Income Tax Appellate Tribunal - Kolkata
Mahabodhi Society Of India, Kolkata vs Ito, Exemption - 1(4), Kolkata , Kolkata on 23 August, 2019
आयकर अपील य अधीकरण, यायपीठ - "B" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL
KOLKATA BENCH "B" KOLKATA
Before Shri J.Sudhakar Reddy, Accountant Member and
Shri S.S.Godara, Judicial Member
ITA No.261/Kol/2018
Assessment Years: 2007-08
Mahabodhi Society of बनाम / Income Tax Officer,
India, 4A, Bankim V/s . Exemption-1(4),
Chatterjee Street, Kolkata
Kolkata-700 073
[PAN No.AAATM 4537 A]
अपीलाथ /Appellant .. यथ /Respondent
अपीलाथ क ओर से/By Appellant Shri S.K.Tulsiyan, Advocate
यथ क ओर से/By Respondent Shri Sankar Halder, JCIT, SR-DR
सुनवाई क तार ख/Date of Hearing 23-08-2019
घोषणा क तार ख/Date of Pronouncement 23-08-2019
आदे श /O R D E R
PER S.S.Godara, Judicial Member:-
This assessee's appeal for assessment year 2007-08 arises against the Commissioner of Income Tax (Appeals)-25, Kolkata's order dated 12.10.2017 involving proceedings u/ 147 r.w.s. 143(3) of the Income Tax Act, 1961; in short 'the Act'.
Heard both the parties.
The assessee's detailed paper book comprising of its settlement deed dated 06.12.1956 followed by a supplemental deed dated 28.05.1957, registration application under the Foreign Contribution (Regulation) Act, 1976 dated 20.12.1995, copy of letter dated 28.08.1996 informing it about death of the last ITA No.261/Kol/2018 Assessment Year 2007-08 Mahabodhi Society of India Vs ITO Ex1(4), Kol. Page 2 beneficiary & transfer of fund dated 26.06.1994, Government of India's letter dated 01.12.1999 prohibiting acceptance of foreign contribution Ministry of Home Affair's letter dated 26.03.2002 allowing foreign contribution upto ₹5 lakh per month, its application dated 24.10.2005 seeking prior permission under the FCRA law (supra), its letter dated 11.09.2006 sent to the London based solicitar firm for transfer of fund to Sri Lanka and the Assessing Officer's sec. 148 notice dated 02.09.2006 running into 27 pages stands perused.
2. This assessee is a charitable trust set up for imparting education as well as for running hospital and dispensary. It got registration as a society under the West Bengal Societies Registration Act 1961. There is no further dispute that the department also granted registration u/s. 12AA registration to the assessee as per the CIT's order dated 16.11.1987 to this effect.
3. This taxpayer filed its return on 29.10.2007 stating nil income after claiming sec. 11 exemption. The same stood "summarily" processed. The Assessing Officer thereafter formed reasons to believe that the assessee's income liable to be assessed had escaped assessment. He issues sec. 148 notice dated 07.03.2014 by recording the following reasons:-
"For the Assessment Year 2007-08, it has been gathered that on 28.08.1996, the London Solicitors M/s Couts & Co. informed the said Society of the bequest made by two ladies namely Miss Grace Lounsbery and Madame Marguerite La Fuenmade to the said society of UK Pounds 1,75,000/- (Rs.1,51,09,500/- as per prevailing rate of exchange of RBI on the date of transfer i.e. 09-02-2007) The statement of cash in hand and bank balance as on 31.03.2007 has been examined and found that Bank of Ceylon shows only Rs.2/- as bank balance. Ven. P. Seewalee Thero, the Acting General Secretary of the Society in his own admission admitted the fact that it has not been reflected in the Bank of Ceylon"
4. The Assessing Officer took up re-assessment thereafter Page-2 in the re- assessment in question dated 30. 30.03.2015 indicates that the assessee had also faced proceedings u/s 4 of the Foreign Exchange Management Act before the Adjudicating ITA No.261/Kol/2018 Assessment Year 2007-08 Mahabodhi Society of India Vs ITO Ex1(4), Kol. Page 3 Authority for alleged violation of the foreign exchange law. The said authority's order dated 29.05.2014 imposed ₹1 crore and ₹50 lakh fine(s) on assessee and Dr. Thero; respectively u/s 13(2) of the Foreign Exchange Management Act, 1999. There is further no quarrel that both these parties filed their respective appeals before the Appellate Tribunal under the said law which accepted on 05.04.2019 as under:-
"19. Considering the above facts the appellant should not be considered to have violated the provisions of section 4 of the Act and Regulation 3 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 in view of peculiar facts and circumstances of the present matter.
20. By holding in the impugned order that the foreign exchange outside India the appellant has neither acted deliberately in defiance of law nor in conscious disregards of its obligation as it was held by Hon'ble Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa (1972) 83 ITR 26 (SC) that even if a minimum penalty is prescribed, the authority to imose the penalty will be justified in refusing to impose the penalty, when there is a technical or venial breach of the provision of the Act or where the breach flows from a bona fide belief that the offender is not liable to ac in the manner prescribed by the statue. Thus, the penalty levied is excessive and unreasonable having regard to the facts of the case.
21. The Adjudicating Authority have mentioned in the order that the Sri Lankan rupees now in the form of treasury bills with the Bank of Ceylon, Colombo, Sri Lanka is liable to be brought into India and is also liable for confiscation in favaour of the Central Government in terms of section 13(2) of FEMA, 1999 after the repatriation into India. The Adjudicating Authority has passed the order for confiscation without issuing any show cause notice for the same. the principle of natural justice has been totally violated. The Adjudicating Authority has passed the order for confiscation as a matter of course without considering the totality of the facts of the case and by without giving any justification for the same.
22. The nature of this transaction i.e. the Realisation of the foreign exchange as per the Will of the foreign national being resident outside India doesn't spell any conscious wrong doing on the part of the appellant. The possession of foreign exchange was neither unlawful nor has remained unexplained. The appellant before realization of this amount outside India has requested to grant permission for the repatriation of this amount to India. The said request of the appellant is to be determined as per law.
It was held in the case of CP Devasay Vs. Directorate of Enforcement (1998) 41 Taxman 39 (FERAB) and in the case of Dr. V.G. Joseph Vs. Additional Director (2004) 52 SCL 530 )ATFE) that in such circumstances the order for confiscation is unjustified. The finding in this regard are against the law and facts and circumstances of the present matters. The order for confiscation is based on assumptions and suppositions. No cogent reasons has been given for passing the order. It was held in the case of Abdul Razak Haji Ismail Vs. ITA No.261/Kol/2018 Assessment Year 2007-08 Mahabodhi Society of India Vs ITO Ex1(4), Kol. Page 4 Director (2004) 51 SCL 337 (Bom) that the power of confiscation being panel in nature must be exercised for having cogent and clear evidence. The order for confiscation cannot be inferred by implication and the power to confiscate cannot be assumed on the basis of assumptions and suppositions.
23. In the light of above, I allow both the appeals and set-aside the impugned order dated 29th May, 2014 against the appellants. However, this Tribunal does not wish to express any opinion or to pass a direction with regard to amount lying in foreign land. The appellant is at liberty to initiate the proceedings in that regard as per law as this Tribunal has no jurisdiction to pass an such direction."
5. Coming back to impugned re-assessment, the Assessing Officer issued his sec. 142(1) and sec.143(2) notice(s) asking for necessary particulars of the UK based bequest amounting to 175,000 pounds allegedly credited in assessee's Sri Lanka based bank account with the Bank of Ceylon. He then proceeded to make the impugned addition of the bequest in assessee's hands on the ground that it has received the said sum lying with the above stated bank's bills and for not having recorded the same in its books of account for relevant previous year. He further concluded that assessee had neither claimed any exemption u/s 11(1) Explanation nor had it set apart the bequest u/s 11(2) of the Act. All this resulted in the impugned addition of UK based fund 175,000 pounds as per the RBI prevailing rate of exchange.
6. The CIT(A) upholds the Assessing Officer's action as under:-
"5. Decision:
In this case the ground nos. (3), (4), (5), (9) & (13) are general in nature which does not require any specific adjudication and ground no. (11) is consequential in nature. Similarly, ground nos. (6), (10) & (12) are not pressed.
First ground of appeal relates to the issue that the assessment order for the A.Y.2008-2009 was without any reason to believe. The appellant in his argument has submitted that the transactions pertains to the F.Y. 2006-07 as the amount was credited in the Treasury dated 09.02.2007. Hence, the addition should have been made in the A.Y. 2007-08. I have perused the facts of the case and order of the A.O. In the order itself the A.Y. is mentioned as 2007-08 and the A.O.in the entire order has mentioned A.Y. 2007-08. Therefore, the aforesaid objection of the appellant is wrong and without any substance. The aforesaid issue raised by the appellant is on the basis that in the column of previous year of the order it has been mentioned as 2008-09 whereas in the entire assessment order and in the body of the order of the assessment it is mentioned 2007-08. The mentioning of previous year as 2008-09 is typographical mistake. Therefore, it is nothing but typographical mistake and in all facts and essence it is passed for A.Y. 2007-08 such typographical mistake is curable u/s 296B of the LT. Act.ITA No.261/Kol/2018 Assessment Year 2007-08
Mahabodhi Society of India Vs ITO Ex1(4), Kol. Page 5 Next ground of the appeal of the appellant relates to the issue of addition of Rs.l,sl,09,sOOj-
on account of the fact that the aforesaid money was transferred in the account of the appellant dated 09.02.2007. The A.O. while passing the order has observed that:
"the above mentioned amount was invested into the account of Sri Lanka Govt. Treasury Bills in the name of Mahabodhi Society of India. The A.R. also stated that the Mahabodhi Society of India applied to the Govt. of India, Ministry of Home Affairs for permission to bring the money of India. But the permission is still pending and total amount is still lying under custody of Ceylon Govt. Treasury Bill and for this reason Mahabodhi Society of India did not show the amount in Books of Account for the A.Y.2007-08."
The A.O has concluded that the income was own by the Trust and the application of the same can be given under explanation 2 of Sec.11(1) rather than can be set apart u/s 11(2) of the LT. Act which is not done by the appellant, therefore, the A.O. added the entire amount.
In the ground no.(2), the appellant has challenged the reason recorded by the A.O; Whereas the AO has recorded his reasons which are narrated in the assessment order. The fact of the case is that:
"For the Assessment Year 2007-08, it has been gathered that on 28.08.1996, the London Solicitors M/s Couts & Co. Informed the said Society of the bequest made by two ladies namely Miss Grace Lounsbery and Madame Marguerite La Fuenmade to the said society of UK Pounds 1,75,000 (Rs. 1,51,09,500/-) as per prevailing rate of exchange of RBI on the date of transfer i.e. 09.02.2007).
The statement of cash in hand and bank balance as on 31.03.2007 has been examined and found that Bank of Ceylon shows only Rs.2/- as bank balance Ven.P.Seewalee Thero, the Acting General Secretary of the Society in his own admission admitted the fact that it has not been reflected in the Bank of Ceylon", The A.O. has further observed in his assessment order that during the course of hearing on 23.12.2014, the AR of the assessee appeared and filed photocopy of statement of account of Bank of Ceylon, Inward Remittance Department, 8th floor, Head Office Bldg., 4, Bank of Ceylon Mawatha, Colombo-1, which clearly shows the credit of 1,75,000/- UK Pounds (Rs.1,51,09,500/- as per prevailing rate of exchange of RBI on the date of transfer i.e. 09/02/2007).
As per order of the Joint Director (Adjudicating Authority), Directorate of Enforcement (Foreign Exchange Management Act), Lucknow Zonal Office, 2nd Floor, Princeton Business Park 16-Ashok Lucknow-226001 passed by Shri Vivek Prasad, Joint Director vide Adjudication Order No. Adj/15/LZO/2014/JD(VP) dated 29.05.2014 that the Mahabodhi Society of India violated Section 4 of Foreign Exchange Management Act, 1999 (FEMA) and Regulation 3 of the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000.
