Income Tax Appellate Tribunal - Agra
Jhansi Development Authority, Jhansi vs Assessee on 14 August, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA Nos. 232 /Agra/ 2013
Assessment Years 2004-2005
Jhansi Development Authority Vs. Dy. Commissioner of I. Tax
Opp. Commissionery Campus Range-6,
Jhansi. Jhansi
(PAN -AAALJ 0068 K)
ITA Nos. 238 /Agra/ 2013
Assessment Years 2004-2005
Income Tax Officer-6(1), Vs. Jhansi Development Authority
Jhanshi Vikas Bhavan,
Jhansi.
(PAN -ABUPS 8611G)
(Appellant) (Respondent)
Appellant by : Shri R.K. Agarwal &
Shri Rahul Agarwal, Advocates
Respondent by : Shri Waseem Arshad, Sr. D.R.
Date of hearing : 14.08.2013
Date of pronouncement : 23.08.2013
ORDER
PER A.L. GEHLOT,ACCOUNTANT MEMBER:
These cross appeals have been filed by the assessee and Revenue against the order dated 28.02.2013 passed by the learned CIT(A)-I, Agra for A.Y. 2004-05.
2. The effective grounds raised in these appeals are reproduced as below:- 2 ITA Nos.232 /Agra/2013
238/Agra/2013, A.Ys. 2004-05 ITA No. 232/Agra/2013 by the assessee:- "1. Because on the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-1, Agra hereinafter referred to as CIT(A)-1, Agra erred both in law and on facts in rejecting the additional ground raised by the appellant. He failed to appreciate the legality of the order dt. 21.10.2010 passed by the Ld. Commissioner of Income Tax (II), Agra granting registration w.e.f. 01.04.2003. In doing so, the Ld. CIT(A)-1, Agra has further ignored various judicial decisions.
2. Because on the facts and circumstances of the case, the Ld. CIT (A)-1, Agra erred both in law and on facts in sustaining an addition of Rs.11,39,756/-. He failed to appreciate that the appellant is admittedly, not doing any business and as such the estimate of income is wholly illegal.
3. Because the appellant craves leave to alter/modify grounds before or at the time of hearing of the appeal."ITA No. 238/Agra/2013 by the Revenue:-
1. The ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in allowing relief of Rs.31,53,210/- ignoring the fact that the assessee itself had declared 10% profit on the amount of work sales and registration money received while working income/loss for A.Y. 2003-04.
2. The ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in allowing relief of Rs.31,53,210/- ignoring the fact that the assessee had continued to follow the mercantile system of accounting as in preceding years.
3. The ld. Commissioner of Income Tax (Appeals) being erroneous in law and on facts deserves to be quashed and that of the Assessing Officer deserves to be restored.
4. That the appellant craves leave to add of alter any or more ground or ground of appeal as may be deemed fit at the time of hearing of appeal."
3 ITA Nos.232 /Agra/2013
238/Agra/2013, A.Ys. 2004-05
3. The brief facts of the case are that the assessee filed return of income on 27.05.2005 declaring an income of Rs.54,06,320/- in the status of local authority. The assessee being a Development Authority was earlier claiming exemption under Section 10(20A) of the Act. However, after omission of the said Section by the Finance Act, 2002 w.e.f. 01.04.2003 wherein taken away the general exemption granted to such authority. The A.O. while making assessment under Section 143(3) of the Act, made addition of Rs.42,92,966/- on account of profit earned by the assessee-Jhansi Development Authority of project development work of housing accommodation for the public. Apart from the addition of Rs.42,92,966/-, the A.O. made addition of Rs.2,22,522/- disallowing expenditure on project development of Sarandhara Nagar. The A.O. completed assessment on total income of Rs.99,21.810/- as against income of Rs.54,06,320/- declared by the assessee. That it is a case of multi round of litigation. On earlier round of litigation the assessee filed appeal against the order of A.O. passed under Section 143(3) of the Act before CIT(A). The CIT(A) vide order dated 31.01.2011 decided the appeal. The assessee filed appeal before I.T.A.T., Agra Bench. I.T.A.T., Agra Bench vide orders dated 23.11.2012 and 09.08.2012 on appeal filed by the assessee as well as Revenue, has set aside the order of the CIT(A) and directed CIT(A) to consider the additional ground taken by the assessee for considering its status as being registered under Section 12AA of the Act. As per the order of CIT-II, 4 ITA Nos.232 /Agra/2013 238/Agra/2013, A.Ys. 2004-05 Agra registration under Section 12AA was granted with retrospective effect 01.04.2003. The matter was restored to the CIT(A) by the ITAT with direction to compute the income as per the Section 11 considering registration under Section 12AA of the Act. In consequence to the direction of the I.T.A.T., the CIT(A) has taken up the matter for re-adjudication . During the appellate proceeding before CIT(A), the assessee has raised some additional grounds, which was raised during the first appellate proceeding for computation of income as the Section 11 of the Act in view of the registration being granted to the assessee under Section 12AA contending that in terms of report under Section 10B filed before the CIT(A). During appellate proceeding, it was requested to the CIT(A) to admit the additional grounds and report under Section 10B exercising power under Section 251(1)(a) of the Act. The CIT(A) admitted the additional ground observing as under :-
"I have admitted the additional ground taken by the Ld. AR for determination of its income considering its status as a charitable organization registered u/s 12AA for the year under consideration."
4. The above observation has been made by the CIT(A) at Page Nos. 10 & 11 of his order. The CIT(A) after admission of the additional ground has observed that though the assessee has got the registration under Section 12AA of the Act, but its accounts were not audited as per the provisions of Section 12A(b) of the Act and Rule 17B in Form 10B. Therefore, the provisions of 5 ITA Nos.232 /Agra/2013 238/Agra/2013, A.Ys. 2004-05 Section 11 of the Act were not found to be acceptable for computation of income of the assessee. The CIT(A) did not accept the report filed by the assessee in Form 10B observing as under :- (CIT(A) Page Nos. 10 & 11) "Now during the present appeal proceeding undertaken by me as per the direction of the Hon'ble ITAT Agra, the appellant has filed the audit report u/s 10B requesting to accept this audit report having conterminous power with the AO but as per the decision of the Hon'ble Supreme Court in case of CIT Vs. Kanpur Coal Syndicate (1964) 53 ITR 225 and Jute Corporation of India Limited Vs. CIT(SC) 187 ITR 688, the CIT(A) has conterminous power only with respect to carrying out further enquiries to decide the issue under appeal but such conterminous powers cannot be exercised with respect to statutory powers given to the AO under the Act with respect to making of assessments and in this process, receiving certain statutory reports such as audit report in Form 10B. As per the provision of section 12A(b), such audit report is required to be furnished along with the return of income for the relevant assessment year. As per record, no such audit report was filed along with the return of income of the assessment year under appeal and in fact, instead of the audit report u/s 10B, the audit report in form 3CD was filed applicable for a business concern and not a charitable organization registered u/s 12AA. Therefore, such audit report furnished before me in Form 10B at appellate stage to fulfill the condition for computation of income as per the provision of section 11 cannot be accepted."
5. The CIT(A) has also examined the issue from another angle stating that even for the sake of argument, if its assumed that income of the assessee has to be computed as per the provision of Section 11 being charitable organization, it can be shown that the its income is not fully exempt because it has not fulfilled the conditions prescribed in Section 11 of the I.T. Act. The CIT(A) noted that the assessee did not utilize 85% of 6 ITA Nos.232 /Agra/2013 238/Agra/2013, A.Ys. 2004-05 its receipt, therefore, claiming exemption for its whole income is not correct. The assessee did not satisfy the provision of Section 11(2) of the Act, which provides that the assessee has to inform through a notice to its A.O. in writing in Form 10 as per Rule 17 of the Act giving the details for which the excess amount would be set apart or accumulated and utilized within five years and such money is to be invested in the specified securities as mentioned in Section 11(5) of the Act and such notice is to be given before expiry of time allowed under Section 139(1) of the Act. The CIT(A) further noted that the excess amount has to be deposited by the assessee in Scheduled Bank but no such notice was given to the A.O. Therefore, assessee's income cannot be taken as exempt. The CIT(A) dismissed the additional ground as under :-
(CIT(A) Page No. 13) "Considering all the facts and circumstances of the case as discussed in this para above, the additional ground raised by the appellant claiming the entire income to be exempt on the ground that it is granted the status of charitable trust with retrospective effect from 01.04.2003 is not found to be tenable on legal ground as well as on merit because except getting registration u/s 12AA, the assessee(appellant) has not fulfilled any other conditions for the purpose of computation of its income as pr the provisions of section 11 and hence, additional ground raised by the appellant is dismissed."7 ITA Nos.232 /Agra/2013
238/Agra/2013, A.Ys. 2004-05
6. The CIT(A), while considering the grounds on merit, allowed part relief confirming the addition to the extent of Rs.11,39,756/- out of the addition of Rs.54,06,320/- and deleted the addition which was made by the A.O. on account of disallowance of expenditure. Since the CIT(A) has partly allowed the appeal, therefore, both the Revenue as well as assessee are in appeal before us.
7. We have heard ld. Representatives of the parties and records perused. On perusal of order of CIT(A), we find that the CIT(A) in his own interpretation was of the view that he is not empowered to accept the audit report filed by the assessee in Form 10B. The action of the CIT(A) is contrary to the Instruction No. 1148 dated 09.02.1978. The relevant abstract of the instruction is reproduced as below:-
"Instruction No:1148, Section(s) Referred: 12A(b), Statute: Income - Tax Act, 1961 Date of Issue:9/2/1978 "Under section 12A(b) of the Income-tax Act, 1961, in thecase of a charitable or religious trust or institution whose total income without giving effect to the provisions of section 11 and 12 of the Income-tax Act 1961 exceeds twenty-five thousand rupees in any preveious year, the accounts of the trust or institutions should be audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income should along with the return of income for the relevant assessment year the report in Form 10B duly signed and verified by such accountant.
2. The Board have and occasion to consider whether the requirement of filing audit report "along with the return of income"is mandatory so as to disentitle the trust from claiming exemption under section 11 8 ITA Nos.232 /Agra/2013 238/Agra/2013, A.Ys. 2004-05 and 12 in case of omission of furnishing such report in the prescribed form along with the return. Normally it should be possible for a trust to file the auditor's report along with the return of income. However, in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report, the exemption as available to such trust under section 11 and section 12 may not be denied merely on account of delay in furnishing the auditor's report, and the ITO should report reasons for accepting a belated audit report."
8. In the above instruction, it is clearly stated that the exemption as available to such Sections 11 and 12 of the Act may not be denied merely on account of delay in furnishing the audit report. It is also relevant to state that the matter has been sent back by ITAT to CIT(A) for examining the case of the assessee, in the light of the fact that registration under Section 12AA has been granted therefore, case is accordingly to be examined in the light of Sections 11 and 12 of the Act. Since the CIT(A) having co-terminus power of the A.O., therefore, he is bound to accept the audit report filed by the assessee in Form 10B. The Hon'ble Gujarat High Court in the case of ITO Vs. VXL India Ltd., [2009] 312 ITR 187 (Guj) has held that the audit report submitted before completion of assessment is sufficient compliance. According to law laid down by the Hon'ble Apex Court in the case of Goetze (India) Ltd. Vs. Commissioner of Income-tax, 157 Taxman 1(SC). The CIT(A) is empowered to consider assessee's claim at his stage. Similar view is taken by the Hon'ble Madhya Pradesh High Court in the case of CIT Vs. Medicaps Ltd. [2010] 323 ITR 554 (MP).
9 ITA Nos.232 /Agra/2013
238/Agra/2013, A.Ys. 2004-05
9. In the case under consideration, the ITAT has sent back the matter to the file of CIT(A) after admitting the additional grounds of appeal and directed to decide the matter in accordance with law. When the matter is sent back to the file of CIT(A) the facts becomes peculiar and the facts of the case and Sections 11 and 12 are required to be examined accordingly. The CIT(A) ought to have admitted such information and Form 10B at his stage as the assessee submitting such material which are admitted on the issue and in the interest of the justice they all required to be considered before coming to the conclusion. The CIT(A) did not examine the case as per direction of the I.T.A.T. and in accordance with Sections 11 and 12 of the Act. He did not put the complete facts on record after examining the relevant materials and submission of the assessee. In absence of complete facts on record, the issue cannot be decided at this stage. In the light of the fact and considering the fact that for deciding the issue the complete facts are required to put on record. Since records and materials are available with A.O. therefore, we think it proper to send back the issue to the file of the A.O. in stead of CIT(A) to decide the issue afresh in accordance with law and in accordance with Sections 11 and 12 keeping in view that the assessee has granted registration under Section 12AA w.e.f. 01.04.2003. Before parting from the matter it is relevant to state that A.O. while deciding the issue afresh in accordance with law will not be influenced by the observation of the CIT(A) made in the 10 ITA Nos.232 /Agra/2013 238/Agra/2013, A.Ys. 2004-05 impugned order which we have set aside. The A.O. is directed to decide the issue afresh in accordance with law, in the light of the above discussions and in accordance with law, after providing reasonable opportunity of hearing to the assessee.
10. The CIT(A) has also decided the issue on merit which is also a pre- matured decision. As the CIT(A) did not examine the case of the assessee in the light of Sections 11 and 12 of the Act, we, therefore, set aside the order of the CIT(A) allowing part relief. Since CIT(A) allowed part relief, therefore, Revenue is also in appeal. Since we set aside the order of the CIT(A) and sent back the matter to the file of the A.O. The grounds of appeal raised in the Revenue's appeal are also being sent back to the file of the A.O. with the direction as stated above.
11. In the result, both the appeals of the assessee and Revenue are allowed for statistical purposes.
Sd/- Sd/-
(BHAVNESH SAINI) (A.L. GEHLOT)
Judicial Member Accountant Member
Amit/
11 ITA Nos.232 /Agra/2013
238/Agra/2013,
A.Ys. 2004-05
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT (Appeals) concerned
4. CIT concerned
5. D.R., ITAT, Agra Bench, Agra
6. Guard File. By Order
Sr. Private Secretary
Income Tax Appellate Tribunal, Agra
True Copy