Whether benefit of extended period of limitation under explanation 3 of Sec. 153(3) and Sec.267 to pass assessment order pursuant to finding/ direction of appellate authority available if assessee was not given a specific opportunity of being heard?

Last updated: 14 June 2014

Court :
ITAT Agra

Brief :
The assessee is a trustee in three different trusts. CIT(A) held that the trusts were not valid trusts since they did not come into existence in accordance with Section 6 of Indian Trusts Act” and its income should be taxed in hands of all the trustees. CIT(A) passed assessment order u/s 267 r.w.s. 251 in the assessee’s case and assessed the income in his hands without giving the trustees an opportunity of being heard. The assessee filed an appeal before the tribunal for not being given opportunity of being heard by CIT(A). It was held that according to explanation 3 of Sec. 153(3), the time limit of making an assessment or direction does not apply if the person was given a specific opportunity of being heard before passing of order. It is only when the Assessing Officer can demonstrate that this assessee was given a specific opportunity of hearing, before the appellate order that was passed in the cases the three trusts, the impugned assessment order can be treated as legally valid. Thus the matter stands restored to the file of the Assessing Officer.

Citation :
Gaurav Luthara "Appellant" Versus - Income Tax Officer - Respondent

Judgment and Facts of the case

IN THE INCOME TAX APPELLATE TRIBUNAL,

AGRA BENCH, AGRA

I.T.A. No.: 278/Agra/2011

Assessment year: 2002-03

Gaurav Luthara

Appellant

37, Saket Colony, Shahganj, Agra

[PAN: AACHG1403P]

Versus.

Income Tax Officer

Ward 2(1), Agra

Respondent

Appearances by:

Manuj Sharma, for the appellant

Waseen Arshad, for the respondent

Before Coram:

Pramod Kumar AM and Joginder Singh JM]

Date of concluding the hearing: June 4, 2014

Date of pronouncing the order: June 4, 2014

ORDER

Per Pramod Kumar:

1. This appeal, filed by the assessee, is directed against the order dated 21st January 2011 passed by the learned Commissioner of Income Tax (Appeals)-I, Agra, in the matter of order under section 267 r.w.s. 251 of the Income Tax Act, 1961, for the assessment year 2002-03. The appeal is time barred by 4 days but having perused the condonation petition and having heard the rival contentions on the same, we are inclined to condone this small delay. Accordingly, we admit the appeal and proceed to take up the same on merits.

2. To adjudicate on this appeal, we have to begin by taking note of some undisputed material facts. The assessee before us is a trustee in Gurunank Devji Trust, Guru Govind Singhji Trust and Guru Teg Bahadurji Trust. While adjudicating appeals in the cases of these trusts, learned CIT(A) held that “these trusts were not valid trusts since they did not come into existence in accordance with Section 6 of Indian Trusts Act” and, therefore, “its income should be taxed in hands of all the trustees who were shown to be managing affairs of the trusts”. In pursuance of the directions so given by the CIT(A) vide order dated 31st October 2005, the Assessing Officer passed the following order on 4th December 2006 :

“In order to the valuable directions of the learned CIT(A)- I, Agra, vide his appeal order no. 428,430,427,429 and 431/CIT(A)/ ITO 2(1) Agra/2005-06 dated 3rd October 2005, for the assessment order narrated hereinabove, “the income shown in the hands of the trusts, has to be considered in the hands of the trustees in the equal proportion”.

Since the aforesaid assessee is a trustee in the trusts, i.e. Gurunanakdevji Trust, Guru Govind Singhji Trust and Guru Teg Bahadurji Trust, 37 Saket Colony, Agra, which have been decided by the CIT(A) vide his aforesaid appellate orders. Hence, after taking into account equal proportionate shares from the trusts, as narrated below, income so arrived in the share of this trustee is added in his income”

3. With these brief observations, the Assessing Officer added the shares of income from the said three trusts, at Rs 1,13,000, Rs 1,14,000 and Rs 1,07,500 respectively. Taking these amounts into account, as also his income of Rs 1,49,350 declared in the return of income filed by the assessee, the assessment was now framed at Rs 4,83,850. Aggrieved, assessee carried the matter in appeal before the learned CIT(A) but without any success. Learned CIT(A) rejected the grievances of the assessee and, inter alia, observed as follows:

“...........As per order dated 3.10.05 of the CIT(A) in the case of the trusts, it is very clearly held by the CIT(A) that these trusts have not come into existence in accordance with Section 6 of the Indian Trusts Act,1882. The source of all capital shown in the balance sheet has not been properly examined. He has also held that these trusts are not genuine. Therefore, in the end of the order, it has been held by the CIT(A) that the income shown in the hands of the trust has to be considered in the hands of the assessee in equal proportion. . .... The order of the AO under appeal is passed in accordance with the directions of the CIT(A)-I Agra, in his order dated 3.10.2005, and against this order of the CIT(A), no findings have are given by the Hon’ble ITAT Agra....... order passed by the AO under section 267/251 dated 4.10.2006 determining income of the appellant at Rs 4,83,850 is confirmed...”

4. The assessee is aggrieved and is in appeal before us.

To read the full judgment, please find the attached file:

Attached file:

http://www.itatonline.in:8080/itat/upload/650086535614700018013$5%

5E1REFNOITA278AGRA2011_Gaurav_Luthara_Vs_ITO.pdf