BRIEF FACTS OF THE CASE Enquiries in this case were initiated on the basis of a Complaint dated 27.08.2009 made by one of the" Managing Trustee, The Buddhist International, Mumbai to the effect that Dr. E.R. There, General Secretary, Mahabodhi Society of India, Kolkata had, in contravention of the Provisions of FEMA., 1999 got transferred an amount of UK Pounds of 1,75,000/- to the account NO.06185854 of the Mahabodhi Society of India, maintained with the Bank of Ceylon, Sri Lanka. The amount of UKP 1,75,000/- allegedly represented the amount which was donated by the Will dated 06/12/1956 of Late Miss Grace C. Lousbery and Late Madam Marguerite - La Fuerte's in favour of the Society. On the basis of the information and documents provided by the complainant, Dr. D.R. Thero, General Secretary of the Society of ITA No.261/Kol/2018 Assessment Year 2007-08 Mahabodhi Society of India Vs ITO Ex1(4), Kol. Page 6 India was examined U/s 37 of FEMA, 1999 on 17.03.2009, 18.03.2009 and 20.04.2009. Sri Thero in his statements, inter-alia, stated that he was a Sri Lankan national residing in India and his passport had been deposited with District Magistrate, Varanasi in terms of the Hon'ble High Court of Allahabad in connection with a FERA case pending against him; that he was residing in India since 1976 and had been Nepal, Sri Lanka and Japan in connection with work related to the society; he was the General Secretary of the Mahabodhi Society of India, Kolkata since 1985. When Dr. Thero was confronted with photocopy of letters dated 11.09.2006 and 07.10.2006 written by him to Mr. Steve Welham, Senior Trust Service Officer, Coutts & Co., Trustee Department, Chelmsford, UK, he stated that dated 11.09.2006 was written to Mr. Steven Welham intimating him that the Governing body of the society had decided to take necessary steps to have transferred the available amount in London in terms of the last Will of Late Miss Grace C. Lousbery and Late Madam Marguerite to the account of the society with Bank of Ceylon, Sri Lanka and thereafter Mr. Steve Welham, vide letter dated 07.10.2006 was instructed to transfer the funds under settlement to the account NO.06185854 of the society with Bank of Ceylon, Colombo, Sri Lanka. He was furnished a copy of certificate dated 09.02.2007 from Bank of Ceylon regarding receipt of inward remittance of UKP 1,75,000/- to the account No. 06185854 of the said society and further submitted that the said amount had been invested in Treasury Bill with Bank of Ceylon, Colombo. Dr. Thero agreed that the Society had not taken any permission from RBI to maintain the said account with Bank of Ceylon in Sri Lanka or to purchase the Treasury Bills.
Dr. D.R. Thero, General Secretary of the Mahabodhi Society of India being the chief functionary of the society and in-charge for conduct of affairs of the society appeared to have contravened the provisions of section 4 of FEMA, 1999 and Rule 3 of the Foreign Exchange Management Regulations, 2000.
In view of the above, Mahabodhi Society of India guilty of contravention of provisions of contravention of provisions of Section 4 of the Foreign Exchange Management Act, 1999. Penalty of Rs.1 Crore on Mahabodhi Society of India and Rs.50 Lakhs on Dr. D.R. Thero, General Secretary of Mahabodhi Society of India, Kolkata has been imposed in terms of section 13(1) of the Foreign Exchange Management Act, 1999.
Show cause notice was issued to the assessee on 27.02.2015 requested to explain why the amount of UK Pounds of 1,75,000 (Rs.1,51,09,500/- as prevailing rate of exchange of RBI on the date of transfer i.e. 09.02.2007) should not be added back to the total income. In response to this letter the A.R. of the assessee had stated that the above mentioned amount was invested into the account of Sri Lanka Govt. Treasury Bills in the name of Mahabodhi Society of India. The AR also stated that the Mahabodhi Society of India applied to the Govt. of India Ministry of Home Affairs for permission to bring the money of India. But the permission is still pending and total amount is still lying under custody of Ceylon Govt. Treasury Bill and for this reason -Mahabodhi Society of India did not show the amount in Books of Account for the A.Y.2007-08.
So the assessee has admitted that the income was received by it. Now it for some reason or other the same could not be applied, then the assessee had two options for claiming exemptions (a) Exercise option vide Explanation 2 to Section 11(1) of the IT. Act, 1961 Set apart u/s 11(2) of the IT. Act, 1961."
The appellant in his submission dated 12.10.2017 stated that from the fact of the case as stated herein above, it can be seen that the assessee was not in receipt of any voluntary contribution rather inherited a property through a deed of settlement which was lying outside India having statutory restriction imposed by the Central Government right from 1999 for bringing back the proceeds to India. Further the proceeds were under confiscation in favour of the Central Government once the same repatriated to India. Thus neither there was an element of revenue-receipt emanating from the settlement deed made out on 06.12.1956 / 28.05.1957 nor ITA No.261/Kol/2018 Assessment Year 2007-08 Mahabodhi Society of India Vs ITO Ex1(4), Kol. Page 7 there was, an actual or constructive receipt as on 09/02/2007. Even the assessee's right in the property after repatriation to India was transferred in favour of Central Government. Under this circumstance, no income can accrue or arisen for the assessee during the AY 2007-08 merely for transferring a sum of UKP 1,75,000 from London to Sri Lanka on 09/02/2007 and in the absence of any income in the hands of the assessee, there can be no case for escapement of income which is subjected to assessment / reassessment u/s 147 of the Income Tax Act, 1961. Therefore the reopening proceedings are unsustainable and liable to be quashed.
On going through the fact it can be seen that a settlement deed dated 06/12/1056 was entered into between Miss Grace C Lounsbery and marguerite La Fuente as 1st party and M/s Coutts & Co, the other party. As per the settlement deed, the settlers had appointed Coutts & Co as trustee for the trust fund in respect of securities as stated thereon. As per clause 2(c) of the supplemental deed dated 28/05/1957, after the death of the settelors, the trustees shall pay the income thereof to another lady Ms. Mademoiselle M Bouet. And as per clause 2(d), after her death, M/s Coutts & Co shall hold the trust fund & the income thereof in trust for the assessee i.e. Maha Bodhi Society of India, Kolkata.
The above clearly emerges that the assessee was not in receipt of any income which can be termed as voluntary contribution or otherwise to denote a normal income liable to tax. As per the terms of the settlement, the assessee will be the beneficiary of the trust fund after the death of the settlers. The assessee had just inherited the interest in the property of the trust whereby the trustees had transferred the fund to assessee's account. When a trustee holds a trust fund and same is bequeath and transferred on the beneficiary, the same can, at best be termed as 'capital receipt' in the hands of the beneficiary - which is not liable to tax as income. In other words, even if, the transfer of fund from the trustee's account at London to the assessee's account at Sri Lanka is considered as a constructive receipt without accrual of any legal/financial right in favour of the assessee, it cannot be termed as a receipt of income. Considering the facts & circumstances and the character of receipts, at best it can be termed as capital receipt not liable to tax. Therefore even if the transaction involved a receipt, there was no element of income within the same - which might have escaped assessment liable to be reopened by invoking section 147 of the IT Act. Accordingly the reopening proceedings are unsustainable and liable to be quashed.
Without prejudice to what has been stated herein before, we submit that the reopening proceeding is invalid even from the view point of failure on the part of the AO to maintain the statutory time limit for issuance of notice u/s 148 of the IT Act, 1961. U/s 149(b) of the Act, no notice u/s 148 can be issued for any income chargeable to tax has escaped assessment for a period beyond 6 years. In the present case, the trust was formed outside India with a fund for the benefit of some persons. As per the terms of the settlement, on their death, the trustees shall hold the fund in trust for the assessee. The death of the last survivor took place on 26/06/ 1994 and the assessee was informed by the trustee on 28/08/1996 about the settlement whereby the assessee was nominated as beneficiary of trust fund.
While it was a fact that due to statutory prohibition, the trustees could not transfer the fund to the assessee at India even till now, the fact remained that the interest in the property, if any, had accrued to the assessee just on the death of the last beneficiary i.e. on 26/06/1994 and accordingly to maintain the reopening proceedings, notice u/ s 148 of the Act should have been issued within 6 months from the relevant AY i.e. within 31/03/2000. However in the present case, the notice was issued on 07/03/2014. Therefore the notice is time bar and accordingly the reopening fails. Even if it is construed that the interest in the property was accrued to the assessee as soon as the same was notified by M/s Coutts & Co to the assessee, still the reopening is time barred. M/ s Coutts & Co notified the fact of the bequest made in favour of the assessee on 28/08/1996 and accordingly no notice u/s 148 can be issued after 31/03/2003. Since the notice was issued only on 07/03/2014, the reopening is not sustainable."
