Koraput District Public School Education Society, Koraput V. ITO, Jeypore

ITA 334/CTK/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0804 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 13-09-2010
• Court: TRIBUNAL
• Department Lawyers: S K DASH
• Assessee Lawyers: A ANAND RAO
• Keywords: Charitable institution; Reasonable cause
• Section: 148; 12; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 333 AND 334/CTK/2010 / ASSESSMENT YEAR 2005 - 06 KORAPUT DISTRICT PUBLIC SCHOOL EDUCATION SOCIETY, SUNABEDA, DIST.KORAPUT PAN: AAAAT7615F - - - VERSUS - INCOME - TAX OFFICER, W ARD 2, JEYPORE. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI A.ANAND RAO, AR / FOR THE RESPONDENT: / SHRI S.K.DASH, DR / ORDER . . . , , SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER . THESE TWO APPEALS ARE FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME - TAX (APPEALS) BOTH DT.9.7.2010. 2. THE ASSESSEE HAS RAISED THE FOLLOWING ISSUES IN ITA NO.333/CTK/2 010. 1. THAT THE ISSUE OF NOTICE U/S 148 IS UNJUST AND UNWARRANTED WHEN THERE IS NO ESCAPEMENT OF INCOME BECAUSE THE SCHOOL IS EXEMPTED FROM PAYMENT OF TAXES AND THE BOOKS OF ACCOUNT WERE VERIFIED BY THE LEARNED ASSESSING OFFICER AND THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) IN THE CASE OF A. V. AMBROSE, PRINCIPAL, PUBLIC SCHOOL, JEYPORE. 2. THAT THE PURCHASES MADE THROUGH CREDIT CARD ARE VERIFIED; HENCE ISSUE OF NOTICE ON THE SAME SCORE IS UNJUST AND ILLEGAL . 3. THAT THE DISALLOWANCE OF EXPENSES OF 15,000/ - ON ACCOUNT OF DONATIONS IS UNJUST AND UNEARTHED. 4. THAT THE DISALLOWANCE OF EXPENSES OF 3,52,488 BEING 50% OF THE CLAIM OF THE APPELLANT IS UNJUST BECAUSE THESE ARE THE ALLOWANCES PAID TO EMPLOYEES OF THE APPELLANT. 5. THAT THE FACT OF DE STRUCTION OF BOOKS OF ACCOUNT DURING COMMUNAL RIGHTS WERE CONVEYED TO THE LEARNED ASSESSING OFFICER. AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WHICH THEY HAVE CONSIDERED PARTLY BUT DISALLOWED THE EXPENSES WHICH IS UNJUST. 6. THAT THE DISALLOWAN CE OF EXEMPTION U/S. 10 (23) ( C ) IS UNJUST BECAUSE THE EXEMPTION IS UNDER THE STATUTE AND IT SHOULD BE ALLOWED. I.T.A.NO.333 AND 334/CTK/2010 2 7. THAT THE APPELLANT HAS FILED ALL THE PAPERS TO PROVE THAT THIS IS AN EDUCATIONAL INSTITUTION AND THE INCOME IS EXEMPTED. 8. THAT THE APPEL LANT HAS APPLIED FOR REGISTRATION U/S. 12 A OF THE INCOME TAX ACT AND APPROVED BY THE LEARNED COMMISSIONER OF INCOME TAX, BHUBANESWAR, WHICH WAS TREATED AS CHARITABLE INSTITUTION AND ALL THE PROVISIONS ARE COMPLIED FOR THE ASSESSMENT YEAR 2009 - 10. 9. THAT THE ASSESSING AUTHORITIES VERY WELL KNEW THAT THIS IS AN EDUCATIONAL INSTITUTION AND THEY A RE RUNNING FOR MORE THAN 30 YEARS. 10. THAT THE REGISTRATION U/S. 12 A IS NOT APPLIED EARLIER BECAUSE THEY ARE NOT REQUIRED AND IT IS REQUIRED WHEN THE GROSS RECEI PTS EXCEED 1 CRORE. IN THE INSTANT CASE, THE RECEIPTS ARE 34,37,247. 3. IN ITA NO.334 OF 2010 THE ASSESSEE HAS RAISED THE FOLLOWING ISSUES. 1. THAT THE APPELLANT IS RUNNING SCHOOL AND THE RETURN OF INCOME WAS FILED FOR THE A.Y. 2005 - 06. 2. THAT THE BOOKS OF ACCOUNT WERE DESTROYED DURING COMMUNAL RIGHTS AT JEYPORE AND THE FACT WAS COMMUNICATED AND THE RELEVANT DOCUMENTS WERE FILED AT THE TIME OF HEARING OF THE CASE. 3. THAT THE AUTHORIZED AGENT WAS APPEARING FOR THE CASE AS DIFFERENT DATE. 4. THAT THE IMPOSITION OF PENALTY OF 10,000/ - FOR NON APPEARANCE AND NON SUBMISSION OF PARTICULARS IS INJUSTICE AND UNWARRANTED. 4. BOTH PARTIES WERE HEARD REGARDING THE ISSUES RAISED BY THE ASSESSEE IN THESE TWO APPEALS AND THEIR LEGAL IMPLICATIONS. 5. ON CAREFUL CONSIDERATION OF THE MAT ERIAL MADE AVAILABLE TO THE TRIBUNAL AND ANALYZING THE SAME IN THE LIGHT OF THE RIVAL SUBMISSIONS OF BOTH THE PARTIES, THE UNDISPUTED FACTS ARE THAT THE ASSESSEE - SOCIETY IS RUNNING EDUCATIONAL INSTITUTIONS AT JEYPORE, SUNABEDA AND KORAPUT AND THE SCHOOL IS APPROVED FOR EXEMPTION U /S.10(23) CLAUSE (C) OF THE INCOME - TAX ACT,1961. THE BOOKS OF ACCOUNT SUBMITTED BEFORE THE LEARNED ASSESSING OFFICER FOR VERIFICATION IN EARLIER OCCASIONS FOR THE SAME ASSESSMENT YEAR. LATER ON THERE WAS A COMMUNAL RIOT IN JEYPORE AND THE SCHOOL WAS DAMAGED AND FIRED BY ANTISOCIAL ELEMENTS AND THE BOOKS OF ACCOUNT AND THE DOCUMENTS WERE DESTROYED AND A REPORT OF THE SAME WAS GIVEN TO THE ASSESSING OFFICER. THE ASSESSING OFFICER WITHOUT ASKING FOR ANY INFORMATION DISALLOWED THE EXPEN SES, RENT AMOUNT PAYABLE TO FINANCERS AND DISALLOWANCE OF THE CLAIM OF ALLOWANCE U/S.10(23)(C) ETC. I.T.A.NO.333 AND 334/CTK/2010 3 6. AS THE ASSESSEE IS NOT ABLE TO PRODUCE THE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER ON BEING ASKED TO DO SO, THE ASSESSING OFFICER HAS INITIATED PE NALTY PROCEEDINGS U/S.271(1)(B) OF THE I.T.ACT AND AFTER ENQUIRY AND HEARING THE ASSESSEE , HAS LEVIED PENALTY OF 10,000 AGAINST THE ASSESSEE FOR THE SAME ASSESSMENT YEAR. THEREFORE, THE ASSESSEE FILED APPEAL BEFORE THE LEARNED CIT(A) AND BEING UNSUCCESSFU L , FILED APPEAL BEFORE THE TRIBUNAL. 7. THE LEARNED AR OF THE ASSESSEE HAS VEHEMENTLY CONTENDED BEFORE THE TRIBUNAL THAT THE ASSESSEE HAS ADMITTEDLY RUNNING THE EDUCATIONAL INSTITUTION BY NAME KORAPUT DISTRICT PUBLIC SCHOOL AT KORAPUT, SUNABEDA AND JEYPORE . IT HAS FILED THE RETURN FOR THE ASSESSMENT YEAR 2005 - 06 ON 12.9.2005 QUOTING THE STATUS AS AOP DECLARING AN INCOME AT NIL. THE ASSESSING OFFICER HAS HOWEVER, ASSESSED THE ASSESSEE AT 16,980,500. AS THE ASSESSEE IS NOT ABLE TO PRODUCE THE BOOKS OF ACCOUN T BEFORE THE ASSESSING OFFICER DUE TO THEIR DESTRUCTION IN COMMUNAL RIOT IN JEYPORE AND THE ASSESSEE PRODUCED EVIDENCE SUCH AS PHOTOGRAPH OF DESTRUCTION OF SCHOOL AND COPY OF FIR AS EVIDENCE .BUT THE ASSESSING OFFICER REJECTED THIS PLEA AND MADE THE BEST J UDGMENT ASSESSMENT ON THE BASIS OF AUDITED REPORT, WRITTEN EXPLANATIONS, DOCUMENTS THAT WERE EARLIER PRODUCED BEFORE THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS AND INFORMATION COLLECTED U/S.133(6) FROM VARIOUS SOURCES. HE FURTHER SUBMITTED THAT TH E BOOKS OF ACCOUNTS AND OTHER DOCUMENTS OF THE SOCIETY WERE DESTROYED IN COMMUNAL RIOT THEREFORE THOSE WERE NOT PRODUCED BEFORE THE ASSESSING AUTHORITIES. PRIOR TO THE COMMUNAL RIOT AS THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS WERE AVAILABLE TO THE ASSESSE E THEY WERE PRODUCED BEFORE THE DEPARTMENTAL AUTHORITIES. BUT TAKING THESE INTO CONSIDERATION, BOTH THE LOWER AUTHORITIES HAVE DISBELIEVED THE CONTENTION OF THE ASSESSEE REGARDING DESTRUCTION OF THE BOOKS OF ACCOUNT AND DOCUMENTS DURING COMMUNAL RIOT OCCUR RED LATTER ON. UNDISPUTEDLY THE ASSESSEE IS CARRYING ON THE OBJECTS OF IMPARTING EDUCATION WITHOUT ANY LOSS OR PROFIT BY SPENDING THE DONATIONS RECEIVED BY T HE SOCIETY AND EMPLOYING FACULTY MEMBERS AND INCURRING OTHER CONNECTED EXPENSES. THIS WAS NOT DISPU TED BY THE LOWER AUTHORITIES BUT AT THE SAME TIME THEY HAVE DISALLOWED THESE EXPENSES INCURRED BY THE ASSESSEE WITHOUT SHOWING ANY REASON. HAVING BEEN AGREED THAT THE ASSESSEE IS I.T.A.NO.333 AND 334/CTK/2010 4 RUNNING SCHOOL AND IMPARTING EDUCATION ON NO PROFIT OR LOSS BASIS THE AUTHORI TIES HAVE COMMITTED ERROR IN D ISALLOWING EXEMPTION U/S.10(23)( C) WHICH IS A STATUTORY ALLOWANCE AVAILABLE TO THE ASSESSEE. THE AUTHORITIES BELOW HAVE NOT DISBELIEVED THE CONTENTION OF THE ASSESSEE THAT IT IS AN EDUCATIONAL INSTITUTION AND ITS INCOME IS EXE MPTED. THE ASSESSEE HAS APPLIED FOR REGISTRATION U/S.12A OF THE I.T.ACT AND WAS GRANTED SO BY THE CIT, BHUBANESWAR TREATING IT TO BE A CHARITABLE INSTITUTION FOR THE ASSESSMENT YEAR 2009 - 10. FOR THE PREVIOUS YEARS, THE ASSESSEE HAS NOT APPLIED FOR REGISTRA TION U/S.12A BECAUSE SUCH REGISTRATION IS NOT REQUIRED UNDER LAW AS THE GROSS RECEIPTS ARE BELOW THE PRESCRIBED LIMIT OF 1 CRORE. IN THE PRESENT PERIOD, THE GROSS RECEIPTS OF THE ASSESSEE WAS 4,37,246 ONLY. THIS FACT WAS TOTALLY IGNORED BY THE LOWER AUTHORITIES WHILE PASSING THE IMPUGNED ORDERS. 8. CONSIDERING THE ASSESSING OFFICER LEVYING PENALTY U/S.271(1)(B) OF THE I.T. ACT, THE LEARNED AR OF THE ASSESSEE HAS CONTENDED THAT THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER IS UNJUSTIFIED PER SE AS IT IS ONLY PASSED ON SURMISES ONLY BUT NOT WITH ANY POSITIVE ESTABLISHMENT OF ANY VIOLATION OR DISOBEDIENCE OF NOTICES ISSUED BY THE DEPARTMENT. THE PENALTY BEING QUASI - JUDICIAL IN NATURE BEFORE LEVYING THE SAME, THE AUTHORITIES HAS TO NECESSARILY PROVE THE WILLFUL ACT OF THE ASSESSEE ALLEGED AGAINST HIM. BUT IN THE PRESENT CASE BOTH THE AUTHORITIES FAILED TO CONSIDER THE PRIMAR Y INGREDIENT REQUIRED UNDER THE LAW AS UNDISPUTEDLY THE ASSESSEES BOOKS OF ACCOUNT AND OTHER DOCUMENTS WERE DESTROYED IN THE COMMUNAL RIOT THAT OCCURRED IN THE VICINITY OF THE INSTITUTION CONCERNED OF THE ASSESSEE. IN THESE FACTS AND CIRCUMSTANCES ONLY TH E ASSESSEE IS NOT ABLE TO PRODUCE THE BOOKS OF ACCOUNT AND DOCUMENTS AS REQUIRED IN THE NOTICES ISSUED BY THE ASSESSING OFFICER. THIS IS A SUFFICIENT AND REASONABLE CAUSE FOR NON - PRODUCTION OF BOOKS OF ACCOUNTS AND DOCUMENTS REQUIRED BY THE ASSESSING OFFIC ER WHICH WAS TOTALLY IGNORED. HENCE, HE CONTENDED THAT BOTH THE ORDERS OF THE CIT(A) ARE NOT SUSTAINABLE FOR LEGAL SCRUTINY AND REQUIRE TO BE SET ASIDE. 9. CONTRARY TO THIS, THE LEARNED DR HAS VEHEMENTLY ARGUED CONTENDING INTER ALIA THAT AS THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE CONTENTION OR CLAIM MADE BEFORE THE ASSESSING AUTHORITIES THEY WERE WELL JUSTIFIED IN NOT ACCEPTING THE SAME. SO ALSO I.T.A.NO.333 AND 334/CTK/2010 5 AS THE ASSESSEE ADMITTEDLY NOT PRODUCED THE BOOKS OF ACCOUNT AND DOCUMENTS AS REQUIRED BY THE ASSESSING OFFI CER, THE PENALTY US.271(1)(B) IS AUTOMATICALLY ATTRACT ED AND THE ASSESSEE IS LIABLE TO BE PENALIZED. IN THAT VIEW OF THE MATTER, THE PENALTY IMPOSED AND CONFIRMED BY THE CIT(A) IS VERY MUCH JUSTIFIED AND HENCE , REQUIRES TO BE UPHELD. THUS, HE SOUGHT FOR D ISMISSAL OF THE APPEALS OF THE ASSESSEE BY UPHOLDING THE IMPUGNED ORDERS OF THE LEARNED CIT(A). 10. ON CA REFUL ANALYSIS OF THE MATERIAL MADE AVAILABLE WITH THE TRIBUNAL IN THE LIGHT OF THE RIVAL SUBMISSIONS OF BOTH THE PARTIES, IT IS FOUND THAT THE DEPARTM ENT HAS NOT DISPUTED THE FACTUAL ASPECT OF THE ASSESSEE BEING AN EDUCATIONAL INSTITUTION RUNNING ITS INSTITUTIONS AT THREE PLACES, KORAPUT, SUNABEDA AND JEYPORE SINCE THE LAST TWENTY YEARS IT IS NOT HAVING INCOME EXCEEDING 1 CRORE AT ANY TIME EARLIER INCL UDING THIS YEAR. THE REASON GIVEN BY THE LOWER AUTHORITIES FOR DISALLOWING THE EXPENSES OF THE ASSESSEE IS THAT THE ASSESSEE HAS NOT PRODUCED THE REQUIRED BOOKS OF ACCOUNT AND VOUCHERS THEREOF, BUT AT THE SAME TIME THEY HAVE NOT DISPUTED THAT THE ASSESSEE IS RUNNING INSTITUTION FOR THE RELEVANT PERIOD WHICH IMPLIES THAT THESE EXPENSES ARE EMINENT FOR RUNNING THE INSTITUTION. THEREFORE, DISALLOWING THE EXPENDITURE OF SUCH INSTITUTION FOR WANT OF EVIDENCE IS NOT SUSTAINABLE MORE SO IN THE LIGHT OF THE CONTENT ION OF THE ASSESSEE THAT THE BOOKS OF ACCOUNT AND DOCUMENTS WERE DESTROYED IN COMMUNAL RIOT THAT OCCURRED DURING THE PERIOD UNDER CONSIDERATION AT THE RELEVANT PLACES. THOUGH THE ASSESSEE WAS NOT REQUIRED REGISTRATION/S.12 A OF THE I.T.ACT IT HAS APPLIED FO R SUCH REGISTRATION ON RECEIVING NOTICE FROM THE I.T. DEPARTMENT AND IT WAS GRANTED W.E.F. 1.4.2009. THE ASSESSEE HAS UTILISED THE ENTIRE RECEIPTS FOR EDUCATION PURPOSES. THEREFORE, THE DISALLOWANCE OF EXPENDITURE OF 3,50,344 AND RS1,815 SHOWN BY THE ASSESSEE TOWARDS STAFF SALARY ETC., IS NOT SUSTAINABLE AS THE DEPARTMENT HAS NOT DOUBTED THE RUNNING OF EDUCATIONAL INSTITUTION BY THE ASSESSEE. SINCE THE DONATION OF 1 , 25,000 WERE MADE FOR EDUCATION PURPOSES ONLY THE DI SALLOWANCE OF SUCH AMOUNT IS BAD IN LAW. NOWHERE IN THE IMPUGNED ORDERS, THE DEPARTMENTAL AUTHORITIES HAVE NOT DOUBTED THE EXISTENCE OF THE ASSESSEE SOCIETY ON 15.5.1999 AND ITS RECEIPTS WERE NEVER BEFORE , INCLUDING THE PRE SENT PERIOD UNDER CONSIDERATION, EXCEEDED THE AMOUNT OF 1 CRORE PRESCRIBED UNDER LAW , WHEN ONLY THE I.T.A.NO.333 AND 334/CTK/2010 6 ASSESSEE IS OBLIGED TO FILE NECESSARY EXEMPTION/S.10(23)(C) CLAUSE (D) OF THE I.T.ACT. ALL THESE MATERIAL FACTS WERE NOT DISPUTED BY THE LOWER AUTHORITIES IN THE IMPUGNED ORDERS. IN THE L IGHT OF SUCH UNDISPUTED FACTS AND CONSIDERATION OF THE EXPENDITURE INCURRED BY THE ASSESSEE AND CLAIMED AS ALLOWANCE HAS TO BE ACCEPTED. BUT BOTH THE AUTHORITIES BELOW HAVE NOT ACCEPTED THE CONTENTION OF THE ASSESSEE. IN THE ABSENCE OF DOUBTING THE RUNNING OF INSTITUTION OR ESTABLISHING THAT THE ASSESSEE IS NOT RUNNING THE INSTITUTE FOR A PROFIT CONTRARY TO THE OBJECTS MENTIONED IN THE ARTICLES OF ASSOCIATION THE CLAIM OF THE ASSESSEE IS LIABLE TO BE ACCEPTED BY THE DEPARTMENT. AS THE DEPARTMENT HAS MADE TH E DISALLOWANCE AND ADDITIONS IN DISPUTE WITHOUT ESTABLISHING THE NON - ILLIGIBILITY OF THE ASSESSEE THEREOF IS NOT SUSTAINABLE FOR LEGAL SCRUTINY AND HENCE, THE APPEAL OF THE ASSESSEE BEING ITA NO.330/CTK/2010 IS HEREBY ALLOWED BY SETTING ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A). 11. NOW COMING TO THE ISSUE OF LEVY OF PENALTY U/S.271(1)(B) OF THE I.T.ACT, IT IS SEEN THAT AS STATED SUPRA, THE DEPARTMENT HAS NOT DOUBTED THE OCCURRENCE OF DESTRUCTION OF DOCUMENTS AND BOOKS OF ACCOUNTS OF THE ASSESSE E DURING COMMUNAL RIOT OCCURRED IN THE VICINITY WHICH IS A REASONABLE CAUSE FOR NON - PRODUCTION OF BOOKS OF ACCOUNT AND DOCUMENTS BY THE ASSESSEE LATER TO THAT DESTRUCTION . WITHOUT ESTABLISHING THE NON - GENUINITY OF THIS CLAIM OF THE ASSESSEE, RATHER MALAFID E INTENTION OF THE ASSESSEE FOR NON - PRODUCTION OF BOOKS OF ACCOUNT AND DOCUMENTS AS PER THE ASSESSING OFFICER , LEVY OF PENALTY U/S.271(1)(B) IS UNSUSTAINABLE FOR LEGAL SCRUTINY AND THE SAME IS HEREBY CANCELLED BY ALLOWING THE APPEAL OF THE ASSESSEE. 12. I N THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 18 TH FEBRUARY, 2011 S D/ - SD/ - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER. ( ) DATE: 18 TH FEBRUARY, 2011 ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY. I.T.A.NO.333 AND 334/CTK/2010 7 - COPY OF THE ORDER FORWARDED TO: 1 . / TH E APPELLANT : KORAPUT DISTRICT PUBLIC SCHOOL EDUCATION SOCIETY, SUNABEDA, DIST.KORAPUT. 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 2, JEYPORE. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENC H 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY