Income Tax Officer, Exemptions-2, Hyderabad V. Nalgonda Diocess Social Service Society, Nalgonda

ITA 2065/Hyd/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6816 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 17-03-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 07-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income; Charitable institution; Additional evidence; Assessment record; TDS; CHAPTER IV
• Section: 143(3); 40(a)(ia); 12A; 201; 13; 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND LAXMI P RASAD SAHU, ACCOUNTANT MEMBER ITA NO. 2065 /H/20 1 7 ASSESSMENT YEAR: 201 1 - 1 2 INCOME - TAX OFFICER EXEMPTIONS 2, HYDERABAD. VS. NALGONDA DIOCESE SOCIAL SERVICE SOCIETY, NALGONDA. PAN AADCV 5902 G (APPELLANT) (RESPONDENT) REVENUE BY: SHRI ROHIT MUJUMDAR ASSESSEE BY: SHRI S. RAMA RAO DATE OF HEARING: 1 7 /0 3 /2021 DATE OF PRONOUNCEMENT: 09 /04/2021 O R D E R PER L.P. SAHU, A.M. : T H IS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST CIT( A ) - 9 , HYDERABADS ORDER DATED 3 1 / 0 8 /201 7 INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 ; IN SHORT THE ACT WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. LD. CIT(A) ERRED IN LAW AND IN FACTS IN NOT ADJUDICATING THE ISSUE THAT BY FAILING TO SUBMIT THE DETAILS OF THE LOANS DISBURSED TO SELF HELP GROUPS (SHG) AS OBSERVED IN THE ASSESSMENT ORDER AND REMAND REPORT, THE ASSESSEE HAS FAILED TO PROVE THAT THE INCOME ITA NO . 2065 /H YD/ 20 1 7 NALGONDA DIOCESE SOCIAL SERVICE SOCIETY, NALGONDA : - 2 - : HAS BEEN APPLIED FOR THE PURPOSE OF T HE OBJECTS OF THE TRUST. HENCE THE DENIAL OF EXEMPTION U/S.11 IN THE ASSESSMENT ORDER DUE TO NON SUBMISSION OF DETAILS OF LOAN DISBURSED TO SHGS IS AS PER LAW. 2. THE LD. CIT(A) HAS ERRED IN FACTS AND IN LAW IN OVERLOOKING AND NOT CONSIDERING THE FACT ME NTIONED IN THE REMAND REPORT THAT THE ASSESSEE FAILED TO SUBMIT ADEQUATE PROOF OF DISBURSEMENT OF THE MONEY TO SHGS. THUS ASSESSEE FAILED TO PROVE THE APPLICATION OF INCOME. 3. THE LD. CIT(A) HAS ERRED IN FACTS AND IN LAW IN DIRECTING THE AO TO ALLOW THE EXEMPTION U/S.11 TO THE ASSESSEE. 4. THE LD. CIT(A) HAS ERRED IN FACTS AND IN LAW IN MENTIONING AN ABSOLUTELY INCORRECT FACT IN PARA 6.1 OF THE CIT(A)'S ORDER THAT THE ASSESSING OFFICER DENIED EXEMPTION U/S.11 ON TWO GROUNDS VIZ. A) FIXED DEPOSITS HELD OUTSIDE THE BOOKS OF ACCOUNTS AND B) NON DEDUCTION OF TDS, WHEREAS THERE IS ONE MORE GROUND FOR DENYING EXEMPTION U/S.11 THAT IS FAILURE OF THE ASSESSEE TO SUBMIT DOCUMENTARY EVIDENCE FOR DISBURSEMENT OF LOAN TO SHG'S AS MENTIONED IN PARA 3 FOURTH LINE OF THE ASSESSMENT ORDER AND REMAND REPORT PARA 4. 5. THE LD.CIT(A) HAS ERRED IN FACTS AND IN LAW IN DECIDING THAT SECTION 40(A)(IA) WILL HAVE NO APPLICATION IN THE ASSESSEE'S CASE. 6. ANY OTHER GROUND THAT MAY URGED AT THE TIME OF HEARING. 2 . BRIEF F ACTS OF THE CASE ARE THAT THE ASSESSEE SOCIETY FILED ITS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 30.03.2012 DECLARING NIL INCOME AFTER CLAIMING EXEMPTION U/S 11 OF THE I.T . ACT. DURING ASSESSMENT PROCEEDINGS , AO OBSERVED THAT THE ASSESSEE TOOK A LOAN OF R S .1, 50,00,000/ - TO ITA NO . 2065 /H YD/ 20 1 7 NALGONDA DIOCESE SOCIAL SERVICE SOCIETY, NALGONDA : - 3 - : DISBURSE THE SAID AMOUNT TO SELF HELP GROUPS. RS.1,32,30,000/ - OUT OF THE ABOVE WAS CLAIMED TO HAVE BEEN DISBURSED TO VARIOUS SELF HELP GROUPS. ASSESSING OFFICER HELD THAT ASSESSEE PLEDGED FDS WHICH ARE NOT REFLECTED IN THE BOOKS TO OBTAIN T HE ABOVE LOAN. AS THE DEPOSITS WHICH WERE PLEDGED TO THE BANK WERE NOT APPEARING IN THE BALANCE SHEET OR RECEIPT AND PAYMENT ACCOUNT OF ASSESSEE, ASSESSING OFFICER HELD THEM TO BE NOT REFLECTED IN THE BOOKS OF ACCOUNTS. ASSESSING OFFICER FURTHER STATED TH AT ASSESSEE PAID RS.1 ,08,81 ,770/ - TO ONE MR. BHASKAR, CONTRACTOR FOR CONSTRUCTION OF HOUSING PROJEC T WITHOUT DEDUCTIN G TAX. THEREFORE, ASSESSING OFFICER HELD THAT ASSESSEE HAS NOT ORGANISED OR MAINTAINED THE PUBLIC ASSETS (TRUST ASSETS) IN ACCORDANCE WIT H THE OBJECTS OF THE SOCIETY AND HENCE DENIED EXEMPTION U/S 11 AND ALSO BROUGHT TO TAX THE INCOME OVER EXEMPTION OF RS.19,86,866/ - . HE ALSO ADDED BANK FDS OF RS.2,78,32,283/ - AS INVESTMENTS NOT REFLECTED IN THE BOOKS AND ALSO DISALLOWED PAYMENT OF RS.1,08, 81,750 / - BY INVOKING PROVISIONS OF SECTION 40(A)(IA). 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 4. DURING THE APPELLATE PROCEEDINGS, ASSESSEE FILED ELABORATE WRITTEN SUBMISSIONS ALONG WITH CERTAIN ADDITIONAL EVIDENCE. THE CIT(A) FORWARDED THE SAME TO ASSESSING OFFICER TO FURNISH A REMAND REPORT ON THE SUBMISSIONS MADE ITA NO . 2065 /H YD/ 20 1 7 NALGONDA DIOCESE SOCIAL SERVICE SOCIETY, NALGONDA : - 4 - : AND THE EVIDENCE FILED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE REMAND REPORT OF THE AO, THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: 6. I HAVE CONSIDERED THE ARGUMENTS OF THE ASSESSEE AND HAVE GONE THROUGH THE FACTS OF THE CASE. ASSESSING OFFICER AFTER APPRAISAL OF THE EVIDENCE SUBMITTED BY THE ASSESSEE DID NOT FIND ANY FAULT WITH THE ASSESSEE'S CONTENTION THAT THE FDRS ACTUALLY BELONG TO NALGONDA DIOCESE SOCIETY. AS THE FDRS DO NOT PERTAIN TO THE ASSESSEE SOCIETY, THERE IS OBVIOUSLY NO QUESTION OF THE DEPOSITS BEING HELD OUTSIDE BOOKS OF ACCOUNTS. ON PERUSAL OF THE BANK SANCTION NOTE AND ALSO THE LETTER OF NALGONDA DIOCESE SOCIETY, IT I S SEEN THAT ONLY THREE FDRS OF RS. 65,OO,OOO/ - , RS. 90,OO,OOO/ - AND RS.58,32,283/ - THAT ARE PLEDGED WITH BANK OF INDIA AN D IT IS NOT DISPUTED THAT ALL THESE DEPOSITS BELONG TO THE NALGONDA DIOCESE SOCIETY. EVEN IN THE SANCTION LETTER OF INDIAN OVERSEAS BA NK, THE PRIME SECURITY IS MENTIONED TO BE THESE THREE DEPOSITS AND COLLATERAL SECURITY IS MENTIONED AS MORTGAGE OF LAND AND BUILDINGS. THERE IS NO MENTION OF DEPOSIT OF F D R N050100 0 35 OF RS.65,00, 000 / - DATED 25.11.2010. I HAVE PERSONALLY PERUSED THROUGH TH E ASSESSMENT RECORDS AND FOUND THAT VIDE LETTER DATED 20.03.2014, ASSESSEE'S AR SUBMITTED THAT THE ASSESSEE SOCIETY OFFERED COLLATERAL SECURITY OF FD NO.501000435 DATED 25.11.2010. COPY OF THE DEPOSIT RECEIPT IS ALSO FURNISHED ON PERUSAL OF WHICH IT IS SEE N THAT THE DEPOSIT PERTAINS TO NOS (NALGONDA DIOCESE SOCIETY), BISHOP HOUSE, DUKE ROAD, NALGONDA. THEREFORE, IT IS CLEAR THAT EVEN THIS DEPOSIT PERTAINS TO THE NALGONDA DIOCESE SOCIETY AND IS RENEWED RECEIPT OF OLD FOR. HENCE, IT IS HELD THAT NONE OF THE F IXED DEPOSITS ARE IN THE NAME OF THE ASSESSEE SOCIETY. FURTHER, AS SUBMITTED BY THE ASSESSEE, NEITHER THE TRANSACTION OF OBTAINING LOAN NOR DISBURSAL PERTAINS TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IT IS NOT DISPUTED THAT THE LOAN WAS SANCTIONED AND D ISBURSED IN MARCH 2010 AND HENCE THE TRANSACTION WOULD OBVIOUSLY NOT GET REFLECTED IN THE BOOKS OF ACCOUNT PERTAINING TO A.Y. 2011 - 12. ITA NO . 2065 /H YD/ 20 1 7 NALGONDA DIOCESE SOCIAL SERVICE SOCIETY, NALGONDA : - 5 - : THEREFORE, ASSESSING OFFICER COMMITTED A FACTUAL ERROR IN BRINGING TO TAX THE DEPOSITS WHICH DO NOT PERTAIN TO THE ASSESS EE SOCIETY UNDER THE MISTAKEN ASSUMPTION THAT THESE DEPOSITS ARE INVESTMENTS NOT REFLECTED IN THE BOOKS. 6.1 COMING TO THE DISALLOWANCE OF AMOUNT PAID TO BHASKAR, IT IS RIGHTLY POINTED OUT BY THE ASSESSEE THAT DISALLOWANCE U/S 40(A)(IA) CAN ONLY BE RESOR TED TO THE PAYMENTS MADE PERTAINING TO THE BUSINESS INCOME UNDER CHAPTER IV. AS HELD BY VARIOUS TRIBUNALS, SECTION 40(A)(IA) DOES NOT HAVE ANY APPLICATION IN ASSESSMENT OF CHARITABLE TRUSTS U/S 11. SECTION 40(A)(IA) WOULD COME INTO EFFECT ONLY WHEN THE INC OME OF THE TRUST IS ASSESSED APPLYING THE COMMERCIAL PRINCIPLES BUT NON - DEDUCTION OF TDS ITSELF CANNOT BE A GROUND FOR DENIAL OF EXEMPTION U/S 11. ON PERUSAL OF THE ASSESSMENT ORDER, IT IS OBSERVED THAT THE ASSESSING OFFICER DENIED EXEMPTION U/S 11 ON TWO GROUNDS, VIZ., (A) FIXED DEPOSITS HELD OUTSIDE THE BOOKS OF ACCOUNTS AND (B) NON - DEDUCTION OF TDS. AS IT IS OBSERVED THAT THE IMPUGNED FIXED DEPOSITS DO NOT BELONG TO THE ASSESSEE, BUT TO NALGON D A DIOCESE SOCIETY , THE CONCLUSION OF ASSESSING OFFICER THAT A SSESSEE HELD FIXED DEPOSITS WHICH ARE NOT REFLECTED IN THE BOOKS IS FACTUALLY WRONG. THEREFORE, DENIAL OF EXEMPTION ON THAT BASIS CANNOT BE UPHELD. AS THE ASSESSING OFFICER DID NOT POINT OUT ANY OTHER VIOLATION U/S 11 OR 13 AND AS THE REGISTRATION U/S 12A IS IN FORCE. THE ONLY OTHER GROUND BASED ON WHICH ASSES SIN G OFFICER DENIED EXEMPTION IS NON - D E DUCTION OF TDS. A S ALREADY DISCUSSED, SECTION 40(A)(IA) CAN ONLY BE APPLIED ONCE EXEMPTION IS VALIDLY DENIED TO THE ASSESSEE AND ITS INCOME IS COMPUTED ON COMMERC IAL LINES, BUT NON - DEDUCTION ITSELF CANNOT FORM THE BASIS OF DENIAL OF EXEMPTION U/S 11. IN THE LIGHT OF THE ABOVE DISCUSSION, IT IS HELD THAT BOTH THE REASONS STATED BY THE ASSESSING OFFICER FOR DENIAL OF EXEMPTION ARE NOT VALID AND HENCE THERE IS NO GROU ND FOR ASSESSING OFFICER TO DENY EXEMPTION TO THE SOCIETY. IN VIEW OF THE ABOVE, ASSESSING OFFICER IS DIRECTED TO ALLOW EXEMPTION TO THE ASSESSEE ITA NO . 2065 /H YD/ 20 1 7 NALGONDA DIOCESE SOCIAL SERVICE SOCIETY, NALGONDA : - 6 - : U/S 11 AND COMPUTE THE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 11. ADDITION MADE ON ACCOUNT OF UNACCOUNTED FDS IS DIRECTED TO BE DELETED. IN THE RESULT, GROUNDS NO.2 TO 5 AND 7 ARE HELD TO BE ALLOWED. 7. DISALLOWANCE U/S 40(A)(IA) : AS IT IS HELD THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 11, THE PROVISIONS OF SECTION 40(A)(IA) WILL HAVE N O APPLICATION IN THE CASE OF THE ASSESSEE AND HENCE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE MADE U/S 40(A)(IA). IN THE RESULT, GROUNDS NO.6 AND 8 IS ALLOWED. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE THE ITAT. 6. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. 6. 1 AS REGARDS THE FDRS, THE ASSESSEES CLAIM IS THAT SINCE THE DEPOSITS DO NOT PERTAIN TO THE ASSESSEE SOCIETY, THERE IS NO QU ESTION OF THE DEPOSITS BEING HELD OUTSIDE THE BOOKS OF ACCOUNTS. THE CIT(A)S OBSERVATIONS IN THIS REGARD ARE THAT ON PERUSAL OF SANCTION LETTER OF NALGONDA DIOCESE SOCIETY, NONE OF THE DEPOSITS ARE IN THE NAME OF THE ASSESSEE SOCIETY AND THEREFORE HE CAME TO THE CONCLUSION THAT THE AO COMMITTED A FACTUAL ERROR IN BRINGING TO TAX THE DEPOSITS WHICH DO NOT PERTAIN TO THE ASSESSEE SOCIETY. HE, THEREFORE, DIRECTED THE AO TO ALLOW EXEMPTION TO THE ASSESSEE U/S 11 ITA NO . 2065 /H YD/ 20 1 7 NALGONDA DIOCESE SOCIAL SERVICE SOCIETY, NALGONDA : - 7 - : AND ALSO HELD THAT SINCE THE ASSESSEE IS ELIGIBL E FOR EXEMPTION U/S 11, THE PROVISIONS OF SECTION 40(A)(IA) WILL HAVE NOT APPLICATION IN THE CASE OF THE ASSESSEE AND, HENCE, DIRECTED TO DELETE THE DISALLOWANCE MADE U/S 40(A)(IA). 6.2 IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE WITH TH E ORDER OF CIT(A) AND UPHOLDING THE SAME, WE DISMISS THE GROUNDS RAISED BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 9 TH APRIL , 2021 . SD/ - SD/ - (S . S . GODARA) (L . P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 9 TH APRIL , 20 2 1 . KV C OPY TO : 1 I T O(E) - 2, 2 ND FLOOR, B - BLOCK, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD . 2 NALGONDA DIOCESE SOCIAL SERVICE SOCIETY, DUPPALAPALLI ROAD, NALGONDA 508 001 3 CIT( A ) - 9 , HYDERABAD 4 CIT (EXEMPTIONS), HYDERABAD. 5 ITAT, DR, HYDERABAD 6 GUARD FILE.