Income Tax Appellate Tribunal - Pune
State Bank Of India Officer'S ... vs Pr. Commissioner Of Income-Tax ,, on 7 July, 2017
आयकर अपीलीय अिधकरण,
अिधकरण पुणे यायपीठ "ए
ए" पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
ी डी.
डी. क णाकरा राव , लेखा सद य
एवं ी िवकास अव थी,
अव थी याियक सद य के सम
BEFORE SHRI D.KARUNAKARA RAO, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No. 862/PUN/2015
िनधा रण वष / Assessment Year : 2010-11
State Bank of India Officers .......... अपीलाथ /
Association Education Society, Appellant
Zonal Office, Plot No.79,
CIDCO, Aurangabad,
Maharashtra
PAN : AAMFS9429B
बनाम v/s
Principal (Exemptions),
Pune .......... यथ /
Respondent
Assessee by : Shri Anand A. Desai
Revenue by : Shri Ajit Korde, CIT
सुनवाई क तारीख / घोषणा क तारीख /
Date of Hearing :05.07.2017 Date of Pronouncement:07.07.2017
आदेश / ORDER
PER D. KARUNAKARA RAO, AM :
This appeal filed by the Assessee against the order of Pr.CIT (Exemptions), Pune dated 26-03-2015 for the Assessment Year 2010-11.
2. Grounds raised by the assessee are extracted as under :
"1. The Prl. CIT(Exemptions) erred in passing order u/s.263 when in fact order is not erroneous and consequently entire assessment u/s.263 is bad in law.
2. The Prl. CIT(Exemptions) did not realize the fact that the appellant has exercised the option u/s.11(1)(a) r.w. explanation 2 and accordingly intimation has been filed by the appellant before the Assessing Officer within the specified time mentioned in the law and therefore there was complete compliance with the requisite provisions.
3. The Prl. CIT(Exemptions) wrongly applied sec.11(2) and concluded that the procedural part was not followed and taxed the income when in fact the appellant had never applied/considered sec.11(2) for the relevant assessment year.2 ITA No.862/PUN/2015
4. The Prl. CIT(Exemptions) failed to appreciate the fact that sec.263 can be invoked when the assessment order is erroneous. In given case, the appellant has filed separate letter for exercising option under explanation 2 of sec.11(1)(a) which was considered by the Assessing Officer and after application of own mind he has passed the order. The view of the Assessing Officer being the correct and only interpretation, the invoking sec.263, was without jurisdiction and therefore bad in law."
3. Briefly stated the relevant facts are that the assessee is a trust with the object of imparting formal education through the schools at Nerul, Navi Mumbai and Aurangabad. Assessee filed the return of income declaring NIL income. Assessment u/s.143(3) was completed on 23-10-2012 accepting the income returned by the assessee. Principal CIT (Exemptions), Pune invoked the provisions of section 263 of the Act and held that the assessment order passed by the AO (supra) is erroneous in so far as prejudicial to the interest of the Revenue. Eventually, the AO's order was set aside by the Prl. CIT. In the revision order, Prl. CIT initiated the revision proceedings by holding that the assessee failed to file Form No.10, being the notice for accumulation of income. Prl. CIT is of the view that the trust income which is short applied to the tune of Rs. 23,47,812/-. On finding this issue was not verified by the AO properly, the order of the AO was proposed to be found to be erroneous order prejudicial to the interest of the Revenue. In response to the said proposal of the Prl. CIT, the assessee vide letter dated 11-03-2015 submitted that surplus income of the assessee constitutes Rs.23,47,812/-. The same is accumulated as per the provisions of clause (2) of the Explanation to section 11(1) of the Act. Assessee submitted requisite intimation to the AO as per the provisions of said clause (2) to the said Explanation. The fact of above accumulation was also disclosed fully in the computation of income filed along with the return of income. The said accumulated income was duly utilized for the objects of the trust in the next assessment year. The same was also disclosed in the computation of income relevant to the A.Y. 2011-12. Thus, it is the 3 ITA No.862/PUN/2015 case of the assessee that the income was accumulated as per the provisions of clause (2) of the Explanation to section 11(1) of the Act and has met the conditions of intimating the AO about it as per the option specified therein. Therefore, there is no requirement of filing of Form No.10 in the said explanation in the instant case which happened to be the condition precedent as per the provisions of section 11(2)(a) of the Act. These provisions are not opted by the assessee. Considering the same the assessee requested for dropping of the proposal to revise the assessment order of the AO.
4. Prl. CIT invoked the provisions of section 11(2) and found fault with the assessee in so far as furnishing of the requisite Form No.10 being the notice of accumulation of income. Referring to Form No.10 which is filed by the assessee after the due date and in response to the demands of the authorities, the Prl. CIT considered the same as invalid and directed the AO to pass a fresh assessment order.
5. Aggrieved with the same assessee is in appeal before us with the grounds extracted above.
6. Grounds of appeal No.1 and 5 are general in nature and Grounds of appeal No.2 to 4 are argumentative. Arguments of the assessee include that the Principal CIT (Exemptions), Pune did not appreciate the fact of assessee exercising the option u/s.11(1)(a) r.w. clause (2) of the Explanation of the Act. He also mentions that the Prl. CIT erroneously applied the provisions of section 11(2) which was never invoked by the assessee. Considering the fact the assessee intimated the option to the AO that there is no error in order of the AO nor any loss of Revenue to the Department if the correct provisions such as provisions of clause (2) of the Explanation to section 11(1)(a) of the Act are applied. Referring to the paper book, Ld. Counsel for the assessee brought our attention to page 5, letter dated 08-09-2010 giving intimation to 4 ITA No.862/PUN/2015 the AO regarding the applicability of provisions of clause (2) of the Explanation to section 11 (1) of the Act.
7. In reply, Ld. Departmental Representative for the Revenue relied heavily on the order of the Prl. CIT and submitted that the same should be upheld.
8. We heard both the parties on the issue of jurisdiction of Prl.CIT u/s.263 of the Act in this case. Grounds of appeal No.1 refers to the same. We also perused the order passed by the AO originally is erroneous in so far as it is prejudicial to the interest of the Revenue. It is not the case of the Prl. CIT that the AO has wrongly applied the provisions of section 11(1) of the Act in place of the provisions of section 11(2) of the Act as decided by the Prl. CIT. In his revision order, Prl. CIT is of the opinion that as per section 11(2) of the Act, assessee is under obligation to file Form No.10 when the amount which falls short of 85% of the income was accumulated or set apart (Para No.4). Further, he observed that the said Form No.10 was not filed. Therefore, the amount of Rs.23,47,812/- should be included in the total taxable income of the assessee. Further Prl. CIT is of the opinion that the AO has passed the assessment order without applying his mind to the aspects of accumulation. However, revision order does not refer to the fact that the assessee made a claim u/s.11(1) of the Act and not u/s.11(2) of the Act. As per section 11(1) of the Act, there is no requirement of filing of Form No.10. However, there is a requirement of exercising option and communicating such option in writing to the AO before filing the return of income u/s.139(1) of the Act. As such, there is no dispute on the fact of assessee's claim u/s.11(1) of the Act. Without getting into these aspects, Prl. CIT came to the conclusion that the AO failed to apply his mind (Para No.5) and therefore erroneously completed the assessment on the NIL income as returned by the assessee. 5 ITA No.862/PUN/2015
9. With the facts mentioned above, we examined the relevant provisions of clause (2) of the Explanation below section 11(1) of the Act. For the sake of completeness, we proceed to extract the said relevant provisions as under :
"(1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income-
(a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of [fifteen] per cent of the income from such property;
(b) . . . . . . . . . .
(c) . . . . . . . . . .
(d) . . . . . . . . . .
Explanation- For the purposes of clauses (a) and (b),-
(1) . . . . . . .
(2) if, in the previous year, the income applied to charitable or religious purposes in India falls short of [eighty five] per cent of the income derived during that year from property held under trust, or, as the case may be, held under trust in part, by any amount - "
(i) for the reason that the whole or any part of the income has not been received during that year, or
(ii) for any other reason, then -
(iii) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and
(iv) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount, may, at the option of the person in receipt of the income (such option to be exercised in writing before the expiry of the time allowed under sub-section (1) [***] of section 139 [***] for furnishing the return of income) be deemed to be income applied to such purposes during the previous year in which the income was derived; and the income so deemed to have been applied shall not be taken into account in calculating the amount of income applied to such purposes, in the case referred to in sub- clause (i), during the previous year in which the income is received or during the previous year immediately following, as the case may be, and, in the case referred to in sub-clause (ii), during the previous year immediately following the previous year in which the income was derived.] (emphasis supplied) 6 ITA No.862/PUN/2015
10. From the above, we find that, when Assessee falls short of 85% of application of income, the Assessee, has an option as per clause (2) of the Explanation to section 11(1) of the Act. Prior to the amendment, as applicable to the current A.Y. 2010-11, such option is to be exercised by the assessee in writing and the same needs to be communicated to the AO, before expiry of the time (not due date for filing return of income) allowed under section 139(1) for furnishing the return of income. Accordingly, as evident from the assessee's letter dated 08-09-2010 (supra), assessee exercised such an option and relevant paragraph from the same are extracted as under :
" Dt. 08-09-2010
To,
The Income Tax Officer,
Wd-1(1),
Aurangabad
Sub : State Bank of India Officers Association Education Society - A.Y. 2010-11 Intimation under Explanation 2 to sec.11(1). Respected Sir/Madam, The activities conducted by the Trust in pursuance of the objects of the Trust resulted in a surplus of Rs.23,47,812.42 (Rupees Twenty Three Lakhs Forty Seven Thousand Eight Hundred and Twelve and Paise Forty Two) for the year ended on 31st March, 2010. The Trust wishes to accumulate this amount and apply the same towards its object of promotion of education in the immediate subsequent year (i.e. F.Y. 2010-11, A.Y. 2011-12). Kindly consider this correspondence as an intimation as required under explanation 2 to section 11(2) and allow the Trust to accumulate the unspent amount to be applied towards its objects in the subsequent previous year ending on 31/03/2011 (i.e. F.Y. 2010-11).
Thanking You, Yours Sincerely For State Bank of India Officers Association Education Society Sd/-
(Trustees)"
11. It is not the case of the Prl. CIT that the said communication is not made to the AO as per the said provision. As discussed in the above paragraphs of this order, assessee has an option to opt for between the provisions of section 11(1) of the Act and provisions of section 11(2) of the 7 ITA No.862/PUN/2015 Act. Assessee opted for earlier one and rejected the later one, which require filing of Form No.10. As per the provisions of section 11(1), there is no requirement of furnishing of Form No.10. Such condition is not specified in the provisions of clause (2) of the Explanation to section 11(1) of the Act. Therefore, on finding no mistake with the assessee opting for the provisions of clause (2) of the Explanation to section 11(1) of the Act, we are of the view that there is no need for the assessee to furnish Form No.10. As per the said Explanation (2) to section 11(1) of the Act, assessee duly furnished the statement dated 08-09-2010 (supra).
12. Ld. Counsel for the assessee submitted that this is not the first year of the Trust/Society. Assessee has been consistently filing the return of income and claiming the option provided in the provisions of clause (2) of Explanation to section 11(1) of the Act. The Department is consistently accepting the said claim including the current year which is under review by the Prl. CIT. When the AO followed the principles of consistency, the Prl. CIT should not have disturbed the set principle when there is no difference on facts. Therefore, we are of the view that the original assessment order completed by the AO is proper as the same was made in accordance with the provisions of section 11(1) of the Act. Therefore, the AO's order does not call for any revision u/s.263 of the Act.
13. Regarding the allegation of non-application of mind of the AO by the Prl. CIT, in our considered opinion, the same is not based on any facts. Infact, it is the Prl.CIT who has not applied his mind to the correctness of the applicability of section 11(2) of the Act qua the issue of communicating the requirement of filing of Form No.10. As such, it is a settled proposition that the CIT can only assume jurisdiction only when there is an erroneous assumption of fact, erroneous assumption of law/fact or failure of the AO (1) 8 ITA No.862/PUN/2015 to apply his mind, or (2) to conduct the required enquiries, etc. Under the provisions of section 263, the Prl. CIT is not empowered to thrust his opinion on the assessee qua the provisions of section 11(2) of the Act when the assessee opted for the provisions of section 11(1) of the Act, which is rightly upheld by the AO in his assessment order. Therefore, we do not find any of these deficiencies in the order of the AO. Therefore, we are of the view that the grounds raised by the assessee should be allowed.
14. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on this 07th day of July, 2017.
Sd/- Sd/-
(VIKAS AWASTHY) (D. KARUNAKARA RAO)
JUDICIAL MEMBER ACCOUNTANT MEMBER
पुणे Pune; दनांक Dated : 07th July, 2017.
सतीश
आदेश क ितिलिप अ िे षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. The Prl.CIT, Pune
4. The CITA)-10, Pune
5. DR, ITAT, "A Bench" Pune;
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER,
//True Copy //
सहायक रिज ार/Assistant Registrar
आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune