All India Personality Enhancement & Cultural Centre for Scholars, New Delhi V. DDIT (E), New Delhi

ITA 4644/DEL/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3150 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-02-2017
• Assessment Year: 1999-2000
• Appeal Filed On: 21-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Search and seizure; Opportunity of being heard; Principle of natural justice; Competent authority; Benefit of exemption; Capital expenditure
• Section: 143(3); 234B; 12A; 246; 132; 12; 10; 11

Judgement Text

ITA NO. 4644/DEL/2010 ASSESSMENT YEAR 1999-2000 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI S.V. MEHROTRA, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 4644/DEL/2011 ASSESSMENT YEAR: 1999-2000 ALL INDIA PERSONALITY ENHANCEMENT & CULTURAL CENTRE FOR SCHOLARS, AIPECCS SOCIETY, PREM KIRAN KUNJ, SATBARI, CHATTARPUR, NEW DELHI-110074 VS DDIT(E), INVESTIGATION CIRCLE-I, NEW DELHI. APPELLANT BY SHRI ROHIT JIAN, ADV. , SH. ROHIT GARG, CA RESPONDENT BY SHRI RAVI JAIN, CIT DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER OF LD. CIT(A)-XXI, NEW DELHI DATED 29.07.2011 AND PERTAINS TO ASSESSMENT YEAR 1999-00. 2. THE FACTS IN BRIEF ARE THAT THE RETURN WAS FILED DECLARING NIL INCOME. THE ASSESSEE IS A SOCIETY RUNNING COL. SAT SANGI MEMORIAL DATE OF HEARING 08.02.2017 DATE OF PRONOUNCEMENT 11.05.2017 ITA NO. 4644/DEL/2010 ASSESSMENT YEAR 1999-2000 2 SCHOOL, SATBARI, MEHRAULI, NEW DELHI AND TWO OTHER EDUCATIONAL INSTITUTIONS AT NAWARANGPUR AND BHIWADI. THERE WAS A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME TAX, 1961 O N 15.01.1999 IN THE ABOVE CASE. CONSEQUENT TO THE SEARCH, THE CA SES OF THE GROUP WERE CENTRALIZED WITH THE THEN DCIT CENTRAL CIRCLE- 11, NEW DELHI. THE REGULAR ASSESSMENT FOR ASSESSMENT YEAR 1999-200 0 WAS MADE ON 27.03.2002 ON A TOTAL INCOME OF RS.1,57,48,783/- . IN THIS ASSESSMENT, THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10(23C)(VI) WAS DENIED. AGAINST THE ASSESSMENT ORDER, THE ASSES SEE WENT IN APPEAL AND THE CIT(A)-1 IN APPEAL NO. 113/02-03, VI DE HIS ORDER DATED 10.07.2003, PARTIALLY ALLOWED THE ASSESSEE'S APPEAL. AGAINST THE ORDER OF THE CIT(A), BOTH THE ASSESSEE AND DEPA RTMENT FILED APPEALS BEFORE THE ITAT. SUBSEQUENTLY, THE CASES O F THE GROUP WERE DECENTRALIZED AND THE CASE OF THE ABOVE ASSESSEE WA S TRANSFERRED TO DDIT(EXEMPTION), INVESTIGATION CIRCLE-I, DELHI. THE ITAT RESTORED THE ASSESSMENT TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER ASCERTAINING THE POSITION ABOUT THE ASSESSEES APPLICATION FOR APPROVAL U/S 10(23C)(VI) OF THE ACT . THE ITAT FURTHER DIRECTED THAT THE ASSESSEE WAS TO SUBMIT NECESSARY DETAILS ABOUT ITS APPLICATION HAVING BEEN FILED FOR APPROVAL U/S 10 ( 23C) (VI) OF THE ITA NO. 4644/DEL/2010 ASSESSMENT YEAR 1999-2000 3 ACT SO THAT THE ASSESSING OFFICER MAY FORWARD THE S AME TO THE COMPETENT AUTHORITY PRESCRIBED FOR THE PURPOSE. 3. SUBSEQUENTLY, DURING ASSESSMENT PROCEEDINGS, NOT ICE U/S 143(2) WAS ISSUED AND IN COMPLIANCE THERETO, THE AS SESSEE FILED A COPY OF THE APPLICATION FOR APPROVAL U/S 10 (23C) ( VI) ALONG WITH THE RELEVANT ENCLOSURES WHICH WAS FILED BY THE ASSESSEE WITH THE OFFICE OF THE DIRECTOR OF INCOME TAX (EXEMPTION) ON 30.3.1 999. THE DDIT(E) DELHI DISPOSED OF THE ASSESSEES APPLICATIO N FOR EXEMPTION 10 (23C) (VI) VIDE ORDER DATED 29.10.2012 REJECTIN G THE SAME. 4. DURING THE SET ASIDE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS DENIED THE BENEFIT OF EXEMPTION U/S 11 AND 12 A S THE ASSESSEE WAS NOT REGISTERED U/S 12A OF THE ACT AND IN VIEW O F THE ASSESSEES APPLICATION FOR APPROVAL U/S 10 (23C) (VI) HAVING B EEN REJECTED, THE INCOME OF THE ASSESSEE WAS ASSESSED AT A GROSS TOTA L INCOME OF RS. 1,57,48,783/-. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD. CIT(A) WHO PARTLY ALLOWED THE ASSESSEES APPEAL BUT UPHELD THE DENIAL OF BENEFIT U/S 11 AND 12 OF THE ACT AND THE CONSEQUENT ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX THE RELATED INCOME. ITA NO. 4644/DEL/2010 ASSESSMENT YEAR 1999-2000 4 NOW, THE ASSESSEE HAS APPROACHED THE ITAT AND HAS R AISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ASSESSMENT ORDER DATED 31.12.2010, PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT, WITHOUT APPRECIATING THAT THE SA ME HAVING BEEN PASSED WITHOUT AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE APPELLANT, IS VIOLATIVE OF THE PRINCIP LES OF NATURAL JUSTICE AND IS, THEREFORE, ILLEGAL AND BAD IN LAW. 2. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) E RRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASS ESSING OFFICER, HOLDING THAT THE APPELLANT IS NOT ELIGIBLE FOR EXEM PTION UNDER SECTION 10(23C)(VI) OF THE ACT ON THE BASIS OF REJE CTION ORDER DATED 29.12.2010 PASSED BY THE DGIT (EXEMPTION). 2.1 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN PROCEEDING TO DISPOSE OF THE AP PEAL OF THE APPELLANT WITHOUT WAITING FOR THE DECISION OF THE H IGH COURT IN THE WRIT PETITION FILED BY THE APPELLANT AGAINST TH E ORDER OF THE DGIT (EXEMPTION) WAS DULY MENTIONED BY THE APPELLAN T. 3. THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) E RRED ON FACTS AND IN LAW IN NOT SETTING ASIDE THE ALLEGATIO N OF THE ASSESSING OFFICER THAT THE APPELLANT HAD VIOLATED T HE AIMS AND OBJECTS AS PROVIDED IN THE MEMORANDUM OF ASSOCIATIO N. 4. THAT THE CIT(A) ERRED ON FACTS AND LAW IN CONFIR MING THE DISALLOWANCE OF CAPITAL EXPENDITURE OF RS.1,44,09,0 78/- DEBITED TO THE INCOME AND EXPENDITURE ACCOUNT, WHILE COMPUT ING INCOME UNDER SECTION 10(23C)(VI) OF THE ACT. ITA NO. 4644/DEL/2010 ASSESSMENT YEAR 1999-2000 5 5. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) E RRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AS SESSING OFFICER IN CHARGING INTEREST UNDER SECTION 220(2) I N THE DEMAND NOTICE DATED 31.12.2010 ISSUED UNDER SECTION 156 OF THE ACT ON THE GROUND THAT THE SAME IS NOT APPEALABLE UNDER SECTION 246 OF THE ACT. 5.1 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) E RRED ON FACTS AND IN LAW IN CHARGING INTEREST UNDER SECTION 220(2) ON THE GROUND THAT THE SAME IS NOT APPEALABLE UNDER SE CTION 246 OF THE ACT, THAT TOO, WITHOUT AFFORDING OPPORTUNITY OF BEING HEARD TO THE APPELLANT. 6. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) E RRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASS ESSING OFFICER IN LEVYING INTERESTS UNDER SECTIONS 234A AN D 234B OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY FROM THE AFORESAID GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING. 6. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE HON BLE DELHI HIGH COURT IN A WRIT PETITION FILED BY THE ASSESSEE IN D IRECTOR OF INCOME TAX (EXEMPTION) VS ALL INDIA PERSONALITY ENHANCEMEN T & CULTURAL CENTRE FOR SCHOLARS (AIPECSS) 379 ITR 464 (DEL) HAS SET ASIDE THE ORDER DATED 29 TH DECEMBER 2010 PASSED BY THE DGIT(E) DISMISSING THE ASSESSEES APPLICATION FOR APPROVAL U/S 10 (23C ) (VI) AND HAS RESTORED THE SAME TO THE FILE OF THE DGIT(E) FOR CO NSIDERING THE ITA NO. 4644/DEL/2010 ASSESSMENT YEAR 1999-2000 6 APPLICATION AFRESH IN LIGHT OF THE OBSERVATIONS CON TAINED IN THE AFORESAID ORDER. IT WAS SUBMITTED BY THE LD. AR TH AT IN VIEW OF THE DETAILED OBSERVATIONS OF THE HONBLE DELHI HIGH COU RT AND THE FACT THAT THE ISSUE OF APPROVAL U/S 10 (23C) (VI) HAVING BEEN RESTORED TO THE FILE OF THE DGIT(E), THE ASSESSMENT SHOULD ALSO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDIC ATION. 7. LD. DR AGREED TO THE ASSESSEES PLEA. 8. WE HAVE GONE THROUGH THE RELEVANT RECORD AND HAV E ALSO HEARD BOTH THE PARTIES AT LENGTH. ON PERUSAL OF THE ORDE R OF THE HONBLE DELHI HIGH COURT IN THE ASSESSEES OWN CASE AS REFE RRED TO ABOVE, WE FIND THAT THE HONBLE HIGH COURT HAS OBSERVED IN PA RA 58 THAT THE OBJECTS OF THE ASSESSEE SOCIETY WERE SOLELY FOR THE PURPOSES OF EDUCATION AND NOT FOR THE PURPOSES OF PROFIT. THE HONBLE HIGH COURT HAS FURTHER OBSERVED THAT THE DISTRIBUTION OF SURPLUSES WAS PROHIBITED AND FURTHER, IN THE EVENT OF DISSOLUTION OF THE ASSESSEE SOCIETY, ITS ASSETS WOULD HAVE TO BE TRANSFERRED TO ANOTHER INSTITUTION, CARRYING ON SIMILAR ACTIVITIES AND THE SAME CANNOT BE DISTRIBUTED TO ITS MEMBERS. THE HON'BLE HIGH COURT FURTHER OBSERVED THAT THE ASSESSEE HAS BEEN RUNNING THREE S CHOOLS THAT ARE ITA NO. 4644/DEL/2010 ASSESSMENT YEAR 1999-2000 7 AFFILIATED TO CBSE AND ADMITTEDLY, THIS WOULD NOT H AVE BEEN PERMISSIBLE IN CASE THE ASSESSEE DID NOT EXIST SOLE LY FOR EDUCATIONAL PURPOSES AND/OR IF THE ASSESSEE WAS FOUND TO BE PUR SUING THE PROFIT MOTIVE. THE HON'BLE HIGH COURT ALSO OBSERVED THAT THE SURPLUSES GENERATED BY THE ASSESSEE WERE NECESSARILY TO BE AP PLIED TOWARDS ITS CHARITABLE OBJECTS AND, THEREFORE, IN VIEW OF THE A FORESAID, EXEMPTION CANNOT BE DENIED BY THE ASSESSEE ONLY FOR THE REASO N THAT IT HAD BEEN GENERATING SURPLUSES. IN PARA 73, THE HON'BLE DELHI HIGH COURT HAS FURTHER OBSERVED THAT THE ACTIVITIES OF T HE ASSESSEE MUST BE VIEWED IN THE OVERALL PERSPECTIVE OF ITS NATURE AND ITS PRINCIPAL OBJECT AND IT WAS NOT DISPUTED THAT THE SURPLUSES G ENERATED BY THE ASSESSEE COULD NOT BE DISTRIBUTED TO ITS MEMBERS AN D THERE WAS ALSO NO ALLEGATION THAT FUNDS OF THE ASSESSEE HAD BEEN S O DISTRIBUTED. THE HON'BLE HIGH COURT FURTHER OBSERVED THAT THE FA CT THAT CERTAIN ADVANCES HAD BEEN MADE TO COL. SATSANGI AND SOME OF HIS FAMILY MEMBERS WHO WERE ALSO INVOLVED IN RUNNING THE SCHOO L CANNOT BE CONSTRUED AS DILUTING THE PREDOMINANT OBJECT OF THE ASSESSEE WHICH WAS MANAGING SCHOOLS AND THE SUBSTRATAL PURPOSES OF ITS ACTIVITIES WAS EDUCATION. THE HON'BLE HIGH COURT HELD THAT TH E ASSESSEE WOULD QUALITY FOR EXEMPTION U/S 10(22)10(23C) OF TH E ACT. ITA NO. 4644/DEL/2010 ASSESSMENT YEAR 1999-2000 8 9. THEREFORE, RESPECTFULLY APPLYING THE RATIO OF TH E JUDGMENT OF THE HON'BLE HIGH COURT, WE DEEM IT FIT TO RESTORE T HE ASSESSMENT TO THE FILE OF THE ASSESSING OFFICER FOR RE-EXAMINATIO N AND FRESH ASSESSMENT AFTER DULY CONSIDERING THE STATUS OF THE ASSESSEES APPLICATION FOR APPROVAL U/S 10 (23C) (VI) BEFORE T HE DGIT(E) AND AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. 10. IN THE RESULT, THE ASSESSEES APPEAL STANDS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH MAY, 2017. SD/- SD/- (S.V. MEHROTRA) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEMBER DT. 11TH MAY 2017 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR