Revisional Power U/S 263 Income Tax Act Cannot Be Upheld By Tribunal On Grounds Not Taken By Commissioner: Kerala High Court

The Kerala High Court has held that a tribunal cannot travel beyond the grounds not cited by the commissioner while exercising jurisdiction under Section 263 Income Tax Act.Justices A. Muhamed Mustaque and Harisankar V. Menon stated that only one reason was highlighted by the Commissioner for exercising the power under Section 263 of the Act and the Tribunal having found the said reason as not a valid one, the Tribunal should have stopped there rather than making further observations as regards the sustainability or otherwise of the extension of the benefits under Section 11 of the Act through the assessment order.In this case, the assessee/appellant is a Charitable Trust, having obtained registration under Section 12A of the Income Tax Act, 1961, and therefore entitled to the benefits flowing out of Section 11 of the Act. During the financial year 2013-14, the assessee received various donations, both from India and foreign countries, and made further donations to other institutions, which were also stated to be having registration under Section 12A of the Act. The assessing authority accepted the return of income by the assessee. However, the Commissioner of Income Tax (Exemptions), Kochi, initiated suo motu revisional steps under Section 263 of the Act, as per which the assessment order was set aside, remitting the matter back to the Assessing Officer for fresh disposal as per law. According to the revisional authority, only the donations made to institutions that have a similar nature of categorisation under the Foreign Contribution (Regulation) Act, 2010 (FCRA Act), as that of the assessee were entitled to exemption. In the appeal instituted by the assessee against this order, the Income Tax Appellate Tribunal, Cochin Bench, found that the donations made by the assessee were not hit by the provisions of the Act and hence amounted to an application of income for charitable purposes.However, the Tribunal went on to hold further that the donations should be consistent with the objects of the Trust, and since the assessment order was silent in that regard, there was no illegality in the exercise of the revisional power under Section 263 of the Act. The assessee referred to the case of Commissioner of Income Tax v. Chandrika Educational Trust [(1994) 207 ITR 108], where it was held that:“In entertaining an appeal from the Commissioner's order what the Tribunal does is to examine whether the said order is sustainable in law and whether it is within the powers conferred by section 263. Therefore, when the Commissioner has chosen to set aside the order of the Income-tax Officer only on a particular ground, the Tribunal is not entitled to go beyond and sustain the order of the Commissioner on grounds different from that relied on by the Commissioner himself.” It is to be noticed that the benefits under Section 11 of the Act are not in relation to the provisions of the FCRA Act. Therefore, the Commissioner was not justified in exercising the suo motu revisional power under Section 263 of the Act, added the bench.The bench opined that the decision in Chandrika Educational Trust (supra) will apply to the case. In view of the above, the bench allowed the appeal. Case Title: Save A Family Plan (India) v. The Deputy Commissioner of Income Tax Case Number: ITA NO. 81 OF 2025Citation: 2025 LiveLaw (Ker) 791Counsel for Appellant/Assessee: Abraham Joseph Markos Counsel for Respondent/Department: Jose JosephClick Here To Read/Download Order

Revisional Power U/S 263 Income Tax Act Cannot Be Upheld By Tribunal On Grounds Not Taken By Commissioner: Kerala High Court

Mehak Dhiman

Tags