The Income Tax Officer, Srinagar V. M/s. J.K.Public School, Kashmir

ITA 307/ASR/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7727 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-11-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 09-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Bonafide mistake
• Section: 144; 10

Judgement Text

P A G E | 1 ITA NO. 307/ASR/2014 AY: 2010 - 11 ITO VS. M/S J.K. PUBLIC SCHOOL IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SHRI T.S. KAPOOR, AM AND SHRI RAVISH SOOD, JM ./ I.T.A. NO . 307/ASR/2014 ( / ASSESSMENT YEAR: 2010 - 11 ) INCOME TAX OFFICER WARD - 3(1), SRINAGAR, POST OFFICE LANE, SHAH HOUSE OPP. KITAB MANZIL, RAJBAGH SRINAGAR - KASHMIR, J & K. / VS. M/S J.K. PUBLIC SCHOOL, HUMHAMA - BUDGAM KASHMIR . ./ ./ PAN/GIR NO. AABTJ1255B ( / REVENUE ) : ( / ASSESSEE ) / REVENUE BY : SHRI S.S. KANWAL, D .R / ASSESSEE B Y : SHRI M.A. MIR, A. R / DATE OF HEARING : 15 /11/2017 / DATE OF PRONOUNCEMENT : 17 /11/2017 P A G E | 2 ITA NO. 307/ASR/2014 AY: 2010 - 11 ITO VS. M/S J.K. PUBLIC SCHOOL / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A), JAMMU , DATED 26.02.2014 , WHICH IN ITSELF ARISES FROM THE ASSESSMENT ORDER PASSED BY THE A.O UNDER SEC.144 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 01.03.2013 . THE REVENUE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACT S AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN ALLOWING A RELIEF ON ACCOUNT OF DEDUCTION U/S 10(23C)(IIIAD) OF THE I.T. ACT, 1961 WHEN THE TURNOVER OF THE SCHOOL IS LESS THAN OF RS. ONE CRORE BUT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THAT THE ASSESSEE INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSES AND NO T FOR PROFIT. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN ALLOWING THE RELIEF ON ACCOUNT OF DISALLOWANCE OF 25% OF EXPENSES AS THE ASSESSEE HAS FAILED TO PRODUCE THE BOOKS OF ACCOUNTS DURING THE ASSESSMENT PROCEEDINGS AND THE SAID ADDITION HAS BEEN DELETED BY THE LD. CIT(A) SIMPLY ON THE BASIS THAT THE ASSESSEE IS ENTITLED TO EXEMPTION/DEDUCTION U/S 10(23C)(IIIAD) OF THE I.T. ACT, 1961. THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MORE GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE WHICH IS AN EDUCATIONAL INSTITUTION HAD FILED ITS RETURN OF INCOME FOR A.Y 2010 - 11 , DECLARING NET INCOME OF RS.26,92,741/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143( 1 ) OF THE ACT. THE CASE OF THE ASSESSEE WAS THEREAFTER TAKEN UP FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SEC. 143(2), DATED 22.09.2011 WAS ISSUED AND SERVED UPON THE ASSESSEE. THAT IN COMPLIANCE TO THE QUE RY LETTER ISSUED BY THE A.O THE ASSESSEE FILED IT S REPLY, HOWEVER, AS PER THE RECORD SOME OF THE P A G E | 3 ITA NO. 307/ASR/2014 AY: 2010 - 11 ITO VS. M/S J.K. PUBLIC SCHOOL QUERIES RAISED BY THE A.O REMAINED UNANSWERED. THAT AS STANDS GATHERED FROM THE ASSESSMENT ORDER , AS THE ASSESSEE DESPITE BEING AFFORDED SUFFICIENT OPPORTUNIT IES WAS NEITHER FORTHCOMING WITH THE R EPLIES TO THE REMAINING QUERIES NOR PRODUCING THE BOOKS OF ACCOUN T FOR NECESSARY EXAMINATION, THEREFORE, THE A.O SERVED A PROPOSED DRAFT ASSESSMENT ORDER, D ATED 04.02.2013 ON THE ASSESSEE. THE ASSESSEE WAS INFORMED BY THE A.O THAT IN THE ABSENCE OF NECESSARY COMPLIA NCE AND FURNISHING OF THE REPLY TO THE QUERIES THAT HAD REMAINED UNANSWERED TILL DATE , THE ASSESSMENT WOULD BE FRAMED AS PER THE PROVISIONS OF SEC. 144 OF THE ACT. THE ASSESSEE IN REPLY TO THE PROPOSED DRAFT ASSESSMENT ORDER SUBMITTED BEFORE THE A.O THAT IT HAD CLAIMED EXEMPTION UNDER SEC. 10(23C) OF THE INCOME - TAX ACT, 1961, TO WHICH IT WAS DULY ENTITLED. THAT STILL FURTHER THE ASSESSEE STATED THAT THE REPLY TO THE REMAINING QUERIES RAISED BY THE A.O VIDE HIS LETTER DATED 07.12.2012 WERE ALSO BEING SUBMI TTED. THE A.O AFTER DELIBERATING ON THE REPLY OF THE ASSESSEE WAS NOT INSPIRED BY THE SAME AND OBSERVED THAT THE SAME WAS FAR FROM THE FACTS AS THEY SO REMAINED . IT WAS FURTHER OBSERVED BY THE A.O THAT THE FAILURE ON THE PART OF THE ASSESSEE TO FURNISH THE REQUISITE INFORMATION/DOCUMENTS AND PRODUCE THE BOOKS OF ACCOUNT FOR NECESSARY EXAMINATION BEFORE HIM , CONTINUED AS SUCH . THAT AS PER THE A.O THE CONTENTION OF THE ASSESSEE THAT IT HAD CLAIMED EXEMPTION UNDER SEC. 10(23C) IN RESPECT OF EXCESS OF INCOME OVER EXPENDITURE FOR THE YEAR UNDER CONSIDERATION, VIZ . A.Y 2010 - 11, WAS ALSO NOT CORRECT A ND THE SAID FACT COULD SAFELY BE GATHERED FROM A PERU SAL OF (PART - B) COL. NO. 26 OF THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THUS, T HE A.O HOLDING A CONVICTION THAT NOW WHEN THE ASSESSEE HAD NEITHER PLACED ON RECORD THE REQUISITE REPLIES TO THE QUERIES RAISED, NOR P A G E | 4 ITA NO. 307/ASR/2014 AY: 2010 - 11 ITO VS. M/S J.K. PUBLIC SCHOOL PRODUCED THE BOOKS OF ACCOUNTS DESPITE SPECIFIC DIRECTIONS DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THEREFORE, HE WAS LEFT WITH NO OTHER ALTERNATIVE BUT TO FRAME THE ASSESSMENT AS PER THE PROVISION OF SEC. 144 OF THE ACT . 3. THE A.O ON THE BASIS OF THE AFORESAID FACTS THEREIN OBSERVED THAT THE ASSESSEE WAS NOT REGISTERED AS A CHARITABLE TRUST/SOCIETY UNDER THE PROVISIONS OF SEC. 12A(A) OF THE ACT. IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE WHICH HAD DECLARED ITS GROSS RECEIPTS FROM RUNNING OF A SCHOO L, VIZ. J.K. PUBLIC SCHOOL AT RS.93,82,100/ - , HAD AFTER DEDUCT ING VARIOUS EXPENSES AS PER THE INCOME AND EXPENDITURE ACCOUNT DR AWN FOR THE YEAR 31.03.2012, THEREIN DECLARED NET EXCESS OF INCOME OVER EXPENDITURE AT RS.22,26,941/ - . THE A.O BEING OF THE VIEW THAT AS THE ASSESSEE HAD NOT CLAIMED ANY EXEMPTION IN RESPECT OF THE EXCESS OF INCOME OVER EXPENDITURE AS PER ITS RETURN OF INCOME F OR THE YEAR UNDER CONSIDERATION, THEREFORE , THE ENTIRE SURPLUS WAS LIABLE TO BE BROUGHT TO TAX. THE A.O BEING OF THE VIEW T HAT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE EXPENSES WHICH WERE CLAIMED BY IT, THEREFORE, DISALLOWED 25% OF THE AGGREGATE EXPENSES OF RS.47,03,012/ - , RESULTING TO A CONSEQUENTIAL ADDITION OF RS.11,75,776/ - TO THE RETU RNED INCOME OF THE ASSESSEE. THE A.O FURTHER OBSERVING THAT THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE ON THE RENT OF RS.4,24,100/ - WHICH WAS CLAIMED AS AN EXPENSE IN THE INCOME AND EXPENDITURE ACCOUNT , THEREFORE, DISALLOWED THE SAME AS PER SEC. 40(A) (IA) OF THE ACT. THUS, ON THE BASIS OF THE AFORESAID OBSERVATIONS THE A.O ASSESSED THE INCOME OF THE ASSESSEE AT RS. 42,92,520 / - . P A G E | 5 ITA NO. 307/ASR/2014 AY: 2010 - 11 ITO VS. M/S J.K. PUBLIC SCHOOL 4. AGGRIEVED , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE IN THE BACKDROP OF THE FACTS OF THE CASE , THEREIN OBSERVED THAT AS THE GROSS RECEIPTS OF THE ASSESSEE FROM RUNNING OF THE SCHOOL, VIZ. J.K. PUBLIC SCHOOL , HUMHAMA BUDGAM, KASHMIR WAS LESS THAN RS. 1 CRORE, THEREFORE, THE ASSESSEE WAS ENTITL ED TOWARDS CLAIM OF EXEMPTION UNDER SEC. 10(23C) (IIIAD) OF THE ACT. IT WAS OBSERVED BY THE CIT(A) THAT THE ASSESSEE HAD IN ITS RETURN OF INCOME WHILE CLAIMING ITS INCOME AS EXEMPT, HAD I NADVERTENTLY MADE A MENTION OF SEC. 11 , AS AGAINST ITS ENTITLEMENT U NDER SEC. 10(23C)(IIIAD) OF THE ACT. THE CIT(A) FOU ND FAVOUR WITH THE CONTENTION OF THE ASSESSEE THAT AS ITS GROSS RECEIPTS WERE LESS THAN RS.1 CRORE, THEREFORE, IT STOOD DULY ENTITLED TOWARDS CLAIM OF DEDUCTION UNDER SEC. 10(23C)(IIIAD) OF THE ACT. THU S , ON THE BASIS OF THE AFORESAID OBSERVATIONS, THE CIT(A) ALLOWED THE DEDUCTION OF RS.26,92,741/ - CLAIMED BY THE ASSESSEE UNDER THE AFORESAID STATUTORY PROVISION, VIZ. SEC. 10(23C(IIIAD) . 5. THAT AS REGARDS THE ADHOC DISALLOWANCE OF 25% OF THE EXPENSES OF RS.11,75,776/ - BY THE A.O, THE CIT(A) OBSERVED THAT AS THE A.O HAD FAILED TO POINT OUT ANY BASIS FOR MAKI NG THE ADHOC DISALLOWANCE, THEREFORE, THE SAME COULD NOT BE SUSTAINED. 6. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT( A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R ) AT THE VERY OUTSET SUBMITTED TH AT AS THE ASSESSEE DESPITE SPECIFIC DIRECTIONS BY THE A.O, HAD NEITHER COMPLIED WITH THE NOTICES ISSUED UNDER SEC. 142(1), NOR PRODUE D THE BOOKS OF ACCOUNT FOR VERIFICATION, THEREFORE, THERE WAS NO OCCASION ON THE PART OF P A G E | 6 ITA NO. 307/ASR/2014 AY: 2010 - 11 ITO VS. M/S J.K. PUBLIC SCHOOL THE A.O TO HAVE VERIFIED THE FULFILMENT OF THE REQUISITE CONDITION S BY THE ASSESSEE , WHICH THEREIN ENTITL ED IT TOWARDS THE CLAIM OF EXEMPTION UNDER SEC. 10(23C) (IIIAD) OF THE ACT. IT WAS SUBMITTED BY THE LD. D.R THAT IN THE ABSENCE OF ANY COMPLIANCE ON THE PART OF THE ASSESSEE, THE A.O BEING LEFT WITH NO OTHER ALTERNATIVE HAD RIGHTLY INVOKED THE PROVISION OF SEC. 144 OF THE ACT AND FRAMED THE ASSESSMEN T . THE LD. D.R TAKING US THROUGH PARA 4.3 OF THE ORDER OF THE CIT(A) , THEREIN SUBMITTED THAT THE LATTER WHILE REJECTING THE CLAIM OF THE ASSESSEE THAT THE DISALLOWANCE OF EXPENSES WOULD AUTOMATICALLY LEAD TO INCREAS E IN THE AMOUNT OF ELIGIBLE INCOME WHICH WOULD BE EXEMPT UNDER SEC. 10(23C)(IIIAD), HAD OBSERVED THAT NOW WHEN THE ASSESSEE HAD VIOLATED THE PROVISIONS OF THE ACT, THEREFORE, SUCH A PLEA ON ITS PART WAS NOT ACCEPTABLE. IT WAS SUBMITTED BY THE LD. D.R THAT NOW WHEN ON ONE HAND THE CIT(A) HAD CONCEDED THAT THE ASSESSEE HAD VIOLATED THE STATUTORY PROVISIONS , THEREFORE , IT WAS BEYOND COMPREHENSION AS TO HOW IN CLEAR CONTRADICTION OF HIS OWN OBSERVATIONS THE DEDUCTION UNDER SEC. 10( 23C)(IIIAD) WAS ALLOWED BY THE CIT(A) . PER CONTRA, THE LD. AUTHORIZED REPRESENTATIV E (FOR SHORT A.R ) SUBMITTED THAT MAKING A MENTION OF SEC. 11 AS AGAINST SECTION 10(23C)(IIIAD) BY THE ASSESSEE HAD OCCASSIONED ONLY ON ACCOUNT OF AN INADVERTENT MISTAKE ON THE PART OF THE ASSESSEE . THE LD. A.R SUBMITTED THAT THE ASSESSEE VIDE HIS LETTER DATED 21.02.2013 HAD CATEGORICALLY CLARIFIED THE SAID INADVERTENT MISTAKE ON ITS PART BEFORE THE A.O. IT WAS SUBMITTED BY THE LD. A.R THAT NOW WHEN IT WAS A MATTER OF FACT THAT THE ASSESSEE WAS AN EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROFIT , HAVING GROSS RECEIPTS FROM RUNNING OF THE EDUCATIONAL INSTITUTION NOT EXCEED ING THE PRESCRIBED AMOUNT OF RS 1 CRORE DURING THE P A G E | 7 ITA NO. 307/ASR/2014 AY: 2010 - 11 ITO VS. M/S J.K. PUBLIC SCHOOL YEA R UNDER CONSIDERATION, THEREFORE, THE ASSESSEE DULY STOOD ENTITLED FOR CLAIM OF EXEMPTION UNDER SEC. 10(23C)(IIIAD) OF THE ACT. 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVE S FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MAT ERIAL AVAILABLE ON RECORD. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND FIND THAT OUR INDULGENCE IN THE PRESENT CASE IS SOUGHT FOR ADJUDICATING AS TO WHETHER THE CIT(A) IS RIGHT IN LAW IN ALLOWING THE EXEMPTION UNDER SEC. 10(23C)(I IIAD) OF THE ACT TO THE ASSESSEE, OR NOT. WE FIND THAT IT REMAINS AS A MATTER OF FACT THAT THE ASSESSEE IS AN EDUCATIONAL INSTITUTION RUNNING A SCHOOL, VIZ. J.K. PUBLIC SCHOOL AT HUMHAMA BUDGAM, KASHMIR. WE FIND THAT THE FACT THAT THE ASSESSEE IS A N EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR PURPOSE OF PROFIT , HAD NOT BE EN DOUBTED AT ANY STAGE BY THE A.O. WE FURTHER FIND THAT THE CLAIM OF THE ASSESSEE THAT IT WAS IN RECEIPT OF GROSS RECIEPTS OF RS.93,82,100/ - FROM RUNN ING OF THE AFORESAID SCHOOL, VIZ. (I) TUITION FEES : RS.67,58,601/ - ; (II ) OTHER INCOME : RS.9,284/ - ; AND (III) BUS FEES : RS.26,14,214/ - , HAD ALSO NOT BEEN DISPUTED OR DIS LODGED BY THE A.O DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. THUS , A CONJOINT PERU SAL OF THE AFORESAID FACTS REVEALS THAT THE ASESSEE IS AN EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR THE PURPOSE O F PROFIT, WHOSE GROSS RECEIPTS DURING THE YEAR UNDER CONSIDERATION WERE TO THE TUNE OF RS.93,82,100/ - . WE ARE OF THE CONSIDERED VEIW THAT NOT ONLY THE AFORESAID FACTS CLEARLY REVEALS THE ELIGIBILITY OF THE ASSESSEE TOWARDS CLAIM OF EXEMPTION UNDER SEC. 10(23C)(IIIAD) OF THE ACT , BUT EVEN OTHERWISE , NEITHER ANY SUBMISSION NOR ANY MATERIAL HAD BEEN PLACED ON RECORD BEFORE US WHICH COULD PERSUADE US TO HOLD OTHERWISE. WE FURTHER FIND THAT THE ASSESSEE HAD WRONGLY BY P A G E | 8 ITA NO. 307/ASR/2014 AY: 2010 - 11 ITO VS. M/S J.K. PUBLIC SCHOOL WAY OF AN INADVERTENT BONAFIDE MISTAKE, DESPITE NOT BEING REGISTERED UNDER SEC. 12A(A) , HAD WRONGLY MADE A MENTION OF SEC. 11 AS AGAIN ST ITS STATUTORY ENTITLEMENT UNDER SEC. 1 0 (23C)(IIIAD). WE ARE OF THE CONSIDERED VIEW THAT THE AFORESAID BONAFIDE INADVERTENT MISTAKE ON THE PART OF THE ASSESSEE IN MAKING A REFERENCE TO A WRONG STATUTORY PROVISION, WHICH THOUGH WAS CORRECTED BY WAY OF A CLARIFICATION DURING THE ASSESSMENT PROCEEDINGS, CANNOT BE ALLOWED TO BE FATAL TO THE VERY ENTITLEMENT O F THE ASSESSEE TOWARDS THE CLAIM OF THE AFORESAID EXEMPTION. WE ARE OF A STRONG CONVICTION THAT NOW WHEN THE ASSESSEE HAD SATISFIED THE REQ UISITE CONDITIONS FOR CLAIM OF EXEMPTION UNDER SEC. 10(23C)(IIIAD), THEREFORE , MERELY ON ACCOUNT OF A TECHNICAL AND INADVERTENT MISTAKE IN MAKING A CORRECT MENTION OF THE STATUTORY PROVISION IN THE RETURN OF INCOME, THE ASSESSEE CANNOT BE DISENTITLED AS RE GARDS ITS AFORESAID STATUTORY ENTITLEMENT . WE THUS , FIND ING OURSELVES AS BEING IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) THAT THE ASSESSEE IS ENTITLED TOWARDS CLAIM OF EXEMPTION UNDER SEC. 10(23C)(IIIAD), THEREFORE, UPHOLD HIS ORDER ON THE ISSUE UNDER CONSIDERATION. THE GROUND OF APPEAL NO. 1 RAISED BY THE REVENUE IS DISMISSED. 8. THAT AS REGARDS THE ADHOC DISALLOWANCE OF 25% OF EXPENSES BY THE A.O, WE HAVE DELIBERATED ON THE FACTS LEADING TO THE AFORESAID DISALLOWANCE AND FIND OURSELVES TO BE IN AGREE MENT WITH THE VIEW TAKEN BY THE CIT(A) THAT NOW WHEN THE A.O HAD FAILED TO POINT OUT THE BASIS ON WHICH THE SAID ADHOC DISALLOWANCE HAD BEEN MADE, THEREFORE , THE SAME CANNOT BE SUSTAINED. WE ARE OF THE CONSIDERED VIEW THAT THE SAID DISALLOWANCE IN ALL FAIR NESS HAD RIGHTLY BEEN STRUCK DOWN BY THE CIT(A) . WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN RESPECT OF THE P A G E | 9 ITA NO. 307/ASR/2014 AY: 2010 - 11 ITO VS. M/S J.K. PUBLIC SCHOOL ISSUE UNDER CONSIDERATION AND THEREFORE UPHOLD THE SAME. THE GROUND OF APPEAL NO. 2 RAISED BY THE REVENUE BEFORE US IS DISMISSED. 9. THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONO UNCE D IN THE OPEN COURT ON 17. 11.2017 SD/ - SD/ - ( T.S. KAPOOR ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER 17 . 11.2017 PS. ROHIT K UMAR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, AMRITSAR 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, AMRITSAR P A G E | 10 ITA NO. 307/ASR/2014 AY: 2010 - 11 ITO VS. M/S J.K. PUBLIC SCHOOL