Madras High Court prior to issue of notice u/s 263 of the Act. We find that the judgment of the Hon'ble jurisdictional High Court was not in existence when AO passes the order u/s 153A r.w.s. 144 of the Ac....
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....tate, only if a raid is conducted. When the provisions are attracted, legal presumptions are raised against the assessee. The burden shifts on the assessee. Audited accounts for a period of ten years may have to be reopened." VIII. In this case we observe that 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. In view of the above discussion, facts discussed, perusal of records, we are of the view that 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 Ann/JCE/ANJ/ED/S-1, sworn statements of the Shri Xavier, Shri Selvaraj and Babu Manoharan. 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 verifie....