The jurisdiction under Section 263 of the Income Tax Act is invalid where the conditions for invoking revisional powers are not satisfied and the assessments are time-barred.

ORDER

PER ABY T. VARKEY, JM:

These are appeals preferred by the assessee against the order of the Learned Principal Commissioner of Income Tax (Central), (hereinafter referred to as “the Ld.PCIT”), Chennai-1, dated 28.03.2025 for the Assessment Year (hereinafter referred to as "AY”) 2015-16 and order dated 26.03.2025 for AY 2016-17 exercising his revisional power u/s.263 of the Income Tax Act, 1961 (hereinafter referred to as "the Act”). Both sides agreed that the facts and issues involved in both the appeals are same and therefore, with the consent of both the parties, the facts pertaining to AY 2015-16 is taken as the lead case, result of which will be followed for AY 2016-17.

2. The brief facts pertaining to AY 2015-16 are that the assessment in the case of assessee’s trust was completed by the AO vide order dated 25.10.2017 u/s.143(3) of the Act without making any addition [original assessment]. Thereafter, pursuant to search conducted at the premise of Chettinad Builders [third party], the AO based on material found at the premises of Chettinad builders, recorded his satisfaction on 29.01.2022 for invoking action under Section 153C of the Act and consequently issued notice u/s.153C of the Act; and thereafter, is noted to have passed the reassessment order on 31.03.2023 by making certain additions inter-alia alleging certain undisclosed transactions with Chettinad Builders and determined total income at ₹2,32,57,930/-. Similarly, for AY 2016-17, original assessment u/s.143(3) of the Act was completed vide order dated 24.12.2018 accepting the ITR filed by the assessee. As noted supra, pursuant to the search, re-assessment order was passed by making certain addition related to materials found at the premises of Chettinad Builders at total income of ₹1,64,06,776/-.

3. The Ld.PCIT is noted to have perused the assessment records of the assessee’s Trust and noted that the assessee has shown to have received other income of ₹14,50,92,622/- in the form of Hostel Fees, stationery and transportation fees and value added course fees for AY 2015-16 [herein after the ‘other-income’]. According to Ld PCIT, the assessee for earning of these ‘other income’ (except the mess income), didn’t maintain separate books of accounts as mandated by Section 11 (4A) of Act and hence, he was of the view that such other-income earned by the assessee [for running transport, hostel and stationery, etc,] are not from educational activities and can’t be termed as incidental to the objectives of the Trust. Therefore, citing (4A) of the Act, the Ld.PCIT was of the view that unless the business is incidental to attainment of the objectives of the trust and the assessee maintains separate books of accounts for such incidental activity, exemption can’t be granted for such income. And thus in this regard found fault with the AO on two counts (i) for not verifying whether the receipt of ₹14,50,92,622/- in the form of Hostel fees, transportation fess, Stationery and value added courses for AY 2015-16 are incidental to the objects of the Trust and (ii) whether any separate books of accounts are maintained for these receipts as mandated by (4A) of Act. Thereby found fault with the AO’s action allowing exemption on these receipts (supra). Hence, he issued show cause notice (SCN) to the assessee dated 12.03.2025 ‘as to why’ the assessment order passed by the AO u/s.153C of the Act dated 31.03.2023 shouldn’t be interfered u/s.263 of the Act. Pursuant to the notice, the assessee is noted to have filed reply on 18.03.2025 and objected to the proposed revisional action by the Ld.PCIT on the following grounds:

1. All