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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI GAGAN GOYAL
Present for: Assessee by : None Revenue by : Shri Soumendu Kumar Dash, D.R. Date of Hearing : 14 . 09 . 2022 Date of Pronouncement : 29 . 09 . 2022 O R D E R Per Bench: For the sake of brevity aforesaid interconnected appeals bearing common question of law and facts are being taken up for disposal by way of composite order.
2. The appellant M/s. Social Education & Welfare Association (hereinafter referred to as ‘the assessee’) by filing the present appeals, sought to set aside the impugned orders even dated 2 M/s. Social Education & Welfare Association 20.03.2017 passed by Commissioner of Income Tax (Appeals), [hereinafter referred to as the CIT(A)] qua the assessment years 2009-10 & 2010-11 on identically worded grounds except the difference in figures of addition/disallowance inter alia that:-
“1. On the facts and in the circumstances of the case and in law the order passed by the learned CIT(A) under sec. 143(3) r.w.s. 147 of the I.T. Act 1961 is invalid and bad in law. The Ld. A.O. has merely issued notice u/s 148 and thereafter lie has never issued any notice u/s 142(1] or 143(2).
2. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in determining the income at Rs.1,36,54,190/- & Rs.93,52,650/- as against the Returned Income of Rs.4,44,540/- & Rs.18,43,800/- as per return of Income for A.Y. 2009-10 & 2010-11 respectively.
3. On the facts and in the circumstances of the case and in the law the learned CIT(A) erred in acting and understanding the facts that Your Appellant should be assessed as AOP and not as Company as the rectified PAN was also secured and submitted to the Hon. CIT (A). The Appellant should have been assessed as AOP and should have been allowed the benefits available under the Law rather than assessed as Company. The Ld. A.O. should have transferred the case to the concerned Jurisdictional Officer having Jurisdiction to assess your appellant.
4. On the facts and in the circumstances of the case and in law the learned CIT (A)'s action in confirming the additions made by Ld. A.O. without understanding the technicality as well as factual submission is merely on surmises, suspicion or conjectures.
On the facts and in the circumstances of the case and in law, the charging of interest u/s.234B and 234C of the I.T. Act are invalid and bad in law.”
3. Assessee by filing appeal bearing sought to set aside the impugned order dated 26.02.2018 passed by Ld. CIT(A) confirming the penalty of Rs.1,00,000/- levied by the Assessing Officer (AO) under section 271B of the Act on the ground inter alia that: “1. On the facts and in the circumstances of the case and in law the Penalty Order passed by the Ld. AO 14(3)(3), Mumbai and 3 M/s. Social Education & Welfare Association subsequently upheld by Honorable CIT (A)-22, Mumbai under sec. 271B of the I.T.Act 1961 for levying penalty of Rs.1,00,000/- is invalid and bad in law.
The Commissioner of Income Tax (Appeals) has erred in law and on facts in passing the Penalty Order without following the Principle of Natural justice.
On the facts and in the circumstances of the case and in the law the learned CIT [A] erred in acting and understanding the facts that Your Appellant should be assessed as AOP/Trust and not as Company as the rectified PAN was also secured and submitted to the Hon. CIT (A). The Appellant should have been assessed as AOP/Trust and should have been allowed the benefits available under the Law rather than assessed as Company. The Ld. A.O. should have transferred the case to the concerned Jurisdictional Officer having Jurisdiction to assess your appellant.
Your appellant has filed appeal against the original quantum assessment order.
5. The appellant craves leave to add, to amend, alter or delete all or any of the foregoing grounds of appeal.”
4. Briefly stated facts necessary for adjudication of the controversy at hand in the quantum appeal for A.Y. 2009-10 & 2010-11 are: on the basis of information received through NMS module of the ITB system that the assessee has not filed its return of income for A.Y. 2009-10 and 2010-11 and from the data available in the system it was noticed that assessee has entered into financial transactions inter alia that purchase and sale of stock and also got contracts’ receipt on which TDS was deducted, assessment was reopened by way of issuance of notice under section 148 of the Act, after recording reasons. In response to the notice, assessee filed its return of income at Rs.4,44,540/- & Rs.18,43,800/- on 20.03.2015 for A.Y. 2009-10 & 2010-11 respectively. Statutory notices under section 143(2) and notice under section 142(1) of the Income Tax Act, 1961 (for short ‘the Act’) along with questionnaire were issued and served upon the assessee and in 4 M/s. Social Education & Welfare Association response thereto one Harish H. Hegde, chartered accountant appeared on behalf of the assessee company, filed details, documents and explanations called for. AO noticed that the assessee company has claimed various expenses to the tune of Rs.3,70,391/- & Rs.3,75,498/- on account of repair and maintenance, depreciation, salaries and allowances to supervise conveyance expenses, telephone expenses and electricity charges for A.Y. 2009-10 & 2010-11 respectively. On failure of the assessee to submit the detail of expenses claimed in the profit & loss account AO disallowed 15% of these expenses amounting to Rs.55,560/- & Rs.56,325/- for A.Y. A.Y. 2009-10 & 2010-11 respectively to the total income of the assessee.
5. AO also noticed that the assessee has also claimed expenditure on account of object of the trust to the tune of Rs.8,76,93,941/- and Rs.4,96,83,444/- on account of construction expenses, salary and allowances to the supervisor and consultancy fees for A.Y. 2009-10 & 2010-11 respectively. Again on failure of the assessee to fully authenticate the vouchers relied upon, AO proceeded to disallow 15% of these expenses amounting to Rs.1,31,54,091/- & Rs.74,52,520/- for A.Y. 2009-10 & 2010-11 respectively and thereby framed the assessment under section 143(3) read with section 147 of the Act.
6. AO has also initiated the penalty proceedings under section 271B of the Act on failure of the assessee company for filing return of income along with audit report under section 44AB of the Act. Declining the contentions raised by the assessee, the AO proceeded to hold that since the assessee has failed to file the tax audit report 5 M/s. Social Education & Welfare Association along with return of income penalty to the tune of Rs.1,00,000/- each in A.Y. 2009-10 & 2010-11 is levied under section 271B of the Act.
7. Assessee carried the matter before the Ld. CIT(A) by way of filing appeals who has partly allowed the same. Feeling aggrieved the assessee has come up before the Tribunal by way of filing present appeals.
8. Aforesaid appeals were filed on 27.06.2017 and were first time listed for 12.11.2018 on which date Shri Sanjay Sonjkar represented the assessee company. Thereafter, Shri Sanjay Sonjkar put in appearance on 10.01.2019, 12.06.2019, 22.01.2019 & 16.11.2016. However, none appeared on behalf of the assessee on 24.02.2022, 25.04.2022, 22.06.2022 and 14.09.2022 despite issuance of the notices sent through registered cover with AD which presumed to have been served upon the assessee but assessee has not preferred to put in appearance to pursue the present appeals. Consequently, Bench has decided to dispose of present appeals on the basis of material available on record as well as with the assistance of the Ld. D.R. for the Revenue.
9. Bare perusal of the assessment orders framed in these cases by the AO under section 143(3) read with section 147 of the Act goes to prove that the AO after reopening these cases without any enquiry and without discussing the detail, documents and explanation furnished by the assessee as mentioned in para 2 of the assessment order made the addition on adhoc basis by disallowing the various expenses claimed by the assessee company to the tune of 15% of the total expenses claimed. 6 M/s. Social Education & Welfare Association
10. When we peruse the impugned order passed by the Ld. CIT(A), para 5.1 goes to show that the assessee has made specific averments that assessee has been wrongly assessed as penny entity which is not a company but a registered charitable trust and stated to have furnished the complete documents before the AO and made a request to assess the assessee as an Association of Persons (AOP). It is also brought on record by the assessee that the assessee was incorrectly allotted a PAN card under the series applicable for a company entity by the issuing authority for which the assessee should not be held responsible. It is also brought on record by the assessee that the office bearers of the assessee trust are not highly qualified rather simpleton persons not well versed with the combination of the alphanumeric code that was received on the numeric PAN.
The assessee has tried to file the return as AOP but the same could not be filed due to the PAN error and at the instance of the AO the assessee had to file the return under the category of Pvt. Ltd. Company as there was no option available to the assessee. The factum of wrong PAN allotted to the assessee was brought to the notice of AO who has not taken note of the same as the case was getting time barred and thereby framed the assessment under section 143(3) read with section 147 of the Act.
Undisputedly, the assessee company has filed the return of income pursuant to the notice issued under section 148 of the Act. Both AO as well as Ld. CIT(A) without taking into consideration the submissions made by the assessee extracted in para 5.1 of the 7 M/s. Social Education & Welfare Association Ld. CIT(A) proceeded to decide the issue by treating the assessee a private company and not as an AOP as pleaded by the assessee.
No doubt ignorance of law is no excuse but framing the assessment by making addition on adhoc basis without conducting any enquiry by the AO and without considering any documents brought on record before the Ld. CIT(A) is not sustainable in the eyes of law.
When the assessee has brought on record complete details before the AO he was required to frame the assessment by considering all the details/documents furnished before him and not to botch up the enquiry by making adhoc addition for the reason that the assessment was getting time barred. The AO has not even made a whisper in the order if the assessee is a charitable trust being into the activity of construction of toilet and handing over the same to the locality in the slum areas pertaining to the downtrodden of the society.
However, the Ld. CIT(A) for the reason best known to him has discussed these facts in para 5.2 and 6.2 of the impugned order without recording, if any, application for additional evidence has been made by the assessee rather decided this issue by returning generic findings.
From the perusal of impugned order passed by the Ld. CIT(A) it is evident that the case has not been inquired into at the level of AO for framing assessment as per law. All the details, documents, explanation furnished by the assessee before the AO as mentioned in para 2 of the assessment order have been suppressed 8 M/s. Social Education & Welfare Association being not dealt with in accordance with law rather assessment has been framed on the basis of surmises on adhoc basis which is not sustainable in the eyes of law. To decide the issue once for all and to impart complete justice, we are of the considered view that aforesaid appeals bearing & 4606/M/2017 for A.Y. 2009-10 & 2010-11 respectively are required to be remitted back to the AO to decide afresh after providing opportunity of being heard to the assessee.
Appeal bearing for A.Y. 2009-10 challenging the penalty levied by the AO and confirmed by the Ld. CIT(A) under section 271B of the Act is also not sustainable being consequential in nature as the quantum cases decided by the AO as well as Ld. CIT(A) have failed to withstand the judicial scrutiny and consequently have been set aside. So appeal bearing ITA No.3986/M/2018 is also remitted back to the AO to decide afresh after deciding the quantum appeals. Resultantly, all the aforesaid appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the open court on 29.09.2022.