Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘E’ : NEW DELHI
Before: SHRI C.M. GARG & SHRI ANADI NATH MISHRA
PER ANADI NATH MISHRA, ACCOUNTANT MEMBER :
This appeal filed by Revenue is directed against the order
dated 31.12.2008 passed by the Commissioner of Income-tax
(Appeals)-XXI, New Delhi for the Assessment Year 2005-06 on
the following grounds :-
“1. On the facts and in this circumstances of the case, the Ld. CIT (A) has wrongly held that the income of the
2 ITA No.897/Del./2009
assessee is exempt u/s 11, when the A.O. has held that activities of the assessee are for the benefit of founder i.e. Maruti Udyog Limited and in violation of section 13(1)(c) read with u/s 13 (3).
On the facts and in the circumstances of the case, the Ld. CIT (A) has wrongly held that Sh. Jagdish Khattar is the founder, whereas as per the MOA of the society, Sh. Jagdish Khattar is only representative of Maruti Udyog Limited and therefore, Maruti Udyog Limited is the founder as rightly held by the A.O.
On the facts and in the circumstances of the case, the Ld. CIT (A) has wrongly held that the assessee is entitled to exemption u/s 11 and that there is no violation of section 13(1)(c).
On the facts and in the circumstances of the case, the Ld. CIT (A) was not justified in deleting the addition of Rs.5,25,00,000/- made under the head corpus donation received, as exemption u/s 11(1)(a) is not available when there is violation of section 13(1)(c).”
The assessee society was incorporated on 15.05.2002 and was granted registration under section 12A of the Income-tax Act,
1961 (for short ‘the Act’) vide order dated 25.02.2003 of ld.
Director of Income-tax (Exemptions). Vide assessment order dated
28.12.2007 for Assessment Year 2005-06, the AO disallowed the
exemption claimed under section 11 & 12 of the Act holding, inter
alia, that there was violation of provisions of section 13 of the Act.
The assessee filed appeal before the ld. CIT (A) against the order
of the AO. Vide order dated 31.12.2008, the ld. CIT (A) allowed
3 ITA No.897/Del./2009
the appeal of the assessee and upheld the claim of exemption of
assessee under sections 11/12 of the Act. Revenue filed appeal
against the order of the ld. CTI (A) in Income Tax Appellant Tribunal (for short ‘the Tribunal’) on the grounds of appeal stated
in the foregoing paragraph no.1 of this order.
The appeal of Revenue was dismissed by the Tribunal vide
order dated 02.09.2009 wherein the order of ld. CIT (A) was
upheld. Revenue filed appeal under section 260A of the Act in
Hon’ble Delhi High Court raising the following question of law :
“Whether the Income Tax Appellate Tribunal was right in holding that the assessee is a charitable institution and has not violated the Section 13(1)(c)(ii) read with 13(3) of the Income Tax Act, 1961?”
3.1 Vide order dated 21.05.2012, Hon’ble Delhi High Court set aside the order passed by the Tribunal and restored the matter to
the Tribunal to re-examine the factual matrix in the light of the
legal position laid down by the Hon’ble High Court in the aforesaid
order dated 21.05.2012. Relevant portion of order of Hon’ble High
Court is reproduced below : " The order of the tribunal in the assessment year 2005-06 is devoid of reasoning and does not refer to factual matrix and details which have to be examined and considered while deciding the question whether or not Section 13 (1)(c)(ii) read with Section 13(3)is violated. The facts, figures mentioned in the income expenditure
4 ITA No.897/Del./2009
account and the activities undertaken etc. have not been mentioned or specifically examined, what was and whether any benefit or advantage was enjoyed by the person mentioned in Section 13 (3) has not been adverted to and considered. General observations have been made. The order of the tribunal is cryptic and cannot be categorized as a reasoned and speaking order which is mandated and required to be passed by the final fact finding authority." ………………………………………………………..
“ In view of the aforesaid position, we answer the aforesaid question of law in negative with the order of remit. Question of law is partly decided in favour of the appellant Revenue. The tribunal will examine the factual matrix and position in the light of legal position mentioned above. Before applying the ratio/law, they shall first record finding on facts relevant and which are to be examined."
3.2 It is necessary to take note of further facts in this connection.
The registration granted to the assessee society u/s 12A of Income
Tax Act was cancelled by Ld. Director of Income-tax (Exemptions), since inception, vide order no.DIT(E)/2011-12/1467
dated 22.02.2011. The assessee filed an appeal before Income Tax
Appellate Tribunal challenging the aforesaid order dated
22.02.2011. Vide order dated 17.02.2012, the Tribunal remitted
the matter back to the file of Director of Income-tax (Exemptions)
for re-adjudication. A fresh order was passed by Ld.
Commissioner of Income-tax (Exemptions) on 26.02.2015
whereby once again registration granted to the assessee u/s 12A of
5 ITA No.897/Del./2009
I.T. Act was cancelled since inception of the assessee society. The
assessee society has accepted the aforesaid order dated 26.02.2015
of Commissioner of Income-tax (Exemptions) and no appeal has been filed by the assessee society against it. Thus, cancelation of
registration of appellant society u/s 12A of I.T. Act vide aforesaid
order dated 26.02.2015 of Commissioner of Income-tax
(Exemptions) has become final.
3.3. We are thus faced with an extraordinary situation. The appeal
has come up before us for fresh adjudication as result of aforesaid
order dated 21.5.2012 of Hon’ble High Court whereby the appeal
is remitted to ITAT with the direction to examine the factual matrix
and position. The order of Hon’ble High Court is based on the
position that registration granted to assessee society u/s 12AA of I.T. Act has not been revoked. However, this position has
completely changed because Revenue has cancelled registration
vide aforesaid order dated 26.2.2015 which has become final as the
assessee society has not filed appeal against aforesaid order dated
26.2.2015. Thus factual matrix and position has substantially
changed.
3.3. At the time of hearing before us, in his preliminary remarks,
at the outset, the ld. Counsel for the assessee submitted that
6 ITA No.897/Del./2009
grounds no.1, 2 & 3 of appeal are to be decided in favour of
Revenue and against the assessee because assessee society has
accepted order dated 26.02.2015 of ld. CIT (E) cancelling the registration granted to assessee society u/s 12A of the Act. He
submitted that the only ground of appeal that the assessee society
wanted to contest was ground no.4 of appeal filed by Revenue. In
his preliminary submissions, ld. Counsel for the assessee society
submitted that even after cancellation of registration granted to
assessee u/s 12A of the Act vide aforesaid order dated 26.02.2015,
the addition of Rs.5,25,00,000/- is unsustainable being capital
receipt in the hand of the assessee society.
The Ld. DR appearing for Revenue submitted that at this stage,
the assessee society cannot argue that the aforesaid amount of Rs.5,25,00,000/- was capital receipt. He drew attention to Rule 27
of Income Tax (Appellate Tribunal) Rules, 1963 and contended
that the respondent cannot support the order of the ld. CIT (A) at a
ground which has not been decided against the respondent. The ld.
DR highlighted the facts that the order of ld. CIT (A) the appeal
was decided in favour of the assessee, and that the assessee was
neither in appeal before the Tribunal nor had the assessee even
filed any cross objection. The Ld. DR contended that as no ground
7 ITA No.897/Del./2009
of appeal had been decided against the assessee by the ld. CIT (A),
the window for intervention by assessee is firmly closed, the ld.
DR contended, in view of Rule 27 of Income Tax (Appellate Tribunal) Rules, 1963. Thus, the ld. DR contended that the
respondent has no locus standi to agitate before the Tribunal.
