SHRI LAL BAHDUR SHASHTRI ARYA MAHILA COLLEGE, BARNALA V. ITO , WARD -1, BARNALA

ITA 77/CHANDI/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6102 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2017-2018
• Appeal Filed On: 09-02-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA DHAR
• Assessee Lawyers: RAKESH KUMAR GUPTA
• Keywords: Bonafide belief; TDS
• Section: 10; 154; 11; 139; 143(1); 10(23C)

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “एकल सद यीय’, च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘SMC’ CHANDIGARH ीमती दवा संह, या#यक सद य BEFORE: SMT. DIVA SINGH, JM आयकर अपील सं./ ITA No. 77/CHD/2022 नधा रण वष / Assessment Year : 2017-18 Shri Lal Bahadur Shashtri Arya Mahila College, Ram Bagh Road, Barnala. बनाम VS The ITO, Ward-1, Barnala. थायी लेखा सं./PAN No: AAFTS0570C अपीलाथ /Appellant यथ /Respondent नधा रती क! ओर से/Assessee by : Shri Rakesh Kumar Gupta, Advocate राज व क! ओर से/ Revenue by : Smt. Priyanka Dhar, Sr.DR स ु नवाई क! तार&ख/Date of Hearing : 08.06.2022 उदघोषणा क! तार&ख/Date of Pronouncement : 18.07.2022 आदेश/ORDER The present appeal has been filed by the assessee wherein the correctness of the order dated 17.12.2021 of CIT(A) (NFAC i.e. National Faceless Appeal Centre) Delhi pertaining to 2017- 18 assessment year on the following grounds : 1. That the learned CIT(Appeals) NFAC has erred in law and on facts in rejecting the appeal summarily vide his order dated 17.12.2021 on technical grounds and sustaining an addition of Rs. 1667017 on account of FDRs interest on the ground that an appeal against order dated 25.07.2019 passed by AO CPC, Banglore under section 154 of the Income Tax Act, 1961 should have been filed instead of filing an appeal against the order dated 23.05.2019 passed by the AO CPC, Banglore u/s 143(l)(a) of the Act while the issue in both the orders passed by AO CPC is the same i.e. the addition of interest income against FDRs at Rs. 1667017 which have been added twice by A.O. CPC at Rs. 3336034/- u/s 143(l)(a) of the Act while the interest at Rs. 1667017 which accrued in the year under appeal as per Form No. 26AS is incidental while carrying out the charitable activity of the appellant and the interest accrued on FDRs is exempt u/s 10(23C)(iiiab) read with section 11 of the Act. ITA-77/CHD/2022 A.Y. 2017-18 Page 2 of 7 2. That the appeal against the order passed by AO CPC, Banglore under section 143(l)(a) has been preferred before CIT (Appeals) Patiala / NFAC instead of preferring an appeal against order u/s 154 of the Act passed by A.O. CPC under bonafide belief that in both the orders passed by the A.O. CPC, the issue is the same and contested for the deletion of sustained interest amounting to Rs. 1667017 before CIT (Appeals) Patiala / NFAC as the interest accrued against the FDRs which has been added twice that is at Rupees 3336034 u/s 143(l)(a) wrongly by AO CPC while only interest income of Rupees 1667017 accrued against FDRs in the year under appeal as per Form No. 26AS which is exempt under section 10(23C)(iiiab) read with section 11 of the Act. 3. That the principals of natural justice has been violated by the CIT (Appeals) NFAC as well as by the AO CPC while passing their respective orders as the interest income of Rs. 1667017 against FDSs which accrued to the appellant in the year under appeal as per Form No. 26AS is exempt being incidental while carrying out the objectives of the appellant under section 10(23C)(iiiab) read with section 11 of the Act. 4. That the learned A.O. has erred in in law and on facts in charging interest under section 234B at Rupees 40430 and interest charged under section 234C at Rupees 7854 of the Income Tax Act, 1961 which is liable be deleted from the assessment order. 2. That the appellant with your permission craves leave to add, alter, amend, modify, substitute and declare any ground of appeal on or before the final hearing, if necessary so arises before the appeal is disposed off.” 2. The ld. AR reiterating the submissions as advanced before the First Appellate Authority submitted that the AO by his order u/s 143(1) of the Act acted contrary to law and facts by determining the total income of the assessee at Rs.33,36,034/- by resorting to make an addition of Rs.16,68,017/-. For the sake of completeness, submissions advanced before CIT(A) repeated before ITAT are extracted hereunder : “1. That the assessee trust is running a college in the name of Shri Lal Bahadur Arya Mahila College and LBS Arya Mahila Collegiate Senior Sec. School Barnala and providing education to girls only and is claiming under section 10(230/11 under the Income Tax Act. 2. That the assessee is a registered institution u/s Section 12A/12AA of the Income Tax Act and also is an institution substantially financed by government eligible to claim exemption u/s 10(23C)(iiiab) of the Income TaxAct,1961. ITA-77/CHD/2022 A.Y. 2017-18 Page 3 of 7 3. The assessee trusts maintains detailed books of accounts and are audited by Chartered Accountant and copy of Audit Report is duly furnished along with the return. 4. During the year, the assessee had originally filed income tax return showing nil income. Since the assessee institution incurred Net Loss amounting to Rs .81,60,65.57 after considering total receipts including interest and expenditures for the period ending 31.3.2017 and claimed TDS amounting to Rs. 1,79,590 deducted on interest Income of Rs. 16,68,017 . 5. Thereafter return was considered as defective and intimation u/s 143(l)was received on 23-03-2018 proposing adjustment of Rs. 16,68,017 stating reason that in return no income/receipts is disclosed under voluntary contribution/Aggregate Income head/any other heads of Income however Form 26AS Shows Income/Gross Receipts. 6. Thereafter, in response to return filed u/s 139 (9)a intimation u/s 143(1) was issued on 22-08-2018 by assessing officer stating total Income to 33,36,034 which was subsequently rectified by the assessing officer to Rs 16,68,017 via intimation issued u/s 143(l)of the Income Tax Act dated 23.06.2019 7 The fact of the case are that assessee earned interest income of Rs. 16,68,017 on which was TDS was deducted amounting to Rs.1,79,590 and exemption on such interest income was claimed u/s 10(23C)(iiiab), since assesses is educational institution existing solely for educational purposes and not for purpose of profit and is substantially financed by government. 8. The assessing officer clearly erred in law and on facts in failing to appreciate the settled principle that when a debatable question arises and when the issue is contentious, prima facie adjustment u/s 143(1) of the Act is not Permissible. Since the adjustment relating to disallowance of exemption u/s 10(23C)(iiiad) is not an "arithmetical error in the return or an incorrect claim apparent from any information in the return" Therefore no adjustment could be made by way of intimation u/s 143(1). 9. That even otherwise exemption u/s 10(23C) (iiiab) could not denied for the reason that no information is furnished in Schedule VC of the return in respect of receipt of Government contribution as Voluntary contribution is not part of Income as defined u/s 2(24) (iia) of the Income Tax Act as defined below : (iia) "voluntary contributions received by a trust created wholly or partly for charitable or religious .purposes or by an institution established wholly or partly for such purposes or by an association or institution referred to in clause (21) or clause (23), or by a fund or trust or institution referred to in sub-clause (iv) or subclause (v) or by any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via) of clause (23C) of section 10 or by an electoral trust". ITA-77/CHD/2022 A.Y. 2017-18 Page 4 of 7 Thus, Voluntary contributions received by a university, other educational institution or hospital or medical institution which are exempt u/s 10(23C)(iiiab) and (iiiae) i.e which are wholly or substantially financed by the government are not treated as income of such as institution. 10. Also that the whole income of university or other educational institution covered by clauses 10(23C)(iiiab) and 10(23C)(iiiad) would be exempt from tax without any conditions except that it must be existing solely for educational purposes and not for purposes of profit. Thus if incidentally any income in the nature of business is earned by such educational or medical institution the same would not be liable to tax. 11. Further the seventh proviso to 10(23C) enables the trust or institution to carry on . business activity subject to the condition that the activity must be incidental to the main activity and separate books of accounts are to be maintained. "Income" in the case of charitable trust or institution has to be understood in the broadest of terms. As in the case of any other assessee, it will include income falling under different heads of income including income from other sources, which otherwise do not poses the character of "income" are also to be included in income. All these amounts will, in the first instance, be included in the income of the charitable trust or institution, and therefore exemption can be claimed. Also it was held in the following cases that the interest income received on account of an investment is incidental to running the college if this income is utilized for the main objects of the education institution and it is entitled for exemption : i) Additional Commissioner of Income Tax Gujrat V/S Surat Art Silk Manufacturers Association (1980) 121 ITR 0001 (SC) ii) City Montessori School (Regd.) V/S UOI & others (2009) 315 ITR 48 (All) iii) Brahman Education Society V/S Asstt. CIT (1997) 227 ITR 317 (Kerala) iv) DCIT v.Nehru Prasutika Astpal Samiti (2014) 159 TTJ 813 :14b ITD 8 (ITATAGRA) We trust same will meet your valued satisfaction. However, need be of any further information, explanation and /or evidence in the matter, the same shall be furnished on listening from you.” 3. Accordingly, it was his prayer that relief in accordance with law may be granted to the assessee. 4. The ld. Sr.DR on the other hand relying upon the impugned order submitted that the assessee has filed an appeal before the First Appellate Authority against the order passed ITA-77/CHD/2022 A.Y. 2017-18 Page 5 of 7 u/s 143(1) and has not challenged the order passed u/s 154. Accordingly, it was her submission that the appeal of the assessee may be dismissed. 5. The ld. AR in reply submitted that the addition made by the AO is contrary to law and facts and the CIT(A) should have granted relief to the assessee on the basis of material available on record. 6. I have heard the submissions and perused the material on record. It is a fact not in dispute that before the First Appellate Authority the assessee challenged the 143(1) order dated 23.05.2019. The assessee apparently ignored the fact that a Rectification Application u/s 154 had been filed by the assessee challenging the 143(1) order. The Rectification Application as per record stood decided by the AO vide order dated 25.07.2019. The 143(1) order dated 23.05.2019 as a result thereof stood merged with order passed by the AO u/s 154 dated 25.03.2019. It is a fact that the assessee had not challenged this order. Accordingly, it is seen that in these peculiar facts and circumstances, no mistake can be said to have been committed by the ld. CIT(A) in dismissing the appeal filed. The assessee presumably under ignorance instead of challenging the order passed u/s 154 dated 25.07.2019 has instead challenged the order u/s 143(1) of the Act. ITA-77/CHD/2022 A.Y. 2017-18 Page 6 of 7 Accordingly, on facts no fault can be found with the exercise of power by the First Appellate Authority. 7. While so concluding that the appeal of the assessee deserves to fail, it need also be observed that being live to the concerns of the assessee, it is hereby deemed necessary to observe that in the eventuality the assessee deems it fit to challenge the order passed by the AO u/s 154, it is hoped that the First Appellate Authority considers the delay in the filing of the appeal fairly as admittedly in the facts of the present case, the assessee cannot be said to have acted carelessly or be accused of sleeping over his rights. The assessee as per record has suffered on account of the ignorance in understanding the nuances of law. Accordingly, on account of lack of proper advice available to the assessee, opportunity to claim redressal under law should not be crushed. It is seen that no undue advantage is gained by the assessee by approaching the First Appellate Authority by filing appeal against the order u/s 143(1) and no vested right of the Revenue is upset if the assessee is permitted to appeal against the order u/s 154 of the Act. Accordingly, with the aforesaid direction and observations, the appeal of the assessee is dismissed. Said order was pronounced in the Open Court at the time of hearing itself. ITA-77/CHD/2022 A.Y. 2017-18 Page 7 of 7 8. In the result, the appeal of the assessee is dismissed. Order pronounced in the Open Court on 18 th July,2022. Sd/- ( दवा संह ) (DIVA SINGH) या#यक सद य/Judicial Member “प ू नम” आदेश क! त,ल-प अ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant – 2. . यथ / The Respondent 3. .आयकर आय ु /त/ CIT 4. .आयकर आय ु /त (अपील)/ The CIT(A) 5. -वभागीय त न2ध, आयकर अपील&य आ2धकरण, च4डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File आदेशान ु सार/ By order, सहायक पंजीकार/ Assistant Registrar