Khandesh Maratha Mandal, Pune V. Commissioner of Income-Tax (Exemptions), Pune

ITA 371/PUN/2022

AI Insights

The case involves Khandesh Maratha Mandal, a charitable trust, appealing against the order of the Commissioner of Income-tax, Exemption, Pune, which invoked revision proceedings under section 263 of the Income Tax Act. The primary contention was that the reassessment and subsequent revision were conducted without proper adherence to legal procedures, such as the issuance of notice under section 143(2) and a mechanical approval for reassessment. The trust argued that the reassessment was based on a misunderstanding of their financial activities, particularly regarding the classification of certain receipts. The Tribunal found that the trust was not given a fair opportunity to present its case during the initial proceedings, primarily due to the disruptions caused by the COVID-19 pandemic, leading to the decision to remand the case for a thorough re-examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302279 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-03-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 23-05-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Charitable institution; Principle of natural justice; Reassessment proceedings; Set aside
• Section: 148; 263; 11; 143(3); 12A; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA No. 371/PUN/2022 : A.Y. 2010-11 Khandesh Maratha Mandal, Sector No. 24, Near Ganesh Talav, Pradhikaran, Nigdi, PUNE- 411 044. PAN: AAATK 7573 L Appellant Vs. The Commissioner of Income-tax, Exemption, Pune. Respondent Applicant by : Shri Abhilash Hiran Respondent by : Shri Keyur Patel – CIT DR Date of Hearing : 23-03-2023 Date of Pronouncement : 03-04-2023 ORDER PER SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER This appeal preferred by the assessee emanates from order of ld. C.I.T. Exemption, Pune, dated 30-03-2021 for A.Y.2010-11 as per the following grounds of appeal. Grounds challenging the validity of re-assessment proceedings Ground 1: Erred in granting a mechanical approval by the learned CIT with respect to satisfaction of reasons to believe by mentioning "Yes I agree". Hence the reassessment proceedings are bad in law Ground 2: Erred in not issuing the notice under section 143(2) of the Act before passing the reassessment order, hence the order is bad in law. Grounds challenging the validity of revision proceedings Ground 3: Erred in invoking the revision proceedings under section 263 of the Act without appreciating the fact that the Assessing Officer had already dealt with the issue on merits and hence, the assessment order cannot be regarded as 'erroneous' and "prejudicial to the interest of the revenue" for the purpose of initiating the proceedings under the said section. Grounds challenging the merits of the case: Ground 4: Erred in concluding that the Trust is engaged in the upliftment of a specific community under section 13(1 )(b) overlooking the various objects of trust which are beneficial for the public at large 2 I.T.A. No. 371 of 2022 Khandesh Maratha Mandal A.Y. 2010-11 Ground 5: Erred in concluding that the Trust has received rental income whereas the donations were towards the building fund ' In view of the above grounds and in the facts and circumstances of the case and in law, the Appellant prays your Honours to set aside order under section 263 of the Act and grant relief to the Appellant. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Hon’ble Tribunal to decide this appeal according to law.” 2. The relevant facts are that the assessee is a Charitable Trust. It is registered u/s 12A of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) vide registration No. PN/CIT (Exemp.)/Tech/12AA/Pune Rg /954/284/2016-17/1087 dated 13.06.2016. In the case of the assessee, the reassessment order u/s 143(3) r.w.s. 147 of the I.T. Act was passed on 18.12.2017 and the income was assessed at Rs. NIL. The assessment proceedings in the assessee's case for A.Y. 2010-11 was re-opened by issue of notice u/s 148 of the Act dated 22.03.217 on the grounds of non-filing of return of return of income and escapement of income from taxation to the tune of Rs. 8,75,629/-. The reason recorded for reopening of assessment is as under: “As per information available on record, the trust has made time deposit/ cash transaction of Rs. 8,75,629/- in .bank during F. Y. 2009-10 under consideration. On further verification it is also found that the assessee trust has not filed the ROI for A Y 2010-11. In absence of ROI the above mentioned transaction/investment remains unexplained and need to be brought to tax.” 3. In response to the notice u/s 148 of the Act, the assessee filed its return of income for A.Y. 2010-11 on 15.12.2017 declaring total income at Rs. NIL. After verification of the submissions made by the assessee, the AO completed the reassessment proceedings by accepting the returned income vide order u/s 143(3) r.w.s. 147 of the Act dated 18.12.2017. However, on verification of the assessment 3 I.T.A. No. 371 of 2022 Khandesh Maratha Mandal A.Y. 2010-11 record it is found that the during .the reassessment proceedings, the Assessing Officer had called for the sources of cash deposits. In response, the assessee trust vide letter dated 14.12.2017 had stated that this cash deposit was made out of the fund received against the building fund of Rs. 7,94,680/-, life member fund of Rs. 47,500/- and other donation of Rs. 3,846/-. It has also filed copies of receipts. On verification of these receipts it was noticed that in remark column it has stated details of marriage and other functions, karate class etc. That means the assessee has received the amount as a rent. Further, all these receipts stated to be building fund and other donation totalling to Rs. 7,98,526/- are not reflected in the Income & Expenditure Account but are taken directly to the Balance Sheet. This amount received will not from the corpus fund of the trust as the said amount received as a rent and should have been taken into l&E account. Further on going through the objects of the trust it was noticed that the objects are upliftment of only Maratha Samaj i.e. for the benefit of a particular community. As per the provisions of Section 13(1)(b) of the Act, if the trust or institution is created or established for the benefit' of any particular: religious community or caste, the provisions of Section 11 are not applicable. Therefore, the amount of Rs. 7,98,526/- shown as building fund in the Balance Sheet should be taxed in the hands of assessee trust. Considering the fact of the case the revised income had been computed as under: Total receipts as per I & E a/c Rs. 45,495/- Add: Amount received as discussed above Rs. 7,98,526/- ------------------ Rs. 8,44,021/- Less Expenditure Rs. 2,01,116/- Revised total income Rs. 6,42,905/- 4. The Assessing Officer failed to verify the above aspects during the course of reassessment proceedings. Since the above facts had not been considered by the Assessing Officer while passing the reassessment order dated 18.12.2017 for A.Y. 4 I.T.A. No. 371 of 2022 Khandesh Maratha Mandal A.Y. 2010-11 2010-11, the reassessment order u/s 143(3) r.w.s. of the Act for A.Y. 2010-11 dated 18.12.2017 was found to be erroneous in so far as prejudicial to the interest of revenue by the ld. CIT(A). Proceedings u/s 263 of the Act were therefore invoked in the case of the assessee and notice dated 24.03.2021 was issued to the assessee for submission of documents in respect of its stand in the matter. The assessee did not reply to the above notice issued. In this backdrop it became pertinent to decide the case on merits. 5. That on going through the aforesaid facts on record, we observe that vide para 6 of order of the ld. CIT it is evident inspite of opportunities being given to the assessee, the assessee did not make any submissions or respond to the statutory notices issued. The ld. CIT had decided the case based on material available on record without the submissions being filed by the assessee. 6. At the time of hearing before us, ld. A.R submitted that it was during Covid period that the notice was issued to the assessee i.e. 24-03-2021 and because of pandemic the assessee was unable to respond to the notice of the Department and also could not submit any details/documents in response to the said notice. Given these facts the order of the ld. CIT takes the colour of ex parte order where the assessee was unable to represent its case on merits. 7. The ld. D.R submitted that he does not have any objection if the matter is remanded back to the file of the ld. CIT for re-adjudication on merits considering the submissions of the assessee. 8. Having heard the parties herein, we are of the considered view that non- appearance before the ld. CIT by the assessee was neither deliberate nor intentional and due to pandemic situation prevailing they could not comply with the 5 I.T.A. No. 371 of 2022 Khandesh Maratha Mandal A.Y. 2010-11 statutory notice served to them. In the interest of justice, therefore, one more opportunity should be given to the assessee and accordingly we set aside the order of the ld. CIT and remand the matter back to his file for re-adjudication as per law after complying with principles of natural justice and at the same time, we direct the assessee that they should file written submissions/documents/evidences before the Department and represent their case on merits. We order accordingly. Grounds of appeal raised in this appeal are allowed for statistical purposes. 9. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 3 rd day of April 2023. Sd/- sd/- (R.S. SYAL) (PARTHA SARATHI CHAUDHURY) VICE PRESIDENT JUDICIAL MEMBER Pune; Dated, the 3 rd day of April 2023. Ankam Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The CIT Exemption 5. D.R.ITAT ‘A’ Bench 6. Guard File BY ORDER, Sr. Private Secretary ITAT, Pune. /// TRUE COPY /// 6 I.T.A. No. 371 of 2022 Khandesh Maratha Mandal A.Y. 2010-11 Date 1 Draft dictated on 23-03-2023 Sr.PS 2 Draft placed before author 24-03-2023 Sr.PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on 03-04-2023 Sr.PS/PS 7 Date of uploading of order 03-04-2023 Sr.PS/PS 8 File sent to Bench Clerk 03-04-2023 Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order