Soceity for Eleimination of Rural Povery, Secunderabad V. Deputy Director of Income Tax (Exemptions)-II, Hyderabad

CO 49/HYD/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7663 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 10-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Charitable institution; Additional evidence
• Section: 143(3); 12A; 10B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER S. NO. ITA NO. AY APPELLANT RESPONDENT 1. 255/HYD/11 2004 - 05 DY. DIRECTOR OF INCOME- TAX(EXEMPTION)- II, HYDERABAD SOCIETY FOR ELIMINATION OF RURAL POVERTY, HYDERABAD (PAN AADTS3780J) 2. 256/HYD/11 2005 - 06 - DO - - DO - 3. 257/HYD/11 2006 - 07 - DO - - DO - AND C.OS S. NO. C.O. NO. AY CROSS OBJECTOR RESPONDENT 4. 49/HYD/11 (IN ITA NO. 255/HYD/11) 2004 - 05 SOCIETY FOR ELIMINATION OF RURAL POVERTY, HYDERABAD (PAN AADTS3780J) DY. DIRECTOR OF INCOME- TAX(EXEMPTION)-II, HYDERABAD 5. 50/HYD/11 (IN ITA NO. 256/HYD/11) 2005 - 06 - DO - - DO - 6. 51/HYD/11 (IN ITA NO. 257/HYD/11 2006 - 07 - DO - - DO - REVENUE BY : SHRI V. SRINIVAS ASSESSEE BY : SHRI C.V. NARASIMHAM & SHRI C. KAMESWARA RAO DATE OF HEARING : 05/09/2012 DATE OF PRONOUNCEMENT : /09/2012 ORDER PER BENCH, J.M.: THESE APPEALS PREFERRED BY THE REVENUE ARE DIRECTE D AGAINST A COMMON ORDER OF THE CIT(A)-IV, HYDERABAD DATED 30/1 1/2010 FOR THE ASSESSMENT YEARS 2004-05, 2005-06 AND 2006-07. THE ASSESSEE ALSO FILED CROSS OBJECTION AGAINST THE SAID ORDER OF THE CIT(A ) FOR THE SAID ASSESSMENT YEARS. 2 ITA NO. 255 TO 257/HYD/2011 & COS. 49 TO 51/HYD11 SOCIETY FOR ELIMINATION OF RURAL POVERTY 2. SINCE THE ISSUES AND FACTS ARE IDENTICAL IN ALL THESE APPEALS, WE REFER TO THE FACTS FROM AY 2004-05 BEING ITA NO. 255/HYD/ 11 TO DISPOSE OF THESE APPEALS. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE VOLUNTARILY FILED RETURNS OF INCOME FOR ASSESSMENT YEARS 2004-05, 200 5-06, AND 2006-07 ON 8 TH OCTOBER, 2007 ALONG WITH AUDIT REPORT IN FORM NO. 10B DECLARING A NIL INCOME. THE ASSESSING OFFICER ISSUED NOTICES U/S 148 OF THE ACT FOR ALL THREE YEARS UNDER CONSIDERATION. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT FOR ALL THE YEARS UNDER CONSIDERATION ON 31 ST DECEMBER, 2009 U/S 143(3) READ WITH SECTION 147 OF THE ACT, DISALL OWING THE EXEMPTION U/S 11 OF THE ACT ON THE GROUND THAT THE SOCIETY WA S NOT REGISTERED U/S 12A OF THE ACT. 4. AGGRIEVED, THE ASSESSEE SOCIETY PREFERRED APPEAL S BEFORE THE CIT(A). 5. MEANWHILE, AFTER COMPLETION OF THE ASSESSMENT, T HE SOCIETY WAS REGISTERED U/S 12A OF THE ACT ON 22 ND MARCH, 2010. 6. BEFORE THE CIT(A), THE SOCIETY FILED A PETITION U/S 250(5) OF THE ACT RAISING ADDITIONAL GROUNDS OF APPEAL CONSEQUENT TO THE REGISTRATION OF THE SOCIETY U/S 12A OF THE ACT WITH EFFECT FROM THE INC EPTION OF THE SOCIETY. THE SOCIETY ALSO FILED ADDITIONAL EVIDENCE UNDER RU LE 46A OF THE ACT FOR CONSIDERATION BY THE CIT(A). 7. THE CIT(A) SOUGHT A REMAND REPORT FROM THE ASSES SING OFFICER WITH REGARD TO THE ADDITIONAL GROUNDS RAISED CONSEQUENT TO THE REGISTRATION OF THE SOCIETY UNDER SECTION 12A OF THE ACT AND ALSO O N THE ADDITIONAL EVIDENCE. 3 ITA NO. 255 TO 257/HYD/2011 & COS. 49 TO 51/HYD11 SOCIETY FOR ELIMINATION OF RURAL POVERTY 8. THE ASSESSING OFFICER SUBMITTED HIS REMAND REPOR T AND THE ASSESSEE-SOCIETY SUBMITTED ITS COMMENTS/OBJECTIONS TO THE REMAND REPORT BEFORE THE CIT(A). 9. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND REMAND REPORT OBTAINED FROM THE ASSESSING OFFICER A LLOWED THE APPEALS OF THE ASSESSEE BY HOLDING THAT IT IS CLEAR THAT BUT F OR ABSENCE OF REGISTRATION U/S 12A AT THE TIME OF FINALIZATION OF ASSESSMENT, THE CLAIM OF EXEMPTION U/S 11 COULD NOT HAVE BEEN DENIED FOR ANY REASONS S ET OUT BY THE ASSESSING OFFICER IN HIS ORDER. HE, THEREFORE, CONC LUDED THAT HAVING OBTAINED THE REGISTRATION U/S 12A, THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 11 FOR THE AYS. 2004-05, 2005-06 AND 2006-07. I N SO FAR AS THE ISSUES REGARDING THE SCOPE OF INCOME, AND TREATME NT OF GRANTS, BUDGETARY ALLOCATIONS OR GRANTS IN AID BY THE A SSESSING OFFICER IS CONCERNED, THE CIT(A) HELD THAT THE SAME DOES NOT R EQUIRE ANY ADJUDICATION AS THESE REMAIN OF ONLY ACADEMIC INTER EST. HE, THEREFORE, DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE TOT AL INCOME OF THE ASSESSEE AFTER CONSIDERING WHETHER IT IS ELIGIBLE F OR EXEMPTION U/S 11 OF THE ACT. 10. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENU E PREFERRED APPEALS BEFORE US AND THE ASSESSEE ALSO FILED ITS CROSS OBJ ECTIONS. 11. GROUNDS OF APPEAL RAISED BY THE REVENUE ARE COM MON IN ALL THE THREE APPEALS UNDER CONSIDERATION, WHICH ARE REPROD UCED FROM ITA NO. 255/H/11, AS UNDER: 1. THE LEARNED CIT(A) ERRED BOTH ON FACTS AND IN LA W. 2. THE LEARNED CIT(A) ERRED IN ALLOWING THE CLAIM O F EXEMPTION U/S 11 FOR ALL THE THREE ASSESSMENT YEARS, WHICH WAS DE NIED FOR THE REASONS SET OUT BY THE ASSESSING OFFICER IN HIS ORD ER. THE TRUST HAS OBTAINED THE REGISTRATION U/S 12A AFTER COMPLETION OF ASSESSMENT PROCEEDINGS W.E.F. DATE OF INCEPTION VIZ., 11/02/20 00 VIDE DIRECTOR OF INCOME-TAX(EXEMPTIONS) ORDER DATED 22/03/2010. 4 ITA NO. 255 TO 257/HYD/2011 & COS. 49 TO 51/HYD11 SOCIETY FOR ELIMINATION OF RURAL POVERTY 3. THE CIT(A) HAS NOT CONSIDERED THAT THE ASSESSMEN T WAS REOPENED BY THE ASSESSING OFFICER IN THE ABSENCE OF REGISTRATION U/S 12A AND NON-FILING OF THE RETURNS. 4. THE CIT(A) HAS NOT GONE INTO THE MERITS OF THE C ASE AND NOT EXAMINED THE VARIOUS ADDITIONS MADE FOR THE LAPSES ON THE PART OF THE TRUST. THE LEARNED CIT(A) HAS NOT CONSIDERED TH AT THE TRUST HAS NOT CARRIED OUT ITS OBJECTS INDEPENDENTLY AND NEVER OBTAINED THE UTILISATION CERTIFICATES FROM THE SUB-ORDINATE ORGA NISATIONS TO WHOM THE WORK OF EXECUTION WAS ENTRUSTED AND THE SAME WA S SUBMITTED TO THE CONCERNED CONTROLLING AUTHORITIES. 5. THE LEARNED CIT(A) HAS NOT CONSIDERED THAT TRUST HAS SHOWN TRANSFERS OF THE GRANTS AS EXPENDITURE IN THE AUDIT REPORT IN RESPECT OF EACH UNIT. 6. THE CIT(A) HAS NOT CONSIDERED THAT THE ASSESSEE HAS NOT INVESTED THE FUNDS AS PER THE PROVISIONS OF SECTION 11(5) OF THE ACT. THE TRUST HAS OFFERED LAPTOPS TO SOME OF THE NON-OFFICIAL MEB ERS WHO ARE NOT WORKING IN THE TRUST. THIS EXPENDITURE IS CLAIMED A S CHARITABLE ONE. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE NAT URE OF ADDITIONS MADE BY THE ASSESSING OFFICER IN THE ABSENCE OF THE REGISTRATION U/S 12A AT THE TIME OF THE ASSESSMENT PROCEEDINGS. 7. THE LEARNED CIT(A) OUGHT NOT TO HAVE TREATED THE ASSESSMENT PROCEEDINGS COMPLETED U/S 143(3) R.W.S. 147 AS ILLE GAL AND INVALID. 8. THE LEARNED CIT(A) HAS NOT CONSIDERED THAT THE A SSESSEE HAS NOT BEEN REGISTERED UNDER AP CHARITABLE & HINDU RELIGIO US INSTITUTIONS & ENDOWMENTS ACT, 1987. 12 THE CROSS OBJECTIONS RAISED BY THE ASSESSEE FOR THE THREE YEARS UNDER CONSIDERATION ARE IDENTICAL, THEREFORE, WE RE FER TO THE GROUNDS FROM THE C.O. 49/HYD/2011, WHICH ARE AS UNDER:- 1. THE LEARNED OUGHT TO HAVE ANNULLED THE ASSESSMEN T ORDER PASSED U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE REO PENING OF THE ASSESSMENT U/S 147 OF THE ACT IS VALID. 3. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESS ING OFFICER TO RECOMPUTE THE INCOME. 5 ITA NO. 255 TO 257/HYD/2011 & COS. 49 TO 51/HYD11 SOCIETY FOR ELIMINATION OF RURAL POVERTY 4. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT BUDGE TARY RELEASES ARE GOVERNMENT FUNDS AND THEY DO NOT FORM PART OF T HE FUNDS OF THE SOCIETY AND CANNOT BE TREATED AS ITS INCOME. 5. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE F UNDS ARE RELEASED TO THE SOCIETY FOR THE PURPOSE OF IMPLEMEN TATION OF GOVERNMENT PROGRAMMES SINCE THE SOCIETY IS IMPLEMEN TING AGENCY. THE FUNDS ARE HELD BY THE SOCIETY IN TRUST FOR THE STATE GOVERNMENT AND THE SOCIETY DOES NOT HAVE OWNERSHIP OF THE FUND S. 6. THE CIT(A) OUGHT TO HAVE HELD THAT THE SOCIETY I S IMPLEMENTING AGENCY FOR THE ANDHRA PRADESH DISTRICT POVERTY INIT IATIVES PROJECT (DPIP) AND ANDHRA PRADESH RURAL POVERTY REDUCTION P ROJECT (RPRP). FOR IMPLEMENTATION OF THESE TWO PROJECTS, THE STATE GOVERNMENT RECEIVES THE LOANS FROM THE INTERNATIONAL DEVELOPME NT ASSOCIATION (WORLD BANK) THROUGH GOVERNMENT OF INDIA. THE SOCIE TY RECEIVES FUNDS FROM THE STATE GOVERNMENT. THE WORLD BANK REL EASES THE LOAN AMOUNT TO THE GOVERNMENT. AS SUCH THE FUNDS DO NOT CONSTITUTE INCOME OF THE SOCIETY AND ARE TIED UP FO R SPECIFIC PURPOSE DIRECTED BY THE GOVERNMENT. 7. THE CIT(A) OUGHT TO HAVE HELD THAT THE BUDGETARY RELEASES ARE NOT VOLUNTARY CONTRIBUTIONS/INCOME OF THE APPELLANT WITHIN THE MEANING OF 12(1) READ WITH 2(24(IIA) OF THE ACT. 8. THE CIT(A) OUGHT TO HAVE HELD THAT THE FUNDS REC EIVED BY THE SOCIETY ARE TIED UP GRANTS; THEY DO NOT BELONG TO T HE SOCIETY. SUCH GRANTS DO NOT FORM CORPUS OF THE ASSESSEE OR ITS IN COME AND IT DOES NOT HAVE UNRESTRICTED FREEDOM. AS SUCH, THEY DO NOT FORM PART OF VOLUNTARY CONTRIBUTIONS. THE CIT(A) OUGHT TO HAVE F OLLOWED THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF NIRMAL AGRICULTURAL SOCIETY VS. ITO [1999] 71 ITD 1 52 (HYD.) 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. W E FIND THAT AT THE TIME OF COMPLETION OF ASSESSMENT, THERE IS NO VALID REGI STRATION U/S 12 A OF THE ACT, WHICH WAS GRANTED TO THE ASSESSEE SUBSEQUENT T O THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. HOWEVER, THE ASSESSEE FILED ITS RETURNS OF INCOME FOR THE YEARS UNDER CONSIDERATION , VIZ., AY 2004-05, 2005-06 AND 2006-07 CLAIMING SUBSTANTIAL AMOUNTS AS APPLIED FOR CHARITABLE PURPOSES AND ENTITLED TO CLAIM EXEMPTION U/S 11 THEREON. SINCE THE ASSESSEE GOT REGISTRATION U/S 12A OF THE ACT, A T THE TIME OF FILING 6 ITA NO. 255 TO 257/HYD/2011 & COS. 49 TO 51/HYD11 SOCIETY FOR ELIMINATION OF RURAL POVERTY APPEALS BEFORE THE CIT(A), THE CIT(A) CONSIDERED TH E SAME AND DECIDED THE APPEALS ACCORDINGLY. WE ARE OF THE OPINION THA T THE ASSESSING OFFICER HAS NO OCCASION TO EXAMINE THE ISSUES AFTER OBTAINI NG THE REGISTRATION U/S 12A OF THE ACT, AND SINCE REGISTRATION FOR THE SOC IETY U/S 12A OF THE ACT IS THE CRUX FOR DECIDING THE ISSUES IN THE APPEALS, T HE CIT(A) INSTEAD OF REMITTING THE APPEALS BACK TO THE FILE OF THE ASSES SING OFFICER DECIDED THE SAME, WHICH IS BAD IN LAW. THEREFORE, IT IS APPROP RIATE TO RESTORE THE APPEALS BACK TO THE FILE OF THE ASSESSING OFFICER T O DECIDE THE SAME AFTER EXAMINING THE REGISTRATION U/S 12 A OBTAINED BY THE ASSESSEE AND DECIDE THE ISSUES IN ACCORDANCE WITH LAW. WE ORDER ACCORDI NGLY. 14. AS REGARDS THE GROUND REGARDING REOPENING OF TH E ASSESSMENT U/S 147 OF THE ACT RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS, WE ARE OF THE OPINION THAT THE REOPENING IS VALID AS THERE WAS NO VALID REGISTRATION U/S 12A OF THE ACT, WAS GRANTED TO THE ASSESSEE FOR AY S. 2004-05, 2005-06, 2006-07, BUT, IT WAS GRANTED BELATEDLY ON 22/03/201 0. HOWEVER, THE ASSESSEE CLAIMED EXEMPTION U/S 11 OF THE ACT. THERE FORE, TO CONSIDER THIS ASPECT, THE ASSESSMENT WAS REOPENED AS DISCUSSED B Y THE CIT(A) AT PARA 22 OF HIS ORDER. THUS, WE CONFIRM THE REASSESSMENT MADE BY THE ASSESSING OFFICER U/S 147 OF THE ACT. 15. SINCE THE REVENUE APPEALS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER, THE C.OS. FILED BY THE ASSESSEE ARE ALSO R ESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION, EXCEPT TH E CROSS OBJECTION FOR REOPENING OF THE ASSESSMENT BY THE ASSESSING OFFICE R U/S 147 OF THE ACT. 7 ITA NO. 255 TO 257/HYD/2011 & COS. 49 TO 51/HYD11 SOCIETY FOR ELIMINATION OF RURAL POVERTY 16. IN THE RESULT, REVENUE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES AND THE C.OS. ARE PARTLY ALLOWED FOR STATISTICAL PU RPOSES. PRONOUNCED IN THE OPEN COURT ON 28/09/2012. SD/- SD/- ( CHANDRA POOJARI) (ASHAVIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED: 28 TH SEPTEMBER, 2012. KV COPY TO:- 1) DDIT(E), HYDERABAD 2) SOCIETY FOR ELIMINATION OF RURAL POVERTY, 4 TH FLOOR, 5-10-192, HERITAGE COMPLEX, HILL FORT ROAD, HYDERABAD. 3) THE CIT (A)-IV, HYDERABAD 4) DIT(E), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.