Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali V. CIT (Exemptions), Chandigarh

ITA 445/CHANDI/2022

AI Insights

The case involves Asthan Dera Udasian Murti Baba Shri Chand Ji, a trust, which appealed against the order of the CIT (Exemptions), Chandigarh. The dispute centered on the classification of sold agricultural land as a capital asset and the subsequent tax implications under the Income Tax Act, 1961. The CIT (Exemptions) had found that the Assessing Officer had incorrectly allowed deductions under section 54B, which is not applicable to trusts, and that the trust was not eligible for exemptions under sections 11 and 12 of the Act as it was not registered under sections 12A/12AA or section 10(23C). The Tribunal agreed with the CIT's findings and dismissed the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127814 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-05-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 18-05-2022
• Other Referred Cases: Malabar Industrial Co. Ltd V/s CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Revision of order; Opportunity of being heard; Assessment record; Capital Gains
• Section: 54; 263; 12; 11; 143(3); 54B; 12A; 12AA; 11(1A); 10(23C)

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, ‘A’, CHANDIGARH BEFORE SHRI A.D. JAIN, VICE PRESIDENT & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 445/CHD/2022 नधा रण वष / Assessment Year : 2017-18 Asthan Dera Udasian Murti Baba Shri Chand Ji, VPO Manauli, Mohali, Punjab Vs. बनाम The CIT, Exemptions, Chandigarh थायी लेखा सं./PAN NO: AAFTA2794Q अपीलाथ /Appellant यथ /Respondent नधा रती क ओर से/Assessee by : Smt. Komal Thakur, Advocate राज व क ओर से/ Revenue by : Sh. Rohit Sharma, CIT DR स ु नवाई क तार$ख/Date of Hearing : 23.05.2023 उदघोषणा क तार$ख/Date of Pronouncement : 19.06.2023 आदेश/Order Per A.D. Jain, Vice President: This is assessee’s appeal against the order of the ld. CIT (Exemptions), Chandigarh dated 24.03.2022, for the Assessment Year 2017-18. 2. The revised grounds of appeal filed by the Assessee read as follows: 1. The Sold land was agriculture land & not a capital asset but the Ld. Assessing Officer wrongly considered and Ld. Commissioner of Income Tax 445Chd-2022 – Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali 2 wrongly confirmed the sold land as capital asset .The sold property is not a capital asset it may kindly be considered. 2. The Ld. Commissioner of Income Tax Exemption, Chandigarh has wrongly passed order U/s 263 of the Income Tax Act, 1961 without going through the facts of the case. The Appellant has not claimed the deduction U/s 54B of the Income Tax Act, 1961. The Order U/s 263 may kindly be cancelled. 3. The Appellant claimed deduction amounting to Rs.12,85,37,078/- as Capital expenditure before the Ld. Assessing Officer but the Ld. Income Tax Officer wrongly allowed deduction U/s 54 B of the Income Tax Act,1961 which was not claimed by the Appellant. The Capital expenditure which was claimed by the Appellant according to the order of Additional Sessions Judge SAS Nagar Mohali vide dated 14.07.2015 was not allowed by the Ld. Assessing Officer, which may kindly now be allowed. 4. Any other ground which may be taken before the hearing of appeal with permission of Honourable Income Tax Appellate Tribunal. 3. A show cause notice dated 9.2.2022 was issued to be Assessee by the ld. CIT(E) u/s 263 of the Income Tax Act, 1961 (hereinafter called 'the Act'), wherein it was stated that the Assessee had received sale consideration of Rs. 12,89,16,667/- for sale of agricultural land and had claimed the amount of Rs. 12,46,53,524/- spent on purchase of agricultural land as exemption u/s 11(1A) of the Act and since the Assessee was not registered u/s 12A / 12AA or section 10(23C), the provisions of sections 11 and 12 of the Act were 445Chd-2022 – Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali 3 not applicable. It was further stated that that the AO had wrongly granted deduction u/s 54B of the Act to the Assessee; that section 54B is applicable to persons with status of “individual” or “HUF” only but the Assessee is a trust and so, benefit of section 54B is not available to it. 4. The Assessee vide reply dated 15.3.2022 stated as follows:- “Dera has sold the agriculture land and purchased the agriculture land. It did not want to sold the land. The sold land was situated in village - Manauli. All the other owners sold the land to the Janta Promoters, but the Dera was not interest to sold the land so dera's land was become a sandwich between other properties. No path is available to reach the said land and the said land cannot be utilized for any worthwhile purpose. It was further submitted that the Janta promoters have developed land in Sector 82 and have carved out plots around the Dera's land, as a result land of the assessee has become /sandwiched /marooned from all its sides in between the property owned by janta Promoters. 2. The Dera's went to the Hon'ble Court of Additional District Court, SAS, Mohali filed the suit. It is indeed clear that the sold agriculture land and purchased another agriculture land with equal amount of sale proceeds. It will not be out of place to say that the said transaction was merely the exchange of land rather than sale purchase of the land. A copy of order of Hon'ble Additional District Court is enclosed (As Per Annexure -!). The Hon'ble Court in its order mentioned as below on page No. 13:- 445Chd-2022 – Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali 4 ‘It has been dedicated in the name of "Murti Baba Siri Chand Ji" and as such legally it is held in Trust on behalf of "Murti Baba Siri Chand Ji" by Mahant Biram Dass. Thus a case of potent legal necessity has been made out to sell the suit land. It is under the circumstances permission to sell suit property at the market rate has been sought so as to purchase equivalent chunk of land elsewhere. That the assessee shall purchase agriculture land or immovable property with the sale proceeds of suit land within six months from this sale and shall furnish certified copies of those sale deeds in its favour to this Court for records.’ 3. No person has contributed the amount to purchase the new agriculture land. The property sold by the Dera and purchased by the Dera was not intentionally /discretionary. It was legal obligatory procedure which was followed by the Dera. The net sale consideration result in acquisition of new purchasing of land. Details of sale and purchase of land are given below:- Sale of agriculture land for 12,89,16,667 on dated 7.06.2016 to Janta land Promoters and purchased the agriculture land for 12,46,53,524 within six months of the sale of land. The copied of sale and purchase land have been deposited as per the court order. 4. CBDT Circular no. 52 date 30.12.1970 clarified - That the intent of the legislature was not in favour of imposing tax liabilities in cases where the capital gains as well as considerations is applied for acquisition of new capital asset. The Charitable organizations were afforded an advantage in getting an opting of claiming benefit of re- investment with regard to capital gain. 445Chd-2022 – Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali 5 5. I further submitted that the Dera lands are exempted from provisions of Punjab land Reforms Act 1972, now Punjab Land reforms (Amendments) Act 2017. 6. CBDT Circular 14 dated 11.04.1955 - Officers of the Department must not take advantage of ignorance of an assessee as to his rights. The Dera has never claimed the benefit u/s 54B of the Income Tax Act, 1961.” 5. By virtue of the impugned order the ld. CIT(E) has held that the assessment order dated 09.12.2019 passed by the AO is erroneous in so far as it is prejudicial to the interests of the Revenue. Cancelling the assessment order, the ld. CIT(E) has directed the AO to pass an order afresh in accordance with law keeping in view the observations made by the ld. CIT(E) and on affording reasonable opportunity of hearing to the Assessee. It has been observed (relevant portion) as follows:- “3.1. The assessee Trust, is seen to have received (sales) consideration amounting to Rs. 12,89,16,667/- during the year under consideration on account of sale of land, and thereupon is found to have claimed an amount of Rs. 12,46,53,524/-as exempt under section 11(1 A) of the Act. As per the assessment records, the assessee trust is not registered u/s 12A/12AA or 10(23C) of the Act. Therefore, the exemptions under section 11 and 12 of the Act are not applicable in this case. This is per the text of Section 11, the first limb of sub-section 1 of which [viz. Section 11(1)] is reproduced hereunder (emphases in underlined bold italics supplied): 445Chd-2022 – Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali 6 "(1) Subject to the provisions of Sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income— (a) Income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India....... " Therefore the Question and Answer situation to apply the above would be: Q: Which kind of income is exempted from tax under Section 11? A: The following income is exempted: 1. The Income is derived from property which is held under trust 2. The property must be so held under trust for charitable or religious purposes; 3. Such income as held under trust for charitable or religious purposes must be applied in India. Therefore, any amounts that do not simultaneously meet the above criteria are not eligible for any exemption u/s 11 of the Act. For instance, there can arise a question on whether voluntary donations received can be treated as income from property held under trust. The answer to this is that voluntary donations are received from outsiders and there would hence be no connection between the property held under trust and voluntary donations received. So, prima facie, these cannot be treated as income from property held under trust. However a deeming fiction has been introduced in Section 12(1) by which voluntary contributions are deemed to be income derived from the property held under trust. The answer would therefore be in the affirmative that voluntary contributions are indeed to be treated as income from property held under trust.......... 445Chd-2022 – Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali 7 ....... 3.2 Further, on the matters involving the claim of exemption u/s 54B of the Act, the Assessing Officer while passing the assessment order dated 09.12.2019 is seen to have given the benefit of the said deduction [u/s 54B of the Act] in the calculation of total taxable income without any claim from the assessee for such benefit [of deduction u/s 54B of the Act]. It is seen that this does not represent the correct application of the provisions of the Act. Even if the assessee had claimed the deduction u/s 54B of the Act, the assessing officer should not have allowed such claim since the provisions of Section 54 B of the Act are applicable to the persons with the status "Individual” and "HUF' only. The assessee being a "Trust” during the year under consideration is not eligible to enjoy the benefit of deduction under Section 54B of the Act. 3.3 The assessee in its submission has written that “The property sold and purchased by the Dera was not intentionally/discretionary. It was legal obligatory procedure which was followed by the Dera. The net sale consideration result in acquisition of new purchasing of land." The submission of the assessee has been perused by the undersigned. Since the proceedings of this case are governed by the provisions of the Income-tax Act, the undersigned is bound to act as per the provisions of the said Act. The benefits of the deduction allowed to the assessee during the course of assessment proceedings by the Assessing Officer u/s 54B of the Act do not represent or demonstrate the correct application of provisions of the Act. Whether the sale or alienation of the property in consideration has been done voluntarily or under duress or without discretion or unintentionally or in any other 445Chd-2022 – Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali 8 manner is not material to the assessment of the incomes that are chargeable to tax under the Income-tax Act unless the assessee is able to demonstrate to the Assessing officer that there are provisions in the Income-tax Act that operate in manners granting exemption or relief or benefit in any manner to the considerations that have emerged from the sale/alienation transaction. Therefore the following submissions of the assessee that: "Dera lands are exempted from provisions of Punjab land Reforms Act 1972, now Punjab Land reforms (Amendments) Act 2017. CBDT Circular 14 elated 11.04.1955 - Officers of the Department must not take advantage of ignorance of an assessee as to his rights. The Dera has never claimed the benefit u/s 54B of the Income Tax Act, 1961" are to be examined against the above backdrop. As stated earlier, even if the assessee has not claimed the benefit u/s 54B of the Act, the Assessing Officer has granted the same which is erroneous and prejudicial to revenue and the same is bound to be re-examined and if necessary reassessed. “Whether the "Dera lands are exempted from provisions of other statutes" is not auto- applicable for the purposes claiming exemptions or benefits under the Income-tax Act, and need to be examined. Further, the assessee will not be entitled to the benefits of Sections 10(21) r.w.s 35(1) r.w.s 11 of the Act unless it is demonstrated that all of the applicable conditions as discussed earlier are satisfied. It is open to the assessee to bring and place forth before the Assessing Officer any material provisions of law or facts in its favour during the assessment proceedings. Hence, the assessment order passed by the Assessing Officer according the benefit of deduction u/s 54B of the 445Chd-2022 – Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali 9 Act to the assessee is erroneous well as the issue has remained unexplained on the part of the assessee during the course of above stated assessment proceedings for AY 2017-18. 3.4 It is therefore clear vide the above discussions that the e have been violations of the applicabilities - and in the applications - of Sections 10(21), 35(1), 11, 12(1) and 54B of the Act. The Assessing Officer's impugned assessment order is seen to be erroneous and prejudicial/detrimental to the cause of revenue on account of these violations which now need to be re- examined by the Assessing Officer. 4.1. The Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd V/s CIT in 243 ITR 83(SC) has held that a bare reading of section 263 of the Act makes it clear that the pre-requisite to exercise of jurisdiction by the CIT suo motu under it is that the order of the ITO is erroneous in so far as it is prejudicial to the interest of revenue. The CIT has to be satisfied of twin conditions, namely, (i) the order of AO sought to be revised is erroneous and (ii) it is prejudicial to the interest of revenue. If one of them is absent i.e. if the order of the ITO is erroneous but is not prejudicial to the interest of the revenue or if it is not erroneous but is prejudicial to the interest of revenue, recourse cannot be taken u/s 263 of the Act. It has also held that there can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous that the section shall be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. It has also held that the phrase "prejudicial to the interest of revenue" is not an expression of art and is not 445Chd-2022 – Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali 10 defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the ITO, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopts one of the course permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order to the interests of the revenue unless the view taken by the ITO unsustainable in law. 4.2 In the instant case, from the perusal of assessment record of AY 2017-18, it is reiterated that the assessee has been given undue benefit f deduction u/s 54B of the Act to the extent of Rs. 12,46,53,524/- during the year und<3r consideration. This has happened because of the lack of proper application by the Assessing Officer of the relevant provisions of law. It is also re-iterated that the exe nptions claimed by the assessee, if and as any, by the assessee u/s 11 r.w.s 10(21) r w.s 35(1) of the Act do not appear tenable. 4.3 It is noted that the assessing officer failed to apply provisions of the Act with respect to the observations made above. Therefore, it is clear that these issues remained unexplained on the part of the assessee as well as on the part of the assessing officer. There is incorrect assumption of facts, as well as an incorrect application of law that too without application of mind which clearly 445Chd-2022 – Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali 11 satisfies the requirement of the order being erroneous. The order is prejudicial to Revenue, this is because in the light of these facts, the revenue has lost taxes lawfully payable by the person, hence the AO's order certainly falls in the mischief of being prejudicial to the interest of the revenue. 5. In the view of the facts stated above, it is concluded that the assessee has nothing to say in its defense and it is observed that the assessment framed u/s 143(3) of the Act on 09.12.2019 is erroneous in so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by the Finance Act, 2015 w.e.f. 01.06.2015. Accordingly, the Assessment Order passed by the AO on 09.12.2019 u/s 143(3) of the Act for the A.Y. 2017-18 is cancelled with the direction to pass an order afresh in accordance of law keeping the view above observation and after affording reasonable opportunity of being heard to the assessee.” 6. It is seen that the Assessee has not controverted the facts that (i) it is not registered either u/s 12A or section 12AA, or approved u/s 10(23C) of the I.T. Act and that as such, the exemptions u/ss 11 & 12 are not applicable to it, as rightly observed by the ld. CIT(E). (ii) The AO had wrongly given benefit of deduction u/s 54B to the Assessee, without any claim by the Assessee for such benefit. (iii) Even otherwise, the provisions of section 54B of the Act are applicable to individuals and HUFs, whereas the Assessee is a trust, and so, not entitled to benefit u/s 54B of the Act. (iv) The Assessee is not entitled to benefit u/s 10(21) r.w.s. 35(1) r.w.s. 11 of the I.T. Act. (v) Whether the sale of the property was voluntary or otherwise, is not material to 445Chd-2022 – Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali 12 the assessment of the income chargeable to tax under the Income Tax Act, except if any exemption or benefit becomes available from the transaction of sale. 7. Therefore, in our considered opinion, the ld. CIT(E) has correctly held the assessment order to be erroneous as well prejudicial to the interests of the Revenue. The ld. CIT(E) has, rightly, hence, cancelled the assessment order dated 9.12.2019, passed u/s 143(3) of the I.T. Act, in the Assessee’s case, for A.Y. 2017-18. 8. In view of the above, finding no error therein, the order under appeal is hereby confirmed. The grievance sought to be raised by the Assessee is found to be without merit and the same is hereby rejected. 9. In the result, appeal is dismissed. Order pronounced on 19.06.2023. Sd/- Sd/- (VIKRAM SINGH YADAV) ( A.D. JAIN ) Accountant Member Vice President Dated : 19 .06.2023 “आर.के.” 445Chd-2022 – Asthan Dera Udasian Murti Baba Shri Chand Ji, Mohali 13 आदेश क त*ल+प अ,े+षत / Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आय ु 1त/ CIT 4. +वभागीय त न5ध, आयकर अपील$य आ5धकरण, च7डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड फाईल/ Guard File आदेशान ु सार/ By order, सहायक पंजीकार/ Assistant Registrar