CHEMBUR MAHATMA EDUCATION SOCIETY, MUMBAI V. ITO (E) -I(1), MUMBAI

ITA 1726/MUM/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3252 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2016
• Court: TRIBUNAL
• Department Lawyers: DR DARSI SUMAN RATNAM
• Keywords: Rejection of books of accounts; Opportunity of being heard
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 1726 /MUM/ 20 16 (ASSESSMENT YEAR 2011 - 12 ) CHEMBUR MAHATMA EDUCATION SOCIETY CHEMBUR NAKA CHEMBUR MUMBAI - 400 071. VS. ITO (E) - 1(1) 5 TH FLOOR PIRAMAL CHAMBERS LALBAUG MUMBAI - 400 012. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAATC8534H ASSESSEE BY SHRI RAMESH IYER DEPARTMENT BY DR. DARSI SUMAN RATNAM DATE OF HEARING 8 . 6. 201 6 DATE OF PRONOUNCEMENT 8 . 6 . 201 6 O R D E R PER B.R. BAS KARAN, A M : - THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 19 - 01 - 2016 PASSED BY LD CIT(A) - 1, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2011 - 12. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ORDER OF ASSESSI NG OFFICER IN REJECTING THE BOOKS OF ACCOUNTS AND IN ASSESSING THE ENTIRE AMOUNT OF GROSS RECEIPTS WITHOUT ALLOWING DEDUCTION OF ANY OF THE EXPENSES. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS A SOCIETY AND IT IS RUNNING EDUCATI ONAL INSTITUTIONS. IT IS REGISTERED U/S 12A OF THE ACT. THE COMMITTEE MEMBERS OF THE ASSESSEE SOCIETY HAD EARLIER FORMED ANOTHER SOCIETY BY NAME MAHATMA EDUCATION SOCIETY, WHICH WAS CLAIMED TO BE PARENT BODY OF THE GROUP. IT IS STATED THAT THE MAHATMA EDUCATION SOCIETY HAS INITIALLY STARTED SCHOOLS AT VARIOUS PLACES AND SUBSEQUENTLY EACH OF THE SCHOOLS WERE GIVEN TO SEPARATE SOCIETIES FORMED FOR SPECIFIC PURPOSE OF RUNNING THE SCHOOLS. CHEMBUR MAHATMA EDUCATION SOCIETY 2 ACCORDINGLY, THE PRESENT ASSESSEE CAME TO BE INCORPORATED TO RUN T HE SCHOOLS LOCATED IN CHEMBUR AREA. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE APPROVAL TO RUN SCHOOLS WAS GRANTED TO THE MAHATMA EDUCATION SOCIETY AND NOT TO THE ASSESSEE SOCIETY, I.E., THE ASSESSEE SOCIETY WAS RUNNING SCH OOLS WITHOUT REQUISITE APPROVAL FROM THE GOVERNMENT. ACCORDINGLY, THE AO TOOK THE VIEW THAT THE SCHOOLS RUN BY THE ASSESSEE SOCIETY ARE ILLEGAL AND VOID. HE FURTHER NOTICED THAT THE PARENT BODY, VIZ., MAHATMA EDUCATION SOCIETY HAS TRANSFERRED ITS MOVABLE ASSETS WITHOUT ANY BASIS AND WITHOUT ANY CONSIDERATION. THE IMMOVABLE PROPERTIES WERE CONTINUED TO BE OWNED BY THE MAHATMA EDUCATION SOCIETY. THE TRANSFER OF LICENSE TO THE ASSESSEE SOCIETY HAS BEEN DONE WITHOUT REQUISITE APPROVAL FROM CHARITY COMMISSIO NER OR APPROPRIATE GOVERNMENT AUTHORITIES. ACCORDINGLY THE AO TOOK THE VIEW THAT THE RECEIPTS OF THE ASSESSEE, IN EFFECT, BELONG TO THE PARENT BODY, VIZ., MAHATMA EDUCATION SOCIETY. FOR THE ABOVE SAID REASONS, THE AO REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HOWEVER, SINCE THE ASSESSEE HAS REPORTED RECEIPTS, HE ASSESSED THE GROSS RECEIPTS AS INCOME OF THE ASSESSEE WITHOUT ALLOWING ANY DEDUCTION TOWARDS EXPENDITURE. ACCORDING TO LD A.R, THE ASSESSING OFFICER HAS ALSO ASSESSED CORPUS DONATIONS THAT WERE RECEIVED IN THE EARLIER YEARS. THE LD CIT(A) ALSO CONFIRMED THE ORDER OF THE AO. 4. ON A PERUSAL OF THE FACTS AVAILABLE ON RECORD AND RIVAL CONTENTIONS, WE NOTICE THAT THE ASSESSING OFFICER HAS NOT POINTED ANY DEFECT IN THE BOOKS OF ACCOUNTS MAIN TAINED BY THE ASSESSEE. THE VARIOUS DEFICIENCIES POINTED OUT BY THE AO RELATE TO THE TRANSFER OF SCHOOLS AND ASSETS. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE SOCIETY WAS RUNNING SCHOOLS WITHOUT GETTING PERMISSION IN ITS OWN NAME AND HENCE THE ACT IVITY OF RUNNING SCHOOLS ON THE STRENGTH OF LICENSE OBTAINED IN THE NAME OF ANOTHER SOCIETY IS NOT LEGAL. FURTHER, THE AO HAS CHEMBUR MAHATMA EDUCATION SOCIETY 3 DISCUSSED ABOUT THE CONTRAVENTION OF THE PROVISIONS RELATING TO REGISTRATION/APPROVAL WITH/BY CHARITY COMMISSIONER. THUS, WE N OTICE THAT THE AO HAS NOT POINTED OUT ANY DEFECT WITH THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 5. WE HAVE NOTICED THAT THE ASSESSEE SOCIETY IS REGISTERED BY THE DIT (EXEMPTION) U/S 12A OF THE ACT AND NO ACTION HAS BEEN TAKEN TO WITHDRAW REGISTRATION EVE N AFTER MAKING OBSERVATION THAT THE ASSESSEE SOCIETY WAS NOT AUTHORISED TO RUN SCHOOLS. FOR THE REASONS DISCUSSED IN THE PRECEDING PARAGRAPH, WE ARE OF THE VIEW THAT THERE IS NO JUSTIFICATION FOR REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. WE HAVE N OTICED THAT THE AO HAS EXPRESSED THE VIEW THAT THE RECEIPTS OF THE ASSESSEE SOCIETY, IN EFFECT, BELONG TO THE PARENT BODY, VIZ., MAHATMA EDUCATION SOCIETY, BUT PROCEEDED TO ASSESS THE GROSS RECEIPTS ON SUBSTANTIVE BASIS IN THE HANDS OF THE ASSESSEE. THUS, THE OBSERVATION SO MADE WAS RENDERED MEANINGLESS. THUS, WE NOTICE THAT THE ASSESSING OFFICER HAS PROCEEDED TO COMPLETE THE ASSESSMENT IN A HALF HEARTED MANNER WITHOUT GIVING ANY CONCRETE DECISION ON VARIOUS DEFECTS POINTED OUT BY HIM. 6. SINCE W E HAVE HELD THAT THE REJECTION OF BOOKS OF ACCOUNTS WAS NOT JUSTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND SINCE THE AO HAS COMPLETED THE ASSESSMENT WITHOUT PROPER BASIS, WE ARE OF THE VIEW THAT THE MATTER RELATING TO ASSESSMENT OF INCOME NEEDS T O BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AND DIRECT THE AO TO DO THE ASSESSMENT DE - NOVA AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. CHEMBUR MAHATMA EDUCATION SOCIETY 4 7. IN THE RESULT, THE APPEAL FI LED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BEEN PRONOU NCED IN THE OPEN COURT ON 8 .6 .2016 . SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; D ATED : 8 / 6/ 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS