Case Law Details
Gourishankar Education Society Vs CIT (ITAT Pune)
In the case of Gourishankar Education Society vs. CIT (Exemption), the ITAT Pune dismissed appeals filed by the assessee against the revisional orders passed under Section 263 of the Income Tax Act for the assessment years (AYs) 2013-14 and 2014-15. The orders were deemed erroneous and prejudicial to the revenue’s interests due to the lack of adequate inquiry during reassessment proceedings. The Tribunal upheld the directions for de novo assessments while affirming the Commissioner’s jurisdiction under Section 263.
The assessee, a registered trust under Section 12A, had disclosed a deficit of ₹2.16 crore in its returns for AY 2013-14, including an interest income of ₹14.55 lakh. During a survey, it was discovered that the trust had advanced interest-free loans amounting to ₹3.30 crore to another trust, despite itself incurring interest-bearing loans. The reassessment proceedings under Section 147 resulted in an ex-parte order adding ₹3.30 crore to taxable income but failed to address the interest income and other material facts disclosed in the return.
The CIT (Exemption), invoking Section 263, noted that the reassessment order lacked proper inquiry and failed to consider critical aspects like the genuineness of receipts and expenditures. Despite the assessee’s contention that all relevant details were already submitted and verified, the ITAT found merit in the CIT’s observation of procedural lapses. Referring to precedents like Malabar Industrial Co. Ltd. vs. CIT (243 ITR 83), the Tribunal reiterated that a lack of application of mind by the Assessing Officer (AO) during reassessment can render the order erroneous.
For AY 2014-15, the facts and issues mirrored those of AY 2013-14, and the Tribunal dismissed the corresponding appeal by applying the same reasoning. The ITAT emphasized that revisional jurisdiction under Section 263 is justified if the AO fails to conduct due inquiries, thereby harming revenue interests.
The decision underscores the importance of thorough assessments and the scope of Section 263 in addressing errors stemming from inadequate examination by assessing officers. Both appeals were dismissed, upholding the CIT’s directions for reassessments.
FULL TEXT OF THE ORDER OF ITAT PUNE
These appeals filed by the assessee are directed against the separate orders dated 30.03.2024 passed by Ld. CIT, Exemption, Pune u/s 263 of the IT Act for the assessment years 2013-14 and 2014-15 respectively.
2. Since identical facts and common issues are involved in both the above captioned appeals of the assessee, therefore, we proceed to dispose of the same by this common order.
3. First, we shall take up the appeal of the assessee in ITA No.1234/PUN/2024 for A.Y. 2013-14 for adjudication.
ITA No.1234/PUN/2024, A.Y. 2013-14 :
4. The appellant has raised the following grounds of appeal :-
“1. The learned CIT(E), Pune erred in law and on facts in assuming jurisdiction u/s 263 of the ITA, 1961 on the analogy that the order passed u/s 147 r.w.s 144 r.w.s 144B of the ITA, 1961 dated 16/03/2022 is erroneous and prejudicial to the interest of the revenue.
2. The learned CIT(E), Pune erred in law and on facts in directing the learned AO to frame the assessment ‘de novo’ instead of giving specific directions. As such, the order passed u/s 263 of the ITA, 1961 is erroneous.
3. The learned CIT(E), Pune ought to have appreciated that the interest income as appearing in the Form 26AS amounting to Rs. 8,16,010 has already been offered to tax in the return of income and the same has also been verified during the reassessment proceedings u/s 147 of the ITA, 1961. As such, the re-assessment order dated 16/03/2022 cannot be said to be erroneous and prejudicial to the interest of the revenue.
4. The learned CIT(E), Pune ought to have appreciated that genuineness of the receipts and claim of expenditure has already been verified during the re-assessment proceedings. As such, the re-assessment order dated 16/03/2022 cannot be said to be erroneous and prejudicial to the interest of the revenue.
5. Learned CIT(E) ought to have appreciated that, scope of section 147 can’t be enhanced to such other areas / issues, which required detailed probing / verification. Appellant contends that, only such other issue of escapement of income, which comes to “notice” of the learned ITO can be considered in the 147 proceedings. Appellant thus contends that, directions issued by learned CIT(E) for verification of “genuineness” is an incorrect and defective exercise of j”urisdiction”.
6. Appellant craves leave to add / amend / modify / delete all / any of the grounds of appeal.”
5. The facts of the case, in brief, are that the assessee is a trust registered under the Societies Act, 1860 on 28.06.1993. The assessee trust is also registered u/s 12A of the IT Act w.e.f. 01.04.2007. The objects of the assessee trust are to establish and maintain pre-primary, primary, secondary, post SSC educational institutions including technical and medical education and to give educational aid to poor & needy students belonging to any community. The assessee trust filed its return of income on 01.04.2014 declaring a deficit of Rs.2,16,73,473/-. The above loss (deficit income) was disclosed after considering the interest income of Rs.14,55,213/- received from various banks. Subsequently, a survey action u/s 133A of the IT Act was conducted on 02.05.2019 in the case of Gourishanker Educational & Charitable Trust. During the course of survey proceedings, it was found that the assessee trust has advanced interest-free loan to Gourishanker Educational & Charitable Trust, although, the assessee himself has raised interest bearing loans from various banks/cooperative credit societies etc. Accordingly, the assessee’s case was reopened by recording reasons as per provisions of section 147 and notice u/s 148 was issued to the assessee.
6. During the course of assessment proceedings, it was found by the Assessing Officer that the assessee trust has given loan of Rs.3,30,00,000/- to Gourishanker Educational & Charitable Trust and therefore the provisions of section 13(2)(a) of the IT Act are violated. Since the assessee did not reply to any of the notices, the Assessing Officer passed ex-parte assessment order u/s 147 r.w.s. 144 of the IT Act on 16.03.2022 by making the addition of Rs.3.30 crores thereby assessing total income at Rs.3.30 crores. The assessee preferred first appeal before Ld. CIT(A) and being unsatisfied with the ex-parte order of Ld. CIT(A), second appeal was filed before the Tribunal and the Tribunal has set-aside the ex-parte order passed by Ld. CIT(A) and restored the matter back to the file of Ld. CIT(A) with a direction to decide the appeal on merits of the case, after providing reasonable opportunity of hearing to the assessee, which is still pending for disposal.
7. In the meantime, Ld. CIT, Exemption, Pune found that the assessee had received interest amounting to Rs.14,55,213/- which has escaped assessment. Accordingly, a notice u/s 263 was issued on 30.01.2024. After considering the reply of the assessee, again a notice was issued to the assessee on 28.03.2024 calling for genuineness of the receipts and expenditure for the year under consideration. However, the assessee failed to furnish any evidence before Ld. CIT, Exemption, Pune, therefore, assessment u/s 144 r.w.s. 147 of the IT Act dated 16.03.2022 passed by the Assessing Officer was found to be erroneous and prejudicial to the interest of the Revenue. Accordingly, by an order dated 30.03.2024 the same was set-aside by invoking the powers u/s 263 of the IT Act, the Assessing Officer was directed to pass assessment order de novo for fresh determination of income after allowing reasonable opportunity of hearing to the assessee.
8. It is this order against which the assessee is in appeal before this Tribunal.
9. AR appearing from the side of the assessee submitted before us that the assessee himself has declared interest income in his books of accounts as well as in return of income & nothing was concealed by him, therefore proceedings u/s 263 of the IT Act are not correct.
10. DR appearing from the side of the Revenue relied on the order passed by Ld. CIT, Exemption, Pune and requested to confirm the same.
11. We have heard Ld. Counsels from both the sides and perused the material available on record. We find that the assessee trust in its return of income has already disclosed interest income of Rs.14,55,213/-. But when the Assessing Officer passed the reassessment order u/s 144 r.w.s. 147, the above interest income was not taken into consideration and only the interest-free loan of Rs.3.30 crores was added back to the income of the assessee trust and the same amount was determined as taxable income. It is further found that the assessee himself has shown loss in his books of accounts but it appears that the same was also not considered while passing the reassessment order. Accordingly, we do not find any error in the order passed by Ld. CIT, Exemption, Pune u/s 263 of the IT Act, wherein it was held by him in para 10 of his order by observing as under :-
“10. …. , the AO failed to take into cognizance the information as per the return of income filed on 01.04.2014 during the assessment proceedings which shows lack of application of mind on the part of the A.O. The case is of wrong assumptions of facts without any enquiry as to the genuineness of the receipts to have emanated
12. However, we also find that the ex-parte reassessment order is already subject to challenge before Ld. CIT(A) by the assessee trust. But till now, no orders have been passed by Ld. CIT(A) and accordingly we do not hesitate to confirm the revisional order passed u/s 263 of the IT Act wherein the ex-parte reassessment order was held to be erroneous & prejudicial to the interest of the revenue, & accordingly the Assessing Officer was directed to pass the assessment order afresh de novo for fresh determination of income after allowing reasonable opportunity of being heard to the assessee and to examine the facts of the case on the basis of material available on record. Thus, the grounds of appeal raised by the assessee in this appeal are dismissed.
13. In the result, the appeal filed by the assessee in ITA No.1234/PUN/2024 for A.Y. 2013-14 is dismissed.
ITA No.1235/PUN/2024, A.Y. 2014-15 :
14. Since the facts and issues involved in the appeal of the assessee for the assessment year 2014-15 are identical to the facts of the case for assessment year 2013-14, therefore, our decision in ITA No.1234/PUN/2024 for A.Y. 2013-14 shall apply mutatis mutandis to this appeal of the assessee in ITA No.1235/PUN/2024 for A.Y. 2014-15. Accordingly, the appeal of the assessee in ITA No.1235/PUN/2024 for A.Y. 2014-15 is also dismissed.
15. To sum up, both the above captioned appeals of the assessee are dismissed.
Order pronounced on this 10th day of January, 2025.
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