Vidya Sagar Charitable Trust, Bhubaneswar V. CIT(Exemptions), Hyderabad

ITA 89/CTK/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5978 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 16-08-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Depreciation; Charitable institution; Condonation of delay; Revenue expenditure; Capital expenditure; TDS; Set aside
• Section: 263; 143(3); 142(1); 194C

Judgement Text

P a g e1 | 11 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.89/CTK/2 021 Assessment Year : 2015-16 Vidya Sagar Charitable Trust, Plot No.A-103, Sahid Nagar, Bhubaneswar. Vs. DCIT, Circle-1(1), Bhubaneswar. PAN/GIR No.AAATV 4014 D (Appellant) .. ( Respondent) Assessee by : Shri B.D.Ojha, AR Revenue by : Shri M.K.Gautam, CIT (DR) Date of Hearing : 24/5/ 2022 Date of Pronouncement : 18/08/2022 O R D E R Per C.M.Garg, JM This is an appeal filed by the assessee against the order of the CIT(Exemptions), Hyderabad dated 24.3.2021 for the assessment year2015- 16 . Application of the assessee dated 16.08.2021 seeking condonation of delay of 86 days in filing the appeal 2. The ld. AR submitted that order of PCIT dated 24.03.2021 was received by the assessee on 24.03.2021 and the assessee had to file appeal before the Tribunal on or before 23.05.2021. But, due to prevalent lock I T A N o . 8 9 / C T K / 2 0 2 1 A s s e s s m e n t Y e a r : 2 0 1 5-16 P a g e2 | 11 down declared by the Government of Orisha on 05.05.2021 on account of Covid-19, the appeal could not be filed within the due time limit. Therefore, the delay of 86 days in fling the appeal may kindly be condoned. 3. The ld. CIT, DR by placing reliance on the judgment of the Hon’ble Supreme Court in the case of Veda Bai Vijayantabai Baburoa Patil vs. Shantan Baburao Patil, 253 ITR 798 (SC) submitted that condonation was to be allowed only on showing sufficient cause for delay in filing appeal and there is no sufficient cause in the present case. Therefore, the delay cannot be condoned. 4. On careful consideration of the above rival contentions and the cause stated by the assessee, we are of the opinion that by the pandemic of Covid-19 is a bona fide and sufficient cause due to which delay of 86 days was caused in filing the appeal. Therefore, keeping in view the said sufficient cause, the delay of 86 days in filing the appeal is condoned. The appeal is admitted for hearing. 5. The assessee trust runs educational institutions and registered u/s.12AA of the Act. In this case, the assessment u/s.143(3) was completed by the Assessing Officer on 22.12.2017 accepting the return of income of the assessee. Thereafter, the CIT (E), Hyderabad, on verification of assessment record of Konark Institute of Science & Technology, noticed I T A N o . 8 9 / C T K / 2 0 2 1 A s s e s s m e n t Y e a r : 2 0 1 5-16 P a g e3 | 11 that the total receipts were at Rs.10,16,17,057/-. On perusal of income and expenditure account for the year ended 31.3.2016 of the assessee trust, the CIT(E) noticed that an amount of Rs.1,06,96,062/- was received but the same was not applied for charitable purposes. Therefore, the excess of income over expenditure is Rs.1,06,96,062/- and same has been transferred to the trust fund account instead of paying taxes on the total receipts. He also noticed that the assessee trust has received an amount of Rs.23,95,650/- from M/s. Edujobs Academy Pvt Ltd., on account of contract u/s.194C and interest income of Rs.30,456/- received from Executive Engineer. However, the same was not shown in income and expenditure account and TDS amount of Rs.50,959/- was claimed in the return of income. Accordingly, the CIT (E) issued notice u/s.263(1) of the Act to explain as to why the assessment order passed by the AO is not erroneous and prejudicial to the interest of the revenue. In reply, the assessee submitted as under: “1. The assessee trust runs educational institutions and registered u/s.12AA of the IT. Act. 1961. The income of Rs.1,06,96,062/- shown in the Income and Expenditure account of the trust prepared on mercantile basis of accounting consists of income from the educational institution namely Konark Instittue of Science and Technology of Rs. 87.36.790/- after meeting the day to day running expenditure of the institution such as salary, repairs, maintenance etc., and other income representing interest income of Rs. 19,59,272/-. There was no revenue expenditure of the trust which should have been debited to Income and expenditure account of the trust for application. I T A N o . 8 9 / C T K / 2 0 2 1 A s s e s s m e n t Y e a r : 2 0 1 5-16 P a g e4 | 11 2 The trust has filed the return of income on the basis of Receipts and Payments Account taking into accounts the actual receipts of income and actual expenditure during the impugned year which is contemplated in section 11 of the IT. Act, 1961. The income available for application as per Receipts and Payment Account submitted during assessment proceedings u/s. 143(3) after meeting the day to day revenue expenditure was Rs.1,02,90,800/-. As per the return of income submitted for the impugned year, the trust has applied Rs.30,84,431/- towards capital expenditure and Rs.47,97,067/- towards repayment of loan totaling to Rs.78,81,498/- which is per Form No.10B filed by the trust. Further, the trust has exercised option u/s.11(1) for Rs.8.65,682/- to be deemed application. The total application of Rs.87,47,180/- (Rs.78,81,-498 + Rs.8,65,682) is 85% of income available for application i.e. Rs. 1,02.90,800/-. 3. The alleged income of the trust of Rs.1,06,96,062/- transferred to trust fund account is normal accounting practice. Since the income of the trust has been applied for charitable purpose as submitted in para-2 above, no provision for tax has been made in the accounts. The statement of computation of income showing the amount claimed exempt u/s.11 is enclosed. 4. The amount received/receivable by the trust from Edujobs Academy Pvt. Ltd. For renting of computers, hostel for boys and girls. The income has been derived from the property held by the trust and the said property has been used for educational purposes. Out of the total credits of Rs.23.95.650/- in Form No.26AS. Rs.21.59,300/- has been received during the year and has been included in educational income and the Rs.30.456/- representing interest electricity deposit accrued, not received and accordingly not included in the income in receipt payment account. 5. The details of educational income as per receipt and payment account for the impugned year is enclosed. 6. In view of the foregoing submissions it is prayed that the issues raised in the present proceeding u/s.263 of the IT.Act, 1961 are not prejudicial to the interest of revenue as the income of the trust is exempt u/s.11 of the i.T.Act and subject issues have been considered while framing the assessment u/s.143(3). Therefore the proceeding u/s.263 may be dropped in the interest of justice and fair play.” I T A N o . 8 9 / C T K / 2 0 2 1 A s s e s s m e n t Y e a r : 2 0 1 5-16 P a g e5 | 11 6. The above submissions of the assessee did not find favour by the ld CIT(E), who observed as under: i) The income and expenditure account of M/s. Konark Institute of Science and Technology shows a total income of Rs.10,16,17,057/- and expenditure of Rs.9,28,80,267/- including of depreciation of Rs.1,76,09,839/- thereby having a net surplus of Rs.87,36,790/-. Ii) The income and expenditure account of the assessee trust shows a total income of Rs.1,06,96,062/- and the application of money is Rs.78,81,498/-. Therefore, the application of income is less than 85%, therefore, the expenditure u/s.11 would not be admissible. 7. With the above observation, the ld CIT(E) was of the view that while passing the assessment order, the AO has not taken into consideration the above issues, therefore, the same is erroneous and prejudicial to the interest of the revenue and accordingly, set aside the assessment order with a direction to the AO to examine the issues and redo the assessment after verification in accordance with law. 8. The ld. AR, drawing our attention towards the assessee’s paper book page 9 and 10, submitted that the ld.PCIT issued notice to the assessee u/s 263 of the Act by taking up two issues viz., (i) the excess of income over expenditure- rs.1,06,96,062/- has been transferred to trust fund account instead of paying taxes on total receipts; and (ii) that during AY 2015-16, the assessee trust received an amount of Rs.23,95,650/- from M/s Edujobs Academy Pvt. Ltd. on account of contract u/s 194C of the Act and interest income of Rs.30,456/- from Executive Engineer, but, these amounts have I T A N o . 8 9 / C T K / 2 0 2 1 A s s e s s m e n t Y e a r : 2 0 1 5-16 P a g e6 | 11 not been shown in the income & expenditure account despite the fact that the TDS amount of Rs.50,959/- was duly claimed in the return of income. Further, drawing our attention towards paper book pages 12 and 13, the ld. AR submitted that the assessee filed a detailed reply to the observation of the ld. PCIT in the notice u/s 263 of the Act vide reply dated 06.02.2020 the contents of which are self-speaking and, therefore, the ld.PCIT was not required to proceed further to pass order u/s 263 of the Act. The ld. AR, supporting the said reply submitted that from the receipt and payment account for the year ended 31.03.2015, the total payment was Rs.6,55,16,829/- and the total receipts were Rs.7,58,05,337/- and, thus, the assessee shown surplus/income of Rs.1,02,90,800/-. The ld. AR also drew our attention towards the impugned order of the ld.PCIT pages 5 and 6 and submitted that the ld.PCIT himself has noticed these figures and facts, but, in the last para at page 6, he wrongly stated that the income & expenditure account of the trust for the year ended 31.03.2015 shows total income at Rs.1,06,96,062/-. Therefore, keeping in view application of income of Rs.78,81,498/- and deemed application of Rs.8,65,682/-, the total application comes to Rs.87,47,180/- which is 81.77% of the said total income, therefore, application of income is less than 85% for claiming exemption u/s 11 of the Act. The ld. AR submitted that as per the judgment of the Hon’ble Gujarat High Court in the case of CIT vs. Ganga Charity Trust Fund, 162 ITR 612 (Guj), there could be no application or I T A N o . 8 9 / C T K / 2 0 2 1 A s s e s s m e n t Y e a r : 2 0 1 5-16 P a g e7 | 11 setting apart or accumulation of income derived from the trust property unless it is actually available for application or accumulation in the hands of the trustees. The ld. AR, drawing our attention to para 7 of the said judgment, submitted that where an assessee is following mercantile system of accounting, the income on accrual basis should be reflected in the books of account, but, no such notional income is incapable of actual application or accumulation u/s 11(1)(a) of the Act and if the assessee trust is called upon to pay income-tax for want of such application or accumulation, it would result in rendering the benevolent provision found in clause (a) of section 11(1) of the Act nugatory. 9. On the second issue, the ld. AR drew our attention towards page 17 of the assessee’s paper book and submitted that the assessee actually received Rs.21,59,300/- from M/s Edujobs Academy Pvt. Ltd., during relevant financial period which was included in the total receipts of Rs.7,58,05,337/- as per ITR-7. The actual amount of receipt was not Rs.23,95,650/- and, therefore, the actual amount received during the relevant period was included in the receipts/income shown by the assessee in its return of income and Rs.30,456/- representing interest on the deposit with the electricity department was not received during the relevant financial period. Therefore, the assessee did not include the same in the receipts shown in the return of income. Therefore, the ld.PCIT was not I T A N o . 8 9 / C T K / 2 0 2 1 A s s e s s m e n t Y e a r : 2 0 1 5-16 P a g e8 | 11 correct in alleging that the order is erroneous and prejudicial to the interests of the Revenue. 10. Replying to the above, the ld. CIT, DR submitted that during the assessment proceedings, the AO has not raised any query on both the issues as picked up by the ld.PCIT for initiating revisionary proceedings u/s 263 as the AO has not issued any notice u/s 142(1) of the Act nor any questionnaire has been issued to the assessee and, thus, no reply on both the issues have been filed by the assessee during the assessment proceedings. Therefore, the ld.PCIT was right in observing that the assessment order is erroneous and prejudicial to the interests of the Revenue. 11. Placing rejoinder to the above, the ld. AR again drew our attention to judgment of the Hon’ble Gujarat High Court and to page 16 of the assessee’s paper book and submitted that the ld.PCIT himself has noted that the surplus over income eligible for application was Rs.1,02,90,800/- and after considering the total application of Rs.78,81,498/- and deemed application u/s 11(1) of the Act amounting to Rs.8,65,682/-, the total application comes to Rs.87,47,180/- which is more than 85% of the total income eligible for application. He also drew our attention to last para at page 6 of the revisionary order of the ld. PCIT to submit that there is no allegation of ld. PCIT that the AO has not made any inquiry on these points I T A N o . 8 9 / C T K / 2 0 2 1 A s s e s s m e n t Y e a r : 2 0 1 5-16 P a g e9 | 11 and, therefore, the revisionary order cannot be held as sustainable. The ld. AR vehemently pointed out that when the assessee is taking total eligible amount for application on accrual basis, then, as per judgment of the Hon’ble Gujarat High Court in the case of Ganga Charity Trust Fund (supra), the amount paid as per mercantile system of accounting cannot be taken for consideration to allege such application of income for denying the benefit of section 11 of the Act. 12. On careful consideration of the above submissions, we are of the considered view that from the impugned assessment order dated 22.12.2017 passed u/s 143(3) of the Act, we are unable to see any inquiry by the AO on both the counts as stated in para 5 of the notice u/s 263 of the Act dated 27.01.2020. During scrutiny assessment proceedings, it is the duty of the AO to ascertain proper inquiry on all the issues which may lead to fastening of tax liability on the assessee and failure of the AO to make such required inquiry makes the assessment order erroneous and prejudicial to the interests of the Revenue. We may point out that the arguments of the ld. AR on merits may have force in the facts and circumstances of the case, but, in the present case, the ld. PCIT has not modified or enhanced the addition, but, set aside the issue to the file of the AO with a direction to examine the issues mentioned therein and to redo the assessment after verifying all the issues in accordance with the law. All arguments advanced by the ld. AR on merits before us are relevant on both the issues in view of I T A N o . 8 9 / C T K / 2 0 2 1 A s s e s s m e n t Y e a r : 2 0 1 5-16 P a g e10 | 11 the judgment of the Hon’ble Gujarat High Court in the case of CIT vs. Ganga Charity Trust Fund (supra) which would be considered by the lower authorities at the appropriate time. 13. In view of the foregoing discussion, we reach to a logical conclusion that the ld.PCIT was quite correct in revising the impugned assessment order being erroneous and prejudicial to the interests of the Revenue. Therefore, the grounds of the assessee being bereft of merits are dismissed. 14. In the result, the appeal filed by the assessee is dismissed. Order pronounced on 18/08/2022 under Rule 34(4) of the IT(AT) Rules, 1963. Sd/- Sd/- (Arun Khodpia) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack, Dated 18/08/2022 I T A N o . 8 9 / C T K / 2 0 2 1 A s s e s s m e n t Y e a r : 2 0 1 5-16 P a g e11 | 11 Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The Appellant : Vidya agar Charitable Trust, Plot No.A-103, Sahid Nagar, Bhubaneswar 2. The Respondent. DCIT, Circle-1(1), Bhubaneswar. 3. CIT (Exemption), Hyderabad 4. DR, ITAT, Cuttack 5. Guard file. //True Copy//