INCOMETAX OFFICER (EXEMPTION WARD), RAJAHMUNDRY V. SRI VENKATESWARA SWAMY TEMPLE, MACHILIPATNAM

ITA 77/VIZ/2025

AI Insights

The case involves the Income Tax Officer, Exemption Ward, Rajahmundry as the appellant and Sri Venkateswara Swamy Temple, Batchupet, Machilipatnam as the respondent. The dispute centers around the assessment year 2017-18, where the Revenue challenged the CIT(A)'s decision to allow the assessee's claim after a delayed submission of Form 10B, and the assessee contested the assessment of income from the sale of soil and agricultural income. The Tribunal found procedural discrepancies in the CIT(A)'s handling of the case, particularly in addressing issues not originally part of the assessment order, leading to a remand for re-evaluation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360679 (ITAT-VISAKHAPATNAM)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: Association of Indian Panelboard Manufacturer v Deputy Commissioner of Income Tax, Shree Bhairav Seva Samiti vs Income Tax Officer, CIT vs Xavier Kalavani Mandal (P) Ltd, Sarvodaya charitable Trust vs. ITO (Exemption)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: APARNA VILLURI
• Assessee Lawyers: SIVA RAM KUMAR
• Keywords: Condonation of delay; Set aside; Capital asset; Tax effect; Capital receipt; Capital Gains; Charitable institution; Benefit of exemption; Maximum Marginal Rate
• Section: 11; 12AA; 133(6); 12A; 12; 10B

Judgement Text

"आयकर अपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM “DIVN” BENCH, VISAKHAPATNAM श्री धिजय पाल राि, उपाध्यक्ष Before Shri Vijay Pal Rao, Vice President एिं and श्री एस बालाक ृष्णन, लेखा सदस्य क े समक्ष Shri Balakrishnan S., Accountant Member आ.अपी.सं /ITA No.77/Viz/2025 (निर्धारण वर्ा/Assessment Year: 2017-18) Income Tax Officer Exemption Ward Rajahmundry Vs. Sri Venkateswara Swamy Temple Batchupet, Machilipatnam Krishna Dist. [PAN : AAAJS4922R] (Appellant) (Respondent) Cross Objection No.8/Viz/2025 (Arising out of आ.अपी.सं /ITA No.77/Viz/2025) (निर्धारण वर्ा/Assessment Year: 2017-18) Sri Venkateswara Swamy Temple Batchupet, Machilipatnam Krishna Dist. [PAN : AAAJS4922R] Income Tax Officer Exemption Ward Rajahmundry (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri Siva Ram Kumar, AR (through Hybrid hearing) रधजस्‍ व द्वधरध/Revenue by: Dr.Aparna Villuri, DR सुिवधई की तधरीख/Date of Hearing: 06/05/2025 घोर्णध की तधरीख/ Date of Pronouncement: 20/05/2025 2 ITA No.77/Viz/2025 & CO No.8/Viz/2025 Sri Venkateswara Swamy Temple आदेश / ORDER PER VIJAY PAL RAO, VICE PRESIDENT: This appeal filed by the Revenue and cross objections by the assessee are directed against the order dated 15.10.2024 of Commissioner of Income Tax (Appeals) [“Ld.CIT(A)”], National Faceless Appeal Centre, Delhi for the A.Y.2017-18. 2. The Revenue has raised the following grounds of appeal : 1. The Ld.CIT(A) erred in law and ignored the fact that the Act provided a facility to the assessee to file Form-10B (Audit Report) belatedly, but such delay in filing Form-10B can only be condoned by the CIT(Exemptions) and not by CIT(A). 2. The Ld.CIT(A) erred in law by directing to consider the Form 10B and allow the claim of the assessee after verification though the assessee had not filed its return of income for the AY 2017-18 and has filed Form 10B with undue delay. 3. The Ld.CIT(A) erred in law and ignored the fact that the AO has finalized the assessment as AOP and therefore ought to have adjudicated the issue of sale of soil and agricultural income brought to tax by AO on merits as these were the issues appealed against by the assessee. 4. Any other ground that may be urged at the time of hearing. 3 ITA No.77/Viz/2025 & CO No.8/Viz/2025 Sri Venkateswara Swamy Temple 3. The assessee has raised the following grounds of Cross Objections: 1. The Grounds of Appeal enumerated by the Appellant are erroneous on facts and in Law and the order of the first appellate authority is sustainable in Law. 2. The appeal filed falls below the prescribed monetary limits set out in CBDT Cir.No.5/2024 dt.15.3.24 and hence not maintainable; and is also not maintainable as the appellant has not demonstrated as to how the present appeal with ‘tax effect’ below the monetary limits as per CBDT Circular No.5/2024 is covered by the exceptions, as none of the exceptions mentioned in the Circular are relevant/applicable in the appeal filed by the Revenue; the tax effect in the appeal as per the CIT(A)’s order is Rs.21,66,994/- (%.2180025- %.13031) only . (*Exceptions mentioned in Circular No.5/2024 are shown below for ready reference) Without prejudice to the above Ground: 3. The First Ground of the learned AO in the Grounds of Appeal is not only erroneous but also unnecessary as the Respondent never sought to be assessed as a Trust with Sec.11 exemption and argued for assessment as AOP and at normal rates, with Sec.45 benefit for sale of rural agricultural land and aggregation of Agricultural income only for rate purposes. 4. Learned AO passed consequential order to Sec.250 Order by treating the Respondent as AOP only and collected tax, but raised Ground No.1 that the CIT appeals was not competent to condone delay 4 ITA No.77/Viz/2025 & CO No.8/Viz/2025 Sri Venkateswara Swamy Temple in filing Form.10B; which are not aligned to each other and hence not sustainable. 5. The First Ground of the learned AO in the Grounds of Appeal is not relevant as the learned AO originally assessed the Respondent as AOP and also collected tax from the Respondent as ‘AOP’ and ‘not as Trust with exemption u/S.11 even after the receipt of the CIT Appeals’ Orders, since he has not granted Sec.11 benefit to the Respondent at anytime and learned CIT ‘Appeals’ order for condonation of delay of Form.10B, has no consequences to the Appellant-AO. 6. The Respondent was assessed in the Status of “Artificial Juridical Person” by the learned AO; Form.i0B was not at all in picture while assessing the Respondent at the assessment stage and subsequently also. 7. The third Ground of the Revenue that “ the learned AO has finalized assessment of the Respondent as AOP and as such the issues of the ‘sale of soil’ and the ‘agricultural income’ would have been dealt as per law” is also not maintainable as the Respondent is entitled to support the learned CIT(Appeals)’ order on Grounds not Respondent- favourably-adjudicated, but the final result of the Order u/S.250 was in the Respondent's favour, per Rule.27, ITAT Rules,1963. 8. Learned CIT(Appeals)’ order was favourable to the Respondent though his reasoning on Form.10B in the Order u/S.250 was not based on the Respondent’s submissions before him; the appellant supports the ClIT(Appeals)’ order for its finally favourable result as per Rule.27 ITAT Rules,1963. 9. Learned AO’s assessment order assessed the Respondent as AOP, and as such the filing of 5 ITA No.77/Viz/2025 & CO No.8/Viz/2025 Sri Venkateswara Swamy Temple Form.10B is not relevant and in such a case, learned AO erred (a) in computing the total income liable to tax,(b) taxing the total income at the maximum Marginal Rate, (c) not granting exclusion of capital gains on rural agricultural land u/S.45 r.w.S.2(14) and (d) taxing Agricultural Income except aggregation for rate purposes. This Ground is taken as per Rule.22, ITAT Rules,1963. 10. Your respondent craves leave to add or amend any grounds of cross-objections mentioned herein. 4. We have heard the Ld.DR as well as the AR and carefully perused the order of the Assessing Officer (“the AO”) as well as the impugned order of the Ld.CIT(A). The assessee did not file any return of income for the year under consideration. Therefore, the AO issued notice u/s 142(1)(i) of the Income Tax Act, 1961 (“the Act”) on 14.03.2018, calling for return of income. There was no response on behalf of the assessee Trust to the notice issued by the AO u/s 142(1)(i) of the Act and hence no return was filed even in response to the notice u/s 142(1)(i) of the Act. The AO then issued notice u/s 133(6) to State Bank of Hyderabad, Batchupeta Branch for furnishing statement of account of the assessee Trust for the financial year relevant to the assessment year under consideration. After considering the details of the cash deposit in the bank account, the AO assessed the total income of the assessee in paras 2 to 4 as under: “2. On verification of statement of account, it is found that the assessee-trust has made cash deposits to the tune of Rs.42,59,459/- in its bank account Nos. 62490025343, 62490806417 and 62199263846 had with State Bank of Hyderabad, Batchupet, Machilipatnam. Accordingly, a 6 ITA No.77/Viz/2025 & CO No.8/Viz/2025 Sri Venkateswara Swamy Temple show cause notice was issued to the assessee-trust on 12.09.2019 asking the assessee-trust to explain the sources for the cash deposits of Rs.42,59,459/- along with necessary documentary evidences for verification. In response, the assessee-trust has furnished a detailed statement wherein the date wise cash deposits along with sources / explanation for the entire F.Y.2016-17 relevant to the A.Y.2017-18. The claim of cash deposits made during the demonetization period has been verified with reference to the information furnished vis-a-vis bank statements. 3. Further, the assessee-trust has also furnished financial statements along with necessary documents. As verified from the information furnished, it is understood that the affairs of the trust are managed by Endowments Department, Govt.of Andhra Pradesh through Executive Officer appointed by it. The main source of income of the assessee-trust is from hundi collections, sale of prasadams, sale of darshan & puja tickets, sale of sarees, rental income, income from lease on fish tanks etc. However, the assessee-trust has not filed its return of income electronically through e-filing portal and also not submitted Form 10B which is mandatory. The assessee-trust vide its letter dt.25.09.2019 requested to complete the assessment Proceedings basing on the financial statements and written submissions. 4. The information filed by the assessee-trust has been subjected to verification which reveals that all the cash deposits are found to be made with proper sources. Further, on perusal of Income & Expenditure account for the year ended 31.03.2017, the assessee-trust has shown excess of income over expenditure of Rs.76,38,426/- which includes soil sold of Rs.58,00,000/- which is not an agricultural income and it is liable for taxation. When asked to explain the same, the assessee-trust has not furnished any information. Since the assessee- trust has no valid registration for the A.Y.2017-18, the status of the assessee- trust is treated as AOP and the income of the assessee-trust is computed as under:- Gross receipts Rs.1,43,39,726 7 ITA No.77/Viz/2025 & CO No.8/Viz/2025 Sri Venkateswara Swamy Temple Less: Expenses Rs. 67,01,300 Total Income Rs. 76,38,426 Computation sheet and demand notice enclosed herewith. Penalty proceedings u/s.270A are initiated separately for under reporting of income.” 5. Thus the AO has taken the gross receipts and allowed the expenses while computing the total income of the assessee as there was no return of income filed by the assessee. The assessee challenged the order of the AO before the Ld.CIT(A) and contended that the AO should not have assessed the agricultural income to tax. The assessee has also taken an alternative plea before the Ld.CIT(A) that the assessee is a Charitable Trust registered u/s 12AA of the Act and shall not be taxed without extending the benefit of section 11 for the period prior to its registration u/s 12AA of the Act. It is pertinent to note that there was no issue before the AO regarding the claim of deduction u/s 11 and 12 of the Act, rather the assessee did not file any return of income. The Ld.CIT(A) has though reproduced entire assessment order in para 7.2 of the impugned order, whereby, the AO has assessed the income of the assessee by taking into consideration the gross receipts and allowing the expenses to arrive at the total income at Rs.76,38,426/-, however, the Ld.CIT(A) has given a finding in para 7.3 to 7.8 as under : “7.3. During the appellate proceedings, the appellant has argued that the amount received by grant of right 8 ITA No.77/Viz/2025 & CO No.8/Viz/2025 Sri Venkateswara Swamy Temple to excavate earth/soil on the rural agricultural land of Ac.32.33 owned by the Temple situated at Tarakaturu Village as sale of rights in rural agricultural land and hence the same was a capital receipt not includible in the taxable income of the appellant-Temple and not a taxable capital gain u/S.45 as sale of an asset NOT being a capital asset u/S.2(14)as it is 16.2km from nearest Town. However, the AO in the assessment order has stated that Rs.58,00,000/- was not a sale of asset and it was income from other sources. 7.4. Be that as it may, he A.O., in his remand report reproduced above, has submitted that the appellant filed form 10B on 24.09.2019. It was also submitted that in the Remand Report that the explanatory letter dated 25-09-2019 filed by the appellant was not considered by the Assessing Officer before he finalized the assessment. 7.5. In the light of the above facts, it is noted that the failure to file Form No.10B in time was the reason for the A.O. to deny the exemption to the appellant and subject its income to taxation. The Hon’ble Gujarat High Court in the case of Association of Indian Panelboard Manufacturer v Deputy Commissioner of Income Tax [2023] 157 taxmann.com 550 (Gujarat), has categorically held that filing of Form 10B along with the return of income is only a procedural requirement and cannot be treated as mandatory requirement for the purpose of claiming exemption u/s 11 & 12 of the Act and even if filed at a later stage the assessee is entitled to exemption claimed. 7.6. The ITAT Mumbai Bench in the case of Shree Bhairav Seva Samiti vs Income Tax Officer (2023) 149 taxmann.com 478( Mumbai-Trib) allowed assessee’s claim to exemption u/s 11 of the Act, denied in identical circumstances by the CPC in adjustment made u/s 143(1) of the Act for non-filing of form 10B along with return of income, but which was 9 ITA No.77/Viz/2025 & CO No.8/Viz/2025 Sri Venkateswara Swamy Temple subsequently filed by the assessee, following the decision of the Hon’ble Gujarat High Court in the case of CIT vs Xavier Kalavani Mandal (P) Ltd(2014) 41 taxmann.com 184 (2014) which held that even if form 10B is filed at a later stage exemption cannot be denied u/s 11 of the Act. 7.7. Further, Hon'ble Gujarat High Court decision in case of Sarvodaya charitable Trust vs. ITO (Exemption) (2021) 125 Taxmann.com 75 (Gujarat) also held that where the assessee is a public charitable trust registered under section 12A of the Act and substantially satisfied condition for availing benefit of exemption as a charitable could not be denied exemption, the assessee merely on bar of limitation in furnishing audit report in Form 10B. 7.8. As in the present case also, the appellant has complied with the procedural requirement of obtaining and filing Form 10B, therefore, respectfully following the aforesaid decisions, the Assessing Officer is directed to decide the claim of the appellant made under section 11 on merits, after accepting the Form 10B filed by it. Accordingly, grounds no. 1 - 8 raised by the appellant are allowed, subject to verification. 8. The ground of appeal no.9 is general in nature and does not require any separate adjudication of this ground. Thus, the ground no. 9 is dismissed. 9. In result, the appeal is “partly allowed”. 6. This finding of the Ld.CIT(A) is given on an issue which does not emanate from the assessment order. Therefore, the Ld.CIT(A) has given a finding on the subject matter, which is completely alien to the assessment order passed by the AO. The issue which has not arisen as a result of assessment order and also not germane to the facts of the case of the assessee has 10 ITA No.77/Viz/2025 & CO No.8/Viz/2025 Sri Venkateswara Swamy Temple been taken up and decided by the Ld.CIT(A), resulting in not adjudicating the controversy arising from the assessment order. It is pertinent to note that the Ld.CIT(A) has given a finding on the issue of delay in filing the Form 10B, whereas in the case of the assessee, there is no return of income, then the question of filing of Form 10B does not arise. Accordingly, the impugned order of the Ld.CIT(A) is set aside, being contrary to the facts as well as law. Both the Revenue and the assessee have challenged the impugned order and therefore, in the interest of justice, the matter is remanded to the record of the Ld.CIT(A) for fresh adjudication of the appeal of the assessee on the issue which is emanating from the assessment order 7. In the result, appeal of the Revenue and cross objections of the assessee are allowed for statistical purpose. Order pronounced in the Open Court on 20th May, 2025. Sd/- Sd/- (BALAKRISHNAN S.) ACCOUNTANT MEMBER (VIJAY PAL RAO) VICE PRESIDENT Hyderabad, Dated 20th May, 2025 L.Rama, SPS 11 ITA No.77/Viz/2025 & CO No.8/Viz/2025 Sri Venkateswara Swamy Temple Copy to: S.No Addresses 1 The Income Tax Officer, Exemptions Ward, Shiva Towers, 5th Floor, Danavaripeta, Rajahmundry 2 M/s Sri Venkateswara Swamy Temple, Batchupet, Machilipatnam, Krishna Dist. 4 The Pr.Commissioner of Income Tax, Visakhapatnam 4 The DR, ITAT Hyderabad Benches 5 Guard File "