Janarth, New Delhi V. ITO, Trust Ward-4, New Delhi

ITA 5963/DEL/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6987 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 17-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Assessee Lawyers: DHEERAJ WADHWA
• Keywords: Charitable institution; TDS; Set aside
• Section: 143(3); 201; 147; 148; 12

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F+SMC: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5963/DEL/2018 (ASSESSMENT YEAR: 2010 - 11 ) JANARTH, C/O. WDK & ASSOCIATES, CAS, D - 50, SARITA VIHAR, NEW DELHI PAN: AAATJ0392C VS. ITO, TRUST WARD - 4, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DHEERAJ WADHWA, CA REVENUE BY: SHRI S. L. ANURAGI, SR. DR DATE OF HEARING 25/07 / 201 9 DATE OF PRONOUNCEMENT 2 2 / 10 / 2019 O R D E R PER PRASHANT MAHARISHI, A. M. 1 . THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - 36, NEW DELHI DATED 21.06.2018. THE ASSESSEE HAS RAISED GROUNDS OF APPEAL WHICH ARE QUITE ELABORATE AND ARGUMENTATIVE IN NATURE. HOWEVER, FOR THE PURPOSE OF RENDERING JUSTICE , WE PROCEED TO DECIDE THE APPEA L OF THE ASSESSEE ON THE MERITS AS ONLY ISSUE INVOLVED IS OF APPLICATIONS OF INCOME U/S 11 AND 12 OF THE ACT. 2 . THE ASSESSEE HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS ON THE FACTS AND IN THE LAW. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASES, HE OUGHT TO HAVE ACCEPTED THE RETURNED INCOME. 2. THE LEARNED ASSESSING OFFICER HAS MADE THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT. THE OFFICER HAS CONSIDERED THE GROSS RECEIPTS OF THE DONATIONS (RS.2,40,67,532) FOR THE PURPOSE OF CALCULATION OF APPLICATION OF FUNDS U/S 11 (1)(A). THE SAID GROSS RECEIPTS INCLUDE NON CA SH RECEIPTS OF RS. 31,36,713 WHICH ARE ON ACCOUNT OF WRITING BACK OF EXCESS PROVISION OF EXPENSES OF THE EARLIER YEARS WHICH ARE NO MORE PAYABLE NOW. THE SAID AMOUNT OF RS. 31,36,713 SHOULD HAVE BEEN REVERSED TO WORK OUT THE INCOME WHICH SHOULD FORM BASIS TO CALCULATE 85% APPLICATION U/S 11(1 )(A). JANARTH VS ITO ITA NO. 5963/DEL/2018 (ASSESSMENT YEAR: 2010 - 11) PAGE | 2 3. THE GROSS RECEIPTS ALSO INCLUDE ACCRUED INTEREST OF FDRS (RS. 369175) AND TDS ON INTEREST ON FDRS (RS. 52329) NOT RECEIVED DURING THE YEAR. THE TOTAL OF THESE AMOUNTS (RS.4,21,504) SHOULD NOT BE CONSIDERED AN D THUS SHOULD BE REVERSED TO DERIVE THE AMOUNT OF INCOME, AS IT IS NOT RECEIVED IN CASH AND THUS CANNOT BE APPLIED. 4. THE ASSESSEE HAS APPLIED OR ACCUMULATED ITS INCOME FOR APPLICATION WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR WHICH IT IS ESTABLISHED AND IT DID NOT INVEST OR DEPOSIT ITS FUND FOR ANY PERIOD DURING THE PREVIOUS YEAR OTHERWISE THAN IN ANY ONE OR MORE FORM OR MODE SPECIFIED IN SUB SECTION (5) OF THE SECTION 11 OF THE INCOME TAX ACT. THUS THE ASSESSEE WISHES TO FORM PROVISIONS OF SECTION 10 (2 3C) (IV) OF THE INCOME TAX ACT AS ITS GROUND OF APPEAL AND REQUESTS FOR EXEMPTION OF TAX AS IT MEETS THE SAID CONDITION LAID DOWN IN THE THIRD PROVISO TO SECTION 10(23C). 5. THERE IS AN AMOUNT OF RS. 4,87,977 RECEIVED FROM CLAP (SAVE THE CHILDREN) BUT TAK EN AS INCOME IN THE NEXT FINANCIAL YEAR (2010 - 11) AUDITED ACCOUNTS NOW TAKEN IN THE FY 2009 - 10 AS INCOME. THIS INCOME IS ADDED SUO MOTO ON RECOVERY OF THE MISTAKE. 6. TAKING INTO ACCOUNT THE PURPOSE FOR WHICH CONDITIONS OF SECTION 11(1 )(A) ARE IMPOSED, M EANING OF INCOME SHOULD BE CONSIDERED WHICH IS ARRIVED AT IN THE CONTEXT OF WHAT IS AVAILABLE IN THE HANDS OF THE ASSESSEE. THUS ALL THE NON CASH INCOME AS REFERRED TO IN THE PARA 2 (RS. 31,36,713) AND PARA 3 (RS.4,21,504) SHOULD BE REVERSED FROM THE GROSS RECEIPTS OF RS. 2,40,67,532 TO WORK OUT THE APPLICATION OF INCOME UNDER SECTION 11 (1 )(A) OF THE INCOME TAX ACT. (SEPARATE SHEET ATTACHED - REWORKING OF INCOME AND ITS APPLICATION FOR FY 2009 - 10) 7. THE LEARNED CIT IN THE APPELLATE ORDER HAS NOT SPECIFIE D ANY REASONS FOR DISMISSAL OF GROUNDS 2, 3, 4 & 6 OF APPEAL AND HAS NOT CONSIDERED VARIOUS CASE LAWS QUOTED WITH DETAILS AT THE TIME OF HEARING. THE FACTS OF THE CASE LAWS QUOTED ARE VERY MUCH RELEVANT AND ARE SIMILAR TO FACTS OF THIS CASE. IN THE PARA 4. 3.3 OF THE ORDER, LEARNED CL I HAS STATED THAT 'AO HAS COMPUTED THE GROSS RECEIPTS CORRECTLY' AND HAS NOT GIVEN ANY REASONS FOR DISMISSING THE GROUNDS. 8. THE LEARNED CIT HAS ONLY ACCEPTED GROUND 5 AND THUS ALLOWED ADDITIONAL INCOME OF RS. 4,87,977 WHICH IS BEING ADDED BY THE ASSESSEE SUO MOTO ON RECOVERY OF MISTAKE. IT CLEARLY SHOWS THAT EXCEPT FOR THE ADDITION IN INCOME, ALL GROUNDS FOR REDUCTION OF TAXABLE INCOME ARE DISMISSED WITHOUT ANY BASIS. 3 . THE BRIEF FACTS OF THE CASE SHOWS THAT ASSESSEE IS A SOCI ETY REGISTERED WITH THE REGISTRAR OF THE SOCIETIES , DELHI VIDE NO. S - 16902 DATED 17.07.1986 . IT IS CARRYING ON SOCIO - ECONOMIC AND EDUCATIONAL ACTIVITIES. IT FILED ITS RETURN OF INCOME ON 28.09.2010 AT NIL INCOME. THE RETURN WAS PROCESSED ON 23.01.2012. SU BSEQUENTLY, BY ISSUE NOTICE U/S 147 OF THE ACT ON 18.12.2012 THE LD AO REOPENED THE ASSESSMENT. IN RESPONSE TO THE NOTICE JANARTH VS ITO ITA NO. 5963/DEL/2018 (ASSESSMENT YEAR: 2010 - 11) PAGE | 3 U/S 148 THE ASSESSEE SUBMITTED THAT THE ORIGINAL RETURN WAS INADVERTENTLY BEEN FILED IN ITR - 4 INSTEAD OF ITR - 7. THE LD AO AFTER EXAMIN ATION OF THE DETAILS COMPUTED THE TOTAL INCOME OF THE ASSESSEE OF RS. 2287820/ - AGAINST THE NIL RETURN OF INCOME OF THE ASSESSEE. NO REASONS WERE GIVEN IN THE ASSESSMENT ORDER FOR COMPUTATION OF THE INCOME IN THE ABOVE MANNER. THE LD AO EXCLUDED THE DEPREC IATION FROM THE APPLICATION OF INCOME. THUS THE ASSESSMENT ORDER U/S 143(3) READ WITH SECTION 148 OF THE ACT WAS PASSED ON 31.03.2014. 4 . THE ASSESSEE AGGRIEVED WITH THE ORDER OF THE LD AO PREFERRED AN APPEAL BEFORE THE LD CIT(A) WHO PASSED AN ORDER ON 21.06. 2016. THE LD CIT(A) NOTED THAT THE LD AO HAS PASSED THE ASSESSMENT ORDER TAKING THE GROSS RECEIPT OF RS. 24067532/ - WHICH IS CONTESTED BY THE ASSESSEE THAT THE LD AO HAS CONSIDERED NON CASH INCOME FOR THE PURPOSE OF COMPUTING THE 85% APPLICATION OF INCOME U/S 11. THE LD CIT(A) HELD THAT THE LD AO HAS GIVEN EXEMPTION TO THE EXTENT OF 15% OF THE GROSS RECEIPT AMOUNTING TO RS. 3836522/ - AND THUS HAS CORRECTLY COMPUTED THE INCOME OF THE ASSESSEE AT RS. 2287816/ - . 5 . THE ASSESSEE AGGRIEVED HAS PREFERRED THIS APPEAL . 6 . THE LD AR SUBMITTED THE GROSS RECEIPT OF RS. 24067532/ - INCLUDED IN THE NON CASH RECEIPT IS WRITING BACK OF EXCESS PROVISION OF EXPENSES WHICH ARE NO LONGER PAYABLE NOW OF RS. 3136713/ - AND THEREFORE, THE ASSESSEE IS NOT IN A POSITION TO SPENT ANY SUM , OUT OF ABOVE SUM AS IT WAS NOT RECEIVED BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT GROSS RECEIPT INCLUDED THE ACCRUED INTEREST ON FIXED DEPOSIT RECEIVED OF RS. 369175/ - WHICH WAS NOT RECEIVED DURING THE YEAR , THUS INTEREST PLUS TDS THEREON , COULD NOT H AVE BEEN APPLIED BY THE ASSESSEE. HE OTHERWISE STATED THAT SUCH FDR INTEREST HAS ALREADY BEEN INVESTED IN THE SPECIFIED SECURITIES. HE FURTHER SUBMITTED THAT DONATION RECEIVED OF RS. 4879877/ - IS RECEIVED DURING THE YEAR AND THEREFORE HE SUBMITTED THAT ALL NON CASH INCOME SHOULD BE EXCLUDED FOR THE PURPOSE OF WORKING OF THE APPLICATION OF THE INCOME. HE SUBMITTED THAT IF ABOVE WORKING IS COMPUTED FOR THE APPLICATION OF INCOME , GRIEVANCE OF THE ASSESSEE WOULD BE ADDRESSED. HE FURTHER REFERRED TO THE COMPUTAT ION OF TOTAL INCOME SUBMITTED BY HIM TO SHOW THAT THERE IS NIL TAXABLE INCOME. HE JANARTH VS ITO ITA NO. 5963/DEL/2018 (ASSESSMENT YEAR: 2010 - 11) PAGE | 4 FURTHER SUBMITTED THAT BEFORE THE LD AO , ASSESSEE DID NOT GET ANY OPPORTUNITY , SINCE THE FINANCIAL STATEMENT, RECORDS AND OTHER RELATED DATA WERE NOT AVAILABLE WITH THE ASSESSEE BECAUSE OF THE REASON THAT THE OPERATIONS WERE CARRIED OUT IN AURANGABAD. HE THEREFORE, SUBMITTED THAT THERE IS NO PROPER OPPORTUNITY AVAILABLE TO THE ASSES SEE BEFORE THE LD AO. 7 . THE LD DR VEHEMENTLY SUBMITTED THAT THE LD CIT(A) HAS CONSIDERED THE SUBMISSION OF THE ASSESSEE AND ALSO OBTAINED THE REMAND REPORT. THUS , THERE IS NO LACK OF OPPORTUNITY TO THE ASSESSEE. HE FURTHER SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 8 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE LD AO HAS COMPUTED THE INCOME OF THE ASSESSEE BY CONSIDERING THE GROSS TOTAL INCOME AND THEN GRANTED 5 5% OF THE GROSS RECEIPT AS APPL ICATIONS U/S 11(1)(A) OF THE ACT. THE ASSESSEE COULD NOT SUBMIT THE RELEVANT DETAILS BEFORE THE LD AO. HOWEVER, BEFORE THE LD CIT(A) COMPLETE INFORMATION AVAILABLE AND THE ASSESSEE WAS GRANTED ADEQUATE OPPORTUNITY OF HEARING. ONLY ISSUE INVOLVED IN THIS AP PEAL THAT ASSESSEE HAS EARNED INCOME TO THE CREDIT OF THE PROFIT AND LOSS ACCOUNT OF RS. 3136713/ - AS WRITING BACK OF EXCESS PROVISION OF EXPENSES OF EARLIER YEAR. SUCH INCOME WAS NOT AT ALL RECEIVED BY THE ASSESSEE DURING THE YEAR. ACCORDING TO SECTION 11 THE SPECIFIED INCOME OF THE TRUST ARE CHARGEABLE TO TAX WHICH INCLUDED INCOME DERIVED FROM PROPERTY HELD UNDER A TRUST. THE WRITING BACK OF THE EXPENSES PROVISION COULD NOT HAVE BEEN APPLIED FOR THE CHARITABLE PURPOSE S AS THE ASSESSEE DID NOT RECEIVE SUCH INCOME. INFACT , THE ASSESSEE HAS CLAIMED EXCESS APPLICATION OF INCOME IN THE EARLIER YEARS. FURTHER , ACCUMULATION CAN ONLY BE OF REAL INCOME , AS IT HAS ONLY BEEN RECEIVED BY THE ASSESSEE AS HELD IN 159 ITR 280. FURTHER , WITH RESPECT TO THE BANK INTEREST A ND TAX DEDUCTION AT SOURCE THEREON ARE NOT RECEIVED DURING THE YEAR , BUT REMAIN INVESTED IN THE SPECIFIED SECURITIES SUCH AS BANK FDR. THUS , IT IS APPARENT THAT CORRECT INCOME OF THE ASSESSEE HAS NOT BEEN COMPUTED BY THE LD AO IN ACCORDANCE WITH THE PROVIS ION OF SECTION 11 TO 13 OF THE ACT. FURTHER, THE PROVISION OF EXPLANATION 1 1(2) SPECIFICALLY PROVIDE THAT IF THERE IS ANY INCOME WHICH IS NOT RECEIVED DURING THAT YEAR THEN THE ASSESSEE MAY EXERCISE AN OPTION THAT APPLICATION CANNOT BE MADE IN THE YEAR IN WHICH THE JANARTH VS ITO ITA NO. 5963/DEL/2018 (ASSESSMENT YEAR: 2010 - 11) PAGE | 5 INCOME IS RECEIVED. THEREFORE, IT IS APPARENT THAT LOWER AUTHORITIES HAVE NOT CORRECTLY COMPUTED THE TOTAL INCOME OF THE ASSESSEE . THUS, WE SET ASIDE THE WHOLE ISSUE BACK TO THE FILE OF THE LD AO WITH A DIRECTION TO ASSESSEE TO SUBSTANTIATE THE C OMPUTATION OF TOTAL INCOME BEFORE HIM. HE MAY ASSESS INCOME OF THE ASSESSEE ON THE CORRECT INCOME IN ACCORDANCE WITH THE LAW. 9 . ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED WITH ABOVE DIRECTION ORDER PRONOUNCED IN THE OPEN COURT ON 2 2 / 10 / 2019 . - SD / - - SD/ - ( AMIT SHUKLA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 2 / 10 / 2019 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI