Laxmibai Gangane Shikshan Prasarak Mandal, Akola V. Income tax Officer , Ward-1, Akola

ITA 146/NAG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1790 (ITAT-NAGPUR)
• Duration Of Justice: 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 04-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR M BHUSARI
• Keywords: Depreciation; Benefit of exemption; Revised return; Bonafide mistake
• Section: 234B; 12A; 12AA; 148; 6; 10

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH , ( E - COURT), MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI RAJENDRA , A M ITA NO. 146 / N AG / 20 1 2 ( ASSESSMENT YEAR S : 200 6 - 0 7 ) LAXMIBAI GANGANE SHIKSHAN PRASARAK MANDAL, AKOT, AKOLA VS. ITO WARD - 1,AKOLA. PAN/GIR NO. : A AA TL 6313 R ( APPELLANT ) .. ( RE SPONDENT ) /ASSESSEE BY : MR. K.P.DEWANI /REVENUE BY : DR. M. BHUSARI DATE OF HEARING : 30 TH JAN ., 201 3 DATE OF PRONOUNCEMENT : 8 TH FEB. ,201 3 O R D E R P ER SHRI R.K.G UPTA, JM : TH IS APPEAL HA S BEEN PREFERRED BY THE ASSESSEE BEFORE THE ITAT NAGPUR BENCH, NAGPUR, AGAINST THE ORDER OF LEANED CIT (A) - I , NAGPUR (MAHARASHTRA) RELATING TO THE ASSESSMENT YEAR 200 6 - 0 7 , WHICH HA S BEEN HEARD THROUGH E - COURT, MU MBAI . 2 . THE ASSESSEE IS OBJECTING IN HOLDING THAT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION (23C) (IIIAB) OF THE ACT. THE ASSESSEE HAS ALSO TAKEN OTHER GROUNDS IN REGARD TO CONFIRMING THE VARIOUS ADDITIONS AND CHARGING INTEREST UNDER SECTI ON 234A & 234B OF THE ACT IN SEPARATE GROUNDS. ITA NO . 146 /20 1 2 2 3 . BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE SOCIETY IS AN EDUCATIONAL INSTITUTION WHICH HAS BEEN GRANTED REGISTRATIO N U/S 12AA W.E.F. 21 - 01 - 2009. AO OBSERVED THAT FOR AY 2006 - 07 NO RETURN WAS FILED. FR OM THE STATEMENT OF ACCOUNTS FILED DURING THE PROCEEDINGS U/S 12A IT WAS OBSERVED THAT ASSESSEE HAD A SURPLUS OF RS. 54,88,557/ - FOR THE SAID YEAR. NOTICE U/S 148 WAS THEREFORE ISSUED. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AO POINTED OUT THAT AS PER INCOME AND EXPENDITURE STATEMENT FILED DURING THE PROCEEDINGS U/S 1 2A ASSESSEE HAS SHOWN A SURPLUS FOR FY 2005 - 06 OF AN AMOUNT OF RS. 54,88,557/ - . THESE STATEMENTS WERE AUDITED. HOWEVER AS PER THE REVISED AUDITED REPORT WHICH ACCOMPANIED THE RETURN OF INCO ME FILED IN RESPONSE TO NOTICE U/S 148 A DEFICIT O F RS. 4,19,649/ - WAS CLAIMED. AO SOUGHT EXPLANATION FROM THE ASSESSEE FOR THE VAST DIFFERENCE IN THE YEAR UNDER CONSIDERATION . REPLY WAS FILED. THE AUDITOR, WHO AUDITED THE BOOKS OF ACCOUNTS, WAS APPEARED A ND REASONS FOR DIFFERENCE IN THE PROFIT AND LOSS ACCOUNT WAS EXPLAINED, HOWEVER, THE AO WAS NOT SATISFIED. THE CONTENTION OF THE ASSESSEE THAT THE DIFFERENCES ARE DUE TO CONSOLIDATION OF FIGURES , WAS NOT ACCEPTED . IN HIS VIEW NO SATISFACTORY RECONCILIATIO N OF THE ORIGINAL AND THE REVISED STATEMENT COULD BE DONE BY THE CONCERNED CHARTERED ACCOUNTANT WHO HAD IN FACT AUDITED BOTH THE ORIGINAL AND REVISED STATEMENTS. ACCORDINGLY, THE A O CONCLUDED THAT CERTAIN AMOUNT OF DONATIONS, OTHER INCOME AND TUITION FEES RECEIVED BY TRUST HAVE NOT BEEN TAKEN INTO ACCOUNT IN THE REVISED STATEMENTS. T HEREFORE THE AO REJECTED THE CONTENTION OF THE ASSESSEE THAT THE ITA NO . 146 /20 1 2 3 REVISED INCOME AND EXPENDITURE STATEMENT REPRESENTS THE CORRECT STATE OF AFFAIRS AND IS THEREFORE TO BE TAKEN IN TO ACCOUNT. F URTHER REJECT ING THE ASSESSEES CONTENTION OF THE ASSESSEE, THE AO ALSO REJECTED THE CLAIM OF EXEMPTION U/S 10(23C) (IIIAB) OF THE ACT AND HELD THAT THE ASSESSEE WAS MAKING SYSTEMATIC PROFITS AND THEREFORE, NOT ENTITLED TO EXEMPTION. THEREAFTER THE AO AFTER EXAMINATION OF PROFIT AND LOSS ACCOUNT AND OTHER MATERIAL, COMPLETED THE ASSESSMENT AT AN INCOME OF RS. 88,86, 605/ - . 4 . THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) , BEFORE WHOM THE REOPENING OF THE ASSESSMENT , NOT ALLOWING EXEMPTION U/S 10 (23C)(IIIAB) OF THE ACT AND VARIOUS ADDITION MADE, WERE CHALLENGED. LEARNED CIT(A) REJECTED ALL THE GROUNDS OF THE ASSESSEE AS HE WAS SATISFIED WITH THE ORDER OF THE AO . HOWEVER, LEARNED CIT(A) ALLOWED PART RELIEF IN RESPECT TO ADDITIONS MADE ON MERIT. AG AINST THE ORDER OF THE LEANED CIT(A) , THE ASSESSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL CHALLENGING NOT ALLOWING EXEMPTION UNDER SECTION 10(23C)(IIIAB) OF THE ACT AND CONFIRMING VARIOUS ADDITIONS INCLUDING CHARGEABILITY OF INTEREST UNDER SECTION 234AB. 5 . DETAIL WRITTEN SUBMISSIONS WERE FILED ON BEHALF OF THE ASSESSEE. IT WAS ARGUED THAT FROM THE INCEPTION OF THE SOCIETY, THE TRUST IS IMPARTING EDUCATIONS TO THE PUBLIC IN LARGE. THE ASSESSEE TRUST NEVER EARNED PROFIT AS THE SOCIETY IS RUN BY THE AID OF TH E GOVERNMENT FUNDS. IT WAS SUBMITTED THAT THE REGISTRATION UNDER SECTION 12A HAS BEEN GRANTED BY ITA NO . 146 /20 1 2 4 FINDING OUT THAT THE ACTIVITY OF THE ASSESSEE ARE CHARITABLE IN NATURE. IT WAS FURTHER STATED THAT DURING 12AA PROCEEDING, VARIOUS DETAILS WERE FILED OF LAST 3 - 4 YEARS AS REQUIRED BY THE LEARNED CIT(A) AND FROM THAT ACCOUNT ONLY THE AO INFERRED AN IMPRESSION THAT THERE WAS A PROFIT OF RS. 54,88,557/ - . OF COURSE AT THAT POINT OF TIME AS PER AUDITED ACCOUNTS, THERE WAS SURPLUS TO THIS EXTENT, HOWEVER, WHEN THE NOTI CE UNDER SECTION 148 WAS RECEIVED THEN THE ASSESSEE PREPARED THE PROFIT AND LOSS ACCOUNT AND AT THAT POINT OF TIME THE AUDITOR FOUND THAT A MISTAKE HAS BEEN CREPT AS INSTEAD OF SURPLUS OF RS. 55.88 LAKS OR ODD, THERE WAS A LOSS/DEFICIT OF RS. 4,19,649/ - . THE AUDITOR WAS APPEARED BEFORE THE AO AND HE HAS CATEGORICALLY EXPLAINED THAT THIS WAS A MISTAKE AT THE TIME OF AUDIT ORIGINALLY AND IN THE SECOND TIME WHEN THE RETURN WAS PREPARED TO FILE IN RESPONSE TO NOTICE UNDER SECTION 148 , IT WAS SEEN THAT THERE IS A DEPOSIT AND ACCORDINGLY A REVISED STATEMENT WAS PREPARED AND WAS FILED ALONG WITH THE RETURN. RELIANCE WAS FURTHER PLACED ON VARIOUS CASE LAWS. GIST OF SAME ARE PLACED ON RECORD ALONG WITH THE COPY OF THE RESPECTIVE ORDERS OF THE HON BLE HIGH COURTS AND VA RIOUS BENCHES OF THE TRIBUNAL. 6 . ON THE OTHER HAND LEARNED D R HAS PLACED RELIANCE ON THE ORDER LEARNED CIT(A). IT WAS FURTHER SUBMITTED THAT THE INDORE BENCH OF THE TRIBUNAL IN 28 TAX.COM HAS HELD THAT IF THERE IS 75% GOVERNMENT AID, THEN THAT SOCIETY I S ELIGIBLE FOR EXEMPTION UNDER SECTION 10(23C)(IIIAB) . IN REPLY, THE LEARNED COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ITA NO . 146 /20 1 2 5 M/S NATIONAL EDUCATION SOCIETY, PASSED IN ITA NO. 808/2009, VIDE JUDGMENT DATED 8 - 7 - 2010 , COPY OF WHICH IS PLACED IN THE COMPILATION AT PAGE 1 TO 6. IN THE AFORESAID JUDGMENT, THE HON BLE KARNATAKA HIGH COURT HAS HELD THAT THE GOVERNMENT GRANT CONSTITUTES 36.42% OF THE TOTAL RECEIPTS, THEREFORE, THE ASSESSEE CLAIMED EXE MPTION UNDER SECTION 10(23C)(IIIAB) OF THE ACT AND IT WAS HELD THAT THE GRANT OF 36.42% OF THE TOTAL REVENUE D0 CONSTITUTE SUBSTANTIAL FINANCIAL AID FROM THE GOVERNMENT AND THUS THE INSTITUTION - ASSESSEE IS ENTITLED TO THE BENEFIT OF THE AFORESAID PROVISION . 7 . WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD ALONG WITH VARIOUS CASE LAWS RELIED UPON BY BOTH THE PARTIES , WE FOUND THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION UND ER SECTION 10(23C ) (IIIAB) OF THE ACT. IT IS SEEN THAT BOTH THE LOWER AUTHORITIES HAVE REJECTED THE CLAIM OF THE ASSESSEE IN RESPECT TO EXEMPTION UNDER SECTION 10(23C ) (IIIAB) OF THE ACT FOR THE SOLE REASON THAT THERE WAS A SURPLUS OF RS. 58,88,557/ - AS PER AUDIT REPORT FILED ORIGINALLY DURING THE COURSE OF 12AA PROCEEDING. BOTH THE AUTHORITIES HAVE OBSERVED IN THEIR RESPECTIVE ORDER THAT THE ASSESSEE COULD NOT FURNISH ANY REASONABLENESS OR DETAILS TO AUTHENTICATE THAT THE REVISED RETURN OR PROFIT AND LOSS ACCOUNT SHOWING DEFICIT OF RS .4,19,649/ - WAS CORRECT. IT HAS BEEN FURTHER HELD THAT THE GOVERNMENT GRANT WAS NOT SUBSTANTIAL, THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION10(23C(IIIAB) OF THE ACT . ITA NO . 146 /20 1 2 6 8 . WE NOTED THAT LEARNED AUDITOR WHO AUDITE D THE ACCOUNTS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AT THE TIME OF 12AA PROCEEDING, HAS QUANTIFIED SURPLUS OF RS. 55.88 LAKHS OR ODD, HOWEVER, WHEN THE ASSESSEE - SOCIETY RECEIVED NOTICE UNDER SECTION 148, THEN THE ORIGINAL ACCOUNTS WERE REC ONCILE D BY THE AUDITOR AND IT WAS FOUND THAT THERE IS NO SURPLUS BUT THERE IS A DEFICIT . THE COMPUTATION OF ORIGINAL ACCOUNT AND REVISED ACCOUNT IS TABULATED IN THE ORDER OF THE LEARNED CIT(A) AT PAGE 14. IT IS SEEN THAT IN ORIGINAL RETURN, THE RENT COMPONENT AND DEPRECIATION COMPONENT WERE NOT TAKEN INTO CONSIDERATION . THERE IS A DIFFERENCE OF TUITION FEES ALSO AS IN EARLIER OCCASION TUITION FEES WAS SHOWN AT 31.52 LAKHS WHEREAS IN THE REVISED RETURN THE TUITION FEES HAS BEEN SHOWN AT RS. 47.35 LAKHS. MAJOR DIF FERENCE WAS ON ACCOUNT OF OTHER FEES AS THE ASSESSEE HAS SHOWN OTHER FEES AT RS. 43.48 LAKHS IN THE ORIGINAL ACCOUNT WHEREAS IN THE REVISED ACCOUNT IT WAS RS. 7.35 LACS . ANOTHER MAJOR DIFFERENCE IS ON ACCOUNT OF DONATIONS IN CASH AND KIND OF RS. 27.49 LAKHS WAS SHOWN IN THE ORIGINAL PROFIT AND LOSS ACCOUNT, WHEREAS THE THERE WAS NO CASH DONATION IN THE REVISED RETURN. IF THESE DIFFERENCES ARE TAKEN INTO CONSIDERATION THEN IT IS SEEN THAT THERE IS A DEFICIT OF RS. 4,19,649/ - AS PER REVISED RETURN. THERE WAS AL SO DIFFERENCE IN EXPENDITURE OF TRUST AS IN THE ORIGINAL RETURN IT WAS SHOWN AS RS. 1.75 CRORES, WHEREAS AS PER THE REVISED RETURN, IT WAS SHOWN AS RS. 1.45 CRORES. AFTER GOING THROUGH THE CONTENTS OF ORIGINAL PROFIT AND LOSS ACCOUNT AND REVISED PROFIT AND L OSS ACCOUNT, IT IS SEEN THAT THERE IS A DIFFERENCE IN MANY ITEMS. THERE IS NO DIFFERENCE IN GRANT - IN - AID GIVEN ITA NO . 146 /20 1 2 7 BY THE GOVERNMENT . I T WAS AT RS. 93,71, 174/ - . IT IS SEEN THAT THERE WAS A BONAFIDE MISTAKE ON THE PART OF THE AUDITORS AND THIS MISTAKE WAS RECONC ILED AT THE TIME OF PREPARING RETURN WHICH WAS FILED IN RESPONSE TO NOTICE UNDER SECTION 148. 9 . WE ARE OF THE VIEW THAT THERE WAS NO COGENT REASON IN NOT ACCEPTING THE REVISED RETURN, THE AUDITOR, WHO AUDITED ORIGINAL RETURN AS WELL AS REVISED RETURN WA S APPEARED BEFORE THE AO AND HE HAS GIVEN A STATEMENT THAT THIS WAS A MISTAKE ON THEIR PART AS ACCOUNTS WERE NOT PROPERLY CHECKED AT THE TIME OF PREPARING ORIGINAL PROFIT AND LOSS ACCOUNT AS COMPLETE DETAILS WERE NOT AVAILABLE AT THAT POINT OF TIME. IN OUR VIEW, THE AO SHOULD HAVE ACCEPTED REVISED RETURN AND THEN SHOULD HAVE TAKEN INTO CONSIDERATION THE ALLOWA BILITY OF EXEMPTION UNDER SECTION 10(23C)(IIIAB) OF THE ACT. IT IS ALSO NOT A CASE OF THE DEPARTMENT THAT THERE WAS NO SUBSTANTIAL FINANCE BY GOVERNME NT AS GOVERNMENT HAS FINANCED TO THE TUNE OF RS. 93,71,174/ - . THIS CONSISTS ABOUT 70% OF THE TOTAL GROSS RECEIPTS. THOUGH THE HON BLE INDORE BENCH HAS HELD THAT IF THERE IS AN AID WHICH CONSTITUTES ABOUT 75%, THEN IT SHOULD BE SUBSTANTIAL FINANCE BY THE GO VERNMENT . H OWEVER, THE HON BLE KARNATAKA HIGH COURT HAS HELD THAT IF THE GOVERNMENT GRANT IS ABOUT 36.42%, THEN IT HAS TO BE TREATED AS SUBSTANTIAL GRANT GIVEN BY THE GOVERNMENT AND, THEREFORE, THE ASSESSEE TRUST IS ENTITLED TO THE BENEFIT OF EXEMPTION UND ER SECTION 10(23C)(IIIAB) . THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IS BINDING ON US AS NO CONTRARY DECISION OF ANY HIGH COURT IS AVAILABLE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF ITA NO . 146 /20 1 2 8 THE HON BLE KARNATAKA HIGH COURT, WE HOLD THAT THE ASSESS EE IS ELIGIBLE/ENTITLED FOR EXEMPTION UNDER SECTION 10(23C)(IIIAB ) OF THE ACT. WE HAVE ALSO GONE THROUGH VARIOUS OTHER CASES AND FOUND THAT THEY ARE IN SUPPORT OF THE CASE OF THE ASSESSEE. 10 . IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE DIRECT THE AO TO TREAT THE TRUST AS EXEMPTED UNDER SECTION 10(23C)(IIIAB) . 11 . IN REGARD TO THE REMAINING GROUNDS, WE ARE NOT DECIDING AT THIS POINT OF TIME AS WE HAVE GRANTED EXEMPTION UNDER SECTION 10(23C)(IIIAB) AND THE REMAINING GROUNDS ARE RESTORED TO THE FILE OF THE AO TO DECIDE OR PASS A FRESH ORDER AFTER TAKING INTO CONSIDERATION THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 10(23C)(IIIAB) OF THE ACT. 1 2 . IN THE RESULT , APPEAL OF THE ASSESSEE IS ALLOWED PARTLY AND PARTLY FOR STATISTICAL PUR POSES . ORDER PRONOUNCED IN THE E - COURT ON THIS 8 TH DAY OF FEB , 201 3 . - 201 3 SD/ - SD/ - ( ) ( RAJENDRA ) ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 0 8 / 02 / 201 3 . /PKM , PS ITA NO . 146 /20 1 2 9 COPY OF THE ORD ER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI / NAGPUR . 4. / CIT 5. / DR, ITAT, MUMBAI / NAGPUR . 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI