JERMEL'S ACCADEMY,SILIGURI V. I.T.O., WARD - 1(4), , SILIGURI

ITA 1652/KOL/2024

AI Insights

Jermel's Academy, a trust running an educational institution, appealed against the order of the Commissioner of Income Tax (Appeals) which denied them an exemption of Rs. 3,98,75,551 claimed under section 11(1) of the Income Tax Act. The initial assessment by the Assessing Officer was based on the absence of a documentary evidence for the pending application for exemption and the lack of a return of income filed as per section 139(1). The Tribunal, referencing several judicial precedents, concluded that the provisional registration granted to the trust was adequate for claiming the exemption, and thus directed a recomputation of income considering the amounts applied for charitable purposes.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 469570 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Other Referred Cases: Genius Education Society vs. Assistant Commissioner of Income-tax Circle-2, (Exemptions) Chandigarh, Sansthan Shree Eknath Maharaj Vishwastha Mandal vs. Income-tax Officer (Exemption), Sree Sree Ramkrishna Samity vs. Deputy Commissioner of Income-tax, Cir-2, Siliguri, Annadaneshwara Charitable Trust vs. Income-tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ALLOWING
• Keywords: Set aside; Opportunity of being heard; Reassessment proceedings; Principle of natural justice; Competent authority; Charitable institution
• Section: 147; 148; 143(2); 195; 250; 64; 271(1)(c); 11; 12AA; 139(1); 12A; 13; 12; 10; 191; 10(23C)

Judgement Text

"आयकर अपीलीय अधिकरण कोलकाता 'ए' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA श्री प्रदीप क ुमार चौबे, न्याधयक सदस्य एवं श्री राक ेश धमश्रा, लेखा सदस्य क े समक्ष Before SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy Vs. ITO, Ward-1(4), Siliguri (Appellant) (Respondent) PAN: AABTJ0525C Appearances: Assessee represented by : Siddharth Agrawal, Adv. Department represented by : Subhendu Datta, CIT-DR. Date of concluding the hearing : January 30th, 2025 Date of pronouncing the order : March 10th, 2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as the ‘Ld. CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2016-17 dated 24.06.2024, which has been passed against the assessment order u/s 147/144B of the Act, dated 28.03.2022. Page | 2 I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy. Page 2 of 13 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: “1. For that on the facts and in the circumstances of the case, the Ld. CIT (A) was not justified in passing the appeal order dated 24-06-2024. 2. For that on the facts and in the circumstances of the case, the Ld. CIT (A) was not justified in denying the exemption of Rs. 3,98,75,551/- claimed by the assessee u/s 11(1). 3. For that on the facts and in the circumstances of the case, the Ld. CIT (A) has erred while concluding that since no documentary evidences were provided for pendency of application before any competent authority, the appellant should not be given the benefit of provisional registration u/s 12A/12AA. 4. For that on the facts and in the circumstances of the case, the Ld. CIT (A) has erred wile concluding that Section 12A(ba) would be applicable on the appellant when in fact this provision was inserted w.e.f. AY 2018-19. 5. Without prejudice to the above grounds, the Ld. CIT(A) ought to have directed the A.O. to determine the correct income of the assessee by allowing the expenditure incurred relating to the income earned and tax the remaining surplus only. 6. For that the appellant craves leave to add, alter or delete all or any of the grounds of appeal.” 3. Brief facts of the case are that on the basis of the information available with the Revenue that the assessee had made cash deposits amounting to Rs. 3,20,49,890/-, the proceedings u/s 147 of the Act were initiated in the case of the assessee and notice u/s 148 of the Act was issued on 25.03.2021 in response to which the return of income declaring the total income at Rs. ‘NIL’ was filed by the assessee on 18.10.2021. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued on 07.02.2022. The assessee is a Trust and is running a co-educational school for secondary level education and the school is affiliated to the Central Board of Secondary Education (CBSE). It has been further stated by the assessee before the Ld. AO that the Page | 3 I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy. Page 3 of 13 source of cash deposits in the bank account was the fees collected from the students. During the relevant year under consideration, the fees collected were Rs. 4,01,50,550/- and the entire receipts had been accounted for in the account maintained by the Trust. The information/details furnished by the assessee were examined by the Ld. AO, who, on perusal of the return of income/computation of income filed by the assessee, noted that the assessee had claimed exemption u/s 11(1)(A) of the Act amounting to Rs. 3,98,75,551/- and it was stated by the assessee that the exemption was allowable to the assessee Trust in view of the second proviso to section 12A(2) of the Act. The final show cause notice, along with the draft assessment order, was sent to the assessee on 25.03.2022 for 27.03.2022 which was not complied with. Therefore, the assessment was completed on the basis of earlier replies/documents furnished by the assessee. The assessee had furnished a copy of the order for provisional registration dated 30.08.2021 which was from AY 2022-23 to AY 2024-25. The Ld. AO made the addition by holding as under: “5. The assessee has furnished a copy of order for provisional registration dated 30.08.2021 which is from A.Y. 2022-23 to A.Υ. 2024-25. Neither the assessee has furnished any documentary evidence that the application for grant of exemption is pending with the competent authority for the year under consideration nor the assessee has filed any documentary evidence regarding claim of exemption u/s 11(1)(A). For claiming exemption u/s 11(1)(A) the assessee has to file the return of income as per provisions of the section 139(1) of the I.T. Act after getting approval for exemption from the competent authority. Neither the assessee has filed return of income for the year under consideration as per provisions of section 139(1) not the assessee has furnished any documentary evidence that the assessee trust is eligible for exemption u/s 11(1)(A) of the I.T. Act. Therefore, the exemption claimed by the assessee at Rs.3,98,75,551/- is disallowed and the income of the assessee trust is assessed at Rs.3,98,75,551/-. Penalty proceedings u/s 271(1)(c) of the I.T Act are also initiated for furnishing inaccurate particulars of income in the return.” Page | 4 I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy. Page 4 of 13 4. The total income was accordingly assessed u/s 143(3)/147 of the Act at Rs. 3,98,75,551/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who went through the facts filed by the assessee in Form 35 which are as under: “The appellant is a trust running an educational institution. Return of income u/s 139(1) was not filed for A.Y. 2016-17. Assessment u/s 147 was initiated on 25.03.2021 or A.Y.2016 for cash deposits of Rs.3,20,49,820/- made in various bank accounts of the appellant. The appellant had obtained registration u/s 12AB on30.08.2021. The return filed in response to notice u/s 148 was filed on 18.10.2021. The appellant claimed exemption u/s 11(1) on in view of the second proviso to section12A(2) amounting to the total receipts during the year3,98,75,551/-. This amount was spent on the objectives of for which the trust was established and registration u/s 12AB was granted on the basis of the objectives of the trust. In the order passed u/s 147, the A.O. has accepted the source of the cash deposits in the bank accounts being collection of fees from students. However, the exemption claimed u/s 11(1) was denied on the ground that the no documentary evidence was given for the fact that application for grant of exemption was pending for the relevant year with the competent authority. The A.O. has misinterpreted the second proviso to section12A(2) while denying the exemption u/s 11(1). Furthermore, the total receipt of the appellant which was taken in the return to have been applied for the objectives of the trust has been considered as the income. Without prejudice to the claim for exemption u/s 11(1), only the net surplus after deducting all expenses should be considered as income in the event of denying the claim for exemption u/s 11(1). Aggrieved by the order, the appellant is in appeal.” 5. The Ld. CIT(A) issued various notices for hearing to the assessee and in response to which the assessee uploaded detailed submissions on the ITBA portal and requested to consider the same for this appeal and also called for a remand report from the Ld. AO, which was also available on the ITBA portal and has been reproduced in the appeal order. In view of the principles of natural justice, the remand report received from the Ld. AO was forwarded to the assessee on 04.06.2024 to submit the supporting details/documents to contravene/rebut the findings in the remand report of the Ld. AO. The assessee did not Page | 5 I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy. Page 5 of 13 respond to the notice and did not file any submission till date of the order to controvert the comments of the Ld. AO. The Ld. CIT(A) has extracted the assessment order, considered the objections to the addition filed by the assessee and dismissed the ground nos. 1 & 2 related to denial of exemption of Rs. 3,98,75,551/- by holding as under: “9. In the instant case, through Statement of Facts filed with appeal, the appellant stated that it is a trust running educational institution and had obtained registration u/s. 12AB on 30.08.2021, but did not file any proof for the same. It is observed by the A.O in the assessment order that the appellant stated that source of cash deposits in bank accounts are the fees collected from students during the year. These entire receipts have been accounted for in the account maintained by the trust. The appellant has neither identified its status by furnishing Registration Certificate issued u/s. 12A/12AA during the scrutiny/appellate proceedings nor claimed exemption u/s. 11 or any other provisions of the Income-tax Act, 1961 by filing its ITRs. During scrutiny/appellate proceedings, the appellant furnished a copy of order for provisional registration dated 30.08.2021 which is from A.Y. 2022-23 to Α.Υ. 2024-25 but did not furnish any documentary evidence that the application for grant of exemption is pending with competent authority for the year under consideration nor the appellant filed any documentary evidence regarding claim of exemption u/s. 11(1)(A). 10. It is pertinent to mention that the provisions of section 12A(ba) provides that the exemption u/s 11 can be availed only if the return of income was filed in the manner prescribed under the provisions of section 139(4A) of the Act which in turn requires that an assessee claiming exemption of income u/s 11 to file the return of income within the due date prescribed u/s 139(1) of the Act. In the absence of any discretionary power neither the assessing authority nor the appellate authority can relax the provisionsof the Statute. 11. Further, the assessee is also not eligible to get benefit of sub-clause (iiiad) or (vi) of clause 23C of section 10 as the assessee has not furnished any Exemption Certificate issued vide Rule 2CA of Income-tax Rules, 1962 during the course of scrutiny proceedings. 12. Moreover by virtue of 139(4C) every educational institution referred to in sub-clause (iiiab) or sub-clause (iiiad) or sub-clause (vi) of Section 10(23C) whose total income, without giving effect to the provisions of section 10, exceeds the maximum amount which is not chargeable to income-tax are liable to furnish a return of such income of the previous year in the prescribed form. Page | 6 I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy. Page 6 of 13 13. Thus it is quite evident that the appellant has failed to comply with the provisions of the Act. The A.O concluded the order by observing that for claiming exemption u/s. 11(1)(A) the assessee has to file the return of income as per provisions of the section 139(1) of the I.T.Act after getting approval for exemption from the competent authority. Neither the appellant has filed return of income for the year as per provisions u/s. 139(1) nor the appellant has furnished any documentary evidence that the appellant trust is eligible for exemption u/s. 11(1)(A) of the I.T.Act. Therefore, in the prevailing circumstances of the case, I find no infirmity in the action of the AO of denying exemption claimed by the appellant u/s. 11(1)(A) of Rs.3,98,75,551/-Consequently, the Ground Nos. 1 and 2 are dismissed. 14. Through Ground No 3 the appellant has taken the plea that the A.O. has erred in law while treating the total receipts of the appellant as its total income whereas only the surplus if any after reducing the expenses from the total income is taxable in the event of denying the claim for exemption u/s 11(1). 14.1 The assessing officer in the remand report noted as under:- \"Furthermore, in the matter of ground No. 3 of the grounds of appeal, net income can only be examined after the proper verification of expenses claimed in the Income and Expenditure Account for the year ended 31.03.2016. However, the assessee has not filed details, ledgers and documentary evidence before the Ld. CIT(A) as well as during the assessment proceedings.\" 14.2 Thus in absence required details appellant's claim cannot be entertained. Mere assertion lends no credibility. Where the onus is upon the assessee to prove the fact, the assessee must place all relevant material to prove that fact whenever he is asked to furnish the same. The Hon'ble Supreme Court in the case of Calcutta Discount Co [41 ITR 191 (SC.)] has held that it is the duty of assessee to produce the books of account as well as all primary facts necessary for making the assessment at the earliest point of time. Hence, in the absence of any submission from the assessee and incomplete documents, the correct income of the assessee cannot be deduced. Thus this ground is dismissed. 15. In the result, the appeal of the appellant is dismissed.” 6. Aggrieved with the order of the Ld. CIT(A) the assessee has filed the appeal before this Tribunal. Page | 7 I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy. Page 7 of 13 7. Rival contentions were heard and the submissions and judicial pronouncements relied upon have been examined. It was submitted before us that for the impugned assessment year 2016-17 the assessee had not filed the return of income and the return was filed on 18.04.2021 in compliance to the notice u/s 148 of the Act dated 25.03.2021. The assessee is a co-educational institution affiliated with the CBSE and the assessment order is dated 28.03.2022. Information relating to cash deposit of Rs. 3,20,49,890/- was available with the Ld. AO. The provisional approval u/s 12A of the Act was granted to the assessee on 31.08.2021 while the assessment order was passed on 28.03.2021. During the course of assessment proceedings only provisional approval was granted. The assessee has relied upon the provisions of section 12AB(1) and 12A(1)(a) of the Act which are as under: “section 12AB(1): 12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,— (a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; (b) where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) 2[or item (B) of sub-clause (vi)] of the said clause,— (i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about— (A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; Page | 8 I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy. Page 8 of 13 (ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i),— (A) pass an order in writing registering the trust or institution for a period of five years; or [(B) if he is not so satisfied, pass an order in writing,— (I) in a case referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (v) of clause (ac) of sub-section (1) of section 12A rejecting such application and also cancelling its registration; (II) in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of sub-section (1) of section 12A, rejecting such application, after affording a reasonable opportunity of being heard;] [(c) where the application is made under item (A) of sub-clause (vi) of the said clause or the application is made under sub-clause (vi) of the said clause, as it stood immediately before its amendment vide the Finance Act, 2023, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought,] and send a copy of such order to the trust or institution.” “section 12A(1)(a): 12A. (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:— (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Principal Commissioner or Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under section 12AA: Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,— (i) from the date of the creation of the trust or the establishment of the institution if the Principal Commissioner or Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was Page | 9 I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy. Page 9 of 13 prevented from making the application before the expiry of the period aforesaid for sufficient reasons; (ii) from the 1st day of the financial year in which the application is made, if the Principal Commissioner or Commissioner is not so satisfied: Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007;” 8. It was submitted that the provisional registration was good enough for the assessee for claiming exemption. Our attention was also drawn to the order of the Ld. CIT(A) on page 9 para 10. It was also submitted that as per section 12A(ba) which was w.e.f. from 01.04.2018 and not for the year under consideration the return of income was not a prerequisite for claiming exemption u/s 11 of the Act. The assessee has relied upon the following judicial pronouncements in support of the claim that the provisional approval was good enough for the exemption u/s 10AB of the Act: i) Genius Education Society vs. Assistant Commissioner of Income- tax Circle-2, (Exemptions) Chandigarh [2018] 98 taxmann.com 54 (Chandigarh - Trib.)/[2018] 172 ITD 640 (Chandigarh - Trib.) [20-08- 2018] ii) Sansthan Shree Eknath Maharaj Vishwastha Mandal vs. Income- tax Officer (Exemption) [2022] 138 taxmann.com 450 (Pune - Trib.)/[2022] 195 ITD 46 (Pune - Trib.) [03-02-2022] iii) Sree Sree Ramkrishna Samity vs. Deputy Commissioner of Income-tax, Cir-2, Siliguri [2015] 64 taxmann.com 330 (Kolkata - Trib.)/[2015] 44 ITR(T) 678 (Kolkata - Trib.)/[2016] 156 ITD 646 (Kolkata - Trib.)[09-10-2015] Page | 10 I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy. Page 10 of 13 iv) Annadaneshwara Charitable Trust vs. Income-tax Officer [2023] 156 taxmann.com 270 (Bangalore - Trib.)/[2023] 203 ITD 641 (Bangalore - Trib.)[26-09-2023] 8.1 In the case of Genius Education Society (supra) the Hon'ble Tribunal has held as under: “■ Admittedly, the reopening in the instant case was resorted to for the reason that the assessee had been refused approval under section 10(12C)(vi) and had not filed its return of income. It is not disputed that the assessee had been granted registration under section 12AA for the subsequent assessment year, i.e., assessment year 2013-14. The contention of the assessee challenging the reopening is that the second proviso to section 12A(2), debars resorting to reopening under section 147 for subjecting to tax the income for the impugned year merely on account of absence of registration under section 12A. [Para 7] ■ The contention of the revenue on the other hand is that since the assessee failed to fulfill the condition stipulated for claiming exemption under sections 11 & 12 of filing return of income along with report of audit, under section 12A(1)(b) its income for the impugned year was taxable and the reopening, therefore, was valid. [Para 8] ■ Evidently, it is not the case of the Revenue that the reopening was valid on the ground of absence of registration u/s. 12A for the impugned year and therefore its income becoming taxable. In fact, it is found, that the Commissioner (Appeals)(A) has accepted that reopening could not have been resorted to on account of absence of registration u/s. 12A for the impugned year on account of the second proviso to section 12A(2). Therefore the contention of the assessee on this count, stands accepted by the Revenue. But the argument of the Revenue it is found that because the assessee failed to comply with the conditions of section 12A(1)(b) which was necessary for claiming exemption under section 11 & 12, its income for the impugned year was taxable, which had thus escaped assessment and, therefore, the reopening was valid. The said conditions, as pointed out by the CIT(A), are the filing of return of income accompanied with the report of an auditor in the prescribed form. [Para 9] ■ Undoubtedly the requirement of filing of return of income and the report of audit have been specified for being eligible for claiming exemption under sections 11 & 12 along with the grant of registration under section 12AA in the case of the assessee, it is found, that the return of income has been filed in response to notice under section 148. Therefore, the condition of filing of Page | 11 I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy. Page 11 of 13 return of income stands fulfilled. The section, it is found that nowhere prescribes the filing of return by any due date, therefore the findings of the Commissioner (Appeals) that the assessee having not filed its return within the prescribed time it had failed to comply with the requirement prescribed, is not tenable. As for the requirement of filing report of audit in the prescribed form, the said condition has been held by courts to be merely procedural and, therefore, directory in nature and not mandatory for the purpose of claiming exemption under sections 11 & 12. [Para 10] ■ In view of the above therefore no merit is found in the argument of the revenue that the assessee was not eligible for exemption under sections 11 & 12 on account of not having complied with the requirements of section 12A(1)(b). Since this was the sole basis for upholding the validity of the reassessment proceedings resorted to, it is noted that the reassessment resorted to in the instant case was invalid, on account of the second proviso to section 12A(2) which specially debarred resort to the same in view of registration having been granted from the immediately succeeding assessment year. The reassessment framed is therefore set aside. As a consequence the addition made is deleted. [Para 11]” 9. The Ld. CIT(DR) relied upon the order of the Ld. CIT(A) as well as the provisions of law. 10. We have considered the rival submissions made and have also gone through the facts of the case. In this case as no return of income was filed the notice u/s 148 of the Act was issued. However, the cash deposit in the bank account was out of the fees received, which fact has not been disputed before us. In view of the judicial pronouncements in the case of Genius Education Society (supra), the provisional approval granted was good enough for claiming the exemption u/s 11 of the Act. Hence, the ground nos. 2, 3, 4 and 5 are allowed and the Ld. AO is directed to consider the income applied for charitable purposes and recompute the income as per law as the provisional approval was good enough for availing exemption for the impugned assessment year and the provision of section u/s 12A(ba) of the Act was inserted with effect from AY 2018-19 and were not applicable for the impugned assessment Page | 12 I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy. Page 12 of 13 year. Hence, the appeal of the assessee is allowed with the direction to recompute the income as per law after considering the provisional approval for the purpose of granting exemption u/s 11 of the Act. 11. Ground Nos. 1 and 6 are general in nature and do not require any separate adjudication. 12. In the result, the appeal filed by the assessee is allowed as per the directions mentioned above. Order pronounced in the open Court on 10th March, 2025. Sd/- Sd/- [Pradip Kumar Choubey] [Rakesh Mishra] Judicial Member Accountant Member Dated: 10.03.2025 Bidhan (P.S.) Page | 13 I.T.A. No.: 1652/KOL/2024 Assessment Year: 2016-17 Jermel's Accademy. Page 13 of 13 Copy of the order forwarded to: 1. Jermel's Accademy, C/O. Subash Agarwal & Associates, Advocates, Siddha Gibson, 1, Gibson Lane, Suite 213, 2nd Floor, Kolkata, West Bengal, 700069. 2. ITO, Ward-1(4), Siliguri. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "