JAYA EDUCATIONAL TRUST,CHENNAI vs. DCIT CENTRL CIRCLE 1 (2), CHENNAI

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ITA 533/CHNY/2018Status: DisposedITAT Chennai10 November 2020AY 2013-143 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the assessee was not granted an adequate opportunity of being heard by the PCIT. Therefore, the order passed under Section 263 was set aside and the matter was remitted back to the PCIT.

What were the facts?

The assessee trust advanced interest-free loans to certain persons in contravention of Section 13(2) of the IT Act, leading to denial of exemption under Section 11 in a prior assessment year. This violation continued in the current assessment year, but the Assessing Officer (AO) did not consider it. The Principal Commissioner (PCIT) invoked Section 263 to revise the assessment.

What were the issues?

Whether the PCIT correctly exercised its powers under Section 263 without providing the assessee with an adequate opportunity of being heard. Whether the AO erred in not denying exemption under Section 11 for the assessment year in question.

Which sections of the Income-tax Act were involved?

Section 263,Section 13(2),Section 11

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI V. DURGA RAO & SHRI S. JAYARAMAN

Hearing: 05.11.2020

आदेश / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER:

1.

The assessee filed this appeal against the order of the Principal Commissioner of Income Tax, Central-1, Chennai, passed u/s.263 of IT Act, in C.No.1523/PCIT/C-1/3/2017-18 dated 21.12.2017 for the AY 2013-14.

2.

The Principal Commissioner of Income Tax (PCIT) examined the records of the assessee, M/s.Jaya Educational Trust and found that the Assessing Officer in the Scrutiny assessment made for the AY 2012-13 found that the Trust has availed loans from banks by pledging its Fixed Deposits and advanced interest free loans to certain persons in contravention of Sec.13(2) of the IT Act and hence denied exemption u/s.11 of the IT Act. Since the above violation continued to exist in the AY 2013- 14, the AO ought to have denied the exemption and taxed the surplus.

However, in the assessment made for the AY 2013-14, the AO has not considered this aspect. Therefore, the PCIT issued a show cause notice u/s.263 of the IT Act. Since the assessee has neither attended the hearing nor filed the written submissions to the show cause notice, set aside the Assessment Order for the AY 2013-14 u/s.263 of the IT Act and directed the AO to re-do the assessment denying exemption u/s.11 and to treat the entire surplus as income.

3.

Aggrieved against that order, the assessee filed this appeal. The case was posted for hearing through video conferencing. None appeared on behalf of the assessee. The Ld.DR supported the order of the Ld.PCIT.

4.

We heard the Ld.DR and gone through the relevant materials. It is clear from the order u/s.263 of the IT Act that the assessee has not been granted adequate opportunity of being heard. Therefore, we set aside the order u/s.263 and remit the issues back to the PCIT for affording effective opportunity of being heard to the assessee and then decide the issues on merits in accordance with law.

5.

In the result, the assessee’s appeal is treated as partly allowed for statistical purposes.

Order pronounced on the 10th day of November, 2020, in Chennai.

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