Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘A’ BENCH, KOLKATA
Before: Shri Rajesh Kumar & Shri Sonjoy Sarma
Per Rajesh Kumar, Accountant Member:- The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 12.01.2023 passed under section 250 of the Income Tax Act, 1961 for A.Y. 2020-21. 1
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society
The assessee has raised the following grounds of appeal in the Memorandum of Appeal:- (1) That on the facts of the case and in law, the learned CPCerred in not allowing the capital expense of Rs.64,52,436/-and revenue expense of Rs.5,52,52,167/- incurred duringand revenue expense of Rs.5,52,52,167/- incurred duringthe year on the ground that the return of income and Form10B was not filed by the assessee on time and the learnedCIT(A) erred in upholding the same although the saidexpenses were exclusively incurred for the purposes ofgenerating revenue from running of educational institutions. (2) That on the facts of the case and in law, the learned CPCerred in not allowing the statutory exemption ofRs.93,31,921/-, being 15% of the gross receipts u/s 11(1 )(a)of the Act on the ground that the return of income andForm 10B was not filed by the assessee on time and thelearned CIT(A) erred in upholding the same. (3) That on facts and in circumstances of the case, the learnedCPC and CIT(A) failed to appreciate the law that incomederived from the trust property has to be computed oncommercial principles by virtue of Circular No. 5-P(LXX-6) of 1968, dated 19-6-1968. (4) That on facts and in circumstances of the case, the learnedCPC and CIT(A) failed to appreciate the law that incomederived from the trust property has to be computed oncommercial principles by virtue of Circular No. 5-P(LXX-6) of 1968, dated 19-6-1968. (5) That on the facts and circumstances of the case, the delayin filing the return of income and Form 10B was due to firebreakout in the office of the society where records werekept and outbreak of the pandemic Covid- 19 virus whichcaused severe disruption in the normal working conditions. 3. Besides the assessee has also raised an additional ground, which is reproduced below:-
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society “That on the facts and in law, the ld. CPC erred in not following the mandate as required by first proviso to section 143(1) of the Act, which says that no such adjustment shall be made unless an intimation is given to the assessee of such adjustment either in writing or in electronic mode”. 4. At the outset, we would like to mention that the issue raised in the additional ground of appeal by the assessee is a legal issue and is being adjudicated in precedence to regular grounds of appeal.
The facts in brief are that the assessee filed its return of income in Form ITR 7 under section 139(4) on 31.03.2021 declaring total income at NIL and Form No. 10B was filed on 30.03.2021whereas the extended due date for filing the return of income was 15.02.2021. Ld. Assessing Officer, CPC vide order dated 24.12.2021 passed under section 143(1) assessed and computed the total income of the assessee-Society at Rs.6,22,12,809/- being the total revenue as per the audited accounts by rejecting the claim under section 11 of the Act amounting Rs.7,10,36,524/- comprising Rs.64,52,436/- on account of capital expenditure incurred by the assessee-Trust and Rs.5,52,52,167/- towards revenue expenditure for day- to-day running of the Trust and claim being 15% of total receipt u/s 11(1)(a) of the Act Rs. 93,31,921/-. Besides, the order passed under section 143(1) states that the assessee has not filed any Form under 10B, whereas as a matter of fact, the assessee has filed the Form on
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society 30.03.2021.It is pertinent to state that the assessee is a Society registered under section 12AA of the Income Tax Act, 1961 and engaged in running of the educational institutions namely- (i) Camellia Institute of Engineering and Technology, (ii) Camellia Institute of Polytechnic; and (iii) Camellia Public School. These institutes are located at Burdwan, West Bengal, whereas the Corporate Office of the Society is at 7th Floor, 32A, Chittaranjan Avenue, Kolkata-700012. All the records of the said institutions and other statutory documents were kept at the City Office and final accounts were prepared and got audited in the same manner. A devastating fire broke out in the office premises at Trust House, 7th Floor, 32A, Chittaranjan Avenue, Kolkata-700012 and most of the original office records, files, documents and computer hard disks were burnt in the fire. Besides due to outbreak of the pandemic COVID-19 virus and severe disruption in the normal working conditions, it became very difficult for the assessee-society to consolidate the receipts and payments of these educational institutions, which contributed delay in finalizing the books of accounts, which occurred delay in filing the return of income as well as Form 10B beyond the due date as mentioned under the Act.
The ld. A.R. vehemently submitted before the Bench that the issue raised by the assesese in the additional ground of appeal is qua the jurisdiction of
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society the ld. Assessing Officer, CPC to make any addition/adjustment to the returned income unless intimation is given to the assessee for such adjustment either in writing or through electronic mode pursuant to the 1st proviso to section 143(1) of the Act, the ld. A.R. submitted that since the facts are available on record and no further verification of fact is required, the same may kindly be admitted for adjudication. Todefence his argument, ld. A.R. relied heavily on the decision of the Hon’ble Apex Courtin the case of Jute Corporation of India Limited –vs.- CIT reported in (1991) 187 ITR 668 (SC) and National Thermal Power Company Limited –vs.- CIT reported in (1998) 229 ITR 383 (SC) and prayed that the additional ground may kindly be admitted following the above decisions of the Hon’ble Apex Court.
On the other hand, ld. Departmental Representative submitted that the additional ground raised by the assesese may kindly be dismissed. He further contended that the issue was never raised before the ld. CIT(Appeals) and is being raised for the first time before the Tribunal.
We have heard the rival contentions and perused the relevant material available on record. We observe that all the facts qua the additional ground raised are available on record and no further verification of facts is required at the level of ld. Assessing Officer or ld. CIT(Appeals). Besides the case of the
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society assessee is squarely covered by the decision of Hon’ble Apex Court in the case of Jute Corporation of India Limited (supra) and National Thermal Power Company Limited (supra), wherein it has been held that even otherwise an appellate authority while hearing appeal against the order of subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provisions to the contrary , the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. Accordingly, we are inclined to admit the additional ground for adjudication.
After hearing the rival contentions, perusing the material on record and also the proviso to section 143(1)(a) of the Act, we find that the ld. Assessing Officer CPC, before making any adjustment/disallowance to the returned income as per the return of income filed by the assessee is duty bound to intimate the same to the assessee either in writing or in the electronic mode. However, we find that no such intimation has been given to the assessee before making the said adjustment or disallowance either in writing or in electronic mode. We have also examined the records of assessment proceedings on e-portal relating to the assessee as placed before us and observe that the ld. Assessing Officer, CPC has not followed the mandate of first proviso of section 143(1)(a) of the Act and consequently , the order passed under section 143(1) of the
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society Act is not as per the mandate of provisions of the Act and has to be quashed. The case of the assessee finds force from the decision dated 27th April, 2022 of the Tribunal , Ahmedabad Bench in the case of Arham Pumps in ITA No. 206/AHD/1989. The operative part of the order is extracted below:- 7. On going through the above section and proviso attached therein, the total income or loss shall be computed after making following adjustment mainly of any arithmetical error in the return. Incorrect claim, if such incorrect claim is apparent from any information in the return, etc. Thus, it is clear that a return can be processed u/s.143(1) by making adjustments on six types of adjustments only. The first proviso to section I43(l)(a) make it very clear that no such adjustment shall be made unless an intimation is given to the assessee of such adjustment either in writing or in electronic mode. Apparently in the case of the assessee, no intimation had been given to the assessee for making any adjustment or disallowance either in writing or in electronic mode. Thus, the CPC center has not followed the first proviso to section 143(l)(a) of the Act. This position was not controverted by the Id. DR also. Assuming a moment, if such an intimation is given to the assessee as per first proviso, then the second proviso stipulates that if any response is received from the assessee, the same should be considered before making any adjustment or disallowance, and also in a case where NO response is received, then within thirty days of the issue of such intimation, department is free to make such adjustment. 8. On going through the above intimation made under section 143(1), CPC has not followed the above provisos by giving proper opportunity to the assessee to defend its case as per the first proviso to section 143(1)(a) . Further, the NFAC order is also silent about the intimation to the assessee. Therefore, we find that intimation issued under section 143(1) dated 19-10- 2019 is against first proviso to section 143(l)(a), and therefore, the entire 143(1) proceedings is invalid in law. 9. We also observe that the Id.NAFC has not looked into this fundamental principle of "audi alterm partem ", which has not been provided to the assessee as per the 1st proviso of section 143(1) of the Act, but proceeded with the case on merits and also confirmed the addition made by the CPC. The ld. NFAC is thus erred in conducting the faceless appeal proceedings in a more mechanical manner without application of mind. We,
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society therefore, hereby quash the intimation issued by the CPC and allow the appeal filed by the assessee”.
10.In the instant case also, the adjustment has been made by the ld. Assessing Officer, CPC to the income of the assessee without even giving any intimation in terms of proviso to section 143(1)(a) of the Act and, therefore, the said order is quashed as invalid and nullity in the eyes of law. In the result, the additional ground is allowed.
11.In Ground No. 1 to 6 , as per the Memorandum of appeal, the assessee has assailed the order of ld. CIT(Appeals) on the ground that the ld. CIT(Appeals) wrongly upheld the order of ld. Assessing Officer, wherein he has disallowed the exemption claimed u/s 11 of the Act amounting to Rs. 7,10,36,524/- comprising capital expenditure of Rs.64,52,436/-, revenue expenditure of Rs.5,52,52,167/- incurred during the year for charitable purposes of the Trust and also Rs.93,31,921/- being exemption u/s 11(1)(a) of the Actby ignoring the fact that the assessee has filed the return of income and Form 10B on time, whereas the ld. Assessing Officer has held that the income tax return and Form 10B were filed late.
The facts in brief are that the facts have already discussed by us in the additional ground. The ld. Assessing Officer, CPC has rejected the capital expenditure of Rs.64,52,436/- and revenue expenditure 8
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society of Rs.5,52,52,167/- on the ground that the returned income as well as form 10B was filed after the due date under the Act. The ld. A.R. vehemently argued that the return of income as well as Form 10B was filed in time. As due to COVID pandemic outbreak in the country, the Hon’ble Apex Court vide its order dated 10.01.2022 extended the period of limitation for filing the return of income from 15.03.2020 to 28.02.2022 and the said period is to be excluded for computing the period of limitation. The ld. A.R. stated that the return of income filed on 31.03.2021, which was within the limitation period and so that the Form 10B was filed on 30.03.2021.The ld. A.R. also referred to the Board Circular F. No. 173/193/2019-ITA-I dated 23rd April, 2019 and submitted that the said Circular was issued by the Department before setting off COVID 19 pandemic, which states that how the delay in filing Form 10B for A.Ys. 2016-17, 2017-18 and 2018-19 has to be dealt with. The ld. A.R. submitted that on the basis of such Circular issued by the Department, the Hon’ble Apex Court has passed its judgment dated 10.01.2022, wherein it has been held that the order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings.The
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society ld. A.R. submitted that since the assessee has filed the return of income on 31.03.2021 and Form 10B on 31.03.2021, the delay is covered by the said order of the Hon’ble Supreme Court and, therefore, this return of income as well as Form 10B are to be treated as filed well within time.
The assessee challenged the order before the ld CIT(A) however the appeal was dismissed by the ld. CIT(Appeals) by observing and holding as under:- “Findings & Decision: The solitary issue raised in the grounds of appeal relates to denial of exemption under Sec.11 since the return of income was filed under Sec. 139(4) of the Act. Appellant submitted that due to fire break out and covid-19, the return of income was filed on 31.03.2021 and Form 10B was filed on 30.03.2021. The appellant has also filed copy of order passed by the CIT(Appeals) in respect of one of its group cases in support of its claim that the return of income was not belatedly filed. The appellant has filed its return of income under Sec. 139(4) of the Act. The due date for filing the return of income for Asst Year 2020-21 was extended upto 15.02.2021 and the due date for filing the return of income under Sec.139(4) of the Act was 31.03.2021. To allow the benefit of exemption under Sec.11, the appellant has to filed the audit report in Form 10B before the due date for filing the return of income and return of income under Sec.139 of the Act. Now the point for consideration is whether the exemption was denied to the appellant under Sec.11 for filing the return of income under Sec.139(4) of the Act or for filing Form 10B on 31.03.2021 by the CPC.
4.1 The appellant placed reliance on the Miscellaneous Application filed before the Hon’ble Supreme Court for extending the period upto 28.02.2022 in respect of petitions /applications/suits /appeal/all other quasi-judicial proceedings under the general law of limitation or under any special laws. This order relates to the extension of time limit in respect of proceedings pending before the appellate forum and the extension of due date for filing the return of income is prescribed by the Board and the said order is not applicable to the facts of this case. 4.2. Before considering the position of law with regard to Sec. 10B, the provisions of Sec.12A(1 )(ba) which was inserted with effect from Finance Act 2017 shall be analyzed. According to Sec.12A(1)(ba), “the person in receipt of the income has furnished the return of income for tiie previous year in accordanee with the 10
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society provisions of sub-section (4A) of section 139, within the time allowed under that section. ” The above provision was subsequently clarified by the Board vide its Circular F.No. 173/193/2019-ITA-l dated: 23 April, 2019 to clear that return oflncome~fiied unfle7~3ec.139 algo incTu5e~Sec. 139(4) of the Act. The extract of the Circularis reproduce(Tag~betow: Subject: Clarification with regard to the time allowed for filing of return of income subsequent to the insertion of Clause (ba) in sub- section 1 of section 12A of the income -tax Act , 1961. Undersigned is directed to refer to the representation (s) received on above mentioned subject stating that while processing of ITR-7 for the A.Y. 2018- 19, in respect of the belated returns filed u/ s 139(4) of the Income Tax Act, 1961 (Act), the following is being communicated u/s 143(1)(a) of the Act:-
“As per section 12A(1)(ba) of the Income -tax A c t , 1961 the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section. Otherwise the exemption u/s-11 i.e.sr. no 4(i) and 4 viii in schedule Part BTI is not allowed.” Based on this, exemption u/s 11 of the Act has been denied to otherwise eligible trust, thereby creating huge demand. 2. In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under: “as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under sub- section (4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed u/s 139 of the Act or otherwise. In order to provide clarity in this regard, it is proposed to further amend section 12A so as to provide for further condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Act. These amendments are clarificatory in nature. These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018- 19 and subsequent years. ” 3. Additonally, an excerpt of circular 02/2018 dated 15.02.2018 “Explanatory Notes to the Provisions of the Finance Act, 2017” on insertion of clause (ba) in Sub section (1) of section 12A is quoted as under:
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society “the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income -tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income -tax Act. ” 4. Thus, for a trust registered U/s 12AA of the Act to avail the benefit of exemption u/s 11 shall inter-alia file its return of income within the time allowed u/s 139 oi the Act. But this Circular clarifies the position of law with regard to filing of return of income under Sec. 139 of the Act. 4.3. Now, the next point for consideration is whether the audit report in form 10B was submitted before the due date for filing the return of income. As per Rule 17B ‘the report of audit of accounts of a trust or institution which is required to be furnished under clause (b) of Sec 12A shall be in Form 10B and audit report shall be submitted electronically before the due date of filing the return of income. In this case, the appellant filed the Audit Report in Form 10B on 30.03.2021. It is pertinent to mention that considering the covid pandemic, the due date for filing the return of income was extended upto 15.02.2021. However, the appellant did not choose to file the audit report before the due date which has been made mandatory from Asst Year 2016-17 onwards. Hence due to failure to furnish the Audit Report, the exemption was denied to the appellant. To protect the interest of revenue, failure on the part of the appellant to file Audit Report has been treated as calling for adjustment to the income returned and therefore, the benefit of exemption under Sec 11 was denied. 4.4. Next question which arises is whether it is a curable defect? The omission to file Form 10B within the due date for filing the return of income due to technical glitches or due to circumstances beyond control of the appellant can be examined only by the Competent Authority who is the Commissioner of Income-tax (Exemption) under Sec 119(2)(b) as power has been conferred by CBDT on CIT and the appellant has a specific remedy through a specific window. 4.5. In relation to delay in filing Form 10B for Asst Year 2020-21, the Central Board of Direct. Taxes vide Circular No. 10/ 2019 dated 23rd May, 2019 and Circular No. 28/2019 dated 27th September, 2019 both issued vide F.No.197/55/2018-ITA-l has directed that (i) The delay in filing of Form no. 10B for A.Y. 2016-17 and AY. 2017-18, in all such cases where the Audit Report for the previous year has been obtained before the filing of income and has been furnished subsequent to the filing of the return of
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society income but before the date specified under section 139 of the Act is condoned. (ii) In all other cases of belated applications in filing Form No.10B for years prior to AY 2018-19, The commissioner of Income- Tax arc authorized to admit and dispose off by 31.03.2020 such applications for condonation of delay u/s 119(2)(b) of the Act. The Commissioner will while entertaining such belated applications in filing Form No. 10B3 shall satisfy themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time. 5. In addition to the above, it has also been decided by the CBDT that where there is delay of up to 365 days in filing Form No. 10B for Assessment Year 2018-19 or for any subsequent Assessment Years, the Commissioners of Income-tax are hereby authorized to admit such belated applications of condonation of delay u/s 119(2) of the Act and decide on merits.” 4.6. Hence, the appellant is directed to seek the necessary remedy by filing a petition for condonation of delay under Sec 119(2)(b) of the Act before the Competent Authority i.e., Commissioner of Income-tax (Exemptions). 5. In the result, the appeal is “Dismissed”.
The ld. A.R., therefore, prayed that the order passed by the ld. CIT(Appeals) upholding the order of ld. Assessing Officer on the issue that the returned income as well as Form 10B were filed before the due date is erroneous and factually incorrect and against the ratio laid down by the Hon’ble Apex Court dated 10.01.2022. The ld AR submitted that time for filing the return of income u/s 139(1) of the Act was extended for A.Y. 2020- 21 to 15.02.2021. The ld AR further stated that the in view of the Covid 19 outbreak, the Hon,ble Apex Court has extended the limitation in respect of all the judicial and quashi judicial proceedings. The ld AR stated that
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society the Honble Apex Court has ruled that where the limitation would have expired during the period commencing from 15.03.2020 till 28.02.2022, notwithstanding the actual period of limitation , all the persons shall have a limitation period of 90 days from 01.03.2022. In his second argument , the ld AR contended that the income derived from the trust property by the assesse trust has to be computed on commercial principles by relying on the circular no. 5- P(LXX-6) of 1968 dated 19.6.1968. The ld AR also relied on certain decisions namely CIT Vs Jayashree Charity Trust (1986) 159 ITR 280 (CaL), CIT Vs Programme for Community Organisation(1997) 228 ITR 620 (Ker) and CIT Vs Birla Janahit Trust (1994)208 ITR 372(Cal) to defend his arguments. ld AR ,therefore, prayed before the bench that the appellate order is against the order as stated above and may be quashed.
The ld. Departmental Representative, on the other hand, relied on the order of authorities below.
After hearing the rival contentions and perusing the material available on record, we find that admittedly the return of income was filed in Form 7 and Form 10B on 31.03.2021 and 30.03.2021 whilethe extended due date for filing the return of income in relevant assessment year was 15.02.2021.We note that the COVID 19 pandemic was spread all over the country and the entire
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society country rather the entire globe were completely brought to standstill. And so was the condition so far as the assessee trust is concerned. So considering all these practical difficulties for making compliances, Hon’ble Apex Court has extended the period of limitation with respect to judicial or quasi-judicial proceedings. The Hon’ble Apex Court vide its order dated 10.01.2022 held as under:- “The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022”.
In our opinion, considering the said decision of the Hon’ble Supreme Court, there is no delay in filing the return of income as well as Form 10B and, therefore, the order of the ld. CIT(Appeals) upholding the order of ld. Assessing Officer, wherein the exemption claimed under section 11 of the Act by the assessee-Trust has been rejected resulting into disallowance of capital expenditure of Rs.64,52,436/-, revenue expenditure of Rs.5,52,52,167/- and exemption of 15% of total receipts u/s 11(1)(a) which is incorrect and against the ratio laid down by the Hon’ble Supreme Court. Accordingly we set aside the order of ld. CIT(Appeals) 15
ITA No. 106/KOL/2023 Assessment Year: 2020-2021 M/s. Kalyan Educational Society on this issue and direct the AO allow the exemption claimed u/s 11 of the Act. The ground No. 1 to 5 are allowed.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on May 23rd, 2023. Sd/- Sd/- (Sonjoy Sarma) (Rajesh Kumar) Judicial Member Accountant Member Kolkata, the 23rd day of May, 2023
(1) Copies to : M/s. Kalyan Educational Society, Budbud Bye Pass (North), Dist. Bardhaman-713403 (2) Assistant Commissioner of Income Tax, Circle-2, Durgapur, Aayakar Bhawan, Durgapur, West Bengal (3) Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi; (4) Commissioner of Income Tax-; (5) The Departmental Representative (6) Guard File TRUE COPY By order
Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.