Income Tax Appellate Tribunal - Panji
Nababharat Shiksha Parishad, Rourkela vs Dcit, Rourkela on 11 October, 2017
आयकर अपीलीय अधधकरण, कटक न्यायपीठ,कटक
IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK
BEFORE SHRI N.S.SAINI, AM & SHRI PAVAN KUMAR GADALE, JM
आयकर अपील सं./ITA No.163/CTK/2015
( धनधाारण वषा / Assessment Year :2010-2011)
M/s Nababharat Shiksha Vs. DCIT, Circle-Rourkela,
Parishad, Plot No.247/246, Pani Rourkela
Tanki Road, Shakti Nagar,
Rourkela
स्थायी लेखा सं ./ जीआइआर सं ./ PAN/GIR No. : AABTN 1687 R
(अपीलाथी /Appellant) .. (प्रत्यथी / Respondent)
निर्ाा ररती की ओर से /Assessee by : Shri S.K.Agrawalla, AR
राजस्व की ओर से /Revenue by : Shri Kunal Singh, CITDR
सुनवाई की तारीख / Date of Hearing : 03/10/2017
घोषणा की तारीख/Date of Pronouncement 11/10/2017
आदेश / O R D E R
Per Shri Pavan Kumar Gadale, JM:
The assessee has filed an appeal against the order of CIT(A)-2, Bhubaneswar, in Appeal Reference No.0111/12-13, dated 20.02.2015, passed u/s.143(3)/250 of the Income Tax Act, 1961 for the assessment year 2010-2011, wherein the assessee has raised the following grounds :-
1. That, the Authorities below are wrong in holding that the advance of Rs.88,04,000 given to Sai Nibedita Realcon (P) Ltd.
for construction of the school building as diversification of fund and therefore the additions of 88,04,000 is liable to be deleted.
2. That, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals), Bhubaneswar is not correct in taxing the notional interest in view of the fact that the real income of trust is taxable not the notional income, therefore the enhancement of the income of 8,80,000 is liable to be deleted.
3. That, the Ld. Commissioner of Income Tax (Appeals) has committed an error of law in enhancing the income of the appellant without being giving a show cause notice or a reasonable opportunity of being heard as per the provisions of section 251(2) of the Act and therefore the enhancement of interest of 8,80,000 is liable to be deleted.
2ITA No.163/CTK/2015
4. That, the assessment order passed u/s 143(3) is bad in law in view of the fact that neither the case of the appellant was selected under CASS nor as per the scrutiny guideline issued by the CBDT and further the Ld. Commissioner of Income Tax (Appeals) is wrong in holding that, the guideline issued by the CBDT are not the look out of the appellant and not binding on the AO, therefore the assessment order is liable to be quashed.
2. Brief facts of the case are that the assessee is engaged in running educational institution and follow the mercantile system of account and accorded approval u/s.10(23C)(vi) of the Act from the Chief Commissioner of Income Tax, Odisha, Bhubaneswar communicated vide Memo No.CCIT/Tech./10(23C)/72/2011-12/3660-719, Dtd.19th May, 2011 and filed the return of income for the assessment year 2010-2011 on 18.11.2010 with total income of Rs.Nil and the return of income was processed u/s.143(1) of the Act and subsequently the case was selected for scrutiny manually and notice u/s.143(2) & 142(1) along with questionnaire was issued. In compliance to the same, the ld. AR of the assessee appeared from time to time and filed information. The AO on perusal of balance sheet found that in schedule-c the assessee has disclosed advance to others being Rs.88,04,000/- to M/s Sai Nibedita Realcon Pvt. Ltd. and it was found Smt. Nibedita Behera who is the director of M/s Sai Nibedita Realcon Pvt.Ltd. and is wife of management trustee of the assessee Trust Sri Chandan Kumar Behera and the said advance was given for the purchase of land. Since the land deal was not materialized, the AO observed that there is diversion of funds and issued show cause notice, whereas the assessee filed explanations on 3 ITA No.163/CTK/2015 5.11.2013, which is reflected in the assessment order. Ld. AR substantiated the submissions which is referred as under :-
With reference to your notice Dtd.24th December, 2012, I have to state that Rs.88,04,000/- is given to Sai Nibedita Realcon P. Ltd. for purchase of land. A copy of the board resolution and a copy of the agreement with the said company is also furnished to you in this regard.
The society is planning to start a school for this purpose, advance is given by the society to he said company. Merely because wife of the trustee is a director in the said company does not mean that there is diversion of funds.
The advance is being given wholly and exclusively for the purchase of land and construction of building. The use of words funds of the trust are invested or deposited clearly contemplated that monies belonging to the trust should be invested or deposited by a positive act on behalf of the trust and if such investment is not in any of the modes specified u/s.11(5) of the Act, only then the benefit of exclusion of such income from the total income would not be available to the trust. Therefore, to deny the benefit of exclusion u/s.11 and 12 and of deduction u/s.80-G of the Act, by applying sec.13(1)(d) of the Act, is not justified. According to sec.13(1)(d), the money available to the trust should have been invested or deposited by definite positive e act on the part of the trust, otherwise than in the modes specified in sec.11(5) of the Act., The AO found the submissions of assessee lacks merits and also there is a violation of provisions of Section 11(5) of the Act by the assessee and finally the AO after thorough examination of the facts and judicial decisions came to a conclusion that there is diversion of the funds advanced towards acquiring of land Rs.88,04,000/- and added to the total income of the assessee and passed the order u/s.143(3) of the Act dated 16.1.2013.
3. Aggrieved by the order of AO, the assessee filed an appeal with the CIT(A). In the appellate proceedings the ld. AR of the assessee appeared and argued the grounds and reiterated the submissions made before the AO. The ld. CIT(A) considered the findings of AO and the grounds dealt 4 ITA No.163/CTK/2015 independently on each ground and called for various information which was submitted by the assessee and further discussed elaborately at pages 9 to 19 of its order and enhanced the income to the extent of Rs.96,84,000/- by making addition of 10% of advances as interest income and dismissed the appeal of the assessee.
4. Aggrieved by the order of CIT(A), the assessee has filed an appeal before the Tribunal.
5. Before us, ld. AR submitted that the assessee for the first time raised the ground that the assessment order u/s.143(3) is bad in law as the assessee's case was selected for scrutiny under the manual scrutiny norms and the assessee does not fall into the guidelines issued by the CBDT and filed judicial decisions supporting his stand and further the CIT(A) has enhanced the income to Rs.96,84,000/- without giving show cause notice or reasonable opportunity of hearing, whereas the advance was provided to Sai Nibedita Realcon Pvt.Ltd. by the assessee for construction of school building and there is no diversification of the funds and addition has to be deleted. Contra, ld. DR supported the orders of the CIT(A) and further substantiated that the assessee's case falls within the manual scrutiny norms and prayed for dismissal of the appeal.
6. We have heard the rival contentions and perused the material on record. The first argument emphasized by the ld. AR in respect of assessment order passed u/s.143(3) of the Act is bad in law as the case was selected for scrutiny in CASS nor the scrutiny guidelines issued by the CBDT Circular. Ld.AR drew our attention to the page 1 of the paper 5 ITA No.163/CTK/2015 book where guidelines of the selection case for scrutiny for assessment year 2010-2011 were disclosed. Ld. AR's submitted that the assessee does not satisfy any of the criteria. On the query of the bench with respect to clause (g) of selection criteria applicable to all is mentioned as under :-
"g) Assessing officer may select any return for scrutiny after recording the reason and obtaining approval of the CCIT/DGIT. The cases under this category should be selected if, there are compelling reasons and the case is not selected through CASS.
These cases should be watched by CCIT/CIT in respect of the quality of assessment."
Ld. AR could not prove that there is lack of jurisdiction of the AO or does not have approval of CIT for selection of scrutiny except making the submissions with supporting guidelines. On the query from the bench why the case of the assessee does not fall under clause (g) as discussed above. The explanations of ld. AR are not convincing to us and accordingly, we are not inclined to accept the reasons explained by the ld. AR on guidelines and we dismiss this ground of appeal of the assessee.
7. On the second disputed issue of advance of Rs.88,04,000/- for construction of school building, ld.AR could not satisfy with any evidence that the construction has taken place and it was submitted that due to various reasons the construction could not be taken up and filed confirmation to the extent that the company which has received advances from the assessee. We find the assessee could not substantiate before the lower authorities even before us that the construction of the building was with any statutory approval and there is ambiguity in the transaction and we are not in a position to understand why the advance amount was lying with the company even though the transaction has failed and the ld. 6 ITA No.163/CTK/2015 AR's explanation that the amount has been refunded in the subsequent year is without evidence and fail to strength the case. We are not convinced with the explanation on commercial expediency and accordingly we uphold the action of CIT(A) on this ground and dismiss the grounds of appeal of assessee.
8. We find the CIT(A) has enhanced the assessment by Rs.8,80,400/- towards interest on advance without giving show cause notice or reasonable opportunity to the assessee. Ld. AR submitted that the CIT(A) has called for the various information and assessee has cooperated in submitting the same but the CIT(A) has estimated the enhanced income without issuing show cause notice we are of the substantial opinion that there is a gross violation of principle of natural justice as the information collected by the CIT(A) is used against the assessee, without providing reasonable opportunity to defend its case. Considering the apparent facts and material on record, we set aside the enhancement of income by the CIT(A) in his order to the extent of Rs.8,80,400/- and partly allow the grounds of appeal of assessee.
9. The assessee has challenged the levy of interest which is consequential and the AO is directed accordingly.
10. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on this 11/10/2017.
Sd/- Sd/-
(N. S. SAINI) (PAVAN KUMAR GADALE)
लेखा सदस्य / ACCOUNTANT MEMBER न्याधयक सदस्य / JUDICIAL MEMBER
कटक Cuttack; ददनांक Dated 11/10 /2017
प्र.कु .धि/PKM, Senior Private Secretary
7
ITA No.163/CTK/2015
आदेश की प्रधतधलधप अग्रेधषत/Copy of the Order forwarded to :
1. अपीलाथी / The Appellant-
2. प्रत्यथी / The Respondent-
3. आयकर आयु क्त(अपील) / The CIT(A),
4. आयकर आयुक्त / CIT
5. निभागीय प्रनतनिनर्, आयकर अपीलीय अनर्करण, कटक / DR, ITAT, Cuttack
6. गाडा फाईल / Guard file.
सत्याधपत प्रधत //True Copy// आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अधधकरण, कटक / ITAT, Cuttack