The School of Bhagavad Gita, Trivandrum V. The Assistant Director of Income Tax(Exemption), Trivandrum

ITA 316/COCH/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90786 (ITAT-COCHIN)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 27-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Depreciation; Charitable institution; Reasonable cause; Competent authority
• Section: 143(3); 12AA; 263; 11

Judgement Text

1 ITA NO .316/COCH/2014 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI V DURGA RAO, JM AND SHRI B.R. BASKARAN, AM I.T.A. NO. 316/COCH/2014 (ASSESSMENT YEAR : 2009-10) THE SCHOOL OF BHAGAVAD GITA VS THE ACIT (EXEMPTIO N) TC 15/;1849(1), FOR A-C-3 TRIVANDRUM SREE BHAVAN, THYCAUD TRIVANDRUM PAN : AABTT4757G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R KRISHNAN RESPONDENT BY : SHRI M ANILKUMAR, CIT DATE OF HEARING : 11-05-2015 DATE OF PRONOUNCEMENT : 14-05-2015 O R D E R PER SHRI V DURGA RAO, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER U/S 263 PASSED BY THE CIT(A), TRIVANDRUM FOR THE ASSESSMENT YEAR 2009-10. 2. THERE IS A DELAY OF 32 DAYS IN FILING THE APPEAL . THE ASSESSEE BY WAY OF AN AFFIDAVIT EXPLAINED THE REASONS FOR DELAY WHICH IS REPRODUCED AS UNDER: YOUR PETITIONER IS ASSESSED TO INCOME TAX BY THE A SSISTANT DIRECTOR OF INCOME TAX (EXEMPTION), TRIVANDRUM UNDER PAN AAB TT4757G. FOR THE ASST.YEAR 2009-10, THE ASSESSMENT U/S 143(3 ) WAS COMPLETED ON 30-11-2011. SUBSEQUENTLY, THE COMMISS IONER OF INCOME TAX, ACTING U/S 263 OF THE INCOME TAX , INVO KED HIS REVISIONARY POWER AND SET ASIDE THE ASSESSMENT CONC LUDING THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONE OUS AND 2 ITA NO .316/COCH/2014 PREJUDICIAL TO THE INTERESTS OF REVENUE, WITH A DIR ECTION TO EXAMINE THE APPLICABILITY OF SECTION 61 OF THE INCOME TAX A CT AND ALSO THE ALLOWABILITY OF DEPRECIATION AS PER RULES. THE SAI D ORDER WAS SERVED ON THE PETITIONER ON 27-03-2014. ON RECEIPT OF THE ORDER, THE PETITIONER FORWARDED THE SAME TO HIS LOCAL AUDI TOR AT TRIVANDRUM, SRI. V. SIVARAJAN, WHO, IN TURN, HAD TR ANSMITTED A COPY OF THE ORDER U/S 263 TO THE AUTHORIZED REPRESENTATI VE SRI. R. KRISHNAN AT ALLEPPEY. IT WOULD APPEAR THAT THE ORD ER SO TRANSMITTED TO THE AUTHORIZED REPRESENTATIVE, GOT MIXED UP IN H IS OFFICE WITH THE ORDER OF THE REGULAR ASSESSMENT PASSED FOR THE ASST .YEAR 2011-12, RESULTING IN A CONFUSION WITH REGARD TO FILING OF A PPEAL AGAINST THE ORDER U/S 263. ON CHECKING PENDING MATTERS, IT TRA NSPIRED THAT AN APPEAL WAS FILED IN THE CASE OF THE PETITIONER. IT ACTUALLY WAS AN APPEAL AGAINST REGULAR ASSESSMENT FOR THE ASST.YEAR 2011-12 AND NOT AN APPEAL AGAINST THE ORDER U/S 263, WHEREAS TH E PETITIONER WAS UNDER THE BELIEF THAT APPEAL FILED WAS AGAINST THE ORDER U/S 263. SUBSEQUENTLY, THE AUTHORIZED REPRESENTATIVE ALSO GO T BUSY WITH STATUTORY AUDIT OF BANKS AND LIC WITH THE RESULT TH AT A PROPER CROSS VERIFICATION COULD NOT BE DONE BY HIM. IT WAS ONLY BY THE END OF JUNE, 2014 THE PETITIONER REALIZED THE MISTAKE AND WAS AWARE OF THE FACT THAT AN APPEAL, WHICH OUGHT TO HAVE BEEN F ILED ON OR BEFORE 26-05-2014, WAS IN FACT NOT FILED. ON REALIZING TH E SAME, THE PETITIONER HASTENED TO GET THE APPEAL PREPARED AND IN THE PROCESS THERE IS A DELAY OF 32 DAYS IN FILING THE APPEAL. THE DELAY IS UNINTENTIONAL AND IS DUE TO REASONS BEYOND THE CONT ROL OF THE PETITIONER AS MENTIONED ABOVE. IN THE CIRCUMSTANCES, IT IS HUMBLY PRAYED THAT THE DELAY IN FILING THE APPEAL MAY BE CONDONED AND THE APPEAL ADMITTED. 3. ON CONSIDERATION OF THE SUBMISSIONS MADE BY BOTH THE PARTIES, WE FIND THAT THERE WAS A REASONABLE CAUSE IN NOT FILING THE APPEAL IN TIME. ACCORDINGLY, THE DELAY IS CONDONED. 4. SO FAR AS THE MERITS OF THE CASE ARE CONCERNED, THE ASSESSEE, A TRUST, FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION BY DECLARING TOTAL INCOME AT NIL. THE ASSESSING OFFICER COMPLET ED THE ASSESSMENT U/S 143(3) OF THE ACT BY ACCEPTING THE RETURN FILED BY THE ASS ESSEE. IN THE ASSESSMENT 3 ITA NO .316/COCH/2014 ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEES AUTHORIZED REPRESENTATIVE, SHRI V SIVARAJAN, CA APPEARED AND P RODUCED ALL BOOKS F ACCOUNT WHICH WERE VERIFIED IN DETAIL AND THE ASSESSMENT IS COMPLETED BY ACCEPTING THE RETURN OF INCOME FILED. 5. SUBSEQUENTLY, THE COMMISSIONER OF INCOME-TAX BY EXERCISING HIS POWERS U/S 263 ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE ON 10-01-2014 ON THE GROUND THAT THE TRUST IS CARRYING ON BUSINESS ACTIV ITIES LIKE SALE OF CD, BOOKS, MAGAZINES, CONDUCTING YOGA CLASSES AND CONDUCTING R ELIGIOUS TOURS, ETC. AND THUS, THE ACTIVITIES OF THE TRUST ARE NOT SEEN CARR IED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST (PAGE 3 & 4 OF THE PAPER BOOK) . IN RESPONSE TO THE ABOVE LETTER, THE ASSESSEE GAVE DETAILED REPLY BY LETTER DATED 27-01-2014 (PAPER BOOK 5 TO 21). THE COMMISSIONER OF INCOME-TAX, AFTER CONS IDERING THE EXPLANATION OF THE ASSESSEE AND AFTER HEARING THE COUNSEL FOR THE ASSE SSEE CAME TO THE CONCLUSION THAT THE ASSESSEE IS NOT IN A POSITION TO PRODUCE A NY MATERIAL TO STATE THAT THE ASSESSEE IS CARRYING ON CHARITABLE ACTIVITIES. FRO M THE ORDER SHEET ENTRY DATED 23/01/2007, THE COMMISSIONER OF INCOME-TAX NOTED TH AT THE COMPETENT AUTHORITY HAS RECORDED A CLEAR FINDING THAT ON GOING THROUGH THE TRUST DEED AND NOTES ON ACTIVITY, THE TRUST IS CHARITABLE AND RELIGIOUS IN NATURE. THE COMMISSIONER OF INCOME-TAX, THEREFORE, HELD THAT CONTRARY TO WHAT T HE ASSESSEE TRUST WOULD LIKE TO BELIEVE, THE FINDING ON THE FILE AND THE REGISTRATI ON GRANTED BY THE COMPETENT AUTHORITY WAS THAT OF A RELIGIOUS AND CHARITABLE TR UST. HE ALSO CAME TO CONCLUSION THAT APPLICATION OF SECTION 2(15) WAS NOT EXAMINED BY THE AO. THE CIT(A) FURTHER 4 ITA NO .316/COCH/2014 OBSERVED THAT THE FINANCIAL STATEMENT FILED BY THE ASSESSEE FOR THE FINANCIAL YEAR 2008-09 EVIDENCED THAT ALMOST 57% OF THE INCOME ARR IVED AT IS OUT OF THE ACTIVITIES CONDUCTED IN PILGRIMAGE LIKE HIMALAYA YA THRA, KAILAS YATHRA, SAGAR GANGADARSHAN YATHRA ETC. AND SALE OF CDS, BOOKS AND MAGAZINES AND THEY WERE DERIVING PROFIT OUT OF THESE ACTIVITIES AND THAT TH E TRUST RECEIVED SUBSTANTIAL INCOME FROM BUSINESS. 6. THE COMMISSIONER OF INCOME-TAX, AFTER EXAMINING THE ORDER SHEET ENTRY MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AN D THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER OBSERVED THAT THE ASSESSING OFFICER HAS ONLY EXAMINED THE APPLICATION OF INCOME AND THE ASSESSING OFFICER HAS NOT EXPRESSED ANY OPINION ON THE APPLICATION OF SECTION 2(15) OF THE ACT AND FINALLY GAVE A FINDING THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THE COMMISSION ER OF INCOME-TAX SET ASIDE THE ASSESSMENT BY DIRECTING THE ASSESSING OFFICER T O EXAMINE THE APPLICATION OF SECTION 61 OF THE ACT AND ALSO THE ALLOWABILITY OF DEPRECIATION AS PER RULES. 7. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL. 8. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE ASSESSEE IS A RELIGIOUS TRUST AND NOT A CHARITABLE TRUST. THEREFORE, SECTI ON 2(15) OF THE INCOME-TAX ACT HAS NO APPLICATION. ALTERNATIVELY, HE SUBMITTED TH AT EVEN IF ASSUMING THAT THE ASSESSEE IS A RELIGIOUS AND CHARITABLE TRUST, SECTI ON 2(15) HAS NO APPLICATION IN 5 ITA NO .316/COCH/2014 VIEW OF THE CIRCULAR ISSUED BY THE CBDT IN CIRCULAR NO.11/2008 DATED 19-12-2008. THE LD.COUNSEL ALSO RELIED ON THE JUDGMENT OF THE G UJARAT HIGH COURT IN DIRECTOR OF INCOME-TAX (EXEMPTION) VS SABARMATI ASHRAM GAUSH ALA TRUST (2014) 362 ITR 539 (GUJ) AND DIT (E) VS AHMEDABAD MANAGEMENT ASSOC IATION 366 ITR 85 (GUJ). THE LD.COUNSEL FURTHER SUBMITTED THAT THE C OMMISSIONER OF INCOME-TAX WITHOUT ISSUING NOTICE TO THE ASSESSEE WITH REGARD TO APPLICABILITY OF SECTION 61 OF THE ACT AND ALLOWABILITY OF DEPRECIATION DIRECTED T HE ASSESSING OFFICER TO VERIFY THE SAME. THEREFORE, THE ORDER PASSED BY THE COMMISSIO NER OF INCOME-TAX IS NOT CORRECT. 9. ON THE OTHER HAND, THE LD.DR STRONGLY SUPPORTED THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX AND SUBMITTED THAT THE C OMMISSIONER F INCOME-TAX ONLY DIRECTED THE ASSESSING OFFICER TO EXAMINE THE ISSUE IN ACCORDANCE WITH LAW. 10. WE HEARD BOTH SIDES, PERUSED THE RECORDS AS ALS O THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE IS TRUST WHICH CAME INTO EXISTENCE BY VIRTUE OF THE TRUST DEED DATED 10-07-2006. THE OBJECT OF THE TRUST ARE AS FOLLOWS: 2. THE AIMS AND THE OBJECTIVES OF THE TRUST ARE: 1. TO ESTABLISH INSTITUTIONS TO TEACH, PROPAGATE AN D ARTICULATE THE TEACHINGS OF BHAGAVAD GITA FOR THE PEOPLE ALL OVER THE WORLD. 2. TO START CENTERS FOR COUNSELING AN GUIDANCE TO P EOPLE IN DISTRESS AND SOLITUTDE. 3. TO START ORPHANAGES, HOSTELS AND OLDAGE HOMES FO R THE POOR AND DESTITUTE. 6 ITA NO .316/COCH/2014 4. TO PROPAGAQE SELF-RELIANCE, UNITY, COOPERATION A ND GOOD MORALS AMONG THE PUBLIC. 5. TO ENCOURAGE RELIGIOUS KNOWLEDGE AND ESTABLISH R ELIGIOUS THOUGHTS AMONG THE GENERAL PUBLIC. 6. TO MAINTAIN PLACES OF WORSHIP, BURIAL GROUNDS AN D ESTABLISH MARRIAGE HALLS. 7. TO START EDUCATIONAL INSTITUTIONS, CULTURAL INST ITUTIONS OR ANY OTHER INSTITUTIONS FOR THE BETTERMENT OF THE WEAKER SECTI ON OF THE SOCIETY. 11. AFTER CONSIDERING THE ABOVE OBJECTS, THE COMMIS SIONER OF INCOME-TAX CAME TO THE CONCLUSION THAT THE ASSESSEE IS A CHARI TABLE AND RELIGIOUS TRUST WHEREAS THE ASSESSEE ARGUES AS IF THE ASSESSEE IS A RELIGIOUS TRUST WHICH WAS REJECTED BY THE COMMISSIONER OF INCOME-TAX BY CONSI DERING THE ABOVE OBJECTS OF THE TRUST. IN THE CASE BEFORE US, THE ASSESSING OF FICER HAS NOT EXAMINED WHETHER THE ASSESSEE TRUST IS A CHARITABLE TRUST OR RELIGIO US TRUST. THE ASSESSING OFFICER HAS SIMPLY ACCEPTED THE RETURN FILED BY THE ASSESSE E. THE ALTERNATIVE SUBMISSION OF THE LD.COUNSEL FOR THE ASSESSEE IS THAT SECTION 2(15) HAS NO APPLICATION AS THE ASSESSEE IS A RELIGIOUS TRUST. THE ASSESSING OFFIC ER HAS NOT EXAMINED WHETHER THE ASSESSEE IS A CHARITABLE INSTITUTION OR RELIGIO US INSTITUTION OR BOTH RELIGIOUS AND CHARITABLE INSTITUTION. SO FAR AS THE CLAIM OF THE ASSESSEE THAT IT IS A RELIGIOUS TRUST, THE COMMISSIONER OF INCOME-TAX ON THE BASIS OF THE ORDER SHEET NOTINGS AND THE ORDER U/S 12AA FOUND THAT THE ASSESSEE IS A CHARITABLE AS WELL AS RELIGIOUS TRUST. THE LD.COMMISSIONER OF INCOME-TAX FURTHER OBSERVED THAT THE SSESSEE IS ENGAGED IN CONDUCTING PILGRIMAGES LIKE H IMALAYA YATHRA, KAILAS YATHRA, SAGAR GANGADARSHAN YATHRA, ETC. AND SALE OF CDS BOOKS AND MAGAZINES AND THEY WERE DERIVING PROFIT OUT OF THESE ACTIVITI ES. UNDER THESE CIRCUMSTANCES, IT IS DIFFICULT TO ACCEPT THE CONTENTIONS OF THE AS SESSEE THAT THE ASSESSEE IS 7 ITA NO .316/COCH/2014 CARRYING OUT RELIGIOUS ACTIVITIES SO AS TO TERM IT AS A RELIGIOUS TRUST WHEREAS THE ASSESSING OFFICER HAS SIMPLY ACCEPTED THE DETAILS F ILED BY THE ASSESSEE WITHOUT APPLICATION OF MIND AND WITHOUT MAKING NECESSARY EN QUIRY WITH REGARD TO APPLICATION OF SECTION 2(15) OF THE ACT. THEREFORE , THE ORDER OF THE ASSESSING OFFICER BECOMES ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF THE REVENUE. THIS VIEW IS SUPPORTED BY THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS TOYOTA MOTOR CORPORATION (2008) 306 ITR 49 (DEL) WH ICH IS FOLLOWED BY THE CIT(A) WHILE SETTING ASIDE THE ORDER PASSED BY THE AO. AFTER CAREFUL CONSIDERATION OF THE ASSESSMENT ORDER AS ALSO THE O RDER OF THE COMMISSIONER F INCOME-TAX WE FIND THAT THE ASSESSING OFFICER HAS N OT MADE ANY ENQUIRY / INVESTIGATION WITH REGARD TO WHETHER THE ASSESSEE I S A RELIGIOUS TRUST OR CHARITABLE TRUST OR WHETHER SECTION 2(15) APPLIES TO THE CASE OF THE ASSESSEE OR NOT AND WHETHER THE ASSESSEE IS CARRYING ON ANY CHARITABLE ACTIVITIES. HENCE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE CIT SETTING A SIDE THE ORDER OF THE ASSESSING OFFICER AND DIRECTING HIM TO REFRAME THE ASSESSMENT ON THE BASIS OF THE DIRECTIONS ISSUED BY THE CIT. 12. SO FAR AS THE OBJECTION OF THE ASSESSEE THAT TH E COMMISSIONER OF INCOME- TAX DIRECTED THE ASSESSING OFFICER TO VERIFY THE AP PLICABILITY OF SECTION 61 AND ALLOWANCE OF DEPRECIATION WITHOUT ISSUING NOTICE TO IT, WE FIND THAT THE COMMISSIONER OF INCOME-TAX, AFTER SETTING ASIDE THE ASSESSMENT ORDER HAS DIRECTED THE ASSESSING OFFICER TO LOOK INTO THE APP LICABILITY OF SECTION 61 AS ALSO ALLOWANCE OF DEPRECIATION. THE ASSESSING OFFICER W ITHOUT ENQUIRING INTO THE 8 ITA NO .316/COCH/2014 APPLICATION OF SECTION 2(15) OF THE ACT AND WITHOUT APPLICATION OF MIND HAS SIMPLY ACCEPTED THE RETURN FILED BY THE ASSESSEE. THEREFO RE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE DO NOT FIND ANY INFIRM ITY. ONCE THE ASSESSMENT ORDER IS SET ASIDE AND A FRESH ASSESSMENT IS DIRECT ED TO BE FRAMED, THEN IT IS EQUALLY OPEN TO THE ASSESSING OFFICER TO EXAMINE AL L CONNECTED ISSUES EVEN IF THERE WAS NO SUCH DIRECTION ISSUED BY THE COMMISSIO NER OF INCOME-TAX. 13. IN THE CASE OF SABARMATI ASHRAM GAUSHALA TRUST (SUPRA), THE GUJARAT HIGH COURT HAS CONSIDERED THE APPLICATION OF SECTION 2(1 5) OF THE ACT AND OBSERVED THAT PROFIT MAKING WAS NEITHER THE AIM NOR OBJECT O F THE TRUST. IT WAS NOT THE PRINCIPAL ACTIVITY. MERELY BECAUSE WHILE CARRYING OUT THE ACTIVITIES FOR THE PURPOSE OF ACHIEVING THE OBJECT OF THE TRUST, CERTAIN INCID ENTAL SURP0LUSES WERE GENERATED, THAT WOULD NOT RENDER THE ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S 11 OF TH E ACT. WHEREAS IN THE CASE ON HAND, THE ASSESSING OFFICER HAS NOT ENQUIRED IN THE ACTIVITIES CARRIED OUT BY THE ASSESSEE. THE COMMISSIONER OF INCOME-TAX HAS OBSER VED THAT THE ASSESSEES SOURCE OF INCOME IS ONLY FROM PILGRIMAGES LIKE HIMA LAYA YATHRA, KAILAS YATHRA, SAGAR GANGADARSHAN YATHRA, ETC. AND SALE OF CDS BOO KS AND MAGAZINES. THEREFORE, WHAT WAS THE EXACT RELIGIOUS ACTIVITY CA RRIED OUT BY THE ASSESSEE WAS NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE COMMISSIONER OF INCOME-TAX NOR BEFORE US. THEREFORE, THE ABOVE CASE LAW IS NO T APPLICABLE TO THE FACTS OF THE CASE. 9 ITA NO .316/COCH/2014 14. IN THE CASE OF AHMEDABAD MANAGEMENT ASSOCIATION (SUPRA) THE HONOURABLE GUJARAT HIGH COURT HAS OBSERVED THAT WHE RE THE PURPOSE OF THE TRUST OR INSTITUTION IS RELIEF TO THE POOR, EDUCATION OR MEDICAL RELIEF IT WILL NOT CONSTITUTE CHARITABLE PURPOSE EVEN IF IT IS INCIDENTALLY INVOL VES CARRYING ON OF THE COMMERCIAL ACTIVITIES. THE HONOURABLE COURT THEREFORE HELD TH AT THE ACTIVITIES OF THE ASSESSEE WOULD FALL WITHIN THE DEFINITION OF CHARIT ABLE PURPOSE AS PER SECTION 2(15) AND, THEREFORE, WOULD BE ENTITLED TO EXEMPTIO N U/S 11. WHEREAS IN THE INSTANT CASE, THE ASSESSING OFFICER HAS NOT EXAMINE D WHETHER THE ACTIVITIES CARRIED OUT BY THE ASSESSEE IS CHARITABLE OR NOT AN D HAS SIMPLY ACCEPTED THE RETURN FILED BY THE ASSESSEE AND ALLOWED THE CLAIM. THEREFORE, THE ABOVE CASE LAW IS NOT APPLICABLE TO THE FACTS OF THE CASE. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, 15 TH DAY OF MAY, 2015. SD/- SD/- ( B.R. BASKARAN) ( V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 15 TH MAY, 2015 PK/- COPY TO: 1. THE SCHOOL OF BHAGAVAD GITA, TC 15/1849(1), FOR A-C-3, SREE BHAVAN, THYCAUD, TRIVANDRUM 2. THE CIT, THIRUVANANTHAPURAM 3. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, ITAT, COCHIN BENCH