SANSKRITI KMV SCHOOL ,JALANDHAR vs. ACIT, C-1, (E), CHANDIGARH

आदेश/ORDER

The present appeal has been filed by the assessee wherein the correctness of the order dated 03.10.2019 of CIT(A)-II Jalandhar pertaining to 2016-17 assessment year is assailed on the following grounds:

ITA 7/CHD/2020 A.Y. 2016-17 Page 2 of 9 4. That CIT(A) wrongly ignored the Circular No. 10/2019 dated 22.05.2019 . wherein the CBDT had granted blanket permission of condonation of delay in filing Form 10BB pertaining to Asst. Year 2016-17 which was binding on both the authorities. 5. That the order of CIT(A) & AO are against the law and facts of the case.

impugned order submitted that the reasons prevailing with the ld.

Commissioner for denying the claim of the assessee were not

relevant and maintainable in law. Reliance was placed upon the

order of the ITAT passed in assessee's own case for the immediately

preceding assessment year dated 09.05.2019 wherein in ITA

1397/CHD/2018 on similar facts and circumstances, the

departmental appeal was dismissed, copy of this order was filed.

On a reading of this specific order, it was noticed that since the

impugned order is dated 03.10.2019, the order of the ITAT having

already been passed in May, 2019 was thus available to the parties

prior to the passing of the impugned order, thus, why it was not

relied upon before the First Appellate Authority it was questioned.

relied upon.

from the submissions advanced before the ld. CIT(A) whether the

specific order had been brought to the attention of the ld. CIT(A).

On a reading of the submissions extracted in para 3, it was

submitted that the assessee had specifically invited attention to the

fact that in the immediately preceding assessment year, the order

ITA 7/CHD/2020 A.Y. 2016-17 Page 3 of 9

passed by the CIT(A) was in assessee's favour. Relying upon the

written submissions extracted in the order, it was his submission

that on the same set of facts and circumstances, the order of the

CIT(A) in assessee's own case decided in its favour was cited before

the CIT(A) and the fact that this order was upheld by the ITAT was

also brought to the notice of the CIT(A). The factum of the CIT(A)s

order in assessee's favour in the immediately preceding assessment

year it is seen is found mentioned in the order, however, reference

to the order of the ITAT is not found therein. Accordingly, on

10.03.2021, ld. DR was given time to go through the record and

point out whether there was any difference in facts and

circumstances as to why the order passed in the immediately

preceding assessment year was not to be followed by the CIT(A).

After affording time on 10.03.2021 on this ground to the Revenue,

the hearing, accordingly, commenced thereafter on 23.03.2021.

The relevant extract of the court proceedings on 10.03.2021 is

extracted hereunder for ready reference :

ITA 7/CHD/2020 A.Y. 2016-17 Page 4 of 9

written submissions extracted in the impugned order. Inviting

attention to the order of the ITAT in ITA 1397/CHD/2018 dated

09.05.2018 and the joint order dated 22.02.2017 in the case of the

assessee being in ITA 528/ASR/2016 in consolidated order in ITA

526/ASR/2016 in the case of Kanya Maha Vidyalaya and others

including the assessee. The year under consideration, it was

reiterated is 2016-17 assessment year. Copy of the order of the

CIT(A)-2 Jalandhar for 2015-16 assessment year dated 27.08.2018

was relied upon before the CIT(A). This order had been upheld by

the ITAT wherein reference has also been made to the decision of

the CIT(A) dated 14.06.2017 in 2014-15 assessment year. Copy of

this is available at pages 29 to 35 of the Paper Book which has

been referred to by the ITAT in the circumstances it was his

submission that the assessee's appeal was allowable.

approval u/s 10(23C)(vi) to the assessee was granted on 22.02.2017

and since form 10BB had not been filed in accordance with law and

had been filed in the assessment proceedings, he would have

nothing further to state.

the basis of which the filing of From No. 10BB at the assessment

stage was sufficient compliance of law in the peculiar facts of the

ITA 7/CHD/2020 A.Y. 2016-17 Page 5 of 9

present case where the approval came late. No adverse fact is

referred to or available non has the position of law been assailed.

Relying upon the written submissions and the legal position as

canvassed, it was his submission that the claim was allowable.

record. A perusal of the record shows that before the CIT(A),

following submissions were advanced on behalf of the assessee :

“The brief facts of the case are that the assessee Sanskriti KMV School was established by Arya Shiksha Mandal its parent body in the year 2003 for imparting education to Nursery to XII classes o the C.B.S.E. The school was duly affiliated by C.B.S.E. w.e.f. 0J. 04.2008 and ever since is recognized and imparting education on the pattern approved by C.B.S.E. . The school has been regularly filing its return of income by claiming exemption u/s 10(23C)(iiiad) since the receipts of the school were below Rs. 1 crore till Asst. year 2008-09. This exemption was duly allowed by the department without raising any kind of dispute till Asst. year 2008-09. However during the Asst. Year 2009-10 the receipts of the school exceeded Rs. 1 crore therefore application for registration of the school was made to the CCIT Ludhiana for granting of the registration u/s 10(23C)(vi). Further assessee applied for exemption before IT AT Amritsar bench who passed an order allowing exemption u/s 10(23C)(vi) to the school vide its order dated 22.02.2017. The assessee filed its return of income on 10.10.2016 declaring total income at Nil after claiming the entire surplus as exempt u/s 10(23C)(vi). The return was processed u/s 143(1). The notice u/s 143(2) was issued on 13.07.2017 and assessment u/s 143(3) was framed at an income of Rs 4702618/-. Hence this appeal before your goodself. Ground No. 1, 2 & 3 In this regard it is submitted that Amritsar Bench of IT AT has passed an order in favour of the assessee by allowing exemption u/s 10(23c)(vi) vide its order dt 22.2.2017(Copy Enclosed). It is not out of place to mention here that appeal of the assessee for Asst. Year 2014- _ 15 and 2015-16 has already been allowed by your goodself vide order dated, 10.08.2016 Appeal No. 2/10296/16-17 and 27.08.2018 Appeal No 2/10574/17-18 CIT(A) Jal. Ground No. 4 "In this regard it is submitted that assessee school is affiliated to CBSE and it may be stated that it is not government aided school but purely private school imparting education to the students from Nursery to +2 classes. The salaries paid to the staff are neither governed by CBSE nor governed by Government of Punjab since it is not aided school of government. It is totally the management to decide the salary structure payable to staff It is not understood how A.O had presumed the school compromises with the quality of education and what are the measures under which you are making false allegations that quality of education is compromised and there is tendency of earning high profits. The assessee school is charging fee as per the decision made by management under the various heads which are charged by all education institutions. The school is duly eligible to charge fee from students and it is not free school.

ITA 7/CHD/2020 A.Y. 2016-17 Page 6 of 9

It is not the power of the A.O to intervene into the matters o f charging of fees from students and paying salary to staff of school and it is not a criteria on the basis of which exemption u/s 10(23C)(Vi) be denied which has already been granted to the school by the ITAT-Amritsar vide its order dated 22.02.2017 and is applicable from theA.Y.2015-16. 8.1 It is seen that considering the same, the claim was dismissed

holding as under :

4.1 I have carefully considered the facts of the case and submissions of the appellant. The assessee filed its return of income for A.Y. 2016-17 on 10.10.2016 declaring NIL income. The assessee is running an educational institution under the name and style of 'Sanskriti KMV School', Jalandhar. The lessee's application for approval u/s 10(23C)(vi) of the Income Tax Act, 1961 was rejected by the CIT(E), Chandigarh. The Hon'ble ITAT vide order in ITA No.528(Asr)/2016 dated 22.02.2017 directed to grant approval u/s 10(23C)(vi)to the assessee. The assessing officer has observed that the assessee did not have approval u/s 10(23C)(vi) of the Income Tax Act, during the year under consideration as the order of the Hon'ble ITAT was passed only on 22.02.2017. Moreover, from 10BB was also filed after the order of the ITAT i.e. on 06.06.2017. Therefore, the assessee has not satisfied one of the basic conditions for claiming exemption u/s 10(23C)(vi) of the Act. Further it was observed that the assessee was charging high fees under multiple heads and paying lower salaries to the staff. The assessee was thus functioning on commercial principle with misplaced focus on maximisation of surplus which is beyond the scope of 'Charitable purpose' as defind u/s 2(15) of the Income Tax Act, 1961. 6. During the appeal proceedings, Ld. Counsel has stated that Hon'ble ITAT, Amritsar has allowed exemption u/s 10(23C)(vi) vide order dated 22.02.2017. The assessee school is affiliated to CBSE and it is not government aided school but purely private school imparting education to the students, the school was entitled to charge the fees from the students. The assessee school is affiliated to CBSE. The assessing officer has observed that the assessee was functioning on maximisation of profits and not for charitable purposes as it was charging high fees and paying low salaries. It is observed that there is no restriction such on the rate of fees charged or the salaries to be paid to staff. Moreover, the assessee has been granted exemption u/s 10(23C)(vi) vide order of Hon'ble ITAT on 22.02.2017, therefore, the institute is running for the purposes of education i.e. for charitable purposes. It is observed that form 10BB was filed by the assessee on 06.06.2017 as per CBDT Circular 10/2019, the assessee should have filed form 10BB by 17.10.2016. i.e. date of filing of return of income for A.Y. 2016-17. The assessee has not brought on record whether any permission was obtained from the CIT(Exemption) for late filing pf Form 10BB. Since, the assessee has failed to file audit report in form 10BB within the stipulated time, therefore, the assessment made by the assessing officer is upheld. Grounds of appeal of the assessee are dismissed. 8.2 On a perusal of the same, it is seen that there is no

discussion as to why the order of the CIT(A) passed in the

immediately preceding assessment year which has been upheld by

ITA 7/CHD/2020 A.Y. 2016-17 Page 7 of 9

the Co-ordinate Bench was not considered while deciding the issue.

A perusal of the record shows that in ITA 1397/CHD/2018, the Co-

ordinate Bench proceeded to decide the issue in the following

manner :

8.3 The position on facts and law as summed up by the ld. AR are

extracted hereunder for the sake of completeness :

Dear, sir, The brief facts of the case are that the assessee is a public school imparting education to the students from nursery to XII th classes. The school is affiliated with CBSE w.e.f 1-4-2008 and ever since till today is recognized and imparting education on the pattern approved by the CBSE. The school was claiming exemption U/s 10(23c)(iiiad) and it was allowed by the department for A.Y 2013-14,2014-15,2015-16. The A.O denied the exemption on the grounds that the assessee is not an institution which exists solely for education purpose and has not been registered U/S 10(23c)(vi).The CIT (A)reversed the finding of the A.O in all the three years and held that the assessee is an education institution entitled to exemption u/s 10(23c)(vi), copies of the CIT(A) orders for all the three years are placed on paper book pages no's 22 to 28, 29 to 35 and 36 to 39 respectively. The appeals of the department against the order for A.Y 2013-14 and 2014-15 were dismissed by the ITAT on tax effect. However the department filed appeal for A.Y 2015-16 raising the ground before ITAT that the assessee is neither registered u/s 10(23c)(vi) nor it exists solely for the purpose of education and exists for other purposes i.e for the motive of profits . Copies of grounds of appeal are enclosed for your ready reference. The appeal of the department was dismissed by the ITAT vide order dated 9-5-19 placed on paper book page no 45&46.There is a specific finding that there are no changes in the facts & circumstances as compared to A.Y 14-15. In the A.Y 16-17 i.e the impugned year the A.O despite the settled

ITA 7/CHD/2020 A.Y. 2016-17 Page 8 of 9 position by the CIT (A) and the ITAT again disallowed the exemption in Para 11 of the order on 2 grounds that assessee failed to prove that it was existing wholly & solely for education not for profit and secondly on the ground that assessee did not have approval u/s 10(23c)(vi) of the Act during F.Y 15-16. Further the A.O gave presumptive and unnecessary findings in the Para 8 & 9 that the assessee had been paying low salaries to the teachers and the quality of education is low. The assessee filed an appeal before the CIT (A) and also filed written submissions which have been reproduced by her in Para 3 and entire explanation was given to CIT(A). Further the assessee also filed the order of ITAT for A.Y 2015-16 which the CIT (A) has clearly ignored. Evidence of filling the order of ITAT on 18/09/2019 is enclosed herewith. The CIT (A) rejected the appeal of the assessee despite the order of ITAT by giving a finding in the Para 4.1 of the order that the assessee was an educational institution functioning on commercial principles with misplace focus on maximization of surplus which is outside the scope of charitable purpose as defined in sec 2(15). This finding of CIT(A) is contemptuous of not following the order of her predecessor for A.Y 15-16 which was duly confirmed by the ITAT. The second observation of the CIT (A) that form no. 10BB was not filed along with the return of income by 17/10/2016 as prescribed in proviso of 10(23c)(vi). The CIT(A) failed to appreciate that assessee was denied exemption by the CIT(E) for F.Y 14-15 but the exemption was allowed by ITAT by reversing the order of CIT(E) vide their order dated 22/2/17 refer paper book page no 4. The assessee could filed the form 10BB only after receiving this order of ITAT which was filed on 6-6-17 before the A.O which was not considered by the A.O on the ground that form 10BB is not filed along with the return of income. It is not understood as to how 10BB could be filed before the order of ITAT dated 22/2/17 especially when there is column no 6 in form 10BB which ask for the registration number without which it cannot be filed refer to Form no 10BB on page 1 of paper book. Legal position There are various deductions and exemptions under the income tax act for which an audit report is required to be obtained and also to be filed along with the return of income the such sections are 12A(b) ,80 HHC, 801, 80J, 32AB . The Hon'ble Jurisdiction High Court as well as various other High Courts of the country have consistently given a finding that the filling of the audit report is not mandatory but directory in nature and can be filed to claim the exemption /deduction at the time of assessment proceedings or even appellant proceedings. The A.O cannot deny the exemption for non filling of the audit report along with the return and before processing of the return can direct the assessee to file the same as per the provisions of sec 139(5) and 139(9).”

8.4 Accordingly, in the light of the facts and position of law as

argued which stands unrebutted, relying upon consistency in the

absence of any arguments to the contrary, the appeal of the

ITA 7/CHD/2020 A.Y. 2016-17 Page 9 of 9

assessee is allowed. Said order was pronounced at the time of

virtual hearing itself in the presence of the parties via Webex.

statistical purposes.

Order pronounced on 29th April,2021.

Sd/- (�दवा �संह ) (DIVA SINGH) �या�यक सद�य/Judicial Member

“पूनम” आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�/ CIT 4. आयकर आयु� (अपील)/ The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar