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Facts
The assessee, a charitable trust, faced reassessment for AY 2011-12 and denial of Section 11 exemption due to an alleged bogus donation of Rs 1 crore, following the cancellation of its 12AA registration by the CIT(E). Subsequently, the Lucknow ITAT restored the assessee's 12AA registration, which led the CIT(A) to allow the Section 11 exemption for the relevant assessment year. The current appeal is by the assessee challenging the CIT(A)'s order, specifically regarding the upholding of reassessment initiation and treating certain grounds as infructuous.
Held
The Tribunal upheld the CIT(A)'s decision, confirming that since the assessee's 12AA registration was restored by the Lucknow ITAT, the denial of exemption under Section 11 was incorrect. Consequently, the original assessment framed under Section 143(3) stood restored, and the grounds relating to the bogus donation and expenses became infructuous. The ITAT found no infirmity in the CIT(A)'s order.
Key Issues
The validity of initiating reassessment proceedings under Section 147/148, the denial of exemption under Section 11, and the impact of a prior tribunal order restoring the assessee's 12AA registration on the current assessment.
Sections Cited
143(3), 147, 148, 12AA, 11
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI KUL BHARAT & SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2011-12, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. ITBA/NFAC/S/250/2022-23/1049761297(1) dated 15.02.2023 against the order of assessment passed u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 29.11.2016 by the Assessing Officer, DCIT, Exemption Circle, Ghaziabad (hereinafter referred to as „ld. AO‟).
The assessee has raised the following grounds of appeal before us:-
“1. On the facts and in the circumstances of the case, the Learned CIT(A) has erred in upholding the action of the AO on Initiating the proceedings U/s 147 and issuing notice U/s 148 of the Income Tax Act. Observations made, inferences drawn and findings recorded in this regard are illegal and bad in law. “2. On the facts and in the circumstances of the case the Learned CIT (A) has erred in not adjudicating the grounds of appeal number 3, 4 and 5 raised before him and treating them as infructuous. The grounds raised before CIT(A) are as under:- Page | 1
Fateh Chand Charitable Trust Ground No 3 before CIT(A)- That the Learned Assessing officer has erred in recording the findings that the assessee paid amount of Rs 1,00,00,000/- in cash to M/S Herbicure Healthcare and thereby purchased a donation from them. The alleged statement of Sh Swapan Das Gupta is neither with the AO nor has been confronted to the assessee and mere reliance on the same to record the above finding is arbitrary and illegal. Ground No 4 before CIT(A) That the donation from M/S Herbicure Healthcare at Rs 1,00,00,000/- has already been shown by the assessee in its Profit and Loss account and hence the question of considering it again as bogus or part of income is unjustified and uncalled for and would tantamount to double taxation. Ground No 5 before CIT(A) That the Learned Assessing officer has erred in disallowing diesel and petrol expenses at Rs 1,00,00,000/- although no discrepancy was ever pointed out during the course of examination of books of accounts nor any show cause or opportunity in this regard was given to the assessee Moreover the diesel and petrol expenses are at Rs 14,80,925/- only which shows that disallowance was not meant to be made and has inadvertently been made.”
We have heard the rival submissions and perused the materials available on record.
The assessee is a public charitable trust registered u/s 12AA of the Act. The registration of the trust was cancelled with effect from 1.4.2010 by the CIT(E) vide order dated 27.11.2015. The ld. AO received information about certain bogus donation transaction on account of survey proceedings in the case of M/s Herbicure Health Care of Kolkata. Accordingly, the ld. AO reopened the assessment u/s 147 of the Act and passed the reassessment order by denying the benefit of exemption u/s 11 of the Act.
The return of income for the Asst Year 2011-12 was filed by the assessee trust on 30.9.2011 declaring Nil income. The assessment was completed u/s 143(3) of the Act on 28.2.2014 determining Nil income. Based on the statement recorded on oath of Shri Swapan Ragan Das Gupta, Founder of M/s Herbicure Health Care of Kolkata during the survey proceedings conducted on 21.1.2015 the assessee has received donation of Rs 1,00,00,000/- from M/s Herbicure Health Care of Kolkata in Asst Year 2011-12 by paying amount of Rs 1 crore in cash to Fateh Chand Charitable Trust M/s Herbicure Health Care of Kolkata. Reopening was made for this purpose as this information constituted tangible material for the ld. AO to form a belief that income of the assessee had escaped assessment. The ld. CIT(E) cancelled the registration u/s 12A of the Act vide order dated 27.11.2015 which was assailed by the assessee before the Lucknow Tribunal. The Lucknow Tribunal vide its order in dated 18.3.2016 allowed the appeal of the assessee and set aside the order of the CIT(E) cancelling the registration u/s 12A of the Act. Since the Tribunal restored the registration u/s 12AA of the Act, the assessee would be consequentially entitled for benefit u/s 11 of the Act for the activities carried out by it. Accordingly, the ld. CIT(A) had allowed the Ground No.2 raised by the assessee challenging the denial of exemption u/s 11 of the Act. The ld. CIT(A) by following the order of Lucknow Tribunal had granted exemption u/s 11 of the Act by allowing Ground No.2 raised before him and in view of that decision, he held that the Ground Nos. 3 to 5 raised by the assessee were dismissed as infructuous. With regard to Ground No. 6 raised by the assessee before the ld. CIT(A), we find that the ld. CIT(A) had directed the ld. AO to consider the losses in the earlier returns of income and appellate orders and thereafter allow the claim of the assessee. We find from para 4 of the reassessment order, the very basis of making addition of Rs 1 crore was cancellation of registration u/s 12AA of the Act and consequentially non availability of exemption u/s 11 of the Act. Since this aspect has been rightly addressed by the ld. CIT(A), the original assessment framed u/s 143(3) of the Act stands restored. Hence we do not find any infirmity in the order of the ld. CIT(A) and the grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 16/04/2024.