C.B. MUBARKA CHARITABLE TRUST, MUMBAI V. CIT (EXEMPTION), MUMBAI

ITA 638/MUM/2021

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0832 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 26-04-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Charitable institution; Set aside
• Section: 263; 2; 11; 143(3); 142(1); 208; 101

Judgement Text

ITA No.638/Mum/2021 A.Y.2016-17 C.B. Murarka Charitable Trust Vs. CIT (Exemption) 1 IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.638/Mum/2021 (A.Y. 2016-17) C.B. Murarka Charitable Trust, B-310, Virwani Industrial Estate, Western Express Highway, Goregaon East, Mumbai – 400063 Vs. CIT(Exemption) 617, 6 th Floor, Piramal Chamber, Lal Baug, Parel Mumbai - 400012 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAATC0036C Appellant .. Respondent Appellant by : Sanjay C. Shah Respondent by : Sandeep Rai Date of Hearing 23.05.2022 Date of Pronouncement 03.08.2022 आदेश / O R D E R Per Amarjit Singh (AM): The present appeal filed by the assessee is directed against the order passed by the ld. CIT(Exemption), Mumbai, which in turn arises from the order passed by the A.O u/s 143(3) of the Act for A.Y.2016-17. The assessee has raised the following grounds before us: “1. Learned Principal Commissioner of Income Tax erred in passing Order u/s 263 of the Income Tax Act treating the order passed by the Ld. Assessing Officer u/s 143(3) of the Act as erroneous and prejudicial to the Interest of the Revenue within the meaning of Section 263 of the Act and thereby directing Assessing Officer to frame Assessment Order de novo. ITA No.638/Mum/2021 A.Y.2016-17 C.B. Murarka Charitable Trust Vs. CIT (Exemption) 2 Appellant Trust submits that in view of the facts and circumstances of the case as well as in law, the said Order passed u/s 263 of the Act bad in law and deserves to be quashed. 2. Learned Principal Commissioner of Income Tax erred in holding that Order passed u/s 143(3) of the Act is erroneous and prejudicial to the Interest of the Revenue and thereby invoking powers u/s 263 of the Act, mainly on account of alleged non-verification of expenditure incurred by the Appellant Trust. Appellant Trust submits that in view of the facts and circumstances of the case as well as in law, invoking powers u/s 263 of the Act is not permissible only on account of alleged non-verification by Ld. AO in respect expenditure incurred by the Appellant Trust. Appellant Trust submits that in view of the facts and circumstances of the case as well as in law, the said Order passed u/s 263 of the Act bad in law and deserves to be quashed.” 2. Since both the grounds of appeal are based on similar issues and identical facts therefore, these grounds of appeal are adjudicated together. 3. The fact in brief is that return of income of declaring nil income was filed on 24.09.2018. The assessment u/s 143(3) of the Act was finalized on 01.12.2018. Subsequently, the ld. Pr. CIT on verification of the assessment record observed that assessee had made excess expenditure from corpus fund resulted in deficit amounting to Rs.4,31,94,050/-. The Pr.CIT stated that such expenditure claimed from corpus donation was not allowable. In this regard the ld. Pr. CIT has given the detail of expenditure made by the assessee trust as under: Cemetery Expenses 3,52,650 Housekeeping Charges 7,51,660 Security Service Charges 3,37,356 Other Charitable Object 21,36,395 Construction of Bus stand at Laxmangarh 4,89,13,724 Bus stand inauguration Expenses 23,13,212 Other Expenses 1,08,893 Total 5,54,13,890 ITA No.638/Mum/2021 A.Y.2016-17 C.B. Murarka Charitable Trust Vs. CIT (Exemption) 3 The Ld. Pr.CIT also stated that expenditure amounting to Rs.3.37 crores out of Rs.4.89 crores paid to Prime Interior towards construction of bus stand at Laxmangarh on 31.03.2016 has also not been verified. Accordingly, a show cause notice dated 29.01.2021 was issued to the assessee to show cause why assessment order dated 01.12.2018 should not be set aside u/s 263 of the Act with appropriate direction to the A.O to redo the assessment. The ld. Pr. CIT stated that in spite of granting number of adjournments at the request of the assessee, the assessee had not made compliance to the show cause notice issued. After placing reliance on the number of judicial pronouncements i.e Malabar Industrial Company Ltd. Vs. CIT(2000) 243 ITR 83 (SC), Bismillah Trading Company Vs. Intelligence Officer (2001) 248 ITR 292 (Karnataka) Venkateshkrishna Rice Company Vs. CIT (1987) 163 ITR 129 (Madras), Smt. Taradevi Aggarwal Vs. CIT (1973) 88 ITR 323 (SC), Thalibai F. Jain Vs. ITO (1975) 101 ITR 1 (Karnataka), CIT Vs. Amitabh Bachhan, 384 ITR 200 & Others decision the ld. Pr. CIT held that the A.O has passed assessment order without basic verification of issue as mentioned above in this order. Therefore, the assessment order dated 01.12.2018 was set aside to the A.O with direction to undertake assessment proceedings a denovo. 4. During the course of appellate proceedings before us the ld. counsel submitted that A.O has made assessment u/s 143(3) of the Act after necessary verification, therefore, action of the ld. Pr.CIT is not justified. The ld. Counsel has referred page No. 208 of the paper book i.e a letter dated. 24.02.2021 addressed to CIT(Exemption) in which it was explained that assessment u/s 143(3) of the Act was made after considering of the relevant details submitted before the A.O. The ld. Counsel also referred page no. 178 & 179 of the paper book giving the ITA No.638/Mum/2021 A.Y.2016-17 C.B. Murarka Charitable Trust Vs. CIT (Exemption) 4 detail of corpus fund. He also referred page No. 91 of the paper book a copy of annexure of notice u/s 142(1) issued by the A.O wherein assessee was asked as per serial no. 1 to furnish complete details of receipts and the expenditure incurred in respect of charitable activities carried out by the trust for the last 3 years. He also referred page No. 92 of the paper book as per which assessee has furnished its submission vide letter dated 10.08.2018 giving the detail of receipt and expenditure incurred in respect of charitable activities carried out by the trust during the year. The assessee has also referred details of donation received and details of major expenditure incurred for charitable activities of the trust as per page no. 93 to 121 of the paper book. Te ld. Counsel also contended that expenditure were not made out of corps fund and it was definitely not deficit but the excess of expenditure. He also mentioned that amendment of Finance Act, 2021 not applicable to the year under consideration. On the other hand, the ld. D.R. referred page No. 2 of order u/s 263 passed by the ld. Pr.CIT and submitted that the A.O has passed order u/s 143(3) without carrying out any basic verification of the expenditure incurred by the assessee trust. 5. Heard both the sides and perused the material on record. During the year under consideration it is noticed that assessee trust has made expenditure to the amount of Rs.5,54,13,890/- and deficit amount was Rs.4,31,94,050/-. As per profit and loss account the total income of the assessee was Rs.1,22,22,358/- whereas assessee had spent an amount of Rs.5,54,13,890/- on the object of the trust resulting in deficit of Rs.4,31,94,050/-. We have perused the notices u/s 142(1) dated 27.02.2018 and dated 08.10.2018 issued by the A.O during the course of ITA No.638/Mum/2021 A.Y.2016-17 C.B. Murarka Charitable Trust Vs. CIT (Exemption) 5 assessment proceedings placed in the paper book at page 7-8 and 121- 123 respectively. In the notice u/s 142(1) dated 27.02.2018, the A.O asked about details of corpus and non-corpus donations received excluding other basic details. In response to notice u/s 142(1) dated 08.10.2018 the assessee in its response dated 17.10.2018 at serial No. 5 stated that the amount spent on the object of the trust were higher than the amount of income during the year. It was further stated that the excess has been spent out of the corps of the trust. In response to notice u/s 142(1) of the Act, the assessee admitted vide letter dated 17.10.2018 (at page 124 of paper book) that excess has been spent out of the corpus of the trust. In the light of the above facts and material it is noticed that neither the A.O has inquired/verified about these excess expenditure claimed from the corpus donation nor the assessee had explained that how the excess expenditure claimed from the corpus was allowable. Therefore, it is evident from record that A.O had passed order u/s 143(3) of the Act without verification of spending of amount of Rs.4,31,91,531/- out of the corpus fund when the amount earned during the year was only Rs.1,22,22,359/-. The A.O should have verified whether the assessee had claimed any exemption of the amount of Rs.4,31,91,531/- spent from the corpus fund. During the course of appellate proceedings before us, the ld. Counsel has placed reliance on the decision of PCIT Vs. Delhi Airport Metro Express Pvt. Ltd. (2017) 398 ITR 008 (Delhi). We find that the facts in the case of the assessee are distinguishable from the above referred decision of the Hon’ble High Court of Delhi. In the case of the assessee the ld. PCIT has given a number of opportunities but the assessee has ITA No.638/Mum/2021 A.Y.2016-17 C.B. Murarka Charitable Trust Vs. CIT (Exemption) 6 not made any compliance to the notices issued by the ld. PCIT. Therefore, the ld. PCIT after considering the assessment material available in the record found that the A.O had passed the impugned assessment order u/s 143(3) without basic verification of issues of excess expenditure incurred from corpus fund as elaborated above in this order. In the light of the above facts and findings we consider that assessment was completed without basic verification/inquiries on the issue of incurring of excess expenditure out of corpus fund as against total income of the assessee trust of Rs.1,22,22,358/- shown during the F.Y. 2015-16 and corresponding exemption claimed u/s 11 of the Act. Therefore, the order of the A.O is erroneous as well as prejudicial to the interest of revenue and the ld. Pr.CIT has rightly directed the A.O to complete the assessment after examination of this issue as per provision of law. We therefore, uphold the order of the ld. Pr. Commissioner of Income Tax. Accordingly, ground of appeal filed by the assessee are rejected. 6. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 03.08.2022 Sd/- Sd/- (VIKAS AWASTHY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 03.08.2022 PS: Rohit ITA No.638/Mum/2021 A.Y.2016-17 C.B. Murarka Charitable Trust Vs. CIT (Exemption) 7 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT 5. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, अहमदाबाद / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy// (Asst. Registrar) ITAT, Mumbai