Income Tax Appellate Tribunal - Pune
Shri Vishwakalyan Jivraksha ... vs Assessee on 22 July, 2016
आयकर अपील
य अ धकरण "बी" यायपीठ पण
ु े म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, PUNE
ी आर. के. पांडा, लेखा सद य, एवं ी #वकास अव थी, या%यक सद य के सम& ।
BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No. 2013/PN/2014
%नधा(रण वष( / Assessment Year : 2011-12
Income Tax Officer,
Ward - 10(1), Pune
.......अपीलाथ / Appellant
बनाम / V/s.
M/s. Shri Vishwakalyan Jivraksha Pratishthan,
C/o Shri Prafulla Mehta, G-113,
Padmavati Nagar Hsg. Soc. Co.,
Opposite Sambhaji Nagar, Dhanakwadi,
Pune - 411043
PAN : AAKTS8989C
......
यथ / Respondent
*+या&ेप सं. / CO No. 18/PN/2016
%नधा(रण वष( / Assessment Year : 2011-12
M/s. Shri Vishwakalyan Jivraksha Pratishthan,
C/o Shri Prafulla Mehta, G-113,
Padmavati Nagar Hsg. Soc. Co.,
Opposite Sambhaji Nagar, Dhanakwadi,
Pune - 411043
PAN : AAKTS8989C
.......अपीलाथ / Appellant
बनाम / V/s.
Income Tax Officer,
Ward - 10(1), Pune
......
यथ / Respondent
Assessee by : Shri S.N. Doshi
Revenue by : Shri S.K. Jadhav
सन
ु वाई क तार ख / Date of Hearing : 25-05-2016
घोषणा क तार ख / Date of Pronouncement : 22-07-2016
2
ITA No. 2013/PN/2014 & CO No. 18/PN/2016
आदे श / ORDER
PER VIKAS AWASTHY, JM :
The appeal has been filed by the Revenue against the order of Commissioner of Income Tax (Appeals)-V, Pune dated 20-08-2014 for the assessment year 2011-12. The assessee has filed Cross Objections against the aforesaid order of Commissioner of Income Tax (Appeals).
2. The brief facts of the case as emanating from records are: The assessee is a charitable trust. The assessee filed its return of income for the assessment year 2011-12 declaring loss of `5,42,718/-. The return of the assessee was processed u/s. 143(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") on 18-07-2013. At the time of filing of return of income, the assessee was not registered u/s. 12A of the Act. The assessee had filed an application for registration u/s. 12AA of the Act in the prescribed form on 16-01-2013. The Commissioner of Income Tax vide order dated 25-03-2014 granted registration to the assessee u/s. 12AA w.e.f. assessment year 2014-15. Notice u/s. 148 was issued to the assessee on 22-03-2013. The assessee was provided with reasons for issuing notice u/s. 148 for the assessment year 2011-12 vide letter dated 18-06-2013. The assessee filed objections against the issuing of notie u/s. 148, which were disposed off by the Assessing Officer on 23-08-2013. The Assessing Officer, thereafter, vide order dated 27-01-2014 passed order u/s. 143(3) r.w.s. 147 of the Act making addition of `40,92,239/- on account of disallowance of deduction u/s. 57 of the Act.
Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) challenging 3 ITA No. 2013/PN/2014 & CO No. 18/PN/2016 the reassessment proceedings, as well as addition/disallowance made by the Assessing Officer. The First Appellate Authority vide impugned order rejected the contentions of the assessee with regard to reassessment proceedings. However, on merits the Commissioner of Income Tax (Appeals) accepted the appeal of the assessee. Now, both the Revenue and the assessee are in appeal before the Tribunal assailing the order of Commissioner of Income Tax (Appeals). The Revenue in its appeal has assailed the action of Commissioner of Income Tax (Appeals) in deleting the addition and the assessee in Cross Objections has challenged the validity of reassessment proceedings.
3. Shri S.K. Jadhav representing the Department submitted that at the time of filing of return of income the assessee was not registered u/s. 12AA of the Act and hence, was not eligible to claim the benefit of section 11 of the Act. All the donations received by the assessee were liable to be taxed in the absence of registration u/s. 12A. The ld. DR vehemently supported the order of Assessing Officer in making the disallowance of deduction u/s. 57 of the Act.
4. On the other hand Shri S.N. Doshi appearing on behalf of the assessee defended the findings of Commissioner of Income Tax (Appeals) in deleting the addition on merits. The ld. AR submitted that the provisions of section 12A(2) were amended by Finance (No. 2) Act, 2014 w.e.f. 01-10-2014 by inserting proviso to sub-section (2). Although, the said amendment was inserted w.e.f. 01-10-2014. The Cochin Bench of the Tribunal in the case of SNDP Yogam Vs. Assistant Director of Income Tax (Exemption) reported as 68 taxmann.com 152 (Cochin-Trib.) has held that insertion of proviso to section 12A(2) w.e.f. 01-10-2014 is retrospective in operation. The benefit of section 11 4 ITA No. 2013/PN/2014 & CO No. 18/PN/2016 cannot be denied to the trust if it had obtained registration during pendency of appeal before the Commissioner of Income Tax (Appeals). The ld. AR further referred to the decision of Kolkata Bench of the Tribunal in the case of Sree Sree Ramkrishna Samity Vs. Deputy Commissioner of Income Tax reported as 156 ITD 646 (Kolkata-Trib.). The Tribunal held that as long as objects of a society were charitable in nature in years earlier to year in which registration u/s. 12AA was granted and there is no adverse findings with regard to existence of assessee society for charitable purposes, benefit of exemption u/s. 11 has to be given.
4.1 The ld. AR submitted that the Commissioner of Income Tax (Appeals) while dealing with the issue of reopening has erred in holding that the reassessment proceedings were valid. The ld. AR pointed out that the reasons recorded for reopening were factually incorrect. In the reasons recorded for issuing of notice u/s. 148 communicated to the assessee vide letter dated 18-06-2013, it is mentioned that during the year the assessee has received donations of `40,77,937/- and has claimed expenses of `39,21,244/-. Thus, there is a surplus of `1,56,693/-. In fact, the amount of `1,56,693/- is deficit and not surplus. The ld. AR referred to income and expenditure account for the year ending on 31-03-2011 at page 16 of the paper book. The ld. AR pointed that the income of the assessee from donations, bank interest and sale of Shenkhat (cow dung) is `40,77,937/-, against the expenditure of `42,34,630/-. The assessee has claimed income from sale of Shenkhat as agricultural income exempt from tax. Thus, the total income declared by the assessee in computation was `(- )5,42,898/-. The ld. AR further pointed out that in the reasons recorded it has been mentioned that the assessee has shown incorrect 5 ITA No. 2013/PN/2014 & CO No. 18/PN/2016 income there is escapement of income to the extent of `6,99,411/-. However, in the reassessment proceedings, the Assessing Officer did not make any addition on account of such aforesaid escapement but made disallowance of deduction u/s. 57 to the tune of `40,92,937/-. The ld. AR asserted that if no addition was made in respect of amounts mentioned in the reasons recorded for re-opening, there cannot be any other addition. In support of his submissions reliance was placed on the judgment of Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Jet Airways (I) Ltd. reported as 331 ITR 236 (Bom). The ld. AR further contended that the objections filed by the assessee against the reasons for reopening were not properly disposed off by the Assessing Officer. The Assessing Officer has not complied with the mandatory procedure declared by the Hon'ble Supreme Court of India in the case of GKN Driveshafts (India) Ltd. Vs. Income Tax Officer reported as 259 ITR 19 (SC). The ld. AR prayed for dismissing the appeal of the Revenue and reversing the findings of Commissioner of Income Tax (Appeals) with respect to reassessment proceedings.
5. The ld. DR controverting the submissions made on behalf of the assessee submitted that reassessment proceedings were validly initiated against the assessee. The original assessment was made in the case of assessee u/s. 143(1). The assessee had claimed benefit of section 11, whereas the assessee at the time of filing of return of income was not registered u/s. 12AA of the Act. The income declared by the assessee in its return of income was incorrect, therefore, reassessment proceedings were initiated. After issuing notice u/s. 148, reasons for issuing notice were communicated to the assessee. The 6 ITA No. 2013/PN/2014 & CO No. 18/PN/2016 objections filed by the assessee were duly disposed off before passing of the assessment order.
6. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. We have also considered the decisions on which the ld. AR of the assessee has placed reliance and the documents that were referred during the course of making submissions.
7. It is an undisputed fact that at the time of filing of return of income and passing of order u/s. 143(1) the assessee was not registered u/s. 12A of the Act. The assessee made application for registration on 16-01-2013. The assessee was granted registration by the Commissioner of Income Tax on 25-03-2014 w.e.f. assessment year 2014-15. The notice u/s. 148 was issued to the assessee on 22-03-2013. The conditions for applicability of section 11 and 12 of the Act are contained in section 12A of the Act. The provisions of sub- section (2) of section 12A of the Act were amended by the Finance (No.
2) Act, 2014. Proviso to sub-section (2) were inserted by amendment which reads as under :
"(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made.
Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: 7 ITA No. 2013/PN/2014 & CO No. 18/PN/2016
Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year:
Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA."
The aforesaid amendment was made w.e.f. 01-10-2014.
8. The Cochin Bench of the Tribunal in the case of SNDP Yogam Vs. Assistant Director of Income Tax (Exemption) (supra) while dealing with the issue relating to retrospective applicability of newly inserted proviso to section 12A(2) has held that the amendment is retrospective in nature. The relevant extract of the findings of Tribunal are as under :
"7.1 .............The first proviso to section 12A(2) was brought in the statute only as a retrospective effect, with a view not to affect genuine charitable trusts and societies carrying on genuine charitable objects in the earlier years and substantive conditions stipulated in section 11 to 13 have been duly fulfilled by the said trust. The benefit of retrospective application alone could be the intention of the legislature and this point is further strengthened by the Explanatory Notes to Finance (No.2) Act, 2014 issued by the Central Board of Direct Taxes vide its Circular No. 01/2015 dated 21.1.2015. Apparently the statute provides that registration once granted in subsequent year, the benefit of the same has to be applied in the earlier assessment years for which assessment proceedings are pending before the ld. A.O., unless the registration granted earlier is cancelled or refused for specific reasons. The statute also goes on to provide that no action u/s147 could be taken by the AO merely for non-registration of trust for earlier years.
7.2 When section 12A of the Act was amended by introducing new provisos to sub-section (2) of s. 12A by Finance Act, 2014 with effect from 01.10.2014, the assessment orders passed by the assessing officer in respect of the present assessee were pending in appeal before the first appellate authority. During such pendency, the assessee was granted registration u/s 12AA of the Act on 29.07.2013 w.e.f. the assessment year 2013-14. Those appeals were the continuation of the original proceedings and that the power of the Commissioner of Income-tax was 8 ITA No. 2013/PN/2014 & CO No. 18/PN/2016 co-terminus with that of the assessing officer [ADIT (Exemption) in the present case] were two well established principles of law. In view of the above and going by the principle of purposive interpretation of statues, an assessment proceeding which is pending in appeal before the appellate authority should be deemed to be 'assessment proceedings pending before the assessing officer' within the meaning of that term as envisaged under the proviso. It follows there-from that the assessee which obtained registration u/s 12AA of the Act during the pendency of appeal was entitled for exemption claimed u/s 11of the Act.
7.3. The explanatory Memorandum to Finance (No.2) Bill, 2014 which sought to amend section 12A explains the objects and reasons for making such amendments. The explanation makes it clear that it was in order to provide relief to such trusts in respect of which, due to absence of registration u/s 12AA tax liability got attached though otherwise they were eligible for exemption by fulfilling other substantive conditions that the amendment was brought in. That being so, denying such benefit to a trust like the assessee who had obtained registration u/s 12AA during the pendency of the appeals filed against the orders of the assessing authority, by narrowly interpreting the term, 'pending before the assessing officer' so as to exclude its pendency before the appellate authority, will be doing violence to the provisions of the Statute and, as such, liable to be interfered with. Moreover, under the Scheme of the Act, sections 11 and 12 are substantive provisions which provide for exemptions to a religious or charitable trust. Sections 12A and 12AA detail the procedural requirements for making an application to claim exemptions under sections 11 and 12 by the assessee and the grant or rejection of such application by the commissioner. Thus, in our view, sections 12A and 12AA are only procedural in nature. Hence, it is not the registration u/s 12AA by itself that offers immunity from taxation. A receipt whether it is revenue or capital in nature is to be decided at the assessment stage. Being procedural in nature, in our view, liberal interpretation will give effect to the intention of the amendment, thereby removing the hardship in genuine cases like the present assessee under consideration."
9. The Kolkata Bench of the Tribunal in the case of Sree Sree Ramkrishna Samity Vs. Deputy Commissioner of Income Tax (supra) while dealing with the issue where the benefits of exemption u/s. 11 and 12 were denied to the assessee only for the reason that the 9 ITA No. 2013/PN/2014 & CO No. 18/PN/2016 assessee is not registered u/s. 12A of the Act held that the legislature has brought proviso to section 12A(2) to prevent genuine hardship that is caused to the assessee due to non-registration u/s 12AA and accordingly, the amendment to section 12A(2) has to be construed as retrospective in operation.
10. The Commissioner of Income Tax (Appeals) has accepted the contentions of the assessee by placing reliance on the decision of Hon'ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Programme for Community Organisation reported as 248 ITR 1 (SC). The Commissioner of Income Tax (Appeals) held :
"11. This leaves the matter of computation of income which has been complicated by applying the provisions u/s. 57 of Income-tax Act. Voluntary contributions or Donations by their inherent nature do not fall the category of 'Income' unlike other income. These contributions have been deemed as income by virtue of Sec. 12(1) of Income-tax Act. Voluntary contributions received towards corpus of the trust are excluded u/s. 11(1)(a) from the scope of income u/s. 11(1) of Income- tax Act. Therefore, even if exemption is not allowable in view of non registration u/s. 12AA of Income-tax Act, the income of the Trust is required to be computed not in accordance with the provisions of Act but in accordance with the provisions of Act but in accordance with the normal rule of accountancy, in a commercial sense without reference to the head of income specified in See. 14. This is a matter of settled law. The Hon'ble Supreme Court in CIT Vs. Programme for community organization, 248 ITR 1 (SC) had approved Kerala High Court's decision in the same case in 228 ITR 620 (Ker) as to the manner of computation stating that income has to be computed on commercial basis and not headwise or statutory basis wherein Expenditure would be charge on the income, while the net income along with donations other than corpus donations will form eligible base out of which the appellant is expected to apply 75% (now 85%). Therefore, in my opinion, the manner of computation of income will be the same though the appellant will not be entitled to exemption u/s. 11 & 12 of the Income-tax Act being not registered u/s. 12AA of Income-tax Act and the question of taxability of donation u/s. 57 and deduction u/s. 57(iii) of Income-tax Act does not arise. Accordingly, 10 ITA No. 2013/PN/2014 & CO No. 18/PN/2016 the Assessing Officer is directed to delete the addition of `40,92,237/-."
11. The ld. DR has not been able to controvert the well reasoned findings of the Commissioner of Income Tax (Appeals).
Thus, in view of the facts of the case and the decisions of Tribunal holding the amendment to provisions of sub-section (2) to section 12A to be retrospective in nature, coupled with the fact that the assessee was subsequently granted registration u/s. 12AA of the Act, we are of the considered view that the Commissioner of Income Tax (Appeals) has rightly deleted the addition made by the Assessing Officer. Accordingly, the appeal of the Revenue is dismissed being devoid of any merit.
CO No. 18/PN/2016
12. In Cross Objection the assessee has assailed the findings of Commissioner of Income Tax (Appeals) in upholding the reassessment proceedings. The ld. AR of the assessee has pointed that the additions made by the Assessing Officer in reassessment proceedings are for different reasons viz-a-viz reasons mentioned in the 'reasons for reopening'. The reasons for reopening were communicated to the assessee vide letter dated 18-06-2013. The same are reproduced as under :
"The assessee trust has filed Return of Income for A.Y. 2011-12 declaring total loss of Rs.5,42,718/-. During the year the assessee trust has received donations of Rs.40,77,937/- and claimed expense of Rs.39,21,244/- and surplus of Rs.1,56,693/- transferred to Reserve. However, the assessee in his return of Income shown loss of Rs.5,42,718/-. The assessee has shown incorrect income. Therefore, there is an escapement of Income to the extent of Rs.6,99,411/-. The trust has not received registration u/s. 12AA of the Act.11 ITA No. 2013/PN/2014 & CO No. 18/PN/2016
In view of the above fats, I have therefore, reasons to believe that the income chargeable to the tax for A.Y. 2011-12 has escaped assessment within the meaning of section 147 of the IT Act, 1961 to the extent of Rs.6,99,411/-."
13. The ld. AR has further pointed that in the reasons recorded it has been wrongly mentioned that there is surplus of `1,56,693/-, whereas, it is a deficit. In support of his submissions the ld. AR has drawn our attention to the income and expenditure account for the year ended on 31-03-2011 at page 16 of the paper book. We find merit in the submissions of the ld. AR of the assessee. A further perusal of the assessment order shows that the addition has been made on account of disallowance u/s. 57 of the Act. The total expenditure claimed by the assessee is `42,34,630/- out of said expenditure the amount on establishment, miscellaneous and said expenses `1,42,393/- was allowed to the assessee u/s. 57(iii) by the Assessing Officer and the balance amount of `40,92,237/- was disallowed. Thus, the addition made by the Assessing Officer is incoherent to the reasons recorded for issuing notice u/s. 148 of the Act.
14. The Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Jet Airways (I) Ltd. (supra) has held in unequivocal words that where if after issuing notice u/s. 148, Assessing Officer accepts the contention of the assessee and holds that income, for which he had initially formed a 'reason to believe' that it had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him to independently assess some other income. If he intends to do so, a fresh notice u/s. 148 would be necessary. In the present case, we observe that the addition has been made for reasons different 12 ITA No. 2013/PN/2014 & CO No. 18/PN/2016 from what has been communicated to the assessee. No addition has been made on the ground, the Assessing Officer had 'reasons to believe' for reopening assessment. Therefore, in light of decision of Hon'ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Jet Airways (I) Ltd. (supra), we hold that the reassessment proceedings are bad in law. Accordingly, we accept the Cross Objection filed by the assessee.
15. In the result, the appeal of the Revenue is dismissed and the Cross Objection filed by the assessee is allowed.
Order pronounced on Friday, the 22nd day of July, 2016.
Sd/- Sd/-
(आर. के. पांडा / R.K. Panda) (!वकास अव"थी / Vikas Awasthy)
लेखा सद"य / ACCOUNTANT MEMBER $या%यक सद"य / JUDICIAL MEMBER
पुणे / Pune; &दनांक / Dated : 22nd July, 2016
RK
आदे श क- *%त/ल#प अ0े#षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. आयकर आयु'त (अपील) / The CIT(A)-V, Pune
4. आयकर आयु'त / The CIT-V, Pune
5. !वभागीय %त%न,ध, आयकर अपील य अ,धकरण, "बी" ब/च, पण ु े / DR, ITAT, "B" Bench, Pune.
6. गाड1 फ़ाइल / Guard File.
//स या!पत %त // True Copy// आदे शानुसार / BY ORDER, %नजी स,चव / Private Secretary, आयकर अपील य अ,धकरण, पुणे / ITAT, Pune