DDIT, CHENNAI V. The Madras Seva Sadn, CHENNAI

ITA 974/CHNY/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9512 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 19-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 17-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice; Additional evidence; Reasonable cause
• Section: 10B; 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBE R AND SHRI. G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 974/MDS/2014 & C.O. NO.30/MDS/2015 (IN I.T.A. NO. 974/MDS/2014 ) / ASSESSMENT YEAR : 2010-2011 THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS-IV ) AAYAKAR BHAVAN, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S. THE MADRAS SEVA SADAN, NEW NO.13, OLD NO.7, HARRINGTON ROAD, CHETPET, CHENNAI 600 031. [PAN AAATT 2871J ] ( /APPELLANT) ( /RESPONDENT/CROSS OBJECTOR ) ! ' # / APPELLANT BY : SHRI. A.V. SREEKANTH, IRS, JCIT. $% ! ' # /RESPONDENT BY : SHRI. R. VIJAYARAGHAVAN, ADVOCATE & ' ' ( /DATE OF HEARING : 19-04-2016 ) ' ' ( /DATE OF PRONOUNCEMENT : 27-04-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE APPEAL OF THE REVENUE AND CROSS OBJECTION B Y THE ASSESSEE ARE DIRECTED AGAINST ORDER OF THE COMM ISSIONER OF INCOME- ITA NO.974/2014 & CO NO.30/2015. :- 2 -: TAX (APPEALS)-VII, CHENNAI FOR THE ASSESSMENT YEAR 2010-11 IN ITA NO.166/12-13, DT 27.12.2013 PASSED U/S.143(3) AND 250 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 2.1 THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSES SEE IS ELIGIBLE FOR ACCUMULATION U/S.11(2) AS THE REASONS FOR THE FAILURE TO FILE FORM 10 WAS BEYOND THE CONTROL OF T HE ASSESSEE AND HENCE THE ASSESSEE WAS ELIGIBLE TO ACCUMULATE THE SHORTFALL U/S.11(2) OF THE ACT. 2.2 THE LD. CIT(A) TO HAVE APPRECIATED THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS NEITHER FIL ED FORM 10 FOR ACCUMULATION NOR EXERCISED ITS OPTION A S PER SEC.11(1) BEFORE THE ASSESSING OFFICER, INSPIRE OF MANY OPPORTUNITIES GIVEN. 2.3 THE LD. CIT(A) FAILED TO NOTE THAT IN THE REMAN D REPORT, THE ASSESSING OFFICER HAD CLEARLY MENTIONED ABOUT THE ASSESSEES FAILURE TO FILE FORM 10 DURING THE ASSESSMENT PROCEEDINGS, IN SPITE OF MANY OPPORTUNIT IES GIVEN. BUT, THE COMMISSIONER OF INCOME TAX (APPEAL S) HAS GRANTED RELIEF WHICH IS NOT IN CONFORMITY WITH THE REMAND REPORT. 2.4 THE LD. CIT(A) FAILED TO PLACE RELIANCE ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS . NAGPUR HOTEL OWNERS ASSOCIATION (247 ITR 201), WHI CH IS SQUARELY APPLICABLE TO THE FACTS OF THIS CASE, WHER EIN IT HAS BEEN HELD THAT FROM THE WORDING OF SUB-SECTION (2) OF SECTION 11, IT IS MANDATORY FOR THE ASSESSEE TO FIL E FORM NO.10 BEFORE THE ASSESSING OFFICER DURING ASSESSMEN T PROCEEDINGS. 2.5 THE LD. CIT(A) FAILED TO NOTE THAT IN THE ABSE NCE OF ANY SUCH INFORMATION, IT WILL NOT BE POSSIBLE FOR T HE ASSESSING AUTHORITY TO GIVE THE ASSESSEE THE BENEFI T OF SUCH EXCLUSION AND ONCE THE ASSESSMENT IS SO COMPLE TED, IT WOULD BE FUTILE TO FIND FAULT WITH THE ASSESSING AUTHORITY FOR HAVING INCLUDED SUCH INCOME IN THE ASSESSABLE I NCOME OF THE ASSESSEE. ITA NO.974/2014 & CO NO.30/2015. :- 3 -: 2.6 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT E VEN ASSUMING THAT THERE IS NO VALID LIMITATION PRESCRIB ED UNDER THE ACT AND THE RULES EVEN THEN, AS OPINED BY THE SUPREME COURT IN THE CASE CITED SUPRA, IT IS REASON ABLE TO PRESUME THAT INTIMATION REQUIRED UNDER SEC.11(2) HA S TO BE FURNISHED BEFORE THE ASSESSING AUTHORITY BEFORE COMPLETION OF THE CONCERNED ASSESSMENT. 3. THE BRIEF FACTS OF THE CASE THE ASSESSEE IS A SOCIE TY WITH AOP STATUS REGISTERED U/S.12A(A) OF THE INCOME TAX ACT AND FILED RETURN OF INCOME ON 30.09.2010 ADMITTING NIL INCOME. SUBSEQU ENTLY THE CASE WAS TAKEN UP FOR SCRUTINY AND NOTICE U/S.143(2) OF THE ACT WAS ISSUED. THE LD. AUTHORISED REPRESENTATIVE OF ASSESSEE APPEA RED FROM TIME TO TIME AND FILED INFORMATION. BUT LD. ASSESSING OFFI CER ON VERIFICATION OF THE FINANCIAL STATEMENTS AND DETAILS FURNISHED FOU ND THAT ASSESSEE APPLIED 79.88% OF ITS INCOME FOR CHARITABLE PURPO SE AND THE ASSESSEE HAS NEITHER EXERCISED OPTION AS PER CLAUSE 2 OF TH E EXPLANATION TO 11(1) OF THE ACT NOR ACCUMULATE OR SET APART THE SHORTFALL AS PER SEC. 11(2) OF THE ACT IN APPLICATION OF INCOME. ON WI TH THIS FINDINGS, THE LD. ASSESSING OFFICER FINALIZED THE ASSESSMENT BRI NGING THE SHORTFALL OF A.59,96,579/- TO TAX AND RAISED DEMAND. AGGRIEVED B Y THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE COMMISSIONER OF INC OME TAX (APPEALS). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED RE PRESENTATIVE RELIED ON THE GROUNDS AND FURTHER FILED SEPARATE PE TITION DATED ITA NO.974/2014 & CO NO.30/2015. :- 4 -: 21.11.2013 WITH ADDITIONAL GROUNDS, AFFIDAVIT AND PAPER BOOK. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BASED ON T HE ADDITIONAL GROUNDS AND OTHER DOCUMENTS INCLUDING THE STATUTOR Y FORMS CALLED FOR THE REMAND REPORT FROM ASSESSING OFFICER. THE LD. ASSESSING OFFICER ON VERIFICATION OF ADDITIONAL GROUNDS AND E VIDENCE FILED REMAND REPORT DATED 04.12.2013 AND HIGHLIGHTED THE FINDINGS OF THE ASSESSMENT ORDER WERE ASSESSEE HAS NOT FILED ANY R EVISED AUDIT REPORT IN FORM NO.10B OR FORM NO.10 FOR ACCUMULAT ION U/S.11(2) OF THE ACT FOR SHORT FALL IN ASSESSMENT PROCEEDINGS AN D THE DELAY IN FILING WAS NOT EXPLAINED WITH REASONABLE CAUSE. THE LD. CO MMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE REMAND REPORT A ND FINDINGS OF THE ASSESSING OFFICER OBSERVED IN HIS ORDER AT PARA 7 AND ALLOWED THE GROUND OF THE APPEAL WITH THE FINDINGS THAT ASSESSE E IS ENTITLED FOR BENEFITS ALLOWABLE U/S.11(2) OF THE ACT AND BY DE LETING THE ADDITION OF SHORTFALL IN APPLICATION OF INCOME DETERMINED B Y THE ASSESSING OFFICER AS UNDER:- 7. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND WRITTEN SUBMISSION AND AFFIDAVIT FILED BY APPELLANT AND ALSO THE REMAND REPORT FROM THE ASSESSING OFFICER. IT IS AN ADMITTED FACT THAT THE FORM 10B ORIGINALLY FILED WA S ERRONEOUS. ALSO THE NECESSARY FORM 10 WAS NOT FILE D ALONGWITH THE RETURN OF INCOME. THE APPELLANTS SUBMISSION WAS THAT THE SAID FORM WAS NOT FILED WIT HIN THE DUE DATE FOR REASONS BEYOND ITS CONTROL AND FOR BON AFIDE REASONS. NEVERTHELESS, THE APPELLANT FIELD BEFORE ME THE REQUISITE FORM 10 ALONG WITH AN AFFIDAVIT FROM THE HONY GENERAL SECRETARY OF THE TRUST SETTING OUT REASONS FOR THE DELAYED FILING AND PRAYING CONDONATION OF DELAY. I N MY ITA NO.974/2014 & CO NO.30/2015. :- 5 -: CONSIDERED OPINION THAT IN CASES WHERE THE REASONS BEYOND THE CONTROL OF THE ASSESSEE, DELAY OCCURRED IN FILING THE AUDIT REPORT, OR FOR BONAFIDE REASONS, FORM 10 COULD NOT BE FILED ON TIME, THE EXEMPTION AS AVAILABLE TO SUCH TRUST UNDER SECTION 11 AND 12 MAY NOT BE DENIED. I FIND FROM THE FACTS OF THE CASE, WRITTEN SUBMISSIONS AND AFFIDAVITS FILED, THE UNFORESEEN DEATH OF THE AUDIT OR AND CHANGE IN SUBSEQUENT APPOINTMENT OF AUDITORS AND TH E ABRUPT ABSENTATION FROM WORK AND EVENTUAL UNILATERA L LEAVING FROM SERVICE BY THE ACCOUNTANT ARE REASONS BEYOND THE CONTROL OF THE APPELLANT FOR NOT FILING THE FOR M 10 ON TIME. I AM FORTIFIED FOR THE ABOVE VIEW BY THE DEC ISIONS OF HONBLE HIGH COURTS IN THE CASE OF (I) CIT VS. R.B. B BISSESSWARLAL MOTILAL MALWASIE TRUST (1992) 195 ITR 825 (CAL) (II) CIT VS. MAYUR FOUNDATION (2005) 274 ITR 562 (GUJ) AND ALSO BY HONBLE ITAT IN JCIT VS. SEWA EDU CATION TRUST (2013) 27 ITR (TRIB) 292 (AGRA). ACCORDING T O THESE DECISIONS IT WAS HELD THAT WHERE FOR REASONS BEYOND THE CONTROL OF THE ASSESSEE SOME DELAY HAD OCCURRED IN FILING THE AUDIT REPORT FORM 10 ALONGWITH THE RETURN OF IN COME, THE EXEMPTION UNDER SECTION 11 AND 12 MAY NOT BE DENIED. AGGRIEVED BY THE COMMISSIONER OF INCOME TAX (APPEAL S) ORDER, THE REVENUE ASSAILED AN APPEAL BEFORE TRIBUNAL. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE HAS VEHEMENTLY ARGUED THE FINDINGS OF COMMISSIONER OF I NCOME TAX (APPEALS) ERRED IN ACCEPTING THE REASONS WERE ASSES SEE HAS CLAIMED TO HAVE APPOINTED CHARTERED ACCOUNTANT TO CONDUCT THE AUDIT OF THE ASSESSEE TRUST HAS EXPIRED. THE SUBSEQUENT CHANGE OF AUDITORS WAS DELAYED AND DUE TO THE DEFICIENCY OF PROFESSIONAL W ORK WITH GREAT DIFFICULTY THE ASSESSEE COULD FILE RETURN OF INCOM E WITHIN THE DUE DATE ON 30.09.2010. THE ASSESSEE WAS NOT PROHIBITED IN FILING FORM 10 ITA NO.974/2014 & CO NO.30/2015. :- 6 -: ON SAID DATE. THE ASSESSEE HAS FILED FORM NO. 10 F OR THE FIRST TIME BEFORE COMMISSIONER OF INCOME TAX (APPEALS) IN THE NATURE OF ADDITIONAL EVIDENCE AND RULE 46A PROCEDURE HAS TO B E FOLLOWED. FURTHER ASSESSEE HAS NOT PROVIDED PROOF OF INVESTM ENTS UNDER SPECIFIED MODES AS PER PROVISIONS OF SEC.11(5) OF T HE ACT. THE DUE DATE OF FILING FORM NO.10 BY THE ASSESSEE IS 30.09 .2010 BUT THE SAME WAS FILED IN APPELLATE PROCEEDINGS EXPLAINING THE A CCUMULATION AND THIS RESOLUTION PASSED ON 06.11.2012. THE FILING OF FOR M NO. 10 IS MANDATORY IN THE ASSESSMENT PROCEEDINGS THEREFORE O RDER OF COMMISSIONER OF INCOME TAX (APPEALS) BE SET ASIDE AND ASSESSING OFFICER ORDER BE RESTORED. 6. CONTRA, THE LD AUTHORISED REPRESENTATIVE OF ASSESSE E RELIED ON THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) A ND EXPLAINED THE CIRCUMSTANCES OF DELAY IN FILING FORM 10 AND GENUIN E HARDSHIP FACED BY THE ASSESSEE AND EXPLAINED THE OBJECT OF THE TRUST IN HELPING AND SUPPORTING THE DESTITUTE WOMEN AND OTHER OBJECTS A ND FURTHER RELIED ON THE CBDT CIRCULAR NO.273, DATED 3.6.1980 IN SUPP ORT OF ARGUMENTS AND RELIED ON COMMISSIONER OF INCOME TAX (APPEALS) ORDER. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD AND DEPARTMENT CIRCULAR. THE DEPARTMENT MA IN CONTENTION THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS N OT OFFERED ITA NO.974/2014 & CO NO.30/2015. :- 7 -: ADEQUATE OPPORTUNITY TO THE ASSESSING OFFICER IN RE SPECT OF FRESH EVIDENCE FILED BY THE ASSESSEE. NO DOUBT ASSESSEE IS A CHARITABLE INSTITUTION AND ACTIVITIES ARE BENEFICIAL TO THE S OCIETY. THE LD. AUTHORISED REPRESENTATIVE EXPLAINED THE MAIN OBJECT S AND ACTIVITIES TO PROTECT DESTITUTE WOMEN IN THE SOCIETY AND WAS REGI STERED U/S.12A(A) OF INCOME TAX ACT, 1976 AND COMPLYING THE INCOME T AX LAWS AND REGULAR IN FILING INCOME TAX RETURNS. THE ASSESSEE TRUST FILED RETURN OF INCOME WITHIN DUE DATE U/S.139(1) OF THE ACT AND FO RM 10 FOR THE PURPOSE OF ACCUMULATION AND SET APART OF INCOME W AS NOT FILED FOR THE REASONS BEYOND THE CONTROL OF THE ASSESSEE EXPLAIN ED IN THE APPELLATE PROCEEDINGS. THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) CONSIDERED GENUINE HARDSHIP AND CIRCUMSTANCES WHIC H PREVENTED ASSESSEE TO FILE FORM 10 WITHIN TIME LIMIT AND ALSO THERE IS NO DISPUTE BY THE LD. ASSESSING OFFICER ON THE OBJECTS AND ACT IVITIES AND EXPENDITURE INCURRED BY THE TRUST EXCEPT ON FILING REVISED FORM 10B AND 10 BY THE ASSESSEE IN APPELLATE PROCEEDINGS. A T THE TIME OF HEARING THE LD. DEPARTMENTAL REPRESENTATIVE EXPLAIN ED AND FILED WRITTEN SUBMISSIONS THAT ASSESSING OFFICER WAS PREV ENTED FROM VERIFYING THE DOCUMENTS FILED BY THE ASSESSEE BEFOR E COMMISSIONER OF INCOME TAX (APPEALS). BUT ON VERIFYING THE ORDER A T PARA 6 OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS CALLED FOR THE REMAND REPORT AND SAME WAS PRODUCED IN THE APPELLATE PROCE EDINGS VIDE ITA NO.974/2014 & CO NO.30/2015. :- 8 -: REPORT DATED 04.12.2013. THE ASSESSING OFFICER WAS AWARE OF THE CIRCUMSTANCES UNDER WHICH ASSESSEE HAS FILED FORM N O. 10 AND THE WHOLE CRUX OF ISSUE LIES WHETHER THE ASSESSEE IS EL IGIBLE TO SET APART AND ACCUMULATE AS PER FORM 10 AS SAME WAS FILED WI TH DELAY. THE PROCEEDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ARE CO-TERMINUS WITH ASSESSING OFFICER AND ANY VITAL DOCUMENT FORM ING PART OF ASSESSMENT WITH REASONABLE EXPLANATION CAN BE PRODU CED AS ADDITIONAL EVIDENCE BUT DUE COMPLIANCE OF LAW UNDER RULE 46A B E COMPLIED. THE GRIEVANCE OF THE LD. DEPARTMENTAL REPRESENTATIVE BE ING ASSESSING OFFICER WAS PREVENTED TO VERIFY THE GENUINENESS OF EVIDENCE FILED. WE ARE OF THE OPINION, CONSIDERING THE ACTIVITIES OF T HE TRUST AND GENUINESS OF THE OBJECTS AND SUPPORTING AFFIDAVIT IN EXPLAINI NG THE DELAY, THE ASSESSEE SHOULD FILE BEFORE ASSESSING OFFICER REVI SED FORM NO.10B AND FORM NO. 10 FURTHER CONSIDERING THE PRINCIPLES OF NATURAL JUSTICE AND PROVISIONS OF RULE 46A, WE SET ASIDE THE ENTIRE DI SPUTED ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED PURPOSE T O VERIFY THE GENUINESS OF EVIDENCE AND PASS THE ORDER AFRESH AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE DEP ARTMENTAL APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 8. THE ASSESSEE HAS FILED CROSS OBJECTION AND THERE I S A DELAY OF 227 DAYS IN FILING CROSS OBJECTION BY THE ASSESS EE. AT THE TIME OF HEARING THE LD. COUNSEL HAS FILED AN AFFIDAVIT EXPL AINING THE REASONS FOR ITA NO.974/2014 & CO NO.30/2015. :- 9 -: DELAY AND THE LD. DR HAS NO SERIOUS OBJECTIONS FOR CONDONATION OF DELAY. AFTER HEARING THE SUBMISSIONS, WE ARE SATIS FIED WITH SUFFICIENT AND REASONABLE CAUSE FOR FILING THE CROSS OBJECTION BELATEDLY AND WE THEREFORE CONDONE THE DELAY AND ADMIT THE CROSS AP PEAL FOR ADJUDICATION. 9. SINCE THE ENTIRE ISSUE IS REMITTED BACK TO THE FI LE OF ASSESSING OFFICER FOR FRESH CONSIDERATION. THE CROS S-OBJECTIONS FILED BY THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND C.O. OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 27 TH DAY OF APRIL, 2016 AT CHENNAI. SD/- SD/- ( . ) (A. MOHAN ALANKAMONY) # $% / ACCOUNTANT MEMBER ( & . ' ( ) (G. PAVAN KUMAR) ) $% / JUDICIAL MEMBER *& / CHENNAI + / DATED: 27TH APRIL, 2016. KV , ' $'./ 0/' / COPY TO: 1 . ! / APPELLANT 2. $% ! / RESPONDENT 3. 1' () / CIT(A) 4. 1' / CIT 5. /4 5 $'6 / DR 6. 5 7 8 & / GF