Punjab Urban Planning and Development Authority Vs DCIT (ITAT Chandigarh)
PUDA’s Tax Assessments Reopened for Fresh Examination: Later Registration Changes the Picture
Subsequent Developments Required Fresh Assessments
The Chandigarh Bench of the Income Tax Appellate Tribunal restored four assessments of the Punjab Urban Planning and Development Authority (PUDA) to the Assessing Officer for fresh consideration following important developments concerning its charitable registration and exemption status.
These included subsequent registration under the new regime, a notification granting exemption under section 10(46A), and a Punjab and Haryana High Court direction requiring reconsideration of PUDA’s original registration application.
The Tribunal held that these developments had a material bearing on the assessments. It accordingly set aside all four impugned orders and directed de novo assessments, keeping every issue open.
The decision grants reconsideration of the tax liability; it does not finally allow exemption for the assessment years under appeal.
From Local-Authority Exemption to Substantial Tax Liability
PUDA carries out urban development functions. According to the order, it enjoyed exemption as a local authority under section 10(20) until AY 2002-03.
Following the amendment effective from 1 April 2003, it ceased to qualify as a local authority for that exemption and became liable to income tax.
For AY 2015-16, the Assessing Officer referred its accounts for special audit under section 142(2A). He alleged that PUDA remained non-cooperative and failed to disclose a true and fair picture of its accounts.
The assessment, completed under section 143(3) on 8 June 2018, determined income at ₹1,631.33 crore after various additions and disallowances.
The CIT(A) partly allowed PUDA’s appeal. The assessments for the other three years had broadly followed a similar course, leading to the appeals before the Tribunal.
The Original Registration Dispute Remained Alive
PUDA had applied for registration under section 12A in 2003. That application was rejected primarily on the ground that its objects and activities were commercial and did not qualify as charitable.
The Tribunal upheld the rejection by its order dated 1 June 2006 in ITA No. 764/Chd/2003. PUDA challenged that decision before the Punjab and Haryana High Court.
During the pendency of that challenge, the legal framework governing statutory authorities engaged in advancing objects of general public utility developed substantially, particularly through the Supreme Court’s decision in ACIT (Exemptions) v. Ahmedabad Urban Development Authority, (2022) 449 ITR 1.
This later legal development became central to PUDA’s request for reconsideration.
Later Registration and Section 10(46A) Notification
Meanwhile, PUDA applied under the new registration regime. It received provisional registration through Form No. 10AC dated 7 April 2022, covering AYs 2022-23 to 2024-25.
After filing Form No. 10AB, it obtained regular registration on 29 March 2024 for AYs 2022-23 to 2026-27.
PUDA submitted that this registration followed an enquiry and consideration of the Supreme Court’s Ahmedabad Urban Development Authority decision. It also asserted that its objects and activities had remained unchanged since the original application in 2003.
Further, PUDA relied on CBDT Notification No. 172/2025 dated 15 December 2025, granting exemption under section 10(46A).
These developments were presented as relevant to examining its statutory character and activities. Their precise effect on the earlier assessment years remained a matter for adjudication.
High Court Directed Reconsideration of Registration
The Tribunal recorded that the Punjab and Haryana High Court, by its order dated 14 January 2026, had set aside the earlier orders in the original registration dispute and remanded the matter to the CIT(E).
The CIT(E) was required to decide the registration application afresh in light of Ahmedabad Urban Development Authority and CIT v. Gujarat Maritime Board, (2007) 295 ITR 561.
That proceeding remained pending before the CIT(E), Chandigarh.
PUDA therefore argued that the assessments should be reconsidered after taking account of the registration proceedings and the later approvals. It also invoked the proviso to section 12A(2) to contend that subsequent registration had a bearing on the earlier years.
Revenue Accepted the Relevance of the Developments
The Revenue’s representative fairly acknowledged that the subsequent developments would materially affect the disputed assessments.
Accepting PUDA’s request, the Tribunal restored all four assessments to the Assessing Officer for fresh determination in light of those developments and the High Court’s directions.
