RAVI BAL NIKETAN SAMITI, Jaipur V. ITO, Jaipur

ITA 795/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5222 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 19-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S DANGUR CIT DHK
• Keywords: Charitable institution; Opportunity of being heard; Maximum Marginal Rate
• Section: 143(3); 80G; 12A; 12; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI T.R.MEENA, AM VK;DJ VIHY LA -@ ITA NO. 795/JP/2015 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 M/S RAVI BAL NIKETAN SAMITI, SECTOR-18, KUMBHA MARG, PRASTAP NAGAR, JAIPUR. CUKE VS. I.T.O., WARD 5(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAATR 7448 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.S. DANGUR (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 31/05/2016. MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 06/06/2016. VKNS'K@ ORDER PER T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 01/09/2015 PASSED BY THE LD. CIT(A)-III, JAIPUR FOR THE ASSESSMENT YEAR 2009-10 WHEREIN THE ASSESSEE RAISED FOLLOWING GROUND AS UNDER: AS PER CONSOLIDATED INCOME AND EXPENDITURE ACCOUN T OF RBN SAMITI, GROSS RECEIPTS OF SOCIETY FROM OPERATIO N HAVE BEEN SHOWN AT RS. 1,42,878,550/- AGAINST WHICH ITA NO. 795/JP/2015 M/S RAVI BAL NIKETAN SAMITI VS ITO 2 AFTER CLAIMING ALL THE EXPENSES SURPLUS OF RS. 20,51,064/- HAS BEEN SHOWN. ONGOING THREW THE RECORDS THE A.O. FOUND CERTAIN PAYMENTS ARE MADE TO THE OFFICE BEARERS OF SOCIETY WHICH HE HAS CONSIDERE D IT AS PAYMENT MADE FOR PERSONAL BENEFITS OF OFFICE BEA RER AND DENIED THE EXEMPTION U/S 11 AND ASSESSED IT AS TOTAL SURPLUS SHOWN IN THE INCOME AND EXPENDITURE ACCOUNT WHICH IS 20,51,064/- ON THE SAME THE SUBMISSION MADE BY LD AR THAT THE ADVANCE ARE NOT F OR PERSONAL BENEFIT AND ARE GIVEN TO THEM IN PREVIOUS YEAR AND NOT IN THE YEAR UNDER CONSIDERATION. FURTHER EXPLANATION AND SUBMISSION WERE MADE TO THE A.O. ABOUT THE PURPOSE OF ADVANCE AND THE ACCOUNTING TREATMENT THEREAFTER, WHICH WAS NOT CONSIDERED BY HIM AND ASSESSED THE SOCIETY AT SURPLUS SHOWN IN THE INC OME AND EXPENDITURE ACCOUNT OAT RS. 20,51,064/-. 2. THE ASSESSEE SOCIETY FILED ITS RETURN FOR A.Y. 20 09-10 ON 29/09/2009 DECLARING NIL INCOME. THE CASE WAS SCRUTIN IZED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE L D ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS A REGISTERED SOCIETY CONSTITUTED ON 24/11/1967 WHICH WAS REGISTERED U/S 12A OF THE ACT B Y THE CIT W.E.F. 31/1/2002 VIDE CERTIFICATE ISSUED ON 14/6/2002. THE SOCIETY IS ALSO REGISTERED U/S 80G OF THE ACT VIDE CERTIFICATE ISSU ED ON 13/9/2007. THE ITA NO. 795/JP/2015 M/S RAVI BAL NIKETAN SAMITI VS ITO 3 LD ASSESSING OFFICER FURTHER HELD THAT ON EXAMINATI ON OF BOOKS OF ACCOUNT, IT IS FOUND THAT CERTAIN ADVANCES WERE GIVE N BY THE SOCIETY TO ITS OFFICER BEARERS, DETAILS ARE AS UNDER:- NAME OF THE PERSON DESIGNATIO N AMOUNT SMT. MANJU LATA SHARMA CHAIRMAN RS. 36,880/- SHRI MANOJ KUMAR SHARMA MEMBER RS. 68,000/- SHRI KANTA PRTASAD MISHRA FAMILY MEMBER OF CHAIRMAN TOTAL RS. 1,54,880/- THESE ADVANCES WERE COMING FROM EARLIER YEARS AS THE SAME HAS BEEN AS OPENING BALANCE AS ON 01/4/2008 AND NO PAYMENTS WERE MADE TO ANY OF THEM DURING THE YEAR 2008-09. AS SUCH THE OP ENING BALANCE WAS ALSO THE CLOSING BALANCE IN THESE ACCOUNTS. SINCE A LL OF THE ABOVE PERSONS BEING OFFICE BEARERS OF THE ASSESSEE SOCIET Y ARE COVERED U/S 13(3) OF THE ACT AND PROVISIONS OF SECTION 13(1)(C) AND 13(2)(A) COMES INTO OPERATION. HE HAS REPRODUCED PROVISIONS OF SEC TION 13(1) AND 13(2) OF THE ACT AND GAVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AFTER CONSIDERING THE ASSESSEES REPLY, H E HELD THAT IF THESE ADVANCES RECEIVED FROM THE OFFICE BEARER IN THE APR IL, 2009, THIS AMOUNT WAS KEPT FOR TWO YEARS BY THEM AND ADJUSTMENT ENTRY WA S PASSED IN APRIL, 2011. WHEN THE AMOUNT WAS GIVEN EVEN BEFORE 0 1/4/2008 AND PAYMENTS ON BEHALF OF THE SOCIETY WERE MADE BY THE O FFICE BEARER IN ITA NO. 795/JP/2015 M/S RAVI BAL NIKETAN SAMITI VS ITO 4 THE MONTH OF APRIL, 2009 EVEN THEN THE AMOUNT OF RE MAND WITH THE OFFICE BEARER FOR A PERIOD OF MORE THAN ONE YEAR. TH IS IS CLEAR VIOLATION OF SECTION 13(2)(A) OF THE ACT. THE SUBMISSION MADE BY THE ASSESSEE IS ALSO NOT RELIABLE. SINCE THE BOOKS OF ACCOUNT FOR A .Y. 2009-10 AND 2010- 11 HAD ALREADY BEEN CLOSED. HENCE THE ASSESSEE HAD NO OPTION BUT TO SHOW THE ADJUSTMENT ENTRY IN APRIL, 2011 AS ONLY THE CURRENT YEAR BOOKS OF ACCOUNT CAN BE MODIFIED. THE ASSESSEE HAD DECLARE D SURPLUS OF RS. 20,51,064/- IN THE CONSOLIDATED INCOME AND EXPENDIT URE ACCOUNT FOR THE YEAR ENDED ON 31/3/2009. SINCE THE BENEFIT OF SECTI ON 11 WAS NOT GIVEN BY THE ASSESSING OFFICER AND ASSESSEE IS NOT ALLOWED TO ACCUMULATE 15% OF INCOME. THE APPLICATION OF THE INCOME AGAINST THE INVESTMENT IN FIXED ASSETS WAS ALSO NOT ALLOWED. ACCORDINGLY, SURPL US OF RS. 20,51,064/- WAS HELD TAXABLE BY THE ASSESSING OFFICE R. HE FURTHER RELIED ON THE HONBLE ITAT, ALLAHABAD BENCH DECISION IN TH E CASE OF SMT. GOMTI DEVI BANARSI DAS VAID CHARITABLE TRUST VS. ITO 16 ITD 308 WHEREIN IT HAS BEEN HELD THAT PROVISIONS OF SECTION 13(2)(A) IS APPLICABLE ON SIMILAR FACTS AND CIRCUMSTANCES IN TH E CASE OF SOCIETY. ACCORDINGLY HE HAS NOT GIVEN BENEFIT OF SECTION 11 AND HELD SURPLUS OF RS. 20,51,064 AS TAXABLE. ITA NO. 795/JP/2015 M/S RAVI BAL NIKETAN SAMITI VS ITO 5 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), W HO HAD DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING THAT THE SO CIETY IS ENGAGED IN THE PROVIDING EDUCATION. AS ON 01/4/2008 THE ASSESS EE SOCIETY HAD SHOWN ADVANCES TO THE THREE PERSONS FOR RS. 1,54,880 /-, WHICH WAS ALSO OUTSTANDING AS ON 31/3/2009. THE ASSESSEE HAS NOT AB LE TO ESTABLISH THAT THESE ADVANCES WERE GIVEN FOR THE PURPOSES OF P AYMENTS WAS TO BE MADE FOR THE THIRD PERSON WHO HAS RENDERED THE SERVI CES FOR THE SOCIETY. THE ASSESSEE SOCIETY HAS MISUTILIZED THE FU ND BY DIVERTING THE SAME TO THE SPECIFIED PERSONS, WHICH IS LIABLE TO FA CE THE ACTION OF COMMITTING DEFAULT. HE FURTHER CONSIDERED SECTION 1 3(1)(C) AND 13(2)(A) OF THE ACT. THE OTHER ARGUMENTS OF NOMINAL AMOUNT WAS ALSO NOT FOUND CONVINCING TO HER, ACCORDINGLY, SHE DISMISSED THE A PPEAL OF THE ASSESSEE. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE SOCIETY MA DE ADVANCES TO SMT. MANJULATA SHARMA, SHRI MANOJ KUMAR SHARMA AND SHRI KANTA PRASAD MISHRA IN PREVIOUS YEAR AND NOT IN THE YEAR UNDER CONSIDERATION. THE ADVANCES WERE GIVEN TO THEM FOR MAKING ONWARDS PAY MENT TO ITA NO. 795/JP/2015 M/S RAVI BAL NIKETAN SAMITI VS ITO 6 CERTAIN PARTIES FROM WHOM THE SOCIETY HAD OBTAINED S ERVICES OR FOR REPAYMENT OF UNSECURED LOAN TAKEN FROM SOME PERSONS . RS. 68,000/- WAS PAID TO SHRI MANOJ KUMAR SHARMA FOR REPAYMENT OF UNSECURED LOAN TAKEN BY THE SOCIETY FROM VARIOUS PERSONS, WHICH WAS ADJUSTED IN THE BOOKS OF ACCOUNT ON 15/4/2011. RS. 50,000/- WAS PAID TO SHRI KANTA PRASAD MISHRA AND RS. 36,880/- TO SMT. MANJULATA SH ARMA FOR MAKING ONWARDS PAYMENT TO SHUBH ADVERTISING AND MARKETING/B HAVANA TRADERS, WHICH WAS UTILIZED FOR THAT PURPOSE BUT ADJUS TED IN THE BOOKS OF ACCOUNT ON 18/4/2011/25/04/2011. THIS WAS EXPLANA TION BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. THEREFORE, THERE IS NO VIOLATION OF PROVISIONS OF SE CTION 13 OF THE ACT. WITHOUT PREJUDICE TO ABOVE SUBMISSION, IT WAS FURTHE R ARGUED THAT IF THE ASSESSEE VIOLATED THE PROVISIONS OF SECTION 13 AND ENTIRE SURPLUS CANNOT BE CHARGED TO TAX BUT ONLY THAT PART OF THE INCOME, WHICH IS NOT EXEMPT U/S 11 BY VIRTUE OF CLAUSE (C) OR CLAUSE (D) OF SEC TION 13(1) SHALL BE CHARGED TO TAX AT MAXIMUM MARGINAL RATE (MMR). HE H AS ALSO REFERRED SECTION 164 DEALS WITH CHARGE OF TAX WHERE THE SHARES OF THE BENEFICIARY IS UNKNOWN. SECTION 164(2) DEALS WITH THE CHARGE OF TAX ON THE INCOME OF THE TRUST WHICH IS DERIVED BY IT FROM THE PROPERTY HELD WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSE. THEREFORE , ON THE BASIS OF ITA NO. 795/JP/2015 M/S RAVI BAL NIKETAN SAMITI VS ITO 7 PLAIN READING OF SECTION 13, IT IS EVIDENT THAT WHE RE THE WHOLE OR ANY PART OF RELEVANT INCOME IS NOT EXEMPT U/S 11 OR 12 OF THE ACT BECAUSE OF THE PROVISIONS OF SECTION 13(1)(C) OR 13(1)(D) O F THE ACT IS CHARGEABLE ON THE RELEVANT INCOME OR PART OF THE RELEVANT INCO ME AT MMR, THEREFORE, ENTIRE SURPLUS AMOUNT CANNOT BE TAXED @ M MR.. THIS PRINCIPLE HAS BEEN LAID DOWN BY THE HONBLE KARNATAK A HIGH COURT, AFFIRMED BY THE HON'BLE SUPREME COURT, WHICH WAS FOLL OWED BY THE JURISDICTIONAL ITAT, JAIPUR BENCH IN NUMBER OF CASES . HE HAS FURTHER RELIED ON THE DECISION IN THE CASE OF DIT VS WORKING WOMENS FORUM (2015) 235 TAXMAN 516 (SC) DECISION DATED 18/9/2015 WHEREIN IT HAS BEEN HELD THAT THERE IS VIOLATION OF SECTION 13, TH E ASSESSEE WOULD RESULT IN MMR OF TAX ONLY ON DIVIDEND INCOME ON SH ARES, WHICH WAS NOT THE RECOGNIZED MODE OF INVESTMENT AND THAT THE ASSE SSEE WOULD NOT BE VESTED WITH MARGINAL RATE OF TAX ON ENTIRE INCOME. H E FURTHER RELIED ON THE FOLLOWING CASE LAWS:- (I) CIT VS FR. MULLERS CHARITABLE INSTITUTIONS (2014 ) 227 TAXMAN 369 (HON'BLE SUPREME COURT) DECISION DATED 19/9/2014. (II) CIT VS. FR. MULLERS CHARITABLE INSTITUTIONS (2 014) 363 ITR 230 (KAR.) ITA NO. 795/JP/2015 M/S RAVI BAL NIKETAN SAMITI VS ITO 8 (III) CIT VS. ORPAT CHARITABLE TRUST (2015) 230 TAXMAN 0066 (GUJ) (HC). (IV) DIT (EXEMPTION) VS. SHETH MAFATLAL GAGALBHAI F OUNDATION TRUST 249 ITR 533 (BOM) HE FURTHER ARGUED THAT THIS ISSUE HAS ALSO BEEN CON SIDERED BY THE HONBLE ITAT, JAIPUR BENCH, JAIPUR IN THE CASE OF M/ S SANTOKBA DURLABH JI TRUST FUND VS ITO IN ITA NO. 169/JP/2112 ORDER DA TED 5/11/2014 FOR A.Y. 2008-09 AND IN THE CASE OF M/S RAJKALA CHARITA BLE TRUST VS ACIT IN ITA NO. 140/JP/2015 DATED 28/4/2016. THE LD AR FINAL LY REQUESTED TO DIRECT THE ASSESSING OFFICER TO ALLOW EXEMPTION U/S 11 AND IN CASE OF ASSESSEE HELD THAT PROVISIONS OF SECTION 13 HAD BEE N VIOLATED, THE ENTIRE SUM CANNOT BE TAXED AT MMR BUT ONLY SUCH AMO UNT CAN BE TAXED, WHICH HAS VIOLATED SECTION 13, MAY BE TAXED AT MMR. 5. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORTE D THE ORDER OF THE LD CIT(A) AND ARGUED THAT THERE IS CLEAR CUT VI OLATION OF SECTION 13 AND THIS AMOUNT WAS SHOWN ADJUSTED IN APRIL, 2011 WH EN SCRUTINY ASSESSMENT IN A.Y. 2009-10 WAS IN PROCESS. THEREFORE , SURPLUS AMOUNT SHOULD BE TAXED AT MMR OF TAX. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED FACT THAT ITA NO. 795/JP/2015 M/S RAVI BAL NIKETAN SAMITI VS ITO 9 DURING THE YEAR, THE ASSESSEE HAS SHOWN SURPLUS INCO ME OVER THE EXPENDITURE AT RS. 20,51,064/-. THERE IS VIOLATION OF SEC. 13 THAT THE ASSESSEE HAD MADE ADVANCES TO THE OFFICE BEARER, WHI CH WAS COMING AS OPENING FROM 01/4/2008 AND ALSO AS ON 31/3/2009 FOR RS. 1,54,880/- . THE ASSESSEES EXPLANATION WAS THAT IT WAS ADVANCES FOR PAYMENT WAS TO BE MADE FOR THE SERVICES PROVIDED BY THE THIRD P ERSON BUT AS SUCH THE ASSESSEE HAS NOT ESTABLISHED ANY NEXUS WITH EVID ENCE THAT THESE AMOUNTS WERE REALLY PROVIDED AND KEPT WITH THE OFFICE BEARER FOR THE PURPOSES OF SERVICES RENDERED BY THE THIRD PERSON T O THE ASSESSEE SOCIETY AS SAME HAS BEEN ADJUSTED IN THE MONTH OF A PRIL, 2011. THEREFORE, IT IS CLEAR CUT DEFAULT U/S 13 BUT AS VAR IOUS ITATS AS WELL AS HON'BLE HIGH COURTS HELD THAT IF THERE IS VIOLATION OF SECTION 13 READ WITH SECTION 11, MMR CAN BE APPLIED TO THAT SUM, WHIC H WAS CONSIDERED U/S 13 AS VIOLATED DURING THE YEAR, THE ASSESSEES ADVANCE RS. 1,54,880/-. THEREFORE, BY FOLLOWING THE DECISION CITE D BY THE ASSESSEE PARTICULARLY DECISION OF HON'BLE SUPREME COURT IN T HE CASE OF DIT VS WORKING WOMENS FORUM (SUPRA) AND JURISDICTIONAL IT AT DECISION IN THE CASE OF M/S SANTOKBA DURLABH JI TRUST FUND VS ITO (S UPRA) ARE SQUARELY APPLICABLE. ACCORDINGLY, THE LD ASSESSING OFFICER I S DIRECTED TO TAX @ MMR FOR RS. 1,54,880/- AND ALLOW THE BENEFIT OF SECT ION 11 FOR ITA NO. 795/JP/2015 M/S RAVI BAL NIKETAN SAMITI VS ITO 10 REMAINING AMOUNT AS CLAIMED IN THE RETURN BY THE SO CIETY. HENCE, THE ASSESSEES APPEAL IS ALLOWED. 7. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/06/2016. SD/- SD/- DQYHKKJR VH-VKJ-EHUK (KUL BHARAT) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06 TH JUNE, 2016 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S RAVI BAL NIKETAN SAMITI, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD 5(1), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 795/JP/2015) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR