Shri Shridevi Charitable Trust, Tumkur V. Deputy Commissioner Of Income Tax (Exemptions) Circle-1, Bangalore

ITA 227/BANG/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8757 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 04-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANDEEP CHALAPATHY
• Keywords: Depreciation; Charitable institution; Opportunity of being heard; Principle of natural justice
• Section: 154; 11; 143(3); 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND MS. PADMAVATHY S, ACCOUNTANT MEMBER ITA Nos.227/Bang/2022 Assessment Years: 2014-15 M/s.Sri Shridevi Charitable Trust, Shivadeepthi, 3 rd Cross, Someshwara Extension, Tumkur – 572 102. PAN : AADTS 8255 N Vs. DCIT(Exemptions), Circle – 1, Bengaluru. APPELLANTRESPONDENT Assessee by :Shri.Sandeep Chalapathy,CA Revenue by : Smt. Susan Dolores George, CIT(OSD)(DR)(ITAT), Bengaluru. Date of hearing:07.06.2022 Date of Pronouncement:10.06.2022 O R D E R Per Padmavathy S, Accountant Member This appeal against the order of the CIT(A)-11, Bengaluru, dated 07.01.2022, for Assessment Year 2014-15. 2. The grounds raised by the assessee are as follows: 1.That the order of the learned Commissioner of Income-Tax (Appeals) in so far it is prejudicial to the interests of the appellant is bad and erroneous in law and against the facts and circumstances of the case. ITA Nos.227/Bang/2022 Page 2 of 8 2.That the learned Commissioner of Income-Tax (Appeals) erred in law and on facts in deciding the appeal ex-parte without considering the fact that the notices were issued at the peak time of third wave of COVID-19 pandemic and the appellant was a hospital and Medical college therefore, could not respond to the notices. 3.Grounds on section 154 of the Income-Tax Act, 1961 (the Act) 3.1That the learned Commissioner of Income-Tax (Appeals) erred in law and on facts in upholding the validity of order u/s. 154 of the Act on the ground that there is a mistake apparent from record even though there is no mistake apparent from the record. 3.2That the learned Commissioner of Income-Tax (Appeals) ought to have held that the appellant has not claimed double deduction therefore, the order u/s. 154 of the Act is bad in law. 3.3That the learned Commissioner of Income-Tax (Appeals) erred in law and on facts in passing the order u/s. 154 of the Act even though the issue is debatable. 4.Grounds on disallowance of depreciation — Rs. 4,07,99,487 4.1. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the issue of depreciation is not emanating from order u/s. 154 of the Act even though the issue regarding the depreciation is a settled issue and disallowance of depreciation is a mistake apparent from record. 4.2. That the learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the appellant has a right to make any claim which he is legally entitled to at any time during any proceeding. 4.3. That the learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the amendment under sub section (6) of section 11 in Finance Act, 2014 regarding ITA Nos.227/Bang/2022 Page 3 of 8 disallowance of depreciation is applicable with effect from assessment year 2015-16. 5.Grounds on denial of adjustment of brought forward deficit with current year surplus 5.1That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the issue of adjustment of brought forward deficit is not emanating from order u/s. 154 of the Act even though the issue is settled and denial of adjustment of brought forward of deficit is a mistake apparent from record. 5.2That the learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the appellant has a right to make any claim which he is legally entitled to at any time during any proceeding. 5.3That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not allowing the adjustment of brought forward deficit with current year surplus. 6.Grounds on denial of carry forward of deficit to subsequent years 6.1That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the issue of carry forward of deficit to subsequent years is not emanating from order u/s. 154 of the Act even though the issue is settled and denial of carrying forward of deficit to subsequent years is a mistake apparent from record. 6.2That the learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the appellant has a right to make any claim which he is legally entitled to at any time during any proceeding. 6.3That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in denying the carry forward of deficit of Rs. 2,30,39,489 to subsequent years. ITA Nos.227/Bang/2022 Page 4 of 8 7.Grounds on disallowance of deduction claimed as repayment of loan — 6,80,69,334/- 7.1That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the repayment of loan of Rs. 6,80,69,334/- cannot be allowed as an application of income as the same amounts to double deduction. 7.2That the learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the appellant did not claim the purchase of asset as an application of income therefore, the appellant's claim of repayment of loan as an application of income will not amount to double deduction. 7.3That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not considering the fact that the appellant had made submissions on repayment of loan during the assessment proceedings and the assessing officer verified and passed the order u/s 143(3) of the Act. 8.Grounds on restricting the deduction u/s. 11(1)(a) of the Act to the extent of surplus available 8.1That the learned lower authorities ought to have allowed the deduction u/s. 11(1)(a) of the Act being 15% of the gross receipts and not restricting to the surplus available to the appellant. 3. The assessee is a charitable trust running various education institutions. The assessee is registered under section 12A of the Income Tax Act, 1961 (the Act) and is also recognized under section 80G(5)(vi) of the Act. For the year under consideration, the appellant had filed its return of income on 24.09.2014 declaring Nil income after claiming deductions under Section 11 of the Act. An order under Section 143(3) of the Income Tax Act was passed by the DCIT, Exemptions Circle-1, Bengaluru [AO] on 19.12.2016 after making certain disallowances. However, later on the AO noticed that the there were some mistakes ITA Nos.227/Bang/2022 Page 5 of 8 apparent from record. So after issuing a notice under Section 154 Of the Act, the AO has passed an order on 26.02.2021 by raising the demand of Rs. 1,73,54,906/-. The AO in the order passed under section 154 has stated that the assessee has not declared the loan taken during the year for Rs.82,77,40,905/- as income whereas the repayment of loan for Rs.6,80,69,334/- is claimed as application. Since this according to AO is a mistake apparent on record, proceeded to add the repayment of loan shown as application to the total income of the assessee. 4. Aggrieved, the assessee filed an application before the CIT(A). The assessee in the appeal before the CIT(A) also raised grounds pertaining to additions / disallowances made in the order under section 143(3). The CIT(A) concluded the appeal ex-parte stating that there was no representations from assessee’s side in response to the notices issued by him. In the order the CIT(A) rejected those grounds raised against the order under section 143(3) stating that it is not emanating out of the order under section 154. With regard to ground raised on addition made towards repayment of loan, the CIT(A) upheld the addition done by AO stating that AO is in correcting the mistake apparent on record, due to the binding decision of ITAT in the case of People Education Society Vs. DCIT [ITA No.1074/Bang/2016 dated 09.06.2017]. The CIT(A) also stated that the assessee has not filed any objections before the AO. ITA Nos.227/Bang/2022 Page 6 of 8 5. Aggrieved, the assessee is in appeal before the Tribunal. 6. The learned AR submitted that the assessee could not represent before the CIT(A) as it was during the covid period and due to various restriction, assessee could not appear before the CIT(A). The learned AR also submitted that the contention of CIT(A) that the assessee did not raise any objection before the AO is not factually correct, since the assessee vide letter dated 27.02.2021 (submitted on 02.03.2021) did raise objections before the AO. The learned AR further submitted that the assessee could not follow through the proceedings under section 154 again due to covid restrictions. The learned AR therefore prayed that in the interest of natural justice the order of CIT(A) is liable to be quashed. The learned AR, with regard to grounds raised before the Tribunal on additions made under section 143(3), submitted that the same may be considered on merits for adjudication. 7. Learned DR strongly objected to the prayer of AR that the grounds raised against 143(3) additions may be considered. The learned DR submitted that impugned order under appeal is against the order under section 154 and hence the adjudication would be restricted only to the mistake corrected in the order under section 154 and supported the order of CIT(A) who held that the additions made under section 143(3) cannot be considered for adjudication. ITA Nos.227/Bang/2022 Page 7 of 8 8. We heard the rival submissions and perused the materials on record. We notice that the CIT(A) has passed the order ex-parte, stating that the assessee did not respond to the notices issued and therefore we will therefore restrict the adjudication of this appeal to the issue of the CIT(A) passing the order ex-parte and rest of the grounds are left open. In this regard on perusal of records it is clear that the notices issued by the CIT(A) dated 16.12.2021 and 23.12.2021 are during the covid period. We are well aware of the Covid situation in the country during the said period of time and hence in our view the assessee’s contention that it could not represent due to Covid restrictions has merits. Audi alteram partem – Hear the other party or the rule of fair hearing or the rule that no one should be condemned unheard. This principle is the basic concept of principle of natural justice. This expression implies that a person must be given opportunity to defend himself. An opportunity of being heard is the most important component of the principle of Natural Justice and implies a proper opportunity of hearing. In the given case, the assessee had a genuine reason for not representing before the CIT(A). Therefore, in the interest of justice, we remand the issue back to the CIT(A) to consider all the open issues presented before him afresh in accordance with law. The assessee may be given a reasonable opportunity of being heard. This issue is allowed in favour of the assessee for statistical purposes. ITA Nos.227/Bang/2022 Page 8 of 8 9. In the result, appeal of the assessee is partly allowed. Pronounced in the open court on the date mentioned on the caption page. Sd/- (BEENA PILLAI) Sd/- (PADMAVATHY S) Judicial MemberAccountant Member Bangalore, Dated: 10.06.2022. /NS/* Copy to: 1.Appellants2.Respondent 3.CIT4.CIT(A) 5.DR 6. Guard file By order Assistant Registrar, ITAT, Bangalore.