Buckeye Trust Vs PCIT-2 (ITAT Bangalore)
ITAT Bangalore held that non application of mind by the AO to the legal issues would justify action of section 263 of the Income Tax Act. Accordingly, appeal of the assessee dismissed and action of PCIT in holding order of AO as erroneous and prejudicial to interest of revenue justified.
Facts- Assessee is a private discretionary trust and was established under the provisions of Indian Trust Act, 1882 vide settlement deed dated January 23, 2018 executed between Mr. Anand Nadathur, being the Settlor and Vervain Management Private Limited, being the Trustee. The settlor settled investments amounting to INR 669,27,63,437 to the trust out of natural love and affection. It has filed its return of income on 30.8.2018 declaring nil income. Thereafter, the case of the assessee was selected for scrutiny and assessment u/s 143(3) of the Act has been framed vide order dated 7.4.2021 accepting the returned income of the assessee.
Thereafter, PCIT called for the assessment records and examined the proceedings. CIT(A) after going through the case records and assessment records took a view that the order passed by the AO is erroneous and prejudicial to the interest of revenue. Accordingly, the ld. PCIT issued a notice u/s 263 of the Act on 13.3.2024 and called for the reply from the assessee. PCIT passed an order stating therein that amount of Rs.669,27,63,437/- received by the trust should have been brought to tax under the head “Income from other sources” as provided in section 56(2)(x)(a) of the IT Act. Being aggrieved, the present appeal is filed.
