Under Section 263, AO's order after enquiry and plausible view on Section 11(2) fund utilization not revisable without CIT's independent verification proving error; Explanation 2 requires show-cause mention; twin conditions of erroneousness and prejudice unsatisfied.

JUDGMENT :

(PER AARTI SATHE, J.)

1. This Appeal has been filed by the Appellant-Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), challenging the order dated 2^nd January 2023 (hereinafter referred to as the “impugned order”) passed by the Income Tax Appellate Tribunal (hereinafter referred to as the “ITAT”), allowing the Respondent-Assessee’s Appeal, which was filed against the order dated 24^th March 2022 passed by the Commissioner of Income Tax (Exemptions), Mumbai (hereinafter referred to as the “CIT (Exemptions), Mumbai”), thereby holding that the order passed by the CIT (Exemptions), Mumbai under Section 263 of the Act was not sustainable. The assessment year (AY) in question is AY 2017-2018. By the present Appeal, the Appellant-Revenue has raised the following re-framed questions of law:-

“1. Whether the Hon'ble ITAT was justified in allowing the appeal, when the order revised did not make any inquiries and verification with regard to claim of utilization of accumulated income of Rs 6 crores under section 11(2) thereby rendering the assessment order erroneous and prejudicial to the interest of revenue?

2. Whether the Hon'ble ITAT was justified in setting aside the order passed under section 263 of Income Tax Act without considering that Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (243 ITR 83) has clearly held that the Commissioner of Income Tax is within his jurisdiction to set aside the assessment order if it is passed without examination of the relevant details or without application of mind and both these criteria are fulfilled in the present case?

3. Whether the Hon'ble Tribunal was justified in setting aside the order revising under section 263 when Hon'ble Bombay High Court in the case of Sesa Starlite Ltd Vs Commissioner of Income Tax 430 ITR 121 (Bom) held that whatever be the status of the queries, non-consideration and consequently, non-application of mind to the material on record is enough to uphold the order u/s 263?”

2. Briefly, the facts are as follows:-

i. The Respondent-Assessee is a non-profit company incorporated under Section 25 of the Companies Act, 1956 (charitable institution) registered under Section 12AA of the Act, and is an organization formed as an NGO for helping organizations to improve implementation of programs which help women and children in education, health, and livelihoods. For the relevant AY, the Respondent-Assessee e-filed its Return of Income Tax (ROI) on 4^th October 2017, declaring total income at Nil. The Respondent-Assessee, being a charitable organization and claiming exemption under Section 12AA of the Act, also claimed benefit under Section 80G in order No. DIT(E)/MC/80G/116/2008/2008-09 dated 13^th October 2008, being also registered with the Charitable Commissioner, Mumbai. The Respondent-Assessee had also claimed an exemption under Section 11 of the Act.

ii. Post filing of the ROI, the Respondent-Assessee’s case was selected for scrutiny, and notices under Sections 143(2) and 142(1) dated 11^th August 2018 were issued, and further notices under Section 142 (1) along with annexures were issued from time to time and served on the Respondent-Assessee. The Respondent-Assessee, in response to the aforesaid notices, furnished details electronically through its e-filing account on incometaxindiaefiling.gov.in from time to time.

iii. After examining the details as submitted by the Respondent-Assessee in response to the aforesaid