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Income Tax Appellate Tribunal, : ‘B’ BENCH, KOLKATA
Before: Shri J. Sudhakar Reddy & Shri S.S.Viswanethra Ravi
This is appeal filed by the Assessee is against the order dated 23-06-2014 of Commissioner of Income-tax (A), Jalpaiguri for the assessment year 2009-10.
2. The only issue is to be decided as to whether the CIT-A is justified in confirming the assessment order determining the total income of assesse at Rs.92,04,200/- against the returned income at Rs. Nil in the facts and circumstances of the case.
Brief facts of the case, according to AO are that the assessee is an ‘AOP’ and filed its return of income declaring ‘Nil’ for the A.Y under consideration on 19-02-2010. Notices u/s. 143(2) and 142(1) of the Act were issued and duly served on the assessee. In response to which, the A/R of the assessee appeared and filed written submissions and produced books of accounts. During the course of scrutiny proceedings the AO found that the application for renewal of approval u/s. 35(1)(ii) of the Act for the period from 1-4-08 onwards 2 Indian Institute of.Chemical Engineers, Kolkata has been rejected by the Central Board of Direct Taxes hereafter for short as CBDT vide its order dt. 24-08-09. Thereby the AO treated the assessee as ‘AOP’ and determined the total income at Rs.92,04,200/- vide his order dt. 25-11-2011 passed u/s 143(3) of the Act.
4. Before the CIT-A, in first appellate proceedings, it was contended that the assessee is an institute which was established in the year 1947 and was later on registered under the Societies Registration Act, 1961. It has been approved by the Scientific and Industrial Research Organization, Ministry of Science. The application for renewal of recognition as a Scientific and Industrial Research Organization by the Department of Scientific and Industrial Research' (DSIR) has been approved upto 31.03.2014. The assessee has been consistently involved in the field of chemical engineering over the years. It has also been involved in various R&D projects. The assessee also conducts Associate Membership Examination which is recognized by various Universities and Institutes. It has been organizing professional meets & seminars, publishing journals and research papers in the field, of chemical engineering. The assessee was also an approved scientific research organization and had obtained certificate u/s 35(1)(iv) of the IT. Act. Subsequently the application for renewal of the said certificate was rejected by the CBDT. The assessee has been trying to revive the said application and is in the process of pursuing the matter before the higher authorities. The AO out rightly assessed the surplus of the assessee as the taxable income under the I.T. Act without appreciating the facts and the AO should have made a protective assessment.
Considering the above submissions, the CIT-A in absence of any approval u/s. 35(1)(ii) of the Act rejected the claim of assessee and confirmed the order of the AO. The relevant portion of which is reproduced as under: 3 Indian Institute of.Chemical Engineers, Kolkata “1. This appeal is filed against order U/s. 143(3) dated 25/11/2011 assessing the income at Rs.92,04,200 against the returned income of Rs. NIL.
The AO noted that the renewal of approval U/S 35(1)(ii) for the period 01/04/2008 onwards has been rejected by Central Board of Direct Taxes vide Order Dated 24/08/2009. As the assessee was not registered as a charitable trust U/S 12, the AO did not allow exemption U/S 11.
3. During the appellate proceedings, the assessee made written submissions and oral arguments.
Conclusion- I have considered the written submissions of the assessee and the assessment order. The fact that the assessee’s renewal of approval U/S 35(1)(ii) by the CBDT is not disputed. Also, the assessee was not registered as a charitable organization entitled for exemption U/S 11 during the relevant period. CBDT is the highest decision- making authority of the Income Tax Department and the AO has rightly taxed the assessee as AOP. The order of the AO is upheld and the appeal of the assessee is dismissed.”
Before us the ld.AR submits that initially the Govt. of India granted recognition for exemption u/s. 35(1)(ii) of the Act vide order dt. 24-02-1977 for the period from 1-4-1976 to 31-03-1979, placed on record and referred to para-1 of the written submission filed before us vide dt. 06-062017. It has been renewed from time to time upto 31-03-2005. The assessee made an application for renewal for the period from 1-4-05 to 31-03-08 and no such order was passed by the CBDT. The assessee again made an application for the period from 1-4-08 to 31-03-2011, which was rejected by the CBDT vide its order dt. 24-08-2009. The ld.AR argued that the CBDT rejected the application of the assessee without there being any authority. The Govt. of India is the authority to grant approval u/s. 35(1)(ii) of the Act or renewing the same thereafter. In view of the such circumstances, the Ld.AR argued that the order of rejection of renewal passed by the CBDT is not valid and prayed to allow the grounds of appeal as raised by the assessee before the Tribunal.
On the other hand, the ld. DR relied on the orders of the authorities below.
Heard rival submissions and perused the material on record. We find that the CBDT rejected the application of assessee for renewal of the recognition seeking exemption by an order dated 24- 4 Indian Institute of.Chemical Engineers, Kolkata 08-2009 stating that no adequate scientific research activity has been carried out by the assesse. We note that in order to claim exemption u/s. 35(1)(ii) of the I.T Act 1961 approval is essential and necessary. The relevant portion of which is reproduced as under:- “2. After careful examination of the application as well as other details furnished by you from time to time, it is noticed that adequate scientific research activity, which is an essential to qualify for approval u/s 35(1)(ii) of the Income-tax Act 1961, has not been carried out by you. Accordingly, the “prescribed authority” has held that M/s. Indian Institute of Chemical Engineers is NOT A fit case for grant of approval under that section. It is, therefore, regretted that your application for approval under section 35(1)(ii) of the Income-tax Act, 1961, has been rejected.”
Therefore, it is clear from the record there was no approval for the assesse to claim exemption u/s 35(1)(ii) of the Act as on the date of assessment and grounds raised are liable to be dismissed.
The arguments of the ld.AR regarding the order of CBDT having no authority to grant approval, in this regard, we note that the assessee challenged the action of the CBDT in rejecting the application seeking approval before the Hon’ble High Court of Calcutta and the Hon’ble High Court was pleased observe that it is to left open to the assesse to agitate before the authority which may propose to hear on the subject vide its order dt:28-11-2013 in MAT 795/2013 + CAN 8121/2013+CAN 8346/2013 is at document no-3 of paper book of the assessee. Thereafter, the assesse moved another application in FMA 3161/2015 and the Hon’ble High Court was pleased to observe that the assesse failed to realize that the matter shall thereafter be placed before the Ministry of Finance for passing an order either accepting or rejecting the prayer for approval is at document no-4 of paper book of assessee. The relevant portion of which is reproduced herein below:- “In this case the petitioner was offered an opportunity of hearing before "Member (IT) CSDT and CIT (IT)''. CIT (IT) is also the authority to receive the application for approval, CIT(IT) after receiving such application is required to satisfy himself as regards eligibility of the applicant. In case he is not satisfied be may also afford an opportunity of hearing to the appellant and shall thereafter make the recommendation. In this case such an opportunity was granted by the letter dated 26th February, 2013 but the writ petitioner refused to avail the opportunity on the ground that the member (IT) CBDT was not authorised to hear., The writ petitioner failed to realize that the matter shall there-after be placed before the Ministry of Finance for passing an order either accepting or rejecting' the prayer for approval, For that purpose the Ministry is entitled to make further enquiry into the matter. Provision for such further enquiry is there in Rule 9 and 10 quoted above. 5 Indian Institute of.Chemical Engineers, Kolkata
In case the Ministry allows the prayer, there is no reason why any further hearing is to be given. In case it is inclined to reject the prayer, it has to disclose reasons but before it does that it is required to give an opportunity of hearing to the applicant. Therefore, hearing before the member (IT) CBDT and the CIT proposed by the letter dated 2611i February, 2013 was not the end of the road. The writ petitioner by refusing to appear at personal hearing and by refusing to satisfy the CIT as regards its eligibility prevented the statutory authority from performing its job. In the circumstances there was no occasion for any further hearing before rejecting the prayer for approval. The contention of the writ petitioner on the basis of the judgement in the case of G. Nageswara Rao (Supra) is therefore without any basis. We are as such of the opinion that the Member (IT) CBDT and CIT(IT) were in law authorised to hear the applicant before making the recommendation one way o!' the other. In the result, the appeal fails and is dismissed.”
In view of the decision above by the Hon’ble High Court of Calcutta, we find no force in the submissions of the Ld.AR in respect of the CBDT has no power to decide the application seeking approval u/s 35(1)(ii) of the Act. Admittedly, it is noticed that for the A.Y under consideration, there was no approval for getting exemption u/s. 35(1)(ii) of the Act as on the date of assessment to claim exemption. Therefore, in our opinion, the CIT-A rightly exercised his jurisdiction in confirming the order of AO in rejecting the claim of the assessee. Therefore, grounds raised by the assessee in the appeal are dismissed.
In the result, the appeal (ITA No. 1777/Kol/2014 for the A.Y 2009-10) of the assessee is dismissed.