AI Insights
The case involves M/s. Reliable Educational Alliance Society, a charitable society, which appealed against the order of the Commissioner of Income Tax (Exemption), Lucknow. The Commissioner had set aside the original assessment order under section 263, alleging it was erroneous and prejudicial to the interest of the Revenue concerning the receipt of a corpus donation of Rs. 1 crore. The Tribunal examined whether the Assessing Officer had adequately inquired into the matter during the assessment proceedings. The Tribunal found that the Assessing Officer had indeed made detailed inquiries and accepted the assessee's explanations and evidence, leading to the restoration of the original assessment order.
Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 300720 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 10 month(s) 4 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-05-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
G
Next Hearing Date
30-04-2023
Assessment Year
2015-2016
Appeal Filed On
06-07-2021
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘H’ NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No.834/Del/2021 Assessment Year: 2015-16 M/s. Reliable Educational Alliance Society, C/o- M/s. RRA TAXINDIA, D-28, South Extension, Part-I, New Delhi Vs. Commissioner of Income Tax (Exemption), Lucknow PAN :AAATR7920C (Appellant) (Respondent) ORDER PER SAKTIJIT DEY, JM: Captioned appeal has been filed by the assessee assailing order dated 24.03.2021 passed under section 263 of the Income- tax Act, 1961 (in short ‘the Act’) by learned Commissioner of Income Tax (Exemption), Lucknow, pertaining to assessment year 2015-16. 2. Though, the Registry has notified delay of 45 days in filing the appeal, however, the delay is ignored as the delay in filing the Appellant by Dr. Rakesh Gupta, Advocate Sh. Deepesh Garg, Advocate Respondent by Ms. Sapna Bhatia, CIT (DR) Date of hearing 01.05.2023 Date of pronouncement 11.05.2023 ITA No.834/Del/2021 AY: 2015-16 2 | P a g e appeal was due to strict restriction imposed on account of Covid- 19. 3. Briefly the facts are, the assessee is a society registered under the Societies Registration Act, 1860. Since, the assessee has charitable objects, it has been granted registration under Section 12AA of the Act by Commissioner of Income Tax (CIT), Ghaziabad. As stated, the assessee runs two educational institutions in the name and style of M/s. Reliable Institute of Law and M/s Reliable Institute of Management & Technology. For the assessment year under dispute, the assessee filed its return of income on 24.09.2015, declaring nil income after claiming exemption under section 11 of the Act. The return of income filed by the assessee was selected for scrutiny and assessment in case of the assessee was completed under section 143(3) of the Act, accepting the income returned. Subsequently, in exercise of power conferred under section 263 of the Act, learned CIT called for and examined the assessment record of the assessee for the assessment year under dispute. On such examination of record, he noticed that in the year under consideration, the assessee had added corpus donation of Rs. 1 crore stated to have been received from M/s. Suran Protsahan. From the confirmation of accounts of ITA No.834/Del/2021 AY: 2015-16 3 | P a g e M/s. Suran Protsahan, it was found that the assessee had availed loan of Rs.1 crores from the said party on 02.04.2014 and had returned back the amount on 31.03.2015. Therefore, he was of the view that the assessee has not received any corpus donation of Rs.1 crore. Alleging that the Assessing Officer has not inquired into and examined the receipt of corpus donation of Rs. 1 crore, learned CIT issued a show-cause notice to the assessee requiring him to explain, why the assessment order, being erroneous and prejudicial to the interest of Revenue, should not be set aside. In response to the show-cause notice issued, the assessee filed detailed submissions explaining the factual aspect of the receipt of corpus donation from M/s. Suran Protsahan. It was submitted by the assessee that in course of assessment proceeding, the Assessing Officer has conducted proper inquiry, and being satisfied that corpus donation was received from M/s. Suran Protsahan, had accepted the income declared in the return of income. The submission made by the assessee was not to the satisfaction of learned CIT. He observed that as per the confirmation letter of M/s. Suran Protsahan, the assessee had received loan of Rs. 1 crore on 02.04.2014, which was repaid on 31.03.2015. However, there was no corpus donation as claimed ITA No.834/Del/2021 AY: 2015-16 4 | P a g e by the assessee. He observed, though, in the reconciliation statement furnished during the course of assessment proceeding, the repayment of loan as well as receipt of corpus donation was mentioned, however, such transactions were not reflected, either in the balance sheet of the trust or the balance sheet of M/s. Suran Protsahan. Referring to Explanation 2 to section 263 of the Act, learned CIT observed that the Assessing Officer has neither made proper inquiry, nor applied his mind, which made the assessment order erroneous and prejudicial to the interest of Revenue. Accordingly, he set aside the assessment order with a direction to pass a fresh order after obtaining required details and making necessary inquiry on the issue raised. 4. Learned counsel appearing for the assessee submitted that in course of assessment proceeding, the Assessing Officer has made in-depth inquiry with regard to all aspects of assessee’s return of income, including the receipt of corpus donation of Rs. 1 crores. In this context, he drew our attention to the questionnaire along with notice dated 18.01.2017 issued under section 142(1) of the Act. He submitted, in response to the query raised in the questionnaire, the assessee filed a detailed reply on all issues, ITA No.834/Del/2021 AY: 2015-16 5 | P a g e including the receipt of corpus donation. He submitted, the Assessing Officer asked for further details by issuing another notice on 02.08.2017. He submitted, in response to that notice also, the assessee furnished its reply. He submitted, not only the audited financial statements and bank statements of the assessee were furnished, but the return of income and bank statements of donor were also furnished. He submitted, even, the donor is also registered under section 12AA of the Act. He submitted, in the balance sheet of the assessee also, the corpus donation was reflected. Thus, he submitted, the allegation of CIT that the corpus donation was not reflected in the balance sheet and bank statements is contrary to materials on record. Without prejudice, he submitted, except the corpus donation of Rs. 1 crore, the assessee has not received any other donation during the year under consideration. He submitted, assuming that the corpus donation is in the nature of ordinary donation, since the assessee has applied more than 85% of its fund/income towards charitable purpose, the assessee would still be entitled for exemption under section 11 of the Act. Hence, it will be tax neutral. Therefore, no prejudice is caused to the Revenue. Thus, he submitted, the ITA No.834/Del/2021 AY: 2015-16 6 | P a g e assessment order cannot be treated as erroneous and prejudicial to the interest of Revenue. 5. Learned Departmental Representative strongly relied upon the observation of learned CIT and submitted that the assessee has failed to reconcile the receipt of corpus donation of Rs. 1 crore with proper evidences. Drawing our attention to the bank statement of M/s. Suran Protsahan, she submitted that as per the entries in the bank statement, the corpus donation was received in the next financial year. Thus, she submitted, the Assessing Officer, having not inquired into and examined the facts relating to receipt of corpus donation, the order is erroneous and prejudicial to the interest of Revenue. 6. We have considered rival submissions and perused the materials on record. Undisputedly, the assessee is a charitable society registered under section 12AA of the Act. For the assessment year under dispute, the assessee had filed its return of income claiming exemption under section 11 of the Act. It is observed, in course of assessment proceeding, the Assessing Officer has made detailed inquiry through notice issued under section 142(1) of the Act. In the questionnaire appended to the ITA No.834/Del/2021 AY: 2015-16 7 | P a g e said notice, the Assessing Officer has specifically called upon the assessee to furnish details of donations, including corpus donations during three years, along with the name and complete address of the donors, their PAN, name of the Assessing Officer where they are being assessed to tax, confirmations, details of cheque/draft through which donations are received etc. He has further asked the assessee to clarify whether donation was taken as corpus donation or general donation and also to prove the identity and creditworthiness of the donors with supporting evidences, including bank accounts, copies of return of income etc. In reply to the queries raised in the questionnaire, the assessee furnished all the details relating to the corpus donation along with supporting evidence as called for by the Assessing Officer. The assessee also furnished the return of income and bank statements of the donor. Still unsatisfied with the reply of the assessee, the Assessing Officer issued a second notice to the assessee on 02.08.2017 requiring further details, including details of corpus donations. In response to the said notice, the assessee furnished its reply on 30.08.2017 with details as called for. Thus, from the aforesaid facts on record, it is quite clear that not only the Assessing Officer made detailed inquiry with regard ITA No.834/Del/2021 AY: 2015-16 8 | P a g e to corpus donation received during the year, but the assessee furnished all the requisite details with supporting evidences. After proper application of mind to the facts and materials on record, the Assessing Officer completed the assessment accepting the return of income. 7. As could be seen, learned CIT has raised doubt regarding the receipt of corpus donation based on the fact that the assessee had only received a loan of Rs. 1 crores from M/s. Suran Protsahan, which was repaid on 31.03.2015 and had actually not received any donation. To back such conclusion, learned CIT has observed that except the reconciliation statement where the repayment of loan and receipt of donation is mentioned, neither balance sheet, nor bank statements reflecting such transaction were furnished. In our view, the aforesaid finding of learned CIT is contrary to facts and materials on record. We have noted, in the computation of income, the assessee has specifically mentioned the receipt of corpus donation of Rs. 1 crore. Even, the balance sheet forming part of the Tax Audit Report reflects the corpus donation. The assessee has furnished the return of income and bank statement of the donor. Perusal of the bank statements of ITA No.834/Del/2021 AY: 2015-16 9 | P a g e the donor clearly reveals that on 02.04.2014, the assessee had received loan of Rs.1 crore, which was repaid back on 31.03.2015. Whereas, the assessee received an amount of Rs.1 crore towards corpus donation, which is reflected in the bank statement of donor. These are established facts on record, which cannot be ignored. It is also a fact that donor itself is registered as a charitable trust/society under section 12AA of the Act. Therefore, there cannot be any doubt regarding the genuineness of the donor. Thus, the allegation of learned CIT that the Assessing Officer has not made proper inquiry with regard to the receipt of corpus donation is found to be contrary to facts and materials on record. 8. As regards the contention of learned Departmental Representative that the corpus donation was received in subsequent financial year, we must observe that though, the cheque was received by assessee in the financial year relevant to the assessment year under dispute, however, the money was realized on 04.04.2015, as reflected in the bank statement of M/s. Suran Protsahan. Therefore, such contention of learned Departmental Representative is not of much relevance. Even ITA No.834/Del/2021 AY: 2015-16 10 | P a g e otherwise also, on a careful reading of the order passed under section 263 of the Act, we are unable to locate any clear cut finding of learned CIT regarding the prejudice caused to the Revenue. As rightly contended by learned counsel for the assessee, even assuming that the amount of Rs. 1 crore is not a corpus donation but a general donation, still the effect on Revenue would be tax neutral as the assessee has utilized more than 85% of the income/fund. Thus, on overall analysis of facts and circumstances of the case, we are of the view that the Assessing Officer, having passed the assessment order after conducting proper inquiry and applying his mind with due diligence, such assessment order cannot be considered to be erroneous and prejudicial to the interest of Revenue. Accordingly, we quash the impugned order passed under section 263 of the Act and restore the order of Assessing Officer. Grounds are allowed. 9. In the result, the appeal is allowed. Order pronounced in the open court on 11 th May, 2023 Sd/- Sd/- (M. BALAGANESH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 11 th May, 2023. ITA No.834/Del/2021 AY: 2015-16 11 | P a g e RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi
