Income Tax Appellate Tribunal - Chennai
Adhiparasakthi Charitable Medical ... vs Acit, Chennai on 31 January, 2018
आयकर अपील
य अ धकरण, 'सी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL , 'C' BENCH, CHENNAI
ी ए. मोहन अलंकामणी, लेखा सद य एवं ी ध!ु वु" आर.एल रे #डी, या%यक सद य के सम&
BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER
AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER
आयकरअपीलसं./I.T. A. No.2214/Mds/2016
( नधा रणवष / Assessment Year: 2012-13)
The Asst. Commissioner of Vs M/s. Adhiparasakthi Charitable
Income Tax, Medical Educational and Cultural
Central Circle - 2(2), Trust, GST Road, Cheyyur,
Chennai - 34. Melmaruvathur, Kanchipuram
District
PAN: AAATA0722H
(अपीलाथ /Appellant) ( यथ /Respondent)
C.O. No. 127/Mds/2016
(in I.T.A. No.2214/ Mds/2016)
M/s. Adhiparasakthi Charitable Vs The Asst. Commissioner of
Medical Educational and Cultural Income Tax,
Trust, GST Road, Cheyyur, Central Circle - 2(2),
Melmaruvathur, Kanchipuram Chennai - 34.
District
PAN: AAATA0722H
(अपीलाथ /Appellant) ( यथ /Respondent)
राज की ओर से /Revenue by : Shri N Madhavan, JCIT
नधा रती क ओर से /Assessee by : Shri R.M. Narayanan, CA
सन
ु वाईक तार ख/Da t e of h e ar in g : 29.01.2018
घोषणाक तार ख /D at e of Pr on o unc em en t : 31.01.2018
आदे श / O R D E R
Per A. Mohan Alankamony, AM:-
The appeal by the Revenue and cross objection by the assessee are directed against the order passed by the learned Commissioner of Income Tax (Appeals)-18, Chennai dated 2 ITA No.2214/Mds/2016 & CO 127/Mds/2016 07.04.2016 in ITA No.312/15-16 for the assessment year 2012-13 passed U/s.250(6) r.w.s. 143(3) of the Act.
2. Revenue's Appeal:-
The Revenue has raised the following grounds in its appeal "1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law.
2. The Ld.ClT(A) erred in directing to allow exemption u/s 11 of the IT Act, 1961, when the assessee in the return of income filed for the A Y 2012-13 has claimed exemption only u/s 10(23C)(iv) of the IT Act.
3. The learned CIT(A) has erred in holding that the assessee trust is entitled to exemption u/s 11 of the IT Act, 1961.
4. The ld.ClT(A) erred in allowing relief to the assessee without discussing about the details and the nature of additional evidences produced by the assessee before him.
4.1 The ld.CIT(A} having held that the proviso to section 2(15) of the IT Act is not attracted in the case of the assessee, ought to have appreciated that the assessee trust has indulged in carrying on business in the form of purchase and sale of books and that the total turnover in this regard exceeded the specified limit of RS.25 lakhs.
4.2 The ld.CIT(A) ought to have appreciated that that the assessee was not selling the books on "No Profit Basis" and that the profit earned (Rs.77,66,881/-) for this AY 2012-13 works out to 62% of the cost price (Rs.1,25,10,076/-) approximately and for the previous AY 2011-12, the profit on sale of books worked out to 68% approximately.
4.3 The ld.CIT(A} ought to have appreciated that the assessee has filed during the appeal remand proceedings, only separate Balance Sheet and P&L Account for purchase and sale of stationery, institution wise, in the additional evidences, without producing and establishing, the fact of maintenance of separate books of account in respect of that incidental business of purchase and sale of books and hence, there is violation of section 11{4A) of the I T Act and thus, the assessee is not eligible for exemption u/s 11 of the IT Act, 1961.3 ITA No.2214/Mds/2016 &
CO 127/Mds/2016
5. The ld.CIT(A) erred in not appreciating that the payment of Rs. 65.43 lakhs made to various relatives including trustees, are excessive and not commensurate with the services rendered by the concerned persons and thus there is violation of provisions of sec. 13(2)(c) r.w.s. 13(l)(c) of the IT Act, 1961 and thereby the assessee is not eligible for exemption u/s 11 of the IT Act, for AY 2012-13.
6. The ld.CIT(A) erred in not appreciating that there is violation of Sec. 13(1)(c) of the IT Act, 1961, on the part of the assessee, from payment made by the assessee to M/s Devi Constructions, in which the relatives of the trustees are interested and moreover when the assessee has not been able to establish that the payment made to that concern during the year is commensurate with services rendered by it thereby leading to denial of exemption u/s 11 of the IT Act, for AY 2012-13.
7. The ld.ClT(A) erred in allowing the assessee's claim of exemption u/s 11 on the capital receipts of Rs. 2,04,24,749/-, when it is not eligible for exemption u/s 11 of the IT Act, 1961 .
8. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT{Appeals) may be set aside and that of the Assessing Officer be restored."
3. Assessee's Cross Objection :-
The Assesse has raised the following grounds in its cross objections:-
1) The Learned CIT(A) erred in not accepting the Assessees's submissions that the assessment was in complete violation of the principles of Natural Justice. He also erred in not entertaining the appeal on the matter of section I 0(23C)(iv) exemption denial.
Assessment in violation of principles of Natural Justice:
2) The Learned CIT(A) grossly erred in overlooking the following undisputed facts:4 ITA No.2214/Mds/2016 &
CO 127/Mds/2016 • That the issue regarding denial of 12A exemption was raised for the first time vide the show cause notice dated 24-3-2015, received by post only on 4-4-2015, ie after the completion of assessment.
• That no time was given to the assessee to reply.
• That the assessment order does not satisfactorily address the submissions made by assessee vide letters dated 30-3-2015 and 31-3-2015.
• That the assessment was actually completed on 30-3-2015 as evidenced by the Demand notice, though order was dated 31-3-2015.
• That the show cause notice also did not raise the issues regarding undue benefit to specified persons and taxation of capital receipts which is a major travesty of justice and • That the remand report of the assessing officer concedes the above facts, in effect accepting that adequate opportunity was indeed not afforded to the assessee on the matter.
3) The assessee therefore humbly submits that • The assessment order is in gross violation of the principles of Natural Justice and the maxim Audi AlteramPartem which is sine qua non of every civilized society.
• The assessment is vitiated by a serious procedural illegality as laid down in
-M/s Rameshwaram Paper Mills (P) Limited vs. State of UP. and Others (2009 NTN (VO!. 40) - 358 [Allahabad High Court])
-Padam Traders & others v. State of UP. & others, (2009) 47 STJ 392 • The urgency of the time frame cannot preclude a reasonable opportunity of being heard as held in CB. Gautam v. Union of India, [1992) 65 Taxman 440 (SC)and • Therefore that the assessment is completely void as per the principles of the following decisions:
- Green Power Realtors (P.) Ltd v.Deputy Commissioner of Income-tax, Circle -11(2), [2013J 34 taxmann.com 27 (Madras) 5 ITA No.2214/Mds/2016 & CO 127/Mds/2016
- JK. Synthetics Ltd. v. o.s. Bajpai, Income-tax Officer, [1976J 105ITR 864 (All)
- Smt. Ritu Devi v. Commissioner of Income-tax, [2004J 141 Taxman 559 (Mad)
- Jagdhamba Industries v. Income-tax Officer, [2010] 2ITR (Trib.) 134 (Delhi) Exemption u/s.10(23C)(iv):
4) Without prejudice to the above, it is submitted that the Learned CIT(A) grossly erred in not entertaining the assessee's claim to exemption u/s 10(23C)(iv) overlooking the following:
- That the show cause notice from the DGIT (Inv) for withdrawal of exemption mentioned only the AY s 2006-07 to 2011-12, but the final withdrawal order was for AY 2006-07 and onwards. Thus the withdrawal of exemption for the AY under consideration is patently illegal and without issue of any show cause notice.
- That the reasons for which the said exemption was withdrawn by the DGIT(Inv) were all issues in respect of AY s 2006-07 to 2011-12 which were settled in favour of the assessee by the Hon'ble Settlement Commission. Consequently, the order of the DGIT(Inv) withdrawing the exemption amounted to overthrowing the findings of a higher authority.
