ASSISTANT COMMISSIONER OF INCOME TAX (E), LUCKNOW vs. M/S. MAHARSHI PATANJALI VIDYA MANDIR SAMITI, ALLAHABAD

In this case, the Assessee-Society had filed an application dated 26.3.2022, requesting for transfer of the appeal filed by the Revenue, from ITAT, Lucknow Bench to ITAT, Allahabad. The Registry of this Bench, vide letter dated 8.4.2022 sought the comments of the Revenue regarding transfer of the appeal, in response to which, the Asstt. CIT (E), Lucknow, vide his letter dated 5.5.2022 conveyed that they have no objection for transfer of the case from ITAT, Lucknow to ITAT, Allahabad. Accordingly, the matter relating to transfer has come up for hearing before the Bench on 31.5.2022. At the time of hearing, the ld. Counsel for the assessee moved an application dated 31.5.2022, with a request to withdraw the petition for transfer of appeal from ITAT, Lucknow to ITAT, Allahabad, to which the ld. D.R. has submitted that the Revenue has no objection for withdrawal of the application for transfer. Accordingly, the request for withdrawal of the transfer application is allowed and we proceeded to hear the appeal of the Revenue on merits.

The brief facts of the case are that the Assessee-Society filed its return of income for the year under consideration showing Nil income, on 8.10.2013. The return was processed under section 143(1) of the I.T. Act, making an addition of Rs.13,53,24,510./- and raising a tax demand of Rs.5,34,75,860/-. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who cancelled the order of the Assessing Officer, observing that the Assessing Officer is not legally correct in disallowing the expenditures, as such action does not come within the ambit of section 143(1) of the I.T. Act 4. The ld. D.R. has submitted that the ld. CIT(A) has erred in law and facts in deleting the disallowance of deduction, without appreciating the fact that the deduction has rightly been disallowed by the Assessing Officer; that the Assessee-Society has not claimed exemption under section 10 of the I.T. Act in its return of income and has also not filed its return of income under section 139(1) of the Act; and that therefore, the order of the ld. CIT(A) be reversed and that of the Assessing Officer be revived and confirmed.

On the other hand, the ld. Counsel for the assessee has submitted that the Assessee-Society has been regularly assessed to tax for the last several years; that the Assessee-Society runs Educational Institutions and is imparting education to the poor and needy; that for the year under consideration, it had filed the return of income, declaring NIL income and NIL tax payable; that while computing the income, it had claimed deduction in respect of the expenditure incurred, both on revenue and capital account and had also accumulated income as per the provisions of section 11 (2) of the Act; that during the year under consideration, the Assessee-Society had Gross Receipts of Rs.13,53,24,510/- and Expenditure of Rs.11,57,32,018/-, which is more than 85% of the Gross Receipts; that while processing the return under section 143 (1), the entire surplus of Rs.13,53,24,510/-, has been taken as income and tax has been levied on the same by the Assessing Officer, whereas, the deduction in respect of expenditure incurred and amount accumulated has not been allowed; that the return of the Assessee-Society was not processed in accordance with the provisions of section 143(1) of the I.T. Act and therefore, since the action of the Assessing Officer is not in consonance with the provisions of section 143(1) of the I.T. Act, the order of the ld. CIT(A), cancelling such erroneous order of the Assessing Officer, needs to be upheld.

We have heard both the parties and have perused the material on record. It is undisputed that the Assessee-Society is engaged in the activity of running educational institutions and is existing solely for educational purposes, and not for earning profit; that the Society is registered as a charitable society under section 12AA of the Act and has also got approval from the Chief Commissioner of Income-tax under section 10(23C)(vi); that therefore, the total income of the Assessee-Society is exempt under sections 12AA as well as 10(23C)(vi) of the Act; that the Assessee-Society is maintaining regular books of account which have been audited under the provisions of the Income-tax Act, 1961 and audit report in the prescribed Forms, i.e., 10B and 10BB have been issued and all transactions have been verified with the supporting documents and records; that the Assessee- Society has been regularly filing its return of income for the last several years in the prescribed Form; that the Income-tax assessments, including scrutiny assessments under section 143(3) of the Act have been completed at Nil income for many past years and subsequent years as well; that for the year under consideration, the books of account were audited as per the requirement of the Income Tax Act and the copies of the Audited Balance Sheet, Income & Expenditure Account and Fixed Assets’ Schedule, along with the Report of the Auditors in the prescribed Form, i.e., 10B and 120BB and the statements showing income utilized and accumulated as per the provisions of section 11 of the I.T. Act, were duly furnished before the authorities below; that during the year under consideration, the Assessee-Society had Gross Receipts of Rs.13,53,24,510/- and Expenditures of Rs.11,57,32,018/-, which shows that the assessee had spent more than 85% of its Gross Receipts; and that while processing the return under section 143 (1), the entire Receipts of Rs.13,53,24,510/-, have been taken as income of the assessee and tax has been levied on the same by the Assessing Officer, whereas, the deduction in respect of expenditure incurred and amount accumulated has not been allowed. We are of the considered view that the return of the assessee was not processed in consonance with the provisions of section 143(1) of the I.T. Act. None of the provisions contained in section 143(1) provide for treating the entire gross receipts to be the assessed income. Therefore, we find no error in the order of the ld. CIT(A), cancelling such erroneous order of the Assessing Officer. Accordingly, the order of the ld. CIT(A) is confirmed and the grounds of appeal