The Dharmodayam Co., Trichur V. The ITO, Trichur

ITA 552/COCH/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90782 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 13-05-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 22-12-2014
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: JOSE POTTOKKARAN CA S
• Keywords: Reopening of assessment; Charitable institution
• Section: 12A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI V.DURGA RAO, JM AND B.R.BASKARAN, AM I.T.A. NO. 552/COCH/2014 ASSESSMENT YEAR : 2004-05 THE DHARMODAYAM CO., ROUND EAST, THRISSUR-680 001. [PAN:AAACD 8589J] VS. THE INCOME TAX OFFICER, WARD- 1(1), THRISSUR. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI JOSE POTTOKKARAN, CA SREVENUE BY SHRI K.K. JOHN, SR. DR DATE OF HEARING 13/05/2015 DATE OF PRONOUNCEMENT 14/05/2015 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THIS ASSESSEE HAS FILED THIS APPEAL CHALLENGING TH E ORDER DATED 23-09- 2014 PASSED BY THE LD. CIT(A)-IV, KOCHI AND IT RELA TES TO THE ASSESSMENT YEAR 2004-05. 2. THE GROUNDS OF APPEAL URGED BY THE ASSESSEE GIVE RISE TO THE FOLLOWING ISSUES: (A) VALIDITY OF RE-OPENING OF THE ASSESSMENT U/S. 147 OF THE ACT. (B) ASSESSMENT OF PART OF INCOME ACCUMULATED U/S. 11(2) OF THE ACT. (C) INTEREST CHARGED U/S. 234A AND 234D OF THE ACT . I.T.A. NO.552/COCH/2014 2 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE IS A PUBLIC CHARITABLE INSTITUTION AND ITS MAIN OBJECTIVE IS TO PROVIDE MEDICAL AID, EDUCATION AND CARRY ON OTHER PUBLIC CHARITABLE ACTIVITIES. IT WAS REGISTERED U/S. 12A OF THE ACT. IT FILED ITS RETURN OF INCOME FOR THE YEAR UN DER CONSIDERATION DECLARING A LOSS OF RS.9631/- ON 25-10-2004 AND THE SAME WAS PROCESS ED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER RE-OPENED THE A SSESSMENT ON 03/04/2006 BY ISSUING NOTICE U/S. 148 OF THE ACT. IN RESPONSE TH ERETO, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL INCOME. 4. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.31,35,000/- AS DEDUCTION U/S. 11(2) OF THE ACT O N THE GROUND THAT IT WAS ACCUMULATED FOR FUTURE APPLICATION. AS PER THE PRO VISIONS OF SEC. 11(2) OF THE ACT, THE MONEY SO ACCUMULATED OR SET APART IS REQUI RED TO BE INVESTED OR DEPOSITED IN THE FORMS OR MODES SPECIFIED IN SECTIO N 11(5) OF THE ACT. 5. THE ASSESSEE HAS FURNISHED DETAILS OF DEPOSIT AS UNDER: DEPOSIT NO. DATE OF DEPOSIT WITH WHOM THE AMOUNT IS DEPOSITED AMOUNT OF DEPOSIT DUE DATE 0685101000005345 22.02.03 SOUTH INDIAN BANK LTD., BAZAR BRANCH, THRISSUR 108,243 22.02.06 0085101000004639 23.09.2002 -DO- 518,399 21.09 .05 PWD 20022213 23.09.2002 CATHOLIC SYRIAN BANK LTD., THRISSUR MAIN 519,110 22.09.2005 I.T.A. NO.552/COCH/2014 3 PWD 012753 31.01.2004 CATHOLIC SYRIAN BANK LTD., EAST FORT, THRISSURY 750,000 28.02.06 00841010000010754 31.01.04 SOUTH INDIAN BANK LTD., THRISSUR MAIN 750,000 31.01.06 PWD 20040016 20.02.04 CATHOLIC SYRIAN BANK LTD., ANTHIKAD BRANCH 500,000 3145.752 20.02.06 THE ASSESSING OFFICER NOTICED THAT THE FIRST THREE DEPOSITS LISTED OUT IN THE TABLE EXTRACTED ABOVE, WERE FOUND TO HAVE BEEN MADE IN TH E IMMEDIATELY PRECEDING YEAR AND THE REMAINING THREE DEPOSITS HAVE BEEN MAD E DURING THE CURRENT YEAR. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESS EE SHOULD HAVE MADE DEPOSITS/INVESTMENTS ONLY AFTER TAKING DECISION ABO UT THE ACCUMULATION OF INCOME IN TERMS OF SEC. 11(2) OF THE ACT, I.E., THE AO TOOK THE VIEW THAT DEPOSITS SHOULD HAVE BEEN MADE OUT OF THE CURRENT YEARS INC OME. ACCORDINGLY, HE TOOK THE VIEW THAT THE FIRST THREE DEPOSITS AGGREGATING TO RS.11,45,752/- CANNOT BE CONSIDERED TO BE DEPOSITS MADE IN TERMS OF SECTION 11(2)(B) OF THE ACT, SINCE THEY HAVE NOT BEEN MADE OUT OF CURRENT YEARS INCO ME. ACCORDINGLY, THE ASSESSING OFFICER RESTRICTED THE DEDUCTION U/S. 11( 2) OF THE ACT TO RS. 20.00 LAKHS AND THUS DETERMINED THE TOTAL INCOME OF THE ASSESSE E AT RS.10,53,240/-. 6. IN THE APPEAL FILED BY THE ASSESSEE, THE LD. CIT (A) CONFIRMED THE VALIDITY OF THE RE-OPENING OF THE ASSESSMENT AND ALSO CONFIR MED THE DISALLOWANCE OF PART I.T.A. NO.552/COCH/2014 4 OF DEDUCTION CLAIMED U/S. 11(2) OF THE ACT. AGGRI EVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 7. THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMI TTED THAT THE ASSESSING OFFICER WAS NOT RIGHT IN HOLDING THAT THE DEPOSITS/ INVESTMENTS SHOULD BE MADE OUT OF CURRENT YEARS INCOME ONLY IN TERMS OF SEC.1 1(2)(B) OF THE ACT. THE LD. COUNSEL FURTHER SUBMITTED THAT THE CO-ORDINATE BENC H OF THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF OLLUR SADHU SAMRAKSHNA SANGHAM IN I.T.A. NO.178/COCH/2002 AND THE TRIBUNAL, VIDE ITS ORDER DATED 26 TH OCTOBER, 2004, HAS UPHELD THE FINDINGS OF THE CIT(A) THAT TH E INTENTION OF THE LAW APPEARS TO BE THAT THE INCOME SET APART SHOULD BE REPRESENT ED BY SOME ASSETS PRESCRIBED U/S. 11(5) OF THE ACT. THE LD. COUNSEL FURTHER SUB MITTED THAT THE ABOVE SAID ORDER OF THE CO-ORDINATE BENCH WAS ALSO FOLLOWED BY ANOTHER BENCH IN I.T.A. NO. 807/COCH/2005 RELATING TO THE CASE OF THE SAME ASSE SSEE. THE LD. AR FURTHER SUBMITTED THAT THE DEPARTMENT HAS CHALLENGED THE OR DER PASSED BY THE TRIBUNAL ON A DIFFERENT GROUND BEFORE THE HONBLE HIGH COURT OF KERALA AND HENCE, THE ORDER OF THE TRIBUNAL ON THIS ISSUE HAS BEEN ACCEPT ED BY THE REVENUE. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN EARMAR KING THE LIEN FREE DEPOSITS IN IDENTICAL MANNER IN OTHER YEARS ALSO AND THE SAME H AS NOT BEEN FOUND FAULT WITH BY THE ASSESSING OFFICER. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ACT DOES NOT PRESCRIBE ANY CONDITION THAT ONLY CURRENT YEAR S INCOME SHOULD BE INVESTED IN SPECIFIED ASSETS IN ORDER TO AVAIL DEDUCTION U/S. 1 1(2) OF THE ACT. I.T.A. NO.552/COCH/2014 5 8. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE ASSESSEE CANNOT PLACE RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CAS E OF OLLUR SADHU SAMRAKSHNA SANGHAM, CITED SUPRA, SINCE THE FACTS PREVAILING IN THAT CASE ARE TOTALLY DIFFERENT. INVITING OUR ATTENTION TO THE DECISION RENDERED BY THE TRIBUNAL IN THE ABOVE CITED CASE, THE LD. DR SUBMITTED THAT THE ASSESSEE THERE IN HAD INVESTED IN THE EARLIER YEARS IN KISAN VIKAS PATRAS. THE INTEREST INCOME A CCRUED IN THE KISAN VIKAS PATRAS SCHEME SHALL BE REPAID ONLY ON MATURITY ALON G WITH THE PRINCIPAL AMOUNT. HOWEVER, THE ABOVE SAID ASSESSEE WAS FOLLOWING MERC ANTILE SYSTEM OF ACCOUNTING AND HENCE, THE INTEREST ACCRUED ON KVP WAS TAKEN AS ITS INCOME EVERY YEAR. CONSIDERING THESE PECULIAR FACTS, THE LD. CIT(A) HA S HELD THAT THE ACCRUED INTEREST IN KISAN VIKAS PATRAS CAN BE CONSIDERED T O BE THE PRESCRIBED INVESTMENT MADE BY THE ASSESSEE IN COMPLIANCE OF SECTION 11(2) OF THE ACT. THE LD D.R FURTHER SUBMITTED THAT THE FORM NO.10 PRESCRIBED UN DER RULE 17 OF THE I.T RULES PRESCRIBED A TIME LIMIT OF SIX MONTHS COMMENCING FR OM THE END OF THE PREVIOUS YEAR TO MAKE INVESTMENT/DEPOSIT OF ACCUMULATED INCO ME. HE SUBMITTED THAT THIS CONDITION PRESCRIBED IN FORM NO.10 AMPLY MAKES CLEA R THAT THE DEPOSIT/INVESTMENT SHOULD BE MADE OUT CURRENT YEAR S INCOME ONLY. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE SOLITARY DISPUTE THAT IS CONTESTED BEFORE US IS WHETHER THE BANK FIXED DEPOSITS, WHICH WERE MADE IN THE IMMEDIATELY PRECEDING YEAR, COULD BE EARMARKED TOWARDS THE I.T.A. NO.552/COCH/2014 6 INCOME ACCUMULATED U/S 11(2) OF THE ACT OR NOT, IN COMPLIANCE WITH THE PROVISIONS OF SEC. 11(2)(B) OF THE ACT. 10. ACCORDING TO THE TAX AUTHORITIES THE INVESTMENT /DEPOSIT SHOULD BE MADE OUT OF CURRENT YEARS INCOME ONLY. SINCE THE ASSES SEE HAD EARMARKED THE FIXED DEPOSITS THAT WERE MADE IN THE IMMEDIATELY PRECEDIN G YEAR TO SATISFY THE COMPLIANCE OF THE PROVISIONS OF SEC. 11(2)(B), THE ASSESSING OFFICER HAS HELD THAT THE SAME CANNOT BE CONSIDERED TO BE PROPER COMPLIAN CE OF THE CONDITIONS PRESCRIBED FOR ACCUMULATION OF INCOME U/S 11(2) OF THE ACT, SINCE THEY HAVE NOT BEEN MADE OUT OF CURRENT YEARS INCOME. 11. IN OUR OPINION, THE VIEW TAKEN BY THE REVENUE A PPEARS TO BE TOO TECHNICAL. IN OUR VIEW, THE PROVISIONS OF SEC. 11(2) OF THE AC T SHOULD BE INTERPRETED IN A HOLISTIC WAY DULY CONSIDERING THE OBJECTIVE BEHIND EACH OF THE PROVISION. IF THE ASSESSEE DECIDES TO ACCUMULATE A PORTION OF INCOME, THEN IT HAS TO PASS A RESOLUTION TO THAT EFFECT SPECIFYING THE PURPOSE OF ACCUMULATION. THEN THE ASSESSEE SHOULD GIVE A NOTICE IN PRESCRIBED FORM TO THE ASSESSING OFFICER. A FURTHER CONDITION THAT IS IMPOSED IS THAT THE MONEY SO ACCUMULATED OR SET APART IS INVESTED OR DEPOSITED IN THE FORMS OR MODES SPEC IFIED IN SEC. 11(5) OF THE ACT. OBVIOUSLY, THE OBJECTIVE BEHIND INSISTING FOR DEPOS IT OF THE MONEY SO ACCUMULATED OR SET APART IS ONLY TO ENSURE THAT THE ASSESSEE UTILIZES THE SAID MONEY ONLY FOR THE PURPOSE OF ACHIEVING THE OBJECTI VE FOR WHICH THE INCOME WAS I.T.A. NO.552/COCH/2014 7 ACCUMULATED. THERE WILL NOT BE ANY CHECK IF THE AS SESSEE IS NOT MANDATED TO MAKE DEPOSIT/INVESTMENT OF THE INCOME SO ACCUMULATE D. 12. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT T HE ASSESSEE HAS PASSED A RESOLUTION FOR ACCUMULATION OF INCOME DULY SPECIFYI NG THE PURPOSE OF ACCUMULATION. OUT OF THE SUM OF RS.31.35 LAKHS CLA IMED U/S 11(2) OF THE ACT AS ACCUMULATION OF INCOME, A SUM OF RS.20.00 LAKHS WAS FOUND TO HAVE BEEN DEPOSITED IN BANK FIXED DEPOSITS DURING THE YEAR UN DER CONSIDERATION. FOR THE REMAINING AMOUNT, THE ASSESSEE HAS EARMARKED THE FI XED DEPOSITS ALREADY AVAILABLE WITH IT TOWARDS THE INCOME ACCUMULATED U/ S 11(2) OF THE ACT. CONSIDERING THE OBJECTIVE OF THE PROVISION OF SEC. 11(2)(B), IN OUR VIEW, WHAT IS REQUIRED TO BE SEEN IS WHETHER THE INCOME ACCUMULAT ED HAS BEEN DEPOSITED OR INVESTED IN THE FORMS PRESCRIBED U/S 11(5) OF THE A CT, I.E., THERE SHOULD BE CORRESPONDING INVESTMENT, WHICH COULD BE IDENTIFIED WITH THE INCOME ACCUMULATED. THE PERIOD OF SIX MONTHS PRESCRIBED I N FORM NO.10, IN OUR VIEW, IS THE OUTER LIMIT FOR MAKING DEPOSIT/INVESTMENT. 13. IT IS ALSO PERTINENT TO NOTE THAT THE PROVISION S OF SEC. 11(2)(A) TALKS ABOUT INCOME, WHERE AS THE PROVISIONS OF SEC. 11(2)(B) TALKS ABOUT THE MONEY SO ACCUMULATED. THE MONEY AVAILABLE WITH THE ASSESS EE MAY BE PERTAINING TO THE CURRENT YEARS INCOME OR EARLIER YEARS INCOME. FU RTHER, IF THE VIEW TAKEN BY THE TAX AUTHORITIES THAT THE DEPOSIT SHOULD HAVE BEEN M ADE OUT OF CURRENT YEARS I.T.A. NO.552/COCH/2014 8 INCOME IS ACCEPTED AS CORRECT FOR A MOMENT, THEN TH E ASSESSEE TRUST SHALL BE FORCED TO FORECLOSE THE EXISTING DEPOSIT AND THEREA FTER MAKE A NEW DEPOSIT, THUS LOSING CONSIDERABLE AMOUNT TOWARDS LOSS OF INTEREST /PENALTY. THE SAME WOULD BE VERY MUCH TECHNICAL IN NATURE. HENCE, IN OUR CONSI DERED VIEW, THE EARMARKING OF EXISTING BANK FIXED DEPOSITS, WHICH IS FREE FROM AN Y LIEN, TOWARDS THE INCOME ACCUMULATED U/S 11(2) OF THE ACT DURING THE YEAR UN DER CONSIDERATION WOULD BE SUFFICIENT COMPLIANCE WITH THE PROVISIONS OF SEC. 1 1(2)(B) OF THE ACT, SINCE THE ACCUMULATED INCOME IS REPRESENTED BY THE CORRESPOND ING DEPOSIT/INVESTMENT. 14. IN VIEW OF THE FOREGOING DISCUSSIONS, WE SET AS IDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO D ELETE THE DISALLOWANCE OF INCOME ACCUMULATED U/S 11(2) OF THE ACT. 15. WITH REGARD TO THE ISSUE RELATING TO VALIDITY O F RE-OPENING OF ASSESSMENT, WE NOTICE THAT THE RETURN OF INCOME FILED BY THE AS SESSEE HAD EARLIER BEEN PROCESSED U/S 143(1) OF THE ACT ONLY AND FURTHER TH E ASSESSMENT HAS BEEN REOPENED WITHIN FOUR YEARS FROM THE END OF THE RELE VANT ASSESSMENT YEAR. FURTHER THERE WAS PRIMA FACIE REASON WITH THE ASSES SING OFFICER TO BELIEVE THAT THE ASSESSEE HAD NOT MADE INVESTMENT IN TERMS OF SE C. 11(2)(B) OF THE ACT. EVEN THOUGH THE PRIMA FACIE REASON MAY GO WRONG SUBS EQUENTLY, THE REOPENING CANNOT BE HELD TO BE INVALID ON THAT COUNT. UNDER THESE SET OF FACTS, BY FOLLOWING I.T.A. NO.552/COCH/2014 9 THE DECISION OF HONBLE SUPREME COURT RENDERED IN T HE CASE OF RAJESH JHAVERI STOCK BROKERS LTD (291 ITR 500), WE UPHOLD THE RE-O PENING OF ASSESSMENT. 16. THE ISSUES URGED BY THE ASSESSEE WITH REGARD TO CHARGING OF INTEREST DO NOT REQUIRE ADJUDICATION AS THEY ARE CONSEQUENTIAL IN NATURE. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 14 -05-2015 SD/- SD/- (V. DURGA RAO) (B.R. BASKARAN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 14TH MAY, 2015 GJ COPY TO: 1. THE DHARMODAYAM CO.. ROUND EAST, THRISSUR-680 001 . 2. THE INCOME TAX OFFICER, WARD-1(1), THRISSUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-IV, KOCH I, 4. THE COMMISSIONER OF INCOME-TAX, THRISSUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN