Asst.Director of Income-tax (Exemptions)-I, Hyderabad V. Hari Prasad Memorial Hospital Trust, Hyderabad

ITA 1623/HYD/2013

• Counselvise Citation: 162322514 RSA 2013
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 28-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Charitable institution; Difference of opinion; Change of opinion
• Section: 143(3); 12A; 147; 148; 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1623/HYD/2013 ASSESSMENT YEAR : 2004-05 THE ASST. DIRECTOR OF IT (EXEMPTIONS)-1, HYDERABAD VS. M/S. HARI PRASAD MEMORIAL HOSPITAL TRUST, HYDERABAD PAN: AAATH1932Q APPELLANT RESPONDENT APPELLANT BY: S RI SOLGY JOSE T. KOTTARAM RESPONDENT BY: NONE DATE OF HEARING: 05 .0 8 .2014 DATE OF PRONOUNCEMENT: 28 .0 8 .2014 ORDER PER SAKTIJIT DEY, J.M.: THE REVENUE HAS PREFERRED THIS APPEAL AGAINST THE ORDER DATED 13.9.2013 OF THE LEARNED CIT(A)-IV, HYDERABAD PERTAINING TO ASSESSMENT YEAR 2004-05. 2. IT IS EVIDENT FROM THE POSTAL ACKNOWLEDGEMENT PLACED ON RECORD THAT NOTICE WAS SERVED ON THE RESP ONDENT ASSESSEE INTIMATING DATE OF HEARING OF APPEAL. HOW EVER, SINCE NEITHER THE ASSESSEE NOR ANY ONE REPRESENTING IT WAS PRESENT WHEN THE APPEAL WAS CALLED FOR HEARING, WE PROCEED TO DISPOSE OF THE APPEAL EX-PARTE QUA THE A SSESSEE AFTER HEARING THE LEARNED DR. 3. THE EFFECTIVE GROUNDS OF THE DEPARTMENT ARE AS UNDER: 2. THE LD. CIT(APPEALS) IS NOT CORRECT IN STATING THAT THE FIRST ISSUE IN THE APPEAL IS 2 ITA NO. 1623/HYD/2013 M/S. HARI PRASAD MEMORIAL HOSPITAL TRUST =============================== THE VALIDITY OF THE PROCEEDINGS U/S. 147 OF THE LT ACT, 1961, AS EVIDENT FROM THE GROUNDS OF APPEAL FILED BY THE ASSESSEE BEFORE THE CIT(APPEALS), REPRODUCED IN PARA 3 OF THE APPELLATE ORDER. 3. THE LD. CIT(APPEALS) IS NOT JUSTIFIED IN HOLDING THAT THE NOTICE ISSUED U/S. 148 OF THE LT ACT, 1961, IS INVALID, WHEN THE ASSESSEE HAS NOT OBJECTED TO THE SAID NOTICE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, AS EVIDENT FROM THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITS APPEAL FILED BEFORE THE CIT(APPEALS). 4. THE LD. CIT(APPEALS) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR CLAIM OF EXEMPTION U/S. 11 OF THE IT ACT, 1961 EVEN IN THE ABSENCE OF APPROVAL UNDER SUB- CLAUSE (VIA) TO SECTION 10(23C) OF THE LT ACT, 1961. 5. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT APPROVAL UNDER SUB-SECTION (VIA) TO THE SECTION 10(23C) OF THE LT ACT, 1961, IS DISTINCT FROM REGISTRATION U/S. 12A OF THE LT ACT, 1961. 6. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT OBTAINING APPROVAL FROM THE PRESCRIBED AUTHORITY IS MANDATORY AS PER THE PLAIN MEANING OF PROVISIONS OF SECTION 10(23C)(VIA) OF THE LT ACT, 1961, WHEN THE AGGREGATE ANNUAL RECEIPTS OF THE HOSPITAL RUN BY THE ASSESSEE TRUST EXCEEDS RS. 1 CRORE. 4. AS CAN BE SEEN FROM THE GROUNDS RAISED, THE DEPARTMENT IS CHALLENGING THE ORDER OF THE CIT(A) O N THE FOLLOWING TWO ISSUES: (I) THE CIT(A) WAS NOT CORRECT IN HOLDING THE PROCEEDING INITIATED U/S. 147 OF THE ACT TO BE INVALID. 3 ITA NO. 1623/HYD/2013 M/S. HARI PRASAD MEMORIAL HOSPITAL TRUST =============================== (II) IN ABSENCE OF APPROVAL U/S. 10(23C)(VIA), THE ASSESSEE IS NOT ELIGIBLE TO EXEMPTION U/S. 11 OF THE ACT. 5. FACTS NECESSARY FOR DECIDING THE AFORESAID ISSUES, BRIEFLY ARE, ASSESSEE IS A CHARITABLE TRUST REGISTE RED U/S. 12A OF THE ACT. IT OWNS A MEDICAL INSTITUTION IN T HE NAME AND STYLE OF HARI PRASAD MEMORIAL HOSPITAL. FOR TH E IMPUGNED ASSESSMENT YEAR THE ASSESSEE FILED ITS RET URN OF INCOME ON 30.12.2004 DECLARING NIL INCOME AFTER CLA IMING EXEMPTION U/S. 11 OF THE ACT. ASSESSMENT IN CASE O F THE ASSESSEE WAS COMPLETED U/S. 143(3) OF THE ACT ON 15.12.2006 ACCEPTING CLAIM OF EXEMPTION U/S. 11. THEREAFTER, THE ASSESSING OFFICER REOPENED THE ASSE SSMENT U/S. 147 OF THE ACT BY ISSUING A NOTICE U/S. 148 TO THE ASSESSEE ON 12.11.2009. THE ASSESSEE RESPONDED TO THE SAID NOTICE BY STATING THAT RETURN FILED ORIGINALLY SHOULD BE TREATED AS RETURN FILED U/S. 148. IN COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT ASSESSEE'S GROSS RECEIPT DURING THE YEAR WAS RS. 1,60,60,978. HENCE, IT REQUIRED APPROVAL IN TERMS OF SEC. 10(23C)(VIA) FOR AVAILING EXEMPTION. AS THE ASSESS EE HAS NOT OBTAINED ANY APPROVAL U/S. 10(23C)(VIA), THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY EXEMPTION CLAIMED WILL NOT BE DISALLOWED. IN REPLY , THE ASSESSEE STATED THAT AS THE TRUST IS REGISTERED U/S . 12A OF THE ACT EXEMPTION CLAIMED IS JUSTIFIED. REJECTING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER CONCLUDED THAT AS THE ASSESSEE HAS NOT OBTAINED APP ROVAL U/S. 10(23C)(VIA), IT IS NOT ENTITLED FOR ANY EXEMP TION. ACCORDINGLY, HE COMPLETED THE ASSESSMENT BY ASSESSI NG THE EXCESS OF INCOME OVER EXPENDITURE AMOUNTING TO RS. 16,57,487 TO TAX. 4 ITA NO. 1623/HYD/2013 M/S. HARI PRASAD MEMORIAL HOSPITAL TRUST =============================== 6. BEING AGGRIEVED OF THE ASSESSMENT ORDER SO PASSED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) CHALLENGING BOTH ON THE LEGAL ISSUE OF VALIDITY OF PROCEEDINGS INITIATED U/S. 147 OF THE ACT AS WELL A S ON MERITS. THE CIT(A) ACCEPTING ASSESSEE'S CONTENTION ON VALIDITY OF REOPENING BY APPRECIATING THE FACT THAT ASSESSMENT WAS REOPENED U/S. 147 BEYOND FOUR YEARS IN ABSENCE OF ANY FAILURE ON THE PART OF THE ASSESSEE TO MAKE A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS, H ELD THE REOPENING OF ASSESSMENT AS VOID AB INITIO . THE FINDING OF THE LEARNED CIT(A) IN THIS RESPECT IS AS UNDER: '4. THE FIRST ISSUE IN APPEAL IS THE VALIDITY OF THE PROCEEDINGS U/S 147. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) ON 15.12.2006. THE NOTICE U/S 148 WAS ISSUED ON 12.11.2009 I.E. MORE THAN FOUR YEARS AFTER THE END OF THE ASSESSMENT YEAR. THE PROVISO TO SEC. 148, THEREFORE, COMES INTO OPERATION IN THE APPELLANT'S CASE AND IT BECOMES NECESSARY FOR THE ASSESSING OFFICER TO ESTABLISH THAT THE ESCAPEMENT OF INCOME WAS ATTRIBUTABLE TO A FAILURE ON THE PART OF THE APPELLANT TO MAKE A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS. THE APPELLANT HAD CLAIMED EXEMPTION U/S 11 WHICH HAD EARLIER BEEN ACCEPTED BY THE ASSESSING OFFICER. THERE IS NO SUCH FINDING IN THE ASSESSMENT ORDER. THOUGH THE REASONS FOR RE-OPENING OF ASSESSMENT ARE NOT RE-PRODUCED IN THE ASSESSMENT ORDER, THE ONLY ISSUE IN THE RE-ASSESSMENT IS THE APPLICATION OF SEC. 11 TO THE APPELLANT AS AGAINST SEC. 10(23C). IN ANY EVENT, THE NATURE OF ACTIVITIES OF THE APPELLANT AND THE FACT THAT IT HAD CLAIMED EXEMPTION U/S 11 AND NOT U/S 10(23C) WAS EVIDENT FROM THE RECORD AND THERE IS NOTHING TO SUGGEST THAT THERE WAS ANY FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. THE ISSUE OF NOTICE U/S 148 IS THEREFORE HELD TO BE INVALID RENDERING THE RE- ASSESSMENT VOID AB INITIO. THIS ISSUE IS THEREFORE ALLOWED IN FAVOUR OF THE APPELLANT.' 5 ITA NO. 1623/HYD/2013 M/S. HARI PRASAD MEMORIAL HOSPITAL TRUST =============================== 7. WE HAVE HEARD THE LEARNED DR. ON PERUSAL OF THE FACTS AND MATERIALS ON RECORD, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF THE LEARNED CIT(A). UNDISPUTEDLY, THE ASSESSEE IS A TRUST REGISTERED U/S. 12A OF THE ACT. IT IS ALSO A FACT ON RECORD THAT THE ASSESSEE HAS FILED I TS RETURN OF INCOME ORIGINALLY CLAIMING EXEMPTION U/S. 11 OF THE ACT AND SCRUTINY ASSESSMENT WAS ALSO COMPLETED U/S 143( 3) OF THE ACT AFTER VERIFYING ASSESSEE'S CLAIM U/S. 11 . IT IS ALSO NOT DISPUTED THAT ASSESSMENT WAS REOPENED SOLE LY FOR THE REASON THAT AS THE ASSESSEE HAS NOT OBTAINED AP PROVAL U/S. 10(23C)(VIA) IT IS NOT ELIGIBLE TO CLAIM EXEMP TION. THERE IS NO ALLEGATION BY THE ASSESSING OFFICER OR FOR THAT MATTER ANY OTHER MATERIAL HAS BEEN BROUGHT ON RECOR D TO SHOW THAT THERE IS FAILURE ON THE PART OF THE ASSES SEE TO DISCLOSE FULLY OR TRULY ALL MATERIALS NECESSARY FOR ASSESSMENT. IN THE AFORESAID CIRCUMSTANCES, REOPEN ING OF ASSESSMENT BEYOND FOUR YEARS ON A MERE CHANGE OF OPINION HAS RIGHTLY BEEN HELD BY THE LEARNED CIT(A) TO BE INVALID. EVEN ON MERITS ALSO ASSESSING OFFICER'S V IEW CANNOT BE SUSTAINED DUE TO THE FOLLOWING REASONS. AS ALREADY STATED EARLIER THE ASSESSEE IS A TRUST REGI STERED U/S. 12A OF THE ACT. THERE IS NO ALLEGATION BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS VIOLATED AN Y OF THE CONDITIONS MENTIONED IN SECTIONS 11 TO 13 OF THE AC T. THAT BEING THE CASE, ASSESSEE IS ELIGIBLE TO AVAIL EXEMPTION U/S. 11 OF THE ACT. FURTHER, A CAREFUL READING OF SECTION 11 IT WILL BE EVIDENT THAT THERE IS NO SUCH PRE-CON DITION OF OBTAINING APPROVAL U/S. 10(23C)(VIA) FOR AVAILING EXEMPTION U/S. 11 OF THE ACT. THEREFORE, ASSESSEE' S CLAIM OF EXEMPTION U/S. 11 CANNOT BE DENIED SOLELY FOR TH E REASON THAT IT IS NOT APPROVED U/S. 10(23C)(VIA) OF THE ACT. IN CASES OF SIMILAR NATURE OF DENIAL OF EXEMPTION U /S. 11 6 ITA NO. 1623/HYD/2013 M/S. HARI PRASAD MEMORIAL HOSPITAL TRUST =============================== TO EDUCATIONAL INSTITUTIONS IN ABSENCE OF APPROVAL U/S. 10(23C) CO-ORDINATE BENCHES OF THIS TRIBUNAL HAVE H ELD THAT EVEN IN THE ABSENCE OF APPROVAL US. 10(23C) AS SESSEE WOULD STILL BE ELIGIBLE TO AVAIL EXEMPTION U/S. 11 IF IT IS REGISTERED U/S. 12A AND SATISFIES ALL OTHER CONDITI ONS. IN THIS CONTEXT WE REFER TO THE ORDERS PASSED IN THE C ASES OF ASST. DIRECTOR OF INCOME-TAX VS. SHRI CHAITANYA EDU CATION TRUST, IN ITA NOS. 1306 & 1326/HYD/2013 ORDER DATED 16.5.2014 AND ADIT(E) VS. FARAH EDUCATIONAL SOCIETY IN ITA NOS. 1609 TO 1611/HYD/2013 ORDER DATED 4.4.2014 . SO FAR AS THE DECISION RELIED UPON BY THE ASSESSING OFFICER, EXTRACTED AT PAGE 4 OF THE ASSESSMENT ORDE R, ON PERUSAL OF THE SAME IT BECOMES CLEAR THAT IT IS REN DERED IN A COMPLETELY DIFFERENT FACTUAL CONTEXT. IN THAT CA SE THE ASSESSEE HAD CLAIMED EXEMPTION U/S. 10(22) OF THE A CT WHEREAS IN THE PRESENT CASE ASSESSEE IS CLAIMING EXEMPTION U/S. 11. IN THE AFORESAID VIEW OF THE MA TTER, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) BY DISMIS SING THE GROUNDS RAISED BY THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2014 SD/ - (P.M. JAGTAP) ACCOUNTANT MEMBER SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 28 TH AUGUST, 2014 TPRAO 7 ITA NO. 1623/HYD/2013 M/S. HARI PRASAD MEMORIAL HOSPITAL TRUST =============================== COPY TO: 1. THE ASST. DIRECTOR OF INCOME - TAX (EXEMPTIONS) - 1, 3 RD FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. HARI PRASAD MEMORIAL HOSPITAL TRUST, 21 - 1 - 684, RIKAB GUNJ, HYDERABAD. 3. THE CIT(A) - IV, HYDERABAD. 4. THE DIRECTOR OF INCOME - TAX (EXEMPTIONS), HYDERABAD. 5 . THE DR, B - BENCH, ITAT, HYDERABAD.