ROSE TRUST,DELHI V. DCIT, CIRCLE 49(1), DELHI

ITA 3663/DEL/2024

AI Insights

The case involves Rose Trust, a charitable trust, appealing against the order of the Commissioner of Income Tax (Appeals), which confirmed the levy of tax at the maximum marginal rate instead of the rates applicable to individuals. The primary contention was that the CIT(A) disposed of the appeal ex-parte without sufficient opportunity for the appellant to be heard, and that the adjustments made under Section 143(1) of the Income Tax Act were in violation of the principles of natural justice and not in accordance with the provisions of the Act. The Tribunal noted the lack of adequate hearing and the contentious nature of the tax rate applied, which led to the decision to remand the case for a fresh hearing.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315806 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2022-2023
• Other Referred Cases: Dr. Shalmali Khasbardar Foundation v. ITO (Exemption), National Association of Interlocking Surgeons v. ITO, Mahakavi Edasseri Smarka Trust v. ITO, Jain SanghParabdiKhayu Trustee v. DCIT, CPC, Bangalore
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR YADAV
• Assessee Lawyers: VASANTI PATEL
• Keywords: Set aside; Opportunity of being heard; Question of law; Principle of natural justice; Charitable institution; Maximum Marginal Rate
• Section: 11

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCHES “F”, NEW DELHI BEFORE : SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No. 3663/Del/2024 (िनधा[रण वष[ / Assessment Year :2022-23) Rose Trust B-60/61, C/o Bajaj Auto Limited, Naraina Industrial Area, Phase II,Delhi-110028 बनाम / Vs. Deputy Director of Income Tax, CPC Bengaluru èथायीलेखासं./जीआइआरसं./PAN/GIR No. : AAATR0380G (Appellant) .. (Respondent) अपीलाथȸ ओर से/Appellant by : Ms. Vasanti Patel, Advocate Ĥ×यथȸ कȧ ओर से/Respondentby: Shri Sunil Kumar Yadav, Sr. DR Date of Hearing 09/04/2025 Date of Pronouncement 16/05/2025 O R D E R PER SMT. ANNAPURNA GUPTA, AM: The present appeal has been filed by the assessee against the order passed by the Commissioner of Income Tax(Appeals), ADDL/JCIT(A)-4, Kolkata (in short ‘the CIT(A)’) under Section 250of the Income Tax Act, 1961 (in short ‘the Act’) dated 06.06.2024 pertaining toAssessment Year 2022-23. 2. The grounds raised in the appeal by the assessee are as under: ITA No.3663/Del/2024[Rose Trust vs. DCIT] A.Y. 2022-23 - 2 – “1. EX-PARTE DISPOSAL OF APPEAL 1.1 On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in disposing off the appeal \"Ex-Parte\" without affording sufficient opportunity of being heard to the Appellant. 1.2. The learned CIT(A) failed to acknowledge/consider the Application for Adjournment filed against the Notice dated 06.06.2024 - DIN & Notice No: ITBA/APL/F/APL_1/2024- 25/1065451216(1) on 21.06.2024. As a result, the Order under Section 250 has been passed without giving any opportunity of being heard to the Appellant. Accordingly, the said ex-parte Appellate Order may kindly be set aside. II. ADJUSTMENT/LEVY OF TAX UNDER SECTION 143(1) OF THE ACT: 2.1 On the facts and in circumstances of the case and in law, the learned Commissioner of Income-Tax (Appeals) [CIT(A)] e peals) [CIT(A)] erred in confirming the levy of tax and surcharge at a higher rate while processing the Return under Section 143(1) of the Act by the learned Assistant Director of Income Tax (CPC) (The Assessing Officer), (hereinafter referred to as \"the AO\"). 2.2 It is submitted that the adjustment has been made to tax liability of the Appellant without affording to the Appellant any opportunity of being heard and the same is in gross violation of principles of natural justice and also not in accordance with the provisions of Section 143(1)(a) of the Act. Hence, the said adjustments may kindly be struck down/set aside. 2.3 It is submitted that the issue involved is a highly debatable question of law and the same cannot be ground for adjustment under Section 143(1)(a)/143(1) of the Act. The learned Assessing Officer has resorted to the adjustments without complying with the provisions of Section 143(1) of the Act. The Appellant prays that the adjustment made is illegal, unwarranted and contrary to the law and may therefore be kindly struck down/ deleted. III. RATE OF TAX: ITA No.3663/Del/2024[Rose Trust vs. DCIT] A.Y. 2022-23 - 3 – 3.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the levy of Tax at flat rate of 30%, instead of normal slab rates applicable in the case of the appellant. 3.2. The learned CIT (Appeals) and the learned Assessing Officer failed to appreciate that the appellant is a charitable trust Association of Persons (AOP) not enjoying benefits of Section 11 of the Act and is liable to pay tax at the slab rates applicable in the case of an Individual, etc. 3.3. The learned CIT(Appeals) failed to appreciate the facts of the case furnished by the Appellant. The learned CIT(Appeals) failed to consider and deal with various Appellate Orders of NFAC, New Delhi and the Order of the jurisdictional ITAT, New Delhi, in the case of Associate Trusts of the Appellant and on the identical facts, The appellant prays that the learned Assessing Officer may kindly be directed to re-compute the tax liability of the appellant as explained above and reduce the same accordingly IV. ERRONEOUS LEVY OF SURCHARGE: 4.1 On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) erred in confirming levy of surcharge at the Rate of 37% on Interest Income instead of applicable Rate of 15% in the case of the Appellant 4.2 The learned AO failed to appreciate that the Total Income of the appellant for the above year Rs. 6,26,59,960/- (including the income by way of Dividend Rs 5,95,96,268/-) exceeds Rs.5 crores. However, it is not covered by either Clause (ii) or clause (iv) of the Paragraph (A) of Part-1 of First Schedule to the Finance Act as Total Income excluding Dividend Income of Rs. 5,95,96,268/- is only Rs.84,81,052/- . Therefore, the rate of surcharge applicable on the entire income including income by way of dividend is 15%. Hence, surcharge levied by the Assessing Officer and upheld by the CIT (Appeals) is erroneous and illegal. 4.3 The learned CIT(Appeals) failed to appreciate the facts of the case furnished by the Appellant. The learned CIT(Appeals) failed to consider and deal with various Appellate Orders of NFAC, New Delhi and the Order of the ITA No.3663/Del/2024[Rose Trust vs. DCIT] A.Y. 2022-23 - 4 – jurisdictional ITAT, New Delhi, in the case of Associate Trusts of the Appellant and on the identical facts.” 3. At the outset itself, Ld. Counsel for the assesseepleaded that the matter be restored back to the Ld. CIT(A) since the assessee had not been given adequate opportunity of hearing before it. She pointed out that only one notice of hearing was given to the assessee for which an adjournment application was filed.Thereafter, no further notice of hearing was given to the assessee and the appeal was decided ex parte by the CIT(A) upholding the adjustment made in the intimation issued to the assessee u/s.143(1) of the Act on preliminary scrutiny of the return filed by the assessee. She pointed out that the assessee was a charitable trust,and had filed return of income for the impugned year computing the tax payable on its income on the rates applicable to individuals. That in the intimation made u/s 143(1) of the Act the CPC had applied maximum marginal rate of tax on the assessee treating it as an AOP. The assessee was primarily aggrieved with this levy of tax on its income at the maximum marginal rate as opposed to the rates applicable to individuals as per which the assessee had calculated its tax liability and paid the same. She pointed out that the Ld. CIT(A) without affording any opportunity of hearing to the assessee had confirmed levy of tax at the maximum marginal rate on the income of the assessee for the impugned year in the intimation made by the CPC u/s.143(1) of the Act. 4. Ld. Counsel for the assessee contended that it had fairly a good case in its favour, since there was several judicial decisions ITA No.3663/Del/2024[Rose Trust vs. DCIT] A.Y. 2022-23 - 5 – of the Co-ordinate Benches of the ITAT holding categorically that charitable trusts were not to be subjected to tax at the maximum marginal rate. She referred to the following decisions in this regard: 1. Decision of the ITAT, Mumbai bench in the case of Dr. Shalmali Khasbardar Foundation v. ITO (Exemption) ITA No.: 3811/Mum/2024 (MUM) 2. Decision of the ITAT, Pune Bench in the case of National Association of Interlocking Surgeons v. ITO (2025) 172 taxmann.com 9 (Pune) 3. Decision of the ITAT, Cochin Bench in the case of Mahakavi Edasseri Smarka Trust v. ITO (E) (2024) taxmann.com 44 (Cochin) 4. Decision of the ITAT, SMC, Ahmedabad Bench in the case of Jain SanghParabdiKhayu Trustee v. DCIT, CPC, Bangalore - ITA No. 353-354/AHD/2021 5. She further pointed out that in the assessee’s own case for succeeding assessment year i.e. A.Y. 2024-25, the Ld. CIT(A) had held that tax was not leviable at the maximum marginal rate on its income but on the rates applicable to individuals. Copy of the order of the Ld. CIT(A) for A.Y. 2024-25 also placed before us. 6. The Ld. DR fairly agreed that the assessee was not afforded adequate opportunity of hearing before the Ld. CIT(A). 7. In the light of the above, since admittedly, the assessee has not been heard by the Ld. CIT(A), we consider it fit to restore the ITA No.3663/Del/2024[Rose Trust vs. DCIT] A.Y. 2022-23 - 6 – matter back to the Ld. CIT(A) to decide the issue afresh after affording due opportunity of hearing to the assessee. 8. In the result, Ground No.1 raised by the assessee is allowed. 9. Since, we have restored the appeal back to the Ld. CIT(A) for fresh adjudication, other grounds raised by the assessee before us on the merits of the issue need no adjudication. 10. In the result, the appeal filed by the assessee is allowed for statistical purposes. This Order pronounced on 16/05/2025 Sd/- sd/- (MADHUMITA ROY) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:16.05.2025 S. K. SINHA Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Delhi "