MESERS STOCK EXCHANGE CUSTOMER PROTECTION FUND, LUDHIANA V. INCOME TAX OFFICER (EXEMPTIONS), JALANDHAR

ITA 260/ASR/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4238 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 03-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANPREET SINGH DUGGAL
• Keywords: Charitable institution; Competent authority; Condonation of delay; Reason to believe
• Section: 147; 11; 2(A)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. Nos. 646,159,160,260 & 457/Asr/2016, 2017, 2018 & 2019 Assessment Years: 2009-10 to 2011-12 & 2014-15 to 2015-16 M/s Stock Exchange Customers Protection Fund, LSE Building, Feroze Gandhi Market, Ludhiana [PAN: AAHTS 2730E] Vs. Income Tax Officer (Exemptions), Jalandhar (Appellant) (Respondent) Appellant by : None Respondent by: Sh. Manpreet Singh Duggal, Sr. DR Date of Hearing: 09.05.2022 Date of Pronouncement: 23.06.2022 ORDER Per Dr. M. L. Meena, AM: These appeals have been filed by the assessees against the impugned order dated 29.08.2016, 11.01.2017, 16.02.2018 and 09.04.2019 passed by the Ld. Commissioner of Income Tax (Appeals)-4, Ludhiana [Hereinafter referred to as (“the CIT(A)”)], in respect of the Assessment Years 2009-10 to 2011-12 & 2014-15 to 2015-16. ITA Nos. 646/Asr/2016 & Ors Stock Exchange Customers Protection Fund v. ITO 2 2. The assessee has raised the following common grounds of appeal and hence, the ITA No. 646/Asr/2016 is taken as a lead case and grounds are extracted as under: “1. That the learned CIT(A)has erred inholding that the learned Assessing Officer was justified in invoking the provisions of section 147 and 148 of the Act. 2. That the learned CIT(A)has erred in sustaining the addition of Rs. 44,50,204/- made by the learned Assessing Officer by disallowing the contribution received from M/s Ludhiana Stock Exchange Ltd. on the contention that the fund is not notified under section 10(23EA) of the Act, without giving credence to the fact that the application filed by the appellant for notifying itself under section 10(23EA) of the Act is pending for disposal before the concerned authorities and delay in disposal of such application is not on the part of the appellant. 3. (a) That the learned CIT(A)has erred in concurring with the learned Assessing Officer in rejecting the appellant’s claim for accumulation of income under section 11 (2) of the Act read with Rule 17 of the Income Tax Rules 1962 and treating the contribution of Rs. 44,50,204/- from M/s Ludhiana Stock Exchange Ltd. as taxable income of the appellant, without giving credence to various explanations and documents filed before the learned Assessing Officer. 4. (b) That in this connection the learned CIT(A) has not given credence to the fact that a request for condonation of delay in filing of Form No. 10 is pending for disposal before the learned CIT(Exemptions) Chandigarh. 5. That the appellant craves leave to add, amend and/ or alter the grounds at a later stage.” 3. Since, there are common issues being involved on identical facts in all the subjects appeals as per the aforesaid that firstly, the validity of reopening the assessment and secondly denial of exemption to the assessee society under section 10(23EA) as well under section 11/12 of ITA Nos. 646/Asr/2016 & Ors Stock Exchange Customers Protection Fund v. ITO 3 the Act, on the varying amount received by the assessee society from Ludhiana Stock Exchange and Members for example of Rs.44,50,204/- in ITA No. 646/Asr/2016 and hence these appeals were taken up for hearing after hearing the ld. DR as the appellant assessee has been filing adjournment applications repeatedly without giving specific reasons and thus, deliberately avoiding the proceeding on account of non-receipt of necessary certificate of notification from CBDT for the last 4-5 years. The assessee has taken as many as 12 dates on 22.03.2017, 03.08.2017, 10.10.2017, 31.11.2017, 12.02.2018, 28.06.2018, 19.11.2018, 05.03.2018, 06.05.2019, 13.07.2021, 21.09.2021, 21.04.2021, adjournments without any specific reasons for seeking adjournment, therefore, the adjournment application of the assessee has been rejected and it is decided to take of the case for hearing on merits in the interest of justice, after hearing the DR. Accordingly, we have decided to hear these appeals together and disposed of by this common order. 4. The brief facts of the case are that during the course of assessment proceedings for the A.Y. 2011-12, the Assessing Officer has noticed that the assessee has received Rs.44,50,203/- from Ludhiana Stock Exchange during the financial year 2008-09 relevant to A.Y. 2009-10 which in his opinion was taxable in the relevant year. It was further noticed by him that the assessee society has not filed its return of income for the A.Y. 2009-10 although its income was taxable. The assessment in the case of the assessee was, therefore, reopened by the Assessing Officer under section 147 of the Act after recording reasons to believe for escapement of income by issue of notice under section 148 of the Act on 27.03.2014. In response ITA Nos. 646/Asr/2016 & Ors Stock Exchange Customers Protection Fund v. ITO 4 to notice under section 148 of the Act, the assessee society filed its return of income declaring therein an income of Rs.9,16,800/- which represents interest income received by the assessee society on FDRs. The assessee society has claimed deduction under section 10(23EA) of the Act in the return in respect of income other than income from interest on FDRs. During the course of re-assessment proceedings for the A.Y. 2009-10, the Assessing Officer has further noticed that the assessee society is not notified under section 10(23EA) of the Act although it has claimed exemption under this section. In the opinion of the Assessing Officer, the assessee society should be notified by the competent authority to claim its income as exempt under section 10(23EA) of the Act. It has also been noticed by the Assessing Officer that although the assessee society got registration under section 12A/12AA of the Act but it has neither utilized specified amount of income for charitable purposes nor filed Form No. 10 along with the return of its income to claim exemption under section 11/12 of the Act. So, the Assessing Officer denied exemption to the assessee society under section 10(23EA) of the Act as the assessee society was not notified under this section The exemption under section 11/12 was also denied as the assessee society neither filed form No. 10 nor applied specified percentage of its income for charitable purposes to claim exemption under section 11/12 of the Act. The objections raised by the assessee society against reopening of assessment in this case were also disposed off by the Assessing Officer. The assessment in this case was ultimately completed by the Assessing Officer vide order under section 143(3) read with section 147 of the Act dated 16.03.2015 at an assessed income of Rs. 53,67,004/-. While making the assessment in this case, the ITA Nos. 646/Asr/2016 & Ors Stock Exchange Customers Protection Fund v. ITO 5 Assessing Officer has made an addition of Rs.44,50,204/- to the returned income of the assessee society which represents contribution received by the assessee society from Ludhiana Stock Exchange and Members as the Assessing Officer was of the opinion that the contribution received by the assessee society from Ludhiana Stock Exchange and Members is taxable in its hands as the assessee society did not fulfill the requirements for claim of exemption either under section 10(23EA) or under section 11/12 of the Act. 5. Being aggrieved with the assessment orders the appellant assessee has filed appeals before the learned CIT appeal who has confirmed the finding of the assessing officer by observing as under: First issue of CIT(A) “6.2 I have considered the observations, of the Assessing Officer as made by him in the assessment order while reopening the assessment in this case. I have also considered written submissions filed by the assessee society through its learned AR vide letter dated 29.08.2016 on the issue under reference. I have further considered other material placed by the assessee society on record. On careful consideration of the rival contentions, I am of the considered opinion that the Assessing Officer was having prima facie reason to believe that the income of the assessee society to the extent of Rs.44,50,204/- has escaped assessment in view of the fact that the assessee society has failed" to file the return of its income for the year under consideration although its income was taxable. It has also been noticed that the assessee society was not notified under section 10(23EA) of the Act and has incorrectly claimed part of its income as exempt under section 10(23EA) of the Act. It has further been noticed that the assessee society is not even entitled for exemption under section 11/12 of the Act although ITA Nos. 646/Asr/2016 & Ors Stock Exchange Customers Protection Fund v. ITO 6 it got registration under section 12A/12AA of the Act as the assessee society did not fulfill the necessary conditions for claim of exemption under section 11/12 of the Act. Under such circumstances, the action of the Assessing Officer in reopening the assessment in this case cannot be said to be unjustified. 6.3. In view of the above stated facts and in the circumstances of the case, I am of the opinion that the Assessing Officer is fully justified in reopening the assessment in this case on the ground that the assessee society failed to file its return of income in spite of the fact that it has taxable income and was not entitled to exemption of its income either under section 10(23EA) or under section 11/12 of the Act. The action of the Assessing Officer in reopening the assessment in this case is, therefore, upheld. In the result, ground No. 2(a) and 2(b) of appeal taken by the assessee society are dismissed.” 6. The appellant assessee was ground number one, contender that the learned CIT(A)has erred inholding that the learned Assessing Officer was justified in invoking the provisions of section 147 and 148 of the Act. We have also considered written submissions filed by the assessee society through its learned AR vide letter dated 29.08.2016 on the issue under reference before the Ld. CIT(A). 7. Per contra, the learned DR vehemently supported the finding of the learned CIT appeal. He submitted that the Assessing Officer was having prima facie reason to believe that the income of the assessee society to the extent of Rs.44,50,204/-and varying amount in the different assessment years under appeal has escaped assessment. In view of the fact that the assessee society has failed" to file the return of its income for the year under consideration although its income was taxable. He argued that It has ITA Nos. 646/Asr/2016 & Ors Stock Exchange Customers Protection Fund v. ITO 7 also been noticed by the AO that the assessee society was not notified under section 10(23EA) of the Act and has incorrectly claimed part of its income as exempt under section 10(23EA) of the Act. Accordingly, he prayed that the finding of the learned CIT appeal may be sustained. 8. We heard the learned DR, perused the material on record, impugned order and assessment order. Admittedly, the assessee society did not file its return of income for the assessment years under consideration, although it had taxable income of Rs. 4,450,204 and varying amount in the subsequent years under consideration. This also admitted fact on record that the assessee society was not notified under section10(23EA) of the Act and therefore it has incorrectly claimed part of its income as exempt under section 10(23EA) of the and that the assessee society was not even entitled for exemption under section 11/12 of the Act although it got registration under section 12A/12AA of the Act as the assessee society did not fulfill the necessary conditions for claim of exemption under section 11/12 of the Act. In our view, the learned CIT appeal was fully justified in confirming the action of the assessing officer in reopening the assessments in this case. Accordingly, we find no infirmity or perversity in the order of the learned CIT appeal on the issue of validity of the reopening of assessment by the assessing officer. Therefore, the validity of reopening of assessment confirmed by the CIT appeal is hereby sustained. The ground number one of appeal of the assessee on the issue of reopening is dismissed. ITA Nos. 646/Asr/2016 & Ors Stock Exchange Customers Protection Fund v. ITO 8 9. While confirming the finding of the assessing officer on merits, on the second issue as regards to denial of exemption to the assessee society under section 10(23EA) as well under section 11/12 of the Act, the learned CIT appeal has observed as under: “7.2 I have considered the observations of the Assessing Officer as made by him in the assessment order while denying exemption to the assessee society under section 10(23EA) as well as under section 11/12 of the Act on an amount of Rs.44,50,204/- received by the assessee society from Ludhiana Stock Exchange and Members as contribution. I have also considered written submissions filed by the assessee society through its learned AR vide letter dated 29.08.2016 on the issue under reference. I have further considered other material placed by the assessee society’ on record. On careful consideration of the rival contentions, I am also of the considered opinion that the assessee society is neither entitled for exemption under section 10(23EA) of the Act nor under section 11/12 of the Act in view of the fact that the assessee society did not fulfill necessary conditions for claim of exemption either under section 10(23EA) of the Act or under section 11/12 of the Act. For claim of exemption under section 10(23EA) of the Act, the assessee society was required to be notified by the competent authority i.e. CBDT whereas the assessee society has not been notified till date. Similarly, for claim of exemption under section 11/12 of the Act, the assessee society is either required to utilize specified percentage of its income (i.e. 85%of its income) towards charitable purposes or it should file form No.10 in case the specified amount is not utilized for charitable purposes but the assessee society has failed to fulfill either of the mandatory conditions. Under such circumstances, the action of the Assessing Officer in denying exemption to the assessee society under section 10(23EA) as well as under section 11/12 the Act and thereafter making an addition of Rs.44,50,204/- to the returned income of the assessee society in this case cannot be said to be unjustified. 7.3. In view of the above stated facts and in the circumstances of the case, I am of the opinion that the Assessing Officer is fully justified in denying exemption to the assessee society under section 10(23EA) as well as under section 11/12 of the Act and thereafter making an addition of Rs.44,50,204/- to the returned income of the assessee society in this case. The addition of Rs.44,50,204/- made by the Assessing Officer after denial of exemption under section 10(23EA) as ITA Nos. 646/Asr/2016 & Ors Stock Exchange Customers Protection Fund v. ITO 9 well as under section 11/12 of the Act in this case is, therefore, upheld. In the result, ground No. 3(a) and 3(b) and 4 of appeal taken by the assessee society are also dismissed.” 10. The appellant assessee by grounds of appeal contended that the learned CIT(A) has erred in sustaining the addition of Rs. 44,50,204/- made by the learned Assessing Officer by disallowing the contribution received from M/s Ludhiana Stock Exchange Ltd. on the contention that the fund was not notified under section 10(23EA) of the Act, without giving credence to the fact that the application filed by the appellant for notifying itself under section 10(23EA) of the Act is pending for disposal before the concerned authorities and delay in disposal of such application is not on the part of the appellant; that the learned CIT(A)has erred in concurring with the learned Assessing Officer in rejecting the appellant’s claim for accumulation of income under section 11 (2) of the Act read with Rule 17 of the Income Tax Rules 1962 and treating the contribution of Rs. 44,50,204/- from M/s Ludhiana Stock Exchange Ltd. as taxable income of the appellant, without giving credence to various explanations and documents filed before the learned Assessing Officer; that the learned CIT(A) has not given credence to the fact that a request for condonation of delay in filing of Form No. 10 is pending for disposal before the learned CIT(Exemptions) Chandigarh. 11. The defendant, the learned DR stands by the order of the CIT appeal. He argued that the assessee society did not fulfill necessary conditions for claim of exemption either under section 10(23EA) of the Act or under section 11/12 of the Act. For claim of exemption under section 10(23EA) of the Act, the assessee society was required to be notified by the competent ITA Nos. 646/Asr/2016 & Ors Stock Exchange Customers Protection Fund v. ITO 10 authority i.e. CBDT whereas the assessee society has not been notified till date. Similarly, for claim of exemption under section 11/12 of the Act, the assessee society is either required to utilize specified percentage of its income (i.e. 85%of its income) towards charitable purposes or it should file form No.10 in case the specified amount is not utilized for charitable purposes but the assessee society has failed to fulfill either of the mandatory conditions. He contended that the CIT appeal was fear and justified, in confirming the action of the Assessing Officer in denying exemption to the assessee society under section 10(23EA) as well as under section 11/12 the Act and thereafter making an addition of Rs.44,50,204/- to the returned income of the assessee society. 12. We heard the learned DR, perused the material on record, impugned order and assessment order on the issue of denial of exemption to the assessee society under section 10(23EA) as well under section 11/12 of the Act. We have also considered written submissions filed by the assessee society through its learned AR vide letter dated 29.08.2016 on the issue under reference before the learned CIT appeal. It is seen that the assessee society did not fulfill necessary conditions for claim of exemption either under section 10(23EA) of the Act or under section 11/12 of the Act and hence, the assessee society is neither entitled for exemption under section 10(23EA) of the Act nor under section 11/12 of the Act. As per the mandate, for the purpose of claim of exemption under section 10(23EA) of the Act, the assessee society was required to be notified by the competent authority i.e. CBDT whereas the assessee society has not been notified till date of hearing before us. Similarly, for claim of exemption under section ITA Nos. 646/Asr/2016 & Ors Stock Exchange Customers Protection Fund v. ITO 11 11/12 of the Act, the assessee society is either required to utilize specified percentage of its income (i.e.85% of its income) towards charitable purposes or it should file form No.10 in case the specified amount is not utilized for charitable purposes but the assessee society has failed to fulfill either of the mandatory conditions. Under such circumstances, the action of the CIT appeal confirming the finding of the the Assessing Officer in denying exemption to the assessee society under section 10(23EA) as well as under section 11/12 the Act and consequential addition of Rs.44,50,204/- to the returned income of the assessee society in this case, is hereby held to be fair and justified. In our view, the Assessing Officer was justified in denying exemption to the assessee society under section 10(23EA) as well as under section 11/12 of the Act and consequential an addition of Rs.44,50,204/- to the returned income of the assessee society in this case. Accordingly, we find no infirmity and perversity in the decision of the learned CIT appeal and confirming the addition of Rs.44,50,204/- made by the Assessing Officer by denial of exemption under section 10(23EA) as well as under section 11/12 of the Act in this case and therefore, the order of the CIT appeal is sustained. Thus, ground 2 to 4 of appeal taken by the assessee society are dismissed. 13. The facts in ITA No. 646/Asr/2016 in respect of Assessment Year 2009-10 are identical to the facts in other appeal in ITA Nos. 159, 160, 260 and 457/Asr/2017-2019 in respect of Assessment Years 2010-11, 2011-12, 2014-15 and 2015-16 respectively. Therefore our observation and finding given in ITA No. 646/Asr/2016 shall apply to the appeal in ITA Nos.159, 160, 260 and 457/Asr/2017-2019 in mutatis mutandis. ITA Nos. 646/Asr/2016 & Ors Stock Exchange Customers Protection Fund v. ITO 12 14. In the result, all the appeals filed by the assessee are dismissed. Order pronounced in the open court on 23.06.2022. Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T. True Copy By Order