ST.JOSEPH'S EDUCATIONAL TRUST,CHENNAI V. PCIT CENTRAL CHENNAI - 1, CHENNAI

ITA 1620/CHNY/2024

AI Insights

The case involves appeals by St. Joseph's Institute of Science and Technology Trust and St. Joseph's Educational Trust against the revision orders issued by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act. The revisions were based on the grounds that the original assessments allowed exemptions under section 11 for alleged unaccounted capitation fees, which the PCIT deemed erroneous following a decision by the Madras High Court in the case of MAC Public Charitable Trust. The Tribunal examined whether the assessments were erroneous and prejudicial to the interests of the revenue, considering the inquiries made by the Assessing Officer and the legal context of the High Court's decision, which was stayed by the Supreme Court.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 39315 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-09-2024
• Assessment Year: 2020-2021
• Appeal Filed On: 27-05-2024
• Other Referred Cases: CIT vs MAC Public charitable Trust, CIT Vs Malabar Industrial Co Ltd, CIT v. Max India Limited, CIT vs. Balaji Educational & Charitable Public Trust, Kammavari Sangham VS DDIT, PCIT VS Rashtreeya Sikshana Samithi Trust, Devender Kumar Gupta v. PCIT, Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association, Madras, CIT vs. M.Chandra Sekhar, CIT Vs. Kelvinator of India Ltd, CIT Vs. Shivshahi Punarvasan Prakalp Ltd., Marico Ltd., vs. ACIT, GKN Sinter Metals Ltd., vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILAY BARAN SOM; IRS
• Assessee Lawyers: K.R. VASUDEVAN
• Keywords: Set aside; Opportunity of being heard; Revenue expenditure; Transfer pricing; Question of law; Capital expenditure; Search and seizure; Audit objection; Charitable institution; Revision of order; Prejudicial to interest; CHAPTER XIVB
• Section: 144; 142(1); 263; 11; 12AA; 132; 153A; 22; 13; 139; 274; 2(A); 10B; 20

Judgement Text

" आयकर अपीलीय अिधकरण ‘ए’’Ɋायपीठ चेɄई मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI माननीय ŵी मनु क ुमार िगįर, Ɋाियक सद˟ एवं माननीय ŵी जगदीश, लेखा सद˟ क े समƗ। BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND HON’BLE SHRI JAGADISH, ACCOUNTANT MEMBER आयकरअपील सं./ ITA Nos.1618 & 1619 /Chny/2024 (िनधाŊरणवषŊ / Assessment Years: 2018-19 & 2020-2021) St. Joseph’s Institute of Science and Technology Trust, No.56C, Old Mahabalipuram Road, Sholinganallur, Chennai 600 119. [PAN: AAHTS 9943B] Vs. The Principal Commissioner of Income Tax, Central, Chennai -1 आयकरअपील सं./ ITA No.1620 /Chny/2024 (िनधाŊरणवषŊ / Assessment Year: 2020-2021) St. Joseph’s Educational Trust, No.56C, Old Mahabalipuram Road, Sholinganallur, Chennai 600 119. [PAN: AAMTS 3888G] Vs The Principal Commissioner of Income Tax, Central, Chennai -1 (अपीलाथȸ/Appellant) (Ĥ×यथȸ/Respondent) अपीलाथȸ कȧ ओर से/ Appellant by : Shri K.R. Vasudevan, Advocate Ĥ×यथȸ कȧ ओर से /Respondent by : Shri Nilay Baran Som, IRS, CIT. सुनवाई कȧ तारȣख/Date of Hearing : 18.09.2024 घोषणा कȧ तारȣख /Date of Pronouncement : 15.10.2024 आदेश / O R D E R MANU KUMAR GIRI (Judicial Member) The assessee St. Joseph’s Institute of Science and Technology Trust, has filed appeals for assessment years 2018-2019 and 2020-2021 against separate orders dated 31.03.2024 of ld. Principal Commissioner of Income Tax, Central, Chennai -1. 2 ITA Nos.1618 to 1620/Chny/2024 St. Joseph’s Educational Trust has filed an appeal for assessment year 2020-2021 against order dated 31.03.2024 of ld. Principal Commissioner of Income Tax, Central, Chennai-1. Since the issues are common in all these appeals, they are heard together and are disposed of by this common order. For the sake of brevity we take up St. Joseph’s Institute of Science and Technology Trust appeal in ITA No.1618/Chny/2024 for assessment year 2018-2019 as lead case. Our decision on this issue will equally apply to appeal Nos. 1619 & 1620/Chny/2024 for assessment years 2020-2021 also. 2. Sans unnecessary details, brief facts of the case are that the assessee/appellant “M/s. St. Joseph Institute of Science and Technology Trust’’ is registered public charitable trust under section 12AA of the Income Tax Act, 1961 (‘Act’ in short) since its inception and have been running an engineering college under the name and style \"St. Joseph's College of Engineering\" and \"St. Joseph's Institute of Technology\" respectively. A search was conducted in the premises of the assessees on 07.11.2019 and certain excel sheets containing details about receipts in the form of DD and cash were seized from the electronic devices used by the employees of the Trust, namely, Mr.Xavier and Mr.Selvaraj as under:- Name AY DD Cash Total St. Joseph Institute of Science and Technology Trust 2018-19 Nil 6,78,55,600 6,78,55,600 St. Joseph Institute of Science and Technology Trust 2020-21 2,35,33,650 4,45,31,350 6,80,65,000 St. Joseph Education Trust 2020-21 24,00,000 78,75,000 1,02,75,000 3 ITA Nos.1618 to 1620/Chny/2024 The assessee have duly offered those receipts which were mentioned in the excel sheet as 'cash' were offered to tax \"anonymous donations\" and paid taxes thereon under section 115BBC of the Act. The seized material Ann/JCE/ANJ/ED/S-1 does not mention that the alleged receipts are capitation fees. The assessees have also offered to tax those receipts in the form of DD, which were already recorded as \"corpus donations\" in the books of accounts were offered as \"voluntary donations\" in accordance with the provisions of section 11 of the Act, as it is a registered charitable Trust u/s 12AA of the Act. The income offered by the assessee pursuant to search has been duly accepted by the AO after examining the details of donations by issuing notice u/s 142(1) of the Act dated 14.09.2021 and after analyzing the list of donors already filed on 05.03.2020 with the DDIT (Inv) during the course of the assessment proceedings has passed the order under section 153A/153B of the Act dated 28.09.2021 with the prior approval from the Addl. CIT under section 153D of the Act. During March 2024, show cause notices under section 263 of the Act were issued by the PCIT to the assessee as to why the assessment order u/s 153A of the Act should not be set aside for allowing the exemption under section 11 of the Act for the alleged unaccounted capitation fees in the light of the decision of the Madras High Court in the case of CIT vs MAC Public charitable Trust. However, after considering the submissions made by the assessee, the PCIT passed the order u/s 263 of the Act on the same day 31.03.2024 holding that the order passed by the Ld. AO is erroneous and prejudicial 4 ITA Nos.1618 to 1620/Chny/2024 to the interests of the revenue and set aside the order with a direction to deny the claim of exemption under section 11 of the Act. 3. Being aggrieved by the order of the ld. PCIT dated 31.03.2024, the appellants are in appeal before us in the present appeals. 4. Before us ld.Counsel for the assessee, first of all drew our attention to the paper-book filed by it from page 66 to 75 which includes reply dated 23.09.2021 during search assessment proceedings u/s 153A, return filed on 03.11.2018 u/s 153A, Form 10B, Tax computation Memo, copy of Registration issued u/s 12AA of the Act. The ld. Counsel for the assessee referred the notice dated 14.09.2021 u/s 142(1) of the Act in all three appeals which are as under:- For AY 2018-19, St Josephs Institute of Science and Technology Trust [DIN & Notice No. ITBA/AST/F/142(1)/2021-22/1035548990(1)]: Annexure ST.JOSEPHE INSTITUTE OF SOTERICE AND TECHNOLOGY TRUST 1. Please furnish the registration certificate issued u/s.12AA, computation of total income statement, audit report, income and expenditure account, balance sheet for the asst. years 2014-15 to 2020-21. 2. Please produce relevant material to show that an amount of Rs.1,02,75,000/- declared as unaccounted fees collected by St. Joseph's Educational Trust for the asst. year 2020-21 has been offered in the respective asst. year. 3. Please produce relevant receipts in connection with corpus donations claim of Rs.5,88,60,300/- for the asst. year 2018-19 and Rs.24,00,000/- for the asst. year 2020-21. Also, furnish the following details in connection with corpus donation received for the asst. years 2014-15 to 2020-21: S.No Asst. year Name & Address of donor(s) Contact No. Amount of donation Corpus donation Date of receipt of donation/corpus donation JAYARAMAN SARAVANAN DC/ACIT CENT CIR 1(3) CHENNAΙ 5 ITA Nos.1618 to 1620/Chny/2024 For AY 2020-21, St Josephs Institute of Science and Technology Trust [DIN & Notice No. ITBA/AST/F/142(1)/2021-22/103554929(1): Annexure 1. Please furnish the registration certificate u/s. 12AA, computation of total income statement. audit report, income and expenditure account, balance sheet for the asst. years 2014-15 to 2020-21. 2. Please produce relevant material to show that an amount of Rs.6,80,65,000/- and Rs.6,78,55,600/- declared as unaccounted fees collected by St. Joseph's College of Engineering for the asst. years 2020-21 and 2018-19 has been offered in the respective asst. years. 3. Please produce relevant receipts in connection with corpus donations claim of Rs. 15,25,59,500/- for the asst years 2018-19, Rs. 1,79,83,850/- for the asst. year 2019-20 and Rs.2,35,33,650/- for the asst. year 2020-21. Also, furnish the following details in connection with corpus donation received for the asst. years 2014-15 to 2020-21: S.No Asst. year Name & Address of donor(s) Contact No. Amount of donation Corpus donation Date of receipt of donation/corpus donation JAYARAMAN SARAVANAN DC/ACIT CENT CIR 1(3) CHENNAΙ For AY 2018-19 St Josephs Education Trust [DIN & Notice No. ITBA/AST/F/142(1)/2021-22/1035550535(1): Annexure 1. Please furnish the registration certificate u/s. 12AA, computation of total income statement. audit report, income and expenditure account, balance sheet for the asst. years 2014-15 to 2020-21. 2. Please produce relevant material to show that an amount of Rs.6,80,65,000/- and Rs.6,78,55,600/- declared as unaccounted fees collected by St. Joseph's College of Engineering for the asst. years 2020-21 and 2018-19 has been offered in the respective asst. years. 6 ITA Nos.1618 to 1620/Chny/2024 3. Please produce relevant receipts in connection with corpus donations claim of Rs. 15,25,59,500/- for the asst years 2018-19, Rs. 1,79,83,850/- for the asst. year 2019-20 and Rs.2,35,33,650/- for the asst. year 2020-21. Also, furnish the following details in connection with corpus donation received for the asst. years 2014-15 to 2020-21: S.No Asst. year Name & Address of donor(s) Contact No. Amount of donation Corpus donation Date of receipt of donation/corpus donation JAYARAMAN SARAVANAN DC/ACIT CENT CIR 1(3) CHENNAΙ 5. A letter to the AO filed during search assessment proceedings u/s 153A pursuant to notice u/s 142(1) dated 23.09.2021 which reads as under:- September 23, 2021 To The Assistant Commissioner of Income Tax, Central Circle 1(3), Chennai-600 034. Respected Sir, Sub: Proceedings initiated u/s 153A of the Income-tax Act, 1961 (the Act) for the Assessment year('AY) 2018-19 in the case of M/s. St. Joseph's Institute of Science and Technology Trust -PAN: AAHTS9943B. Ref: Notice issued under section 153A of the Act dated 07-07-2021- ITBA/AST/S/153A/2021-22/1034055618(1) Notice issued under section 142(1) of the Act dated 14-09-2021- ITBA/AST/F/142(1)/2021-22/1035548990(1):- reg We are the authorized representatives of the abovementioned assessee. We wish to bring it your attention that your assessee has still been facing certain difficulties in filing the return of Income electronically through the IT portal in pursuance to the notice issued under section 153A of the Act dated 07-07-2021. We have already informed your goodself about the difficulties in the IT portal for filing the return of income for the subject AY 2018-19 vide our letter dated 17-09- 2021. 7 ITA Nos.1618 to 1620/Chny/2024 Your assessee has also been issued a notice under section 142(1) of the Act dated 14-09-2021 requiring them to furnish certain details. We are furnishing the following documents as required by your goodself. 1. Return filed on 03-11-2018 u/8 153A of the Act. 2. Form 10B 3. Tax computation Memo. 4. Copy of the Registration issued under section 12AA of the Act During the subject AY 2018-19, the assessee has offered the entire amount of Rs. 15,25,59,500, which has been recorded in the books of the assessee as corpus donation, as now been treated voluntarily donations and the application of income has been recomputed as required under section 11 & 12 of the Act and paid taxes thereon, if required. Hence, we are not providing the details of the corpus donations as required by your goodself. Further, the assessee has offered the cash donations of Rs. 67,855,600 received during the subject AY 2018-19, under section 115BBC of the Act and paid taxes thereon We would be glad to furnish any further details / information as required by your good self. Thanks. Thanking you Yours truly, For V. Narayanan & Co 6. The ld. Counsel for the assessee then took us through the paper-book filed by it from page 66 to 75 and referred reply dated 05.03.2020 pursuant to summon issued under section 131(1A) of the Income Tax Act, 1961 and the same is reproduced as under:- 05 March 2020 To The Deputy Director of Income-tax (INV) Unit 1 (3) Chennai-600 034 Sir, Sub: Submission of details in the case of St Joseph's Institute of Science and Technology Trust and St. Joseph's Educational Trust, Chennai-600119. 8 ITA Nos.1618 to 1620/Chny/2024 Ref: Summons issued under section 131(1A) of the Income Tax Act, 1961. (the Act) in the case of St Joseph's Institute of Science and Technology Trust, Chennai-600 119. This is in response to the Summons notice issued under section 131(1A) of the Act to the above mentioned assessee dated 30-01-2020. In this regard we hereby submit the following details as required by your goodself: 1. Return of income along with Income tax Calculation Memo and Financials for AY 2013-14 to AY 2019-20: B.Babu Manoharan-Refer Annexure 1 M/s St Joseph's Institute of Science and Technology Trust Refer Annexure 2 M/s. St. Joseph's Educational Trust-Refer Annexure 3 2. Details of Sale of plots for Trinity Promoter of AY 2020-21-Refer Annexure 4 3. Details of Sale of plots and Statement of income for AY 2019-20 – Refer Annexure 5 4. Details of Corpus donors for St.Josephs Institute of Science and Technology Trust for FY 2017-18-Refer Annexure 6 With regards to the other details asked for by your goodself, we wish to state that we are in the process of collating the required documents and we request you to provide us time till in order to enable us to submit the same. We shall gladly furnish any further information your good self may require in this regard. Thanking you Yours truly, For V. NARAYANAN & CO Chartered Accountants Partner 7. The ld. Counsel for the assessee further took us through the search assessment passed u/s.153A r.w.s.144 of the Act dated 28.09.2021 and stated that the assessee has recomputed the total income treating the cash donations as anonymous donations and corpus donations collected in DD. The AO in his search 9 ITA Nos.1618 to 1620/Chny/2024 assessment order u/s 153A r.w.s.144 in para 3 and 4 had noted the same as under:- ‘’3. Unaccounted capitation fee of Rs.6.78.55,600/- received in cash added to the aggregate of income: During the course of search in the case of the assessee trust on 07.11.2019, it was noticed from the seized material Ann/JCE/ANJ/ED/S-1 that the assessee had collected capitation fees by way of cash which was not accounted in the books of account. The trustee of the assessee trust, Shri. Babu Manoharan, has also accepted the unaccounted capitation fees in his sworn statement recorded on 09.11.2019, further to the sworn statements recorded from Shri.Xavier, In- charge of admissions in the educational institution under the trust and from Shri. Selvaraj. Office Manager in the St. Joseph's group of institutions. The assessee had declared this amount of Rs.6,78,55,600/- in its computation of total income statement submitted during the course of scrutiny assessment proceedings, since, return u/s. 153A could not be filed by the assessee due to technical glitch. Accordingly, as per the computation of income statement, the assessee added this amount to the aggregate receipts of Rs.104,79,15,009/- admitted in the return of income filed u/s.139 on 31.10.2018. 4. Unaccounted capitation fee of Rs. 15,25,59,500/- received as corpus donation in the form of D.D. added to aggregate of income: It is seen from the seized material Ann/JCE/ANJ/ED/S-1 that the assessee received unaccounted capitation fee of Rs.15,25,59,500/- by way of demand draft and treated the same as 'corpus fund'. The Managing Trustee of the assessee trust, Shri. Babu Manoharan in the course of his sworn statement on 13.07.2020 and 20.07.2020 receipt of Rs.15,25,59,500/-, This amount of Rs. 15,25,59,500/- was added by the assessee and offered in the computation of income total statement furnished in the course of scrutiny proceedings, since, return u/s.153A could not be filed by the assessee due to technical glitch. Accordingly, as per the computation of income statement, the assessee added this amount to the aggregate receipts of Rs. 104,79,15,009/- admitted in the return of income filed u/s. 139 on 31.10.2018’’. 8. The ld. Counsel also stated that in the garb of clause (a) of Explanation to section 263 of the Act, the PCIT only wants to re-verify or re-verification which has been done in search assessment u/s 153A. Before us ld. Counsel for the assessee further argued that for invoking the powers under Section 263 of the Act, the twin conditions specified therein shall have to be satisfied i.e the order passed by the Ld. 10 ITA Nos.1618 to 1620/Chny/2024 AO must be \"erroneous\" and so far \"prejudicial to interest of the revenue\". He placed reliance on the decisions of the Supreme Court in the case of CIT Vs Malabar Industrial Co Ltd (2000) 243 ITR 83 (SC) and CIT v. Max India Limited [2007] 295 ITR 282 (SC). The ld. Counsel for the assessee argued that there is no mentioning of the description about the nature of those receipts in those seized materials and it is the allegation of the investigation department that it is purportedly capitation fees. The ld. Counsel for the assessee argued that it is not a case of ‘lack of inquiry’, since it is a search assessment, the details of donors were called for and examined by the investigation team and also by the AO during the assessment proceedings by issuing the notice u/s 142(1) of the Act on 14.09.2021 and hence the allegation of the PCIT that the matter was not examined by the AO is totally incorrect. Further, the ld. Counsel for the assessee argued that the PCIT cannot invoke jurisdiction under section 263 of the Act merely if he believes that the inquiries made by the AO are inadequate or insufficient and only if AO has not made any inquiry at all. Hence, the order of the AO cannot be regarded as \"erroneous\" for the purpose of invoking jurisdiction u/s 263 of the Act. For this proposition, the ld. Counsel for the assessee argued relied upon the decision of the Delhi High Court in the case of CIT v. Sunbeam Auto Ltd. [2011] 332 ITR 167 (Delhi) and the co- ordinate bench of Chandigarh ITAT decision in the case of Manju Jain HUF vs PCIT in ITA No. 392/Chd/2022 dated 19.02.2024. Further, the ld. Counsel for the assessee argued that the PCIT cannot held that the order of the AO as \"erroneous\" for not following the order of the Madras High Court in the case of MAC Public Charitable Trust dated 31.10.2022 was not is existence at all, when the AO passes 11 ITA Nos.1618 to 1620/Chny/2024 the order on 28.09.2021. The ld. Counsel for the assessee further argued that the action of the PCIT in invoking the jurisdiction u/s 263 of the Act is void ab initio, when the order of the Madras High Court in the MAC Public Charitable Trust dated 31.10.2022 was already stayed the Hon'ble Supreme Court on 04.12.2023 itself, when the SCN issued by the PCIT u/s 263 of the Act оn 02.03.2024. The ld. Counsel for the assessee further argued the decision of the Madras High Court in the case of CIT Vs. Balaji Educational & Charitable Public Trust (2015) 374 ITR 274 (Madras) and also the coordinate bench decision in the case of MAC Charitable Trust and others in ITA Nos 2885/ Mds/2014 for AY 2011-12 dated 12.04.2017 and ITA Nos.616/Chny/2019 for AY 2014-15 dated 13.11.2019, were in vogue when that AO has passed that the order wherein it is held that the so long as the assessee Trust holds a valid registration certificate u/s 12AA of the Act, it is entitled to exemption u/s 11 of the Act, in the respect of donations which were applied for the charitable objects of the Trust. He also submitted that the Karnataka High Court in the case of Kammavari Sangham VS DDIT (2023) 459 ITR 433 (Kar) and PCIT VS Rashtreeya Sikshana Samithi Trust (2023) 152 Taxmann.com 664 (Kar) has taken similar view. Therefore, the ld. Counsel for the assessee argued that the AO has taken one of the plausible views and hence the order of the AO cannot be termed as \"erroneous\" in view of the decision of the Supreme Court in the case of Malabar Industrial Co Ltd and Max India Ltd (supra). The ld. Counsel for the assessee argued that since the appellant has paid the taxes u/s 115BBC of the Act on cash receipts and also paid the taxes on receipts in the form of DD under section 11 of the Act to the extent it is not applied for the charitable purpose of the Trust, there is no loss of revenue to 12 ITA Nos.1618 to 1620/Chny/2024 the department and hence, the order of the AO cannot be regarded as \"prejudicial to the interest of the revenue\" and hence the PCIT cannot invoke jurisdiction u/s 263 of the Act. The ld. Counsel for the assessee further argued that the PCIT ought to have made some independent inquiry to ascertain whether the decision of the Madras High Court in the case of MAC Public Charitable Trust would be applicable to the facts of the appellant, before directing the AO to deny exemption u/s 11 of the Act by blindly following the decision of the MAC Public Charitable Trust without bringing any prima facie evidence on record to prove that those alleged receipts are not donations but \"capitation fee\" as held in the case of MAC Public Charitable Trust. The ld. Counsel for the assessee further argued that the PCIT ought to have applied his mind before passing the order directing the AO to deny exemption u/s 11 of the Act on the entire receipts when the appellant has already paid the taxes on cash receipts u/s 115BBC of the Act and holds valid registration u/s 12AA of the Act and neither the AO or PCIT has power to deny the exemption u/s 11 of the Act nor to cancel the registration u/s 12AA of the Act by the CIT (Exemptions). For this proposition, the ld. Counsel for the assessee argued relied on the co-ordinate bench decision of Ahmedabad ITAT in the case of Torrent Pharmaceuticals Ltd Vs DCIT (2018) 97 taxmann.com 671 (Ahm). The ld. Counsel for the assessee further argued that even though the PCIT has not mentioned about the audit objection in the SCN, it is manifestly clear from the notice issued by the ld. Assessing Officer under section 148A(b) of the Act in the year 2023 for AY 2019-20, wherein the details of audit objection were reproduced, which is akin the reasons mentioned in the SCN u/s 263, that the reason for issuing SCN is mainly based to audit objection. 13 ITA Nos.1618 to 1620/Chny/2024 The AR argued the PCIT cannot invoke jurisdiction u/s 263 of the Act based on audit objection. For this proposition, relied on the co-ordinate bench decisions of Delhi ITAT in the case of Ahlcon Parenterals (India) Ltd Vs PCIT [2024] 162 taxmann.com 759 (Delhi - Trib.) and Jaipur ITAT in the case of Pinkcity Jewelhouse Pvt Ltd vs PCIT in ITA No. 63/JP/2021 dated 07-03-2024. Further, the ld. Counsel for the assessee argued that the order passed under section 153A of the Act pursuant to search proceedings with the prior approval of Joint/ Addl. CIT u/s 153D of the Act is not amenable to jurisdiction under section 263 of the Act. For this proposition he relied on various co-ordinate bench decisions of the ITAT including the latest decision of the Delhi ITAT in the case of Devender Kumar Gupta v. PCIT [2024] 166 taxmann.com 95 (Delhi - Trib.). 9. Per contra, the ld. CIT-DR, Mr. Nilay Baran Som, CIT strongly supported the impugned orders of the PCIT dated 31.03.2024. The ld. DR argued that the original search assessment was done u/s 153A r.w.s 144 of the Act. The ld. DR further argued that the case law relied was of prior to insertion of explanation 2 to section 263(d) of the Act hence not binding. He relied upon the Jurisdictional High Court judgment in the case of Mac Charity (supra) and contended that the ld. PCIT rightly invoked jurisdiction u/s 263 of the Act. He further contended that the AO did not inquire the seized material. 10. We have heard rival contentions and gone through the record, paper books and impugned order. We may refer recent judgment of the Hon’ble Delhi High Court dated 01.03.2024 passed in ITA No.1428/2018 in the case of Pr. 14 ITA Nos.1618 to 1620/Chny/2024 Commissioner of Income Tax -2, Delhi Vs M/s Clix Finance India Pvt. Ltd. which after considering section 263 of the Act and various settled judgments of the Hon’ble Supreme Court and Hon’ble High Courts held as under: “15. We have heard the learned counsel appearing on behalf of the parties and perused the record. 16. Vide order dated 06.11.2019, this Court framed the following question of law:- A. Whether, in the facts and circumstances of the case, the Hon'ble ITAT was justified in quashing the order under Section 263 of the Income Tax Act? 17. The brief controversy involved in the present appeal pertains to the invocation of revisional jurisdiction under Section 263 of the Act by the CIT to set aside the original assessment order dated 30.03.2005. 18. Before adverting to the merits of the case, it is apposite to refer to the power of the revisional authority of the CIT envisaged as per Section 263 of the Act. For the sake of clarity, the relevant extract of Section 263 of the Act is reproduced as under: ‘’263. Revision of orders prejudicial to revenue (1) The [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner] may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify,’ [including,’ (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under Section 92- CA; or (iii) an order cancelling the order under Section 92-CA and directing a fresh order under the said section.] *** [Explanation 2. ‘For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner, 15 ITA Nos.1618 to 1620/Chny/2024 (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under Section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] *** 19. A bare reading of sub-Section (1) of Section 263 of the Act makes it abundantly clear that the said provision lays down a two-pronged test to exercise the revisional authority i.e., firstly, the assessment order must be erroneous and secondly, it must be prejudicial to the interests of the Revenue. Further, Explanation 2 to Section 263 of the Act delineates certain conditions and circumstances when the order passed by the AO can be said to be erroneous and prejudicial to the Revenue. 20. Clause (a) of Explanation 2 to Section 263 of the Act further stipulates that if an order is passed without making an enquiry or verification which should have been made, the same would bestow a revisional power upon the Commissioner. However, the said Clause or any other condition laid down in Explanation 2 does not warrant recording of the said enquiry or verification in its entirety in the assessment order. 21. Admittedly, in the instant case, the questionnaire dated 02.11.2004, which has been annexed and brought on record in the present appeal, would manifest that the AO had asked for the allowability of the claims with respect to the issues in question. Consequently, the respondent-assessee duly furnished explanations thereof vide replies dated 09.12.2004, 20.12.2004 and 06.01.2005. Thus, it is not a case where no enquiry whatsoever has been conducted by the AO with respect to the claims under consideration. However, this leads us to an ancillary question? whether the mandate of law for invoking the powers under Section 263 of the Act includes the cases where either an adequate enquiry has not been made and the same has not been recorded in the order of assessment or the said authority is circumscribed to only consider the cases where no enquiry has been conducted at all. 22. Reliance can be placed on the decision of this Court in the case of CIT v. Sunbeam Auto Ltd. [2009 SCC OnLine Del 4237], wherein, it was held that if the AO has not provided detailed reasons with respect to each and every item of deduction etc. in the assessment order, that by itself would not reflect a 16 ITA Nos.1618 to 1620/Chny/2024 non-application of mind by the AO. It was further held that merely inadequacy of enquiry would not confer the power of revision under Section 263 of the Act on the Commissioner. The relevant paragraph of the said decision reads as under:- We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between \"lack of inquiry\" and \"inadequate inquiry\". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of \"lack of inquiry\" that such a course of action would be open. In Gabriel India Ltd. (1993) 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113) ** 23. A similar view was taken by this Court in the case of CIT v. Anil Kumar Sharma [2010 SCC OnLine Del 838], wherein, it was held that once it is inferred from the record of assessment that AO has applied its mind, the proceedings under Section 263 of the Act would fall in the category of Commissioner having a different opinion. Paragraph 8 of the said decision reads as under:- 8. In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Once such application of mind is discernible from the record, the proceedings under section 263 would fall into the area of the Commissioner having a different opinion. We are of the view that the findings of facts arrived at by 17 ITA Nos.1618 to 1620/Chny/2024 the Tribunal do not warrant interference of this court. That being the position, the present case would not be one of \"lack of inquiry\" and, even if the inquiry was termed inadequate, following the decision in Sunbeam Auto Ltd. (2011) 332 ITR 167 (Delhi) (page 180) : \"that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter.\" No substantial question of law arises for our consideration. 24. In Ashish Rajpal as well, this Court was of the view that the fact that a query was raised during the course of scrutiny which was satisfactorily answered by the assessee but did not get reflected in the assessment order, would not by itself lead to a conclusion that there was no enquiry with respect to transactions carried out by the assessee. 25. Further, the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd., enunciates the meaning and intent of the phrase ’prejudicial to the interests of the Revenue’, in the following words:- ’8.The phrase ‘prejudicial to the interests of the Revenue’ is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The High Court of Calcutta in ‘Dawjee Dadabhoy & Co.v.S.P. Jain[(1957) 31 ITR 872(Cal)], the High Court of Karnataka in CITv.T. Narayana Pai[(1975) 98 ITR 422(Kant)], the High Court of Bombay in CITv.Gabriel India Ltd.[(1993) 203 ITR 108(Bom)] and the High Court of Gujarat in CITv.Minalben S. Parikh[(1995) 215 ITR 81(Guj)] treated loss of tax as prejudicial to the interests of the Revenue. 9. Mr. Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co.v.CIT[(1987) 163 ITR 129(Mad)] interpreting ‘prejudicial to the interests of the Revenue’. The High Court held: “In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration’’. In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. 10. The phrase ‘’prejudicial to the interests of the Revenue‘’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot 18 ITA Nos.1618 to 1620/Chny/2024 be treated as prejudicial to the interests of the Revenue, for example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income Tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. (See ‘Rampyari Devi Saraogiv CIT[(1968) 67 ITR 84(SC)] and in ‘’Tara Devi Aggarwalv.CIT[(1973) 3 SCC 482:1973 SCC (Tax) 318:(1973) 88 ITR 323].) [Emphasis supplied] 26. Recently, the Hon’ble Supreme Court in the case of CIT v. Paville Projects (P) Ltd. [2023 SCC OnLine SC 371], while relying upon Malabar Industrial Co. Ltd., has discussed the sanctity of two-fold conditions for the purpose of invoking jurisdiction under Section 263 of the Act. The relevant paragraph of the said decision reads as under:- Learned counsel appearing on behalf of the assessee has heavily relied upon the decision of this Court in the case of Malabar Industrial Co. Ltd.(supra). It is true that in the said decision and on interpretation of Section 263 of the Income Tax Act, it is observed and held that in order to exercise the jurisdiction under Section 263(1)of the Income tax Act, the Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. It is further observed that if one of them is absent, recourse cannot be had to Section 263(1) of the Act. ***’. 27. Considering the aforesaid judicial pronouncements, it can be safely concluded that inadequacy of enquiry by the AO with respect to certain claims would not in itself be a reason to invoke the powers enshrined in Section 263 of the Act. The Revenue in the instant case has not been able to make out a sufficient case that the CIT has exercised the power in accordance with law. Rather, in our considered opinion, the facts of the case do not indicate that the twin conditions contained in Section 263 of the Act are fulfilled in its letter and spirit. 28. Notably, the ITAT, while making a categorical finding that the CIT had failed to point out any definite or specific error in the assessment order, has satisfactorily explained both the claims in question in Paragraph 8.2 of its order, which reads as under:- 19 ITA Nos.1618 to 1620/Chny/2024 “8.2 In the Impugned Order, the Ld. Commissioner of Income Tax- IV, Delhi held that the AO had not examined the aforesaid two issues properly and, therefore, set aside the issues for further inquiries to be conducted by the AO. As regards the first issue is concerned, we note that out of total provision of Rs. 1114.68 lacs, a sum of Rs. 7,60,76,105/- was suo moto added back in the computation of income and a further sum of Rs. 73,46,160- was disallowed by the AO in the original assessment order dated 30.3.2005. Therefore, out of Rs. 1114.68 lacs, Rs. 834.22 lacs already stood disallowed in the original assessment order. The balance amount represented actual write off which was palpably clear from page 2 of the impugned order itself. No deduction on account of any such provision was, therefore, allowed to the assessee. Hence, there is no error or prejudice to the interest of revenue. As regards second issue it was noted that interest rate swap was an actual loss and only the net loss of Rs. 114.05 lacs after setting of gain of interest rate swap was claimed as deduction. However, we find that both these issues were duly examined by the AO vide Questionnaire dated 2.11.2004 (Page 1-2 of the Paper Book) to which replies dated 9.12.2004, 20.12.2004 and 6.1.2005 (Page No. 3-39 of Paper Book-1) were furnished and, therefore, the finding of the Ld. CIT that the issues were not examined properly was not correct. Even the Ld. CIT has not pointed out the definite and specific error in the original assessment order and observed that the inquiry made by the AO was inadequate or improper without first pointing out the error in the original assessment order passed by the AO, particularly because both the aforesaid issues were duly examined at the stage of the original assessment proceedings, hence, the impugned order is beyond jurisdiction, bad in law and void-ab-initio’’. 29. It is discernible from the aforenoted findings of the ITAT that both the claims were duly examined during the original assessment proceedings itself and neither there was any error nor the same was prejudicial to the interests of the Revenue. Thus, the findings of fact arrived at by the ITAT do not warrant any interference of this Court. 30. So far as the reliance placed by the CIT on Umashankar Rice Mill is concerned, the same is misplaced, particularly in light of the insertion of Explanation 2 to Section 263 of the Act, brought in place by the Finance Act, 2015. The said amendment markedly specifies various conditions to exercise the authority vested in the Commissioner under Section 263 of the Act, leaving no ambiguity in the interpretation of the said provision. 31. In view of the aforesaid, the appeal preferred by the Revenue is dismissed alongwith the pending application(s), if any’’. 20 ITA Nos.1618 to 1620/Chny/2024 11. The Hon'ble Supreme Court in the case of CIT vs. M.Chandra Sekhar [151 ITR 433 (SC)] has held that the presumption that A.O. has considered the details filed by the assessee was \"founded\" on the principle that an officer entrusted with a judicial or quasi- judicial duty must be presumed to have discharged his duties in a proper and bonafide manner. This view is confirmed by the full bench decision of the Delhi high court in CIT Vs. Kelvinator of India Ltd (256 ITR 1) (Delhi FB), was upheld by the Supreme court in Commissioner of Income Tax Vs. Kelvinator Of India Ltd ( 320 ITR 561)(SC). 12. The Hon’ble High Court of Bombay in the case of Marico Ltd., vs. ACIT in writ petition No.1917 of 2019 dated 21.08.2019, wherein the Hon’ble High Court has clearly pointed out once a query has been raised by the AO during the assessment proceedings and the assessee has responded to that query, it would necessarily follow that the AO has accepted the assessee’s submission, so as to not deal with that issue in the assessment order. 13. The Hon’ble High Court of Bombay considering another decision of the same High Court in the case of GKN Sinter Metals Ltd., vs. ACIT reported in 371 ITR 225 has categorically pointed out that an assessment order passed u/s.143(3) of the Act does not reflect any consideration of the issue, it must follow that no opinion was formed by the AO in the regular assessment proceedings. This submission was negatived by the Hon’ble Bombay High Court and the relevant paras 10 & 11 reads as under:- 21 ITA Nos.1618 to 1620/Chny/2024 ‘’Another aspect argued by ld.counsel that in term of clause (a) to Explanation 2 to section 263 of the Act, reassessment order is deemed to be erroneous insofar as prejudicial to the interest of revenue. The ld.counsel for the assessee drew our attention to the decision of Hon’ble High Court of Delhi in the case of PCIT vs. Clix Finance India Pvt. Ltd., ITA No.1428/2018, order dated 01.03.2024 and drew our attention to paras 19 & 20 explaining the provisions and particularly Explanation 2(a) as under:- 19. A bare reading of sub-Section (1) of Section 263 of the Act makes it abundantly clear that the said provision lays down a two- pronged test to exercise the revisional authority i.e., firstly, the 17:06:54 assessment order must be erroneous and secondly, it must be prejudicial to the interests of the Revenue. Further, Explanation 2 to Section 263 of the Act delineates certain conditions and circumstances when the order passed by the AO can be said to be erroneous and prejudicial to the Revenue. 20. Clause (a) of Explanation 2 to Section 263 of the Act further stipulates that if an order is passed without making an enquiry or verification which should have been made, the same would bestow a revisional power upon the Commissioner. However, the said Clause or any other condition laid down in Explanation 2 does not warrant recording of the said enquiry or verification in its entirety in the assessment order’’. 14. Even the Hon’ble High Court of Bombay in the case of PCIT vs. Shivshahi Punarvasan Prakalp Ltd., in ITA No.397 of 2018, order dated 05.08.2022 has considered the issue of no enquiry case or inadequate enquiry even after the insertion of Explanation 2 in para 32 as under:- “32. In this appeal, we are concerned with the assessment year 2006- 07. Prior to the insertion of Explanation 2, it was the prerogative of the Assessing Officer to determine what enquiry he wants to make while completing the assessment. We have already observed that an enquiry was made by the Assessing Officer and the assessment order passed. Therefore, the CIT could not invoke jurisdiction under Section 263 as the view taken by the Assessing Officer was a possible/plausible view. It was only if the Assessing Officer had not made any enquiry then it could be said that the order passed was erroneous. This is not a case of lack of enquiry though it may be a case of inadequate enquiry. Inadequacy of enquiry as elucidated above does not give jurisdiction to the CIT to invoke provisions of Section 263 prior to the insertion of 22 ITA Nos.1618 to 1620/Chny/2024 Explanation 2. In our view, the Explanation 2 does not help the revenue in as much as the same is prospective and applicable with effect from 1st June, 2015.” 15. Hence in the light of above judgment and cases cited at bar, we are of the considered view that the impugned order is liable to be set aside for the following reasons:- I. When these factual situation that the cash donations as anonymous donations and corpus donations have been considered by the AO during search assessment proceedings u/s153A, where is error in search assessment order dated 28.09.2021 so as to make the same prejudicial to the interest of revenue, the ld.CIT-DR could not controvert the above fact situation except supporting the revision order passed by the PCIT. II. Taking guidance from the various judgments referred supra, in this case twin conditions of Section 263 are not satisfied, as there is no lack of inquiry by the AO, and the AO has taken a plausible view and there is no prejudice to the interest of the revenue since the assessee has paid taxes on the income chargeable to tax in accordance with the provisions of section 11 of the Act and section 115BBC of the Act; III. The ld. PCIT should have made preliminary enquiry about the applicability of the judgment of the Hon’ble Madras High Court prior to issue of notice u/s 263 of the Act. We find that the judgment of the Hon’ble jurisdictional High Court was not in existence when AO passes the order u/s 153A r.w.s. 144 of the Act. We also find that the Hon’ble Supreme Court vide order dated 23 ITA Nos.1618 to 1620/Chny/2024 04.12.2023 in the case of M/s MAC PUBLIC CHARITABLE TRUST [SLP (C) Nos.21782-21783/2022] has already passed the following order: UPON hearing the counsel the court made the following ORDER “Issue notice to the respondent (s). Having regard to the order dated 24.11.2023 passed in SLP(C) Nos.22564- 22567/2022 arising from the same batch of cases disposed of by the Madras High Court on 31.10.2022 and following the same, there shall be interim stay of further proceedings of the impugned judgment and order in these matters also.” IV. Therefore, by the order of the Hon’ble Supreme Court that judgment of the Hon’ble jurisdictional High Court in the case of M/s MAC PUBLIC CHARITABLE TRUST was already stayed by the Supreme Court prior to issue of notice dated 04.03.2024 u/s 263 of the Act itself; V. The Hon'ble Apex Court in the case of Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association, Madras, (1992) 3 SCC 1 has explained the meaning of ‘quashing of an order’ and ‘stay of operation of an order’. Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay order is that the order which has been stayed would not be operative from the date of passing of stay order. VI. Therefore, invoking jurisdiction by the ld.PCIT u/s 263 vide notice dated 04.03.2024 is void ab-initio for the reason that the Hon’ble jurisdictional High 24 ITA Nos.1618 to 1620/Chny/2024 Court judgment in the case of M/s MAC PUBLIC CHARITABLE TRUST was not operative by virtue of the Hon’ble Supreme Court order referred supra. VI. The ld.PCIT has grossly failed to note that the registration u/s 12AA of the Act remains in force and no action or proceedings have been initiated for cancellation of the Trust and also for violation under the Tamilnadu Educational Institutions (Prohibition of Collection of Capitation Fee) Act, 1992 till date; VII. The Hon’ble Supreme Court of India in the case of Manish Maheshwari vs Asstt. Commissioner Of Income Tax & Anr (2007) 289 ITR 341 has observed as under: “The provisions contained in Chapter XIVB are drastic in nature. It has draconian consequences. Such a proceeding can be initiated, it would bear repetition to state, only if a raid is conducted. When the provisions are attracted, legal presumptions are raised against the assessee. The burden shifts on the assessee. Audited accounts for a period of ten years may have to be reopened.” VIII. In this case we observe that assessee had an occasion to face search & seizure under a rigorous provision of Section 132 Chapter XIVB and the assessing officer took a particular view on same material, same figures and taxed the assessee. In view of the above discussion, facts discussed, perusal of records, we are of the view that the very issue was raised in the search assessment u/s.153A of the Act, Further, it is noted that the complete details were examined by the AO in the search assessment proceedings and framed assessment u/s.153A r.w.s. 144 of the Act. During search assessment, AO explicitly records details like seized material Ann/JCE/ANJ/ED/S-1, sworn 25 ITA Nos.1618 to 1620/Chny/2024 statements of the Shri Xavier, Shri Selvaraj and Babu Manoharan. Even such queries were answered by the assessee in reply to questionnaire issued along with notice u/s.142(1) of the Act dated 14.09.2021 while completing reassessment. Hence, it is a full verification case and AO has verified complete facts and after verification took one of view and completed the search assessment. IX. The revenue cannot invoke clause (d) of Explanation 2 of section 263 of the Act and say that search assessment order u/s 153A dated 28.09.2021 is erroneous in the light of the Hon’ble Jurisdictional High Court delivered in the case of MAC Public Charitable Trust dated 31.10.2022 for the reason that when search assessment order u/s 153A was passed the judgment of the Hon’ble Jurisdictional High Court in the case of MAC Public Charitable Trust was not at all in existence. X. Hence, we find no reason to hold that the search assessment order dated 28.09.2021 u/s 153A r.w. section 144 of the Act is erroneous insofar as prejudicial to the interest of revenue on this very jurisdictional issue. Hence, we quash the revision order passed by PCIT dated 31.03.2024 and allow this appeal of assessee. 16. Since, the facts and circumstances of the other two separate appeals of different assessee being ITA No.1619/Chny/2024 and ITA No.1620/Chny/2024 for same AY 2020-21 are identical to the lead case being ITA No.1618/Chny/2024 for AY 2018-19 hence, will accordingly apply mutatis mutandis. 26 ITA Nos.1618 to 1620/Chny/2024 17. In the result, all the three appeals filed by the assessee are allowed. Order pronounced in the open court on 15th day of October, 2024 at Chennai. Sd/- Sd/- (जगदीश) (JAGADISH) लेखा सद˟ / ACCOUNTANT MEMBER (मनु क ुमार िगįर) (MANU KUMAR GIRI) Ɋाियक सद˟ / JUDICIAL MEMBER चेɄई Chennai: िदनांक Dated :15-10-2024 KV आदेश कȧ ĤǓतͧलͪप अĒेͪषत /Copy to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT, Chennai/Coimbatore/Madurai/Salem. 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF "