ITAT quashes Assessment Framed in name of Artificial Juridical Person Instead of Local Authority [Read Order]

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently quashed assessment framed in the name of an artificial juridical person instead of local authority.

The assessee, Ganna Vikas Parishad filed its return of income in the status of ‘Local Authority’, at Nil income. Subsequently, the case was selected for scrutiny assessment. During the scrutiny assessment proceedings, the assessee was asked to explain as to how it is entitled for exemption of the income.  The reply submitted by the assessee was not found acceptable by the Assessing Officer and he assessed the income by making addition.

Aggrieved by the order, the assesee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)], who dismissed the appeal of the assessee. Thus, the assessee filed a second appeal before the tribunal.

During the appeal proceedings no one appeared for the assessee hence, on the basis of the written submissions filed by assessee, the tribunal decided the appeal.

The asseesee in his written submission contented that the assessee is a local authority. As per the provisions of U.P. Sugar Cane (Regulation of Supply & Purchase) Act, 1953, the assessee is neither authorized to do any business/profession or any other activity with profit motive, nor it is doing any such activity as contemplated under Section 28 of the Income Tax Act.

Further, the assessee had filed its return of income as a ‘Local Authority’. However, the assessment was framed in the status of ‘Artificial Juridical person’.

Om Parkash, counsel for the revenue, supported the contentions of the lower authorities.  It was observed by the tribunal that the AO has issued notice as a ‘Local Authority’ and the assessment has been framed in the name of ‘Artificial Juridical person’.

Therefore, the single member bench of Kul Bharat, (Judicial Member) held that the AO could not have changed the status from ‘Local Authority’ to ‘Artificial Juridical person’ and therefore the assessment framed by the AO is liable to be cancelled.

To Read the full text of the Order CLICK HERE

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