Income Tax Appellate Tribunal - Bangalore
Karnataka Golf Association vs Director Of Income-Tax (Exemption), ... on 12 March, 2003
Equivalent citations: [2004]90ITD749(BANG), (2004)84TTJ(BANG)855
ORDER
G.S. Pannu, Accountant Member
1. The petitioner, being a society registered under the Mysore Societies Registration Act, 1960, by means of the present petition is seeking stay of the assessment proceedings being carried out by the Deputy Director of Income-tax (Exemption), Bangalore, for the asst.year 2002-03. The petitioner has filed its return income for the asst.year 2002-03 in the status of AOP as the assessment for all the earlier years had been made in the status of an AOP. For the asst.years from 1996-97 to 2001-02, the petitioner had filed its return claiming exemption Under Section 11 even though the provisions of Section 12A, requiring registration with the Commissioner, was not complied with. The petitioner, in pursuance to the requirements Under Section 12A approached the DIT(Ex) for registration vide its application filed on 23.1.98. The DIT(Ex), vide his order dt.17.12.02 passed Under Section 12AA(1)(b)(ii) of the Act has disposed of the said application and has rejected the application seeking registration. The said order of the DIT(Ex) dt.17.12.02 is the subject matter of appeal by the assessee before the ITAT vide ITA.175/Bang/03 filed on 6.2.03. The said appeal is presently pending before the Tribunal. The petitioner in its appeal has assailed the order of the DIT(Ex) on various grounds including the period of limitation, as according to it, the said order had been passed beyond the period stipulated by law. Be that as it may, it will be sufficient for us at this stage to observe that the said appeal of the assessee is pending with the Tribunal. By way of the present petition it is sought to be canvassed by the assessee that the AO by relying on the unjustified order of the DIT (Ex) was rushing to complete the assessment for the asst.year 2002-03 which is not getting time barred by limitation in the near future, with the objective of fastening the assessee with heavy demand. Hence, the prayer in the said petition that the assessment proceedings for the asst.year 2002-03 being carried out by the AO shall be stayed till the disposal of the assessee's appeal pending with the Tribunal in ITA.175/Bang/03, agitating the denial of registration by the DIT(Ex), is disposed of.
2. Against the aforesaid factual matrix, Shri K.R. Prasad, Advocate, the learned counsel for the assessee, at the out set, dealt at length with the powers of the Tribunal to grant stay of the assessment proceedings. It is sought to be canvassed by the learned counsel that the Tribunal had the inherent power to entertain and dispose of the petitions of the impugned nature by necessary implications as it enjoyed all the powers necessary to make its substantive power of disposal of appeals fully effective. For his arguments on this count, the learned counsel derived support from the decision of the Apex Court in ITO v. M.K. Mohammed Kunhi (1969) 71 ITR 815 as also the decisions in ITO v. Khalid Mahdi Khan (1977) 110 ITR 79 (AP): Puran Mal Kauntia v. ITO (1975) 98 ITR 39 (Pat) and Ritz Ltd. v. D.D. Vyas and Ors. (1990 185 ITR 311 (Bom).
2.1 It is further submitted by the learned counsel that one of the conditions for claiming exemption Under Sections 11 & 12 is the compliance of the requirement of registration Under Section 12A. Therefore, the denial of registration by the DIT (Ex) will have a bearing on the assessment proceedings and if the assessments are allowed to be completed without waiting for the decision of the Tribunal in ITA.175/Bang/03, it will not only result in multiplicity of proceedings, but may result in unnecessary demands and pressure on the assessee. It was sought to be emphasised that the assessment proceedings are not getting time barred in the near future and, therefore, it was prayed that the matter pending with the Tribunal in ITA.175/Bang/03 may be taken up for hearing on an out of turn basis and till such time the assessment proceedings be stayed. It was also submitted by the counsel that the assessee's application, seeking exemption Under Section 10(23) was also pending for disposal by the CBDT, of course, the said application pertained to assessment years 1994-95 and 1995-96, the two assessment years which are not presently involved in the appeal before the Tribunal.
3. On the other hand, Shri Amitabh Kumar, the learned DR, has vehemently opposed the prayer of the petitioner. At the out set, it is argued by the learned DR that the reliance placed by the petitioner in the case of Mohammed Kunhi (supra) was misplaced inasmuch as that the subject matter before the Apex Court therein was only in relation to the stay of recovery proceedings and not stay of the assessment proceedings as such. Therefore, it is argued by the learned DR that, notwithstanding the decisions cited by the counsel in ITO v. Khalid Mehdi Khan (1977) 110 ITR 79 (AP): Puran Mal Kauntia v. ITO (1975) 98 ITR 39 (Pat) and Ritz Ltd. v. D.D. Vyas and Ors. (1990) 185 ITR 311 (Bom) the Tribunal does not have any inherent powers to stay the assessment proceedings.
3.1 Our attention was drawn to Section 153(3) prescribing time limit for completion of assessments and reassessments. Clause (ii) of Explanation 1 below Section 153(3) provides that for the purposes of computing the period of limitation for the purposes of the said section, the period during which the assessment proceedings was stayed by any order of injunction of Court was to be excluded. It is pointed out that the Tribunal is not a "Court" in the sense it is used in the said section and, therefore, if the assessment proceedings was stayed by the Tribunal it may lead to a situation where no sufficient time be left with the Department to complete the assessment within the period of limitation as laid down in the Act.
3.2 It is further argued that the present petition has been preferred only as a result of misplaced apprehension of the petitioner and that in the absence of any proceedings pending with the Tribunal with regard to the impending assessment, the Tribunal does not possess jurisdiction to deal with the prayer of the assessee.
3.3 As an alternative ground, it was argued that in the event of the Tribunal proceeding to dispose of the present petition on merits, the balance of convenience lay in favour of the Department and the prayer of the petitioner should not be acceded to. According to the learned DR, the stay of the assessment proceedings would lead to prejudice to the revenue and referred to the observations of the Kerala High Court in Travancore Electro Chemical Industries Ltd. v. DCIT (1992) 195 ITR 857 in this regard. It was submitted that the mere apprehension of the petitioner that the proposed assessments would result in huge demands is, as of today, unfounded. On the similar reasoning, the Hon'ble Kerala High Court in Travancore Electro Chemical Industries Ltd., (supra) had declined to stay the assessment proceedings.
4. In reply, Shri K.R. Prasad, the counsel for the assessee has rebutted the arguments of the learned DR. The learned counsel referred to Section 255(6) of the IT Act. According to him, the Appellate Tribunal enjoys all the powers of a Civil Court for all purposes by virtue of the provisions of Sub-section (6) of Section 255 and, therefore, the Tribunal has adequate powers to consider grant of stay.
5. We have heard the rival submissions and perused the material on record as also the case laws cited at bar very carefully. The crux of the dispute in the present application can be understood as threefold, viz., (a) whether the Tribunal has the necessary powers to entertain the petitions of the present nature; (b) if so, can it be said in the instant case that the proceedings pending with the Tribunal by way of the assessee's appeal have any bearing on the proposed assessment so as to merit interference of the Tribunal at the present interim stage; and (c) if so, as to whether under the facts and circumstances of the case, the balance of convenience lies in favour of the assessee meriting the stay of assessment proceedings.
5.1 We would like to discuss the various case laws cited by the learned counsel. The facts before the Hon'ble Andhra Pradesh High Court in the case of Khalid Mehdi Khan (supra) were to the following effect. The assessee therein had filed a return including his 1/5th share of the lease amount received in respect of certain property and the said return was accepted and the assessment was completed. Subsequently, the CIT assuming jurisdiction Under Section 263 proceeded to revise the order of ITO holding that the entire lease amount received in respect of the property was liable to be assessed in the hands of the AOP comprising of the assessee and the other interested persons. Therefore, the CIT set aside the orders of the AO and directed him to frame the assessment afresh. Against the order of CIT Under Section 263, the assessee preferred an appeal before the ITAT and pending disposal of the said appeal, the Tribunal granted stay of all further proceedings including the assessment proceedings and also directed the appeals to be posted for out of turn hearing. The aforesaid order of the Tribunal came to be challenged in writ petition before the Hon'ble Andhra Pradesh High Court by the Department. Against the aforesaid facts, the Hon'ble Andhra Pradesh High Court held that the Tribunal was within its jurisdiction in granting stay or passing any other interlocutory order in an appeal pending before it. The Hon'ble Andhra Pradesh High Court by referring to the decision of the Apex Court in Mohammed Kunhi (supra) affirmed the view that Section 254 of the Act confers on the Tribunal the powers of widest amplitude in dealing with the appeals before it and that by necessary implication, the same also confers on the Tribunal the powers of doing of such acts or employing of such means as would be essential for the exercise of its substantive power i.e., in relation to the effective disposal of appeal. In coming to such conclusion, the Andhra Pradesh High Court also negated the argument that Clause (ii) of Explanation 1 to Section 153(3) expressly qualifies or curtails the orders of the Tribunal to pass all necessary orders Under Sections 254(1) of the Act. While appreciating that the Tribunal was not a Court, yet, the Hon'ble Andhra Pradesh High Court was not convinced that Section 153 has the effect of depriving or abridging the Tribunal to pass interim orders as would be in the fitness of things in a particular case. The following observation of the Andhra Pradesh High Court is worthy of notice:
Parliament must be presumed to have known about the said decision of the Supreme court with reference to the powers of the Tribunal under Section 254 of the Act, and if it wanted to deprive the Tribunal of the said power or to abridge the same, it could have done so expressly. Moreover, no reasons are placed before us compelling us to hold that Sub-section (2A) cuts down the power of the Tribunal under Section 254(1) of the Act in any manner. However, it is obvious that the provision contained in Sub-section (2A) shall have to be on additional factor which the Tribunal has to take into consideration while passing an order of stay or other interlocutory order pending the appeal before it. In other words, while granting the stay or any other interlocutory order, the Tribunal shall have to keep in mind the period of limitation prescribed in Section 153(2A) of the Act and pass orders in the light of the same. It is always open to the department to bring to the notice of the Tribunal the particular difficulties, if any, it would fact in case a stay is granted, on the Tribunal shall of course consider the said plea and all other relevant circumstances, and shall exercise its power having regard to them and in the light of the principles enunciated by the Supreme Court in Income-tax Officer v. Mohammed Kunhi (1969) 71 ITR 815 (SC).
5.2 The second decision is of the Hon'ble Patna High Court in the case of Puran Mal Kauntia (supra). The facts therein were that the assessee approached the ITAT for stay of further proceedings before the Appellate Assistant Commissioner pending the disposal of the appeal by the Tribunal. The Tribunal rejected the application on the ground that it did not have the requisite power to grant stay of proceedings. On being approached by way of a writ petition, the Hon'ble High Court of Patna held that the view of the Tribunal was erroneous inasmuch as that the Tribunal had the implied power to order stay in a proper case and directed the Tribunal to dispose of the case on merits.
5.3 The Hon'ble Bombay High Court in Ritz Ltd., (supra) again held on the same lines as decided by the Hon'ble Patna High Court in Puran Mal Kauntia (supra). The Hon'ble Bombay High Court by referring to the decision in Mohammed Kunhi's case (SC) (supra), as also in the case of CIT v. Bansi Dhar (1986) 157 ITR 665 (SC) held that the Tribunal was empowered to stay the assessment proceedings.
5.4 In view of the aforesaid three decisions, an irresistible conclusion that can be drawn is that the ITAT may in an appropriate case invoke its inherent powers of staying the assessment proceedings. However, such implied power to grant the stay of assessment proceedings shall not be exercised as a matter of routine or as a matter of course in view of the special nature of the revenue laws. Such power is to be exercised only when a prima facie case is made out that the entire purpose of appeal pending before the Tribunal will be frustrated or rendered (SIC) nugatory by allowing the assessment proceedings to continue during the pendency of appeal before it.
5.5 To a specific question from the bench as to whether the result of the appeal pending before the Tribunal would have an effect on the impugned assessment proceedings, the learned DR submitted that the two were not connected.
5.6 On the other hand, the learned counsel for the assessee referred to the following extract of the communication from the AO dt.21.1.03 :
As seen from the records and as brought to your notice vide this office letter dt.8.1.2003 you are not recognized Under Section 10(23) by the CDT, New Delhi, as on the date and your application for registration Under Section 12A has been rejected and DIT(E), Bangalore. Hence you are not eligible for claiming exemption of your income Under Section 10(23) & 11 of the IT Act, 1961.
It was submitted that the appeal pending before the Tribunal against the denial of registration Under Section 12A shall have a bearing on the allowability or otherwise of the exemption Under Sections 11 and 12 to be adjudicated upon by the AO in the course of the assessment proceedings. On this issue, we do not find ample force in the submissions of the DR. Needless to mention, under the provisions of IT Act, the exemptions Under Sections 11 and 12 in respect of a charitable or religious trust or institution is available only if certain conditions specified in that section are satisfied. One of the conditions in Section 12A provides that the person in receipt of income shall make an application for registration of the trust/institution in the prescribed form and manner to the CIT. The CIT on receipt of such application shall satisfy himself as to the charitable or religious nature of the objects and genuineness of the activities of the institution and shall pass on order granting registration. If the CIT is not so satisfied, he may proceed to pass an order refusing registration in terms of Section 12AA. The said order of the CIT passed Under Section 12AA is appealable before the ITAT in terms of Section 253(1)(c) of the Act.
6. Now coming back to the instant case, the appeal of the assessee against the order passed by the DIT(Ex) denying registration is pending before the Tribunal in ITA.175/Bang/03. We are convinced that the result in the above appeal pending before the Tribunal shall also have a bearing on the assessment proceedings inasmuch as that if the assessee is held liable for registration, the AO can only thereafter consider the efficacy of the exemption Under Section 11 and 12 as the assessee would appear to have met the particular condition as laid down in Section 12A. If the result is in the negative, the AO while framing the assessment in the impugned proceedings would be justified in rejecting the claim of the assessee for exemption Under Section 11/12. Therefore, in our considered view, the issue pending before the Tribunal would have a bearing on the course of the assessment proceedings which are presently being carried out by the AO for the asst.year 2002-03 inasmuch as it related to the claim of the assessee for exemption Under Section 11 and 12.
6.1 As far as the issue of balance of convenience requiring the Tribunal to stay the assessment proceedings is concerned, in our considered view, on this issue, we find ample force in the submissions of the department. In stating so, we are conscious of the fact that, while the Tribunal has the powers to stay the assessment proceedings, but the invoking of the same is desirable in the most exceptional cases. In our view, the balance of convenience does not favour the assessee requiring the stay of the assessment proceedings at this stage. Notwithstanding the aforesaid, we are also anxious to ensure that the AO, while completing the assessment for the year 2002-03, should also have the benefit of the result of the assessee's appeal pending before the Tribunal. Therefore, having regard to the aforesaid discussion and on the basis of the principles enunciated by the judicial decisions discussed above, we propose to dispose of the present petition as under:
(i) That the assessment proceedings being carried out by the AO for the asst.year 2002-03 does not require to be stayed;
(ii) That the demand of tax, if arising consequent to the finalisation of assessment by the AO as a result of the denial of exemption Under Section 11 and 12 of the Act shall not be enforced by the AO till the disposal of the assessee's appeal pending with the Tribunal in ITA 175/Bang/03;
(iii) In the light of the peculiar circumstances of the present case, we direct both the parties to cooperate with the Tribunal to dispose of the above appeal early so that the result in the appeal would be available for the benefit of the Assessing Officer;
(iv) With the above objective, the registry is hereby directed to post the appeal on an out of turn basis for hearing before the respective bench on 7.4.03.
7. In the aforesaid manner, the present petition is accordingly disposed of.