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Facts
The assessee filed five appeals against orders for assessment years 2010-11 to 2014-15. The appeals were consolidated as they were interconnected. The assessee raised nine grounds of appeal, primarily concerning the validity of reassessment proceedings initiated under Section 147 read with Section 143(3).
Held
The Tribunal found that the show cause notice for reassessment was issued on a limited issue, but the assessment order covered a wider scope, including the entire income and expenditure account. This was considered a violation of principles of natural justice. Consequently, the matter was remitted back to the Assessing Officer for fresh adjudication.
Key Issues
Whether reassessment proceedings initiated on a limited issue and subsequently expanded to cover the entire income and expenditure account are valid, and whether the AO properly applied Section 13(1)(b).
Sections Cited
147, 143(3), 13(1)(b), 12AA, 11, 12
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Income Tax Appellate Tribunal, DELHI BENCH “E”, NEW DELHI
Before: SHRI SHAMIM YAHYA, & SHRI SUDHIR KUMAR
(Asstt. Year : 2011-12) (Asstt. Year : 2012-13) ITA No. 2999/Del/2023 (Asstt. Year : 2013-14) ITA No. 3000/Del/2023 (Asstt. Year : 2014-15) The Northern India Zonal, Assembly vs. Income Tax Officer (Exemptions) Of the Mar Thoma Church, New Delhi Ward 2(3), Civic Centre, 26, Bhai Vir Singh Marg, New Delhi-2 Gole Market, New Delhi – 1 (PAN: AAATT9295N) (Appellant) (Respondent) Appellant by : Sh. R.K. Sharma, Adv. Respondent by : Sh. Dheeraj Kumar Jain, Sr. DR. Date of Hearing 29.05.2025 Date of Pronouncement 29.05.2025 ORDER PER BENCH : These 05 appeals have been filed by the Assessee against the separate orders passed by the NFAC, New Delhi relating to assessment years 2010-11 to 2014-15 respectively. Since these appeals are inter-connected, hence, were heard together and disposed of by this common order for the sake of convenience, by dealing with the assessment year 2010-11, being the lead case wherein, the assessee has raised as many as 09 following grounds of appeal.
1. Whether on the facts and circumstances of the case, the CIT Appeal has grossly erred and failed to appreciate that the AOs order under section 147 read with section 143(3) is bad in law as the proceedings were invoked without satisfying the requirements and conditions for reassessment.
2. Whether on the facts and circumstances of the case, the CIT Appeal has grossly erred and failed to appreciate that the AO has invoked the reassessment proceedings based on false information without verifying that the purported informer DCIT(E) himself has not made any addition with regard to religious activity and has made additions pertaining only to administrative expenses vide its Assessment Order under section 143(3) AY 2010-11 dated 31.12.2016.
3. Whether on the facts and circumstances of the case, the CIT Appeal has grossly erred and failed to appreciate that the AO has passed the order in blatant ignorance and disregard of the statutory provisions; the AO misapplied the provision of section 13(1)(b) which cannot be invoked even if the assessee is engaged in religious activity as section 13(1)(b) applies only to charitable activities (not religious activity) conducted for a specific religious community.
4. Whether on the facts and circumstances of the case, the CIT Appeal has grossly erred and failed to appreciate that the AO erred in law and on facts by not recording any finding about religious activity of the assessee, the onus was on the AO to have established that the assessee was engaged in religious activity and not on the assessee as observed in the order passed by the AO.
5. Whether on the facts and circumstances of the case, the CIT Appeal has grossly erred and failed to appreciate that the AO erred in law and on facts by assuming that a charitable organisation cannot engage in religious activity which is against the settled law as enunciated by the Supreme Court in the case CIT, Ujjain v. Dawoodi Bohara Jamat [2014] 43 taxmann.com 243 (SC) where it was held that a trust carrying on charitable and religious activity simultaneously was permissible.
6. Whether on the facts and circumstances of the case, the CIT Appeal has grossly erred and failed to appreciate that the AO erred on law and facts by taxing the capital expenditure of Rs. 1.49 crore without disputing a single voucher of the various genuine expenditures made by the assessee. The depreciation which is part of revenue expenditure was also wrongly disallowed.
7. Whether on the facts and circumstances of the case, the CIT Appeal has grossly erred and failed to appreciate that the AO erred on law and facts by taxing the income to the extent of Rs. 1.49 crore towards capital expenditure which is bad in law in the light of non applicability of section 13(1)(b) and validity of 12AA registration merely on the basis of allegation. The CIT Appeal further erred on facts and in law in not taking the note of the fact, that all expenditures and its supporting vouchers, balance sheet along-with audit report of all projects were submitted before the assessing authority but nothing is found by the assessing authority to be of religious nature with regard to expenditure or utilization of fund on religious activities.
8. Whether on the facts and circumstances of the case, the CIT Appeal has grossly erred and failed to appreciate that the order is bad in law in the light of the fact that the CIT (Appeal-17) Chennai, for the AY 2010-11 to 2015-16 had quashed all additions pertaining to religious activity and inter charity grant in case of Caruna Bal Vikas. The orders of CIT (Appeal) have not been appealed by the Income Tax Department and therefore, attained finality. CIT (Appeal-17) Chennai upheld additions only pertaining to administrative expenses and are sub judice before ITAT Chennai.
9. Whether on the facts and circumstances of the case, the CIT Appeal has grossly erred and failed to appreciate that the reassessment order of CBV Chennai dated 31.12.2016, based on which the reassessment was made, was not considered in entirety. In the said order there is no addition pertaining to section 13(1)(b) and the restricted grant have not been treated as income. (This ground has been added as per the directions of Hon'ble High Court of Delhi vide its order no W.P. (C) 5394/2023 dated 08.05.2023).
2. However, in all the captioned appeals, the assessee has raised a following common Additional Ground and submitted that this legal ground goes to the root of denying opportunity to rebut the allegations reasons are given in additional legal ground, hence, the same may be admitted first and then adjudicate it. “The show cause notice for completing the assessment u/s. 143(3) r.w.s. 147/148 of the I.T. Act is issued only on one issue of denying
4 | P a g e the exemption u/s. 11 & 12 r.w.s. 13(1)(b) of the Income Tax Act whereas while framing the impugned assessment, the AO assessed entire Income and Expenditure Account including all receipts and genuine expenditure which is contrary to the settled principles of law that the show cause notice is kind of an opportunity given to the appellant to reply all proposed allegations, therefore, in the show cause notice in the instant case given on one issue cannot framed the entire income and expenditure account.”
Heard rival contentions and perused the records. We find that the aforesaid additional ground raised by the assessee is purely a legal ground and goes to the root of the matter, thus, on the anvil of the Hon’ble Supreme Court decision in the case of NTPC Vs. CIT the aforesaid additional ground filed by the assessee is admitted and is being adjudicated in the forgoing paragraphs.
At the time of hearing, Ld. AR for the assessee submitted that AO issued the show cause notice for completing the assessment u/s. 143(3) of the Act only on the issue that some of the activities being undertaken during the year are in the nature of religious activities, namely expenses on Spiritual activities and gifts etc. are in nature of religious activities, whereas while framing the impugned assessment, the AO has touched so many issues and made the various additions under the different heads, as a result thereof, the assessee at that point of time, has not been able to canvass its case on the entire income and expenditure account including all receipts and expenditure. Hence, Ld. AR requested that matter may be remitted back to the file of the AO with the directions to decide the issues afresh, in accordance with law, after giving adequate opportunity of being heard to the assessee. Ld. DR did not object the aforesaid proposition. 5 | P a g e
After hearing both the sides and perusing the records, we find considerable in the contention of the Ld. AR that AO had issued the show cause notice dated 26.12.2017, which is placed at page no. 336-337 of the Assessee’s Paper Book for completing the assessment u/s. 143(3) of the Act only on the issue that some of the activities being undertaken during the year are in the nature of religious activities, namely expenses on Spiritual activities and gifts etc. are in nature of religious activities, whereas while framing the impugned assessment, the AO has touched so many issues and made the various additions under the different heads, which is not sustainable in the eyes of law, because the show cause notice is a source of providing an opportunity to the assessee to reply all the proposed allegations, whereas in instant case the show cause notice was given only on one issue viz. denying the exemption u/s. 11 & 12 r.w.s. 13(1)(b) of the Act, which cannot frame the entire income and expenditure account. In view of the aforesaid factual matrix and in the interest of justice, in our considered opinion, the matter is required to be remitted back to the file of the Assessing Officer with the directions to decide the issues in dispute afresh, in accordance with law, after giving adequate opportunity of being heard to the assessee. Assessee is also directed through his Ld. A.R. to properly canvass its case before the AO on all the issues in dispute to enable the AO to pass a well reasoned assessment order.
In the result, the appeal for the assessment year 2010-11 stand allowed for statistical purposes in the aforesaid manner.