Revision jurisdiction under Section 263 not permitted based solely on conjectures, suspicions, or suppositions

Fact and issue of the case

This is an appeal preferred by the assessee trust against the order of the Ld. Commissioner of Income Tax (Exemptions) [hereinafter referred to as the “CIT(E)”], Mumbai dated 23.03.2022 for assessment year 2017-18 passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

The main grievance of the assessee is against invocation of revisional jurisdiction by Ld. CIT(E) without satisfying the essential condition precedent as required under Section 263 of the Act.

Brief facts is that the assessee trust and is a Charitable Organization Registered u/s 12A of the Act (vide registration no. TR/3007) and filed its return of income on 01.11.2017. The assessee claimed to be engaged in activities of education of the people of India by conducting and/or providing booklets, pamphlets, newspaper, magazines, or in any other manner. The AO noted that in the return of income along with income and expenditure account, the assessee had filed the balance-sheet and audit report in Form 10B declaring total income at Rs.2,20,03,230/-. In the assessment order, the AO acknowledges that he had issued notices u/s 142(1) of the Act on 01.02.2019 & 20.08.2019 calling for relevant details and raised queries. And pursuant to which the assessee had filed answers to queries and furnished details as requisitioned by him. After examining the details filed by the assessee, the AO admits to have examined the books of account and he notes that the assessee is engaged in the publication which included publication of newspaper and magazine as well as carried out various commercial activities. According to AO, assessee even though has section 12A registration , it wont be able to enjoy the exemption u/s 11 of the Act because it’s case was hit by proviso to section 2(15) of the Act and thus it lost its charitable character within the meaning of section 2(15) and u/s 13(8) of the Act for the assessment year in question and the AO held “therefore reject this claim of the assessee and hold that the assessee trust is not eligible for any benefit and/or exemption u/s 11 and accordingly tax the entire income of the assessee trust denying the benefit of exemption u/s 11 of the Act.’ And thus he rejected the claim exemption u/s 11 of the Act. The AO at para 3.10 noted that the assessee has offered rental income; and interest on investment as business income. And therefore the AO at para 3.11 concluded that taxable income from house property profit and gain from business and income from other sources was calculated as under: –

Particular		Amount
Income from business	(2,08,85,298)
Add: Prior period expenses	42,918/-
Add: Provision for taxation	70,00,000/-	(1,38,42,380)
Income from house property		3,49,24,677/-
Income from other sources		2,98,18,246/-
Addition U/s 11(3)		2,00,00,000/-
	Total Income	6,67,42,923/-
	Round off	6,67,42,920/-

Observation of the court

Therefore, in view of the decision of this Tribunal in assessee’s own case on this issue, the view of the AO cannot be held to be unsustainable in law. And it is not the case of Ld CIT(E) that the order of Tribunal (supra) has been reversed by the Hon’ble High Court. Therefore, we after going through the facts and circumstances of the case and following the principle of consistency also hold that the view of the AO after enquiring on the issue cannot be held to be unsustainable in law.

Since the AO view after enquiring is plausible view it could not have been interfered with unless the Ld CIT(E) has conducted during revisional proceedings enquiry or verified the facts in order to come to a conclusion that AO’s view was erroneous/un-sustainable in law. As noticed (supra) once AO has conducted enquiry (on an issue) then the Ld Pr. CIT before holding the order of AO to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given by the AO on that issue is erroneous/unsustainable in law. Coming back to the present case, once we have found that AO has discharged the duty of investigator (on the issue of deduction claimed u/s 24(a) of the Act which included amenities charges), then before Ld. CIT(E) holds the view of AO as erroneous, it was imperative on the part of Ld CIT(E) to have made necessary enquiries or verification and should have arrived at a conclusion that the view of AO was unsustainable in law. Admittedly, in the instant case, the Ld CIT(E) has not conducted any such enquiry or verification. In such a scenario, we have to hold that he has initiated revision jurisdiction on mere conjectures, suspicions and surmises, which is not permitted.

In such a scenario, his impugned action of holding the claim of assessee (deduction u/s 24(a) of the Act which includes amenity charges) as erroneous and prejudicial to the interests of revenue is untenable. Accordingly, we are of the view that the impugned revision order passed by Ld PCIT is not sustainable in law and assessee succeeds on the legal issue raised before us. Accordingly, we quash the impugned revision order passed by Ld CIT(E).

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 27/02/2023.