Pearls of God, Kolkata V. ACIT, Circle - 2, Hooghly, Hooghly

ITA 1550/KOL/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7926 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2012
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 14-11-2011
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Charitable institution; Opportunity of being heard
• Section: 143(3); 142(1); 12A; 12AA; 147; 263; 11

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND ! ' ! ! ' ! ! ' ! ! ' ! , ) [BEFORE SHRI PRAMOD KUMAR, AM & SHRI MAHAVIR SINGH, JM] # # # # / I.T.A NO. 1550/KOL/2011 '$% &' '$% &' '$% &' '$% &'/ // / ASSESSMENT YEAR : 2005-06 PEARLS OF GOD VS. ASSISTANT COMMISSIONER OF I NCOME-TAX, (PAN: AAATP7501M) CIRCLE-2, HOOGHLY. ()* /APPELLANT ) (+)*/ RESPONDENT ) FOR THE APPELLANT: SHRI MIRAJ D. SHAH FOR THE RESPONDENT: SHRI P. K. CHAKRABORTY DATE OF HEARING: 02.08.2012 DATE OF PRONOUNCEMENT: 02.08.2012 , / ORDER PER MAHAVIR SINGH, JM ( ! ' ! ! ' ! ! ' ! ! ' !, , , , ) THIS APPEAL BY ASSESSEE IS ARISING OUT OF REVISION ORDER OF CIT, KOLKATA-XX PASSED U/S. 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERR ED TO AS THE ACT) IN M. NO. CIT- XX/KOL/28/REVIEW U/S. 263/2011-12/2082-84 DATED 27. 09.2011. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-2, HOOGHLY U/S. 147 R.W.S. 143(3) OF T HE ACT FOR ASSESSMENT YEAR 2005-06 VIDE HIS ORDER DATED 07.12.2009. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS A GAINST THE ORDER OF CIT, KOLKATA-XX, AGAINST PASSING OF REVISION ORDER U/S. 263 OF THE A CT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING TWO EFFECTIVE GROUNDS: 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT-XX, KOLKATA ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE INCOM E-TAX ACT, 1961 AND SET ASIDE THE ASSESSMENT U/S. 147/143(3) OF THE INCOME-TAX ACT 19 61 DATED 07/12/2009. 2. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT-XX, KOLKATA ERRED IN EXERCISING THE POWERS U/S. 263 OF THE INCOME-TAX AC T 1961 AS THE SAID ORDER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENU E. AS SUCH THE ORDER U/S. 263 OF THE INCOME-TAX ACT, 1961 BE SET ASIDE. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A CHARITABLE TRUST ESTABLISHED BY A DEED OF TRUST DATED 15.03.1994 DULY REGISTERED WITH THE REG ISTRAR OF ASSURANCES UNDER THE NAME OF PEARLS OF GOD. THE ASSESSEE TRUST RUNS A SCHOOL BY THE NAME OF PEARLS OF GOD IN HOOGHLY, 2 ITA 1550/K/2011 PEARLS OF GOD A.Y. 05-06 WHICH IS AFFILIATED TO COUNSEL OF INDIAN SCHOOL CER TIFICATE EXAMINATION (IN SHORT CISC). THE ASSESSEE TRUST FILED ITS RETURN OF INCOME FOR THE R ELEVANT AY 2005-06 ON 30.03.2006 DECLARING NIL INCOME. THIS RETURN WAS PROCESSED U/S. 143(1) OF THE ACT ON 08.12.2006 BUT SUBSEQUENTLY, THE AO NOTICED THAT IT HAD AVAILED EXEMPTION U/S. 1 1 OF THE ACT ON THE EXCESS OF INCOME OVER EXPENDITURE OF RS.14,86,980/- BUT ACCORDING TO AO T HE ASSESSEE REQUIRED TO BE REGISTERED U/S. 12AA OF THE ACT, WHICH IS NOT EVIDENT FROM THE RETU RN OF INCOME. ACCORDING TO AO, THE INCOME ESCAPED ASSESSMENT AND HE INITIATED PROCEEDI NGS U/S. 147 R.W.S. 148 OF THE ACT. ACCORDINGLY, AO ISSUED NOTICE U/S. 148 OF THE ACT DATED 15.01.2009. THE AO ISSUED NOTICE U/S. 142(1) AND ASSESSMENT PROCEEDINGS STARTED. TH E ASSESSEE WAS ASKED TO PRODUCE COPY OF REGISTRATION U/S. 12AA OF THE ACT AND IN RESPONSE T O THE SAME, THE ASSESSEE SUBMITTED THAT IT HAD APPLIED FOR REGISTRATION U/S. 12A OF THE ACT WAY BA CK IN JANUARY, 2000 AND IN RESPONSE TO ITS APPLICATION ONE LETTER NO. ASSMNT./171/CT/8E/48/97- 98 DATED 27.04.2000 WAS RECEIVED. ACCORDING TO ASSESSEE, BEFORE THE AO DURING THE COU RSE OF RE-ASSESSMENT PROCEEDINGS, IT WAS REPLIED THAT ORIGINAL APPLICATION WAS NOT AVAILABLE WITH THE ASSESSEE AS THE RELEVANT PAPERS WERE WITH A CONSULTANT, WHO DIED IN 2002 AND NO DOCUMENT COULD BE RETRIEVED BY THE ASSESSEE FROM HIM OR FROM HIS OFFICE. ACCORDING TO ASSESSEE, NO RESPONSE/REPLY WAS ISSUED TO THE ASSESSEE EITHER GRANTING OF APPROVAL OF REGISTRATION OR DENY ING THE SAME WITHIN SIX MONTHS AS PER THE POSITION OF LAW AS ON THAT DATE I.E. JANUARY, 2000. ACCORDING TO ASSESSEE, THE REGISTRATION IS DEEMED TO HAVE BEEN GRANTED FROM MARCH, 1995. THE AO DEPUTED HIS INSPECTOR TO FIND OUT THE STATUS OF APPLICATION OF THE ASSESSEE FOR REGISTRAT ION U/S. 12A OF THE ACT, BUT AS PER REPORT OF THE INSPECTOR IT TRANSPIRED THAT THE OFFICE OF THE ITO, HQRS, ASSESSMENT-II OF CALCUTTA HAS LONG BEEN ABOLISHED AND THE RELEVANT DETAILS ARE NOT AVAILABL E OR NOT TRACEABLE. ACCORDINGLY, THE AO ACCEPTED THE CLAIM OF THE ASSESSEE AND ALLOWED EXEM PTION U/S. 11 OF THE ACT. THE CIT, KOLKATA-XX VIDE REVISION ORDER U/S. 263 OF THE ACT DATED 20.09.2011 DIFFERED FROM THE OPINION OF THE AO AND SET ASIDE THE ASSESSMENT ORDER DATED 07.12.2009 PASSED U/S. 147 R.W.S. 143(3) OF THE ACT BY ACIT, CIRCLE-2, HOOGHLY. THE AO WAS DIR ECTED TO REDO THE ASSESSMENT AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AGGRIEVED AGAINST THE ACTION OF CIT-XX, KOLKATA REVISING THE ASSESSMENT, NOW ASSESS EE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE TRUST HAS MADE AN APPLICA TION FOR REGISTRATION U/S. 12A OF THE ACT BEFORE CIT-XX, KOLKATA AND RECEIVED INTIMATION FROM THE OFFICE OF THE COMMISSIONER OF INCOME TAX, WEST BENGAL VIDE NO. ASSMNT/171/CT/8E/4 8/97-98 DATED 27.04.2000 FROM ITO, HQRS., ASSESSMENT-II, KOLKATA FOR COMMISSIONER. IT IS AN ADMITTED FACT NOW THAT TILL DATE THE 3 ITA 1550/K/2011 PEARLS OF GOD A.Y. 05-06 ASSESSEE TRUST HAS NOT RECEIVED ANY RESPONSE OR REJ ECTION OF APPLICATION FOR REGISTRATION U/S. 12A OF THE ACT AND AS PER THE PROVISIONS OF THE ACT WHE N APPLICATION WAS NOT REJECTED OR ACCEPTED WITHIN SIX MONTHS, ASSESSEE TRUST WAS UNDER THE BON AFIDE BELIEF THAT ITS REGISTRATION APPLICATION U/S. 12A OF THE ACT HAS NOT BEEN REJECTED, THE SAME WAS PRESUMED TO HAVE BEEN GRANTED. AS SUCH, THE TRUST CLAIMED EXEMPTION U/S. 11 OF THE AC T IN THE RETURN OF INCOME AND ACCORDINGLY, ASSESSEE MADE CLAIM FOR EXEMPTION U/S. 11 OF THE AC T. WE FIND THAT THE CIT-XX, KOLKATA WHILE PASSING REJECTION ORDER U/S. 263 OF THE ACT HAS ACC EPTED THE POSITION THAT THE AO HAS DRAWN AN OPINION AND THE RELEVANT PORTIONS OF THE ORDER OF C IT READS AS UNDER: IN ABSENCE THEREOF IT BECOMES ABSOLUTELY DIFFICULT TO ASCERTAIN AS TO WHETHER THE ASSESSEE TRUSTS REGISTRATION APPLICATION WAS REALLY ADJUDIC ATED BY THE DEPARTMENT AT THE RELEVANT POINT OF TIME. IT APPEARS THAT THE A.O. HAD BASICA LLY GUIDED HIMSELF BY THE DEPARTMENTS NOTICE DATED 27.4.2000 AND CONSIDERED THE SAME AS A N INDIRECT PROOF OF APPLICATION FOR REGISTRATION U/S. 12A. SINCE THE EFFORTS MADE BY TH E A.O. TO PELICIT INFORMATION FROM THE ERSTWHILE OFFICE OF THE 1TO HQRS., ASSESSMENT-II CA LCUTTA (SINCE ABOLISHED AT THE TIME OF RESTRUCTURING OF THE DEPARTMENT) REGARDING THE STAT US OF ASSESSEES CLAIMED APPLICATION U/S. 12A PROVED FUTILE AND SINCE THE A.O.S OFFICE D ID NOT HAVE ANY RECORD OF THE APPROVAL/DENIAL OF REGISTRATION IN THE NAME OF THE ASSESSEE TRUST, HE DEEMED IT PROPER TO GRANT THE BENEFIT OF DOUBT TO THE ASSESSEE. IN OTHE R WORDS, HE PRESUMED THAT THE ASSESSEE TRUST WAS DEEMED TO HAVE BEEN GRANTED REGISTRATION BY THE DEPARTMENT U/S.12A. I, HOWEVER, DIFFER FROM THE A.O.S OPINION. THE SUB-SEC TION( 2 ) OF THE SECTION 12AA STIPULATES THAT EVERY ORDER GRANTING OR REFUSING RE GISTRATION HAS TO BE PASSED BY THE COMMISSIONER BEFORE THE EXPIRY OF SIX MONTHS FROM T HE END OF THE MONTH IN WHICH THE ASSESSEES APPLICATION IS RECEIVED BY HIM. THE SECTI ON 12AA IS, HOWEVER, SILENT ABOUT THE IMPLICATION OF THE NON-RESPONSE ON THE PART OF DEPA RTMENT IN RESPECT OF THE ASSESSEES APPLICATION. UNDER THESE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT THE DEEMING REGISTRATION CANNOT AUTOMATICALLY BE PRESUMED. THE REASONS CITED BY THE LD. A.RS. FOR THEIR INABILITY TO PRODUCE COPIES OF THE ESSENTIAL DOCUMENTS ARE NOT VERY CREDIBLE. IT IS PROBABLE THAT ON ACCOUNT OF THE ASSESSEES FAILURE TO COMPLY WITH THE DEPARTMENTS HEARING NOTICE DATE 27.4.2000, THE OFFICE OF THE TH EN C1T, WEST BENGAL MIGHT HAVE REJECTED THE ASSESSEES APPLICATION. FOR THAT REASO N THE ASSESSEE MIGHT NOW BE WITHHOLDING THE SAID INFORMATION FROM THE DEPARTMEN T. IN ABSENCE OF ANY CLINCHING DOCUMENTARY EVIDENCE IN SUPPORT OF THE ASSESSEES A TTENDANCE IN THE HEARING BEFORE THE 1TO HQRS., ASSESSMENT-II CALCUTTA AND ANY INTIMATIO N FROM THE DEPARTMENT IN THIS REGARD, I AM CONSTRAINED TO HAD THAT THE ASSESSEE T RUST DID NOT AT ALL GET REGISTRATION U/S. 12A FROM THE DEPARTMENT, 5. IN VIEW OF THE ABOVE SITUATION, NOW WE HAVE TO C ONSIDER THE VALIDITY OF THE REVISION ORDER PASSED BY