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Facts
The assessee, a charitable trust, filed its income tax return for AY 2017-18. The Assessing Officer (AO) found an accumulation of income and issued a notice u/s 148. The assessee filed a revised return and the AO assessed the total income. The CIT(E) found the AO's order erroneous and prejudicial to the revenue and directed a de-novo assessment.
Held
The Tribunal held that the CIT(E) erred in directing a de-novo assessment based on a bonafide mistake in accumulation of income. The assessee had accepted the mistake and it was rectifiable. Therefore, the directions of the CIT(E) were modified to the extent of rectification of the mistake.
Key Issues
Whether the CIT(E) was justified in directing a de-novo assessment when the assessee accepted a bonafide mistake in income accumulation? Whether the AO's order was erroneous and prejudicial to the revenue?
Sections Cited
12A, 143(1), 148, 143(2), 142(1), 147, 144B, 263, 11(2)(a), 11(3)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH
Before: SHRI PAVAN KUMAR GADALE & SHRI OMKARESHWAR CHIDARA
IN THE INCOME TAX APPELLATE TRIBUNAL, “C” BENCH MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI OMKARESHWAR CHIDARA, ACCOUNTANT MEMBER ITA No. 2034/MUM/2024 (A.Y.2017-18) Chandrakant Narayan Vs. CIT(Exemption), Room.no 322,3rd Floor, patkar Charitable Trust Income Tax Office, 1st Floor, Patkar Trust Pmt Building, Office Buillding, Sankar Seth road, Station Road, Pune-411037, Near Canara Bank, Maharashtra. Dombivli (E), Thane-421201. Maharashtra. PAN/GIR No. AAATT2801N (अपीलाथ�/Appellant) (��यथ�/Respondent)
Appellant by Shri Dharan Gandhi.AR Respondent by Ms.Madhu Malti Ghosh.CIT DR
सुनवाई क� तार�ख/Date of Hearing 02.07.2024 घोषणा क� तार�ख/Date of Pronouncement 09.07.2024
ORDER PER PAVAN KUMAR GADALE, JM: “ The assessee has filed the appeal against the order of the Commissioner of Income Tax (Exemption)(CIT(E)), Pune passed u/sec 263 of the Act. The assesse has raised the following grounds of appeal:
“1 .Ld. CIT(E), Pune erred in directing Ld. AO to pass the assessment order afresh de-novo.
2 ITA No. 2034/MUM/2024 (A.Y.2017-18) Chandrakant Narayan Patkar Charitable Trust, Mumbai
The appellant craves leave to add, amend, modify or delete grounds of appeal. 2. The brief facts of the case are that, the assessee is a charitable trust registered under section 12A of the Act. The assessee has filed the return of income for the A.Y 2017-18 on 29.10.2017 disclosing a total income of Rs. 39,63,440/- and the return of income was processed u/sec 143(1) of the Act. Whereas the Assessing Officer (AO) found that the assessee has made accumulation of income to the extent of Rs. 83,34,631/- and the A.O has a reason to believe that the income has escaped assessment and issued notice u/s 148 of the Act. In compliance to notice, the assessee has filed the return of income on 14.04.2021 with a total income of Rs.39,63,440/-. Subsequently the AO has issued notice u/sec 143(2) and u/sec 142(1) of the Act. The assessee has filed the information and submissions from time to time in the e-assessment proceedings. Finally the AO considering the facts and submissions has assessed the total income of Rs.39,63,440/- and passed the order u/sec 147 r.w.s 144B of the Act dated 23.03.2022.
Subsequently, the CIT(E) on perusal of the records and information found that, the order passed by the AO under section 147 r.w.s 144B of the Act is erroneous and prejudicial to the interest of the revenue and has issued revision notice u/sec 263 of the Act considering the facts
3 ITA No. 2034/MUM/2024 (A.Y.2017-18) Chandrakant Narayan Patkar Charitable Trust, Mumbai
of the assessee case for the A.Y 2018-19 referred at Page 1 Para 2 to 4 of the revision order as under:
“2. Further, case of the assessee for A.Y 2018-19 was selected under CASS for the reason "Accumulation of income by the trust". During the course of assessment proceedings, the FAO noticed that purposes specified in Form 10 were not specific. Accordingly, the FAO passed assessment order on 20/03/2021 by assessing income at Rs.69,46,057/- denying assessee's claim of accumulation u/s 11(2) of the Act. Subsequently, FAO vide letter dated 20/03/2021 shared information with AO to take necessary action that assessee had transferred an amount of Rs.83,34,631/- from income statement to earmarked funds for future application relating to A.Y 2017-18.
Further, it is observed that unutilized amount of Rs 21,00,148/- set apart during F.Y. 2011-12 was required to be offered for taxation as per Sec 11 (2)(a) & 11(3)(c) of the Act.
As such the total income of the assessee should have been as follows:
Gross receipt as per I& E Statement Rs.1,37,59,967/-
Add: Amount set apart in FY 2011-12
but not utilized as per col.8(4) of Schedule
Al of ITR Rs. 21,00,148/-
Aggregate of income u/s 11 & 12 excluding OME
corpus contribution as per Schedule Al of ITR Rs 1,58,60,115/-
Less. Revenue Expenditure Rs. 51,07,083/-
Capital Expenditure Rs. 44,10,577/-
Less: 15% accumulation on
Gross receipt of Rs. 1,37,59,967/- Rs. 20,63,995/-
4 ITA No. 2034/MUM/2024 (A.Y.2017-18) Chandrakant Narayan Patkar Charitable Trust, Mumbai
Taxable balance amount: Rs. 42,78,460/- In view of the above, the total income of the assessee is at Rs 42,78,460/ However, the Assessee had shown its returned income for A.Y 2017-18 at Rs.39,63,440/- and the same has been accepted during the scrutiny proceedings. Thus, there is an under assessment of income of Rs 3,15,020/-. 4. Accordingly, a notice u/s 263 of the Income tax Act, 1961 was issued on 30.01.2024 and sentthrough RPAD and on the registered e-mail id. Vide above notice, the assessee was given an opportunity of being heard by attending this office on 14.02.2024 either personally or through its authorized representative and was also given an option to file its submission from the e-filing portal using the link: incometaxindiaefiling.gov.inand to explain its stand in the matter alongwith documents, account and any other information in its support.”
In compliance to the notice, the assessee has filed the submissions vide letter dated 06.02.2024 referred at Page 3 Para 5 of the revision order as under:
“It was a bonfide error thereby calculating excess accumulation at 15% on Rs. 21,00,148/- i.e Rs. 3,15,022/-. We accept the mistake. You are requested to do the needful.” 5. Whereas the CIT(E) was not satisfied with the explanations and submissions and is of the opinion that the order passed by the AO is erroneous and prejudicial to the interest of the revenue, and accordingly issued directions to the Assessing Officer to pass assessment order afresh de-novo vide revision order u/sec 263 of the Act dated 26.03.2024. Aggrieved by the order of the CIT(E), the assessee has filed an appeal before the Hon’ble Tribunal.
5 ITA No. 2034/MUM/2024 (A.Y.2017-18) Chandrakant Narayan Patkar Charitable Trust, Mumbai
At the time of hearing, the Ld. AR submitted that the CIT(E) has erred in considering the order passed by the AO is erroneous and prejudicial to the interest of the revenue, irrespective of the fact that the assessee has complied with the information and the notices through ITBA and the A.O. having verified and examined the facts has accepted the information.Further the assessee in the course of the revision proceedings has accepted the fact with respect to excess accumulation of income @ 15% and it is a bonafide mistake and can be rectified. Whereas the CIT(E) has overlooked these factual aspects and directed the assessing officer to make de-novo assessment which is not in accordance with the provisions of the Act and prayed for allowing the assessee appeal. Per Contra, the Ld.DR relied on the order of the CIT(E).
We heard the rival submissions and perused the material on record. The Ld.AR envisaged that the order passed by the Pr.CIT is bad in law as the order revised under revision proceedings passed by the CIT(E) is not erroneous and not prejudicial to the interest of the revenue. The contentions of the Ld.AR that, the AO has considered the submissions, facts in respect of claims and method of accounting and information and further in compliance to notice u/sec 143(2) and u/sec 142(1) of the Act, the assessee has filed the explanations on various dates in the e- assesseement proceedings. The CIT(E)
6 ITA No. 2034/MUM/2024 (A.Y.2017-18) Chandrakant Narayan Patkar Charitable Trust, Mumbai
based on the facts of the subsequent assesseement year has issued a revision notice and the assessee in compliance to the notice has filed the information and has accepted the fact of bonafide mistake in calculating the excess accumulation of income @ 15%. Whereas the CIT(E) issued directions to the Assessing Officer to pass assessment order afresh de-novo.The Ld.AR submitted that the CIT(E) has erred in setting aside the order u/sec 147 r.w.s 144B of the Act dated 23.03.2022 merely it does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. The Ld. AR also submitted that the explanation (2) to Sec. 263 of the Act are to be considered only when the AO has not applied his mind and no facts are verified and no enquiry was conducted. The Ld. AR contended that the assessee has complied with the statutory notices and filed reply online through ITBA and the Ld.AR relied on the judicial decisions on the validity of revision proceedings U/sec263 of the Act. Further the Ld. AR contentions are that the assessee has accepted bonafide mistake and any adjustment has to be made to the extent of calculation of accumulated income and there cannot be a de-novo assessment. We considering the overall facts, circumstances and the details submitted in the course of hearing are of the view that the if any query is raised in the assessment proceedings and it was responded by the assessee, mere fact that it is not dealt within by the A.O. in the order cannot implied that there is
7 ITA No. 2034/MUM/2024 (A.Y.2017-18) Chandrakant Narayan Patkar Charitable Trust, Mumbai
no application of mind and the A.O. has applied one of the possible view. Whereas the assessee in the course of the revision proceedings has accepted the fact with respect to excess accumulation of income @ 15% and it is a bonafide mistake and can be rectifiable. Therefore the directions of the CIT(E) to do the denovo assessment for fresh accumulation of income in not justified. Accordingly, we modify the directions of the Pr.CIT to the extent of rectification of bonafide mistake of accumulation of income and we partly allow the grounds of appeal of the asssessee.
In the result, the appeal filed by the assessee is partly allowed. Sd/-
Order pronounced in the open court on 09.07.2024.
/- Sd/- Sd/- Sd/- (OMKARESHWAR CHIDARA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 09/07/2024 KRK Copy of the Order forwarded to: 1. The Appellant, 2. The Respondent 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file.