Urban Local Body Assessed as Partnership Firm: ITAT Considers Exemption, PAN Mix-up and Deletes Assessment [Read Order]

The Income Tax Appellate Tribunal (ITAT), Raipur Bench, considered that the assessee, an Urban Local Body, had been mistakenly allotted the status of a Partnership Firm in PAN and deleted the assessment carried out.

The Assessing Officer (AO) based his proceedings on the information available, since the assessee was a non-filer of ITR. The assessee failed to ensure compliance and therefore was taxed on the investment of INR 3,57,12,724/- which was an un-explained investment which was further increased due to the interest of INR 42,83,870/-. Section 114BBE was applied for the taxes but aggrieved with this order, the assessee appeared before the Commissioner of Income Tax (Appeals) [CIT(A)] who dismissed their appeal.

The counsel for the assessee explained before the ITAT that AO, on the approval of the Principal CIT, had dropped the proceedings for AY 2019-20 and 2020-21. The counsel then appealed to the bench to treat the assessee as an Urban Local Body whose income was eligible for exemption under Section 10(20) of the Income Tax Act, 1961. The CIT-Department Representative concurred with the submissions of the counsel of the assessee for allowing their appeal.

The tribunal took note of the orders dated 19.03.2023 and 24.03.2024 which gave light to the PCIT dropping the proceedings for the AY 2019-20 and 2020-21. Further, the two-member bench held that Urban Local Bodies are eligible for exemption under Section 10(20) of the Income Tax Act, finding merit in the arguments proposed.

Conclusively, the bench of Paratha Sarathi Chaudhary (Judicial Member) and Avdesh Kumar Mishra (Accountant Member), set aside the order and deleted the income assessed by the AO, granting consequential relief to the assessee. The appeal was allowed accordingly.

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