Trust's Loan Exemption Denied, Appeal Admitted, AO's Order Erroneous

The delay in filing the appeal was condoned due to the pandemic, and the appeal was admitted for adjudication. The trust was denied exemption under sections 11 and 12 of the I.T. Act for advancing loans to trustees. The AO's order was deemed erroneous and prejudicial to revenue, leading to a direction for reassessment. The Tribunal upheld the revision order under section 263, dismissing the appeal as the AO's assessment was found to be incorrect and prejudicial to revenue.

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Issues:
1. Delay in filing appeal condonation due to pandemic.
2. Denial of exemption u/s 11 and 12 of the I.T. Act.
3. Order passed by AO considered erroneous and prejudicial to revenue.
4. Revision order under section 263 of the Act challenged by the assessee.

Issue 1: Delay in filing appeal condonation due to pandemic
The appeal was filed with a delay of '362' days, attributed to the pandemic situation. The assessee submitted a condonation application explaining the reasons for the delay. Referring to the decision of the Hon'ble Supreme Court in certain cases, the delay was condoned, and the appeal was admitted for adjudication.

Issue 2: Denial of exemption u/s 11 and 12 of the I.T. Act
During assessment proceedings, it was noted that the assessee trust had advanced loans to trustees, which were shown as other sundry debtors in the balance sheet. The AO concluded that the trust was ineligible for exemption u/s 11 and 12 of the Act due to utilizing funds by giving advances to interested parties u/s 13(3) of the I.T. Act. Consequently, the AO computed the income on commercial principles, rejecting the exemption claim u/s 11 and taxed the income at Maximum Marginal Rate.

Issue 3: Order passed by AO considered erroneous and prejudicial to revenue
The ld.CIT(E) found the AO's order erroneous and prejudicial to revenue. The AO failed to consider the revised computation of income submitted by the assessee during scrutiny proceedings, leading to an incorrect assessment. The ld.CIT(E) set aside the order with directions to re-do the assessment after proper verification of the issues.

Issue 4: Revision order under section 263 of the Act challenged by the assessee
The assessee appealed the revision order under section 263 of the Act. The grounds raised included challenging the sustainability of the revision order, pointing out non-existent bases, and lack of errors or prejudice in the order. The counsel for the assessee argued against the jurisdiction assumed by the PCIT under section 263 of the I.T. Act.

The Tribunal upheld the ld.CIT(E)'s order, finding the AO's assessment erroneous and prejudicial to revenue. The AO's failure to consider certain income components led to an incorrect assessment, justifying the invocation of section 263 of the I.T. Act. Consequently, the appeal filed by the assessee was dismissed.

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