SRI EDUPAYALA VANA DURGA BHAVANI,HYDERABAD vs. INCOME TAX OFFICER, WARD-1, SANGAREDDY

Facts

The assessee, an AOP, failed to file its Income Tax Return for AY 2016-17 despite making cash deposits of Rs. 2.48 crores in bank accounts. The AO initiated reassessment proceedings under Section 147, completing the assessment under Section 144 r.w. Section 147, estimating income at 8% of the cash deposits (Rs. 19.89 lakhs) after treating the entire amount as unexplained. Subsequently, the PCIT initiated revision proceedings under Section 263, finding the AO's order erroneous and prejudicial for not taxing the entire cash deposit under Section 69A r.w. Section 115BBE, and directed the AO to treat the full amount as unexplained money. The assessee appealed the PCIT's order.

Held

The Tribunal affirmed the PCIT's jurisdiction to initiate revision under Section 263, distinguishing the scope of the pending appeal before the CIT(A) from the issues considered by the PCIT. It rejected the assessee's claim for exemption under Section 10(23BBA), clarifying that the endowment did not meet the specific criteria. While concurring with the PCIT's decision to set aside the AO's order for being erroneous and prejudicial, the Tribunal disagreed with the PCIT's summary direction to treat the entire cash deposit as unexplained income under Section 69A without proper verification. The matter was remitted to the AO for fresh adjudication with directions for necessary inquiries and verifications.

Key Issues

1. Whether the PCIT had valid jurisdiction under Section 263 to revise the assessment order when an appeal against the assessment order was pending before the CIT(A), considering Explanation 1(c) to Section 263. 2. Whether the assessee's income, being an endowment, was exempt from tax under Section 10(23BBA) of the Income Tax Act. 3. Whether the AO's estimation of income at 8% of cash deposits was erroneous and prejudicial to the revenue, and if the PCIT was correct in directing the entire deposit to be treated as unexplained money under Section 69A r.w. Section 115BBE.