M/s Nothern Province of Carmelite Sisters of St. Teresa, St. Teresa's Provincilate, Bhopal V. The ACIT- 1(2), Bhopal

CO 58/IND/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8754 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 27-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESH
• Keywords: Charitable institution; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 12A; 147; 148; 12; 154; 11

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.176/IND/2013 A.Y. 2004-05 ACIT-1(2), BHOPAL :: APPELLANT VS M/S. NORTHERN PROVINCE OF CARMELITE SISTERS OF ST. TERESAS PROVINCILATE, MISROD, BHOPAL PAN AAAAN 1010 A :: RESPONDENT AND, CROSS-OBJECTION NO.58/IND/2013 (ARISING OUT OF ITA NO.176/IND/2013) A.Y. 2004-05 M/S. NORTHERN PROVINCE OF CARMELITE SISTERS OF ST. TERESAS PROVINCILATE, MISROD, BHOPAL PAN AAAAN 1010 A :: OBJECTOR VS ACIT-1(2), BHOPAL :: RESPONDENT REVENUE BY SHRI R.A. VERMA ASSESSEE BY SHRI S.S. DESHPANDE 2 DATE OF HEARING 29.7.2013 DATE OF PRONOUNCEMENT 29.7.2013 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 4.1.2013 OF THE LD. CIT(A)-I, BHOPAL, WHEREAS THE ASSE SSEE HAS ALSO FILED CROSS-OBJECTION AGAINST THE ORDER OF THE LD. CIT(A). 2. DURING HEARING, WE HAVE HEARD SHRI R.A. VERMA, LD. SR. DR AND SHRI S.S. DESHPANDE, LEARNED COUNSEL FOR TH E ASSESSEE. FIRST, WE SHALL TAKE UP APPEAL OF THE REVENUE , WHEREIN THE ONLY GROUND RAISED PERTAINS TO DELETING T HE ADDITION OF RS.92,15,262/- MADE AS PER THE PROVISIONS OF SEC. 11 OF THE ACT. THE CRUX OF ARGUMENTS ON BEHALF O F THE REVENUE IS IN SUPPORT OF THE ASSESSMENT ORDER WHERE AS THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNE D ORDER. 3 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE, A CHARITABLE INSTITUTION, WAS GRANTED REGISTERED U/S 12A OF THE ACT BY THE LD. COMMISSION ER VIDE ORDER DATED 13 TH MARCH, 1999. THE ASSESSEE WAS CREATED FOR CHARITABLE ACTIVITIES WHICH INCLUDE RELIEF TO THE POOR , MEDICAL ASSISTANCE AND OTHER ACTIVITIES OF OTHER GENERAL PUBLIC UTILITY. DURING THE RELEVANT A.Y., THE ASSESSE E DECLARED NET DEFICIT OF RS.49,43,029/-, AFTER ADJUSTIN G CARRY FORWARD DEFICIT OF RS.92,15,262/- ON THE BASIS OF THE RETURN FILED FOR A.Y. 2003-04. THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY THE DEFICIT ALLOWED TO BE CARRIED FO RWARD SHOULD NOT BE DISALLOWED AND FURTHER AS TO WHY THE TAX LIABILITY SHOULD NOT BE CREATED. IN RESPONSE TO THIS NOTICE, ISSUED U/S 154 OF THE ACT, THE ASSESSEE FILED ITS DE TAILED SUBMISSION VIDE LETTER DATED 2.3.2011. AS PER THE AS SESSING OFFICER, SINCE THE INCOME OF THE ASSESSEE WAS EXEMPT U/S 4 11 & 12 OF THE ACT, THE ASSESSEE WAS NOT ENTITLED TO CARRY FORWARD THE LOSS/DEFICIT. IT WAS ALSO POINTED OUT BY T HE ASSESSING OFFICER THAT AS PER THE PROVISIONS OF SEC. 11(1)(A) OF THE ACT, THE INCOME IS EXEMPT ONLY IF 85% OF THE TOTAL RECEIPTS IS APPLIED FOR CHARITABLE PURPOSES AND SEC. 11 OF THE ACT DOES NOT PROVIDE FOR SET OFF /ADJUSTMENT OF EARLIER YEARS DEFICIT. THE ASSESSING OFFICER COMPUTED THE UNUTILISED INCOME IN EXCESS OF 15% AS TAXABLE INCOME VIDE ASSESSMENT ORDER U/S 147 R.W.S. 143(3) OF THE ACT DAT ED 18.11.2011. 2.2 ON APPEAL, BEFORE THE LD. CIT(A), IT WAS CLAIMED B Y THE ASSESSEE THAT THE LD. ASSESSING OFFICER COULD NOT APPR ECIATE THAT SEC. 11(1)(A) OF THE ACT DOES NOT CONTAIN ANY WORD OF LIMITATION TO THE EFFECT THAT THE INCOME SHOULD HAVE BEEN APPLIED FOR CHARITABLE PURPOSES ONLY IN THE YEAR IN WH ICH THE INCOME HAS ARISEN. IT WAS FURTHER CLAIMED THAT SET O FF OF THE EXCESS OF EXPENDITURE INCURRED OVER INCOME OF E ARLIER 5 YEARS, AGAINST THE INCOME OF LATER YEARS WILL AMOUNT TO APPLICATION OF INCOME IN LATER YEARS, FOR WHICH, THE ASS ESSEE RELIED UPON THE DECISIONS IN CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION (1987) 164 ITR 439 (RAJ), CIT VS . SHRI P. SWETAMBER MURTI PUJAK JAIN MANDAL (221 ITR 293) (GUJ), CIT VS. INSTITUTE OF BANKING (264 ITR 110) (B OM), AND THE RATIO LAID DOWN IN CIT VS. GUJRATI SAMAJ (2012) 17 TAXMAN.COM 164 (MP). THE CRUX OF THE DECISIONS IS TH AT THE ASSESSEE IS ALLOWED TO CARRY FORWARD THE DEFICIT TO BE ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YEARS. THE CONCLUSION DRAWN IN THE IMPUGNED ORDER IS REPRODUCE D HEREUNDER FOR READY REFERENCE: (V) THE HONBLE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH ALSO HAD AN OCCASION TO CONSIDER THIS ISSUE IN THE CASE OF CIT V. SHRI GUJRATI SAMAJ (REGD.) (2011) 64 DTR M.P. 76, WHEREIN IT WAS OBSERVED BY THE HONBLE HIG H COURT THAT U/S 11(1)(A), THE EXPENDITURE INCURRED I N THE EARLIER YEAR CAN BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND UTILISATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF EARLIER YEAR WOULD AMOUN T TO SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELIGIO US PURPOSES AND ACCORDINGLY IT WAS HELD THAT ASSESSEE S CLAIM TO CARRY FORWARD DEFICIT IN THE APPLICATION O F FUNDS 6 WAS JUSTIFIED. THE HONBLE HIGH COURT OBSERVED IN T HIS CASE AS UNDER :- 8. COMING TO THE NEXT QUESTION AS TO WHETHER THE ORDER OF THE TRIBUNAL HOLDING THAT THE ASSESSEE IS ENTITLED FOR CARRY FORWARD AND SET OFF EXCESS OF EXPENDITURE INCURRED DURING THE YEAR OVER ITS INCOM E. WE FIND THAT IN VIEW OF S. 11(1)(A) OF THE ACT, IT CANNOT BE SAID THAT THE EXPENDITURE INCURRED IN THE EARLIE R YEAR CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND UTILISATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF THE EARLIER YEAR WOULD N OT AMOUNT TO SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. HAVING REGARD TO S. 11(1)(A) OF THE ACT IN OUR VIEW WHEN THE INCOME OF THE TRUST IS USE D OR PUT TO USE TO MEET THE CHARITABLE OR RELIGIOUS PURPOSES IT IS APPLIED FOR CHARITABLE PURPOSES AND THE SAID APPLICATION OF THE INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED TO MEET THE EXPENSES INCURRE D FOR CHARITABLE OR RELIGIOUS PURPOSES. THUS EVEN IF THE EXPENSES FOR CHARITABLE AND RELIGIOUS PURPOSES HAVE BEEN INCURRED IN THE EARLIER YEAR AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSEQUENT YEAR, THE INCOME OF THAT YEAR CAN BE SAI D TO HAVE BEEN APPLIED FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE YEAR IN WHICH EXPENSES INCURRED FOR CHARITABLE AND RELIGIOUS PURPOSES HAD BEEN ADJUSTED . THERE ARE NO WORDS OF LIMITATION IN S. 11(1)(A) OF THE ACT EXPLAINING THAT THE INCOME SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES ONLY I N THE YEAR IN WHICH THE INCOME HAD ARISEN. (SEE CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION (1987) 60 CTR (RAJ.) 40 : (1987) 164 ITR 439 (RAJ.). IN OUR CONSIDERED VIEW THE TRIBUNAL HAS RIGHTLY APPLIED TH E RATIO OF THE JUDGMENTS AND ORDER PASSED BY THE DIVISION BENCH OF RAJASTHAN HIGH COURT IN CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION (SUPRA) 7 AND HAS COMMITTED NO ERROR IN HOLDING THIS ISSUE IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE WELL SETTLED LEGAL POSITION ON THE ISSUE AND RESPECTFULLY FOLLOWING THE DECISION OF HONBLE HIGH COURT, SPECIALLY JURISDICTIONAL HIGH COURT OF MADH YA PRADESH WHICH IS BINDING, IT IS HELD THAT EXCESS EX PENDITURE INCURRED IN EARLIER YEARS CAN BE ADJUSTED AGAINST I NCOME OF THE SUBSEQUENT YEAR. THE EXPENDITURE INCURRED IN EA RLIER YEARS CAN BE MET OUT OF THE INCOME OF SUBSEQUENT YE AR WHICH WOULD AMOUNT TO APPLICATION OF INCOME FOR CHA RITABLE OR RELIGIOUS PURPOSES. ACCORDINGLY, THE AO IS DIREC TED TO ALLOW SET OFF OF CURRENT YEAR INCOME OUT OF CARRY F ORWARD OF DEFICIT IN A.Y. 2003-04 OF RS. 92,15,262/- AND ALLO W THE BALANCE TO BE CARRY FORWARD FOR BEING APPLIED IN SUBSEQUENT YEAR. THUS, THIS GROUND OF APPEAL IS ALL OWED. 2.3 IF THE TOTALITY OF FACTS AVAILABLE ON RECORD, SUBM ISSIONS MADE FROM BOTH SIDES, OBSERVATIONS MADE IN THE ASSESSMENT ORDER AND THE CONCLUSION DRAWN IN THE IMPUGNED ORDER ARE KEPT IN JUXTAPOSITION AND ANALYSED, W E FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT, IN T HE CASE OF CIT VS. GUJRATI SAMAJ (2011) 64 DTR (MP), THE CONCLUSION PART OF WHICH IS REPRODUCED HEREINABOVE, H AS CLEARLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. EVEN OTHERWISE, IN SEC. 11(1)(A) OF THE ACT, THERE IS NO WORDS OF LIMITATION THAT INCOME SHOULD HAVE BEEN APPLIED FOR 8 CHARITABLE OR RELIGIOUS PURPOSES ONLY IN THE YEAR IN W HICH SUCH INCOME HAS ARISEN. THEREFORE, RESPECTFULLY FOLLO WING THE AFORESAID DECISION FROM HONBLE JURISDICTIONAL HIG H COURT, WE AFFIRM THE STAND OF THE LD. CIT(A). THE DEPARTMENTAL APPEAL IS THUS DISMISSED. 3. SO FAR AS THE CROSS-OBJECTION FILED BY THE ASSESSE E IS CONCERNED, THE ONLY GROUND/CROSS-OBJECTION RAISED BY THE ASSESSEE IS THAT THE LD. FIRST APPELLATE AUTHORITY ERRED TO THE EXTENT OF NOT CONSIDERING THE OBJECTIONS THAT THE OR DER PASSED U/S 147/143(3) OF THE ACT IS BARRED BY LIMITATI ON AS THE SAME WAS REOPENED ON THE BASIS OF THE AUDIT OBJECT ION. THE LEARNED COUNSEL FOR THE ASSESSEE ADVANCED HIS ARGUMENTS WHICH ARE IDENTICAL TO THE GROUND RAISED WHEREAS THE LD. SR. DR DEFENDED THE IMPUGNED ORDER. 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE FILED ITS ORIGINAL RETURN DECLARING NET D EFICIT OF 9 RS.49,43,029/- IN ITS RETURN ON 27.9.2004, WHICH WA S COMPLETED AT THE DECLARED DEFICIT ON 29.8.2006. SUBSEQUENTLY, REASSESSMENT PROCEEDINGS WERE INITIATED U/S 147 OF THE ACT WITH THE ISSUANCE OF NOTICE U/S 148 O N 22.3.2011. THE ASSESSEE CLAIMED THAT THE ORIGINAL RETUR N FURNISHED ON 27.9.2004 MAY BE TREATED TO BE CORRECT RETURN TO BE FILED IN RESPONSE TO NOTICE U/S 148 OF THE AC T. HOWEVER, THE LD. ASSESSING OFFICER COMPLETED THE ASSESSMENT DETERMINING THE TAXABLE INCOME AT RS.28,83,200/-. BEFORE THE LD. CIT(A), THE CLAIM OF THE ASSESSEE WAS THAT IN THE ASSESSMENT ORDER, PASSED U/S 143(3) OF THE ACT, THE CLAIM CARRIED FORWARD OF NET D EFICIT OF RS.49,43,029/- WAS ALLOWED BY THE ASSESSING OFFICER. THEREAFTER, A NOTICE U/S 154 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 4 TH FEBRUARY 2011 AS TO WHY THE DEFICIT CARRIED FORWARD SHOULD NOT BE DISALLOWED. THIS RECTIFICATION W AS CHALLENGED BY THE ASSESSEE. ORDER U/S 154 WAS PASSED AND 10 THEN NOTICE U/S 148 OF THE ACT WAS ISSUED ON 22.3.20 11 TO REOPEN THE CASE. PLEA WAS RAISED THAT SUCH REOPENING IS ON THE BASIS OF THE CHANGE OF OPINION. RELIANCE WAS PLACED IN CIT VS. KELVINATOR OF INDIA LTD. (2010) 187 TAXMAN 312 . CONTENTION WAS ALSO RAISED THAT THERE WAS NOT FRESH MATERIAL WITH THE ASSESSING OFFICER REGARDING BELIEF T HAT INCOME HAS ESCAPED ASSESSMENT BY ALLOWING DEFICIT TO BE CARRIED FORWARD. THE LD. CIT(A) HAS DISCUSSED THE ISSU E IN DETAIL, THEREFORE, TO CUT SHORT THE MATTER, WE FIND T HAT THE LD. ASSESSING OFFICER HIMSELF DROPPED THE PROCEEDIN GS U/S 154 OF THE ACT AND THEN ISSUED PROCEEDINGS BY ISSUANC E OF NOTICE U/S 148 OF THE ACT WITHIN THE STATUTORY PERIO D. IN VIEW OF THESE FACTS, IT CAN BE SAID THAT THERE IS NOTHI NG WRONG WITH THE BELIEF OF THE ASSESSING OFFICER THAT INCOME HAS ESCAPED ASSESSMENT. EVEN ON THE BASIS OF MATERIAL AVAILABLE ON RECORD, IF THE SUBSEQUENT OFFICER HAS REASO N TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOME, HE IS 11 EMPOWERED TO ISSUE NOTICE U/S 148 OF THE ACT AFTER RECORDING THE REASONS AND OBTAINING SATISFACTION OF THE LD. CIT(A). THE RATIO LAID DOWN IN SHAKTI TEXTILES LTD. VS . JCIT (2012) 340 ITR 144 (MAD) SUPPORTS OUR VIEW. WE FIND NO JUSTIFICATION TO INTERFERE WITH THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. THE CROSS-OBJECTION OF THE ASSESSEE IS ALSO DISMISSED. FINALLY, THE APPEAL OF THE REVENUE AND THE CROSS- OBJECTION OF THE ASSESSEE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH SIDES IN THE OPEN COURT AT TH E CONCLUSION OF HEARING ON 29.7.2013. SD SD (R.C.SHARMA) (JOGINDER S INGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29.7.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYAS!