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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SH. R. K. PANDA & MS SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, JM These two appeals are filed by the assessee against the order of the Commissioner of Income Tax [Appeals]-I, Noida dated 30.03.2017 for Assessment Years 2007-08 and 2011-12.
The Grounds of appeal are as under:- 1. “That the order passed Ld. CIT(A) enhancing the assessment made by Ld. AO for assessment year 2007-08 is bad and illegal in law and on the facts of the case in as much as - a. The Ld. CIT(A) has failed to discharge his duties as appellate authority as impugned order has been passed without adjudicating on the grounds of appeal challenging the order of assessment before him; b. The Ld. CIT(A) has passed the impugned appellate order enhancing the assessment u/s 251(1)(a) of the Income Tax Act, 1961 without affording an opportunity of being heard to the appellant, as mandated in the relevant section; c. The Ld. CIT(A) has passed appellate order stating the facts which are neither connected to the case of appellant nor are in conformity with the assessment order or material placed before the CIT(A) in course of appellate proceedings; d. The Ld. CIT(A) has made observations and arrived at decision in the impugned order which is not connected with the facts but are more relevant for scholarly treatise on the taxation of trusts; The CIT(A) has passed the impugned order on 30th March, 2017 e. whereas notice issued by his office had asked the appellant to attend his office on 31st March, 2017 in connection with the appellate proceedings pending before him for the relevant assessment year; f. The Ld. CIT(A) has erred in law and on fact while taxing the gross receipts amounting to Rs. 22,73,837/- and donations amounting to Rs. 1,32,00,000/- without appreciating the law and facts correctly in this regard and, while doing so, has failed to appreciate that the gross receipts and donations as per Income & Expenditure Account for the relevant year were Rs. 12,74,909/- and Rs. 732540/- respectively.
2. That Ld. AO has erred in passing the assessment order u/s 143(3)/147 making an addition of Rs.5,92,369/- disregarding the fact that appellant is a mutual benefit association, hence the receipts of it did not fall under charging section.
3. That Ld. AO has erred in passing the assessment order a. without giving allowance of depreciation, which is statutory claim even though not claimed in the Income & Expenditure Account; adding amount of membership fee of Rs. 25,000/- twice; and b. holding lifetime membership fee as revenue receipt instead of capital c. receipt
4. The Ld. AO has erred in charging the tax on such additions at maximum marginal rate without appreciating that the registered society is considered as Association of Persons, to which provisions of section 167B of the Income Tax Act, 1961 are not applicable, and such registered society is eligible for the slab rate of tax on its taxable income.
5. The appellant craves leave to add, amend, delete, modify or supplement any ground of the appeal.”
ITA No.4094/Del/2017:
“That the order passed Ld. CIT(A) enhancing the assessment made by Ld. AO for assessment year 2011-12 is bad and illegal in law and on the facts of the case in as much as - a. The Ld CIT(A) has failed to discharge his duties as appellate authority as impugned order has been passed without adjudicating on the grounds of appeal
challenging the order o, assessment before him; b. The Ld. CIT(A) has exceeded his power while ordering withdrawal of exemption u/s 12AA of the Income Tax Act, 1961 in the absence of any order of cancellation or revocation by t e Commissioner of Income Tax (Exemption), who is empowered to pass any such order u/s 12AA(3) or 12AA(4) of the Income Tax Act, 1961; c. The Ld. CIT(A) has passed appellate order stating the facts which are neither connected to the case of appellant nor are in conformity with the assessment order or material placed before the CIT(A) in course of appellate proceedings, d. The Ld. C1T(A) has made observations and arrived at decision in the impugned order which is not connected with the facts but are more relevant for scholarly treatise on the taxation of trusts; e. The CIT(A) has passed the impugned order on 30th March, 2017 whereas notice issued by his office had asked the appellant to attend his office on 31st March, 2017 in connection with the appellate proceedings pending before him for the relevant assessment year; f. The Ld. C1T (A) has erred in law and on fact while taxing the gross receipts amounting to Rs. 59, 23,690/- and donations amounting to Rs.1,32,00,000/- without appreciating the law and facts correctly in this regard and, while doing so, failed to appreciate that the gross receipts and donations as per Income & Expenditure Account for the relevant year were Rs. 2273837/- and Rs. 1165651/- respectively.
2. That Ld. AO has erred in appreciating that the appellant is a mutual benefit association, hence the receipts of it did not fall under charging section.
3. That Ld. AO has erred in passing the assessment order u/s 143(3) making an addition of Rs. 7,46,080/- without appreciating the fact that failure to file form 1, declaration for setting apart surplus, is merely technical and cannot be basis for refusal to allow claim of exemption, which was otherwise permissible.
The Ld. AO has erred in charging the tax on such additions at maximum marginal rate without appreciating that the registered society is considered as Association of Persons, to which provisions of section 167B of the Income Tax Act, 1961 are not applicable, and such registered society is eligible for the slab rate of tax on its taxable income.
5. The appellant craves leave to add, amend, delete, modify or supplement any ground of the appeal.”
The assessee society was granted registration u/s 12AA w.e.f. 2008-09. The assessee’s case was re-opened u/s 148 and the Assessing Officer observed that the assessee society is not eligible for claiming exemption u/s 11 or 12 as the society has been granted registration u/s 12AA of the Income Tax Act, 1961 w.e.f A.Y. 2008-09. Therefore, the status of the society is treated as AOP by the Assessing Officer. The Assessing Officer has made addition of Rs.5,92,369/- as the assessee society has not claimed the earlier year losses in its return of income. Therefore, lifetime membership which is directly taken in balance sheet and surplus of Rs.5,42,369/- shown in income and expenditure account are to be taxed AOP. As the assessee society was not granted registration u/s 12AA of the Act the assessee was not granted benefit u/s 11 of the Act.
4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) has passed ex-parte order without giving any opportunity of hearing and hence the addition made by the Assessing Officer.
The Ld AR submitted that the CIT(A) should have given opportunity of hearing before making enhancement of the addition. Therefore, the Ld AR requested that the matter may be remanded back to the file of the CIT(A) and fresh hearing on merit to be given to the assessee.
The Ld DR relied upon the assessment order and the order of the CIT(A). The Ld DR further submitted that before the CIT(A) the assessee has not appeared and deliberately not availed the right of hearing.
We have heard both the parties and perused all the relevant materials available on record. From the perusal of the order of the CIT(A) it can be seen that the CIT(A) has not given opportunity of hearing to the assessee before enhancing. As per the provision of the Income Tax Act, 1961, the CIT(A) has to give a proper hearing before enhancing any assessment, but the CIT(A) failed and has overlooked the provisions of the Income Tax Act. Therefore, it will be appropriate to remand back this entire issue to the file of the CIT(A) for proper objection after giving hearing to the assessee. Both the appeals are identical, therefore, both the appeals are partly allowed for statistical purpose.
In the result, appeals of the assessee are partly allowed for statistical purpose.
Order pronounced in the Open Court on 18th day of February, 2020.