4.1. The ld. Counsel for the assessee contended that despite Rule
27 of Income Tax (Appellate Tribunal) Rules, 1963, the assessee
was entitled to plead at this stage that powers of the Tribunal under
section 254 of the Act. He drew our attention to section 254 (1) of
the Act under which the Tribunal has been given wide powers to
pass orders as it thinks fit. He argued that Rule 27 of Income Tax
(Appellate Tribunal) Rules, 1963 does not debar the assessee from
pleading at this stage that the aforesaid amount of Rs.5,25,00,000/- is not taxable being capital receipt in the hands of the assessee
society and relied on case laws for this purpose.
The ld. Counsel for the assessee also made detailed
submissions on merits in an attempt to show that the aforesaid
amount of Rs.5,25,00,000/- was in the nature of capital receipt. In
response, the ld. Departmental Representative also made detailed
submissions contending that this amount of Rs.5,25,00,000/- was
8 ITA No.897/Del./2009
taxable. On merits, the ld. DR argued that this amount was in the
nature of revenue receipt and was taxable.
We have patiently heard both the sides and also have carefully perused the materials on record. We must take
cognizance of changed circumstances. The situation has
substantially changed as a result of cancellation of registration
under section 12A of the Act vide order dated 26.02.2015 of ld.
Commissioner of Income-tax (Exemption) which has become final,
as the assessee has not appealed against it. It is not in dispute that
the plea that the aforesaid amount of Rs.5,25,00,000/- received by
the assessee society is not taxable ( being in the nature of capital
receipt) has been raised by the assessee society for the first time.
Perusal of materials on record shows that this plea was not raised by the assessee in the earlier proceedings listed as under:-
(i) Assessment proceedings before the Assessing Officer
resulting in assessment order dated 28.12.2007;
(ii) Appellate proceedings before the ld. CIT (A) resulting
in order dated 31.12.2008 of ld. CIT (A);
(iii) Appellate proceedings before the Tribunal resulting in
order dated 02.09.2009;
9 ITA No.897/Del./2009
(iv) Proceedings before the ld. Director of Income-tax
(Exemption) resulting in order dated 22.02.2011
whereby registration of the assessee society under section 12A of the Act was cancelled since inception;
(v) Proceedings before the Tribunal leading to order dated
17.02.2012 whereby the matter regarding registration
under section 12A was remitted to the file of Director
of Income-tax (Exemption) for re-adjudication;
(vi) Proceedings before Commissioner of Income-tax
(Exemption) resulting in order dated 26.02.2015
whereby once again registration of the assessee
society under section 12A of the Act was cancelled
since inception; (vii) Appellate proceedings before the Hon’ble Delhi High
Court under section 260A of the Act resulting in order
dated 21.05.2012 of Hon’ble High Court whereby the
earlier order dated 02.09.2009 of the Tribunal was set
aside and was remitted back to the Tribunal.
6.1. Since the assessee had not raised the plea regarding the
aforesaid receipts amounting to Rs.5,25,00,000/- being in the
nature of capital receipt, the lower authorities have not had an
10 ITA No.897/Del./2009
occasion to examine this plea having regard to facts and
circumstances of this case. If the assessee society is allowed to
raise this plea now for the first time, the matter will have to be referred to the Assessing Officer for examining this plea on merits
taking the facts and circumstances of this case. The matter that
arises for reconsideration, therefore, is whether the assessee should
be allowed to raise this plea for the first time at this stage
especially in view of Rule 27 of Income Tax (Appellate Tribunal)
Rules, 1963. As mentioned earlier, the ld. DR opposed this plea
citing Rule 27 of Income Tax (Appellate Tribunal) Rules, 1963 and
contending that window for intervention by assessee is firmly
closed in view of provisions of Rule 27 of Income Tax (Appellate
Tribunal) Rules, 1963. It is necessary in this context to take cognizance of the fact that assessment proceedings, appellate
proceedings before the ld. CIT (A), appellate proceedings before
the Tribunal (resulting in earlier order dated 02.09.2009) and
appellate proceedings under section 260A of the Act before the
Hon’ble Delhi High Court were based on the position that
registration under section 12A of the Act granted to assessee
society by Revenue was still in force and had not been invalidated
by a subsequent order. In a situation when registration under
11 ITA No.897/Del./2009
section 12A of the Act is in force, which entitles the assessee to
claim benefit under sections 11/12 of the Act, it was neither
necessary nor contextual for the assessee to raise a plea that the aforesaid amount of Rs.5,25,00,000/- was capital receipt. It was
sufficient for the assessee to plead that this amount was not taxable
in view of benefits to which the assessee was eligible in view of
sections 11, 12 and 12A of I.T. Act. By cancelling the registration
of the assessee under section 12A of the Act vide order dated
22.02.2011 by ld. Director of Income-tax (Exemption) and once
again vide order dated 26.02.2015 by Commissioner of Income-tax
(Exemption), Revenue has caused a complete shift in paradigm.
Once the benefits under sections 11, 12 and 12A of the Act are
denied to the assessee society by a subsequent action of Revenue, assessee society cannot be precluded from defending itself by
raising such plea(s) which had not been raised earlier. When the
rules of the game have been altered by Revenue, the assessee
cannot be denied the opportunity to adjust its game in accordance
with the changed rules of the game. When there is a complete
paradigm shift, it will be fair and just to provide an opportunity for
fresh examination of the issue at hand in the context of the new
paradigm.
12 ITA No.897/Del./2009
On the other hand, it is also a fact that when assessment
was completed by AO, the assessee enjoyed registration u/s
12A/12AA of I.T. Act and in view of sections 11 and 12 of I.T. Act, the AO had a relatively constrained space to scrutinize and
examine the cases. Registration was granted to assessee on an
application made by assessee society. Thus, the position at the time
of assessment (registration u/s 12A / 12AA of I.T. Act ) was
created at the instance of the assessee. Therefore, it can be said that
assessee society itself had played role in ‘rules of the game’, so to
say ; at the time of assessment. Presently the registration earlier
granted to the assessee u/s 12A/12AA of I.T. Act, has been
cancelled from inception of assessee society which provides the
AO a relatively wider space to scrutinize and examine the case. As both sides (Revenue as well as assessee society) were in agreement
regarding grant of registration u/s 12A/12AA of I.T. Act at the time
of assessment ; and as both sides presently agree for cancellation of
registration since inception of assessee society; neither side can
have any reasonable or legitimate grievance if it is decided to set
aside the orders of the lower authorities and matter is restored to
the file of the AO for denovo assessment. If the assessee is allowed
to raise new plea(s) Revenue also must have reasonable
13 ITA No.897/Del./2009
opportunity to examine the plea(s) in the light of facts and
circumstances of the case.
We reject reliance by the ld. DR on Rule 27 of Income Tax (Appellate Tribunal) Rules, 1963; not only because, as discussed
earlier, cancellation of registration under section12A created an
entirely new situation ; but also in view of decision of Hon’ble
Supreme Court in the case of Hukumchand Mills Ltd. vs. CIT 63
ITR 232 (SC) wherein Hon’ble Apex Court held that Rules 12 and
27 of Income Tax (Appellate Tribunal Rules) 1963 are not
exhaustive of the powers of the Tribunal. The Hon’ble Apex Court
further held in this case, that the rules are merely procedural in
character and do not, in any way, circumscribe or contract the
powers of the Tribunal. 8.1 In view of the foregoing, we set aside the orders of the
lower authorities and restore the case back to the file of the AO for
denovo assessment as per law. The assessee society will be free at
the time of proceedings for denovo assessment to raise any plea(s)
including such plea(s) which have not been raised by the assessee
society earlier.
8.2 In short, orders of lower authorities are set aside for denovo
assessment by AO.
14 ITA No.897/Del./2009
In the result, this appeal is partly allowed for statistical
purposes. Order pronounced on 25th October, 2016
sd/- sd/-
(C.M. GARG) (ANADI N MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 25th October, 2016.
TS Copy forwarded to:
Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY By Order,
ASSISTANT REGISTRAR