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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND MS KAVITHA RAJAGOPAL, JM
ITA No. 1284/MUM/2021 (Assessment Year 2011-12) Vighnaharata Trust CIT (Exemption) 1605/06 Hurrah, City of Joy, Room No-617, 6th Floor, Near Railway Station, LBS Piramal Chamber, Lalbaug, Vs. Marg, Mulund West, Mumbai- Parel, Mumbai- 400 012 400 080 (Appellant) (Respondent) PAN No. AAATV8040K Assessee by : Shri. Rajeev Khandelwal Revenue by : Shri. Achal Sharma CIT DR Date of hearing: 02.11.2022 Date of pronouncement: 15.12.2022
O R D E R PER PRASHANT MAHARISHI, AM:
This appeal is filed by the assessee M/s. Vighnaharata Trust [Assessee/ Appellant] for A.Y. 2011-12 in ITA 1284/MUM/2021 against Revisionary order passed by the CIT(Exemption) Mumbai [ The Ld. CIT ] dated 22.03.2021 u/s. 263 of the Income Tax Act, 1961 [ The Act] wherein it has been held that the assessment order passed u/s. 143(3) of the Income Tax Act on 14.12.2018 is erroneous in as far as it is prejudicial to the interest of revenue.
Assessee has raised following grounds of appeal.
“(1) On the facts of the case and in law, the Ld. CIT(E) has erred in invoking
(2) On the facts of the case and in law, the Ld. CIT(E) has erred in involving the jurisdiction in a very casual and mechanical manner. The Ld. CIT(E) has not applied his mind to the assessment records and proceeded to invoke his power under Section 263 of the Act, even though mandatory conditions for evoking power were not meet.
(3) On the facts of the case and in law, the Ld. CIT(E) has erred in passing the Order under Section 263 of the Act in mechanical manner without considering and applying his mind to submission made by Appellant in protest of Notice under Section 263 of the Act.
(4) On the facts of the case and in law, the Ld. CIT(E) has erred by holding that an „AOP‟ cannot claim loss or deficit if income is computed under the head Income from business and profession.
(b). The Ld. CIT(E) ought to have appreciated that wrong filing of ITR is defect curable under Section 292B of the Income Tax Act. The Ld. CIT(E) has also failed to appreciate that even though the wrong form of ITR was statutory relief and benefits otherwise allowable cannot be to be denied to the Appellant.
(6) On the facts of the case and in law, the Ld. CIT(E) has erred by fail to appreciate that Appellant is out of the purview of Sec. 115BC of the Act and that Section 115BBC is not applicable to AOP‟s but only to those “Persons i.e., who claims benefit of exemption under Section 10(23C) or 11 of the Act.
(7) On the Facts of the case and in law, the Ld.CIT(E) ought to have given finding on the legal issue whether Sec. 115BBC applies to Appellant as it goes to the roots of the matter.
(8) On the facts of the case and in law, the Ld.CIT(E) has erred in holding that filing of
(9) On the facts of the case and in law, the Notice dated 09/03/2021 and order dated 22/03/2021 passed under Section 263 of the Act, suffer from non-application of the mind and are passed in mechanical manner and thereafter ought to be quashed.”
Brief facts of the case shows that, assessee is an Educational Trust running schools, colleges. It is a registered society under the Societies Registration Act and also registered u/s. 12AA of the Income Tax Act w.e.f. A.Y. 2013-14.
For A.Y. 2011-12 the assessee trust filed its return of income on 24.04.2012 declaring the deficit of ₹ 53,02,2672/-. The above return of income was not picked up for scrutiny but was processed on 14/12/2013. Subsequently, notice u/s. 148 of the Act was issued on 26.03.2018 recording the detailed reason.
Assessee filed letter dated 27.04.2018 requesting to treat return filed originally as return u/s. 148 of the Act. Subsequently, assessment u/s. 143(3) r.w.s 147 of the Act was passed by the ld. Assessing Officer on 14.12.2018 wherein the addition of ₹ 05,52,04,903/- was made u/s. 115BBC as anonymous donations. Accordingly, against the
This order was challenged by the assessee before the CIT(A)-1 Mumbai by filling Form No. 35. The assessee has challenged reopening of the assessment as well as the addition on the merits of the case. The assessee filed appeal on 19.03.2019. Same is pending before the ld. CIT (A) for adjudication.
Meanwhile, the ld.CIT exemption examining the record issues show cause notice that order passed by the ld. Assessing Officer is erroneous in So far as it is prejudicial to the interest of revenue in the following manner.
(a) On perusal of the records it is seen that the AO has not made enquiry regarding cash donation and corpus donation. In this case assessee has not claimed exemption us/.s 11, then the Return filed by it in ITR-7 itself is an invalid Return, and therefore, all brought forward deficit under the head „Income from Business and Profession‟ also could have been disallowed. The brought forward losses and depreciation of ₹ 489.78 lacs and ₹ 31.06 lacs respectively have been claimed in the Return of Income, which could have been disallowed. Similarly, the carry forward of current year‟s deficit also would not be allowable, The AO has failed to hold the return of income filed as invalid and thereby disallowing the b/f and c/f of the losses.
(c) It is also seen that the Balance Sheets and Income & Expenditure Accounts of the assessee have been signed by the Auditors on 24.06.2011 but the consolidated balance Sheet has been signed on 17.04.2012. There is an extremely abnormal delay.
(d) It is also important to note that neither the audit report in Form 10B has been filed. Form 3CD which should have been filed if the income was treated as „Income from Business/ Profession/ has not been filed. Moreover, the accounts and financials filed by assessee included receipts and Payment account, and Income & Expenditure Accounts and not the Profit & Loss Account. The AO did not look this aspect.
(e) It is also seen that in the final computation of income AO has started it as deficit shown by assessee at – (₹ 5.52 crores) as per statement of income filed. AO has then added the amount of Rs
The AO has passed order without the basic verification of the above facts stated above and therefore the order is prejudicial to the interest of revenue.
Show cause notice issued on 09.03.2021 , assessee submitted its reply on 18.03.2021 stating as under:
i. The ld. Assessing Officer has completely examined the issue as per Paragraph No. 5-6 of the assessment order therefore, it is completely incorrect to state that AO has not made adequate enquiries it was further stated that several notices in the re-assessment proceedings were issued and same were replied by the AO. It was further stated that AO has made in depth enquiry on the issue of anonymous donations and therefore the assessment order cannot be held to be erroneous.
iii. It was also stated that with respect to the unsecured loan assessee is not required to take any permission because it was a secured loan taken from banks in A.Y. 2010-11 after obtaining permission of the charity commissioner and therefore, the question of the violation of Section 11 does not arise.
iv. With respect to the consolidated balance sheet signed by the auditor is also not a relevant consideration.
v. With respect to the donation, he submitted that the donation was received towards the building fund and shown in the balance sheet. It is also submitted that, same is already added as income by the ld. AO in assessment order therefore, 263 provisions cannot be invoked.
The ld.CIT considered the explanation of the assessee and held as per order dated 22.03.2021 that the order passed by the ld. Assessing Officer is erroneous and prejudicial, to the interest of the revenue for following reasons:-
“Hence, the sum and substance of the above judicial pronouncements is to ascertain whiter the AO in the assessment proceedings has conducted verification/inquiries that were required to be
(1) The assessee has filed return in ITR-7 which is meant exclusively for charitable entities granted necessary registration/notification under the relevant clause of the Act. The AO in the assessment proceedings has not examined implications arising out of this aspect at all.
(2) The assessee has stated in the written submissions stated it has not claimed exemptions under section 11 and treated itself as AOP. If that is the case, how could the assessee claim „deficit‟ under the head income from Business or Profession. The AO has failed to examine this aspect in the assessment proceedings.
(3) Thought the AO has added the amount of ₹ 5.05 crores being anonymous
(4) The assessee has neither filed return Form 10B nor Audit Report in Form 3CD. The assessee in its return of income claims deficit as a charitable entity but does not file the mandated audit report in Form 10B. The assessee filed return of income in ITR 7 but states that it has submitted itself as AOP. If it is an AOP, the necessary Audit report in Form 3CD should have been filed. This aspect has not been verified, examined at all by the AO.
(5) Further, if the assessee is an AOP, Profit & Loss Account should have been filed, On the contrary, Income & Expenditure Account and Receipts and Payments account has been filed as would be done by a charitable entity. The AO has accepted all these discrepancies/anomalies without any verification/ inquiry whatsoever.
In view of the facts and circumstances and legal precedence as narrated above, and by virtue of the powers vested in the undersigned vide provisions of Section 263 of the I.T. Act, 1961, the assessment order dated 14/12/2018 is set aside with a direction to AO to undertake assessment proceedings de novo. The assessment proceedings shall be completed after proper examination of all the relevant issues, and after giving the assessee reasonable opportunity of being heard.”
Therefore, the assessee is aggrieved with that order and is in appeal before us. The ld. Authorized Representative referred to the detailed paper book containing 174 pages. He submitted that
i. When appeal on the same issue is pending before the ld.CIT(A) the CIT could not have invoked jurisdiction u/s. 263 of the Act. In view of the decision of Smt. Renuka PhillipVs. ITO 409 ITR 567 (Madras) he specifically submitted that explanation
ii. Even, otherwise on the merits, he submitted that the ld. AO has carried out detailed enquiry on the anonymous donation. He referred to his reply. He submitted that when the name and address of the parties are submitted, the same cannot be treated as anonymous donation. He referred to the definition of anonymous donation u/s. 115BBC of the Act.
iii. He further stated that,the carried forward sum determined by the AO is only the deficit of depreciation and not any losses.
iv. He further stated that assessee submitted the complete details before the Assessing Officer is applied his mind and passed necessary orders.
v. The explanation was given by before CIT, but without discussing and without pointing out that what is the error in the order of the AO.
The ld.CIT DR supported the order of the ld. PCIT. He submitted that,
i. assessee has filed a wrong return in ITR-7 which is not meant for the assessee. Assessee is a non-registered trust. An incorrect form was filed by assessee and AO without looking into the implication of the same passed the assessment order.
ii. The AO has also allowed the deficit claimed by the assessee without verifying that whether it is allowable to the trust or not. He therefore submitted that computation of income is also erroneous.
iii. Assessee has not filed Form No. 10B or Form No. 3CD then how assessee can claimed the deficit by filing ITR 7 which it is not entitled to look into. Accordingly, the AO considering the wrong return and allowing the loss to the assessee has fallen into an error. Thus, the CIT is correct in invoking the provisions of section 263 of the Act.
iv. He submitted that according to Section 115BBC, the amount of anonymous donation is required to be charged at the rate of 30% on
v. On the issue of decision of Hon‟ble Madras High Court, he referred to the provisions of Section 263 and submitted that, if the issued is „considered and decided‟ in the appeal then only 263 cannot be made. Merely filing of the appeal cannot oust the jurisdiction of revisionary authority. Hence, decision of the Madras High Court does not apply to the facts of the case.
We have carefully considered the rival contentions and perused the order of the lower authorities. The facts of the case are required to be stated once again at the cost of repetition. The assessee is a trust running educational colleges. The assessee is not a registered u/s 12 AA of the act for the impugned
Subsequently, on the basis of information that assessee has received cash donation of ₹ 55,204,903/–, allegedly anonymous donation, therefore, the assessment was reopened for applying the provisions of Section 115BBC of the act by issue of notice u/s 148 of the act on 26/3/2018. The return of income originally filed was reiterated. Naturally on the original return of income filed on 24/4/2012, No assessment was made. The assessment u/s 143 (3) read with Section 147 of the act was passed by the learned assessing officer on 14/12/2018. In the assessment order, the learned assessing officer noted that as assessee does not have eligibility certificate u/s 12 AA, corpus donation being building fund shown in the balance sheet received during the year amounting to ₹ 55,204,903/– is to be assessed as income of the assessee during the year. AO further noted that assessee has received the above
“(b) during the course of assessment proceedings, the assessee is having the huge number of receipt books for the sum of ₹ 3000/– and ₹ 4500/–. However, on going through the same, it is seen that the said receipts contain details such as names, address and other relevant details. However, as mentioned above, all corpus donation letters are not filed. It is also seen that the donation amounts are ranging from ₹ 3000/– to ₹ 4500/– and, therefore, it is beyond comprehension that the assessee has received such a huge amounts of donation running in crores of rupees. By accepting the nominal amount of donation. The assessee has filed the small amount of donation receipts as a
In view of the above, the donation of the assessee is far from convincing and is a cooked- up story, and, therefore, cannot be accepted.
( c ) The total corpus fund being building fund shown by the assessee to the extent of ₹ 55,204,903/– in the balance sheet. This donation of ₹ 55,204,903/– is treated as income of the assessee being donation received in cash being anonymous donation u/s 115B. BC of the IT act.
(d) in view of the above, ₹ 55,204,903/– is treated as income of the assessee by way of an anonymous donation is provided u/s 115B. BC. For the purposes of this Section, anonymous donation means any voluntary contribution referred to in subclause (IIA) of clause (24) of Section (2), where a person receiving such contribution does not maintain a record of such identity, indicating the name and addresses of the persons making such contribution and such other particulars, the same can be treated as income of the assessee.”
The learned AO then computed the total income of the assessee by making an addition of ₹ 55,204,903 and setting it off with the deficit shown by the assessee of 5,30,22,672/– result into the total
In the present case the original return of income was filed on 24/4/2012, which was processed on 14/12/2013. Therefore, according to Section 263 (2) the original assessment could have been revised up to 31 March 2016. The order u/s 263 is passed on 22/3/2021, therefore, the revision of the order could not be made in the original order, concluded on 14/12/2013. As subsequently the assessment was reopened u/s 147 of the act and was framed u/s 143 (3) read with Section 147 of the act on 14/12/2018. This order is subject to revision u/s 263. Therefore, only those issues for which the assessment was reopened could be revised in this order u/s 263 of the act.
The reason for reopening of the assessment is for verification of cash donation of ₹ 55,204,903/– and its taxability u/s 115BBC of the act as anonymous donation. The learned AO has made the addition of the above sum in the reopened assessment order.
Therefore, the filing of return of income in ITR – 7, claim of the deficit of ₹ 5,30,22,672, non-filing of audit report in form number 3 CD or form number 10 B as well as non-filing of profit and loss account are beyond the jurisdiction u/s 263 of the act because of the limitation prescribed u/s 263 (2) of the act.
Further, the issue is pending of the above addition Before the learned CIT – A. Where assessee has filed appeal on 14/12/2018. The issue challenged is reopening of the assessment and addition of cash donation u/s 115BBC of the act. According to the provisions of Section 263 of the act, if the issue is „considered and decided‟ by the appellate authority, the same cannot be revised u/s 263. However, mere „pendency of an appeal‟ before the appellate authority does not oust the jurisdiction of the learned CIT. Honourable Bombay High Court in case of Piramal investment opportunities fund vs ACIT (2019) 111 taxmann.com 5 (BOM), though with
Now the issue that arises whether the assessment order passed by the learned assessing officer, though holding that an anonymous donation is chargeable to tax u/s 115B. BC of the act, can he set off the deficit claimed by the trust. Looking at the computation of total income placed before us at page number 20 of the paper book, the assessee has shown the gross total income at Rs nil. The deficit of the trust Under the head income from business or profession was 5,30,22,672 to which the depreciation included in the income and expenditure account of ₹ 24,003,530 was added and depreciation allowance of Rs. 240,03,530 was raised reduced. In the income and expenditure account interest on fixed deposit of ₹ 1,868,185 was included which was reduced from the business income and offered to tax as interest on fixed deposit Under the head income from other sources. Accordingly, the net income was offered at rupees nil. However, in the end of the computation statement. It claimed the carry forward of the depreciation of Rs 240,03,530, however, did not
According to the provisions of Section 115BBC, on anonymous donation tax is required to be charged at the rate of 30% subject to certain deductions. The learned CIT did not invoke the provisions of Section 263 of the act for this reason. The only reason stated by the PCIT is that the learned assessing officer has granted set off deficit of the assessee trust against the anonymous donation. We are of the view that both these things are different. One is the manner of
In view of this we do not find any reason to uphold the order of the learned PCIT passed u/s 263 of the act as there is no error which is prejudicial to the interest of the revenue pointed out in his order dated 22/3/2021. Hence same cannot be sustained and therefore, quashed.
Accordingly, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 15.12.2022.
Sd/- Sd/- (KAVITHA RAJAGOPAL) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 15.12.2022 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT DR, ITAT, Mumbai 5. 6. Guard file. BY ORDER, True Copy//
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai