Sachin Notified Area Vs PCIT (TAT Surat)
Background
- SNA, constituted under Gujarat Industrial Development Act (GIDA), filed NIL returns claiming exemption u/s 10(20).
- Reassessments completed u/s 147 r.w.s. 144B on 30.03.2022, denying exemption following SC ruling in NOIDA vs. CCIT (95 taxmann.com 58).
- AO accepted treatment of FDR interest ₹9.16 Cr directly credited to reserves in balance sheet, without routing through I&E a/c
- PCIT held AO erred in not taxing interest under “income from other sources” & issued 263 orders.
- Assessee argued identical 263 order for AY 2017-18 had been quashed by ITAT Surat (ITA 343/SRT/2022, order dt. 26.06.2023). PCIT ignored this, stating matter is sub judice before Gujarat HC & passed 263 “to keep issue alive”
Assessee’s Arguments
- PCIT violated principles of natural justice – issued vague SCN without pointing out precise error.
- AO had already examined exemption claim during reassessment; 263 amounts to mere change of opinion.
- Relied on earlier ITAT ruling in its own case for AY 2017-18 quashing similar 263 order
Revenue’s Stand
- FDR interest is revenue receipt, must be taxed as “income from other sources.”
- SNA not a “local authority” under Article 243P; exemption u/s 10(20) not available per SC in NOIDA.
- AO failed to make requisite addition despite clear SC law, making order erroneous & prejudicial
Tribunal’s Observations/ Decision
- PCIT had not decided issue on merits, but only set aside order “to keep matter alive.”
- Such approach improper – 263 must be exercised with clear findings, not deferred to AO.
- Considering ITAT’s earlier decision for AY 2017-18 & submissions of both parties, Tribunal held matter needs fresh adjudication on merits by PCIT.
- Orders of PCIT set aside; issues remanded
- Appeals allowed for statistical purposes.
- PCIT directed to re-examine matter afresh, considering assessee’s submissions & SC decision in NOIDA
FULL TEXT OF THE ORDER OF ITAT SURAT
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