The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has quashed revisionary proceedings initiated against the Eastern India Healthcare Foundation regarding a donation of over ₹5.65 crore made to Medica Hospital Private Limited for COVID-19 relief activities. In a significant relief for the charitable organization, the Tribunal held that the Commissioner of Income Tax (Exemption) cannot invoke Section 263 of the Income Tax Act, 1961 , merely to express disagreement with a legally permissible view already adopted by the Assessing Officer (AO) after due examination. The order, pronounced on October 26, 2026 , marks the conclusion of a dispute concerning the Assessment Year 2022-23 , during which the tax authorities had alleged that the foundation’s activities were erroneous and prejudicial to the interests of the Revenue .

The dispute arose after the foundation received a substantial foreign contribution of ₹14.40 crore from the Germany-based Deutsche Investitions- und Entwicklungsgesellschaft MBH (DEG) under its "develoPPP.de" COVID-19 programme. Of this sum, the foundation utilized ₹5,65,56,841 to support pandemic relief efforts in partnership with Medica Hospital Private Limited . While the assessment for the year was originally completed under Section 143(3) of the Act with the total income assessed at nil, the CIT(Exemption) later issued a notice under Section 263. The Commissioner alleged that the hospital was a related party, claiming that the transaction violated the prohibition against providing benefits to specified persons under Section 13(3) of the Income Tax Act . Furthermore, the Commissioner contended that the Assessing Officer had failed to conduct adequate inquiries into the foundation’s compliance with the Foreign Contribution (Regulation) Act (FCRA), 2010 .

Tribunal Scrutinizes Scope of Revisional Power

During the proceedings before the ITAT, the Accountant Member Rajesh Kumar and Judicial Member Pradip Kumar Choubey emphasized that the jurisdiction under Section 263 is strictly limited to instances where an order is both erroneous and prejudicial to the interests of the Revenue . Relying on established precedents, including the Supreme Court ’s landmark judgment in CIT v. Max India Ltd. , the Tribunal observed that an assessment order cannot be overturned simply because the Commissioner holds a different opinion on a matter already investigated by the AO.

The Bench highlighted that the Assessing Officer had, in fact, exercised due diligence during the original assessment process. Specifically, the AO had issued multiple notices under Section 142(1) of the Act in July and December 2023 , demanding clarification on the foreign funding and the subsequent utilization of these resources. The foundation had provided comprehensive responses, including detailed notes on its charitable objectives, certified cost calculations, and proof of the funding ratios. The Tribunal noted that the AO’s decision to accept the foundation’s returns was the result of a deliberate examination of these materials, not a lack of inquiry.

As the Tribunal observed: “The AO having accepted the claim of the appellant, after due examination of all the materials on the basis of equities/verification conducted by him, the impugned order cannot be called erroneous in as much as the Explanation 2(a) of Section 263 of the Act requirement was fully satisfied.”

Analysis of Alleged Related Party Benefits

The foundation effectively countered the charge that the donation to Medica Hospital constituted an impermissible benefit under Section 13(3). The Tribunal thoroughly examined the shareholding structure of the hospital and found no evidence that the foundation’s trustees or founders held the requisite 20% voting power or substantial interest that would trigger the restrictions under the Act. In fact, the evidence presented showed that the hospital entity was predominantly owned by institutional and public shareholders, with the foundation’s own trustees having no controlling interest.

Furthermore, the ITAT found the Commissioner’s reasoning regarding the FCRA violations to be unsubstantiated. The foundation had duly registered under the FCRA and filed its mandatory returns in Form FC-4. Critically, the Ministry of Home Affairs , which oversees FCRA compliance and retains the authority to conduct inspections, had not flagged any irregularities in the foundation’s pandemic relief operations. The Tribunal questioned the basis for the Commissioner’s claims, noting that the COVID-19 relief initiatives were widely documented in public news channels and the official portals of the German funding partner, DEG.

Regarding the overall assessment, the Tribunal reiterated that the AO is not required to provide an exhaustive discussion on every item of deduction, provided the record demonstrates that the authority applied its mind to the facts. The Bench underscored this point by referencing the Bombay High Court ’s ruling in Commissioner of Income-tax v. Gabriel India Ltd. , which established that the Commissioner cannot initiate revisionary proceedings simply to ask the AO to re-examine a matter after a thorough initial inquiry.

“In our opinion the AO is not supposed to give detailed reasoning or discussion on every issue in the assessment order ,” the Tribunal stated. “It would be sufficient if the [AO] has made an enquiry into the issue.”

Final Disposition and Consequence

The Tribunal concluded that the CIT(Exemption) had initiated the revision proceedings without a proper application of mind and had failed to establish the foundational criteria required to invoke Section 263. The alleged "related party" connection was found to be nonexistent, and the claims of inadequate inquiry were refuted by the documented evidence of the AO’s specific notices and the foundation’s responses.

Consequently, the ITAT allowed the appeal filed by the Eastern India Healthcare Foundation and quashed the revisionary order dated March 17, 2026 . This decision restores the status of the assessment order passed on February 23, 2024 , effectively ending the challenge to the foundation’s COVID-19 relief expenditures. The judgment reinforces the principle that judicial and quasi-judicial authorities must provide concrete grounds, rather than mere disagreement, when attempting to set aside an assessment that has been completed after legitimate investigation.