Civil Services Institute, Lucknow V. Income Tax Officer-2(1), Lucknow

ITA 150/LKW/2023

AI Insights

The case involves the Civil Services Institute, which appealed against the order of the NFAC, which had dismissed their appeal due to non-compliance. The Institute argued that the non-compliance was unintentional, caused by the departure of their manager who had provided his email for communication, leading to missed notifications from the NFAC. The Tribunal found the explanation credible and restored the case to the NFAC for a fresh examination, emphasizing the need for substantial justice and proper opportunity for the assessee to present their case.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123048 (ITAT-LUCKNOW)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-07-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 17-05-2023
• Other Referred Cases: M/s Bangalore Club vs. CIT (2013) 350 ITR 506 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Non compliance

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH ‘SMC’, LUCKNOW BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.150/Lkw/2023 Assessment Year: 2016-17 Civil Services Institute, Raj Bhawan Colony, Lucknow G.P.O., Lucknow-226001 (U.P.) PAN: AAAAC 2071N Vs. The Income Tax Officer-2(1), Lucknow-New/ (Jurisdictional Officer) (Appellant) (Respondent) O R D E R PER SUDHANSHU SRIVASTAVA, J.M.: 1. This appeal has been preferred by the assessee against the order dated 24.03.2023 passed by the National Faceless Appeal Centre (NFAC), Delhi and pertains to Assessment Year (AY) 2016-17. 2. The brief facts of the case are that as per the assessee it’s an Institute governed by the principle of mutuality as the members contribute not with an idea of trade. The Income Tax Return for the captioned year was filed showing income at Appellant by Shri Shweta Mittal, CA Respondent by Shri Sanjeev Krishna Sharma, Addl. CIT (DR) Date of hearing 25/07/2023 Date of pronouncement 27/07/2023 I.T.A. No.150/Lkw/2023 2 Rs.NIL. The case was selected for scrutiny under the CASS guidelines. During the assessment proceedings, the Assessing Officer observed that as per the Memorandum of Association of the Institute, the Institution did not fall under the category of Society u/s. 2(15) of the Income Tax Act, 1961 (hereinafter called the ‘Act’), since the membership of the Institute was restricted and access to the activities of the Institute was also limited to members only. The Assessing Officer also observed that the Institute was operating a club on the principle of mutuality and, therefore, in view of the judgment of the Hon'ble Apex Court in the case of M/s Bangalore Club vs. CIT reported in (2013) 350 ITR 506 (SC), interest income accrued on the fixed deposit was to be taxed under the head ‘income from other sources’. The Assessing Officer further observed that in the Income Tax Return all the receipts/income of the Institute were clubbed and shown under ‘income from other sources’. It was also noted that the reason for limited scrutiny was to verify the deduction claimed under ‘income from other sources’. It was further observed that the assessee had claimed deduction u/s. 56 of the Act to the tune of Rs.72,13,031/-, whereas the income was shown at Rs.69,25,134/- only resulting in a loss of I.T.A. No.150/Lkw/2023 3 Rs.2,87,897/-. It was observed, thus, there was a clear violation of provisions of Section 57(iii) of the Act by claiming revenue expenditure as being deductable u/s. 57 of the Act. The assessee was required to produce books of account as well as relevant vouchers to justify the claim of expenditure. Thereafter, due to non production of vouchers, the Assessing Officer made a disallowance of 5% out of total expenditure of Rs.1,11,8,588/- pertaining to Gymnasium maintenance, Taran Tal maintenance and Tennis maintenance and thus disallowed total amount of Rs.55,930/- on this account. A further disallowance of 25% of the Institute party expenses of Rs.4,99,316/- was made (total party expenses – Rs.19,19,267/-) and another 50% disallowance was made out of other expenses and gardening expenses to the tune of Rs.1,36,242/- (total expenditure of Rs.2,72,485/-). The taxable income was computed at Rs.4,03,591/-. 3. Aggrieved, the assessee approached the ld. First Appellate Authority challenging the various additions/disallowances. The assessee’s appeal was dismissed by the NFAC for the reason of non compliance by the assessee. As per the impugned order, three opportunities were given to the assessee but the assessee I.T.A. No.150/Lkw/2023 4 failed to submit any response and in absence of any submission forthcoming from the assessee’s side the NFAC held that all the disallowances had been rightly made and the appeal of the assessee came to be dismissed. 4. Now, the assessee has approached this Tribunal, challenging the disallowances upheld by the NFAC by raising the following grounds of appeal: “1. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in passing the order, which is unlawful, unjustified and against the principles of natural justice. 2. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in passing the order without giving adequate opportunity of being heard. 3. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts by upholding the disallowance of Rs. 55,930/- made by the Ld. Assessing Officer on ad hoc basis. 4. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts by upholding the disallowance of Rs. 4,99,316/- made by the Ld. Assessing Officer on ad hoc basis. 5. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts by upholding the disallowance of Rs. 1,36,242/- made by the Ld. Assessing Officer on ad hoc basis. 6. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in passing appellate order which is contrary to the facts and law.” I.T.A. No.150/Lkw/2023 5 5. At the outset, the ld. Authorized Representative submitted that the assessee could not respond to the various notices issued by the Assessing Officer for the reason that while filing the appeal, the Manager employed by the Institute had provided his own e-mail I.D. in Form-35 and subsequently the Manager had left the service of the Institute and for this reason, the assessee was unable to view any emails sent by the NFAC. It was submitted by the ld. AR that the assessee is an Association of Persons, catering to the Civil Services Officers and deliberate non compliance was, therefore, out of question. It was submitted that the non compliance was entirely due to the fact that the assessee could not access the emails sent by the NFAC. The ld. AR submitted that the assessee, if provided with another opportunity, will fully cooperate and submit all the relevant details before the NFAC. 6. On a query by the Bench, the ld. Sr. D.R. had no objection if the file was restored to the Office of NFAC for a fresh adjudication. 7. I have heard the rival submissions and have also gone through the record. I am of the considered view that the explanation given by the ld. Authorized Representative for non I.T.A. No.150/Lkw/2023 6 compliance is a tenable one and bona fide of the assessee cannot be doubted. Accordingly, in the interest of substantial justice, I restore this file to the Office of the NFAC with a direction to adjudicate the issue afresh after giving proper opportunity to the assessee to present its case. The assessee is also directed to fully comply with the notices issued by the NFAC in this regard. 8. In the result, the appeal filed by the assessee stands allowed for statistical purposes. (Order pronounced in the open court on 27/07/2023) Sd/- (SUDHANSHU SRIVASTAVA) Judicial Member Dated: 27/07/2023 Aks Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow Asstt. Registrar