Srishti Resident Welfare Association, Noida V. ACIT, Circle- 3, Noida

ITA 3029/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2689 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 01-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S KRISHNAN
• Keywords: Charitable institution; Opportunity of being heard
• Section: 12A; 12AA; 12; 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER ITA NO S. 3028 & 3029 /DEL/201 8 [ASSESSMENT YEAR S : 2 0 12 - 13 & 2014 - 15 ] SRISHTI RESIDENT WELFARE ASSOCIATION VS. THE A.C. I.T. T 6/803, PRASVANATH PRESTIGE - II CIRCLE - 3 SECTOR 93 - A, NOIDA NOIDA PAN: A AEAS 2644 D [APPELLANT] [RESPONDENT] DATE OF HEARING : 05 . 11 .201 8 DATE OF PRONOUNCEMENT : 06 . 1 1 .2018 ASSESSEE BY : S. KRISHNAN, ADV REVENUE BY : MS. AASHNA PAUL , SR. DR ORDER PER N .K. BILLAIYA, ACCOUNTANT MEMBER: T H ESE TWO SEPARATE APPEAL S BY THE ASSESSEE ARE PREFERRED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] 1 , NOIDA DATED 28 . 0 2 .201 8 PERTAINING TO ASSESSMENT YEAR S 20 12 - 13 & 2014 - 15 . SINCE THE FIRST APPELLATE AUTHORITY HAS DISPOSED OFF BOTH THE APPEALS BY 2 A CONSOLIDATED ORDER AND SINCE THE UNDERLYING FACTS IN ISSUES ARE IDENTICAL, BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY, THOUGH THE QUANTUM MAY DIFFER. 2. THE SUBSTANTIVE GRIEVANCES OF TH E ASSESSEE IN BOTH THE A.YS READ AS UNDER: 1. THE CIT(A) ERRED IN RETURNING FINDINGS AND DECIDING THE ISSUE OF THE ASSESSEE'S ENTITLEMENT TO REGISTRATION U / S .12 - AA, WHICH WAS COMPLETELY OUT OF HIS JURISDICTION IN APPEAL. 2. THE CIT(A) ERRED IN PUTTING THE ASSESSEE'S GROSS RECEIPTS TO TAX ON THE PECULIAR REASONING THAT A SOCIETY REGISTERED U / S .12 - AA OF THE ACT CANNOT CLAIM THE BENEFIT OF MUTUALITY. 3. THE CIT(A) ERRED IN ENHANCING THE INCOME IN APPEAL WITHOUT PUTTING THE ASSE SSEE TO NOTICE OF THE ISSUES THEREIN - THE ASPECT OF APPLICABILITY OF SECTION 57, AS ALSO THE INTENT TO PUT GROSS RECEIPTS TO TAX. THE NOTICE U/S.251(2) THEREFORE, IS ONLY TECHNICAL COMPLIANCE OF THE MANDATE IN THE PROVISION. 3 4. THE CIT(A) ERRED IN CONFIR MING ADDITIONS MADE BY THE AO WITHOUT EVEN APPLYING HIS MIND TO AVERMENTS & EVIDENCE PLACED BEFORE HIM IN THIS REGARD, AND PASSING A SPEAKING ORDER. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A RESIDENT WELFARE ASSOCIATION AND REGI STERED UNDER THE REGISTRAR OF SOCIETIES , MEERUT VIDE CERTIFICATE NO. 1573 DATED 25.02.2009. THE ASSESSEE IS ALSO REGISTERED U/S 12AA OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT'] BY THE CIT, GHAZIABAD. 3. RETURN FOR THE YEAR WAS SELE CTED FOR SCRUTINY ASSESSMENT AND DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS AND ON PERUSAL OF INCOME AND EXPENDITURE ACCOUNT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN GROSS RECEIPTS OF RS. 2.24 CRORES AND CLAIMED ENTIRE RECEIPT E XEMPT U/S 11 OF THE ACT. ON PERUSAL OF INCOME AND EXPENDITURE ACCOUNT, THE ASSESSING OFFICER NOTICED THAT GROSS RECEIPTS INCLUDES SURPLUS AMOUNT OF RS. 6,39,591/ - , WHICH WAS EARNED FROM COMMERCIAL ACTIVITIES. THE ASSESSING OFFICER WAS OF THE FIRM BELIEF T HAT THE ACTIVITIES OF THE ASSESSEE DO NOT FIT IN THE DEFINITION OF 4 THE WORDS CHARITABLE PURPOSES AND, THEREFORE, IS NOT ENTITLED FOR EXEMPTION ON SURPLUS OF RS. 6,36,591/ - . 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT( A) BUT, TO ITS SURPRISE, RECEIVED NOTICE FOR ENHANCEMENT. 5. THE FIRST APPELLATE AUTHORITY WAS OF THE OPINION THAT THE ASSESSEE HAS WRONGLY CLAIMED REGISTRATION U/S 12AA OF THE ACT, AND THEREFORE, THE ENTIRE RECEIPT OF THE ASSESSEE - SOCIETY SHOULD BE TRE ATED AS INCOME OF THE ASSESSEE. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSEE IS NOT ENTITLED FOR THE BENEFIT OF DOCTRINE OF MUTUALITY. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAS ADMITTEDLY VIOLATED THE PROVISIONS OF SECTION 13 OF THE ACT IN AS M UCH AS, THE ENTIRE EXPENDITURE OF THE ASSESSEE SOCIETY IS FOR THE BENEFIT OF THE MEMBERS OF THE ASSOCIATION OR PERSONS AND THEIR RELATIVES. 6. ON THE OBSERVATION MADE BY THE FIRST APPELLATE AUTHORITY, THE ASSESSEE - SOCIETY WAS FORCED TO WITHDRAW THE REGIST RATION GRANTED TO IT U/S 12 OF THE ACT. THE CIT(A) NOT 5 ONLY CONFIRMED THE ACTION OF THE ASSESSING OFFICER BUT ALSO TREATED THE ENTIRE RECEIPTS AS INCOME OF THE ASSESSEE. 7. AGGRIEVED BY THE ACTION OF THE FIRST APPELLATE AUTHORITY, THE ASSESSEE IS IN APPE AL BEFORE ME. 8. THE LD. AR VEHEMENTLY STATED THAT SINCE PAST MANY YEARS, BENEFIT OF DOCTRINE OF MUTUALITY WAS ALLOWED TO THE ASSESSEE - SOCIETY. IT IS THE SAY OF THE LD. AR THAT THE CIT(A) HAS NO JURISDICTION TO COMMENT UPON THE ACTION OF THE CIT(EXEMPTIO NS]. THE LD. AR FURTHER STATED THAT THE FIRST APPELLATE AUTHORITY SHOULD NOT HAVE QUESTIONED THE GRANT OF REGISTRATION U/S 12A OF THE ACT BY THE CIT(EXEMPTIONS]. THE LD. AR CONCLUDED BY STATING THAT THE ORDER OF THE FIRST APPELLATE AUTHORITY IS BAD IN LA W. 9. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER AND ON THE POINT OF ENHANCEMENT, SHE RELIED UPON THE OBSERVATIONS OF THE CIT(A). 6 10. I HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. I HAV E ALSO GONE THROUGH THE CONTENTS OF THE AFFIDAVIT FILED BY THE SECRETARY OF THE APPELLANT - SOCIETY. THE UNDISPUTED FACT IS THAT THE APPELLANT SOCIETY WAS ENJOYING THE REGISTRATION GRANTED TO IT BY THE CIT(E), GHAZIABAD U/S 12AA OF THE ACT. I FAIL TO UNDER STAND HOW CAN THE CIT(A) QUESTION THE AUTHORITY OF THE CIT(EXEMPTIONS) FOR GRANTING REGISTRATION U/S 12AA OF THE ACT. IT IS FOR THE CIT(EXEMPTIONS) TO DECIDE THE ALLOWABILITY OR OTHERWISE OF THE REGISTRATION U/S 12A OF THE ACT. IN MY CONSIDERED OPINION, THE CIT(A) SHOULD NOT HAVE MADE ANY OBSERVATION ON THAT ASPECT AND SHOULD HAVE RESTRICTED HIMSELF TO THE ISSUES RAISED BEFORE HIM. AT THE MOST, THE CIT(A) COULD HAVE ENHANCED THE ADDITION MADE BY THE ASSESSING OFFICER, WHICH IS WITHIN HIS POWERS. BUT BY N O STRETCH OF IMAGINATION IT CAN BE ACCEPTED THAT THE FIRST APPELLATE AUTHORITY IS MAKING ENHANCEMENT WHILE COMMENTING ON THE POWERS OF THE CIT(EXEMPTIONS). IN MY HUMBLE OPINION, THE FIRST APPELLATE AUTHORITY HAS CROSS ED HIS POWERS IN DECIDING THE APPEAL A ND, THEREFORE, HIS FINDINGS HAVE TO BE SET ASIDE. I DIRECT ACCORDINGLY. 7 11. COMING TO THE ACTION OF THE ASSESSING OFFICER, I FIND THAT THE ASSESSING OFFICER HAS DOUBTED THE SURPLUS RS. 6,36,591/ - WITHOUT EXAMINING EACH AND EVERY ITEM OF INCOME. I, THEREFO RE, RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE EACH AND EVERY ITEM OF INCOME AND DECIDE THE ISSUES AFRESH AFTER ALLOWING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THE ENH ANCEMENT IS SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER IS RESTORED BACK TO HIS FILE. 12. IN THE RESULT, THE APPEAL S FILED BY THE ASSESSEE IN ITA NO. 3028 & 3029 /DEL/201 8 ARE ALLOWED FOR STATISTICAL PURPOSE. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 06 . 1 1 .2018. SD/ - [N.K. BILLAIYA] ACCOUNTANT MEMBER DATED: 06 TH NOVEMBER , 2018 VL/ 8 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) ASST. REGISTRAR, 5. DR ITAT, NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER