Marathwada Association for Social Services, Aurangabad V. Income-tax Officer,

ITA 451/PUN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1545 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 16-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Reason to believe; Reassessment proceedings; Capital expenditure
• Section: 80G; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . . , BEFORE SHRI R.K. PANDA, AM . / ITA NO.451/PN/2016 / ASSESSMENT YEAR : 2009-10 MARATHWADA ASSOCIATION FOR SOCIAL SERVICES, PLOT NO.19, FLAT NO.2, GROUND FLOOR, VISHWA MOHINI APARTMENTS, BESIDE SAI KRUPA LODGE, SAMARTHNAGAR, AURANGABAD 431001 PAN NO.AABTM6430F . / APPELLANT V/S ITO, WARD - 1 ( 1 ), AURANGABAD . / RESPONDENT / APPELLANT BY : SHRI SUNIL GANOO / RESPONDENT BY : SHRI ANIL CHAWARE / ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 04-01-2016 OF THE CIT(A)-II, AURANGABAD R ELATING TO THE ASSESSMENT YEAR 2009-10. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PUBLIC TRUST CONSTITUTED UNDER THE BOMBAY PUBLIC TRUST ACT, 1 950 AND REGISTERED U/S.12A AND 80G OF THE I.T. ACT ON 20-07-201 2. THE TRUST HAS BEEN ESTABLISHED WITH THE PREDOMINANT OBJECT OF ESTABLISHING AND RUNNING EDUCATIONAL INSTITUTIONS OFFERING TECHNICAL, MEDICAL, VOCATIONAL, PROFESSIONAL, FORMAL AND NON FORMAL EDUCATION AT ALL LEVELS. / DATE OF HEARING :21.07.2016 / DATE OF PRONOUNCEMENT:22.07.2016 2 ITA NO.451/PN/2016 3. IN THIS CASE A NOTICE U/S.148 OF THE I.T. ACT WAS ISSUE D ON 10-07-2012 FOR THE REASON THAT TAKING INTO CONSIDERATION THE AMOUNT OF DEPRECIATION AND THE CAPITAL EXPENDITURE INCURR ED ON ACQUISITION OF MOVABLE AND IMMOVABLE ASSETS, THE ASSESSEE H AS AVAILED DOUBLE DEDUCTION. OWING TO THIS REASON INCOME TO T HE EXTENT OF RS.6,71,630/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147. ACCORDINGLY, NOTICE U/S.148 OF THE ACT WAS ISSUED. THEREAFTER, THE AO COMPLETED THE ASSESSMENT DETERMINING THE TOTAL INCOME AT RS.39,08,784/- WHEREIN HE H AD ADDED THE ABOVE AMOUNT ON ACCOUNT OF ANONYMOUS DONATION. 4. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE CIT(A) WHEREIN THE LD.CIT(A) SUSTAINED THE ADDITION OF RS.39,08,784/- MADE BY THE AO ON ACCOUNT OF ANONYMOUS DONATION. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE IMPUGNED REASSESSMENT ORDER BEING BAD IN LAW, NULL AND VOID AND BEING WITHOUT JURISDICTION, THE LEARNED CIT[A] OUGHT TO HAVE ANNULLED THE IMPUGNED REASSESSMENT ORDER. IT IS PRAYED T HAT THE IMPUGNED REASSESSMENT ORDER BE ANNULLED. 2. SINCE THE LEARNED ASSESSING OFFICER HAS FAILED TO MAK E ANY ADDITION ON THE GROUND FOR WHICH THE REASSESSMENT PROCE EDINGS WERE INITIATED BY RECORDING THE REASONS BEFORE ISSUANCE OF NOTICE U/S 148 OF THE I.T. ACT 1961, THE IMPUGNED REASSESSMENT ORDER IS BAD IN LAW, NULL AND VOID AND BEING WITHOUT JURISDIC TION, THE LEARNED CIT[A] OUGHT TO HAVE ANNULLED THE SAME. IT IS PRAYED THAT THE IMPUGNED REASSESSMENT ORDER BE ANNULLED. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE LEARNED CIT[A] HAS GROSSLY ERRED IN SUSTAINING THE ADDI TION OF RS.39,08,784.00 MADE BY THE LEARNED ASSESSING OFFICER ON THE GROUND OF ALLEGED ANONYMOUS DONATIONS RECEIVED BY THE APPELLANT TRUST WITHIN THE MEANING AND PROVISIONS OF SECTION 115 BBC [1] AND [3] OF THE I.T. ACT 1961. THE SAID FINDING/ CONCLUSIO N OF THE LEARNED CIT[A] BEING ARBITRARY, PERVERSE, BASED ON NO EVIDENC E AND BEING DEVOID OF MERITS THE SAME MAY PLEASE BE DELETED AND TH E IMPUGNED ADDITION OF RS.39,08,784.00 MAY PLEASE BE DELETED AND ALL THE CONSEQUENTIAL RELIEFS BE GRANTED. 3 ITA NO.451/PN/2016 4. THE APPELLANT CRAVES THE PERMISSION TO ADD, AMEND, MODIFY, ALTER, REVISE, SUBSTITUTE, DELETE ANY OR ALL GROUNDS OF APPEAL, IF DEEMED NECESSARY AT THE TIME OF HEARING OF THE APPEAL. 