Section 263 – Where the AO has accepted the claims by the assessee after making proper inquiry, the CIT cannot proceed to revise the order by holding another possible view.Facts
The assessee, running educational institutes, had filed its return of income on 25.01.2011 declaring nil income. It had claimed exemption under section 10(23) (iiiad) and section 11. The assessment was completed under section 143(3) by the AO at the returned income. According to the CIT (Exemption) the order of the AO was erroneous and prejudicial to the interest of the revenue for the following reasons:
a) The assessee had applied for registration u/s 12A on 04.02.2011 and it was not registered u/s 12AA before completion of assessment;
b) The assessee had not included in its gross receipt the sum of Rs. 51.05 lakh received from the State Government on account of students’ scholarship. If the said amount is added to the total receipts declared by the assessee, the gross receipts were more than Rs. 1 crore and thus, the assessee won’t be eligible to claim exemption u/s 10(23)(iiiad);
c) The assessee was not entitled to depreciation of Rs. 7.62 lakh as the capital expenditure incurred by the assessee was already allowed in the year of purchase of assets as application of income;
The assessee claimed that the order passed by the AO was not erroneous and prejudicial to the interest of the revenue for the following reasons:
a) Proviso to section 12A(2) inserted w.e.f. 01.10.2014 provides that where registration has been granted to the trust u/s 12AA, then the provision of section 11 and 12 shall apply in respect of any income derived from the property held under trust of any assessment years for which assessment proceedings are pending before the AO as on the date of such registration. The assessee claimed, since it is a beneficial proviso which is to remove the un-intended hardship, the proviso has a retrospective effect;
b) Scholarship amount was received for disbursement to the students whose names were given by the Government. The assessee cannot retain any part of the scholarship for its benefit and any amount remaining unclaimed has to be returned back to the Government. The assessee was merely acting as a conduit. After examination of this issue the AO had allowed exemption u/s 10(23)(iiiad);
c) The assessee had not claimed any capital expenditure as application of income in as much as in all earlier years, the assessee had claimed exemption u/s 10(23) (iiiad). Even otherwise also, the assessee claimed that u/s 11, both, depreciation as well as capital expenditure are allowable citing several decisions;
However, the CIT(Exemption) did not agree with the assessee and restored the matter back to the AO for making proper enquiry. According to him the benefit under proviso to section 12A(2) inserted w.e.f. 01.10.2014 cannot be given to the assessee who has filed application for registration on 04.02.2011. As regards scholarship – according to him since the assessee had not fully disbursed the scholarship amount by the year end, the said receipt was includible in the gross receipts of the assessee. Thus, according to him, the assessee was not entitled to claim exemption u/s 10(23)(iiiad) as its gross receipt exceeded Rs. 1 crore. As regards depreciation, the CIT(Exemption) relied on the Supreme Court decisions in the cases of Escorts Ltd. vs. Union of India (199 ITR 43) and Lissie Medical Institutions vs. CIT (348 ITR 43) and held that it was a double deduction on the same assets.
Held
The Tribunal noted that before assessing the income of the assessee u/s 143(3 )a detailed questionnaire was issued by the AO and the assessee had furnished requisite details / information / accounts, etc. Thus, according to the Tribunal, the AO had concluded the matter after making detailed inquiry. Further, the Tribunal noted that on the issues raised by the CIT, there are decisions by the courts as well as the ITAT which have decided the matter in favour of the assessee. Thus, according to the Tribunal, the AO had formed one of the views while the CIT (Exemption) had formed another view on same facts and circumstances and therefore, change of opinion was not permissible under the law. Hence, the Tribunal set aside the order of the CIT(Exemption) and allowed the appeal of the assessee.