ITA No.261/Kol/2018 Assessment Year 2007-08Mahabodhi Society of India Vs ITO Ex1(4), Kol. Page 8 I have perused the fact of the case. In this case the money was transferred in the account of appellant in the month of February, 2007. Therefore, the aforesaid money should have been shown in the hand of the appellant which was neither utilised nor shown in the books of account. Therefore, the A.C. has rightly issued notice u/s 148 and the assessment has been made for the assessment year 2007-08 correctly and the facts of the case has been narrated in the assessment order which is not a debatable issue. It is a clear fact when money was created in the account of appellant and it was transferred into the account of appellant, where it was laying? - the same should have been shown in the hand of the appellant. Keeping in view of the facts I do not find any inconformity of the A.O. Therefore, the order passed by the A.O. is hereby upheld and the ground of appeal is dismissed."
All this leaves the assessee aggrieved.
7. We now come to assessee's pleas its first and foremost legal plea that it had not received any income merely on account of transfer of UK based bequest to Sri Lanka based bank account and therefore no part of its taxable income had escaped assessment. Our attention is invited to sec. 2(24)(iia) of the Act treating a voluntary contribution received by a charitable / religious trust as income. The assessee contends that it was nowhere in receipt of the impugned sum since it had inherited the funds in the capacity of a beneficiary and all due permission thereof is still pending. It is reiterated that the assessee's request seeking repatriation of the impugned sum to India is still pending as per the case records (supra) and therefore, the above sum wrongly treated as having the colour of its taxable income.
8. The assessee's next quotes sec. 11(1) Explanation that since it had not enjoyed a clear title qua the impugned bequest there was no question of either claiming exemption or set it apart u/s 11(2) of the Act. The assessee further submits that even if the UK based bequest amount is treated as accrued and not received till date so as to be taken as income u/s 5 of the Act, then, the very accrual took place on Mrs. Boust's demise (supra) on 26.06.1994 as she had enjoyed life time interest in trust funds going by supplementary trust dated 28.05.1957 and not on account of transfer from London to Ceylon. Learned counsel cites sec. 149(1) (b) r.w.s sec. 5(c) of the Act to argue that if the amount of the trust fund is held to have been accrued in assessment year 1995- 96, then the same ought to have been treated as taxable in the said assessment year and not in the year of receipt when the trust property steed in the bank of Ceylon in financial year 2006-07. Case law Mrs. Meherbai N Sethna vs. CIT (1994) 209 ITR 453 (Bom) and Nestle India Ltd. vs. DCIT (2016) 384 ITR 334 (Del) is quoted in support.
ITA No.261/Kol/2018 Assessment Year 2007-08Mahabodhi Society of India Vs ITO Ex1(4), Kol. Page 9
9. The assessee's lastly place reliance upon sec. 160 r.w.s. 161 in case of a "represented assessee" and its liability under the provision of the Act. It pleads that since the trustee bank M/s Coutts & Co. London sup herein is admittedly the represent assessee u/s 160(i)(iv) of the Act. It had held the impugned sum on behalf of the assessee-beneficiary till the date of its transfer to the bank of Ceylon on 09.02.2007. Sec. 161(1) is also cited in support of the plea that the representative assessee is to be subjected to same duties and responsibility and if the income was the income or accrued as received in favour of it beneficiary and it has to be assessed in its own name as a representative assessee. Case law CIT vs. Karelal Kundanlal Trust (1984) 148 ITR 412 (MP) is quoted in support.
10. Learned departmental representative strongly supports both the lower authorities' action adding the impugned London based bequest sum in assessee's hands by taking recourse to sec. 148/147 mechanism. He submits that the impugned bequest sum has been credited to the assessee's account in Sri Lanka and the same is entitled treated as its income of the relevant previous year neither claimed for exemption sec. 11(1) nor set apart sec. 11(2) of the Act.
11. We have given our thoughtful consideration to foregoing rival arguments. The above narrated fact makes it clear that the impugned sum is lying in the treasury of bank of Ceylon since 09.02.2007. The assessee's request seeking transfer thereof to India is pending till date as per the Appellate Authority's order / direction(s) (supra). The question that arises for our apt direction in the instant lis is as to whether the said sum can be held to be the assessee's income accrued or receive u/s 5 of the Act in these facts and circumstances so as to be held as having escaped assessment giving rise to the re-opening / re-assessment in question. We find no force either in Revenue's arguments or in lower authorities' action treating the above bequest as assessee's taxable income. We wish to emphasise here that the assessee is yet to enjoy a clear legal title on the trust property and therefore, the same could not have been treated as its income received under the provision of the Act. Hon'ble apex court's landmark decision in Chainrup Sampatram vs. CIT (1953) 24 ITR 481 (SC) settled the law long back that the principle of conservative and prudence in accounting treatment require that no anticipated profits are treated as income till realization. And that the ITA No.261/Kol/2018 Assessment Year 2007-08 Mahabodhi Society of India Vs ITO Ex1(4), Kol. Page 10 converse is not true regarding anticipated losses which can be deducted from commercial profits at the first sign its reasonable probability.
We refer the above narrated factual position in totality to observe that the assessee could not have recognized the London based bequest transfer to Sri Lanka as its income since the said amount is yet to be received as per the detailed procedure pending as on date seeking repatriated of trend to India.
12. There can be further no dispute as per sec.5 of the Act defining scope of the total income in case of a recipient to include any income; which accrues or arises outside India during the financial year. Even if we accept the Revenue's case in alternative that the trust fund had accrued in assessee's favour in assessment year 1995-96, we find no justification of the lower authorities' action seeking to re-assess the same in the relevant previous year since it goes beyond the time limitation of maximum six year prescribed for initiation of sec.148 proceedings u/s.149(1)(b) (supra). Couple with this, hon'ble Bombay high court's decision Mrs.Meherbai N. Sethna (supra) holds that it is the accrual of income and not actual receipt which forms the only relevant factor for assessment of an overseas income de hors any restriction or prohibition on its remittance to India. We apply the very legal principle herein as well to conclude that the learned lower authorities have erred in treating the impugned piquet fund to be assessee's taxable income having escaped assessment after lapse of twelve years from assessment year 1995-96 when M/s Bouete (supra) had bequested her last.
13. We lastly wish to observe that the Revenue's stand under challenge also does not satisfy sec. 160(1)(iv) r.w.s. 161 of the Act applicable in case of a representative assessee. There can be no dispute about the foregoing facts that Mrs Bousle had expired on 26.06.1994. The assessee is admittedly the ultimate beneficiary of the trust. And the London based trustee based (supra) continued to possess the bequest sum as its behalf (as per clause 2(d) of the supplemental settlement deed dated 28.05.1957 as evident from page 5 in paper book) upto 09.02.2007. Hon'ble Madhya Pradesh high court's judgment in Karelal Kundalal Trust (supra) holds that these two statutory provision stipulated assessment of a representative assessee to be having same duties, responsibilities and liabilities. We conclude in this factual and legal backdrop that it ITA No.261/Kol/2018 Assessment Year 2007-08 Mahabodhi Society of India Vs ITO Ex1(4), Kol. Page 11 was the trustee bank who ought to have been assessed u/s 160 r.w.s 161 of the Act with regard to the impugned sum way back in assessment year 1995-96. We therefore accept the assessee's instant last plea as well. The assessee's twin grounds challenging validity of the impugned reopening / re-assessment as well as correct of the bequest amount addition in question succeed.
14. This assessee's appeal is allowed.
Order pronounced in open court on 23/08/2019
Sd/- Sd/-
(लेखा सद&य) ( या(यक सद&य)
(J.Sudhakar Reddy) (S.S.Godara)
Accountant Member Judicial Member
*Dkp-Sr.PS
)दनांकः- 23/08/2019 कोलकाता / Kolkata
आदे श क त ल प अ े षत / Copy of Order Forwarded to:-
1. अपीलाथ /Appellant-Mahabodhi Society of India, 4A, Bankim Chatterjee Street, Kolkatak-73
2. यथ /Respondent-ITO Exem.1-(4), 10B, Middleton Row, Kolkata-71
3. संबं,धत आयकर आयु-त / Concerned CIT
4. आयकर आय-
ु त- अपील / CIT (A)
5. .वभागीय (त(न,ध, आयकर अपील य अ,धकरण कोलकाता/DR, ITAT, Kolkata
6. गाड2 फाइल / Guard file.
By order/आदे श से, /True Copy/ सहायक पंजीकार आयकर अपील य अ,धकरण, कोलकाता ।