The Pune bench of Income Tax Appellate Tribunal (ITAT) directed a fresh reassessment due to the Assessing Officer (AO) erred in assessing the assessee trust’s Rs. 3.30 crore Interest-free loan and interest income.
Gourishankar Education Society, (assessee) a trust registered under the Societies Act, 1860, is also registered under Section 12A of the Income Tax Act. The trust filed its return of income for the Assessment Year (AY) 2013-14, declaring a deficit of Rs. 2,16,73,473. This amount was disclosed after accounting for interest income of Rs. 14,55,213 received from various banks.
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However, during a survey conducted under Section 133A of the Income Tax Act, it was discovered that the trust had advanced an interest-free loan of Rs. 3.30 crore to Gourishankar Educational & Charitable Trust.
The Assessing officer (AO) reopened the case under Section 147 and issued a notice under Section 148. The reassessment order, passed under Sections 144 and 147, concluded that the trust had violated Section 13(2)(a) of the Income Tax Act. Therefore, the AO added Rs. 3.30 crore to the total income of the assessee and assessed the income accordingly.
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Aggrieved by the order, the assessee appealed before the CIT(A), but the appeal was dismissed. The assessee further filed an appeal before the tribunal, which remanded back to the CIT(A) for a fresh hearing on merits, which was not yet decided.
Meanwhile, The CIT(E) invoked section 263 and issued a notice observing that the AO had failed to consider the assessee’s interest income of Rs. 14,55,213, which had escaped assessment. Despite the assessee’s response, the CIT(E) issued another notice seeking details of the trust’s receipts and expenditures.
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The assessee failed to provide sufficient evidence, therefore the CIT(E) concluded that the AO had committed an error in assessment, holding that the order erroneous and prejudicial to the interest of revenue. Aggrieved by the order, the assessee filed an appeal before ITAT.
The two-member bench comprising Vinay Bhamore (Judicial Member) and R.K. Panda (Vice President) observed that the AO had assessed the Rs. 3.30 crore interest-free loan, but the AO had not considered the disclosed interest income.
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The tribunal noted the AO’s failure to examine and consider interest income. The tribunal further observed that the reassessment lacked proper consideration of the trust’s financial records.
Therefore, the tribunal upheld the CIT(E)’s decision, stating that the reassessment order was erroneous and prejudicial to the revenue’s interest. The tribunal confirmed the revisionary order, directing the AO to reassess the assessee’s income afresh after providing a reasonable opportunity of hearing to the assessee. The appeal of the assessee was dismissed.
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