It expressly stated that all issues were kept open and directed PUDA to promptly plead and prove its cases.
All four appeals were allowed for statistical purposes.
Author’s Comments
The significance of this decision lies in recognising that an assessment may require reconsideration when subsequent registration proceedings and judicial directions affect the basis on which exemption was denied.
However, later registration and exemption do not, through this order alone, conclusively settle the earlier years. PUDA’s argument concerning section 12A(2) was part of its submissions; the Tribunal did not finally determine its application or declare retrospective exemption.
The Assessing Officer must now examine the outcome of the original registration proceedings, the relevant statutory conditions and the effect of subsequent developments on each year.
The ₹1,631.33 crore assessment has been sent back for fresh determination; its underlying additions have not been individually deleted on merits. The remand provides PUDA an opportunity to establish its claims within the applicable legal framework.
Cases Discussed
- ACIT (Exemptions) v. Ahmedabad Urban Development Authority, (2022) 449 ITR 1 (SC)
- CIT v. Gujarat Maritime Board, (2007) 295 ITR 561 (SC)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT CHANDIGARH
1. Aforesaid appeals by assessee for Assessment Years (AYs) 2015-16, 2016-17, 2017-18 & 2021-22 have identical facts as well as issues. First, we take up appeal for AY 2015-16 which arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 30.03.2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) of the Act on 08.06.2018. Having heard rival submissions and upon perusal of case records including the relevant decision of jurisdictional High Court in the case of the assessee as referred by Ld. AR, the appeal is disposed-off as under.
2. The assessee is stated to be carrying out urban development functions. The assessee used to be local authority and was exempted from payment of Income Tax u/s 10(20) till AY 2002-2003. However, vide amendment to Sec.10(20) w.e.f. 01.04.2003, the assessee creased to be a local authority and became liable to pay tax. During scrutiny assessment proceedings, the assessee’s case was referred for Special Audit u/s 142(2A). The Ld. AO alleged that the assessee remained non-cooperative and failed to disclose true and fair picture of its accounts. Accordingly, the income of the assessee was finally assessed at Rs.1631.33 Crores after various additions / disallowances. The Ld. CIT(A) partly allowed the appeal of the assessee. Aggrieved, the assessee is in further appeal before us. The assessments for all the other three years also, more or less, met with the same fate.
3. The Ld. AR, vide its letter dated 21.09.2026 sought remand back of the appeal which read as under: –
Subject : Prayer to Remand back the appeals in ITA Nos. 633-636/Chd.2025 in the case of Punjab Urban Planning and Development Authority (PUDA) for AY 2015-16, 2016-17, 2017-18 and 2020-21, fixed for hearing on 22.09.2026.
Hon’ble Bench,
Kindly refer to the matter cited as subject above. It is most respectfully submitted that the appellant submits this application seeking remand back of the captioned appeals to the file of Ld. AO for fresh consideration of issues in assessment, in view of subsequent developments and the judgment of the Hon’ble P&H High Court in appellant’s own case in the context of registration u/s 12AA. The appellant respectfully submits as under:
1. The appellant is a statutory authority constituted under the provisions of the Punjab Regional and Town Planning and Development Act, 1995, with the mandate of undertaking planned development and regulating the development and the use of land in the State of Punjab, along with the provision of housing and civic infrastructure and other allied public amenities.
2. In furtherance of its statutory objects, the appellant had applied for registration u/s 12A of the Act, in the year, 2003. The said application was rejected by the Worthy CIT(E) vide order dtd. 30.09.2003, primarily on the ground that the activities and objects of the appellant were commercial in nature and did not qualify as charitable activities within the meaning of s. 2(15) of the Act.
3. Aggrieved by the aforesaid order, the appellant preferred appeal before this Hon’ble ITAT, Chandigarh who vide their order in ITA No. 764/Chd/2003 dtd. 01.06.2006 (copy appended herewith as Annexure 1), dismissed the appeal. The appellant thereafter preferred appeal before the Hob’ble P&H High Court in ITA No. 599/2006, challenging this decision.
4. Further, it is submitted that, whilst the appellant’s original registration was pending before the Hon’ble High Court, the appellant had, in the meanwhile, applied for registration under the amended electronic regime of the Act. In this regard, the appellant submitted application on 31.03.2022 under the applicable provisions of s. 12A. Pursuant thereto, provisional registration was granted to the appellant vide Form No. 10AC dtd. 07.04.2022, from AY 2022-23 to 2024-25 (copy appended herewith the Annexure 2).
5. Thereafter, the appellant furnished application in Form No. 10AB, seeking permanent registration, pursuant to which approval was granted on 29.03.2024, from AY 2022-23 to 2026-27 (copy appended herewith as Annexure 3). Kindly appreciate that this registration has been granted after making thorough enquiry and after considering the ratio of decision in Ahmedabad Urban (SC).
6. The aforesaid legal developments are of considerable relevance to the appellant’s case, particularly in the context of its objects and activities and the manner in which its claim for charitable status is required to be examined. The appellant’s activities and objects continue to remain the same right since it applied for registration in 2003.
7. Parallelly the appellant had also applied for exemption u/s 10(46A) and the same has also been granted vide CBDT Notification No. 172/2025 dtd. 15.12.2025 (Copy appended herewith as Annexure 4. It is pertinent to mention that grant of exemption u/s 10 (46A), which specifically concerns eligible statutory authorities engaged in specified public functions, is a significant subsequent development having a direct bearing on the examination of the appellant’s statutory character, objects and activities.
8. During the pendency of aforesaid appeal before the Hon’ble High Court, the legal position governing the charitable character of statutory engaged In the advancement of objects of general public utility underwent significant development, particularly in view of the judgment of the Hon’ble SC in ACIT (E) v. Ahmedabad Urban Development Authority, reported in (2022) 449 ITA 1 (SC).
9. Considering the above decision of Hon’ble Supreme Court, the Hon’ble P&H HC, in the above case of the appellant, vide their Lordship order dtd. 14.01.2026 passed in ITA No. 599/2026 (copy appended herewith as Annexure 5), was pleased to set aside the impugned orders and remand the matter to the file of Worthy CIT(E) for passing decision afresh on application of the assessee made u/s 12AA, in the light of the judgments of Hon’ble SC in ACIT (Exemption v. Ahmedabad Urban Development Authority, (2022) 449 ITR 1 (SC) and CIT v. Gujarat Maritime Board, (2007) 295 ITR 561 (SC).
10. Post above remand by the Hon’ble High Court, the matter is pending consideration before the Worthy CIT(E), Chandigarh.
11. The appellant has, in the meanwhile, also obtained statutory registration/approval and exemption but the appellant’s claim of charitable character is presently required to be examined afresh by the competent authority pursuant to the specific directions of the Hon’ble High Court.
12. The aforesaid developments are directly relevant to the issues involved in the captioned appeals. Since the very question regarding the appellant’s charitable character and entitlement to registration is now pending fresh consideration before the Worthy CIT(E), it would be appropriate that the said issue is first examined by the lower authorities. Further, the subsequent grant of Registration u/s 12AB in 2022 has retrospective effect as per proviso to s. 12A(2) and therefore, has direct bearing on the appeals pending before the Hon’ble Bench. But the Ld. AO did not consider this aspect of the matter while he framed assessment since at that time, he did not have the benefit of subsequent grant of Registration as also of the Judgment of Hon’ble P&H High Court in appellant’s own case.
13. In view of the above facts and circumstances, the appellant most respectfully prays that the Hon’ble Bench may kindly be pleased to:
a) Set aside the impugned orders to the extent they relate to the appellant’s claim for exemption/charitable status; and
b) Restore the issues and entire assessment to the file of Ld. AO for fresh adjudication in accordance with law, after considering the outcome of registration proceedings pending before the Worthy CIT(E) and also the subsequent grant of Registration u/s 12AB in 2022 by the Ld. CIT(E).
We shall be highly obliged.
4. As per the submissions of Ld. AR, the assessee applied for registration u/s 12A in the year 2003 which stood rejected by Ld. CIT(E) primarily on the ground that the activities and objects of the assessee were commercial in nature. The Tribunal upheld the same vide ITA No. 764/Chd/2003 order dated 01.06.2006 which was subjected to assessee’s further challenge before Hon’ble Punjab & Haryana Court in ITA No. 599/2006.
In the meanwhile, in new regime of registration, the assessee applied for provisional registration which was granted in Form No. 10AC dated 07.04.2022. Thereafter, the assessee furnished application in Form No. 10AB, seeking permanent registration and the same was also granted on 29.03.2024 for AYs 2022-23 to 2026-27. These registrations are stated to be granted after making thorough enquiry and after considering the ratio of decision of Hon’ble Apex Court in Ahmedabad Urban Development Authority, reported in (2022) 449 ITA 1 (SC).
The Ld. AR further submits that the activities and objects of the assessee continue to remain the same right since it applied for registration in 2003. It has further been stated that the assessee also applied for exemption u/s 10(46A) which has also been granted to the assessee vide CBDT Notification No. 172/2025 dated 15.12.2025. All these subsequent developments are stated to be having a direct bearing on the examination of the assessee’s statutory character, objects and activities which would ultimately impact assessment of income of the assessee.
The Ld. AR has further pointed out that during the pendency of assessee’s appeal before the Hon’ble High Court, the legal position governing the charitable character of statutory bodies engaged In the advancement of objects of general public utility has underwent significant development, particularly in view of the judgment of the Hon’ble SC in ACIT (E) v. Ahmedabad Urban Development Authority, reported in (2022) 449 ITA 1 (SC). Considering this decision, Hon’ble High Court, vide its order dated 14.01.2026 in ITA No. 599/2026 has set aside the impugned orders and remand the matter to the file of Ld. CIT(E) for passing decision afresh on application of the assessee made u/s 12AA, in the light of the judgments of Hon’ble SC in ACIT (Exemption v. Ahmedabad Urban Development Authority, (2022) 449 ITR 1 (SC) and CIT v. Gujarat Maritime Board, (2007) 295 ITR 561 (SC). Pursuant to the said remand by the Hon’ble High Court, the matter is pending consideration before Ld. CIT(E), Chandigarh. The Ld. AR has further stated that the assessee has obtained statutory registration / approval and exemption but the assessee’s claim of charitable character is presently required to be examined afresh by the competent authority pursuant to the specific directions of the Hon’ble High Court. The aforesaid developments are directly relevant to the issues involved in the captioned appeals. Since the very question regarding the assessee’s charitable character and entitlement to registration is now pending fresh consideration before Ld. CIT(E), it would be appropriate that the said issue is first examined by the lower authorities. Further, the subsequent grant of Registration u/s 12AB in 2022 has retrospective effect as per proviso to Sec. 12A(2) and therefore, has direct bearing on present appeals. All these aspects are, therefore, required to be re-examined by Ld. AO in the light of all these subsequent developments. Accordingly, a prayer has been made to remand back entire assessment to the file of Ld. AO for fresh adjudication in accordance with law, after considering the outcome of registration proceedings pending before Ld. CIT(E) and also in the light of subsequent grant of Registration u/s 12AB in the year 2022 by the Ld. CIT(E).
5. The Ld. CIT-DR fairly stated that these subsequent developments would have material bearing on assessee’s impugned assessments.
6. In the light of above stated facts, we accept the prayer of Ld. AR. Accordingly, all the four impugned orders are set aside and the assessments for all the four years, stand restored back to Ld. AO for de novo assessment in the light of subsequent developments and considering the directions of Hon’ble Court in assessee’s case. All the issues are kept open. The assessee is directed to plead and prove its cases forthwith.
7. All the appeals stand allowed for statistical purposes.
Order pronounced on 01st October, 2026
