INDIAN FOOTWEAR COMPONENTS MANUFACTURES ASSOCIATION, NOIDA V. JCIT, RANGE- 1, NOIDA

ITA 4093/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5372 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 20-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S N MEENA
• Assessee Lawyers: S KRISHNAN
• Keywords: Depreciation; Opportunity of being heard; Maximum Marginal Rate; Capital receipt
• Section: 143(3); 12AA; 201; 148; 12; 11

Judgement Text

1 ITA NOS. 4093 & 4094/DEL/2017 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. NO. 4093/DEL/20 17 (A.Y. 2007-08) AND I.T.A. NO. 4094/DEL/20 17 (A.Y. 2011-12) INDIAN FOOTWEAR COMPONENTS MANUFACTURES ASSOCIATION, A-10A, FDDI COMPLEX, SECTOR 24, NOIDA 201 301. (PAN : AABFI 0367 F) (APPELLANT) VS J CIT, RANGE 1, NOIDA ( RESPONDENT) APPELLANT BY SHRI S. KRISHNAN, ADV. RESPONDENT BY SHRI S. N. MEENA, SR. D.R. ORDER PER SUCHITRA KAMBLE, JM THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS]-I, NOIDA DATED 30.03.2017 FOR ASSESSMENT YEARS 2007-08 AND 2011-12. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- ITA NO.4093/DEL/2017 1. THAT THE ORDER PASSED LD. CIT(A) ENHANCING THE ASSESSMENT MADE BY LD. AO FOR ASSESSMENT YEAR 2007-08 IS BAD AND IL LEGAL IN LAW AND ON THE FACTS OF THE CASE IN AS MUCH AS - A. THE LD. CIT(A) HAS FAILED TO DISCHARGE HIS DUTIES A S APPELLATE AUTHORITY AS IMPUGNED ORDER HAS BEEN PASSED WITHOUT ADJUDICATING ON THE GROUNDS OF APPEAL CHALLENGING THE ORDER OF A SSESSMENT BEFORE HIM; DATE OF HEARING 23.01.2020 DATE OF PRONOUNCEMENT 18.02.2020 2 ITA NOS. 4093 & 4094/DEL/2017 B. THE LD. CIT(A) HAS PASSED THE IMPUGNED APPELLATE O RDER ENHANCING THE ASSESSMENT U/S 251(1)(A) OF THE INCOME TAX ACT, 1961 WITHOUT AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE APPE LLANT, AS MANDATED IN THE RELEVANT SECTION; C. THE LD. CIT(A) HAS PASSED APPELLATE ORDER STATING T HE FACTS WHICH ARE NEITHER CONNECTED TO THE CASE OF APPELLANT NOR ARE IN CONFORMITY WITH THE ASSESSMENT ORDER OR MATERIAL PLACED BEFORE THE CIT(A) IN COURSE OF APPELLATE PROCEEDINGS; D. THE LD. CIT(A) HAS MADE OBSERVATIONS AND ARRIVED AT DECISION IN THE IMPUGNED ORDER WHICH IS NOT CONNECTED WITH THE FACT S BUT ARE MORE RELEVANT FOR SCHOLARLY TREATISE ON THE TAXATION OF TRUSTS; E. THE CIT(A) HAS PASSED THE IMPUGNED ORDER ON 30 TH MARCH, 2017 WHEREAS NOTICE ISSUED BY HIS OFFICE HAD ASKED THE A PPELLANT TO ATTEND HIS OFFICE ON 31 ST MARCH, 2017 IN CONNECTION WITH THE APPELLATE PROCEEDINGS PENDING BEFORE HIM FOR THE RE LEVANT ASSESSMENT YEAR; F. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT WHILE T AXING THE GROSS RECEIPTS AMOUNTING TO RS. 22,73,837/- AND DONATIONS AMOUNTING TO RS. 1,32,00,000/- WITHOUT APPRECIATING THE LAW AND FACTS CORRECTLY IN THIS REGARD AND, WHILE DOING SO, HAS FAILED TO A PPRECIATE THAT THE GROSS RECEIPTS AND DONATIONS AS PER INCOME & EXPEND ITURE ACCOUNT FOR THE RELEVANT YEAR WERE RS. 12,74,909/- AND RS. 732540/- RESPECTIVELY. 2. THAT LD. AO HAS ERRED IN PASSING THE ASSESSMENT ORD ER U/S 143(3)/147 MAKING AN ADDITION OF RS.5,92,369/- DISREGARDING TH E FACT THAT APPELLANT IS A MUTUAL BENEFIT ASSOCIATION, HENCE TH E RECEIPTS OF IT DID NOT FALL UNDER CHARGING SECTION. 3. THAT LD. AO HAS ERRED IN PASSING THE ASSESSMENT ORD ER A. WITHOUT GIVING ALLOWANCE OF DEPRECIATION, WHICH IS STATUTORY CLAIM EVEN THOUGH NOT CLAIMED IN THE INCOME & EXPENDITURE ACCOUNT; B. ADDING AMOUNT OF MEMBERSHIP FEE OF RS. 25,000/- TWI CE; AND C. HOLDING LIFETIME MEMBERSHIP FEE AS REVENUE RECEIPT INSTEAD OF CAPITAL RECEIPT 4. THE LD. AO HAS ERRED IN CHARGING THE TAX ON SUCH AD DITIONS AT MAXIMUM MARGINAL RATE WITHOUT APPRECIATING THAT THE REGISTERED SOCIETY IS CONSIDERED AS ASSOCIATION OF PERSONS, TO WHICH P ROVISIONS OF SECTION 167B OF THE INCOME TAX ACT, 1961 ARE NOT APPLICABLE , AND SUCH REGISTERED SOCIETY IS ELIGIBLE FOR THE SLAB RATE OF TAX ON ITS TAXABLE INCOME. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, DELETE, M ODIFY OR SUPPLEMENT ANY GROUND OF THE APPEAL. 3 ITA NOS. 4093 & 4094/DEL/2017 ITA NO.4094/DEL/2017: 1. THAT THE ORDER PASSED LD. CIT(A) ENHANCING THE ASS ESSMENT MADE BY LD. AO FOR ASSESSMENT YEAR 2011-12 IS BAD AND ILLEG AL IN LAW AND ON THE FACTS OF THE CASE IN AS MUCH AS - A. THE LD CIT(A) HAS FAILED TO DISCHARGE HIS DUTIES AS APPELLATE AUTHORITY AS IMPUGNED ORDER HAS BEEN PASSED WITHOUT ADJUDICAT ING ON THE GROUNDS OF APPEAL CHALLENGING THE ORDER O, ASSESSME NT BEFORE HIM; B. THE LD. CIT(A) HAS EXCEEDED HIS POWER WHILE ORDERIN G WITHDRAWAL OF EXEMPTION U/S 12AA OF THE INCOME TAX ACT, 1961 IN T HE ABSENCE OF ANY ORDER OF CANCELLATION OR REVOCATION BY T E COMMISSI ONER OF INCOME TAX (EXEMPTION), WHO IS EMPOWERED TO PASS ANY SUCH ORDE R U/S 12AA(3) OR 12AA(4) OF THE INCOME TAX ACT, 1961; C. THE LD. CIT(A) HAS PASSED APPELLATE ORDER STATING T HE FACTS WHICH ARE NEITHER CONNECTED TO THE CASE OF APPELLANT NOR ARE IN CONFORMITY WITH THE ASSESSMENT ORDER OR MATERIAL PLACED BEFORE THE CIT( A) IN COURSE OF APPELLATE PROCEEDINGS, D. THE LD. C1T(A) HAS MADE OBSERVATIONS AND ARRIVED AT DECISION IN THE IMPUGNED ORDER WHICH IS NOT CONNECTED WITH THE FACT S BUT ARE MORE RELEVANT FOR SCHOLARLY TREATISE ON THE TAXATION OF TRUSTS; E. THE CIT(A) HAS PASSED THE IMPUGNED ORDER ON 30 TH MARCH, 2017 WHEREAS NOTICE ISSUED BY HIS OFFICE HAD ASKED THE A PPELLANT TO ATTEND HIS OFFICE ON 31 ST MARCH, 2017 IN CONNECTION WITH THE APPELLATE PROCEEDINGS PENDING BEFORE HIM FOR THE RELEVANT ASS ESSMENT YEAR; F. THE LD. C1T (A) HAS ERRED IN LAW AND ON FACT WHILE TAXING THE GROSS RECEIPTS AMOUNTING TO RS. 59, 23,690/- AND DONATION S AMOUNTING TO RS.1,32,00,000/- WITHOUT APPRECIATING THE LAW AND F ACTS CORRECTLY IN THIS REGARD AND, WHILE DOING SO, FAILED TO APPRECIA TE THAT THE GROSS RECEIPTS AND DONATIONS AS PER INCOME & EXPENDITURE ACCOUNT FOR THE RELEVANT YEAR WERE RS. 2273837/- AND RS. 1165651/- RESPECTIVELY. 2. THAT LD. AO HAS ERRED IN APPRECIATING THAT THE APPE LLANT IS A MUTUAL BENEFIT ASSOCIATION, HENCE THE RECEIPTS OF IT DID N OT FALL UNDER CHARGING SECTION. 3. THAT LD. AO HAS ERRED IN PASSING THE ASSESSMENT ORD ER U/S 143(3) MAKING AN ADDITION OF RS. 7,46,080/- WITHOUT APPREC IATING THE FACT THAT FAILURE TO FILE FORM 1, DECLARATION FOR SETTING APA RT SURPLUS, IS MERELY TECHNICAL AND CANNOT BE BASIS FOR REFUSAL TO ALLOW CLAIM OF EXEMPTION, WHICH WAS OTHERWISE PERMISSIBLE. 4 ITA NOS. 4093 & 4094/DEL/2017 4. THE LD. AO HAS ERRED IN CHARGING THE TAX ON SUCH AD DITIONS AT MAXIMUM MARGINAL RATE WITHOUT APPRECIATING THAT THE REGISTERED SOCIETY IS CONSIDERED AS ASSOCIATION OF PERSONS, TO WHICH P ROVISIONS OF SECTION 167B OF THE INCOME TAX ACT, 1961 ARE NOT APPLICABLE , AND SUCH REGISTERED SOCIETY IS ELIGIBLE FOR THE SLAB RATE OF TAX ON ITS TAXABLE INCOME. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, DELETE, M ODIFY OR SUPPLEMENT ANY GROUND OF THE APPEAL. 3. THE ASSESSEE SOCIETY WAS GRANTED REGISTRATION U /S 12AA W.E.F. 2008-09. THE ASSESSEES CASE WAS RE-OPENED U/S 148 AND THE A SSESSING OFFICER OBSERVED THAT THE ASSESSEE SOCIETY IS NOT ELIGIBLE FOR CLAIM ING EXEMPTION U/S 11 OR 12 AS THE SOCIETY HAS BEEN GRANTED REGISTRATION U/S 12AA OF THE INCOME TAX ACT, 1961 W.E.F A.Y. 2008-09. THEREFORE, THE STATUS OF T HE SOCIETY IS TREATED AS AOP BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS MADE ADDITION OF RS.5,92,369/- AS THE ASSESSEE SOCIETY HAS NOT CLAIM ED THE EARLIER YEAR LOSSES IN ITS RETURN OF INCOME. THEREFORE, LIFETIME MEMBERSHI P WHICH IS DIRECTLY TAKEN IN BALANCE SHEET AND SURPLUS OF RS.5,42,369/- SHOWN IN INCOME AND EXPENDITURE ACCOUNT ARE TO BE TAXED AOP. AS THE ASSESSEE SOCIET Y WAS NOT GRANTED REGISTRATION U/S 12AA OF THE ACT THE ASSESSEE WAS N OT GRANTED BENEFIT U/S 11 OF THE ACT. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) HAS PASSED EX-PARTE ORDER WI THOUT GIVING ANY OPPORTUNITY OF HEARING AND HENCE THE ADDITION MADE BY THE ASSESSING OFFICER. 5. THE LD AR SUBMITTED THAT THE CIT(A) SHOULD HAVE GIVEN OPPORTUNITY OF HEARING BEFORE MAKING ENHANCEMENT OF THE ADDITION. THEREFORE, THE LD AR REQUESTED THAT THE MATTER MAY BE REMANDED BACK TO T HE FILE OF THE CIT(A) AND FRESH HEARING ON MERIT TO BE GIVEN TO THE ASSESSEE. 6. THE LD DR RELIED UPON THE ASSESSMENT ORDER AND T HE ORDER OF THE CIT(A). THE LD DR FURTHER SUBMITTED THAT BEFORE THE CIT(A) THE ASSESSEE HAS NOT APPEARED AND DELIBERATELY NOT AVAILED THE RIGHT OF HEARING. 5 ITA NOS. 4093 & 4094/DEL/2017 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIALS AVAILABLE ON RECORD. FROM THE PERUSAL OF THE ORDER OF THE CIT(A) IT CAN BE SEEN THAT THE CIT(A) HAS NOT GIVEN OPPORTUNITY OF HEARIN G TO THE ASSESSEE BEFORE ENHANCING. AS PER THE PROVISION OF THE INCOME TAX A CT, 1961, THE CIT(A) HAS TO GIVE A PROPER HEARING BEFORE ENHANCING ANY ASSESSME NT, BUT THE CIT(A) FAILED AND HAS OVERLOOKED THE PROVISIONS OF THE INCOME TAX ACT. THEREFORE, IT WILL BE APPROPRIATE TO REMAND BACK THIS ENTIRE ISSUE TO THE FILE OF THE CIT(A) FOR PROPER OBJECTION AFTER GIVING HEARING TO THE ASSESSEE. BOT H THE APPEALS ARE IDENTICAL, THEREFORE, BOTH THE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 8. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PARTL Y ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DAY OF FEBRUARY, 2020 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 18 /02/2020 PRITI YADAV, SR. PS /R. N* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NOS. 4093 & 4094/DEL/2017 DATE OF DICTATION 2 9 . 01 .20 20 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30 . 01 .20 20 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER .0 2 .20 20 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS .0 2 .2020 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .0 2 .2020 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 1 9 .0 2 .2020 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 9 .0 2 .2020 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 9 .0 2 .2020 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK