Rajasthan High Court - Jodhpur
Commissioner Of Incom Tax vs M/S Ananta Charitable Eduction Society ... on 18 September, 2025
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HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Income Tax Appeal No. 3/2023
Commissioner Of Incom Tax, Cit Exemption Jaipur
----Appellant
Versus
M/s Ananta Charitable Eduction Society, Ms Ananta Charitable
Education Society 53, V Road, New Keshav Nagar, Udaipur
----Respondent
For Appellant(s) : Mr. K.K. Bissa.
For Respondent(s) : Mr. Anjay Kotari
HON'BLE THE CHIEF JUSTICE MR. K.R. SHRIRAM
HON'BLE MRS. JUSTICE SANGEETA SHARMA
Judgment
18/09/2025
(Per: Chief Justice)
1. This is an appeal under Section 260-A of the Income-Tax Act,
1961 (for short, 'the Act') in which following four substantial
questions of law are proposed:
"1. Whether the ld. ITAT is justified in quashing the order
passed by ld. CIT(E), Jaipur u/s 263 of the IT Act, 1961 as
during the proceedings u/s 263 of the Act, the assessee
itself admitted the fact that some details of unsecured
loans were not available with assessee at the time of
assessment proceedings?
2. Whether on the facts and in the circumstances of the case
and in law, the ld. ITAT is correct in holding that the CIT
was not empowered and entitled to revise assessment
order u/s. 263 of the Act r/w Explanation 2 thereto by
ignoring that the order passed by the AO is erroneous in so
far as it is prejudicial to the interest of revenue in as much
as the Assessing Officer has passed the assessment order
without making inquiries/verification in the light of the
unsecured loans of Rs.40 crores received from 41 persons
and entities and corpus donations of Rs.7,12,87,101/-
received by the assessee?
3. Whether on the facts and in the circumstances of the case
and in law, the ld. ITAT is correct in cancelling the
impugned order u/s. 263 of the Income Tax Act and
allowing all the grounds of the Assessee?
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4. Any other question of law as deemed fit in the facts and
circumstances of the case may also be framed before the
Hon'ble High Court in the interest of justice."
2. In effect, Revenue is unhappy with the findings of ITAT
recorded in order dated 10.01.2023, whereby the ITAT was
pleased to observe that assumption of jurisdiction by
Commissioner of Income-tax under Section 263 of the Act was
erroneous.
3. Assessee is a charitable trust, whose returns were subject
matter of scrutiny for assessment under Section 143(3) of the Act
and assessment order dated 29.09.2018 was passed assessing the
income at NIL.
4. Subsequently, CIT(E) Jaipur passed an order dated
11.12.2019 under Section 263 of the Act holding that order
passed by AO is erroneous in so far as it is prejudicial to the
interest of Revenue. In compliance with order dated 11.12.2019,
FAO passed an order dated 30.09.2021 under Section 143(3) read
with Section 263 of the Act and made addition of
Rs.25,40,44,460/- under Section 68 of the Act in respect of
unsecured loan accepted by assessee. Aggrieved by the said order,
assessee preferred an appeal before CIT(A), which appeal, we are
informed, has been allowed pursuant to order of ITAT impugned in
this appeal. Against that order of CIT(A), a separate appeal has
been preferred by Revenue before ITAT, which is still pending.
5. Against order dated 11.12.2019 passed under Section 263 of
the Act, assessee preferred an appeal before ITAT and ITAT
allowed the said appeal vide order dated 10.01.2023, which is
impugned in this appeal. The ITAT held that order under Section
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263 of the Act was not justified and set it aside. Relevant para 2.6
of ITAT order reads as under:-
"2.6 After careful consideration of the matter, it is seen that it
is not a case of no enquiry conducted by the AO but the AO had
given a questionnaire to the assessee and after inviting a reply
on various queries raised, the assessment has been completed.
The settled legal position on the exercise of power under s. 263
of the Act is that the supervisory jurisdiction to: circumstances
must exist to enable the Id. CIT(E) to exercise power of revision
namely, the assessment order should be erroneous and it
should be prejudicial to the interest of the Revenue. If the AO
has taken a decision in accordance with law, the said order
cannot be termed to be erroneous by the revisional authority in
a light hearted manner. Furthermore, the consideration of
revisional authority under s. 263 must be based on materials on
record of the called for by him. If there is no material on record
on which it can be said that the revisional authority acting in a
reasonable manner could have come to such a conclusion, the
very initiation of the proceedings by the revisional authority will
be illegal and without jurisdiction. On a reading of the order
passed by the revisional authority under s. 263 of the Act, it is
evidently clear that there is no specific finding rendered by the
authority as to how the order passed by the AO was erroneous
and all that the revisional authority states that no enquiry was
conducted, which is factually not correct. The contention of the
Id. CIT(E) seems to be that some more enquiry should have
been done but then there is no limit and the perception of the
extent may be different from person to person, and on facts of
the case. The facts of records reveal that the persons from
whom funds had been received are regular income tax
assessee, and the payments are through banking channels.
There is no material to come to doubt the nature of such
transactions and the receipt of the money and there is no error
as the AO has accepted such details furnished before him. The
phrase 'prejudicial to the interests of the Revenue has to be
read in conjunction with an erroneous order passed by the AO.
Every loss of revenue as a consequence of an order of the AO
cannot be treated as prejudicial to the interests of the Revenue.
When an ITO adopted one of the courses permissible in law and
it has resulted in loss of revenue; unless the view taken by the
ITO is unsustainable in law. In the present case, the AO called
for the information of the Unsecured loans and the corpus
donations received, and we find that the details were duly
submitted during the course of assessment proceedings and on
the basis of such information filed before him, he had taken a
view that the same are acceptable. There cannot be said to be
any error in his decision. The bank account of the assessee was
also submitted and all loans and corpus donations were
received through banking channels. The details of these parties
were also submitted during the course of assessment
proceedings which prima facie indicates a genuineness of the
transactions. We have also considered the judicial decisions
relied on by the parties and observed that when the assessee
has furnished requisite information and the ITO has considered
the records before him and completed the assessment after
considering the evidence filed and after his satisfaction about
the genuineness of cash credits, the order of revision under s.
263 on vague ground that the Assessing Officer did not make
proper enquiry is not valid. Reliance is placed in the case of CIT
vs Ratlam Coal Ash Company (1988) 171 ITR 141 (MP). The
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assessee furnished PAN Number, address, from the creditors,
the assessee has discharged the burden to prove the
genuineness of parties and transactions in addition to the
capacity satisfactorily and as such there is no ground for
addition(Addl. CIT, Bihar vs Hanuman Agarwal (1985). 151 ITR
150 (Patn.). In this regard, the Department has also not
brought any material to disprove the genuineness of the parties,
capacity of the lenders and transactions on the basis of cogent
facts on record. Similarly, in relation to the salary payments
made to two specified persons, we find that the same was qua
the services rendered by them and they were experienced
person and in the similar kind of employer drawing the same
salary which cannot be said to be a basis to say that the order
is erroneous or prejudicial to the interest of revenue. Therefore,
we are of the view that the order u/s 263 was not justified and
accordingly we set aside the same and quash the proceedings
so initiated. Thus the appeal of the assessee is allowed."
6. According to us, ITAT has given a factual finding that as
regards the alleged unsecured loans, which were subject-matter of
order under Section 263 of the Act were subject of consideration
during the assessment proceedings. The factual finding has been
arrived at saying that AO called for information of unsecured loans
and corpus donations received and the assessee had submitted all
details during the course of assessment proceedings, on the basis
of which, assessing officer has taken a view that details were
acceptable. There is a factual finding that the bank account of
assessee was also submitted and all loans and corpus donations
were received through banking channels. Details of parties were
also submitted which, prima facie, indicates genuineness of
transactions.
