DCIT, Exemption, Ghaziabad V. Hardayal Charitable and Educational Trust, Firozabad

ITA 4389/DEL/2017

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7861 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 02-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Assessment record; Benefit of exemption
• Section: 12; 11; 12A; 12AA; 10B; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “C” BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING ) BEFORE SHRI G.S.PANNU, PRESIDENT & SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.4389/Del/2017 [Assessment Year : 2011-12] DCIT, Exemption, Ghaziabad. vs Hardayal Charitable & Educational Trust, 318-Shambu Nagar, Shikohabad, Firozabad, Uttar Pradesh. PAN-AAATH7652M APPELLANT RESPONDENT Appellant by Shri Rahul Agarwal, Adv. Respondent by Shri Umesh Takyar, Sr.DR Date of Hearing 03.11.2021 Date of Pronouncement 24.11.2021 ORDER PER KUL BHARAT, JM : The present appeal filed by the Revenue for the assessment year 2011- 12 is directed against the order of Ld. CIT(A)-2, Agra dated 28.02.2017. The Revenue has raised following grounds of appeal:- 1. “The Ld. Commissioner of Income Tax (Appeal) has erred in law and on facts in deleting the addition of Rs.7,12,60,000/- on account of the corpus donation and allowed the exemption u/s 11 and 12A. 2. The order of the Ld. Commissioner of Income Tax (Appeals) be cancelled and the order of the A.O. restored.” 2. The only effective ground in this appeal is against the deletion of addition of Rs.7,12,60,000/- made on account of the corpus donation which was treated as the exempt by Ld.CIT(A). ITA No.4389/Del/2017 [Assessment Year : 2011-12] 2 | P a g e 3. Facts giving rise to the present appeal are that this is second round of litigation. In the earlier round, the Tribunal had set aside the issue and restored back to the file of the Assessing Officer (“AO”) to decide it afresh. The AO in pursuance of the order of the Tribunal dated 12.08.2015 passed the impugned order thereby, the AO yet again made an addition of Rs.7,13,26,199/-. The basis of making addition by the AO is that the assessee trust was under statutory obligation to get its accounts audited and obtain the audit report with the prescribed time which was not done. 4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A) who after considering the submissions and material placed on record, deleted the addition. 5. Aggrieved against this, the Revenue is in appeal before this Tribunal. 6. Ld. Sr. DR vehemently argued that Ld.CIT(A) was not justified in deleting the addition. He submitted that in this case, it is not the case of the AO that the assessee failed to submit the requisite audit report in Form No.10B alongwith income tax return but in this case, the audit report itself was obtained after filing of the income tax return. Therefore, the AO was justified in declining the benefit of exemption. 7. On the contrary, Ld. Counsel for the assessee opposed these submissions and supported the order of Ld.CIT(A). He submitted that the AO has not given a finding that the corpus donation is bogus. Moreover, the facts of the present case are distinguishable on account of the fact that the ITA No.4389/Del/2017 [Assessment Year : 2011-12] 3 | P a g e registration u/s 12A of the Income Tax Act, 1961 (“the Act”) was granted vide order dated 07.01.2014 w.e.f 01.04.2010. Thereafter, the assessee got its account audited and submitted a report in Form No.10B. It goes to demonstrate that the assessee could not have submitted the Form No.10B report before grant of registration by Ld.CIT-II, Agra. He submitted even otherwise also that this addition is not sustainable in view of the decision of the Tribunal rendered in the case of ITO vs M/s. Gaudiya Granth Anuved Trust, Mathura in ITA No.386/Agra/2012 order dated 02.08.2013. He therefore, submitted that Ld.CIT(A) was justified in deleting the addition. 8. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. The issue to be adjudicated whether Ld.CIT(A) committed an error in deleting the addition, as made by the AO on account of receipt of corpus donation of Rs.7,12,60,000/- and interest thereon of Rs.66,199/-. The basis of making addition as stated in the assessment records in para 6 is reproduced as under for the sake of clarity:- 6. “In view of the above, the assessee trust was under statutory obligation to get its accounts audited and obtain the audit report within the prescribed time in Form 10B which has not been done in assessee's case. Since, assessee trust has not fulfilled the conditions enumerated in section 12A(1)(b) for obtaining the audit report in prescribed time in prescribed form i.e. Form No. 10B, the benefit of section 11 & 12 of IT. Act shall not be allowed to it. On this ground also, it is held that the assessee is not entitled for exemption u/s 11 & 12 in respect of income from its properties and also the ITA No.4389/Del/2017 [Assessment Year : 2011-12] 4 | P a g e deemed income by way of receipts of corpus donation. In view of this, the exemption u/s 11 & 12 is denied in respect of income/corpus donation of the trust on account of failing to obtain the audit report in prescribed Form No. 10B in prescribed time. Further, income or property of Rs. 8 Lakhs has been used or applied for the benefit of trustees who are the persons to be diverted and retained/ utilized by the for their benefit. The trust therefore, violated provisions of section 13(1)(c)(ii) read with section 13(2)(b) & 13(2)(g) of the Act. Therefore, exemption u/s 11 is being denied to the assessee.” 