Income Tax Appellate Tribunal - Panji
The Income Tax Officer, Srinagar vs M/S. J.K.Public School,, Kashmir on 17 November, 2017
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ITA No. 307/ASR/2014 AY: 2010-11
ITO Vs. M/s J.K. Public School
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR
BEFORE SHRI T.S. KAPOOR, AM AND SHRI RAVISH SOOD, JM
आमकय अऩीर सं./ I.T.A. No.307/ASR/2014
(ननधधायण वषा / Assessment Year: 2010 -11)
Income Tax Officer M/s J.K. Public School,
Ward-3(1), Srinagar, फनधभ/ Humhama-Budgam
Post Office Lane, Shah House Kashmir.
Vs.
Opp. Kitab Manzil, Rajbagh
Srinagar- Kashmir, J & K.
स्थधमीरेखधसं ./ जीआइआयसं ./ PAN/GIR No. AABTJ1255B
(अऩीरधथी/Revenue) : (प्रत्मथी / Assessee)
अऩीरधथी की ओय से/Revenue by : Shri S.S. Kanwal, D.R
प्रत्मथी की ओय से/ Assessee by : Shri M.A. Mir, A.R
सुनवधई की तधयीख/ : 15/11/2017
Date of Hearing
घोषणध की तधयीख / : 17/11/2017
Date of Pronouncement
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ITA No. 307/ASR/2014 AY: 2010-11
ITO Vs. M/s J.K. Public School
आदे श / O R D E R
PER RAVISH SOOD, JUDICIAL MEMBER:
The present appeal filed by the revenue is directed against the order passed by the CIT(A), Jammu, dated 26.02.2014, which in itself arises from the assessment order passed by the A.O under Sec.144 of the Income Tax Act, 1961 (for short 'Act'), dated 01.03.2013. The revenue assailing the order of the CIT(A) had raised before us the following grounds of appeal:-
"1. On the facts and circumstances whether the ld. CIT(A) was right in allowing a relief on account of deduction u/s 10(23C)(iiiad) of the I.T. Act, 1961 when the turnover of the school is less than of Rs. One crore but the assessee has failed to substantiate that the assessee institution exists solely for educational purposes and not for profit.
2. On the facts and circumstances whether the ld. CIT(A) was right in allowing the relief on account of disallowance of 25% of expenses as the assessee has failed to produce the books of accounts during the assessment proceedings and the said addition has been deleted by the ld. CIT(A) simply on the basis that the assessee is entitled to exemption/deduction u/s 10(23C)(iiiad) of the I.T. Act, 1961. The appellant craves to amend or add any one or more grounds of appeal."
2. Briefly stated, the facts of the case are that the assessee which is an educational institution had filed its return of income for A.Y 2010-11, declaring net income of Rs.26,92,741/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the 'Act'. The case of the assessee was thereafter taken up for scrutiny assessment and notice under Sec. 143(2), dated 22.09.2011 was issued and served upon the assessee. That in compliance to the query letter issued by the A.O the assessee filed its reply, however, as per the record some of the Page |3 ITA No. 307/ASR/2014 AY: 2010-11 ITO Vs. M/s J.K. Public School queries raised by the A.O remained unanswered. That as stands gathered from the assessment order, as the assessee despite being afforded sufficient opportunities was neither forthcoming with the replies to the remaining queries nor producing the books of account for necessary examination, therefore, the A.O served a proposed draft assessment order, dated 04.02.2013 on the assessee. The assessee was informed by the A.O that in the absence of necessary compliance and furnishing of the reply to the queries that had remained unanswered till date, the assessment would be framed as per the provisions of Sec. 144 of the 'Act'. The assessee in reply to the proposed draft assessment order submitted before the A.O that it had claimed exemption under Sec. 10(23C) of the Income-tax Act, 1961, to which it was duly entitled. That still further the assessee stated that the reply to the remaining queries raised by the A.O vide his letter dated 07.12.2012 were also being submitted. The A.O after deliberating on the reply of the assessee was not inspired by the same and observed that the same was far from the facts as they so remained. It was further observed by the A.O that the failure on the part of the assessee to furnish the requisite information/documents and produce the books of account for necessary examination before him, continued as such. That as per the A.O the contention of the assessee that it had claimed exemption under Sec. 10(23C) in respect of excess of income over expenditure for the year under consideration, viz. A.Y 2010-11, was also not correct and the said fact could safely be gathered from a perusal of (Part-B) Col. No. 26 of the return of income filed by the assessee for the year under consideration. Thus, the A.O holding a conviction that now when the assessee had neither placed on record the requisite replies to the queries raised, nor Page |4 ITA No. 307/ASR/2014 AY: 2010-11 ITO Vs. M/s J.K. Public School produced the books of accounts despite specific directions during the course of the assessment proceedings, therefore, he was left with no other alternative but to frame the assessment as per the provision of Sec. 144 of the 'Act'.
3. The A.O on the basis of the aforesaid facts therein observed that the assessee was not registered as a charitable trust/society under the provisions of Sec. 12A(a) of the 'Act'. It was observed by the A.O that the assessee which had declared its gross receipts from running of a school, viz. J.K. Public School at Rs.93,82,100/-, had after deducting various expenses as per the Income and Expenditure account drawn for the year 31.03.2012, therein declared net excess of income over expenditure at Rs.22,26,941/-. The A.O being of the view that as the assessee had not claimed any exemption in respect of the excess of income over expenditure as per its return of income for the year under consideration, therefore, the entire surplus was liable to be brought to tax. The A.O being of the view that as the assessee had failed to substantiate the genuineness and veracity of the expenses which were claimed by it, therefore, disallowed 25% of the aggregate expenses of Rs.47,03,012/-, resulting to a consequential addition of Rs.11,75,776/- to the returned income of the assessee. The A.O further observing that the assessee had failed to deduct tax at source on the rent of Rs.4,24,100/- which was claimed as an expense in the income and expenditure account, therefore, disallowed the same as per Sec. 40(a)(ia) of the 'Act'. Thus, on the basis of the aforesaid observations the A.O assessed the income of the assessee at Rs.42,92,520/-.
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4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions of the assessee in the backdrop of the facts of the case, therein observed that as the gross receipts of the assessee from running of the school, viz. J.K. Public School, Humhama Budgam, Kashmir was less than Rs. 1 crore, therefore, the assessee was entitled towards claim of exemption under Sec. 10(23C)(iiiad) of the 'Act'. It was observed by the CIT(A) that the assessee had in its return of income while claiming its income as exempt, had inadvertently made a mention of Sec. 11, as against its entitlement under Sec. 10(23C)(iiiad) of the 'Act'. The CIT(A) found favour with the contention of the assessee that as its gross receipts were less than Rs.1 crore, therefore, it stood duly entitled towards claim of deduction under Sec.10(23C)(iiiad) of the 'Act'. Thus, on the basis of the aforesaid observations, the CIT(A) allowed the deduction of Rs.26,92,741/- claimed by the assessee under the aforesaid statutory provision, viz. Sec. 10(23C(iiiad).
5. That as regards the adhoc disallowance of 25% of the expenses of Rs.11,75,776/- by the A.O, the CIT(A) observed that as the A.O had failed to point out any basis for making the adhoc disallowance, therefore, the same could not be sustained.
6. The revenue being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. The ld. Departmental Representative (for short 'D.R') at the very outset submitted that as the assessee despite specific directions by the A.O, had neither complied with the notices issued under Sec. 142(1), nor produed the books of account for verification, therefore, there was no occasion on the part of Page |6 ITA No. 307/ASR/2014 AY: 2010-11 ITO Vs. M/s J.K. Public School the A.O to have verified the fulfilment of the requisite conditions by the assessee, which therein entitled it towards the claim of exemption under Sec. 10(23C)(iiiad) of the 'Act'. It was submitted by the ld. D.R that in the absence of any compliance on the part of the assessee, the A.O being left with no other alternative had rightly invoked the provision of Sec. 144 of the 'Act' and framed the assessment. The ld. D.R taking us through Para 4.3 of the order of the CIT(A), therein submitted that the latter while rejecting the claim of the assessee that the disallowance of expenses would automatically lead to increase in the amount of eligible income which would be exempt under Sec. 10(23C)(iiiad), had observed that now when the assessee had violated the provisions of the 'Act', therefore, such a plea on its part was not acceptable. It was submitted by the ld. D.R that now when on one hand the CIT(A) had conceded that the assessee had violated the statutory provisions, therefore, it was beyond comprehension as to how in clear contradiction of his own observations the deduction under Sec. 10(23C)(iiiad) was allowed by the CIT(A). Per contra, the ld. Authorized Representative (for short 'A.R') submitted that making a mention of Sec. 11 as against Section 10(23C)(iiiad) by the assessee had occassioned only on account of an inadvertent mistake on the part of the assessee. The ld. A.R submitted that the assessee vide his letter dated 21.02.2013 had categorically clarified the said inadvertent mistake on its part before the A.O. It was submitted by the ld. A.R that now when it was a matter of fact that the assessee was an educational institution existing solely for educational purposes and not for the purpose of profit, having gross receipts from running of the educational institution not exceeding the prescribed amount of Rs 1 crore during the Page |7 ITA No. 307/ASR/2014 AY: 2010-11 ITO Vs. M/s J.K. Public School year under consideration, therefore, the assessee duly stood entitled for claim of exemption under Sec. 10(23C)(iiiad) of the 'Act'.
7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We have given a thoughtful consideration to the facts of the case and find that our indulgence in the present case is sought for adjudicating as to whether the CIT(A) is right in law in allowing the exemption under Sec. 10(23C)(iiiad) of the 'Act' to the assessee, or not. We find that it remains as a matter of fact that the assessee is an educational institution running a school, viz. J.K. Public School at Humhama Budgam, Kashmir. We find that the fact that the assessee is an educational institution existing solely for educational purpose and not for purpose of profit, had not been doubted at any stage by the A.O. We further find that the claim of the assessee that it was in receipt of gross reciepts of Rs.93,82,100/- from running of the aforesaid school, viz. (i) tuition fees :Rs.67,58,601/-; (ii) other income :Rs.9,284/-; and (iii) bus fees :Rs.26,14,214/-, had also not been disputed or dislodged by the A.O during the course of the assessment proceedings. Thus, a conjoint perusal of the aforesaid facts reveals that the asessee is an educational institution existing solely for educational purpose and not for the purpose of profit, whose gross receipts during the year under consideration were to the tune of Rs.93,82,100/-. We are of the considered veiw that not only the aforesaid facts clearly reveals the eligibility of the assessee towards claim of exemption under Sec. 10(23C)(iiiad) of the 'Act', but even otherwise, neither any submission nor any material had been placed on record before us which could persuade us to hold otherwise. We further find that the assessee had wrongly by Page |8 ITA No. 307/ASR/2014 AY: 2010-11 ITO Vs. M/s J.K. Public School way of an inadvertent bonafide mistake, despite not being registered under Sec. 12A(a), had wrongly made a mention of Sec. 11 as against its statutory entitlement under Sec. 10(23C)(iiiad). We are of the considered view that the aforesaid bonafide inadvertent mistake on the part of the assessee in making a reference to a wrong statutory provision, which though was corrected by way of a clarification during the assessment proceedings, cannot be allowed to be fatal to the very entitlement of the assessee towards the claim of the aforesaid exemption. We are of a strong conviction that now when the assessee had satisfied the requisite conditions for claim of exemption under Sec. 10(23C)(iiiad), therefore, merely on account of a technical and inadvertent mistake in making a correct mention of the statutory provision in the return of income, the assessee cannot be disentitled as regards its aforesaid statutory entitlement. We thus, finding ourselves as being in agreement with the view taken by the CIT(A) that the assessee is entitled towards claim of exemption under Sec. 10(23C)(iiiad), therefore, uphold his order on the issue under consideration. The Ground of appeal No. 1 raised by the revenue is dismissed.
8. That as regards the adhoc disallowance of 25% of expenses by the A.O, we have deliberated on the facts leading to the aforesaid disallowance and find ourselves to be in agreement with the view taken by the CIT(A) that now when the A.O had failed to point out the basis on which the said adhoc disallowance had been made, therefore, the same cannot be sustained. We are of the considered view that the said disallowance in all fairness had rightly been struck down by the CIT(A). We do not find any infirmity in the order of the CIT(A) in respect of the Page |9 ITA No. 307/ASR/2014 AY: 2010-11 ITO Vs. M/s J.K. Public School issue under consideration and therefore uphold the same. The Ground of appeal No. 2 raised by the revenue before us is dismissed.
9. The appeal of the revenue is dismissed.
Order pronounced in the open court on 17.11.2017 Sd/- Sd/-
(T.S. Kapoor) (Ravish Sood) Accountant Member Judicial Member ददनधंक 17.11.2017 Ps. Rohit Kumar
आदे श की प्रनतनरपऩ अग्रेपषत/Copy of the Order forwarded to :
1. अऩीरधथी / The Appellant
2. प्रत्मथी / The Respondent.
3. आमकय आमुक्त(अऩीर) / The CIT(A)-
4. आमकय आमुक्त / CIT
5. पवबधगीम प्रनतनननध, आमकय अऩीरीम अनधकयण, भुंफई / DR, ITAT, Amritsar
6. गधर्ा पधईर / Guard file.
सत्मधपऩत प्रनत //True Copy// आदे शधनुसधय/ BY ORDER, उऩ/सहधमक ऩंजीकधय (Dy./Asstt. Registrar) आमकय अऩीरीम अनधकयण, भुंफई / ITAT, Amritsar P a g e | 10 ITA No. 307/ASR/2014 AY: 2010-11 ITO Vs. M/s J.K. Public School