SHETH CHIMANLAL GOVINDDAS MEMORIAL TRUST,PUNE vs. CIT(EXEMPTION), PUNE, PUNE

ITA 1224/PUN/2025Status: DisposedITAT Pune16 December 2025AY 2020-2119 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Commissioner of Income Tax (Exemption) rightly invoked the provisions of Section 263 of the Income Tax Act, 1961. The assessee, a charitable trust, invested Rs. 32,75,000/- in Prabodh Artha Sanchay, a partnership firm where its trustee had a substantial interest. This investment was not in the modes prescribed under Section 11(5) and was in violation of Section 13(2)(h) as it was invested in a concern where a person referred to in sub-section (3) has a substantial interest. The AO failed to apply the correct law by allowing exemption under Section 11 on this income. The Tribunal relied on the decisions of the Hon'ble Karnataka High Court in CIT Vs. Fr. Mullers Charitable Institutions and the Hon'ble Bombay High Court in CIT Vs. Audyogik Shikshan Mandal, which held that when income is not exempted under Section 11 read with Section 13, tax shall be levied on the relevant income at the Maximum Marginal Rate. Therefore, the assessment order was erroneous and prejudicial to the interest of the revenue. The appeal filed by the assessee was dismissed.

What were the facts?

The assessee, Sheth Chimanlal Govinddas Memorial Trust, a charitable trust registered under Section 12AA of the Income Tax Act, 1961, filed its return for Assessment Year 2020-21. The Assessing Officer (AO) completed the assessment under Section 143(3) read with Section 144B, allowing exemption under Section 11. The Commissioner of Income Tax (Exemption), Pune, invoked Section 263, issuing a revision order dated 29.03.2025. The CIT(E) held that the AO's assessment order was erroneous and prejudicial to the revenue. The assessee appealed this order to the Income Tax Appellate Tribunal (ITAT). The dispute centers on an investment of Rs. 32,75,000/- made by the trust in Prabodh Artha Sanchay, a related party.

What were the issues?

1. Whether the order passed by the learned Commissioner of Income Tax (Exemption) under Section 263 of the Income Tax Act, 1961, setting aside the original assessment order, is valid, considering the AO had already discussed and scrutinized the issue of investment in a related entity (Section 13(1)(c), 13(2) read with Section 11(5))? Assessee's Contention: The AO had verified the facts and taken one of the possible views after thorough discussion, thus the CIT(E) lacked jurisdiction under Section 263. The CIT(E) failed to point out the enabling provision to tax the ineligible investment or the AO's complete failure. Revenue's Contention: The CIT(E) correctly invoked Section 263 as the AO's assessment order was erroneous and prejudicial to the revenue. The investment in a related entity violated Sections 13(1)(c), 13(1)(d), 13(2)(a), 13(2)(g), 13(2)(h), and Section 11(5), and the AO failed to disallow the investment and tax it at the Maximum Marginal Rate (MMR), and also failed to reject the exemption claim for interest earned on this investment. The revenue relied on CIT Vs. Chandrika Educational Trust and CIT Vs. Fr. Mullers Charitable Institutions.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 144B,Section 11,Section 12AA,Section 13(1)(c),Section 13(1)(d),Section 13(2)(a),Section 13(2)(g),Section 13(2)(h),Section 11(5)

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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE

For Appellant: Shri Abhay Avachat
For Respondent: Shri Amit Bobde –CIT(DR)
Hearing: 25/09/2025Pronounced: 16/12/2025

PER DR. DIPAK P. RIPOTE, AM: This appeal is filed by the Assessee against the order of ld.Commissioner of Income Tax(Exemption), Pune passed under section 263 of the Income Tax Act, 1961 for A.Y.2020-21, dated 29.03.2025 emanating from Assessment Order u/s.143(3) read with section 144B of the Income Tax Act, 1961 dated 26.09.2022. The assessee has raised following grounds of appeal : ITA No.1224/PUN/2025 [A] “1. The Order under section 263 dated 29 03 2025 passed by the learned Commissioner Income Tax Exemption Pune (CIT) is contrary to the facts and circumstances of

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