9. Further, Ld. CIT(A) deleted the addition by observing as under:- 6.4. “I have considered the facts of the case, the written submissions as filed by the Ld AR for the appellant and perused the order of the AO passed in pursuance of the directions of the Hon'ble ITAT Agra. Besides, the directions as contained in the order of the Hon'ble ITAT, the remand report of AO and rejoinder submissions filed by assessee have also been perused with reference to the judicial pronouncements that have been relied upon by the appellant. The issue as involved in this appeal concerns the non admission of report in Form 10B by the AD and consequential denial of exemption to the assessee. While from the perusal of the directions of Hon'ble ITAT, it is clear that the AO was under directions of the Hon'ble ITAT to admit the report filed in form 10B, and allow the benefits available to the appellant u/s 11 and 12 of the Act after making the assessment denovo. As regards the non filing of audit report by assessee at the assessment stage, the Hon'ble ITAT has observed that filing of audit report alongwith the return of income is not mandatory, and no filing of the same is a curable defect. As regards the assessee's claim of admission of the audit report in Form 10B, the Ld AR for the appellant has relied upon various judicial decisions given by Hon'ble Supreme Court Hon'ble as well as by the ITA No.4389/Del/2017 [Assessment Year : 2011-12] 5 | P a g e Hon'ble ITAT, and which have been considered for adjudication of this issue as involved in the instant appeal. Therefore, while considering that the reasons as cited by the Ld AR for the non submission of report along- with the assessee's return of income, it is well borne out that the assessee appellant couldn't have filed the report with the return of income, as it was not having the registration u/s 12A, Which incidentally has been granted to the assessee by the Ld Commissioner of Income tax-II, Agra vide order dated 07.01.2014 and the same was granted w.e.f. 01.04.2010. Thus from the relevant facts and the explanation as given by assessee trust, it is clear that the assessee was prevented by a reasonable cause due to which it could not file the audit report in Form 10B for making its claim of exemption. As regards the Circular No.1/1148 dated 09.02.1978 issued by the CBDT which is referred by the Ld.AR in written submissions; the said circular clearly states that in cases where the due to reasons beyond the control of the assessee, some delay has occurred in filing the said report the exemption as available to such trust u/s 11 and 12 may not be denied merely because on account of delay in furnish such audit report. Therefore it is observed that the AO's action in refusing to admit the report in Form 108 is not justified particularly when the Hon'ble ITAT while setting aside the assessment has clearly observed that filing of audit report along with filing of return was not mandatory, and the same was a curable defect, and thus in view of said observations, the AO was directed by the Hon'ble ITAT to consider the report in Form 10B for framing the assessment de novo in the assessee's case. 6.5. As regards the directions contained in the Hon'ble ITAT's order wherein the matter was remitted to the file of AO with the direction to complete the assessment denovo after affording due opportunity of being heard to the assessee, it is observed that the AO has made ITA No.4389/Del/2017 [Assessment Year : 2011-12] 6 | P a g e the impugned addition on the basis of the non submission of Report in Form 10B along with the original return filed by assessee. The AO without making any inquiry or discussing in requisite details about the assessee's claim of corpus donations received, has proceeded to make the impugned addition of Rs 7,13,26,199/- with citing the sale reason as non submission of report by assessee. Though the AO has made the impugned addition on basis of corpus donations, however the same is well short of any discussion which ought to have been made by the AO, as the whole claim of assessee was up for examination by the AO in de novo proceedings. Even in the remand report submitted, the AO has not stated 'as to how corpus donations, can be added to the income of the appellant trust particularly when the assessee trust was granted registration u/s 12A of the Act. The AO has also not discussed even the findings given in the original assessment which was necessary if the AO wanted to follow or rely on such finding because the whole matter was referred back to the AO for framing fresh assessment. While completing the assessment it was rather mandatory on the part of the AO to make reference to such finding in the original assessment, or carry the examination of the issue of corpus donations to the hilt, however, this aspect has somehow escaped in the assessment made. It is thus clear that fresh assessment has been made by the AO while brushing aside the findings as contained in the original assessment, and while in assessment framed in pursuance of the directions of Hon'ble ITAT, such findings as given in the original assessment seems to have not been given any reference to, therefore there is no adverse finding in terms of section 13(2)(b) of the Act for disallowing the corpus donation, which has either been recorded by the AO or for that matter even the provision of said section has been invoked by the AO. It is pertinent to mention that. the Ld.CIT allowed registration u/s 12 of the Act vide order dated 07.01.2014 and thus if there was any violation of provisions of section 13(2)(b)/13(1)(c) of the Act, then ITA No.4389/Del/2017 [Assessment Year : 2011-12] 7 | P a g e the Ld. CIT would not have allowed registration u/s 12A to the appellant. The main stance of the AO while framing the assessment which is the subject of instant appeal revolves only around the non submission of the report in Form 10B along with the original return of income filed by assessee. However, as observed in view of the clear cut directions of the Hon'ble ITAT and the judicial pronouncements that have been relied by the appellant on this issue, there is certainly no occasion that the report which, due to the peculiar facts of the appellant's case, could not be submitted before and has been submitted by the assessee only after receiving the exemption status, can be brushed aside by the AO with only a single observation that the since the report was not field at the time of filing the return, therefore the assessee's claim was not admissible. Therefore, the additions made by the AO on account of corpus donation does not stem from any sound any specific findings. The corpus donations cannot be form part of the income being capital receipts particularly when the violation of section 13(2)(b) of the Act has not been established during denovo assessment proceedings. The AO has not doubted the genuineness of the corpus donation. It is noted that the particular amount of Rs.8,00,000/- in respect of which the AO tried to establish violation of provisions of section 13 of the Act, stands deleted by me vide order dated 28.02.2017 passed in relation to assessee trust appeal pertaining to AY 2009- 10. As regards this issue, it is relevant here to refer to the decision of Hon'ble ITAT Agra which is rendered in the case of Income tax Officer vs M/s. Gaudiya Granth Anuved Trust, Mathura (ITA No.386/Agra/2012 order dated 02.08.2013) wherein the Hon'ble ITAT has held the corpus donations as capital receipts after observing as under :- "After considering the position of law as it is prevailing at present on the basis of decision of Three Tribunals i.e. ITAT, ITA No.4389/Del/2017 [Assessment Year : 2011-12] 8 | P a g e Chennai, ITAT, Delhi" arid ITAT, Kolkatta and further confirmed by the Delhi High Court, the corpus donation is in the nature of capital receipt and are not taxable, irrespective of the fact whether trust is registered u/s 12AA or not. Therefore, I agree with the Ld. AR that the amount of A.Y. 2007-08 Rs. 68,50,000/- being in the nature of corpus donation is not taxable under the Income Tax Act being in the nature of capital receipt and therefore, the addition of Rs.68,50,000/- made by the AO towards the taxable income of the assessee is hereby deleted and accordingly.” 6.6. Accordingly, in view of the foregoing discussion, it is thus held that the assessee after receiving .the exemption status as granted vide Ld CIT-II, Agra order dated 07.01.2014 has duly got its accounts audited and submitted the report in Form 10B, which shows that the appellant could not have submitted it before the grant of registration by the Ld CIT II, Agra. Therefore, while observing so, the report in Form 10B as filed by assessee ought to have been taken into account while framing the assessment de novo by the AD, which was in compliance to the directions of Hon'ble ITAT. Therefore, the AO is accordingly directed to admit the audit report in form 10B as submitted by the assessee for re-computing assessee's claim under the exemption provisions as per law, and besides, keeping in view the decision given for the different issues adjudicated in this order. 6.7. It is pertinent to mention that the AO has further observed that there is violation of section 13(1)(c)(ii) read with section 13(2)(b) and 13(2)(3) of the I.T. Act. However, the AO has not brought on record any fact in respect of violation of above provisions when the assessment has been framed afresh by the AO in pursuance of the directions as given by Hon'ble ITAT, Agra. It is observed from the above reference of sections made by the AO, the finding of AO is devoid of any merit in view of foregoing discussion made in preceding paragraphs and ITA No.4389/Del/2017 [Assessment Year : 2011-12] 9 | P a g e particularly when the Ld.CIT granted registration u/s 12A of the Act vide order dated 07/01/2014, therefore there is no case of violation of provision of section for the year consideration, which is established by the AO; and hence not maintainable. 6.8. Therefore, the addition which is made by the AO by disallowing the corpus donation only for the reason that report in Form 10B was not filed with the return of income, cannot be sustained without giving any finding by the AO that the corpus donations were not genuine. Therefore, in view of the foregoing, the addition of Rs.7,12,60,000/ made by the AO for the unexplained corpus donation is accordingly deleted. 6.9. As regards the interest received shown by the appellant itself in the return of income of Rs.66,199/-, no argument has been advanced by the Ld.AR for the appellant at the time of hearing of appeal. Also the interest received is taxable as income of the trust even the same is received on the amounts invested as corpus donation. Therefore, the addition of Rs.66,199/- is upheld. Thus, as a result of the above, the Ground No.1 & 2 are allowed, and Ground No.3 is partly allowed.” 10. From the above, it is clear that Ld.CIT(A) has passed a detailed and a well reasoned order. The AO did not point out any specific defects in the account of the assessee. Merely because the accounts were audited post grant of registration u/s 12AA of the Act under the peculiarity of the present case, would not ‘ipso facts’ vitiate the authenticity of the accounts so furnished before the AO. Moreover, the AO failed to make enquiry regarding accounts of the assessee. Under these undisputed facts, we do not see any reason to interfere in the finding of Ld.CIT(A), the same is hereby affirmed. Thus, grounds raised by the Revenue are rejected. ITA No.4389/Del/2017 [Assessment Year : 2011-12] 10 | P a g e 11. In the result, the appeal of the Revenue is dismissed. Above decision was pronounced on conclusion of Virtual Hearing in the presence of both the parties on 24 th November, 2021. Sd/- Sd/- (G.S.PANNU) (KUL BHARAT) PRESIDENT JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI