Shree Shaktidham Trust, Baroda V. The Income tax Officer,Ward-5(1), Baroda

ITA 622/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1724 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-03-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 18-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P R GHOSH SRDR
• Assessee Lawyers: S N SOPARKAR SRAR
• Keywords: Initiation of penalty proceedings
• Section: 143(3); 80G; 12A; 147; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER AND SHRI A.N.PHAUJA, HONBLE ACCOUNTANT MEMBER ITA NO.622-626/AHD/2008 ASSESSMENT YEARS:1999-00 TO 2003-04 DATE OF HEARING:1.3.11 DRAFTED:3.3.11 SHREE SHAKTIDHAM TRUST SHAKTIDHARA, MARUFALIA, WADI, BARODA PAN NO.AAFTS2847A V/S. INCOME TAX OFFICER, WARD-5(1), BARODA (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI S.N.SOPARKAR, SR-AR & SMT. URVASHI SHODHAN, AR REVENUE BY:- SHRI P.R. GHOSH, SR-DR O R D E R PER BENCH:- THESE FIVE APPEALS BY SAME ASSESSEE ARE AGAINST TH E SEPARATE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-V, BAR ODA IN APPEAL NOS.CAB/V/216-220/06-07 OF EVEN DATE I.E. 26-11-200 7 FOR THE ASSESSMENT YEARS 1999-00 TO 2003-04. SINCE ASSESSE E HAS TAKEN FOLLOWING COMMON GROUND IN ALL THE APPEALS WE ARE D ISPOSING OF THEM BY PASSING A CONSOLIDATED ORDER BY TAKING THE FACTS OF ITA NO.622/AHD/2008 FOR ASSESSMENT YEAR 1999-00:- THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN REOPENING THE ASSESSMENT PROCEEDING S U/S 147 OF THE I.T. ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE ACTION OF REOPENING IS WITHOUT JURISDICTION AND NOT PERMISSIBLE ITA NO.622-26/AHD/2008 A.Y S. 99-00 TO 03-04 SH. SHAKTIDHAM TRUST V. ITO WD-5(1), BRD PAGE 2 EITHER IN LAW OR ON FACT. THE PRESENT PROCEEDINGS, THEREFORE, ARE REQUIRE TO BE QUASHED. 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN DISALLOWING EXEMPTIONS U/S.11 & 12 OF THE ACT. 2. ALTERNATIVELY AND WITHOUT PREJUDICE, THE INCOME OF THE APPELLANT MAY KINDLY BE DIRECTED TO BE CALCULATED ON THE COMM ERCIAL PRINCIPLES AND ALL THE EXPENDITURE MAY KINDLY BE AL LOWED AGAINST THE INCOME SO ASSESSED. 3. ALTERNATIVELY AND WITHOUT PREJUDICE, THE INCOME OF THE APPELLANT OUGHT TO HAVE BEEN ALLOWED TO BE ACCUMULATED U/S 11(1)(A)/11(2) OF THE ACT TO BE INCURRED FOR OTHER OBJECTS OF THE APPELLANT TRUST. 4. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN NOT PROPERLY APPRECIATING AND CONSIDERING VARIOUS SUBMI SSIONS, EVIDENCES AND SUPPORTING PLACED ON RECORD DURING TH E COURSE OF THE ASSESSMENT PROCEEDINGS AND NOT PROPERLY APPRECI ATING VARIOUS FACTS AND LAW IN ITS PROPER PERSPECTIVE. 5. LEVY OF INTEREST U/S 234A/B/C OF THE ACT IS NOT JUSTIFIED. 6. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE INITIATION OF PENALTY PROCEEDINGS 2. AT THE TIME OF HEARING GROUND NO.1 WAS NOT PRESS ED. HENCE, THE GROUND NO.1 IS DISMISSED AS NOT PRESSED. 3. GROUND NO.2 RELATES TO EXEMPTION U/S.11 & 12 OF THE ACT. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSING OFFICER FOUND THAT ASSESSEE-TRUST HAD APPLIED FOR APPROVAL U/S SUB-SECTION 5 OF SECTI ON 80G AND THE COMMISSIONER OF INCOME-TAX DECLINED TO GRANT THE AP PROVAL OBSERVING THAT THE TRUST IS INCURRING HUGE EXPENDITURE ON REL IGIOUS ACTIVITIES ALTHOUGH THE OBJECT OF THE TRUST ARE NOT RELIGIOUS. THE ASSESSING OFFICER REOPENED THE ASSESSMENT U/S. 147 OF THE ACT AND COM PLETED ITA NO.622-26/AHD/2008 A.Y S. 99-00 TO 03-04 SH. SHAKTIDHAM TRUST V. ITO WD-5(1), BRD PAGE 3 ASSESSMENT U/S. 143(3) OF THE ACT. THE ASSESSING OF FICER FOUND THAT TRUST HAD SHOWN TOTAL RECEIPT OF RS.15,09,664/- DURING TH E YEAR. HE OBSERVED THAT ENTIRE MONEY HAS BEEN SPENT FOR BUILDING A TE MPLE. HE HELD THAT OBJECT OF TRUST IS ONLY EDUCATIONAL AND CULTURAL. S INCE THE INCOME OF THE TRUST WAS NOT APPLIED TOWARDS THE OBJECT OF THE TRU ST EXEMPTION U/S 11 R.W.S 12 OF THE ACT WAS DENIED. THIS ACTION OF AO W AS CONFIRMED BY LD. CIT(APPEALS) BY OBSERVING AS UNDER:- 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, THE ARGUMENTS OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF AUT HORIZED REPRESENTATIVE. IT IS RELEVANT TO NOTE THAT AS PER THE OBJECT CLAUSE OF THE TRUST, THE TRUST IS CREATED FOR UNDERTAKING PROGRAMS OF EDUCATION, BUILDING SCHOOL, HOSTELS ETC., TO CARRY OUT ADULT EDUCATION, TO CARRY OUT ACTIVITIES OF WEAVING, TAIL ORING ETC., TO UNDERTAKE ACTIVITIES OF TRAINING AND RUNNING HANDLO OM, TO RUN ART CENTER, YOGA CENTER, SPIRITUAL CENTERS ETC. NO WHER E IN THIS LIST OF THINGS, IT IS MENTIONED THAT THE OBJECT OF TRUST IS TO BUILD A TEMPLE OR TO CONDUCT ANY RELIGIOUS ACTIVITY. WITHOUT DOUBT TH E FUNDS COLLECTED BY THE TRUST HAVE NOT BEEN APPLIED TOWARDS THE OBJE CT OF THE TRUST AS PER THE PROVISION OF SEC. 11, EXEMPTION CAN BE G RANTED ONLY TO THE EXTENT, THE INCOME OF THE TRUST IS APPLIED TO T HE PURPOSES OF TRUST. IN THIS CASE THE CERTIFICATE OF COMMISSIONER OF INCOME TAX-III, BARODA, ISSUED GRANTING REGISTRATION, AS REFERRED T O BY THE ASSESSING OFFICER IN THE PAGE 4 OF IS ORDER, GRANTS EXEMPTION TO TRUST AS PER SEC. 11 & 12. SINCE THE INCOME OF THE TRUST IS NOT APPLIED TO THE OBJECTS OF THE TRUST, THE ASSESSING OFFICER HAS RIGHTLY DENIED EXEMPTION. COMING TO THE ARGUMENTS OF THE A. R THAT THE OBJECTS LIKE CARRYING OUT ACTIVITIES SUCH AS CREATI NG INTEREST IN THE SOCIETY TOWARDS CULTURE AND HERITAGE OF INDIA WOULD INCLUDE THE ACTIVITY OF BUILDING OF A TEMPLE, I DO NOT AGREE WI TH SUCH CONTENTION. BUILDING OF A TEMPLE IS A RELIGIOUS ACTIVITY WHICH DOES NOT FID PLACE IN THE OBJECT CLAUSES. AN ENTITY LIKE A TRUST IS ES TABLISHED FOR A DEFINITE AND SPECIFIC PURPOSE. THE DEPARTMENT GRANT S REGISTRATION EXAMINING THE ACTIVITY OF TRUST WITH REFERENCE TO T HOSE OBJECTIVES. WHEN THE ENTITY DOES NOT APPLY ITS RECEIPT OR INCOM E TO THESE PURPOSES OBVIOUSLY EXEMPTION U/S.11 CAN NOT BE GRAN TED TO THE ENTITY. IN THE CASE CITED ABOVE IT IS NOT KNOWN WIT HER THE SOCIAL SERVICE CENTER HAD RELIGIOUS ACTIVITIES AS ONE OF I TS OBJECTIVES. AS IS THE GIVEN CASE THERE IS NO SUCH OBJECTIVE OF THE TRUST THE APPLICATION OF THE INCOME IS CERTAINLY NOT TOWARDS ITS PROFESSED ITA NO.622-26/AHD/2008 A.Y S. 99-00 TO 03-04 SH. SHAKTIDHAM TRUST V. ITO WD-5(1), BRD PAGE 4 OBJECTIVE. THEREFORE THE ACTION OF THE ASSESSING OF FICER IS UPHELD AND THE APPEAL OF THE APPELLANT IS DISMISSED. AGGRIEVED BY THIS ORDER OF LD. CIT(APPEALS) THE ASS ESSEE IS NOW IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE FINDINGS OF THE LOWER AUTHORITIES THAT THE FUND S OF THE ASSESSEE-TRUST WERE USED FOR THE RELIGIOUS PURPOSES AS THE ENTIRE FUNDS HAVE BEEN SPENT FOR BUILDING A TEMPLE IS FACTUALLY INCORRECT. FOR MAKING THIS SUBMISSION HE RELIED ON A LETTER DATED 30-11-2006 F ILED BY ASSESSEE IN REPLY TO THE SHOW CAUSE NOTICE ISSUED BY ASSESSING OFFICER IN THIS REGARD, WHEREIN IT WAS CLEARLY MENTIONED THAT THE T EMPLE IN THE BUILDING COMPLEX WAS STARTED ON 28-01-2004 I.E. ASSESSMENT Y EAR 2004-05 AFTER THE PRAN PRASTHIA RITUAL AND ONLY THEN THE RELIGI OUS ACTIVITY CAN BE SAID TO HAVE STARTED. PRIOR TO THIS, CONSTRUCTION ACTIVI TY IN ITSELF CANNOT BE SAID TO BE RELIGIOUS ACTIVITY. SINCE THE YEARS UNDER APP EAL (ASSESSMENT YEARS 1999-00 TO 2003-04) BEING PRIOR TO THIS NO RELIGIOU S ACTIVITY CAN BE SAID TO HAVE BEEN INDULGED BY THE ASSESSEE-TRUST AND THEREF ORE LOWER AUTHORITIES WERE NOT JUSTIFIED IN NOT ALLOWING EXEM PTION U/S. 11 & 12 OF THE I.T. ACT TO THE ASSESSEE-TRUST. HE FURTHER ARGU ED THAT CHARITABLE ACTIVITIES ARE SYNONYMOUS WITH RELIGIOUS ACTIVITY AND THEREFORE EVEN IF FUNDS WERE UTILIZED FOR RELIGIOUS ACTIVITIES EXEMPT ION U/S.11 & 12 OF THE ACT CANNOT BE DENIED. FOR THIS SUBMISSION, HE RELIE D ON A DECISIONS OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V. SOCIAL SERVICE CENTRE (2001) 250 ITR 39 (AP). HE FURTHER ARGUED THAT OBJ ECTS OF THE TRUST INCLUDED RUNNING OF SPIRITUAL CENTER AND CREATING INTEREST OF THE SOCIETY TOWARDS CULTURAL HERITAGE OF INDIA. RELYIN G ON DICTIONARY MEANING OF THE WORDS OF SPIRITUAL AND CULTURAL HERITAGE HE SUBMITTED THAT THE ITA NO.622-26/AHD/2008 A.Y S. 99-00 TO 03-04 SH. SHAKTIDHAM TRUST V. ITO WD-5(1), BRD PAGE 5 TERM OF SPIRITUAL MEANS RELATED TO RELIGION AND CULTURAL HERITAGE COVERS RELIGION AND FOR THAT PURPOSES TEMPLE ALSO. FURTH ER RELYING ON THE DECISION OF ITAT HYDERABAD BENCH IN THE CASE OF SOCIETY FOR INTEGRATED DEVELOPMENT IN URBAN AND RURAL AREAS (SIDUR) V. DCI T (2004) 90 ITD 493 (HYD.) AND IN THE CASE OF NIRMAL AGRICULTURAL SOCIETY V. ITO (1999) 71 ITD 152 (HYD.), HE SUBMITTED THAT ASSESSING OFFI CER WAS NOT JUSTIFIED IN MAKING ADDITION OF GROSS RECEIPTS INSTEAD OF NET INCOME OF THE ASSESSEE. LASTLY, HE SUBMITTED THAT SINCE ASSESSEE- TRUST WAS REGISTERED U/S. 12A OF THE ACT THE EXEMPTION U/S. 11 & 12 COUL D NOT BE DENIED TO THE ASSESSEE-TRUST IF PART OF ITS INCOME WAS APPLIED FO R RELIGIOUS PURPOSES. FOR MAKING THIS SUBMISSION HE RELIED ON THE CASE LA W OF DELHI BENCH IN THE CASE OF PUCKET TESTAMENT LEAGUE (INDIA) V. DCIT (EEM) (2008) 19 SOT 150 (DEL) AND ON THE CASE OF HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF ACIT V. STOCK EXCHANGE TAX APPEAL NOS.471, 473 & 478 OF 1999 AND IN THE CASE OF AHMEDABAD URBAN DEVELOPMENT AUTHORITY V. DY. DIRECTOR OF INCOME-TAX CIVIL APPEAL NO.2464 OF 2010 DATED 22-08- 2010. CONCLUDING HIS ARGUMENTS LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ORDER PASSED BY LOWER AUTHORITIES MAY KIND LY BE SET ASIDE AND ASSESSING OFFICER MAY KINDLY BE DIRECTED TO ALLOW E XEMPTION U/S. 11 & 12 OF THE ACT TO THE ASSESSEE-TRUST. 5. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D SUBMITTED THAT CONSTRUCTION ACTIVITY WAS ON DURING THE YEARS UNDER APPEAL FOR THE CONSTRUCTION OF TEMPLE AND THEREFORE IT CANNOT BE S AID THAT FUNDS WERE NOT USED FOR THE RELIGIOUS PURPOSES. TO MEET THE O THER SUBMISSIONS OF THE ASSESSEE LD. SR-DR SUBMITTED THAT IF THE OBJECT OF THE ASSESSEE- TRUST INCLUDED RELIGIOUS ACTIVITIES, IT SHOULD HAVE BEEN CLEARLY MENTIONED IN THE TRUST DEED AND THEN ASSESSEE WAS NOT REQUIRE D TO TAKE THE HELP OF DICTIONARY MEANING OF THE WORDS SPIRITUAL AND CU LTURAL HERITAGE. LASTLY ITA NO.622-26/AHD/2008 A.Y S. 99-00 TO 03-04 SH. SHAKTIDHAM TRUST V. ITO WD-5(1), BRD PAGE 6 HE SUBMITTED THAT CERTAIN CONDITIONS ARE TO BE FULF ILLED FOR TAKING EXEMPTION U/S.11 & 12 OF THE ACT EVEN IF THE TRUST IS REGISTERED U/S.12A OF THE ACT. HE THEREFORE, PLACING RELIANCE ON THE ORDE RS OF AUTHORITIES BELOW SUBMITTED THAT ORDER PASSED BY THEM MAY KINDLY BE U PHELD. 6. HEARD BOTH THE PARTIES AND PERUSED THE RECORDS, WE FIND THAT ONLY REASON GIVEN BY THE AUTHORITIES BELOW FOR NOT ALLOW ING EXEMPTION U/S 11 & 12 OF THE ACT TO THE ASSESSEE-TRUST WAS THAT ACCO RDING TO THEM THE ASSESSEE-TRUST WAS INDULGING IN RELIGIOUS ACTIVITY WHICH WAS NOT THE OBJECT OF THE ASSESSEE-TRUST AND THE ONLY REASON GI VEN BY THEM TO HOLD THAT ASSESSEE-TRUST WAS INDULGING IN RELIGIOUS ACTI VITY WAS THAT FUNDS OF THE ASSESSEE-TRUST WERE USED FOR CONSTRUCTING THE T EMPLE. WE FURTHER FIND THAT SHOW-CAUSE NOTICE WAS ISSUED TO THE ASSESSEE-T RUST ON THIS ISSUE. THE ASSESSEE-TRUST HAD REPLIED VIDE LETTER DATED 30 -11-2006, THE RELEVANT PORTION OF WHICH READS AS UNDER:- SIR, THE TEMPLE IN THE BUILDING COMPLEX WAS STARTE D ON 28-01-2004 AFTER THE PRANPRATHISTHA RITUAL AND ONLY THEN THE RELIGIOUS ACTIVITY CAN SAID TO BE HAVE STARTED. BUT PRIOR TO THIS, THE CONSTRUCTION ACTIVITY IN ITSELF CANNOT BE SAID TO BE RELIGIOUS A CTIVITY. RELIGIOUS ACTIVITIES WOULD MEAN TO DO SEVA, PUJA, A ARTI, PRASAD OF ANY HINDU GOD ACCORDING TO HINDU RITUALS AND TO CEL EBRATE THE RELIGIOUS FESTIVALS OF GOD. ALL SUCH ACTIVITIES STA RTED AFTER THE ABOVE REFERRED CEREMONY ONLY AND NOT PRIOR TO THAT. PLEASE FIND ENCLOSED AN INVITATION OF TEMPLE STARTI NG FUNCTION EVIDENCING THE COMMENCEMENT OF TEMPLE. MOREOVER THE TRUST IS ELIGIBLE TO EXPEND 5% OF THE GROSS AMOUNT TOWARDS RELIGIOUS OBJECTS AS PER THE PROVISIONS OF SECTION 80G(5). . . IN ANY CASE THERE IS NO VIOLATION OF SECTION 11 AS THE ACTIVITIES CARRIED ON BY THE TRUST ARE WITHIN THE OBJECTS AS P ER THE TRUST DEED. ITA NO.622-26/AHD/2008 A.Y S. 99-00 TO 03-04 SH. SHAKTIDHAM TRUST V. ITO WD-5(1), BRD PAGE 7 IT IS CLEAR FROM THE ABOVE REPLY THAT DURING THE YE ARS UNDER APPEAL I.E., 1999-00 TO 2003-04 NO RELIGIOUS ACTIVITY CAN BE SAI D TO HAVE STARTED AS TEMPLE WAS STARTED IN THE BUILDING COMPLEX OF THE A SSESSEE-TRUST ONLY ON 28-01-2004. I.E., ASSESSMENT YEAR 2004-05AND THIS F ACT WAS NOT REBUTTED BY THE ASSESSING OFFICER OR BY THE LD. CIT(A) BY PL ACING ANY MATERIAL ON RECORD TO THE CONTRARY. SINCE THE GROUND ON WHICH L OWER AUTHORITIES HAVE DISALLOWED THE EXEMPTION U/S. 11 & 12 OF THE ACT TO THE ASSESSEE-TRUST IS NOT BASED ON FACTS, THEIR ACTION IS NOT SUSTAINABLE IN LAW. THE AUTHORITIES BELOW WERE NOT CORRECT IN HOLDING THAT THE FUNDS OF THE ASSESSEE-TRUST WERE USED FOR THE ACTIVITY OTHER THAN THE OBJECT OF THE ASSESSEE-TRUST. THE ASSESSING OFFICER IS THEREFORE DIRECTED TO ALLO W THE EXEMPTION TO ASSESSEE-TRUST U/S. 11 R.W.S. 12 OF THE ACT. SINCE WE HAVE DECIDED THE ISSUE ON FACTS, WE ARE NOT GOING INTO THE OTHER ARG UMENTS ADVANCED BY THE LD. COUNSEL OF THE ASSESSEE. 7. AS WE HAVE ALLOWED THE GROUND NO.2 THE ALTERNATI VE GROUNDS NO.3 & 4, DO NOT REQUIRE ANY ADJUDICATION. 8. GROUND NO.5 IS ARGUMENTATIVE IN NATURE. 9. GROUND NO.6 IS CONSEQUENTIAL IN NATURE. 10. GROUND NO.7 ALSO DOES NOT REQUIRE ANY ADJUDICAT ION. 11. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 18/03/2011 SD/- SD/- (A.N.PHAUJA) (D.K. TY AGI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 18/03/2011 *DKP COPY OF THE ORDER FORWARDED TO :- ITA NO.622-26/AHD/2008 A.Y S. 99-00 TO 03-04 SH. SHAKTIDHAM TRUST V. ITO WD-5(1), BRD PAGE 8 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-V, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD