M/S BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS, Wardha V. DY. C.I.T. CENTRl cir.-1(1), Nagpur

ITA 40/NAG/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2237 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 09-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PIYUSH KOLHE
• Keywords: Revision of order; Rectification of order; Charitable institution; Opportunity of being heard; Audit objection; Prejudicial to interest; Benefit of exemption; Capital expenditure; Set aside; CHAPTER IV
• Section: 263; 132; 11; 143(3); 153A; 12A; 10B; 143(1); 139(1); 64; 13; 153; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SANDEEP GOSAIN, JM & SHRI ARUN KHODPIA, AM 1) ITA No.: 040/Nag/2017 - A.Y. 2011-12 2) ITA No.: 036/Nag/2017 - A.Y. 2007-08 3) ITA No.: 037/Nag/2017 - A.Y. 2008-09 4) ITA No.: 151/Nag/2017 - A.Y. 2009-10 5) ITA No.: 152/Nag/2017 - A.Y. 2010-11 6) ITA No.: 038/Nag/2017 - A.Y. 2009-10 (143 r.w.s. 263) 7) ITA No.: 039/Nag/2017 - A.Y. 2010-11 (143 r.w.s. 263) Bhaktvastal Sadguru Yogiraj Vasantrao Gopalrao Ghonge Maharaj Nyas Mukteshwar, Behind Rashtrabhasha Gharpure Layout, Nagri Bank Colony Wardha Vs. The DCIT Central Circle 2(2) Nagpur PAN No.:AABTB 2675 F Appellant Respondent Assessee by: Shri K.P. Dewani, CA Revenue by :Shri Piyush Kolhe (CIT-DR) Date of Hearing: 26/04/2022 Date of Pronouncement: 28 /06 /2022 ORDER PER: SANDEEP GOSAIN, J.M. These appeals by appellant are against the orders passed by Learned CIT(A)-3, Nagpur and order passed u/s 263 passed by Learned 2 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR Commissioner of Income Tax (Central), Nagpur. The issue involved in all these appeals are common and interlinked. We have heard all these appeals together and are being decided by this consolidated order for sake of convenience. ITA No.040/Nag/2017: 1. This is appeal by assessee against order of learned Commissioner of Income Tax (Appeals)-3, Nagpur for Asstt. Year 2011-12 dated 24/11/2016 in Appeal Nos. CIT(A)-3/249/2013-14. Grounds of appeal for Asstt. Year 2011- 12 are as under: “i) The learned Commissioner of Income Tax (Appeals)-3, Nagpur has not considered the status of the appellant as registered charitable trust in view of the provisions of section 11 of the Income Tax Act, 1961. The status of the assessee trust should have been granted as registered trust but while deciding the issue the learned Commissioner of Income Tax (A)-3, Nagpur has not considered the same. ii) The genuine registered trust is all the while in existence. iii) The activities of the appellant trust are carried out in accordance to its objectives. iv) The learned CIT(A) – 3 did not considered the wrongful and unlawful denial of exemption u/s 11 of the I.T. Act, 1961 by the learned Assessing Officer because no property or income of the appellant trust is appropriated to enure benefits to the persons detailed in sect ion 13(3) as per the provision of section 13(1)(c) or 3 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR because the investment of the funds of the appellant are not made in contravention of the provisions of section 13(1)(d) of the Act. v) Audit reports of the trust for A.Y. 2006-07 to 2009-10 were duly obtained and were available. vi) The assessee may be allowed to raise any ground / additional ground during the course of appeal proceedings.” 2. Brief facts of the case are that assessee trust is registered u/s 12A of I.T. Act 1961. It is thus eligible for claim of exemption u/s 11 of I.T. Act 1961. Assessee has submitted regular return of income for Asstt. Year 2011-12 u/s 139(1) on 20/03/2013 declaring total income at Rs.NIL. In assessment framed u/s 143(3) A.O. has not accepted the claim of exemption u/s 11 of I.T. Act 1961. A.O. in the assessment framed has computed the income on the basis of financial statement without making any addition except for denying exemption u/s 11 of I.T. Act 1961 observing that assessee does not deserve to claim tax exemption in the name of trust. A.O. has further concluded that the income is determined on protective basis as same is being assessed on substantive basis at the hands of Shri Vansantrao Gopalrao Ghonge. 3. In respect to order passed by A.O. assessee has filed appeal before Learned CIT(A). The Learned CIT(A) vide order dated 24/11/2016 for the assessment year has deleted protective assessment made at the hands of trust by observing that substantive addition made by A.O. at the hands of Shri 4 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR Vasantrao Ghonge has been confirmed in the appellate proceedings by CIT(A) in appellate order passed in the case of Shri Vasantrao Ghonge. 4. Aggrieved by order of CIT(A) for assessment year assessee is in appeal before us on grounds of appeal mentioned hereinabove. 5. Ground No.1 to 5 are inter linked, inter relate and relates to challenging the order of CIT(A) for not considering the income of appellant as that of registered Charitable Trust for provisions of section 11 of Income Tax Act 1961 and denying exemption u/s 11 of Income Tax Act 1961. The CIT(A) in his appellate order for Asstt. Year 2011-12 has held as under: “11. I have considered the assessee’s submission, remand report of the AO and assessment order passed by the AO. It is seen that the assessee trust has been formed by Shri Vasantrao Gopalrao Ghonge and the assessee is not a trust in the real sense. The receipts of the trust found during the search action u/s. 132 of the I.T. Act were attributed to Shri Vasantrao Gopalrao Ghonge and the same has been brought to tax by assessing in the hands of the Shri Vasantrao Gopalrao Ghonge, in the individual case. Since the AO has made additions in the assessment order u/s. 143(3) in the case of Bhaktavatsal Sadguru Yogiraj Vasantrao Gopalrao Ghonge Maharaj Nyas on protective basis, the same are ordered to be deleted considering that the same addition made by the AO on substantive basis has been confirmed in the case of Shri Vasantrao Gopalrao Ghonge in the order referred supra.” 6. The counsel of appellant before us has made submission which is reproduced hereunder: 5 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR “A) Trust is holding registration under Bombay Charitable Trust Act 1950 vide Registration No.E-330 (Wardha) dated 25/04/2006. (P. 1) B) Trust is holding Registration u/s 12A of I.T. Act 1961 dated 21/11/2006 with effect from 01/04/2006. Its Registration No. is 31/59 - 06-07. It is not disturbed and is valid as on date. (P. 2) C) In the course of search no evidence was found to show any violation of provisions of sec. 13 of I.T. Act 1961. It is not so alleged even in assessment order. D) Regular Financial Statements/Books of account are prepared and Audited Financial Statements are submitted before Statutory Authorities being Income Tax and Charity Commissioner. (P. 3 – 10) E) Transactions as recorded in financial statements are accepted and infact income is determined considering the transaction as are available in financial statement. F) Receipts and expenditure in financial statement is as per objectives of Charitable Trust. G) Shri Vasant Ghonge has expired on 13/12/2017. H) In the case of Trust Exemption u/s 11 of I.T. Act 1961 is granted by Department in regular returns submitted for Asstt. Year 2018-19, 2019-20 & 2020-21. Copies of return and intimation u/s 143(1) submitted. 6 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR I) Nothing adverse is on record to deny benefit of exemption u/s 11 of I.T. Act 1961. J) Fresh Registration u/s 12A granted for Asstt. Year 2022-23 to 2026-27 in Form 10AC vide order of registration dated 23/09/2021. (P. 11 to 13) K) Form 10B submitted in terms of which assessee has applied income in excess of 85% during the year on objects of trust and thus income as shown in the return at NIL deserves to be accepted. (P. 4)” 7. The learned DR referred to various facts observed in assessment order. The learned DR placed strong reliance on the order of lower authorities. 8. We have considered the submission made by both the parties and perused the evidence on record. In the course of appellant proceedings concise grounds of appeal have been submitted and same are as under. A) Income of assessee Charitable Trust be determined at Rs.NIL granting benefit of income being exempt u/s 11 of I.T. Act 1961. B) The assessee be held as a Charitable Institution income of which is eligible for benefit u/s 11 of I.T. Act 1961. 9. In the assessment framed A.O. has computed the income to be brought to tax at Rs.5,21,349/- before granting benefit of section 11 of I.T. Act 1961. After computing income at Rs.5,21,349/- it has been concluded that same is assessed at the hands of trust on protective basis in view of same being 7 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR assessed by A.O. at the hands Shri Vasantrao Ghonge. The CIT(A) in his appellate order has deleted the addition made by A.O. in hands of appellant trust by observing that addition made in hands of Shri Vasantrao Ghonge on substantive basis is confirmed. The CIT(A) at para 11 has observed that appellant is not a trust in the real sense. Appellant has objected to such findings in its appeal and contended that appellant is genuine and bonafide trust carrying on activities as per objectives of trust. 10. The appellant trust is registered under the Bombay Charitable Trust Act 1950 and is holding Registration No.E-330 dated 25/04/2006. Trust is registered u/s 12A of I.T. Act 1961 by order of Commissioner of Income Tax- 2, Nagpur at Sr. No.31/59/0607. The appellant trust has submitted regular returns claiming exemption u/s 11 before the date of search at premises of Shri Vasantrao Ghonge on 28/01/2011. The appellant trust has submitted regular returns of income year after year and audited financial statements have been submitted along with income tax returns as well as with various statutory authorities like Charity Commissioner. Perusal of assessment order indicates that the transaction as per income and expenditure account have not been faulted and income has been determined on the basis of transaction as recorded in financial statement of trust. It is not alleged in the case of appellant that Shri Vasantrao Ghonge has taken any benefit from the appellant trust. It is noted that the trust is continuing its activity since Asstt. 8 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR Year 2007-08 and has been submitting regular returns of income much before the date of search. Appellant has maintained regular books of account and obtained audited financial statements as well statutory audit reports for eligibility of its income being exempt u/s 11 of I.T. Act 1961. The appellant trust is holding registration u/s 12A of I.T. Act 1961 since 01/04/2006 and same is subsisting till date. Even after search conducted at the premises of Shri Vasantrao Ghonge on 28/01/2011 no adverse action is taken in respect to registration held by trust for seeking benefits u/s 11 of I.T. Act 1961. It is noted that trust is continuing its activities till date. In the case of appellant it is seen that the trust has submitted the returns of income upto Asstt. Year 2021- 22 and income shown after claim of exemption u/s 11 of I.T. Act 1961 has been accepted in case of appellant. Trust has been granted fresh registration for Asstt. Year 2022-23 to 2026-27 based on the appellant trust holding registration from 01/04/2006. It is noted that Shri Vasantro Ghonge has expired on 13/12/2017. Trust is continuing its activities as per objectives of trust after death of late Shri Vasantrao Ghonge. . Returns of income fro Asstt. Year 2018-19 to 2020-21 along with intimation u/s 143(1) of I.T. act 1961 were brought on record to demonstrate genuineness and bonafides of trust. Fixed assets of trust shown in balance sheet are not found be used for benefit of Shri Vasantrao Ghonge. Appellant is holding Registration u/s 12A of I.T. Act 1961 and no violation of any of the provisions of section 13 is alleged in the 9 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR assessment order. In view of there being application of income at more than 85% of receipts of trust no income is exigible to tax at the hands of appellant. In view of above it held that trust is assessable entity and income of trust is to be assessed/determined at the hands of appellant itself. Income of appellant is determined at Rs.NIL as shown in the return considering provisions of section 11 of I.T. Act 1961. Order of CIT(A) is reversed/modified in terms of discussion made hereinabove. Grounds of appeal of appellant are allowed. 11. Considering the evidence on record observation of Learned CIT(A) the trust is not a trust in real sense is held to be unjustified. It is evident from the computation of income and acknowledgement of return that during the year under consideration appellant has receipts of Rs.19,51,005/- including donation shown directly in the balance sheet. The application of income including capital expenditure as is evident from the computation income is Rs.20,06,130/-. ITA No.: 036&37/Nag/2017 : 12. These appeals by appellant are against order of learned Commissioner of Income Tax (Appeals)-3, Nagpur for Asstt. Year 2007-08 & 2008-09 dated 24/11/2016 in Appeal Nos. CIT(A)-3/252 & 253/2013-14. The grounds raised in both the appeals are similar. Grounds of appeal for Asstt. Year 2007-08 are as under: 10 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR “i) The learned Commissioner of Income Tax (Appeals)-3, Nagpur has not considered the status of the appellant as registered charitable trust in view of the provisions of section 11 of the Income Tax Act, 1961. The status of the appellant trust should have been granted as registered trust but while deciding the issue the learned Commissioner of Income Tax (A)-3, Nagpur has not considered the same. ii) The genuine registered trust is all the while in existence. iii) The activities of the appellant trust are carried out in accordance to its objectives. iv) the learned CIT(A) – 3 did not considered the wrongful and unlawful denial of exemption u/s 11 of the I.T. Act, 1961 by the learned Assessing Officer because no property or income of the appellant trust is appropriated to enure benefits to the persons detailed in sect ion 13(3) as per the provision of section 13(1)(c) or because the investment of the funds of the appellant are not made in contravention of the provisions of section 13(1)(d) of the Act. v) Audit reports of the trust for A.Y. 2006-07 to 2009-10 were duly obtained and were available. vi) The appellant may be allowed to raise any ground / additional ground during the course of appeal proceedings.” 13. The appellant trust is registered u/s 12A of I.T. Act 1961. It is thus eligible for claim of exemption u/s 11 of I.T. Act 1961. Appellant has not 11 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR submitted regular return of income for Asstt. Year 2007-08 and in respect to Asstt. Year 2008-09 had submitted regular return of income u/s 139(1) on 07/01/2009. In the case of appellant notice u/s 153C of I.T. Act 1961 for Asstt. Year 2007-08 & 2008-09 has been issued on 31/01/2013 pursuance to search action at the premises of Shri Vasantrao Gopalrao Ghonge trustee of trust on 28/01/2011. Pursuance to notice issued u/s 153C appellant had submitted return of income for Asstt. Year 2007-08 & 2008-09 on 05/03/2013 claiming income to be exempt u/s 11 of I.T. Act 1961. In assessment framed u/s 153C r.w.s. 143(3). A.O. has not accepted the claim of exemption u/s 11 of I.T. Act 1961. A.O. in the assessment framed has computed the income on the basis of financial statement without making any addition except for denying exemption u/s 11 of I.T. Act 1961 observing that appellant does not deserve to claim tax exemption in the name of trust. A.O. has further concluded that the income is determined on protective basis as same is being assessed on substantive basis at the hands of Shri Vansantrao Gopalrao Ghonge. 14. In respect to order passed by A.O. appellant has filed appeal before Learned CIT(A). The Learned CIT(A) vide order dated 24/11/2016 for both the assessment years has deleted protective assessment made at the hands of trust by observing that substantive addition made by A.O. at the hands of 12 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR Shri Vasantrao Ghonge has been confirmed in the appellate proceedings by CIT(A) in appellate order passed in the case of Shri Vasantrao Ghonge. 15. Aggrieved by order of CIT(A) for both assessment years appellant is in appeal before us on grounds of appeal mentioned hereinabove. 16. Ground No.1 to 5 are inter linked, inter relate and relates to challenging the order of CIT(A) denying exemption u/s 11 of Income Tax Act 1961. The CIT(A) in his appellate order for Asstt. Year 2007-08 has held as under: “11. I have considered the appellant’s submission, remand report of the AO and assessment order passed by the AO. It is seen that the appellant trust has been formed by Shri Vasantrao Gopalrao Ghonge and the appellant is not a trust in the real sense. The receipts of the trust found during the search action u/s. 132 of the I.T. Act were attributed to Shri Vasantrao Gopalrao Ghonge and the same has been brought to tax by assessing in the hands of the Shri Vasantrao Gopalrao Ghonge, in the individual case. Since the AO has made additions in the assessment order u/s. 143(3) in the case of Bhaktavatsal Sadguru Yogiraj Vasantrao Gopalrao Ghonge Maharaj Nyas on protective basis, the same are ordered to be deleted considering that the same addition made by the AO on substantive basis has been confirmed in the case of Shri Vasantrao Gopalrao Ghonge in the order referred supra.” Similar order is passed by Learned CIT(A) in Asstt. Year 2008-09. 17. The counsel of appellant before us has made common submission which is reproduced hereunder: 13 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR “A) Various observations on merits of trust being not valid by A.O. & CIT(A) are unjustified. B) Reliance on Gist of submission for Asstt. Year 2011-12 to submit that trust is valid trust and its income is exempt u/s 11 in view of appellant having registration u/s 12A of I.T. Act 1961. C) Trust has submitted regular return u/s 139(1) for Asstt. Year 2008-09 on 07/01/2009. It is not case of any abated assessment. No incriminating evidence found to deny benefit u/s 11 of I.T. Act 1961. In u/s 53C assessment benefit of exemption u/s 11 cannot be denied. D) CBDT Circular No.7/2020 dated 04/03/2020 clarification on provisions of the Direct Tax Vivad Se Vishwas Bill 2020 at Q. No.35 it has been clarified that on settlement of dispute related to substantive addition A.O. shall pass rectification order deleting the protective addition.” 18. We have considered the submission made by both the parties. It is seen that A.O. in assessment framed u/s 143 r.w.s. 153C has denied the exemption claimed u/s 11 by appellant trust and determined the income of appellant trust at Rs.17,44,572/- in Asstt. Year 2007-08 and Rs.9,12,290/- in Asstt. Year 2008-09 on protective basis whereas same amount was added by A.O. in hands of Shri Vasantrao Ghonge on substantive basis. CIT(A) in his appellate order has deleted the addition made by A.O. on protective basis in 14 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR hands of appellant trust by observing that addition has been upheld by him at the hands of Shri Vasantrao Ghonge on substantive basis. 19. In the case of appellant in Asstt. Year 2011-12 in ITA No.40/2017 we have held that trust is a valid charitable trust and income is eligible for being exempt u/s 11 of I.T. Act 1961. Facts and circumstances in these years are similar and identical and thus we hold that appellant trust is valid charitable trust eligible for its income being exempt u/s 11 of I.T. Act 1961. 20. The assessment proceedings for Asstt. Year 2007-08 & 2008-09 in case of Shri Vasantrao Ghonge were finalized u/s 143(3) r.w.s. 153A vide order dated 18/03/2013. Addition made on substantive basis in case of Shri Vasantrao Ghonge is settled under Vivad-se-Vishwas Scheme and Form 5 was issued on 24/12/2020. The CBDT in circular No.7/2020 dated 04/03/2020 issued clarification on provisions of Direct Tax Vivad-se-Vishwas Bill 2020. At Q.No.35 it has been clarified that on settlement of dispute related to substantive addition A.O. shall pass rectification order deleting protective addition. In the case of appellant CIT(A) has already ordered deletion of protective addition made at hands of appellant. Thus no further action is required. The answer to question No.35 of CBDT Circular referred to hereinabove is reproduced for ready reference. “Question No.35: If there is substantive addition as well as protective addition in the case of same appellant for different assessment year, 15 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR how will that be covered? Similarly if there is substantive addition in case of one appellant and protective addition on same issue in the case of another appellant, how will that be covered under Vivad-se- Viashwas? Answer: If the substantive addition is eligible to be covered under Vivad se Vishwas, then on settlement of dispute related to substantive addition AO shall pass rectification order deleting the protective addition relating to the same issue in the case of the appellant or in the case of another appellant.” 21. In view of Circular of CBDT referred to hereinabove issue as to merits of grant of benefit of exemption u/s 11 of I.T. Act 1961 and protective assessment has become academic in nature. In view of above we do not engage in adjudicating various grounds of appeal as raised in the appeal filed by appellant being of academic nature except for holding that appellant is a valid charitable institution as held in appeal for Asstt. Year 2011-12. 22. The addition made by A.O. on protective basis is already deleted and substantive addition is already settled under Vivad-se-Vishwas Scheme. In view of above appeal of appellant is disposed-off as per discussion made hereinabove and is partly allowed. ITA No.: 151/152/Nag/2015: 23. The appeal filed by appellant for A.Y. 2009-10 and 2010-11 is in respect to common order passed u/s 263 of I.T. Act 1961 by Commissioner of Income Tax Central on 17/03/2015. The grounds of appeal of appellant for A.Y. 2009- 16 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR 10 & 2010-11 are similar. Grounds of appeal for Asstt. Year 2009-10 are as under: “i) The order passed under section 263 of I.T. Act, 1961 is illegal, invalid and bad in law. ii) The order passed by A.O. u/s. 143(3) r.w.s. 153C of I.T. Act 1961 was after due enquiries and after obtaining complete required details in respect to expenditure incurred for achieving the objects of trust and thus learned CIT erred in holding that order passed by A.O. is erroneous and prejudicial to the interest of revenue. iii) The ld. CIT erred in setting aside the assessment with direction to make fresh assessment when complete details were on record. iv) The various observations/directions in the order under 263 of I.T. Act 1961 for computing assessable income at the hands of assessee are unjustified, unwarranted and bad in law. v) Any other ground that shall be taken at the time of hearing.” 24. Brief facts of the case: In case of appellant order u/s 263 has been passed. In the order u/s 263 of I.T. Act 1961 it has been held that A.O. ought to have computed the taxable income of assessee at commercial principle by invoking the provisions of Chapter IV (section 28 to 44) under the head “Income from Business” and ought to have disallowed the expenditure which was not spent wholly and exclusively for earning the income receipt. It has 17 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR been concluded that assessment for both assessment years are set aside for framing fresh assessment after giving opportunity of being heard. 25. The counsel of appellant has submitted that order passed by Commissioner of Income Tax Central u/s 263 is bad in law as order passed by A.O. in the case of assessee was neither erroneous nor prejudicial to the interest of revenue. It is submitted that the exercise of power u/s 263 by CIT, Central is without jurisdiction and order passed u/s 263 deserves to be cancelled. The appellant has made submission in the course of appellate proceedings and same are as under: “A) Hon’ble CIT (Central), Nagpur passed order u/s 263 setting aside assessment framed u/s 143(3) r.w.s. 153C to make fresh assessment as A.O. has failed to compute taxable income on commercial principles by invoking provision of Chapter IV (sec. 28 to 44) under the head Income from Business/Profession. (Para 4.4 of order u/s 263) B) In the case of assessee notice u/s 153C was issued pursuance to action u/s 132(1) on Late Shri Vasantrao Ghonge on 28/01/2011. A.O. framed assessment of Late Shri Vasantrao Ghonge and assessee trust on same date 18/03/2013 for various assessment years of block period. C) Assessee trust is registered u/s 12A. (P- 103) A.O. has not allowed exemption u/s 11 and determined income at Rs.3,64,340/- & Rs.11,21,508/- for Asstt. Years 2009-10 & 18 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR 2010-11 respectively on the basis of audited financial statement of assessee trust keeping in mind commercial principles.. A.O. concluded that net income computed at the hands of assessee trust is liable to be assessed at the hands of Late Shri Vasantrao Ghonge on substantive basis and same income is assessable at the hands of assessee trust on protective basis. He therefore framed assessment at the hands Late Shri Vasantrao Ghonge on substantive basis and at the hands of assessee trust on protective basis. D) Hon’ble CIT (Central), Nagpur held that order passed by A.O. in the case of assessee trust is erroneous and prejudicial to the interest of revenue. Substantive addition has not been faulted or held to be erroneous and prejudicial to interest of revenue. On above factual position, protective addition/order cannot be termed as erroneous and prejudicial to the interest of revenue to exercise power u/s 263 of I.T. Act 1961. E) Substantive addition at the hands of Late Shri Vasantrao Ghonge for Asstt. Years 2009-10 & 2010-11 has been settled under Vivad Se Vishwas Scheme. ITAT order in the case of Late Shri Vasantrao Ghonge in ITA Nos.35 & 36 for Asstt. Years 2009-10 & 2010-11 where in appeals are withdrawn pursuance to matter having been settled under Vivad Se Vishwas Scheme 2020. (P- 64 - 101) F) CBDT Circular No.7/2020 dated 04/03/2020 clarification on provisions of the Direct Tax Vivad Se Vishwas Bill 2020 at Q. 19 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR No.35 it has been clarified that on settlement of dispute related to substantive addition A.O. shall pass rectification order deleting the protective addition. G) A.O. denied benefit of exemption u/s 11 of I.T. Act 1961 and computed income of assessee trust on commercial principles after allowing expenditure incurred by assessee trust. A.O. has assessed corpus donation shown in balance sheet as revenue income. A.O. has computed i ncome of trust by taking receipts and expenditure incurred by trust on commercial principles as per audited financial statement. Observation of Hon’ble CIT (Central), Nagpur that A.O. failed to compute the taxable income of the assessee on commercial principles is factually incorrect. Financial Statement of Trust A. Yr. 2009-10 (P- 1 to 3) A. Yr. 2010-11 (P- 4 to 5) H) Assessee trust is registered u/s 12A of I.T. Act 1961. Provisions of sec. 28 to 44D are inapplicable for determining income in the case of Charitable Institutions holding registration u/s 12A of I.T. Act 1961. Order passed u/s 263 holding that provisions of sec. 28 to 44D not having been applied by A.O. make order of A.O. to be erroneous is unjustified and unsustainable. Reliance on: i) ITAT order in ITA Nos.2733, 2734/Del/2018 in the case of United Educational Society vide order dated 28/06/2019. [Reported at 74 ITR 0011 (Del.)] 20 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR I) A.O. has determined income of assessee trust in following assessment years on commercial principles after allowing expenditure incurred by trust while framing assessment u/s 143(3) r.w.s. 153C on 18/03/2013. II) Asstt. Years Income Determined 2007-08 17,44,570 (P- 6 to 11) 2008-09 9,12,290 (P- 12 to 17) 2009-10 3,64,340 2010-11 11,21,510 Hon’ble CIT (Central), Nagpur has exercised jurisdiction u/s 263 in respect to Asstt. Years 2009-10 & 2010-11. Revenue has accepted action of A.O. in Asstt. Years 2007-08 & 2008- 09. CIT (Central) having accepted orders of A.O. for Asstt. Year 2007-08 and 2008-09 on similar basis being income determined on commercial principles could not have concluded that for Asstt. Years 2009-10 and 2010-11 income is not determined on commercial principles. On above factual position, order passed u/s 263 by Hon’ble CIT (Central), Nagpur is unjustified and unsustainable. Reliance on i) Hon’ble High Court of Judicature at Bombay, Nagpur Bench, Nagpur in ITA No.37 of 2019 in the case of M/s. Eureka Medicare Pvt. Ltd. dated 15/01/2021 J) Assessment of Late Shri Vasantrao Ghonge - Asstt. Year Income of Total Trust Income included assessed 21 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR _________ _________ _________ 2007-08 17,44,572 (P- 27) 36,88,980 2008-09 9,12,289 (P- 40) 39,42,950 2009-10 3,64,342 (P- 50) 19,68,590 (P-66) [V & V form] 2010-11 11,21,508 (P- 62) 41,75,610 (P-84) [V & V form] K) Order u/s 263 of I.T. Act 1961 came to be passed on account of audit objection which was not accepted by A.O. No order u/s 263 of I.T. Act 1961 can be passed. Reliance on: i) (2018) 103 CCH 0112 (Mum.) CIT vs. Maharashtra Hybrid Seeds Co. Ltd. ii) (2008) 296 ITR 0238 ( P & H) CIT vs. Sohana Woollen Mills L) Appeal filed by assessee in respect to order passed u/s 143(3) r.w.s. 153 on 26/04/2013 for Asstt. Years 2009-10 & 2010-11 are pending for disposal even as on date. No order u/s 263 can be passed in respect to pending matter before CIT(A). Reliance on: i) 418 ITR 0723 (All.) CIT vs. Vam Resorts & Hotels Pvt. Ltd. ii) 409 ITR 567 (Mad.) Renuka Philip vs. ITO. iii) 98 TTJ 628 (Jodhpur) Harisingh & Associates (AOP) vs. ITO” 22 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR 26. The learned DR relied upon the order passed by CIT, Central u/s 263 and submitted that learned CIT has correctly exercised power u/s 263 and order passed by A.O. is erroneous and prejudicial to the interest of revenue. 27. We have considered the submissions made by both the parties and perused the evidence on record. In the case of appellant assessment has been framed u/s 153C r.w.s. 143(3) of I.T. Act 1961 by Dy. Commissioner of Income Tax, Central Circle 1(1), Nagpur on 18/03/2013. In the assessment framed income of appellant has been computed on the basis of financial statement as submitted along with the return of income without pointing out any mistake or defect in the financial statement submitted by appellant. A.O. however has concluded that appellant trust does not deserve to claim tax exemption in the name of trust. A.O. has concluded that as substantive addition has been made at the hands of Shri Vasantrao Ghonge trustee of trust in respect to income determined in the case of trust is being assessed on protective basis in hands of trust. Various expenditure incurred and shown in income and expenditure account has been allowed without inviting any adverse observation. It is noted that income has been determined in the case of assessee pursuance to return filed in response to notice issued u/s 153C of I.T. Act 1961. In the assessment order it is not found that any incriminating evidence has been found in respect to claim of expenditure in the income and expenditure account. Neither in the order u/s 263 there is any mention as to 23 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR incriminating material found in respect to expenditure incurred and claimed by Trust. 28. The appeal of appellant is heard along with appeals in the case of appellant for assessment years 2007-08, 2008-09 and 2011-12. It is seen from the appeals for the above mentioned assessment years that A.O. has framed assessment in the case of appellant trust for all the five assessment years on the same date i.e. on 18/03/2013. The assessment orders passed in the case of appellant for Asstt. Years 2007-08 to 2011-12 are similarly worded except variation in quantum of receipts and expenditures as per income and expenditure account as shown in the financial statement of the respective assessment years. The learned CIT, Central has passed order u/s 263 in respect to Asstt. Years 2009-10 and 2010-11even though assessment orders for other assessment years were available with him in which no fault has been found in the assessment framed. Similar claim of expenditure in preceding and subsequent year has achieved finality being allowable deduction for determining income of trust. Expenses in these two years cannot be disputed for reasons given in order u/s 263 of I.T. Act 1961. 29. It is noted from the financial statement that expenditure incurred by appellant trust is normal expenditure incurred on the objects of trust and no incriminating material was found in the search carried out at the premises of Shri Vasantrao Ghonge, pursuance to which notice u/s 153C has been 24 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR issued. In the case of charitable institution it is undisputed fact on record that income has to be determined in terms of provisions of section 11 of I.T. Act 1961. The expenditure incurred on objects of trust has to be allowed as deduction from the gross receipt of charitable institution. The Hon’ble ITAT, Delhi Bench in the case of United Educational Society & Ors. Reported at 74 ITR 0011 (Del) has held that Chapter VID is not applicable in respect to charitable trust and institution whose income to be computed u/s Chapter III. In view of this factual position allowance of expenditure incurred and shown in income and expenditure account cannot be faulted. A.O. has correctly allowed claim of expenditure for determining income of trust. A.O. has taken only possible view of the matter while determining the income at the hands of appellant. 30. It is noted that the income assessed in the case of appellant assessment framed is on protective basis and income computed is assessed on substantive basis in the case of Shri Vasantrao Ghonge by same A.O. vide order dated 18/03/2013. The income assessed on substantive basis at the hands of Late Shri Vasantrao Ghonge is after deducting the expenditure incurred and shown in Income and expenditure account of trust from the gross receipts. The learned CIT Central has found no fault with allowability of same expenditure in the case of Shri Vasantrao Ghonge where income has been determined on substantive basis even though case of Shri Vasantrao Ghonge 25 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR was under his charge. It is also noted that the income determined on substantive basis in the case of Shri Vasantrao Ghonge has been settled under Vivad se Vishwas Scheme by Shri Vasantrao Ghonge for Asstt. Years 2009-10 and 2010-11 and form No.5 has been issued in the case of Shri Vasantrao Ghonge for Asstt. Years 2009-10 and 2010-11 on 25/11/2020 which is placed on record. The CBDT Circular No.7 dated 04/03/2020 issued clarification on provisions of Direct Tax Vivad se Vishwas Bill 2020, Answer to Question No.35 it has been clarified that on settlement of dispute relate to substantive addition A.O. shall pass rectification order deleting protective addition. In view of discussion made hereinabove the order passed by A.O. in no manner of consideration can be considered as erroneous or prejudicial to the interest of revenue. The order passed by A.O. not being erroneous or prejudicial to the interest of revenue Learned CIT Central ought not to have set aside the assessment framed u/s 143 r.w.s. 153C in case of appellant by his order u/s 263 dated 17/03/2015. 31. Considering the facts and circumstances in the case of appellant and considering the evidence on record and discussion made hereinabove we hold that order passed by CIT u/s 263 of I.T. Act 1961 for A.Y. 2009-10 & 2010-11 is not in accordance with law. We are in agreement with various submissions of appellant noted in this order at para 25. Respectfully following judicial precedents discussed in submission of appellant. We are of the view 26 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR that order passed u/s 263 is bad in law. In view of above the order passed by CIT u/s 263 of I.T. Act 1961 for A.Y. 2009-10 and 2010-11 is quashed and appeal of appellant is allowed. ITA 38&39/Nag/2017: 32. The appeals filed by appellant are originating from order passed by A.O. giving effect to order passed u/s 263 by CIT (Central) on 17/03/2015. A.O. has passed order u/s 143(3) r.w.s. 263 of I.T. Act 1961 on 29/01/2016. The present appeals are in respect to assessment proceedings initiated pursuance to order u/s 263 of I.T. Act 1961. The order passed by A.O. is on the basis of assumption of jurisdiction from the order passed u/s 263 by CIT Central on 17/03/2015. The appeals filed by appellant in respect to order u/s 263 of I.T. Act 1961 are allowed and order passed by CIT Central u/s 263 is set aside/quashed. 33. In the case of appellant order passed u/s 263 on the basis of which assessment framed itself is quashed/set aside. Consequent orders giving effect to order u/s 263 are also liable to be set aside. In view of above further proceedings initiated from the order passed by CIT, Central u/s 263 of I.T. Act 1961 also deserved to be cancelled. Thus order passed by A.O. u/s 143(3) r.w.s. 263 on 29/01/2016 and order of CIT(A) dated 28/11/2016 are set aside and appeals of appellants are allowed. 27 ITA 40,36,37,151,152,38 & 39/NAG/2017 BHAKTVASTAL SADGURU YOGIRAJ VASANTRAO GOPALRAO GHONGE MAHARAJ NYAS VS DCIT,CC-1(1), NAGPUR 34. In the result, the appeals of assessee are allowed. Order pronounced in the open court on 28/06/2022 Sd/- Sd/- Sd/- (ARUN KHODPIA) ACCOUNTANT MEMBER Sd/- (SANDEEP GOSAIN) JUDICIAL MEMBER Nagpur DATED: 28 /06 /2022 *Mishra Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order Assistant Registrar ITAT, Nagpur