M/s. CHRISTIAN HOSPITAL, Dewas V. The ITO 2(1), Ujjain

ITA 228/IND/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0382 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 25-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K MAHAJAN
• Keywords: Business income; Charitable institution; Reasonable cause; Non compliance
• Section: 273B; 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, J.M. AND SHRI B.C.MEENA, A.M. I.T.A.NOS. 227 TO 231/IND/2014 A.Y. : 2002-03 TO 2006-07 CHRISTIAN HOSPITAL, ITO DEWAS VS. 1(2), UJJAIN. APPELLANT RESPONDENT PAN NO. AAATC7001M APPELLANT BY : SHRI A. K. MAHAJAN, C. A. RESPONDENT BY : SHRI RAHUL RAMAN, DR DATE OF HEARING : 25 . 0 6 .201 5 DATE OF PRONOUNCEMENT : 07 . 0 7 .201 5 -: 2: - 2 O R D E R PER GARASIA, J.M. THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AG AINST THE COMMON ORDER OF CIT(A), UJJAIN, DATED 24.01.201 4 FOR THE ASSESSMENT YEARS 2002-03 TO 2006-07. SINCE IN ALL T HESE APPEALS COMMON ISSUES ARE INVOLVED, WE DISPOSE OF T HE SAME BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR ASSESSMENT YEAR 2002-03 ON 30.10.2005 DECLARING LOS S OF RS. 7,44,119/-. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,93,137/- ALONGWITH AUDITED IN COME AND EXPENDITURE ACCOUNT AND BALANCE SHEET DATED 9.5.20 02. THE RETURN WAS PROCESSED AND ASSESSMENT WAS COMPLETED U /S 143(3)/148. THE ASSESSEE WAS REQUIRED TO FILE THE A UDIT REPORT BEFORE 31.10.2002 AS THE RECEIPTS WERE EXCEEDED RS. 40 LAKHS I.E. RS. 85,63,846/-. THEREFORE, THE ASSESSEE WAS G IVEN SHOW CAUSE NOTICE AND ASSESSEE HAS FILED THE REPLY TO SH OW CAUSE NOTICE AS UNDER :- 1. THAT THE ABOVE ASSESSEE IS CHARITABLE INSTITUTION RUNNING HOSPITAL IN THE REMOTE AND BACKWARD AREA OF THE -: 3: - 3 DISTRICT PROVIDING ALL THE MEDICAL FACILITIES TO TH E POOREST AND THE NEEDY PEOPLE OF THE SOCIETY AT THE MOST REASONABLE AND CHEAPEST RATES IN THE BEST POSSIBLE WAY. 2. THAT THE MAIN OBJECT OF THE INSTITUTE IS TO GIV E SERVICES TO THE POOR AND NEEDY PARTS OF THE SOCIETY. 3. THAT THE OBJECT OF THE INSTITUTE IS NOT PROFIT EARNING MOTIVE. 4. THAT THE MAIN ACTIVITIES OBJECT AND MOTIVE OF R UNNING HOSPITAL DOES NOT INVOLVE THE COMMERCIAL AND BUSINE SS ACTIVITIES WITH AN OBJECT TO EARN PROFIT. 5. THAT FROM THE MAIN CONTROLLING BODY UNDER WHOM THE HOSPITAL IS WORKING HAD GIVEN AN UNDERSTANDING TO T HE MANAGEMENT OF THE HOSPITAL THAT ITS PROFIT/INCOME WHATEVER THEY ARE EARNING WERE NOT TAXABLE INCOME A ND WERE EXEMPTED FROM THE NET WORK INCOME TAX. 6. THAT UNDER THIS BONA FIDE BELIEF THE HOSPITAL D ID NOT GET HIS BOOKS OF ACCOUNT AUDITED UNDER THE PROVISIO NS OF -: 4: - 4 THE SECTION 44AB OF THE INCOME-TAX ACT, 1961, FOR W HICH THE ASSESSEE EXPRESS REGRET. 7. THAT SINCE THE ASSESSEE HAD NO MALA FIDE INTENT ION HIS MISTAKE IS PRAYED TO BE KINDLY CONDONED. 3. AFTER CONSIDERING THE REPLY, THE AO WAS OF THE V IEW THAT THE TOTAL SALES AND TURNOVER EXCEEDS RS. 40 LAKHS I N THE PREVIOUS YEAR, BUT ASSESSEES ACCOUNTS WERE NOT AUD ITED. IN THE RETURN, IT WAS NOTICED THAT THE ASSESSEE WAS AS SISTED BY C.A. SHRI RAKESH KUMAR VYAS & COMPANY AND C. A. IS QUALIFIED PERSON AND HE WAS FAILED TO COMPLY WITH T HE PROVISIONS OF SECTION 44AB OF THE INCOME-TAX ACT, 1 961. THE AO WAS OF THE VIEW THAT THE INSTITUTION WAS NOT CHA RITABLE AND NOT REGISTERED U/S 12A. THE INSTITUTION WAS ASSISTE D BY C. A. AND THE ASSESSEE HAS OBTAINED SIMPLE AUDIT REPORT. THEREFORE, THE AO HAS LEVIED THE PENALTY U/S 271B OF THE ACT. 4. THE MATTER CARRIED TO THE CIT(A) AND THE CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. -: 5: - 5 5. THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED BEFORE US THAT THE ASSESSEE IS CHRISTIAN HOSPITAL, HAT PIP LIYA AND IS ANCILLARY AND SUB-ORDINATE OF CENTRAL REGIONAL BOAR D OF HEALTH SERVICES OF SYNODICAL BOARD OF HEALTH SERVICES OF CHURCH OF NORTH INDIA, NEW DELHI. THE CONTROLLING BOARD IS RE GISTERED UNDER REGISTRATION OF SOCIETIES ACT, XXI OF 1860 NO . S/7664 OF 1978 WHICH IS A CHARITABLE ORGANIZATION AND HAS BEE N GIVEN EXEMPTION U/S 80G(5)(VI) OF THE INCOME-TAX ACT, 19 61. THE TRUST IS REGISTERED U/S12A READ WITH SECTION 12AA(1 )(B) OF THE INCOME-TAX ACT, 1961. THIS HOSPITAL IS RUNNING SINC E 125 YEARS AND IS SITUATED IN A REMOTE, BACKWARD, TRIBAL VILLA GE AREA OF DEWAS DISTRICT AND IS A CHARITABLE AND PHILANTHROPI C ORGANIZATION PROVIDING MEDICAL FACILITIES AND RELIE F TO THE POOR AND BACKWARD CLASS OF THE SOCIETY IN THE SPIRIT OF SERVICE AND SACRIFICE AT VERY SPECIAL, CONCESSIONAL, NOMINAL AN D SUBSIDIZED RATES. IT HAS NO PROFIT EARNING MOTIVE AT ALL. THE ASSESSEE HAS FILED THE RETURN OF LOSS FOR ASSESSMENT YEAR 2002-0 3 AND SAME WAS REVISED. THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THE HOSPITAL IS 125 YEARS OLD AND SITUATED IN A BACKWARD TRIBAL VILLAGE OF DEWAS DISTRICT. THE INSTITUTION D ID NOT CARRY -: 6: - 6 OUT ANY COMMERCIAL ACTIVITIES AND IT HAS NO PROFIT EARNING MOTIVE AT ALL. THE ASSESSEE HOSPITAL IS SUB-ORDINAT E OF CENTRAL REGIONAL BOARD OF HEALTH SERVICES OF SYNODICAL BOAR D OF HEALTH SERVICES OF CHURCH OF NORTH INDIA, NEW DELHI AND A SSESSEE WAS INFORMED THAT THIS TRUST IS CHARITABLE ORGANIZA TION AND IT DOES NOT REQUIRE BOOKS TO BE AUDITED U/S 44AB OF TH E INCOME- TAX ACT, 1961. THE ASSESSEE TRUST WAS ASSISTED BY R AKESH KUMAR VYAS & COMPANY, C.A. AND CHARTERED ACCOUNTANT DID NOT GIVE THEM TECHNICAL ADVICE THAT ACCOUNTS OF THE ASSESSEE ARE REQUIRED TO BE AUDITED. THEREFORE, THE ASSESSEE HAD REASONABLE CAUSE FOR NOT AUDITED HIS BOOKS OF ACCOU NT. THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS :- (I) LAL SINGH BHANWAR SINGH JADON VS. ITO, (2010) 1 5 ITJ 134 (TRIB.) INDORE BENCH. (II) CIT & ANR. VS. IQBALPUR COOP. CANE DEVELOPMENT UNION LIMITED, (2009) 179 TAXMAN 27 (UTTARAKHAND). (III) ITO VS. SACHINAM TRUST, (2009) 223 CTR (GUJ) 152. -: 7: - 7 (IV) CIT VS. L. S. LAKSHMANASWAMY, (2008) 296 ITR 5 91 (MAD. (V) CIT VS. SAJUMA COOP. CREDIT & SERVICE SOCIETY L TD., (2008) 307 ITR 340 (P & H). (VI) HINDUSTAN STEELS LTD. VS. STATE OF ORISSA, (19 72) 83 ITR 26 ( SC). (VII) BAJRANG OIL MILLS VS. ITO, (2007)207 CTR (RAJ ) 1: (2007) 295 ITR 314 (RAJ) : 2007) 163 TAXMAN 154 (RAJ). (VIII) J.J. EXPORTERS LTD. VS. DY. CIT, (2011) 138 TTJ (KOL) 629. (IX) RAVI KUMAR RAWAT VS. ITO, (2011) 138 TTJ (JP) 254. (X) DR. P.VADAMALAYAN VS. CIT, (1969) 74 ITR 94 (M AD) CIT VS. DR. V.K. RAMACHANDRA, (1981) 128 ITR 727 AND NATVARLAL AMBALAL DAVE VS. CIT, (1997) 138 CTR (GUJ) 181: (1997) 225 ITR 936 (GUJ) -: 8: - 8 (XI) SHALINI HOSPITAL VS. ACIT, (2007 110 TTJ (HYD) 690: (2007) 108 ITD 534 (HYD). (XII) SMT. NIRMAL JAIN VS. ITO, (2007) 112 TTJ (PAT ) 90. 6. THE LD. SENIOR D.R., ON THE OTHER HAND, RELIED U PON THE ORDER OF LD. CIT(A). THE LD. SENIOR D.R. SUBMITTED THAT THE ASSESSEE HAS FILED THE SIMILAR APPEALS FOR THE ASSE SSMENT YEARS 2002-03 TO 2006-07 AND THE ASSESSEE IS RUNNING HOSP ITAL AT HATPIPLIA IN DISTRICT DEWAS. THE ASSESSEE TRUST IS NOT REGISTERED U/S 12A OF THE INCOME-TAX ACT, 1961, BUT THE ASSESSEE HAS NEVER FILED THE RETURNS OF INCOME. THE REFORE, THIS ARGUMENT OF THE ASSESSEE THAT THE ASSESSEE IS A CHA RITABLE INSTITUTION IS NOT TENABLE. THERE IS NO LOSS TO THE REVENUE, THIS ARGUMENT IS ALSO NOT TENABLE ON THE GROUND THAT THE BOOKS OF THE ASSESSEE REQUIRES TO BE AUDITED IS MANDATORY. T HEREFORE, THIS ARGUMENT CANNOT BE TENABLE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND -: 9: - 9 THAT THE ASSESSEE CHRISTIAN HOSPITAL IS ANCILLARY A ND SUB- ORDINATE OF CENTRAL REGIONAL BOARD OF HEALTH SERVIC ES OF SYNODICAL BOARD OF HEALTH SERVICES OF CHURCH OF NOR TH INDIA, NEW DELHI. THE CONTROLLING BODY IS REGISTERED SOCIE TY AND IT IS CHARITABLE ORGANIZATION AND IT HAS BEEN GIVEN EXEMP TION U/S 80F(5)(VI) OF THE INCOME-TAX ACT, 1961, AND THE TRU ST WAS REGISTERED U/S 12A READ WITH SECTION 12AA(1)(B) OF THE INCOME- TAX ACT, 1961. THE ASSESSEE HOSPITAL IS 125 YEARS O LD AND IT IS SITUATED IN REMOTE, BACKWARD AND TRIBAL AREA OF DEW AS DISTRICT. THE HOSPITAL IS ABOUT MORE THAN 125 YEARS OLD. THE ASSESSEE EARNS NO PROFIT. THE ASSESSEE IS RUNNING T HE HOSPITAL ONLY FOR CHARITABLE PURPOSES AND HAS NO PROFIT EARN ING MOTIVE AT ALL. THE ASSESSEE WAS ASSISTED BY THE CHARTERED ACCOUNTANT. THE C. A. HAS NOT ADVISED THE ASSESSEE TO GET ITS A CCOUNTS AUDITED. THEREFORE, WE ARE OF THE VIEW THAT THE ASS ESSEE WAS UNDER BONA FIDE BELIEF THAT ITS TRUSTS ACCOUNTS AR E NOT SUBJECTED TO AUDIT U/S 44AB OF THE INCOME-TAX ACT, 1961. 8. THE QUESTION OF PENALTY FOR NON COMPLIANCE CANNO T BE ENQUIRED INTO WITHOUT READING THE PROVISIONS OF SEC TION 271B -: 10: - 10 AND 273B TOGETHER AS BOTH ARE INTERNALLY CONNECTED. EVEN IF THE MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY CO MPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING THE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF PROVI SIONS OF ACT OR WHEN THE BREACH FLOWS FROM A BONA FIDE BELIEF T HAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCR IBED BY STATUTE. IN TERMS OF SECTION 270B, THE AO WILL BE R EQUIRED TO CONSIDER NOT GETTING THE ACCOUNTS AUDITED FOR THE R ELEVANT YEAR WAS DUE TO ANY REASONABLE CAUSE WHICH THE ASSESSEE PUT FORWARD AS SELF DEFIANCE FOR FAILURE TO COMPLY WITH THE AFORESAID PROVISIONS. IN EITHER CASE, WHERE THE ASSESSEE RAIS ED AN ISSUE THAT HIS CASE DOES NOT FILE WITHIN THE PURVIEW OF S ECTION 44AB BEFORE PENALTY CAN BE LEVIED. THE AO WILL BE UNDER OBLIGATION TO DECIDE SUCH OBJECTION RAISED BY THE ASSESSEE. TH E FACT THAT THE ASSESSEE RAISED CERTAIN QUESTION ABOUT THE INTE RPRETATION OF STATUTE PRIMA FACIE SUPPORTS ITS CASE IN THAT OB JECTION RAISED BY HIM, IS BONA FIDE; HE SEEKS THE DECISION ON HIS MERIT WHERE THE ACCOUNTS ARE NOT AUDITED EVEN THOUGH SECTION 44 AB ATTRACTED. IT DOES NOT AFFECT THE PROPER COMPUTATIO N OF INCOME IN TERMS OF PROVISIONS OF ACT 1961 NOR DOES IT AFFE CT ANY -: 11: - 11 DEDUCTION BY THE ASSESSEE UNDER ANY PROVISIONS OF T HE ACT. IN SUCH EVENT, THE BREACH REMAINS TECHNICAL BREACH OF PROCEDURAL REQUIREMENT. THE ASSESSEES RECEIPTS WERE IN EXCESS OF RS. 40 LAKHS, THEREFORE, THE ASSESSEES ACCOUNTS ARE SUBJ ECT TO AUDIT. THE ASSESSEE IS A CHARITABLE HOSPITAL AND ITS ACCOU NTS WERE AUDITED BY THE CHARTERED ACCOUNTANT. THE ASSESSEE W AS UNDER THE BONA FIDE BELIEF THAT THE ASSESSEES HOSPITAL I S CHARITABLE HOSPITAL, THEREFORE, THEY ARE NOT REQUIRED TO GET I TS ACCOUNTS AUDITED. THE ASSESSEE, THEREFORE, NOT COMPLIED WITH THE PROVISIONS OF SECTION 44AB. AFTERWARDS FROM ASSESSM ENT YEARS 2002-03 TO 2006-07, THE ASSESSEE DID NOT GET ITS AC COUNTS AUDITED AS THE TIME FOR GETTING THE ACCOUNTS AUDITE D WERE ALREADY OVER AND ASSESSEE CAME TO KNOW ONLY DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS THEREAFTER AUDITED ITS ACCOUNTS AND COMPLIED WITH THE PROVISIONS OF SE CTION 44AB REGULARLY. THEREFORE, THE LEVY OF PENALTY U/S 271B FOR NON- COMPLIANCE WITH SECTION 44AB FOR THE ASSESSMENT YEA R 2002- 03 TO 2006-07 IS CANCELLED. -: 12: - 12 9. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 07 JULY, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 7 TH JULY, 2015. CPU* 27