CIT-XX, KOLKATA WHERE HE HAS DIRECT ED THE AO TO REDO THE ASSESSMENT WITHDRAWING THE EXEMPTION U/S. 11 OF THE ACT. FROM THE ABOVE, IT IS CLEAR THAT THE CIT-XX, KOLKATA HAS ACCEPTED THAT THE ASSESSEE FILED AN APP LICATION U/S. 12A OF THE ACT BUT HE PRESUMED THAT SAID APPLICATION MAY HAVE BEEN REJECTED. HENC E, HE CAME TO THE CONCLUSION THAT THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S. 11 OF TH E ACT. WE FIND THAT THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SUBHASH PROJECTS & MAR KETING LTD. HELD THAT THE PROCEEDINGS U/S. 263 OF THE ACT IS A REVISION PROCEEDING, THE ORDER OF THE AO CAN BE SAID TO BE ERRONEOUS ONLY IF 4 ITA 1550/K/2011 PEARLS OF GOD A.Y. 05-06 AN IMPOSSIBLE VIEW HAS BEEN TAKEN BY AO. IF HOWEVE R, THE AO FOLLOWS ONE OF THE POSSIBLE VIEWS, THEN THE ORDER CANNOT BE CONSIDERED AS ERRON EOUS. FURTHER, IT IS WELL SETTLED THAT IN ORDER TO INVOKE THE PROVISION OF SECTION 263 OF THE ACT T HE ORDER OF THE AO SHOULD BE ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. A BAR E READING OF THIS PROVISION MAKES IT CLEAR THAT THE PRE-REQUISITE TO THE EXERCISE OF JURISDICTION B Y CIT UNDER IT IS THAT THE ORDER OF THE AO IS ERRONEOUS INSOFAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. IN SUCH CASE THE CIT HAS TO BE SATISFIED TWIN CONDITIONS VIZ. (I) THE ORDER OF AO SOUGHT TO BE REVISED IS ERRONEOUS AND (II) IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. HONBLE SU PREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 83 (SC) HAS HELD TH AT EVERY LOSS OF REVENUE HAS A CONSEQUENCE AND THE ORDER OF THE AO CANNOT BE TREAT ED AS PREJUDICIAL TO THE INTEREST OF REVENUE. IN THIS CASE, HONBLE SUPREME COURT HAS TAKEN THE E XAMPLE THAT WHEN AO ADOPTED ONE OF THE COURSE PERMISSIBLE IN LAW AND IT HAS RESULTED IN LO SS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WITH WHICH THE CIT DO ES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE , UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. IN SUCH CIRCUMSTANCES, WE AR E OF THE CONSIDERED VIEW THAT THE ORDER OF THE AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTE REST OF REVENUE. HENCE, WE QUASH THE REVISION ORDER OF THE CIT XX, KOLKATA PASSED U/S. 263 OF TH E ACT. APPEAL OF ASSESSEE IS ALLOWED. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 7. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- , ! ' ! ! ' ! ! ' ! ! ' ! , (PRAMOD KUMAR) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( - - - -) )) ) DATED: 2 ND AUGUST, 2012 ./ '$01 '2 JD.(SR.P.S.) , 3 ''4 54&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT PEARLS OF GOD, C/O, D. J. SHAH & CO., K ALYAN BHAVAN, 2, ELGIN ROAD, KOLKATA-700 020. 2 +)* / RESPONDENT ACIT, CIRCLE-2, HOOGHLY 3 . ',$ ( )/ THE CIT(A), KOLKATA 4. ',$ / CIT, KOLKATA 5 . ='> '$ / DR, KOLKATA BENCHES, KOLKATA +4 '/ TRUE COPY, ,$/ BY ORDER, ! 1 /ASSTT. REGISTRAR .