M/S. PODAR LITERACY AND EDUCATION TRUST,BANGALORE vs. DY CIT, CC--1(4), MUMBAI

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ITA 1293/MUM/2021Status: DisposedITAT Mumbai25 April 2022AY 2014-154 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that for concluded assessments, any disturbance by the AO under section 153A is permissible only if incriminating material is found during search. Since no such material was found, the disallowance was quashed.

What were the facts?

The assessee, a charitable trust, had its assessment for AY 2014-15 concluded before a search action. The AO made a disallowance for provision for gratuity based on actuarial valuation in the assessment framed under section 153A without any incriminating material.

What were the issues?

Whether the AO had jurisdiction to disturb a concluded assessment under section 153A without incriminating material. Whether provision for gratuity based on actuarial valuation is an allowable application of funds for a charitable trust.

Which sections of the Income-tax Act were involved?

Section 153A,Section 143(3),Section 132(1),Section 12AA,Section 10(23C)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘C‘ BENCH

Before: SHRI M.BALAGANESH & MS. KAVITHA RAJAGOPAL

For Appellant: Shri Siddharth Kothari & Ms. Tejal
For Respondent: Shri Sunil A Umap
Hearing: 20/04/2022Pronounced: 25/04/2022

आदेश / O R D E R PER M. BALAGANESH (A.M):

1.

This appeal in A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-47, Mumbai in appeal No.CIT(A)-47/10302/19-20 dated 03/11/2020 (ld. CIT(A) in short) against the order of assessment passed u/s.153A r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 27/12/2019 by the ld. Dy. Commissioner of Income Tax, Central Circle- 1(4), Mumbai (hereinafter referred to as ld. AO).

M/s. Podar Literacy and Education Trust

2.

The assessee has raised a legal ground challenging the jurisdiction of the ld. AO to make disallowance on account of provision for gratuity made on actuarial valuation in the assessment framed u/s.143(3) r.w.s. 153A of the Act without any incriminating material found during the course of search. Apart from this, assessee has also challenged the said disallowance on merits.

3.

We have heard rival submission and perused the materials available on record. Admittedly, there was a search and seizure action u/s.132(1) of the Act on 09/01/2018 in the premises of the assessee group, pursuant to which proceedings u/s.153A of the Act were initiated on the assessee. The original return of income was filed by the assessee for the A.Y.2014- 15 on 27/09/2014 which was duly processed u/s.143(1) of the Act. Hence, as on the date of search, the assessment for the A.Y.2014-15 was unabated / concluded. The law is very well settled that in respect of concluded assessments on the date of search, the same could be disturbed only if there is some incriminating material found during the course of search. Reliance in this regard is placed on the decision of the Hon’ble Jurisdictional High Court in the case of Continental Warehousing Corporation reported in 374 ITR 645(Bom) and the decision of the Hon’ble Delhi High Court in the case of Kabul Chawla reported in 234 Taxman 300. We find from the perusal of the assessment order, the ld. AO had resorted to make disallowance on account of provision for gratuity which was made on the basis of actuarial valuation, without making any reference to seized / incriminating material found during the course of search. Hence, respectfully placing reliance on the aforesaid decisions and more especially the fact that assessment for A.Y.2014-15 had been concluded assessment, the disallowance made on account of provision for gratuity on an actuarial valuation basis in the absence of any M/s. Podar Literacy and Education Trust incriminating material found during the course of search is hereby quashed. Accordingly, the legal ground raised by the assessee challenging the jurisdiction to disturb the concluded assessment is hereby allowed.

3.1. Even on merits, we find that assessee had made provision for gratuity and leave encashment only on an actuarial valuation basis which is an ascertained liability and which becomes an allowable expenditure to be treated as an application of funds for charitable purposes. It is not in dispute that assessee is a public charitable trust duly registered u/s.12AA of the Act and was claiming exemption u/s.10(23C) of the Act. This sum would be entitled to be claimed as application of funds for charitable purposes. We further find that this issue was also subject matter of adjudication by this Tribunal in assessee’s own case for A.Yrs. 2015-16 and 2016-17 in & 68/Mum/2021 dated 25/01/2022 wherein this Tribunal had deleted the disallowance made thereon. Hence, the assessee succeeds on merits also.

4.

In the result, appeal of the assessee is allowed.

Order pronounced on 25/04/2022 by way of proper mentioning in the notice board.

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