M/s Manohar Hill Charitable Trust, Kottayam V. ACIT, Kottayam

ITA 583/COCH/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65012 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 22-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Keywords: Charitable institution
• Section: 143(3); 12AA; 28; 11

Judgement Text

1 ITA NO. 583/COCH/2009 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO.583/COCH/2009 (ASSESSMENT YEAR 2006-07) M/S MANOHAR HILL CHARITABLE TRUST VS A.C.I.T., CIR .1 KANGAZHA, KOTTAYAM KOTTAYAM PAN : AAATM3850E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R SREENIVASAN RESPONDENT BY : SMT. S VIJAYAPRABHA DATE OF HEARING : 29-11-2012 DATE OF PRONOUNCEMENT : 07-12-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE TAXPAYER IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER (APPEALS)-IV, KOCHI DATED 30-10-2009 F OR THE ASSESSMENT YEAR 2006-07. 2. SHRI R SREENIVASAN, THE LD.REPRESENTATIVE FOR TH E TAXPAYER SUBMITTED THAT THE TAXPAYER WAS TREATED AS A CHARITABLE INSTI TUTION BY THE DEPARTMENT 2 ITA NO. 583/COCH/2009 FOR A VERY LONG TIME. REFERRING TO THE COPIES OF T HE CERTIFICATES AVAILABLE AT PAGES 1, 2 & 3 OF THE PAPER BOOK, THE LD.REPRESENTA TIVE SUBMITTED THAT FROM THE YEAR 1981 THE TAXPAYER WAS TREATED AS A CHARITA BLE INSTITUTION UNDER THE INCOME-TAX ACT. HOWEVER, THE COMMISSIONER OF INCOM E-TAX HAS FILED A REMAND REPORT BEFORE THIS TRIBUNAL SAYING THAT THE TAXPAYER TRUST WAS NOT REGISTERED U/S 12AA OF THE ACT. REFERRING TO THE O BJECTION FILED BY THE TAXPAYER TO THE REMAND REPORT, THE LD.REPRESENTATIV E SUBMITTED THAT THE TRUST WAS FORMED IN THE YEAR 1964 AND THE APPLICATI ON FOR REGISTRATION WOULD HAVE BEEN FILED IMMEDIATELY. SINCE THERE WAS A FAMILY DISPUTE THE CHARTERED ACCOUNTANT SHRI UNNUNI PAUL WHO WAS IN PO SSESSION OF THE VITAL DOCUMENT HAS TURNED HOSTILE AND WAS ACTING IN DETRI MENT TO THE INTEREST OF THE TRUST. THEREFORE, THE TAXPAYER COULD NOT PRODU CE ANY RECORDS BEFORE THIS TRIBUNAL. THE FACT REMAINS IS THAT THE TRUST WAS TREATED AS A CHARITABLE INSTITUTION BY THE DEPARTMENT FOR A NUMBER OF YEARS . 3. REFERRING TO THE MERIT OF THE ADDITION, THE LD.R EPRESENTATIVE FOR THE TAXPAYER SUBMITTED THAT WITH REGARD TO ADVANCE OF R S.10 LAKHS FOR PURCHASE OF PROPERTY, THE ACCOUNTS OF M.G.D.M. HOSPITAL WHIC H IS AN INSTITUTION RUN BY THE TAXPAYER TRUST SHOWS THE WITHDRAWAL OF THE A MOUNT. THIS DOCUMENT 3 ITA NO. 583/COCH/2009 WAS NOT EXAMINED BY THE LOWER AUTHORITY. THEREFORE , IT IS NOT CORRECT TO SAY THAT THE TAXPAYER HAS NOT FILED ANY MATERIAL BEFORE THE ASSESSING OFFICER. REFERRING TO THE EXCESS CASH FOUND DURING THE SURVE Y OPERATION, THE LD.REPRESENTATIVE SUBMITTED THAT THIS AMOUNT WAS CO LLECTED FROM THE NURSING STUDENTS FOR PURCHASING BOOKS AND UNIFORM. THEREFORE, IT IS NOT CORRECT TO SAY THAT IT WAS EXCESS CASH FOUND. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT THE TAXPAYER HAS ALSO CLAIMED CARRY FORWARD OF THE LOSSES. HOWEVER, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE TAXPAYER ON THE GROUND THAT THE STATUS OF THE TAXPAYER WAS CLAIMED AS TRUST. ADMITTEDLY, THE ASSESSING OFFICER TREATED TAXPAYER AS AOP; THER EFORE, THEY CANNOT REJECT THE CLAIM OF THE TAXPAYER FOR CARRY FORWARD OF THE LOSSES. 4. SMT. VIJAYAPRABHA, THE LD.DR SUBMITTED THAT ON TH E DIRECTION OF THIS TRIBUNAL, THE COMMISSIONER OF INCOME-TAX MADE EXTEN SIVE ENQUIRY AND FOUND THAT THE TAXPAYER TRUST WAS NOT REGISTERED U/ S 12AA OF THE ACT. THE CERTIFICATE AVAILABLE AT PAGES 1, 2 & 3 OF THE PAPE R BOOK WERE ISSUED BY THE INCOME-TAX OFFICER, WHO HAD NO JURISDICTION TO ISSUE THE ABOVE CERTIFICATES. ACCORDING TO THE LD.DR, REGISTRATION OF TRUST U/S 1 2AA IS A PRE-CONDITION FOR 4 ITA NO. 583/COCH/2009 GRANT OF EXEMPTION U/S 11 OF THE ACT. SINCE THE TR UST WAS NOT REGISTERED U/S 12AA OF THE ACT, THE TRUST IS NOT ENTITLED FOR EXEM PTION U/S 11 OF THE ACT. 4.1 REFERRING TO THE ADVANCE PAID FOR PURCHASING OF LAND, THE LD.DR SUBMITTED THAT ONE SHRI VERGHESE PAUL WAS EXAMINED BY THE DEPARTMENT. THE SAID VERGHESE PAUL HAS FAIRLY ACCEPTED THAT AN ADVANCE OF RS.10 LAKHS WAS GIVEN FOR PURCHASE OF 15 ACRES OF LAND FOR EXPA NSION OF THE HOSPITAL. THOUGH THE TAXPAYER CLAIMED THAT THE ADVANCE WAS GI VEN FROM TRUST FUND, NO MATERIAL WAS PRODUCED EITHER BEFORE THE ASSESSIN G OR BEFORE THE COMMISSIONER OF INCOME-TAX(A) TO SHOW THAT THE MONE Y WAS WITHDRAWN FROM THE ACCOUNT OF THE TRUST. THEREFORE, THE COMM ISSIONER OF INCOME- TAX(A) HAS, ACCORDING TO THE LD.DR, RIGHTLY CONFIRM ED THE ADDITION. 4.2 REFERRING TO THE EXCESS CASH FOUND DURING THE C OURSE OF SURVEY OPERATION, THE LD.DR SUBMITTED THAT ON EXAMINATION OF ACCOUNTS IT WAS FOUND THAT ADVANCE COLLECTED FROM THE STUDENTS ARE RECORDED IN THE BOOKS OF ACCOUNT. THEREFORE, IT IS NOT CORRECT TO SAY TH AT THE ADVANCE WAS RECEIVED FROM THE NURSING STUDENTS FOR PURCHASE OF BOOKS AND UNIFORMS. SINCE THE TAXPAYER COULD NOT PROPERLY EXPLAIN THE S OURCE OF RS.3,77,331 5 ITA NO. 583/COCH/2009 FOUND DURING THE COURSE OF SURVEY OPERATION, THE AS SESSING OFFICER HAS RIGHTLY MADE THE ADDITION U/S 69A OF THE ACT. 4.3 REFERRING TO THE CLAIM OF CARRY FORWARD OF LOSS ES, THE LD.DR SUBMITTED THAT THE TAXPAYER HAS TO BE ASSESSED ONLY AS AOP SI NCE NO REGISTRATION WAS GRANTED U/S 12AA OF THE ACT. ACCORDING TO THE LD.R EPRESENTATIVE, THE TAXPAYER IS NOT ENTITLED FOR CARRY FORWARD OF LOSSE S. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. FOR THE PURPOSE OF CLAIMING EXEMPTION U/S 11 THE TAXPAYER HAS TO NECESSARILY BE REGISTERED U/S 12AA OF THE ACT AS CHARITABLE INSTITUTION. THOUGH THE TAXP AYER CLAIMS THAT THE TAXPAYER HAS BEEN TREATED AS A CHARITABLE INSTITUTI ON FOR SEVERAL YEARS, THE FACT REMAINS IS THAT NO REGISTRATION WAS GRANTED U/ S 12AA OF THE ACT. PROBABLY THE TAXPAYER MIGHT HAVE FILED THE RETURNS OF INCOME CLAIMING EXEMPTION WHICH WERE NOT TAKEN UP FOR SCRUTINY. RE GISTRATION U/S 12AA IS A PRE-CONDITION FOR CLAIMING EXEMPTION U/S 11 OF THE ACT. MERELY BECAUSE THE RETURNS FILED BY THE TAXPAYER IN THE EARLIER YEARS WERE NOT TAKEN UP FOR SCRUTINY, IT CANNOT BE SAID THAT THE TAXPAYER SOCIE TY WAS EVER TREATED AS 6 ITA NO. 583/COCH/2009 CHARITABLE INSTITUTION. THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT IN THE ABSENCE OF ANY REGISTRATION U/S 12AA THE TAXPAYER I S NOT ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADVA NCE MADE FOR PURCHASING OF THE LAND. IT IS NOT IN DISPUTE THAT THE TAXPAYER HAS ADVANCED A SUM OF RS.10 LAKHS FOR PURCHASE OF 15 ACRES OF LAND FOR EXPANSION OF THE HOSPITAL. THE REVENUE AUTHORITY HAS DISALLOWED THE CLAIM OF THE TAXPAYER ON THE GROUND THAT THE TAXPAYER HAS NOT PRODUCED AN Y MATERIAL TO SHOW THAT THE AMOUNT WAS WITHDRAWN FROM THE TRUST. NOW THE TAXPAYER HAS FILED COPIES OF THE ACCOUNT TO SHOW THAT THE AMOUNT OF RS .10 LAKHS WAS WITHDRAWN FROM THE ACCOUNT OF M.G.D.M. HOSPITAL WHI CH IS AN INSTITUTION RUN BY THE TAXPAYER SOCIETY. ADMITTEDLY, THIS DOCU MENT WAS NOT EXAMINED BY THE LOWER AUTHORITIES. WHEN THE TAXPAYER CLAIMS THAT THE AMOUNT WAS WITHDRAWN FROM THE HOSPITAL ACCOUNT WHICH WAS RUN B Y THE TAXPAYER TRUST, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CLAIM OF THE TAXPAYER NEEDS TO BE EXAMINED IN THE LIGHT OF THE MATERIAL A VAILABLE ON RECORD. ACCORDINGLY, THE ORDERS OF LOWER AUTHORITIES ARE SE T ASIDE AND THE ISSUE OF ADDITION OF RS.10,00,000 IS REMITTED BACK TO THE FI LE OF THE ASSESSING OFFICER. 7 ITA NO. 583/COCH/2009 THE ASSESSING OFFICER SHALL EXAMINE THE ACCOUNT OF M.G.D.M. HOSPITAL AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPORTUNITY TO THE TAXPAYER. 7. THE NEXT GROUND OF APPEAL IS WITH REGARD TO EXCE SS CASH FOUND TO THE EXTENT OF RS.3,77,331 AT THE TIME OF SURVEY OPERATI ON. THE CONTENTION OF THE TAXPAYER IS THAT IT WAS ADVANCE RECEIVED FROM T HE NURSING STUDENTS FOR BOOKS AND UNIFORM. HOWEVER, THE DEPARTMENT CONTEND S THAT ALL THE RECEIPTS FROM THE STUDENTS WERE RECORDED IN THE BOO KS OF ACCOUNT; THEREFORE, IT IS NOT CORRECT TO SAY THAT THE ADVANC E WAS RECEIVED FOR PURCHASE OF BOOKS AND UNIFORM. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THIS ISSUE ALSO NEEDS TO BE RE-EXAMINED SINCE THE MAIN ISSUE OF ADDITION OF RS.10 LAKHS IS REMITTED BACK TO THE FIL E OF THE ASSESSING OFFICER FOR RECONSIDERATION IN THE LIGHT OF CONTENTIONS RAI SED BY THE TAXPAYER BEFORE THIS TRIBUNAL. BY EXAMINING THE ISSUE ONCE AGAIN O N THE BASIS OF THE MATERIAL AVAILABLE ON RECORD THE INTEREST OF THE RE VENUE MAY NOT BE PREJUDICED. ACCORDINGLY, THE ORDERS OF THE LOWER AU THORITIES ARE SET ASIDE AND THE ISSUE OF ADDITION OF RS. 3,77,331 IS REMITT ED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXA MINE THE ISSUE IN THE LIGHT 8 ITA NO. 583/COCH/2009 OF CONTENTIONS NOW RAISED BY THE TAXPAYER AND THERE AFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPO RTUNITY TO THE TAXPAYER. 8. THE NEXT GROUND OF APPEAL IS WITH REGARD TO CARR Y FORWARD OF LOSSES. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE T AXPAYER ON THE GROUND THAT THE TAXPAYER HAS NOT COMPUTED THE INCOME U/S 2 8 TO 44DA OF THE ACT. THE COMMISSIONER OF INCOME-TAX(A) FURTHER FOUND THA T THE TAXPAYER CLAIMED EXEMPTION IN RESPECT OF INCOME OF THE EARLI ER YEAR. THEREFORE, THE SAME CANNOT BE ADJUSTED AGAINST THE TAXABLE INCOME. THE FACT REMAINS IS THAT NO REGISTRATION WAS GRANTED U/S 12AA OF THE AC T. THE TAXPAYERS RETURN WAS NOT TAKEN UP FOR SCRUTINY. NO ASSESSMENT ORDER WAS PASSED U/S 143(3) OF THE ACT AT ANY POINT OF TIME EXCEPT THE IMPUGNED ASSESSMENT. BASED ON SOME INVALID CERTIFICATES WERE ISSUED BY AN INCOME- TAX OFFICER, WHO HAD NO JURISDICTION TO ISSUE SUCH CERTIFICATES, THE TAXPAYE R CLAIMS THAT IT IS A CHARITABLE INSTITUTION. BUT BASED ON THOSE INVALID CERTIFICATES IT CANNOT BE SAID THAT THE TAXPAYER HAS BEEN RECOGNISED U/S 12AA AND EXEMPTION U/S 11 HAS BEEN GRANTED DURING THE EARLIER YEARS. THE DEP ARTMENT HAS COMMITTED AN ERROR IN NOT TAKING UP THE MATTER FOR SCRUTINY. THE TAXPAYER CLAIMED EXEMPTION U/S 11 WITHOUT GETTING REGISTRATION U/S 1 2AA OF THE ACT. THE 9 ITA NO. 583/COCH/2009 NEGLIGENCE OF THE DEPARTMENT IN NOT TAKING UP THE R ETURN FOR SCRUTINY CANNOT BE CONSIDERED AS IF THE TAXPAYER WAS HAVING EXEMPTED INCOME. WHEN THE TAXPAYER ITSELF WAS NOT REGISTERED AS A CH ARITABLE INSTITUTION U/S 12AA OF THE ACT, THERE CANNOT BE ANY QUESTION OF HA VING ANY EXEMPTED INCOME. THEREFORE, THE OBSERVATION OF THE LOWER AU THORITIES THAT THE TAXPAYER WAS HAVING EXEMPTED INCOME FOR EARLIER YEA RS IS CONTRARY TO THE MATERIAL AVAILABLE ON RECORD. THEREFORE, THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED IN THE LIGHT OF THE MATTER AVAILABLE ON RECORD. IT IS MADE CLEAR THAT IF THE DEPARTMENT CLAIMS THAT FOR EARLIER YEARS THE INCOME WAS TREATED AS EXEMPT U/S 11 OF THE ACT, UNDER WHAT CIRCUMSTANCES SUCH EXEMPTION WAS GRANTED IN TH E ABSENCE OF REGISTRATION U/S 12AA OF THE ACT SHALL BE BROUGHT O N RECORD BY THE ASSESSING AUTHORITY. IN VIEW OF THE ABOVE, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL BRING ON RECORD THE MATERIA L FACTS AND THEN DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER GIVIN G REASONABLE OPPORTUNITY OF HEARING TO THE TAXPAYER. 10 ITA NO. 583/COCH/2009 9. IN THE RESULT, THE APPEAL OF THE TAXPAYER IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 07 TH DECEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 07 TH DECEMBER, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH