ITO WARD-52(1) , DELHI V. .ARMY WIVES WELFARE ASSOCIATION, DELHI

ITA 2350/DEL/2023

AI Insights

The case involves the Army Wives Welfare Association, which appealed against the order of the Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC). The primary contention was regarding the tax exemptions claimed under sections 10(23AA) and 11 of the Income-tax Act, 1961. The Association argued that it should be exempt from filing income tax returns and that its income was applied towards charitable activities, thus qualifying for exemptions. The Assessing Officer had made several additions to the income of the Association, which were contested and partially overturned by the CIT (A). The Revenue appealed against these decisions, leading to the current Tribunal decision.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 31408 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2024
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Appeal Filed On: 21-08-2023
• Other Referred Cases: Sheo Bhagwan Goel vs. ACIT, Anar Chemicals Pvt. Ltd. vs. ITA No.1781/Ahd/2009, Army Wives Welfare Association, Lucknow vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: SATYEN SETHI
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Unexplained investment; Charitable institution
• Section: 148; 142(1); 11; 12AA; 12A; 13; 69A; 139; 12

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’, NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI SUDHIR PAREEK, JUDICIALMEMBER ITA No.2350/DEL/2023 (Assessment Year : 2018-19) ITO, Ward 52 (1), vs. Army Wives Welfare Association, Delhi. Branch Army HQ DHQ PO, Delhi – 110 001. (PAN: AABTA3953B) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Satyen Sethi, Advocate Shri A.T. Panda, Advocate REVENUE BY : Shri Javed Akhtar, CIT DR Date of Hearing : 26.09.2024 Date of Order : 11.12.2024 O R D E R PER S. RIFAUR RAHMAN, AM : 1. This appeal filed by the assessee is against the order of ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC) (hereinafter referred to as ‘ld. CIT (A)’) dated 03.07.2023 for AY 2018-19. 2. Brief facts of the case are, assessee is working for welfare of War Widows, Children of War Widows Deprived and needy Army dependents of serving and retired Army personnel. It basically supports the widows to help them 2 ITA No.2350/Del/2023 to cope with their loss by also addressing any concerns they may have. It also runs Asha Schools for special needy children and currently running all over the country under the aeges of AWWA (the assessee). This Association is being run and managed by Army Wives, a non-public fund established for only army welfare and no benefit is passed on to general public. It was submitted before the tax authorities that this Association should be covered under section 10(23AA) of the Income-tax Act, 1961 (for short ‘the Act’). It was also submitted that there is no requirement of filing of income-tax return for taking exemption u/s 10(23AA) of the Act. 3. Without prejudice to the above submission, it was submitted that income derived by the assessee is applied towards the expenses of the welfare of the society within India. Therefore, assessee is eligible for exemption under section 11, 12 and 13 of the Act being registered as charitable institution with Income-tax Department. Further it was submitted that charitable institution has to incur expenses of 85% of the income during the year and can accumulate or set apart for application to such purposes in India upto 15% of the income. It was submitted that in the case of the assessee, assessee has already incurred more than 85% of the income towards the charitable purposes, therefore, no addition is called for. 4. It was submitted before ld. CIT (A) that AO has accepted total receipts of 3 ITA No.2350/Del/2023 Rs.10,09,74,281/- and the expenses of Rs.8,67,49,278/- and the surplus of Rs.1,42,25,002/- which is less than 15% of the total receipts. It was submitted that the deposits/investment in the various banks of the assessee are out of the receipts declared by the assessee in its income and expenditure account of Rs.10,09,74,281/- and some of the deposits were made out of the earlier renewed deposits. Further it was submitted that the AO has disallowed 10% of the expenditure incurred by the assessee of Rs.86,74,928/- on estimate basis. With the above plea, the assessee has filed an appeal before the ld. CIT (A) and raised various grounds. 5. After considering the submissions of the assessee, ld. CIT (A) gave relief to the assessee on the issue of addition made by the AO of Rs.1,42,25,0002/- on account of taxable surplus by not granting the exemption u/s 11 of the Act. Ld. CIT (A) proceeded with the various charitable activities carried on by the assessee and also observed that the assessee contested that it is registered as charitable society within the definition of section 12A of the Act and also observed that the assessee has applied the total receipts more than 85% for the charitable purposes and he observed that activities carried out by the assessee are in line with objects of section 12A registration granted to the assessee. With the above observations, he deleted the additions made by the AO. 4 ITA No.2350/Del/2023 6. Further with regard to disallowance of 10% of the expenditure incurred by the assessee for the charitable purpose, ld. CIT (A) relying on the decision of Anar Chemicals Pvt. Ltd. (ITA No.1781/Ahd/2009) and decision of Sheo Bhagwan Goel vs. ACIT (ITAT Raipur) deleted the addition. 7. With regard to cash deposit of Rs.1,21,46,601/-, he accepted the submissions of the assessee that it receives hostel fees and sale proceeds in cash. The entire amount is already accounted in the books of account as it submitted relevant documents before him. Since assessee has offered explanation against source of cash and the same has already been considered as part of gross receipts, accordingly, he deleted the addition. 8. Further with regard to unexplained investment of Rs.1,82,43,279/- as unexplained investment in time deposits, he observed that the assessee has purchased RBI Bonds and also made few FDs. He observed that these investments were matured during the year and the same was reinvested in time deposits. With the above observations, he deleted the addition made by the AO. 9. With regard to interest income earned by the assessee of Rs.5,37,280/- from Syndicate Bank and PNB Housing Finance Ltd., he observed that this income is already factored in the financial statements while calculating the permissible limit of 15% set aside amount. After reviewing the financial 5 ITA No.2350/Del/2023 statements, he accepted the contentions of the assessee and according to him, it is acceptable and accordingly he deleted the addition. 10. Further with regard to addition of Rs.2,00,000/- on account of variation in receipt and payment to contractors, he dismissed the same and sustained the addition made by the AO. 11. Aggrieved with the above order, Revenue is in appeal before us raising following grounds :- “1. The Ld.CIT(A) has erred in law and facts by allowing relief to the assessee on account of additions of Rs.1,21,46,605/-(unexplained cash deposits) made u/s 69A r.w.s.115BBE of the I.T. Act by entertaining additional evidences in violation of provisions of rule 46A of I.T. Act, 1961. These evidences never filed before AO during assessment proceedings even providing sufficient opportunities of being heard. 2. The Ld.CIT(A) has erred in law and facts by allowing relief to the assessee on account of additions of Rs.1,82,43,279/-(unexplained investment in Time deposits) made u/s 69A R.W.S. 115BBE of the LT. Act by entertaining additional evidences in violation of provisions of rule 46A of I.T. Act, 1961. These evidences never filed before AO during assessment proceedings even providing sufficient opportunities of being heard. 3. The Ld. CIT(A) has erred in law and facts by allowing relief to the assessee on account of additions of Rs.1,42,25,002/- ( disallowance of surplus under business head) by ignoring decision of the Hon'ble Allahabad High Court Lucknow bench decision dated 15.11.2019 ( ITA No.66/2018) rendered in the case of Army Wives Welfare Association(AWWA)- Lucknow which is umbrella organization 6 ITA No.2350/Del/2023 of Army Wives Welfare Association wherein the Court held that the assessee has failed to prove income on behalf of regimental fund or non-public fund established by 111.8 armed forces of the Union and also in the case of assessee, the assessee failed to prove income of behalf of regimental fund or non-public fund established by the armed forces of the Union. 4. The Ld.CIT(A) has erred in law and facts by allowing relief to the assessee on account of addition of Rs.86,74,928/- (disallowance of 10% of expenses) by ignoring the fact that it is not a adhoc addition since the assessee not filed the return of income and even not filed any documentary evidences before the AO during assessment proceedings to justify its claim of huge expenditure of Rs.8,67,49,278/-. 5. The Ld.CIT(A) has erred in law and facts by allowing relief to the assessee on account of addition of Rs.5,37,280/- made by AO on account of bank interest by ignoring the fact that assessee not filed and ITR even not filed any documentary evidences before the AO during assessment proceedings to justify its claim. 12. At the time of hearing, ld. DR for the Revenue submitted that the assessee is a non-filer of return of income, notice u/s 148 of the Act was issued to the assessee to file the return of income. In response, assessee has not filed any return of income. Subsequently notices u/s 142(1) of the Act were issued to the assessee to furnish the documents and trust deed. He brought to our notice that in response to notices, the assessee has claimed that the case of the assessee is falling u/s 10(23AA) of the Act and also claimed that the objects of the assessee are exactly same as are in any case of regimental fund 7 ITA No.2350/Del/2023 of the army. They relied on para 801(b) of the Regimental Fund Clause and asked for concession before AO. Further several notices were issued to assessee. The AO rebutted point-wise submissions of the assessee and made the addition of surplus fund and other additions which are grossly deleted by the ld. CIT (A). He brought to our notice page 5 of the appellate order and also brought to our notice that ld. CIT(A) has granted the relief to the assessee on the basis that assessee is a registered charitable institution u/s 12A of the Act. Further he submitted that as per section 139(4)(a) of the Act in order to claim the benefit as registered charitable institution, assessee has to file return of income. He submitted that the case of the assessee does not fall u/s 10(23AA) of the Act. 13. On the other hand, ld. AR for the assessee submitted that it is accepted fact that assessee has not filed any return of income, however he prayed that the case of the assessee falls u/s 10(23AA) of the Act. In this regard, he relied on the decision of Hon’ble Allahabad High Court in the case of Army Wives Welfare Association, Lucknow (2020) 116 taxman.com 215 (Allahabad). Further he brought to our notice page 233 of the paper book in which he brought to our notice letter submitted by the assessee before the AO and submitted that assessee has applied more than 85% of the income towards charitable purposes. Further he brought to our notice page 45 of the paper 8 ITA No.2350/Del/2023 book which is application u/s 12AA of the Act on 26.07.1975 and finally he prayed that the issue may be remitted back to AO for proper appreciation of facts on record. 14. Considered the rival submissions and material placed on record. We observed that assessee is a charitable institution and had granted for 12A registration by CIT, Delhi-II, New Delhi on 26.07.1975. Assessee has placed copy of the registration at page 45 of the Paper Book. No doubt, assessee was granted registration nu/s 12A of the Act and it is also a fact on record that assessee has not filed its return of income even though notice u/s 148 of the Act was issued by the Assessing Officer based on the financial informations available with him with regard to various deposits and renewal on time deposits. Before lower authorities, assessee has prayed that the case of the assessee falls under section 10(23AA) of the Act. In the similar case, Hon’ble Allahabad High Court also decided similar issue in the case of Army Wives Welfare Association, Lucknow (supra). Hon’ble High Court has rejected the plea of the assessee with the following observations :- “16. The provision quoted above shows that under what circumstances exemption can be claimed. It can be for the income received by any person on behalf of any regimental fund or non- public fund established by the armed forces of the Union for the welfare of the past and pre sent members. In the instant case, the assessee has failed to prove income on behalf of regimental fund or non-public fund established by the armed forces of the Union. The establishment should be of armed forces of the Union with receipt of 9 ITA No.2350/Del/2023 the fund of the nature given under the said provision. The issue aforesaid has been ignored by the tribunal so as by the CIT(Appeals). It seems to have been persuaded only by one issue which was initial denial of the exemption under section 10(23AA) as it was not claimed at the time of submission of return but during the course of assessment. It may be that assessee can claim the exemption under section 10(23AA) at the time of assessment but entitlement for it was required to be decided by CIT(Appeals) and the tribunal.” 15. Further we noticed that considering the 12A registration in the case of the assessee, ld. CIT (A) has granted relief that assessee has applied for charitable purposes more than 85% of the revenue. However we observed that assessee is falling under non-filer category and has not filed any return of income until the notice was issued to the assessee by the Assessing Officer. Therefore, as per the provisions of section 139(4)(a) of the Act, it is obligation on the part of the assessee who were claiming the benefit u/s 11 of the Act has to file its return of income u/s 139 of the Act to claim the benefits. Even though the assessee who has got registration u/s 12A of the Act, in order to get the benefit it has to file its return of income. Therefore, in the given case, it is fact on record that assessee has not filed its return of income, therefore, assessee loses the benefit of claiming exemption u/s 11 of the Act. Therefore, the case of the assessee has to be assessed on the basis of commercial terms as in AOP. On careful consideration, we observed that the Assessing Officer has assessed the income after considering gross 10 ITA No.2350/Del/2023 receipts and relevant expenditure. In our considered view, ld. CIT (A) has given the relief without considering this aspect on record. Further we observed that since there was no representation on the part of the assessee before the Assessing Officer and ld. CIT (A) has granted the relief based on various documents submitted before him without giving opportunity to the Assessing Officer. Therefore, in our considered view, considering the nature of charitable institution which serves the widows and dependants of army soldiers, we deem it fit and proper to remit this issue back to the file of Assessing Officer to consider various documents and redo the assessment as per law and consider various submissions made by the assessee before the ld. CIT (A) with regard to term deposits and renewal of the same and also cash deposits which has generated by the assessee out of schools and other activities. We also direct the Assessing Officer to redo the assessment as per above direction after giving proper opportunity of being heard to the assessee. 16. In the result, appeal filed by the Revenue is allowed for statistical purposes. Order pronounced in the open court on this 11th day of December, 2024. Sd/- sd/- (SUDHIR PAREEK) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 11.12.2024 TS 11 ITA No.2350/Del/2023 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "