Appeal details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 9703 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 month(s) 28 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-07-2017
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
B
Assessment Year
2012-2013
Appeal Filed On
03-05-2017
Judgement Text
ITA NO.3205/MUM/2017 MANILAL KASTURCHAND GANDHI & KANTA GANDHI CHARITABL E TRUST ASSESSMENT YEAR 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 3205/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) MANILAL KASTURCHAND GANDHI & KANTA GANDHI CHARITABLE TRUST 210 OM JAYA LAXMI BUILDING OPP. SION HOSPITAL, SION(E) MUMBAI 400 022 / VS. COMMISSIONER OF INCOME TAX (EXEMPTIONS) ROOM NO. 617, 6 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG MUMBAI -400 012 ! ./ ./PAN/GIR NO. AAATM-2603-B ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) ASSESSEE BY : K.S.SANGHAVI, LD. AR REVENUE BY : N.P.SINGH, LD. CIT DR / DATE OF HEARING : 28/07/2017 / DATE OF PRONOUNCEMENT : 31 /07/2017 ITA NO.3205/MUM/2017 MANILAL KASTURCHAND GANDHI & KANTA GANDHI CHARITABL E TRUST ASSESSMENT YEAR 2012-13 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2012-13 CONTESTS INVOCATION OF REVISIONAL JURISDICT ION U/S 263 BY LD. COMMISSIONER OF INCOME-TAX (EXEMPTION) [CIT(E)], MU MBAI VIDE ORDER DATED 29/03/2017. 2. THE FACTS LEADING TO THE SAME ARE THAT THE A SSESSEE, BEING RESIDENT TRUST, WAS ASSESSED U/S 143(3) FOR IMPUGNED AY AT RS.11,46 ,710/- AS AGAINST RETURNED LOSS OF RS.3,25,407/- FILED BY THE ASSESSEE ON 28/03/2013. 2.1 THE ASSESSEE TRUST IS REGISTERED WITH THE DIRECTOR OF INCOME TAX (EXEMPTION) , MUMBAI U/S 12A OF THE INCOME TAX ACT, 1961 AS WELL AS CHARITY COMMISSIONER, MUMBAI VIDE REGISTRATION NO. E-12385(MUMBAI) . THE TRUST CLAIMS TO BE ENGAGED IN CHARITABLE ACTIVI TIES IN THE FIELD OF MEDICAL RELIEF, EDUCATIONAL RELIEF & RELIEF OF POVE RTY AND ACCORDINGLY CLAIM EXEMPTION U/S 11 OF THE INCOME TAX ACT. 2.2 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTICED T HAT THE ASSESSEE EARNED INTEREST INCOME OF RS.10.96 LACS FROM CERTAI N DEBENTURES WHICH WERE PROHIBITED MODE OF INVESTMENTS AS PER THE PROV ISIONS OF SECTION 13(1)(D) AS WELL AS SECTION 11(5) OF THE INCOME TAX ACT, 1961 AND CONSEQUENTLY, NOT ELIGIBLE FOR EXEMPTION AND ASSESS ABLE TO TAX AT MAXIMUM MARGINAL RATE OF TAX AS PER SECTION 164(2) IN THE HANDS OF THE ASSESSEE. RESULTANTLY, THE INCOME OF THE ASSESSEE W AS DETERMINED AT RS.11.46 LACS WHICH COMPRISED OF INTEREST INCOME OF RS.10.96 LACS AND DIVIDEND INCOME RS.0.50 LACS. ITA NO.3205/MUM/2017 MANILAL KASTURCHAND GANDHI & KANTA GANDHI CHARITABL E TRUST ASSESSMENT YEAR 2012-13 3 2.3 SUBSEQUENTLY, THE SAID ASSESSMENT WAS SUBJECTE D TO EXERCISE OF REVISIONAL JURISDICTION U/S 263 BY LD. CIT(E) VIDE SHOW CAUSE NOTICE DATED 06/03/2017 ON THE PREMISES THAT SINCE THE INV ESTMENT OF RS.146.52 LACS IN PROHIBITED MODE OF INVESTMENTS WA S OUT OF CORPUS FUNDS AND THEREFORE, CORPUS FUNDS WERE REQUIRED TO BE ADDED TO THE INCOME OF THE ASSESSEE. 2.4 THE ASSESSEE CONTESTED THE SAME ON THE GROUND T HAT THE CORPUS FUNDS OF RS.36.97 LACS REMAINED INVESTED IN PERMISS IBLE MODE OF INVESTMENT AND INVESTMENT MADE IN PERMISSIBLE MODE U/S 11(5) FOR RS.104.20 LACS WELL EXCEEDED THE CORPUS FUND AND TH EREFORE, ADDITION THEREOF WAS NOT WARRANTED FOR PARTICULARLY WHEN THE LD. AO HAD ALREADY APPLIED HIS MIND ON THE SAID ISSUE IN THE ASSESSMEN T ORDER. 2.5 HOWEVER, NOT CONVINCED, LD. CIT(E) AFTER CONSID ERING ASSESSEES SUBMISSION, NOTED THAT THE LD. AO DID NOT VERIFY TH AT WHETHER CORPUS FUNDS RECEIVED DURING THE YEAR WERE UTILIZED TOWARD S MAKING PERMISSIBLE INVESTMENT U/S 11(5) OR PROHIBITED INVESTMENT AND F URTHER, NO INVESTIGATION WAS MADE TO ASCERTAIN THE SOURCE OF F RESH INVESTMENT MADE BY THE ASSESSEE AND THEREFORE, THE ORDER BEING ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE REQUIRED REVISION. H E ACCORDINGLY, WHILE EXERCISING THE REVISIONAL JURISDICTION U/S 263, SET ASIDE THE QUANTUM ORDER TO THE FILE OF LD. AO FOR RE-EXAMINATION OF THIS VE RY LIMITED ISSUE. AGGRIEVED BY INVOCATION OF THIS JURISDICTION, THE A SSESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR ASSESSEE [AR] BY RAISING SIM ILAR CONTENTIONS STRESSED THE POINT THAT ADEQUATE INQUIRIES WAS MADE BY LD. AO WHILE FRAMING ASSESSMENT WITH DUE APPLICATION OF MIND AND HENCE THE REVISION ITA NO.3205/MUM/2017 MANILAL KASTURCHAND GANDHI & KANTA GANDHI CHARITABL E TRUST ASSESSMENT YEAR 2012-13 4 OF THE ORDER WAS NOT JUSTIFIED AND THE ORDER WAS NO T ERRONEOUS. IT IS FURTHER CONTENDED THAT THE ASSESSMENT WAS NOT PREJU DICIAL TO THE INTEREST OF THE REVENUE SINCE ASSESSEE HAS ALREADY SUFFERED ADDITION AGAINST INTEREST INCOME ON ACCOUNT OF PROHIBITED INVESTMENT AND THEREFORE, NO FURTHER ADDITION WAS WARRANTED FOR IN TERMS OF DECI SION OF HONBLE BOMBAY HIGH COURT IN DIT(E) VS. SHETH MAFATLAL GAGALBHAI FOUNDATION TRUST [114 TAXMANN 19] WHICH IS FOLLOWED BY HONBLE KARNATAKA HIGH COURT IN CIT VS. FR. MULLERS CHARITABLE INSTITUTIONS [44 TAX MANN.COM 275]. RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF PUNE TR IBUNAL RENDERED IN SPAN OVERSEAS LTD. VS. CIT [ITA NO. 1223/PN/2013 OR DER DATED 21/12/2015] FOR THE CONTENTION THAT THE REVISIONAL JURISDICTION HAS NOT BEEN EXERCISED WITH DUE APPLICATION OF MIND BUT AT THE BEHEST OF PROPOSAL RECEIVED FROM LD. AO. 3.1 PER CONTRA, LD. CIT DR POINTED THAT INVESTMENT IN PROHIBITED MO DE LEAD TO TWO TYPES OF ADDITION ONE ADDITION OF INT EREST EARNED ON PROHIBITED MODE OF INVESTMENT AND SECONDLY, THE SAM E BEING OUT OF CORPUS FUNDS AND THEREFORE, CORPUS FUNDS BECOME INE LIGIBLE FOR EXEMPTION U/S 11. THE LD. AO ALTHOUGH RIGHTLY EXAMI NED THE ISSUE OF ADDITION OF INTEREST OUT OF SAID INVESTMENT BUT FAI LED TO APPRECIATE THE FACT THAT THE SAID INVESTMENT WERE OUT OF CORPUS FUNDS R ECEIVED BY THE ASSESSEE DURING THE YEAR AND HENCE DISENTITLE THE A SSESSEE TO CLAIM THE EXEMPTION U/S 11 ON CORPUS FUNDS WHICH CONSTITUTE I NCOME OF THE ASSESSEE U/S 2(24)(IIA). THEREFORE, THE ORDER CLEAR LY BEING ERRONEOUS AND PREJUDICIAL WAS RIGHTLY SUBJECTED TO REVISIONAL JUR ISDICTION U/S 263. 4. AFTER WEIGHING RIVAL CONTENTIONS AT THE THRESHOL D OF STATUTORY PROVISIONS, WE ARE CONVINCED WITH THE ARGUMENTS OF LD. DR THAT THE LD. ITA NO.3205/MUM/2017 MANILAL KASTURCHAND GANDHI & KANTA GANDHI CHARITABL E TRUST ASSESSMENT YEAR 2012-13 5 AO ALTHOUGH RIGHTLY BROUGHT INTEREST INCOME TO TAX IN THE HANDS OF THE ASSESSEE BUT FAILED TO NOTE THAT THE ASSESSEE RECEI VED CORPUS FUNDS DURING THE YEAR AND MADE PROHIBITED INVESTMENT AND FAILED TO EXAMINE THE SOURCE THEREOF WHICH COULD LEAD TO FURTHER ADDI TION OF CORPUS FUND IN THE HANDS OF THE ASSESSEE IN TERMS OF SECTION 2(24( IIA). THE LD. AO HAS NOWHERE EXAMINED THE ISSUE FROM THIS ANGLE AS EVIDE NT FROM THE ASSESSMENT ORDER. WE FIND THAT THE RELIANCE OF LD. CIT ON EXPLANATION 2 TO SECTION 263 WAS QUITE APT AND SQUARELY APPLIED T O THE CASE OF THE ASSESSEE SINCE FAILURE TO MAKE INQUIRIES RAISE A DE EMING FICTION THAT THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. THE CASE LAWS RELIED UPON BY THE ASSESSEE DO NOT HELP THE ASSESSEE AT THIS STAGE SINCE AT THIS JUNCTURE, WE A RE NOT CONCERNED WITH THE MERITS OF THE CASE BUT CONCERNED WITH LIMITED I SSUE OF DETERMINING THE LEGALITY OF INVOCATION OF SECTION 263 BY LD. CIT(E) WHICH LD.CIT(E) HAS RIGHTLY EXERCISED WITH DUE APPLICATION OF MIND AND AFTER APPRECIATION OF RELEVANT FACTS. 6. IN VIEW OF THE ABOVE, WE ARE NOT INCLINED TO INT ERFERE, AT THIS STAGE , WITH THE ORDER OF LD. CIT, INVOKING JURISDICTION U/ S 263. 7. RESULTANTLY, THE ASSESSEES APPEAL STANDS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2017. SD/- SD/- (D.T. GARASIA) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 31 .07.2017 SR.PS:- THIRUMALESH ITA NO.3205/MUM/2017 MANILAL KASTURCHAND GANDHI & KANTA GANDHI CHARITABL E TRUST ASSESSMENT YEAR 2012-13 6 / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. , ( ) / THE CIT(A) 4. , / CIT CONCERNED 5. $'. , . , / DR, ITAT, MUMBAI 6. / / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