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET FILED A COPY OF THE REASONS RECORDED U/S.148 OF THE I.T. ACT WHICH RE ADS AS UNDER : ORDER SHEET EXAMINATION OF THE RETURN REVEALS THAT THE ASSESSEE HAD WORKED OUT THE AMOUNT APPLIED FOR THE OBJECTS TAKING INTO CONSID ERATION THE AMOUNT OF DEPRECIATION AND THE CAPITAL EXPENDITURE INCURRED ON ACQUISITION OF MOVABLE AND IMMOVABLE ASSETS BOTH. THE ASSESSEE HAD THUS AVAILED DOUBLE DEDUCTION. 2. OWING TO THIS SECTION, INCOME TO THE EXTENT OF RS.6 ,70,630/-, AS WORKED BELOW, HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147. GROSS RECEIPTS AS PER INCOME AND EXPENDITURE ACCOUNT RS.1,99,65,150/- LESS: AMOUNT APPLIED FOR OBJECTS (EXCLUDING DEPRECIATION OF RS.9,40,189/-) RS.1,35,26 ,333/- --------------------- RS.64,38,817/- LESS : CAPITAL EXPENDITURE INCURRED ON ACQUISITION OF MOVABLE/IMMOVABLE ASSETS RS.28,73,710/- --------------------- RS.35,65,107/- LESS : EXEMPTION U/S.11(1)(A) 15% OF INCOME PERMITTED TO BE ACCUMULATED RS.29,94,477/- -------------------- TAXABLE SURPLUS RS.6,20,630/- -------------------- 3. ISSUE NOTICE UNDER SECTION 148. SD/- DATE 28-06-2012 ITO, WARD-1(1), AURANGABAD 7. HE SUBMITTED THAT THE AO IN THE BODY OF THE ASSESSME NT ORDER HAS NOT MADE ANY ADDITION ON THE ISSUE ON WHICH T HE ASSESSMENT WAS REOPENED AND HE HAS MADE ADDITION OF RS.39,08,780/- ON ACCOUNT OF DONATION TREATING THE SAME A S ANONYMOUS DONATION. REFERRING TO THE DECISION OF HONBLE 4 ITA NO.451/PN/2016 BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS INDI A LTD. REPORTED IN 331 ITR 236 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT UNDER THE PROVIS IONS OF SECTION 147 THE AO HAS TO ASSESS OR REASSESS THE INCO ME WHICH ESCAPED ASSESSMENT AND WHICH WAS THE BASIS OF THE FORMA TION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS A NY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS. HOWEVER, IF A FTER ISSUE OF NOTICE U/S.148, HE ACCEPTS THE CONTENTION OF THE ASSESSEE AND HOLDS THAT INCOME WHICH HE HAS INITIALLY FORMED A REASO N TO BELIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCOME. IF HE INTENDS TO DO SO, A N OTICE U/S.148 WOULD BE NECESSARY IN THE EVENT OF CHALLENGE BY T HE ASSESSEE. HE ACCORDINGLY SUBMITTED THAT SINCE NO ADDITIO N HAS BEEN MADE ON THE ISSUE ON WHICH THE NOTICE U/S.148 WAS ISSUED, THEREFORE, THE AO HAS NO POWER TO INDEPENDENTLY ASSESS SOME OTHER INCOME. HE ACCORDINGLY SUBMITTED THAT THE ADDITION/DISALLOWANCE MADE BY THE AO SHOULD BE DELETED. 8. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D FAIRLY CONCEDED THAT THE AO HAS NOT MADE ANY ADDITION O N THE ISSUE ON WHICH THE CASE WAS REOPENED. 9. AFTER HEARING BOTH THE SIDES, I FIND THE AO IN THE INSTAN T CASE HAS ISSUED NOTICE U/S.148 FOR THE REASON THAT TAKIN G INTO CONSIDERATION THE AMOUNT OF DEPRECIATION AND THE CAPITA L EXPENDITURE INCURRED ON ACQUISITION OF MOVABLE AND IMMOVABLE ASSET, THE ASSESSEE HAS AVAILED DOUBLE DEDUCTION. OWING T O THIS REASON INCOME TO THE EXTENT OF RS.6,70,630/- HAS ESCAPE D 5 ITA NO.451/PN/2016 ASSESSMENT. HOWEVER, WHILE COMPLETING THE ASSESSMENT, I FIN D, THE AO HAS NOT MADE ANY ADDITION ON THIS ACCOUNT AND H AS MADE ADDITION OF RS.39,08,784/- ON ACCOUNT OF DONATION TREATING T HE SAME AS ANONYMOUS DONATION. THUS, NO ADDITION HAS BEEN MADE ON ACCOUNT OF WHICH THE CASE WAS REOPENED. THEREFORE, WHEN THE AO HAS NOT MADE ANY ADDITION ON THE ISSUE ON WHICH THE REASSESSMENT PROCEEDINGS WERE INITIATED BY RECORDING THE REASONS BEFORE ISSUANCE OF NOTICE U/S.148 OF THE I.T. ACT BUT HAD MADE ADDITION ON SOME OTHER ISSUE, IT HAS TO BE SEEN AS TO W HETHER THE ADDITION MADE BY THE AO AND UPHELD BY THE CIT(A) IS AS PE R LAW. I FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE HONBLE BO MBAY HIGH COURT IN THE CASE OF JET AIRWAYS INDIA LTD. (SUPRA). AFT ER ELABORATE DISCUSSION ON THE ISSUE, THE HONBLE HIGH COURT HAS OBSERVED AS UNDER : 22. EXPLANATION 3 LIFTS THE EMBARGO, WHICH WAS INSERTE D BY JUDICIAL INTERPRETATION, ON THE MAKING OF AN ASSESSMENT OF REASSESSM ENT ON GROUNDS OTHER THAN THOSE ON THE BASIS OF WHICH A NOTIC E WAS ISSUED UNDER SECTION 148. SETTING OUT THE REASONS, FOR THE BE LIEF THAT INCOME HAD ESCAPED ASSESSMENT. THOSE JUDICIAL DECISIONS HAD HELD T HAT WHEN THE ASSESSMENT WAS SOUGHT TO BE REOPENED ON THE GROU ND THAT INCOME HAD ESCAPED ASSESSMENT ON A CERTAIN ISSUE, THE ASSESSI NG OFFICER COULD NOT MAKE AN ASSESSMENT OR REASSESSMENT ON A NOTHER ISSUE WHICH CAME TO HIS NOTICE DURING THE PROCEEDINGS. THIS INTERPRETATION WILL NO LONGER HOLD THE FIELD AFTER THE INSERTION OF EXPLANATION 3 BY THE FINANCE (NO.2) ACT OF 2009. HO WEVER, EXPLANATION 3 DOES NOT AND CANNOT OVERRIDE THE NECESSI TY OF FULFILLING THE CONDITIONS SET OUT IN THE SUBSTANTIVE PART OF SECTI ON 147. AN EXPLANATION TO A STATUTORY PROVISION IS INTENDED TO EX PLAIN ITS CONTENTS AND CANNOT BE CONSTRUED TO OVERRIDE IT OR RE NDER THE SUBSTANCE AND CORE NUGATORY. SECTION 147 HAS THIS EFFEC T THAT THE ASSESSING OFFICER HAS TO ASSESS OR REASSESS THE INCOME ('SUCH INCOME') WHICH ESCAPED ASSESSMENT AND WHICH WAS THE BASIS O F THE FORMATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH C OMES TO HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS. HO WEVER, IF AFTER ISSUING A NOTICE UNDER SECTION 148, HE ACCEPTED THE C ONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOME WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER O F FACT NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM INDEPENDENTLY T O ASSESS SOME OTHER INCOME. IF HE INTENDS TO DO SO, A FRESH NOTI CE UNDER SECTION 148 WOULD BE NECESSARY, THE LEGALITY OF WHICH WOULD BE TESTED IN THE EVENT OF A CHALLENGE BY THE ASSESSEE. 6 ITA NO.451/PN/2016 10. FROM THE ABOVE, IT IS CLEAR THAT WHILE THE AO HAS TO ASSESSEE OR REASSESS THE INCOME WHICH ESCAPED ASSESSM ENT AND WHICH WAS THE BASIS OF THE FORMATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE DURING THE COURSE OF PROCEEDINGS. HOWEVER, IF AFTER ISSUING A NOTICE U /S.148 HE ACCEPTS THE CONTENTION OF THE ASSESSEE AND HOLDS TH AT INCOME WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESC APED ASSESSMENT, AS A MATTER OF FACT NOT ESCAPED ASSESSMENT , IT IS NOT OPEN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCOME. IF HE INTENDS TO DO SO, A NOTICE U/S.148 WOULD BE NECESSARY. 11. SINCE IN THE INSTANT CASE ADMITTEDLY NO ADDITION HAS BEEN MADE BY THE AO ON THE ISSUE ON WHICH NOTICE U/S.148 WAS ISSUED AND ADDITION HAS BEEN MADE ON SOME OTHER ISSUE, THEREFOR E, IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT CITED (SUP RA) THE ADDITION MADE BY THE AO AND UPHELD BY THE CIT(A) CA NNOT BE SUSTAINED. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASID E AND THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS ALLOWE D. SINCE THE ASSESSEE SUCCEEDS ON THIS GROUND, THE OTHER GROUNDS BEING ACADEMIC IN NATURE ARE NOT BEING ADJUDICATED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-07-2016. SD/- ( R.K. PANDA ) ACCOUNTANT MEMBER PUNE ; DATED : 22 ND JULY, 2016. 7 ITA NO.451/PN/2016 '# $# / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // // $ % //TRUE &' % * / SR. PRIVATE SECRETARY *, / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (A) - 2, AURANGABAD 4. 5. 6. THE CIT-2, AURANGABAD $ %%*, *, SMC BENCH / DR, ITAT, SMC BENCH PUNE; 2 / GUARD FILE.