COMMISSIONER OF INCOME TAX EXEMPTIONS KOLKATA V. ARMENIAN CHURCH

ITAT/79/2023

AI Insights

The case involves an appeal by the Commissioner of Income Tax (Exemptions), Kolkata against the Armenian Church, challenging the order of the Income Tax Appellate Tribunal which had quashed the earlier order of the Commissioner. The dispute centered on the interpretation of Sections 11(2) and 11(3) of the Income Tax Act, 1961, concerning the taxation of unutilized income set apart for specific purposes. The Tribunal had found that the unutilized income could not be taxed in the 6th year but should be considered in the 7th year if it remained unspent, contrary to the Commissioner's view.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 742382 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 17-05-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Respondent
• Court: HIGH COURT
• Department Lawyers: J P KHAITAN; PRATYUSH JHUNJHUNWALA
• Assessee Lawyers: AMIT SHARMA
• Keywords: Assessment Order; Erroneous; Exemptions; Income Tax; Prejudicial; Unutilized amount; Taxation Year
• Section: 143(3); 263; 260A; 11(2); 11(3)

Judgement Text

"OD - 17 IN THE HIGH COURT AT CALCUTTA SPECIAL JURISDICTION [INCOME TAX] ORIGINAL SIDE ITAT/79/2023 IA NO.GA/2/2023 COMMISSIONER OF INCOME TAX (EXEMPTIONS), KOLKATA -Versus- ARMENIAN CHURCH BEFORE: The Hon’ble T.S. SIVAGNANAM, CHIEF JUSTICE -And- The Hon’ble JUSTICE HIRANMAY BHATTACHARYYA Date : 17th May, 2023. Appearance : Mr.Amit Sharma, Adv. ..for the appellant. Mr.J.P. Khaitan, Sr. Adv. Mr.Pratyush Jhunjhunwala, Adv. …for the respondent. The Court : This appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 (the ‘Act’) is directed against the order dated 11th July, 2022 passed by the Income Tax Appellate Tribunal, “B” Bench, Kolkata (Tribunal) in I.T.A No. 200/Kol/2021, for the assessment year 2016-17. The revenue has raised the following substantial questions for consideration : i) Whether in the Learned Income Tax Appellate Tribunal has committed substantial error in law in quashing the order of the Commissioner of 2 Income Tax (Exemptions), Kolkata when it is apparent from the records that the assessment order was erroneous and prejudicial to the interest of the Revenue inasmuch as the same had been passed by the assessing officer without making due and proper enquiry and without verification on the aspect of unutilized amount in view of Sections 11(2) and 11(3) of the said Act ? ii) Whether in the light of provisions of Section 11(3) of the said Act the Learned Tribunal is correct in observing that if the assessee is not able to utilize the income set apart under Section 11(2) of the said during the five years following the year in which the amount was accumulated or set apart then whatever is unspent has to be utilized in the 6th year failing which it can be brought to tax in the 7th year and not in 6th year ? iii) Whether the Learned Tribunal has substantially erred in law in misconstruing the provisions enshrined under Section 11(2) and 11(3) of the said Act by coming to the conclusion that if the accumulated amount is not utilized in the 6th year the same can be brought to tax in 7th year and not in the 6th year ? We have heard Mr. Amit Sharma, learned standing counsel appearing for the appellant and Mr. J.P. Khaitan, learned senior counsel for the respondent/assessee. The first question to be considered is whether the Commissioner of Income Tax (Exemptions), Kolkata (CITE) could have exercised power under Section 263 3 of the Act. As could be seen from the assessment order dated 9th April, 2018 passed under Section 143(3) of the Act, the Assessing Officer has made an elaborate exercise and in the computation of income the following has been recorded. 4 Less: Administrative & Establishment Expenses 555,38,135 Excess of Expenditure over Income Reversal of reserve chinsurah fund 35,84,735 Reversal of reserve saidabad fund 650,00,000 1241,22,870 Before the Tribunal the assessee specifically raised a plea that the assessment order is neither erroneous nor prejudicial to the interest of the revenue as it has been factually established that the unutilised amount was spent in the 6th year in terms of clause C of Sub-section (3) of Section 11 of the Act. Though such a plea was raised, the learned Tribunal took note of the undisputed fact and held that the unutilised amount cannot be brought to tax in the 6th year but can be brought to tax in the 7th year if it still remains unutilised. In our view, we need not travel that far to take a decision in the matter as we are fully convinced that the CIT(E) has not recorded as to how the scrutiny assessment was erroneous or prejudicial to the interest of revenue. Unless and until the twin tests have been satisfied, the power under Section 263 could not have been exercised. 4 Thus, we find no grounds to interfere with the order passed by the Tribunal. Accordingly, the appeal stands dismissed. The stay application IA No.GA/2/2023 is also dismissed. (T.S. SIVAGNANAM) CHIEF JUSTICE (HIRANMAY BHATTACHARYYA, J.) S.Das/SN. "