7. It will be useful to reproduce para 11 of judgment of a co-
ordinate Bench of this Court in Principal Commissioner of
Income Tax, Jaipur-II Vs. M/s. Shriram General Insurance
Company Limited1 and the same reads as under:-
1 D.B. Income Tax Appeal No.59/2024 (decided on 26.08.2025) at Jaipur Bench
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11. A Division Bench of Bombay High Court in Aroni
Commercials Ltd. Versus Deputy Commissioner of
Income-Tax and Another1 has held that once a query is
raised during the assessment proceedings and assessee has
replied to it, it follows that the query raised was a subject of
consideration of the Assessing Officer while completing the
assessment and it is not necessary that an assessment order
should contain reference and/or discussion to disclose its
satisfaction in respect of the query raised. Para 14 of the
judgment reads as under:
"14. We find that during the assessment proceedings the
petitioner had by a letter dated July 9, 2010, pointed out that they
were engaged in the business of financing, trading and investment
in shares and securities. Further, by a letter dated September 8,
2010, during the course of the assessment proceedings on a
specific query made by the Assessing Officer, the petitioner has
disclosed in detail as to why its profit on sale of investments should
not be taxed as business profits but charged to tax under the head.
"Capital gains". In support of its contention the petitioner had also
relied upon the Central Board of Direct Taxes Circular No.4 of 2007,
dated June 15, 2007 (The reasons for reopening furnished by the
Assessing Officer also places reliance upon Central Board of Direct
Taxes Circular dated June 15, 2007). It would, therefore, be
noticed that the very ground on which the notice dated March 28,
2013, seeks to reopen the assessment for the assessment year
2008-09 was considered by the Assessing Officer while originally
passing the assessment order dated October 12, 2010. This by
itself demonstrates the fact that notice dated March 28, 2013,
under Section 148 of the Act seeking to reopen the assessment for
the assessment year 2008-09 is based on mere change of opinion.
However, according to Mr. Chhotaray, learned Counsel for the
revenue, the aforesaid issue now raised has not been considered
earlier as the same is not referred to in the assessment order dated
October 12, 2010, passed for the assessment year 2008-09. We
are of the view that once a query is raised during the assessment
proceedings and the assessee has replied to it, it follows that the
query raised was a subject of consideration of the Assessing Officer
while completing the assessment. It is not necessary that an
assessment order should contain reference and/or discussion to
disclose its satisfaction in respect of the query raised. If an
Assessing Officer has to record the consideration bestowed by him
on all issues raised by him during the assessment proceeding even
where he is satisfied then it would be impossible for the Assessing
Officer to complete all the assessments which are required to be
scrutinized by him under Section 143(3) of the Act. Moreover, one
must not forget that the manner in which an assessment order is to
be drafted is the sole domain of the Assessing Officer and it is not
open to an assessee to insist that the assessment order must
record all the questions raised and the satisfaction in respect
thereof of the Assessing Officer. The only requirement is that the
Assessing Officer ought to have considered the objection now
raised in the grounds for issuing notice under Section 148 of the
Act, during the original assessment proceedings. There can be no
doubt in the present facts as evidenced by a letter dated
September 8, 2012, the very issue of taxability of sale of shares
under the head "Capital gains" or the head "Profits and gains from
business" was a subject matter of consideration by the Assessing
Officer during the original assessment proceedings leading to an
order dated October 12, 2010. It would, therefore, follow that the
reopening of the assessment by impugned notice dated March 28,
2013, is merely on the basis of change of opinion of the Assessing
Officer from that held earlier during the course of assessment
proceeding leading to the order dated October 12, 2010. This
change of opinion does not constitute justification and/or reasons
to believe that income chargeable to tax has escaped assessment."
The law is settled inasmuch as once a query has been
raised during the assessment proceedings and the assessee has
answered the query, it would mean that the issue was
inconsideration of the Assessing Officer during the assessment
proceedings even if it does not find mention in the assessment
order."
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8. The findings there would squarely apply to this case also.
The ITAT has come to a factual finding that AO has taken a view
and there was no need to remand the matter for de-novo
consideration.
9. In the circumstances, according to us, no substantial
question of law arises.
10. Appeal dismissed.
(SANGEETA SHARMA),J (K.R. SHRIRAM),CJ
21-a.asopa/-
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