Prayer:
5) The Assessee therefore prays that:
- the assessment order dt 31-3-15, being in gross violation of the principles of Natural Justice, deserves to be struck down as a nullity and
- in the alternative, assessee must not be denied exemption under section 10(23C)(iv) based on an invalid order of the DGIT (Inv) withdrawing said exemption."
4. The brief facts of the case are that the assessee is a charitable trust and operates in the Melmarvathur village near Chennai. It runs educational institutions such as engineering 6 ITA No.2214/Mds/2016 & CO 127/Mds/2016 colleges, medical colleges, schools and also a hospital, filed its return of income for the assessment year 2012-13 on 27.01.2012 declaring 'Nil' income. The case was selected for scrutiny under CASS and notice U/s.143(2) of the Act was issued on 23.09.2013 and finally assessment was completed U/s.143(3) of the Act vide order dated 31.03.2015 wherein the Ld.AO withdrew the benefit of exemption U/s.11 of the Act citing various reasons discussed in the assessment order and also treated the entire receipt of Rs.2,04,24,749/- as income of the assessee taxable at maximum marginal rate. The details of the receipt of Rs.2,04,24,749/- are as under:-
1. Donation from Bangaruadigalar Trust Rs.17,30,000/-
2. Donations from APSPWCT Rs.10,00,000/-
3. A.P. Educational Institutions Rs.1,76,94,749/-
Total Rs.2,04,24,749/-
============
5. On appeal the Ld.CIT(A) granted relief to the assessee by holding in his order that the assessee has not violated any of the provisions of Section 13(1)(c) of the Act and thefore it is eligible for exemption U/s.11 of the Act.7 ITA No.2214/Mds/2016 &
CO 127/Mds/2016
6. At the outset the Ld.DR submitted before us that the entire finding of the Ld.CIT(A) was based on additional evidence produced before the Ld.CIT(A) which was not part of the record produced before the Ld.AO. He therefore argued that the Ld.AO was not provided with an opportunity to examine the details filed before the Ld.CIT(A) and therefore the matter may be remitted back. The Ld.DR further pointed out that the Ld.CIT(A) has also not obtained remand report from the Ld.AO before arriving at his decision. The Ld.AR could not controvert to the submission of the Ld.DR and further agreed for the matter to be remitted back to the file of Ld.AO for considering the issue afresh based on the fresh materials produced before the Ld.CIT(A).
7. We have heard the rival submissions and carefully perused the materials on record. It is evident from the facts of the case that the Ld.CIT(A) has arrived at his conclusion based on fresh materials produced before him which was not part of the record produced before the Ld.AO and further the Ld.CIT(A) had failed to obtain remand report from the Ld.AO. This is in gross violation of Rule 46A of the Rules. Therefore as pointed out by the Ld.DR the Ld.AO was denied with an opportunity to examine the additional 8 ITA No.2214/Mds/2016 & CO 127/Mds/2016 evidence produced before the Ld.CIT(A) for the first time. These facts are not disputed by the Ld.AR either. Further both the parties have agreed for the matter to be remitted back to the file of Ld.AO for de-nova consideration. Therefore in the interest of justice, we hereby remit back the appeal of the Revenue to the file of Ld.AO for fresh consideration. Consequently the cross objection of the assessee does not survive. Accordingly both the appeals of the Revenue as well as the cross objection of the assessee are disposed off.
8. In the result the appeal of the Revenue is allowed for statistical purposes and the cross objection of the assessee is dismissed.
Order pronounced on the 31st January, 2018 at Chennai.
Sd/- Sd/-
ु आर.एल रे #डी)
(ध!ु व" (ए. मोहन अलंकामणी)
( Duvvuru RL Reddy ) ( A. Mohan Alankamony )
#या यक सद%य /Judicial Member लेखा सद%य / Accountant Member
चे#नई/Chennai,
'दनांक/Dated 31st January, 2018
RSR
आदे श क त)ल*प अ+े*षत/Copy to:
1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आय.
ु त (अपील)/CIT(A)
4. आयकर आय.
ु त/CIT 5. *वभागीय त न1ध/DR 6. गाड फाईल/GF