M/s Maharawal Khewaji Trust, Faridkot V. The Assistant Commissioner of Income Tax, Ferozepur

ITA 549/ASR/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8781 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 26-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VEDPAL SINGH
• Assessee Lawyers: J K GUPTA
• Keywords: Charitable institution; Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNA AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.SANJAY GARG, JUDICIAL MEMBER I.T.A. NOS.547 TO 550 (ASR)/2015 ASSESSMENT YEAR: 2007-08 TO 2010-11 MAHARAWAL KHEWAJI TRUST, MOTI MAHAL, THE FORT, FARIDKOT. PAN:AAATM2875R VS. ASST. CIT, CRICLE-3, FEROZEPUR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J.K.GUPTA, ADV. RESPONDENT BY: SH. VEDPAL SINGH, DR DATE OF HEARING: 28/11/2016 DATE OF PRONOUNCEMENT:07/02/2017 ORDER PER T.S. KAPOOR, AM: THESE ARE FOUR APPEALS FILED BY ASSESSEE AGAINST THE ORDER OF LD. CIT(A), BATHINDA, ALL DATED 25.08.2015 FOR ASST. YE ARS: 2007-08 TO 2010- 11 RESPECTIVELY. 2. IN THESE APPEALS, THE ASSESSEE IS AGGRIEVED WIT H THE ACTION OF LD. CIT(A), BY WHICH HE HAD RECORDED AN ALERT IN THE AP PELLATE ORDER. 3. COMMON ISSUE IS INVOLVED IN THESE APPEALS AND A LL THESE APPEALS WERE HEARD TOGETHER, THEREFORE, FOR THE SAKE OF CON VENIENCE A COMMON AND CONSOLIDATED ORDER IS BEING PASSED. ITA NOS.547 TO 550/ASR/2015 ASST. YEARS. 2007-08 TO 2010-11 2 4. THE ASSESSEE HAS TAKEN VARIOUS GROUNDS OF APPEAL S. FOR THE SAKE OF CONVENIENCE THE GROUNDS OF APPEAL IN ITA NO.547(ASR )/2015 FOR ASST. YEAR:2007-08 ARE REPRODUCED HEREIN BELOW. (1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN ISSUING THE ALERT TO TH E AO TO TAKE COGNIZANCE OF THE ASSESSEE LOSING ITS STATUS OF TRUST AND THE I NCOME ACCRUING THEREOF BECOMING THE RIGHT OF TWO INDIVIDUALS AS A CONSEQUE NCE OF THE DECISION OF THE ADDITIONAL CIVIL JUDGE, CHANDIGARH AND TAKE CON SEQUENTIAL ACTIONS/REMEDIES SHOULD IT BE CONSIDERED APPROPRIAT E. EVEN THE CIT(A) HAS NOT MENTIONED UNDER WHICH PROVISIONS OF LAW, HE HAS ISSUED SUCH AN ALERT. (2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED C1T(A) ERRED IN GIVING THE ABOVE D IRECTIONS IN GROUND OF APPEAL NO. 1 AS THE DECISION OF THE ADDITIONAL CIVI L JUDGE, CHANDIGARH HAS SINCE BEEN STAYED BY THE DISTRICT JUDGE, CHANDIGARH AND IS STILL IN FORCE. SO, IS BEYOND HIS POWER AND IS PRE-MATURE. EVEN SOM E APPEALS AGAINST THIS ORDER ARE PENDING IN THE HONBLE FLIGH COURT. (3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED C1T(A) ERRED IN GIVING THE ABOVE D IRECTION IN GROUND OF APPEAL NO. 1 AS THE WRIT PETITION STAND ADMITTED AG AINST REJECTION OF APPLICATION FOR REGISTRATION OF CHARITABLE TRUST BY THE DEPARTMENT AND IS STILL PENDING IN THE HONBLE HIGH COURT. SO, THE DIRECTIO NS ARE BEYOND HIS POWER AND ARE PRE-MATURE. (4) THAT ANY OTHER RELIEF MAY KINDLY BE GRANTED TO THE ASSESSEE TO WHOM IT IS FOUND ENTITLED AT THE TIME OF HEARING OF APPEAL. 5. THE BRIEF FACTS OF THE CASE AS NOTED IN THE PENA LTY ORDER ARE THAT ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL I NCOME AND CLAIMED EXEMPT INCOME U/S 11&12 OF THE ACT. HOWEVER, THE AS SESSING OFFICER DID NOT ALLOW EXEMPTION U/S 11&12 OF THE ACT. THEREFORE , THE ASSESSING OFFICER IMPOSED PENALTIES FOR CONCEALMENT OF INCOME U/S 271(1)(C) OF THE ACT. ITA NOS.547 TO 550/ASR/2015 ASST. YEARS. 2007-08 TO 2010-11 3 6. AGGRIEVED WITH THE PENALTY ORDERS, THE ASSESSEE FILED APPEALS BEFORE LD. CIT(A) AND LD. CIT(A) DELETED THE PENALTY IMPOS ED BY ASSESSING OFFICER, HOWEVER, WHILE ALLOWING RELIEF TO THE ASSE SSEE, THE LD. CIT(A) VIDE PARA-14 HAS NOTED AS UNDER.. 14. IT IS CONSIDERED APPROPRIATE, BEFORE PARTING , TO ISSUE AN ALERT TO THE ASSESSING OFFICER TO TAKE COGNIZANCE OF THE APPELLA NT ENTITY LOSING ITS STATUS OF TRUST AND THE INCOME ACCRUING THEREOF B ECOMING THE RIGHT OF TWO INDIVIDUALS AS A CONSEQUENCE OF THE DECISION OF THE ADDITIONAL CIVIL JUDGE, CHANDIGARH AND TAKE NECESSARY CONSEQUENTIAL ACTIONS /REMEDIES, SHOULD IT BE CONSIDERED APPROPRIATE. 7. AGGRIEVED WITH THE ABOVE NOTINGS IN PARA-14, THE ASSESSEE IS IN APPEAL BEFORE US. 8. AT THE OUTSET, THE LD. AR INVITED OUR ATTENTION TO THE POWERS OF INCOME TAX COMMISSIONER (APPEALS) U/S 251(1) OF THE ACT AND HE SUBMITTED THAT THE POWERS OF THE LD. CIT(A) IN DISP OSING OF THE APPEALS RELATING TO IMPOSITION OF PENALTY ARE CONTAINED IN SEC.251(1)(B) OF THE ACT AND AS PER THE PROVISIONS OF THIS SECTION, THE LD. CIT(A) HAS POWERS TO CONFIRM OR CANCEL THE PENALTY OR TO ENHANCE OR REDU CE THE PENALTY. HE SUBMITTED THAT OTHER THAN THIS POWER LD. CIT(A) HAS NO POWER WHILE DISPOSING OF THE PENALTY APPEAL. RELIANCE IN THIS R ESPECT WAS PLACED ON THE FOLLOWING CASE LAWS: (I) CIT VS. RAMESHWARDAS RAM NARAIN 107 ITR 710 (AL L). (II) CIT VS. EMINENT ENTERPRISES 201 ITR 766 (KER). (III) CIT VS. GEDORE TOOLS (P) LTD. 238 ITR 268 (DE L). (IV) MRS. BANOO E COWASJI VS. CIT 138 ITR 686 (MP). THEREFORE, IT WAS PRAYED THAT THE PARA-14 OF LD. CI T(A)S ORDER BE CANCELLED. ITA NOS.547 TO 550/ASR/2015 ASST. YEARS. 2007-08 TO 2010-11 4 9. THE LD. DR, ON THE OTHER HAND, HEAVILY PLACED HI S RELIANCE ON THE ORDER OF AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS AN UN DISPUTED FACT THAT THE ABOVE SAID ORDERS PASSED BY LD. CIT(A) RELATE TO TH E PENALTIES IMPOSED BY ASSESSING OFFICER U/S 271(1) (C) OF THE ACT. IT IS ALSO UNDISPUTED FACT THAT THE LD. CIT(A) HAS ALLOWED RELIEF AND HAD DELETED T HE PENALTIES IN THESE ORDERS. THE POWERS OF CIT(A), WHILE DISPOSING OF TH E APPEALS RELATING TO PENALTIES ARE CONTAINED IN SEC.251(1)(B) OF THE ACT . FOR THE SAKE OF CONVENIENCE, THE SAID POWERS AS CONTAINED IN SEC.25 1(1)(B) ARE REPRODUCED HEREIN BELOW. 251. (1) IN DISPOSING OF AN APPEAL, THE [***] [COMMISSIO NER (APPEALS)] SHALL HAVE THE FOLLOWING POWERS- (A)****** (B) IN AN APPEAL AGAINST AN ORDER IMPOSING A PENALT Y, HE MAY CONFIRM OR CANCEL SUCH ORDER OR VARY IT SO AS EITHER TO ENHANC E OR TO REDUCE THE PENALTY. (C) IN ANY OTHER CASE, HE MAY PASS SUCH ORDERS IN T HE APPEAL AS HE THINKS FIT. FROM THE ABOVE PROVISIONS, WE FIND THAT WHILE DEALI NG WITH THE PENALTY MATTERS, THE LD. CIT(A) HAS LIMITED POWERS BY WHICH HE MAY CONFIRM OR CANCEL SUCH PENALTIES OR MAY REDUCE OR ENHANCE SUCH PENALTY. NO OTHER POWER HAS BEEN MENTIONED IN THE SAID SECTION. THE H ONBLE HIGH COURT OF ALLAHABAD HAS CONSIDERED THE SIMILAR ISSUE AND HAS HELD THAT APPELLATE ASSISTANT COMMISSIONER HAD NO JURISDICTION TO MAKE THE DIRECTION OF THE ITA NOS.547 TO 550/ASR/2015 ASST. YEARS. 2007-08 TO 2010-11 5 KIND THAT HE MADE IN THE APPELLATE ORDER. THE FINDI NGS OF THE HONBLE COURT ARE REPRODUCED BELOW. 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN CANCELING THE DIRECTION OF THE APPELLA TE ASSISTANT COMMISSIONER IN HIS ORDER AGAINST THE PENALTY IMPOS ED UNDER SECTION 28(L)(C) ? ' SECTION 31(3)(F) OF THE ACT CONFERS APPELLATE JURIS DICTION WITH REGARD TO AN ORDER UNDER SECTION 28. UNDER IT THERE IS NO POWER OF MAKING DIRECTION OF THE KIND THE APPELLATE ASSISTANT COMMISSIONER HAS D ONE IN THE PRESENT CASE. IN THE NEXT PLACE, THE INCOME-TAX OFFICER CAN NOT, IN LAW, PROCEED FOR IMPOSITION OF PENALTY UNDER SECTION 28(L)(C) MERELY BECAUSE THE APPELLATE ASSISTANT COMMISSIONER GIVES A DIRECTION IN THIS RE GARD. IF IN LAW HE DID NOT HAVE ANY JURISDICTION TO TAKE ANY FURTHER ACTIO N HE CANNOT VALIDLY TAKE SUCH ACTION. THE DIRECTION IN THE APPELLATE ORDER T HAT THE INCOME-TAX OFFICER SHOULD TAKE SUCH ACTION ACCORDING TO LAW AS HE DEEM S NECESSARY IN THIS CASE MIGHT HAVE CONFUSED THE SITUATION. THE INCOME- TAX OFFICER WAS BOUND TO TAKE SOME ACTION IN ACCORDANCE WITH THE APPELLAT E DIRECTION. FOR THIS REASON ALSO THE TRIBUNAL WAS JUSTIFIED IN SETTING A SIDE THE DIRECTION. SIMILARLY, THE HONBLE KERALA HIGH COURT IN THE CAS E OF CIT VS. EMINENT ENTERPRISES 201 ITR 766 , HAS ALSO CONSIDERED THE SIMILAR ISSUE AND HAS PASSED A DETAILED ORDER BY OBSERVING AS UNDER: SECTION 251 OF THE INCOME-TAX ACT DEALS WITH THE PO WERS OF THE FIRST APPELLATE- AUTHORITY. IT IS AS FOLLOWS : '251. POWERS OF THE DEPUTY COMMISSIONER (APPEALS) O R, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS (1) IN DISPOSING OF A N APPEAL, THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS ) SHALL HAVE THE FOLLOWING POWERS (A) IN A N APPEAL AGAINST AN ORDER OF ASSESSMENT, HE MAY CONFIRM, REDUCE, ENHANC E OR ANNUL THE ASSESSMENT ; OR HE MAY SET ASIDE THE ASSESSMENT AND REFER THE CASE BACK TO THE AO FOR MAKING A FRESH ASSESSMENT IN ACCORDAN CE WITH THE DIRECTIONS GIVEN BY THE DEPUTY COMMISSIONER (APPEALS) OR, AS T HE CASE MAY BE, THE COMMISSIONER (APPEALS) AND AFTER MAKING SUCH FURTHE R ENQUIRY AS MAY BE NECESSARY, AND THE AO SHALL THEREUPON PROCEED TO MA KE SUCH FRESH ASSESSMENT AND DETERMINE, WHERE NECESSARY, THE AMOU NT OF TAX PAYABLE ON THE BASIS OF SUCH FRESH ASSESSMENT (B) IN AN APPEAL AGAINST AN ORDER IMPOSING A PENALT Y, HE MAY CONFIRM OR CANCEL SUCH ORDER OR VARY IT SO AS EITHER TO ENHANC E OR TO REDUCE THE PENALTY ; (C) IN ANY OTHER CASE, HE MAY PASS SUCH ORDERS IN T HE APPEAL AS HE THINKS FIT. ITA NOS.547 TO 550/ASR/2015 ASST. YEARS. 2007-08 TO 2010-11 6 (2) THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CA SE MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT ENHANCE AN ASSESSM ENT OR A PENALTY OR REDUCE THE AMOUNT OF REFUND UNLESS THE APPELLANT HA S HAD A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST SUCH ENHANCEME NT OR REDUCTION. ' SECTION 251(L)(A) DEALS WITH THE POWER OF THE FIRST APPELLATE AUTHORITY IN DISPOSING OF AN APPEAL AGAINST AN ORDER OF ASSESSME NT. THE APPELLATE AUTHORITY MAY CONFIRM, REDUCE, ENHANCE OR ANNUL AN ASSESSMENT. HE MAY ALSO SET ASIDE THE ASSESSMENT AND REFER THE CASE AL TOGETHER TO THE AO FOR MAKING A FRESH ASSESSMENT AND HE CAN ALSO ISSUE DIR ECTIONS IN THAT BEHALF. SECTION 251(L)(B) DEALS WITH AN APPEAL AGAINST AN O RDER IMPOSING PENALTY. THEREIN, THE ONLY POWERS GIVEN TO THE APPELLATE AUT HORITY ARE THAT HE MAY EITHER CONFIRM THE ORDER OR HE MAY CANCEL SUCH ORDE R OR HE MAY VARY IT EITHER BY ENHANCING THE PENALTY OR REDUCING IT. UND ER SECTION 251(L)(C), CASES NOT GOVERNED BY CLAUSES (A) AND (B) CAN BE DE ALT WITH WHEREIN THE APPELLATE AUTHORITY CAN PASS SUCH ORDERS IN THE APP EAL AS HE THINKS FIT. NORMALLY, VERY WIDE DISCRETION OR JURISDICTION IS C ONFERRED ON THE FIRST APPELLATE AUTHORITY UNDER SECTION 251(L)(C) IN CASE S NOT COMING UNDER SECTION 251(L)(A) OR (B). HE MAY SET ASIDE THE ORDE R APPEALED AGAINST AND ORDER REMIT OR MAKE FURTHER DIRECTIONS OR PASS SUCH OTHER ORDER WHICH WILL MEET THE ENDS OF JUSTICE. SECTION 251 DEALS WITH TH E POWERS OF THE FIRST APPELLATE AUTHORITY IN DIFFERENT SITUATIONS. WHEREA S, IN CASES COMING UNDER SECTION 251(L)(A)-APPEAL AGAINST AN ORDER OF ASSESS MENT AND CASES OTHER THAN APPEALS AGAINST ASSESSMENT AND PENALTY THE FIR ST APPELLATE AUTHORITY CAN PASS ANY ORDER AS HE THINKS FIT, IN THE APPEALS AGAINST ORDERS IMPOSING PENALTIES, THE POWER OF THE FIRST APPELLATE AUTHORI TY IS CIRCUMSCRIBED OR CONFINED WITHIN LIMITS. HE CAN ONLY CONFIRM OR CANCEL SUCH ORDER OR VARY IT EITHER ENHANCING IT OR REDUCING IT. IT IS N OT OPEN TO THE FIRST APPELLATE AUTHORITY TO SET ASIDE THE ORDER OF THE I NCOME-TAX OFFICER AND ORDER A REMIT OR TO GIVE ANY DIRECTION AS DONE IN THE INSTANT CASE . THIS SECTION IS SIMILAR TO SECTION 31(3)(F) OF TH E INDIAN INCOME-TAX ACT, 1922. CONSTRUING SECTION 31 (3)(F) OF THE INDIAN IN COME-TAX ACT, 1922, A BENCH OF THE ALLAHABAD HIGH COURT IN CIT V/S. RAMES HWARDAS RAM NARAIN (1977) 107 ITR 710 HELD THAT THERE IS NO POW ER IN THE FIRST APPELLATE AUTHORITY TO GIVE A DIRECTION TO TAKE FRESH ACTION IN ACCORDANCE WITH LAW. IN OTHER WORDS, THE FIRST APPELLATE AUTHORITY IN THE C ASES GOVERNED BY SECTION 31 (3)(F) OF THE INDIAN INCOME-TAX ACT, 1922, CORRE SPONDING TO SECTION 251(L)(B) OF THE INCOME-TAX ACT, 1961, CANNOT SET A SIDE THE ORDER APPEALED AGAINST AND ORDER A REMIT OR GIVE FURTHER DIRECTION S IN THAT BEHALF. IN THIS PERSPECTIVE, THE TRIBUNAL WAS JUSTIFIED IN CANCELLI NG THE ORDER PASSED BY THE APPELLATE ASSISTANT COMMISSIONER AND IN THE RES ULT, CANCELLING THE PENALTY LEVIED. THE DECISION OF THE TRIBUNAL IS NOT OPEN TO OBJECTION. WE, THEREFORE, HOLD THAT THE ORDER OF THE TRIBUNAL DOES NOT SUFFER FROM ANY ERROR OF LAW. WE ANSWER QUESTION NO. 1 IN THE AFFIRMATIVE TO THE EXTENT WE HOLD THAT, ON THE LANGUAGE OF SECTION 251(L)(B) OF THE I NCOME-TAX ACT, 1961, THE FIRST APPELLATE AUTHORITY HAS NO POWER TO SET ASIDE THE ORDER APPEALED AGAINST AND ORDER A REMIT WITH DIRECTIONS. THE ORDE R PASSED BY THE TRIBUNAL INTERFERING WITH THE ORDER PASSED BY THE A PPELLATE ASSISTANT COMMISSIONER DATED 30.12.1983, IS VALID AND JUSTIFI ED. WE ANSWER ITA NOS.547 TO 550/ASR/2015 ASST. YEARS. 2007-08 TO 2010-11 7 QUESTION NO. 2 IN THE AFFIRMATIVE, AGAINST THE REVE NUE AND IN FAVOUR OF THE ASSESSEE AND HOLD THAT THE ORDER OF THE APPELLATE A SSISTANT COMMISSIONER WAS INFIRM AND THAT HE HAS NO POWER TO SET ASIDE AN ORDER LEVYING PENALTY WITH A DIRECTION TO PASS FRESH ORDERS. BOTH THE QUESTIONS ARE ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. THE INCOME-TAX REFERENCE IS DISPOSED OF A S ABOVE. THEREFORE, KEEPING IN VIEW THE ABOVE JUDICIAL PRECE DENTS, WE FIND MERIT IN THE ARGUMENTS OF LD. AR, THEREFORE, WE ORDER THAT P ARA-14 OF LD. CIT(A)S ORDER BE DELETED. 11. IN VIEW OF THE ABOVE, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/02/201 7. SD/- SD/- (SANJAY GARG) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:07/02/2017 /PK/PS COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: 2. THE 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER