M/s.Cochin Chamber of Commerce & Industry, Cochin V. The ITO, Cochin

ITA 317/COCH/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8589 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 29-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHANTOM BOSE
• Assessee Lawyers: RADHESH BHATT
• Keywords: Revision of order; Charitable institution; Principle of natural justice; Initiation of penalty proceedings; Benefit of exemption
• Section: 143(3); 12A; 263; 12

Judgement Text

ITA NO . 317/C/2015 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & G EORGE GEORGE.K , J M ITA NO . 317/COCH/2015 ( A SST YEAR 2010 - 11 ) COCHIN CHAMBER OF COMMERCE AND INDUSTRY BRISTOW ROAD KOCHI 3 VS THE INCOME TAX OFFICER WARD 4(1), K OCHI ( APPELLANT) (RESPONDENT) PAN NO. AAACC 9427A ASSESSEE BY SHRI RADHESH BHATT REVENUE BY SH SHANTOM BOSE, CIT - DR DATE OF HEARING 31 ST MAY 2016 DATE OF PRONOUNCEMENT 2 ND JUNE 2016 OR D ER PER GEORGE GEORGE. K. J M: THIS APPEAL, AT THE INST ANCE OF THE ASSESSEE, IS DIRECTED AGAINST THE CITS ORDER DATED 23.3.2015 PASSED U/S 263 OF THE I T ACT. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. 2 BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A COMPANY REGISTERED UNDER SECTION 2 5 OF THE COMPANIES ACT, 1956. IT IS ALSO REGISTERED AS A CHARITABLE INSTITUTION U/S 12A OF THE I T ACT. IN THE RETURN OF INCOME, THE ASSESSEE CLAIMED THE ENTIRE INCOME AS EXEMPT UNDER THE PROVISIONS O F SECTION 11,12 AND 13 OF THE INCOME TAX ACT. THE AO COMPLETED ITA NO . 317/C/2015 2 THE ASSESSMENT ON 1.3.2013 U/S 143(3) OF THE A CT DENYING THE BENEFIT OF EXEMPTION CLAIMED BY THE ASSESSEE U/S 11, 12 AND 13 OF THE I T ACT. AGAINST THE SAID ORDER OF THE ASSESSMENT, THE ASSESSEE HAS FILED APPEAL BEFORE THE CIT(A), WHICH IS PENDI NG AS ON DATE. 3 THEREAFTER, T HE CIT ISSUED NOTICED U/S 263 OF THE ACT AND PASSED THE ORDER ON 23.3.2015 BY SETTING ASIDE THE ASSESSMENT ORDER DATED 1.3.2013 . THE CIT DIRECTED THE AO TO RE - DO THE ASSESSMENT AFRESH IN THE LIGHT OF CERTAIN ERRORS POINTED O UT IN THE IMPUGNED ORDER PASSED U/S 263 OF THE ACT. 4 THE ASSESSEE BEING AGGRIEVED BY THE ORDER PASSED U/S 263, OF THE ACT IS IN APPEAL BEFORE US , RAISING THE FOLLOWING GROUNDS: I) THE LD CIT WENT WRONG IN REOPENING THE ASSESSMENT U/S 263 OF THE I T AC T. THERE IS NO ERROR WHICH IS PREJUDICIAL TO THE INTEREST OF REVENUE WHICH REQUIRES A REVISION U/S 263 OF THE AC T. II) THE LD CIT WENT WRONG IN HOLDING THAT THE AO HAS OMITTED TO COMPUTE CHARGEABLE INCOME, WITHOUT GIVING THE DETAILS OF SUCH INCOME ALLEGED TO HAVE OMITTED FOR COMPUTATION. THE LD CIT ERRED IN NOT GIVING THE APPELLANT AN OPPORTUNITY TO FURNISH THE EXPLANATION AND HENCE IS AGAINST T HE NATURAL JUSTICE AND EQUITY. III) THE LD CIT ERRED IN GIVING DIRECTION TO THE AO TO VERIFY WHETHER THERE IS OM ISSION TO CONSIDER RENT RECEIVED. ON FACTS THERE IS NO OMISSION TO COMPUTE RENTAL INCOME. IV) THE LD CIT IS ERRED IN GIVING DIRECTION TO THE AO TO VERIFY THE CALCULATION OF TAX THOUGH THERE IS NO MISTAKE IN CALCULATION, WARRANTING REVISION UNDER THE PROVI SIONS OF SEC 263 OF THE I T ACT. V) THE LD CIT WENT WRONG IN HOLDING THAT THE AO HAS OMITTED TO INITIATE PENALTY PROCEEDINGS U/S 271B OF THE ACT. THE LD CIT OUGHT TO HAVE NOTED ITA NO . 317/C/2015 3 THAT PROVISIONS OF SEC. 271B DENOTES THAT LEVY OF PENALTY IS THE DISCRETI ON OF THE A O AND THEREFORE THE REVISION AUTHORITY IS NOT EMPOWERED TO INITIATE THE ACTION U/S 263 FOR NOT INITIATING PENALTY U/S 271B OF THE I T ACT. VI) THE LD C IT ERRED IN INITIATING PENALTY PROCEEDINGS U/S 271B OF THE ACT. THE APPELLANT BEING A CHARIT ABLE ENTITY ENGAGED IN CHARITABLE ACTIVITIES IS NOT LIABLE TO GET ITS ACCOUNTS AUDITED U /S 44AB OF THE ACT. VII) FOR THESE AND OTHER GROUNDS THAT MAY BE FURTHER ADDUCED AT THE TIME OF HEARING , THE ORDER OF THE AO REQUIRES TO BE MODIFIED SUITABLY . 5 THE LD AR REITERATED THE SUBMISSIONS MADE BEFORE THE CIT AND ALSO FILED A BRIEF WRITTEN SUBMISSIONS, THE LD DR PRESENT WAS DULY HEARD. 6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE CIT HAD ISSUED NOTICE U/S 263 FOR THE FOLLO WING FOUR REASONS: I) OMISSION TO COMPUTE THE CHARGEABLE INCOME: THE ASSESSING OFFICE R HAS FOU N D THAT T H E I NCO M E DER I VED FR O M THE AC T I V I T I ES AMONGST THE MEMBERS IS ELIGIBLE FOR E X EMPTION ON THE GRO U ND OF MUT U AL I T Y . T H E N E T RESULT FROM OTHER ACTIVITY IS A LOSS OF RS . 2 , 59 , 785 / - . ON APPORTIONING T H E AFO RES A I D L O S S IN THE RATIO OF RECEIPTS FROM THE ACTIVITIES AMONGST MEMBERS AND NON - ME M B ER S , TH E AMOUNT OF LOSS ATTRIBUTABLE TO ACTIVITIES AMONGST THE MEMBERS W O UL D COME TO A BOU T RS . 2,OO , 115/ - . BY APPLYING PRINC IPLES OF MUTUALITY WHICH WAS ACCEPTED BY THE A SS E SS IN G OFFICER, THIS LOSS IS TO BE IGNORED WHILE COMPUTING THE TOTAL INCOME . TH IS H AS R E SUL TED IN ESCAPEMENT OF INCOME OF RS . 2,OO , 115/ - . II) OMISSION TO CONSIDER RENT RECEIVED AS PER T DS CERTIFICATES : AS P ER THE TDS CERTIFICATES , AMOU NT OF RENT RECEIVED IS RSA , 56 , O OO / - A N D TAX DEDUCTED IS RS . 67 , 205/ - . TAX DEDUCTED OF RS . 67 , 205/ - HAS BEEN G I VE N C R ED I T IN TA X COMPUTATION . THE AMOUNT OF RENT CONS I DERED FO R COMPUT IN G T O T A L I NC O ME CO MES TO RS . 2 , 96 , 400/ - ONLY . HENCE THERE I S AN ESCAPEMEN T . OF INCOME OF RS.1 , 5 9 , 60 0 / - . III) MISTAKE IN TAX CALCULATION : TAX IS LEVIED ON THE TOTAL INCOME AT THE RATE APPLICABLE TO I NDIVIDUALS EVEN THOUGH THE PAN I S TAKEN IN THE STATUS OF COMPANY . THEREFORE , TAX AND CESS TO BE LEVIED AT THE RATES APPLICABLE TO COMPANY . EVEN IF STATUS TO BE TAKEN AS AOP , THE TAX IS LEVIED AT MAXIMUM MARGINA L RATE U / S 167B AS THE SHARES OF ME MBERS ITA NO . 317/C/2015 4 ARE UNDETERMINATE AND UNKNOWN . IV) OMISSION TO INITIATE PENALTY U/S 271 B : THE ASSESSING OFFICER HAS FO UND THA T THE ASSESSEE I S CAR R YING O N A BUS I NESS A N D THE RECE I PTS OF THE B U SINESS WERE R S, 49,92,523/ - . AS 45 S U CH PROV I S I O N S OF SECT I O N 4 4AB OF THE INCOME TAX ACT ARE CLEARLY ATTRACTED . HOWEVER , NO R EPORT IN T HE PRESC R I B ED F ORM IS AVA I LABLE ON RECORD . HOWE VER , THE ASSESSING OFF I CE R HAS OM IT TED TO IN IT I ATE PENALTY PROCEEDINGS U/S 271 B OF THE INCOME TAX ACT . 6 .1 THE ASSESSEE HAD RAISED OBJECTION TO THE PROPOSED REVISION ISSUED BY THE CIT, WHICH IS EXTRACTED A T PARA 3 OF THE IMPUGNED ORDER THE LD AR DURI NG THE COURSE OF HEARING, ADMITTED THAT THE ASSESSEE NO OBJECTION TO THE AO VERIFYING THE OMISSIONS POINTED OUT BY THE CIT , WITH REFERENCE TO THE COMPUTATION OF CHARGEABLE INCOME AND THE MISTAKE IN TAX CALCULATION (MISTAKE NO. ( I ) AND (III) . WITH REFERENCE TO THE OMISSION TO CONSIDER THE RENT RECEIPT AS PER THE TDS CERTIFICATE (MISTAKE NO.(II) , IT WAS SUBMITTED THAT THE ASSESSMENT ORDER GIVING EFFECT TO CITS ORDER WAS DULY PASSED ACCEPTING THE ASSESSEES CONTENTION. THEREFORE, THE ONLY SURVIVING GRIEVANCE WITH REFERENCE TO THE IMPUGNED ORDER OF THE CIT IS WITH REFERENCE TO ISSUE MENTIONED IN ITEM NO (IV), NAMELY, CIT DIRECTION WITH REFERENCE TO AOS OMISSION TO INITIATE PENALTY U/S 271B OF THE ACT. 6 . 2 THE CIT, IN THE IMPUGNED ORDER, HAD DISPOSED OFF THE ASSESSEES OBJECTION WITH REFERENCE TO NON - INITIATION OF PENALTY PROCEEDINGS U/S 271B BY OBSERVING AS UNDER: 5.3 REGARDING THE NON INITIATION OF PENALTY PROCEEDINGS U/S 271B OF THE INCOME TAX ACT, THE RECORDS INDICATE THAT THE ASSESSEE FAILED TO FURNISH AN ITA NO . 317/C/2015 5 AUDIT REPORT AS REQUIRED U/S 44AB OF THE I T ACT AND THE AO HAS FAILED TO INITIATE PENALTY PROCEEDINGS U/S 271B OF THE ACT. THIS IS ALSO AN ACT OF OMISSION AND AN ERROR PREJUDICIAL TO T H E INTERESTS OF REVENUE WITHIN THE MEANING OF SECTION 263 OF THE I T ACT. THIS VIEW IS CONFIRMED BY THE RATIO LAID DOWN IN THE HONBLE ALLAHABAD HIGH COURT JUDGMENT REPORTED IN 275 ITR 13 IN THE CASE OF C IT VS SURENDRAPD AGRAWAL. 6.3 THE LD COUNSEL FOR THE ASSESSEE HAD SUBMITTED THAT THE PROVISIONS OF SECTION 44AB WERE APPLICABLE ONLY TO THOSE ASSESSEE WHO ARE CARRYING ON THE BUSINESS OR PROFESSION. ACCORDING TO THE AR , S INCE THE ASSESSEE IS A CHARITABLE ENTITY, THERE WAS NO REQUIREMENT FOR GETTING THE BOOKS OF ACCOUNT AUDITED U/S 44AB OF THE ACT. THEREFORE, IT WAS SUBMI TTED THAT THE DIRECTIONS OF THE CIT FOR INITIATION OF PENALTY U/S 271B OF THE ACT IS NOT WARRANTED. 6 .4 AS MENTIONED ABOVE, THE ASSESSEE HAD NO OBJECTION FOR AO TO VERIFY THE CERTAIN ERRORS POINTED OUT BY THE CIT IN THE IMPUGNED OR DER PASSED U/S 263 OF THE A CT. IN THAT CONTEXT, NECESSARILY , THE ORDER PASSED U/S 263 OF THE ACT IS TO BE SUSTAINED. AS REGARDS NON INITIATION OF PENALTY U/S 271B OF THE ACT, WE ARE OF THE VIEW THAT THERE IS NOTHING ON RECORD TO SUGGEST THAT THE AO HAS TAKEN A CONSCIOUS DECI SION TO DROP THE PENALTY PROCEEDINGS. IN THAT CONTEXT IT CANNOT BE STATED THAT THE AO HAS TAKEN A VIEW AND CIT IS NOT JUSTIFIED IN SUBSTITUTING HIS VIEW WITH THAT OF AOS VIEW. IF THE PENALTY PROCEEDINGS ARE INITIATED, THE ASSESSEE IS AT LIBERTY TO RAISE A LL CONTENTION AGAINST INITIATION OF PENALTY U/S 271B OF THE ACT, INCLUDING THE PLEA THAT THE ASSESSEE IS NOT LIABLE FOR ITS BOOKS OF ITA NO . 317/C/2015 6 ACCOUNT TO BE AUDITED U/S44AB AND THEREFORE, PENALTY U/S 271B IS NOT WARRANTED. IT IS ORDERED ACCORDINGLY. 7 IN THE RESUL T, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 ND DAY OF JUNE 2016. SD/ - SD/ - ( B P JAIN) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 2 ND JUNE 2016 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN