Loading judgment…
Facts
The assessee trust filed its return declaring nil income for AY 2017-18, claiming deduction under Section 11 of the Act. Since the trust, engaged in charitable activities for the Sindhi community, was not registered under Section 12AA for the relevant year, the Assessing Officer treated it as an AOP and made an addition of Rs. 8,36,509/-. The CIT(A) upheld this assessment and dismissed the assessee's appeal.
Held
The Tribunal dismissed the assessee's appeal, affirming that the trust was not eligible for exemption under Section 11 of the Act for AY 2017-18 due to its non-registration under Section 12AA and its operation for a specific community, which is not in consonance with Section 12AA. It was noted that registration under Section 12AA was only granted for subsequent assessment years. The Tribunal also confirmed the assessment was a complete scrutiny and found the AO's addition justified.
Key Issues
Whether the scrutiny assessment was incorrectly selected; whether the addition made by the AO was justified given the trust's non-registration under Section 12AA for the relevant year; and whether the AO correctly determined the net taxable income and considered the assessee's submissions.
Sections Cited
11, 12AA, 143(3), 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Dr. BRR Kumar & Ms. Suchitra Kamble
आदेश/ORDER
Per Suchitra Kamble, Judicial Member:
1. This is an appeal filed against the order dated 19-03- 2024 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2017-18.
The grounds of appeal are as under:- “Your appellant being aggrieved by the order passed by the learned Ld Commissioner of Income-tax (Appeals). National Faceless Appeal Centre (herein after referred to as Ld. CIT (Appeals)) Delhi presents this appeal against the same on the following amongst other grounds:
1. The Lower authorities has erred in not appreciating the fact that the selection of scrutiny assessment in this case is incorrect and is out of scope of guidelines issued by CBDT. On facts and circumstances of the case, the entire assessment proceeding conducted u/s 143(3) of the Act is NULL and VOID and the assessment order passed dated 12-12-2019 is required be quashed and set aside accordingly. The same be held now.
2. The Learned CIT (Appeals) has erred in confirming the addition made by ld AO Rs 8,36,509/- on the ground that the Appellant is not eligible for exemption u/s 12AA of the Act. It is submitted that neither the Appellant neither has Surplus income nor claimed exemption u/s 12AA of the Act for the year. On facts and circumstances of the case, the addition made and confirmed by lower authorities is completely baseless and without any justification and the same is ought to have been deleted.
3. The Learned CIT (Appeals) has erred in confirming the addition without appreciating the fact that the addition/figures worked out by ld AO in the Assessment order passed is without any basis or logic and the entire addition made by Ld AO being completely illegal and unjustifiable deserves to be deleted. The same be held now.
4. The Learned CIT (Appeals) has erred in confirming the addition made by ld AO without considering fact that there is no such expenditures of Rs 4,19,506/- claimed by Appellant Trust and thus addition made considering wrong figures of expenditures is also wrong and be deleted accordingly.
5. The lower Authorities have erred in determining the net taxable income of the Appellant and wrongly worked out the same at Rs 836,509/- against the net deficit (loss) Rs 3,43,718/- as per audited accounts filed. It is submitted that the Appellant has correctly claimed net deficit (loss) Rs 3,43,718/- for the year under consideration and the same may please be accepted and the addition made of Rs 8,36,509 being unwarranted please be deleted for the sake of natural justice.
6. The Learned CIT (Appeals) has erred in appreciating fact that the addition proposed by id AO in show cause notice was on different footing and with different figures in comparison of final addition made by him. It is therefore submitted that the action of AD for making above addition is self contradictory and thus the impugned addition made of Rs 8,36,500/- be deleted accordingly.
7. The Ld AO has erred in not considering the submissions filed during Couser of assessment proceeding and wrongly mentioned in the assessment order that the Appellant has not replied to the notices issued. It is submitted that the Appellant has duly filed 2 Ahmedabad Kadi Vijapur Pragana Shrimali Soni Uttejak Mandal, A.Y. 2017-18 various details and submissions during course of assessment proceeding and the ignorance of the same on part AO is nothing but his carelessness, which converted into incorrect addition at the end of proceeding. This kind of approach of AO please not be tolerated and the addition made of Rs 8,36,509/- be deleted. The same be held now.
8. The Ld AO has erred in making addition of Rs 8,36,509/- in spite of the fact that he himself has determined loss (deficit) for the year at Rs 3,43,718/- in computation sheet issued along with Assessment Order passed. In view of this also, the addition made of Rs 8.36,509/- be deleted.
9. The Order passed by the learned CIT(A) is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now.
10. Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing of appeal.”
3. The assessee trust filed its return of income on 29-03-2018 declaring total income at Rs. nil after claiming deduction for utilization of fund for the objects of the trust u/s. 11 of the Act and also claimed various expenses incurred for the object of the trust. During the year under consideration, the assessee carried charitable activities related to poor persons of Sindhi community. The trust was not registered u/s. 12AA for the assessment year 2017-18 and therefore the Assessing Officer was of the view that the trust is not eligible for exemption u/s. 11 of the Act. The case of the assessee was selected for scrutiny and notice u/s. 143(2) of the Act was issued on 27-09-2018. Thereafter notice u/s. 142(1) of the Act along with detailed questionnaire was issued on 12-03-2019. In response to the show cause notice, the assessee submitted a reply dated 05-12- 2019 and stated therein that the trust applied for registration u/s. 12AA but the same was rejected and the Assessing Officer treated as AOP as the trust is not registered u/s. 12AA of the Act. Thus, the Assessing Officer made addition of Rs. 8,36,509/-
4. Being aggrieved by the assessment order, the assessee file appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee
The ld. A.R. submitted that there is a delay of 1256 days in filing the present appeal for which the assessee has filed the detailed affidavit for condonation of delay. The assessee was under bonafide belief that the earlier Chartered Accountant has filed the appeal within the stipulated time. But when the trustee/deponent of the affidavit appointed another CA and requested him to check the status of the trust at that time, the assessee became aware about the said non-filing of the appeal before the Tribunal. Thus, the delay is due to the negligence of the earlier CA that cannot be attributed to the assessee. Hence, the delay is condoned.
6. As regards ground no. 1, the ld. A.R. submitted that the Assessing Officer as well as CIT(A) did not appreciate the fact that the selection of scrutiny assessment in this case is incorrect and is out of the scope of the guidelines issued by the CBDT. The ld. A.R. submitted that the scrutiny of the assessee’s case was not on the issue which was in the purview of limited scrutiny.
The ld. D.R. submitted that the assessee’s case was selected for scrutiny and it was not a limited but that of complete scrutiny.
Ahmedabad Kadi Vijapur Pragana Shrimali Soni Uttejak Mandal, A.Y. 2017-18 8. We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the assessee’s case was a complete scrutiny and though it is not mentioned in the assessment order, the same cannot be treated as limited scrutiny assessment. Thus, the contention of the Ld. A.R. does not sustain. Hence ground no. 1 of assessee’s appeal is dismissed.
As regards ground no. 2, the Ld. A.R. submitted that the assessee did not have surplus income as well as not claimed the exemption u/s 12AA of the Act for the present assessment year. Therefore, the Ld. AR submitted that the additions made by the Assessing Officer are not justified. The Ld. A.R. pointed out the audited accounts of the assessee which shows that there is no surplus given by the assessee. The Ld. A.R. submitted that there is no such expenditure f Rs. 4,19,506/- claimed by the assessee. The Ld. A.R. submitted that the Assessing Officer was not right in determining the net taxable income of the assessee and has wrongly worked the same at Rs. 8,36,509/- against the net deficit (loss) at Rs. 3,43,780/- as per audited accounts submitted. The assessee has correctly claimed net deficit (loss) at Rs. 3,43,780/- for the year under consideration. The Assessing Officer in the show cause notice has proposed the addition on a different footing and with different figure in comparison to the final addition. Thus, the Assessing Officer itself has made the addition in the self contradictory manner. The A.R. further submitted that the assessee has in fact replied the notices and has filed various Ahmedabad Kadi Vijapur Pragana Shrimali Soni Uttejak Mandal, A.Y. 2017-18 details during the course of assessment proceedings and thus the Assessing Officer has totally ignored the submission of the assessee while passing the assessment order.
The ld. D.R. relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that vide order dated 28-03-2022. The assessee was granted approval for registration of trust w.e.f. assessment year 2022-023 to 2026-27. The assessment was proposed for A.Y. 2017-18 and at that stage, the assessee was rightly treated as AOP by the Assessing Officer. From perusal of the records, the fact remains that the assessee has not incurred the expenditure of Rs. 4,19,506/- as claimed by the assessee trust and the claim of the assessee for net deficit loss at Rs. 3,43,780/- for the year under consideration. Therefore, the CIT(A) as well as the Assessing Officer rightly rejected the assessee’s claim. The CIT(A) categorically mentioned that apparently the assessee trust is not eligible for getting exemption as the trust is created for a particular community which is not in consonance with the provisions of section 12AA and therefore the denial of registration to the charitable origination was justified. Accordingly, the assessee trust was not held as eligible for registration u/s. 12AA and thus its receipt cannot be treated as exempt u/s. 11 of the Act. The assessee has Ahmedabad Kadi Vijapur Pragana Shrimali Soni Uttejak Mandal, A.Y. 2017-18 been granted the registration u/s. 12AA for the assessment year 2022-23 to 2026-27 which are subsequent assessment years. The present assessment year is assessment year 2017-18 and Assessing Officer through various details has come to a conclusion which should not be interfered with as the assessee failed to prove that the assessee was registered in the year 2017-18. Thus, ground no. 2 of assessee’s appeal is dismissed.
Further, the assessee has relied upon various decisions of the Tribunal which are as follows:
Children Welfare Trust Vs ITO (Exemptions), (ITAT Delhi), (Order date: 29-10-2024)
2. Prem Prakash Mandal Sewa Vs ITO (Exemption), & 263/RPR/2016, (ITAT Raipur), (Order date: 12-8-2021)
Sree Sree Ramkrishna Samity Vs DCIT, Cir-2, to 1685/Kol/2012 (ITAT Kolkata) (Order date: 09-10-2015)
CBDT Circular No. 01/2015 dated 21st January, 2015
5. Commissioner of Income-tax v Crystal Phosphates Ltd., IT Appeal Nos. 140 AND 141 OF 2013, (Punjab & Haryana H.C.) (Order date :28-03-2023)
Amal Kumar Ghosh v ACIT Circle -42, IT Appeal No 21 OF 2011, (Calcutta H.C) (Order date 21-01-2014) 7. DCIT. Vs Raja Arora, (ITAT Delhi), (Order date 24-10-2024)
Vishal Madnani v Income-tax Officer, It Appeal No 669 (Lkw) Of 2010, (ITAT Lucknow) (Order date 15-07-2014)
These decisions and the CBDT circular have categorically mentioned that the trusts which are not registered will not have availability of exemption u/s. 11 of the Act. In the case laws produced by the ld. A.R., the factual aspect are different than the Ahmedabad Kadi Vijapur Pragana Shrimali Soni Uttejak Mandal, A.Y. 2017-18 present assessee’s case wherein the registration was rejected and in fact there was a categorical finding by the CIT(E) that the trust is operating for one particular community which is not allowable for granting exemption u/s. 11 of the Act. Thus, the appeal of the assessee is dismissed.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 04-09-2025 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 04/09/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद