COMMISSIONER OF INCOME TAX Vs. CHANDRIKA EDUCATIONAL TRUST

JUDGEMENT

(1.) The Department having approached this Court earlier under s. 256(2) of the IT Act, 1961, in pursuance of the earlier order of this Court dt. 9th Sept., 1991 in Original Petn. No. 2003/1988, the Tribunal refers the following question :

(2.) The learned senior tax counsel introduced the facts that the assessee - Chandrika Educational Trust, Municipal Office Road, Irinjalakuda, for the year 1974-75 came to be assessed for total income of Rs. 23,980. This was on the basis of grant of exemption under s. 11.

(3.) During the subsequent year - 1976-77 - the ITO found that this was a wrong assessment and the assessee had escaped assessment. By the order dt. 18th Feb., 1980 the assessment was reopened on the basis of the following factual positions. The ITO has observed that the fact that the provisions of s. 13(1)(c)(ii) and s. 13(2)(h) r/w s. 13(3) being applicable, the exemption granted for the previous year under s. 11 of the Act would be a wrong one. It is further observed that this came to light only during the course of the assessment proceedings for the year 1976-77. This resulted in the escapement of assessment for the year in question - 1974-75, and therefore, well within the jurisdiction of the ITO. The ITO has further observed that the audit report filed as per Form 10B did not contain the correct information necessary as required for grant of exemption under s. 11 of the Act. The ITO has specified this aspect by stating that the fact that the trustees are close relatives of the partners of these firms is not revealed in the audit report, in which case the Department would never have granted the claim for exemption under s. 11. It is neatly emphasised that the exemption under s. 11 was allowed wholly on the strength of the audit report.