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2024 Supreme(Guj) 1412
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Bhargav D. Karia, Niral R. Mehta, JJ.
The Commissioner Of Income Tax (Exemptions), Ahmedabad - Appellant
Vs.
Gujarat State Lion Conservation Society - Respondent
TAX APPEAL NO. 774 of 2023
Decided On : 14-06-2024
Advocate Appeared:
For the Appellant : Ms Maithili D Mehta
For the Respondent: Mr. Dhinal A
IMPORTANT POINT
The necessity for independent application of mind by the Principal CIT in initiating revision proceedings under Section 263 was emphasized.
Headnote:
Tax - Income Tax Act - Sections 11, 12, 143, 260A, 263 - The court discussed the provisions regarding exemptions for charitable trusts, the role of the Assessing Officer, and the necessity for independent application of mind by the Principal CIT in revision proceedings.
Fact of the Case:
The assessee Trust filed a return declaring 'Nil' income, but an audit objection raised concerns over a government grant received, leading to a revision under Section 263 by the Principal CIT, which was challenged by the Trust.
Finding of the Court:
The Tribunal found that the Assessing Officer had considered the grant during assessment and that the Principal CIT did not independently verify the assessment order, leading to the conclusion that the revision was invalid.
Issues: Whether the Tribunal was justified in holding that the CIT erred in finding the AO's order erroneous and prejudicial to the Revenue's interest.
Ratio Decidendi: The Tribunal concluded that the Principal CIT's initiation of proceedings under Section 263 lacked independent application of mind, as it was based solely on the AO's proposal.
Result: The appeal was dismissed, affirming the Tribunal's order.
ORDER :
Bhargav D. Karia, J.
[1] This Tax Appeal is filed by the appellant - Revenue under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) arising out of the order dated 3rd August 2022 passed by the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot (for short, “the Tribunal”) in ITA No.69/RJT/2021 for the Assessment Year 2015-16.
[2] The appellant – Revenue has proposed the following substantial questions of law for the consideration of this Court:
“(i) Whether in the law and facts & circumstances of the case, the Hon’ble Tribunal was justified in holding that the CIT has erred in facts and in law in holding that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue?
(ii) Whether in the law and facts & circumstances of the case, the Hon’ble Tribunal was justified in not appreciating the fact that the AO failed to bring on record her finding on the issue of accumulation claimed under Section 11(1)(a) on the Government grant? (iii) The appellant craves leave to add, amend or modify any grounds before or at the time of hearing of the appeal?”
[3] The brief facts of the case are that the assessee Trust – M/s. Gujarat State Lion Conservation Society had filed its return of income for the Assessment Year 2015-16 declaring ‘Nil’ income. The assessment proceedings were completed under Section 143(3) of the Act on 28th March 2022 accepting the income declared in the return as ‘Nil’ income by the assessee.
[4] It appears that the audit objection was raised that the assessee during the year consideration has received Rs.8,00,70,630/- from the State Government as grant and such grant receipts from the Government are only an ascertained liability of the Government and the said grant cannot be treated either as voluntary contribution or income from property held for charitable purposes under Sections 11(1) and 12 of the Act.
[5] As per the audit objection, accumulation of income from the Government grant is not available to the assessee as such grants are generally given with specific direction having no scope of savings and therefore, the same cannot be treated as voluntary in nature. Accordingly, it was objected that the amount accumulation of 15% of Rs.8,14,93,645/- was only available under Section 11(1)(a) of the Act and as such there was an excess allowance of relief of Rs.1,20,09,442/-.
[6] However, as per letter dated 2nd March 2021, the Additional CIT (Exemption), Ahmedabad forwarded a letter to the Assessing Officer dated 22nd February 2021 submitting that the audit objection is not acceptable in light of the facts and legal position narrated by the Assessing Officer in its report. However, the then CIT (Exemption), Ahmedabad, vide letter dated 5th March 2021, conveyed his decision to initiate remedial action under Section 263 of the Act on the factual aspect of the case and the Assessing Officer was directed to submit a suitable proposal in a prescribed format to initiate proceedings under Section 263 of the Act.
[7] Subsequently, vide letter dated 19th April 2022, proposal was made to initiate proceedings under Section 263 of the Act. Accordingly, notice was issued by the Principal CIT under Section 263 of the Act on the ground that the assessee has availed an excess claim of relief under Sections 11(1) and 11(2) of the Act and passed an order under Section 263 of the Act for scrutiny as the claim made by the assessee – Trust required verification on the basis of the material facts submitted and the assessment order dated 19th December 2017 passed under Section 143(3) of the Act was set aside with a direction to make de novo assessment for the Assessment Year 2015-16 after considering the claim of the assessee – Trust and after allowing an opportunity of hearing.
[8] The Assessing Officer, pursuant to the order passed under Section 263 of the Act, passed an assessment order dated 28th March 2022 under Section 143(3) read with Section 263 of the Act by disallowing the exemption under Sectio
