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Facts
The assessee, a charitable trust, filed its return of income for AY 2017-18 declaring Nil income. The Assessing Officer (AO) completed the assessment by disallowing depreciation claimed as application of income, leading to a taxable income of Rs.32,57,688/-. The CIT(A) upheld the AO's order.
Held
The Tribunal held that the assessee had made bona fide mistakes in its return regarding mess receipts, corpus donations, and 15% exemption claim, which should be considered as a revision of claims rather than fresh claims. The reliance on Goetze (India) Ltd. v. CIT was deemed inapplicable in this case.
Key Issues
Whether the assessee's claims for revised figures of mess receipts, corpus donations, and 15% exemption under Section 11(1)(a) constitute fresh claims or revision of claims, and if the CIT(A) was justified in dismissing the appeal.
Sections Cited
Sec. 250, Sec. 11(1)(a), Sec. 11(1)(d), Sec. 11(6), Sec. 143(3), Art. 265, Sec. 234B, Sec. 234D, Sec. 12A, Sec. 11(5), Sec. 139, Sec. 254
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Income Tax Appellate Tribunal, BENGALURU “A” BENCH, BENGALURU
IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU “A” BENCH, BENGALURU Before Shri Chandra Poojari, Accountant Member and Shri Keshav Dubey, Judicial Member ITA No. 764/Bang/2024 (Assessment Year: 2017-18)
Kodava Education Society ACIT (Exemptions), Circle-1 PO Box No. 11, Halligattu Unity Building Annexe vs. Ponnampet 571216 5th Floor, Mission Road PAN – AAAAK1322J Bengaluru 560027 (Appellant) (Respondent) Assessee by: Shri Vishal Rao, CA Revenue by: Shri Ganesh R. Gale, Standing Counsel Date of hearing: 28.05.2024 Date of pronouncement: 16.07.2024 O R D E R Per: Keshav Dubey, J.M. This appeal at the instance of the assessee is directed against the order of the National Faceless Appeal Centre, Delhi /CIT(A) under Section 250 of the Income Tax Act, 1961 (the Act) vide DIN & order No. ITBA/NFAC/S/250/ 2003-24/1061703575(1) dated 28.02.2024 for Assessment Year (AY) 2017-18.
The assessee has raised the following grounds of appeal: - “1 The Impugned order of the Appellate Commissioner of Income Tax is liable to set aside in so far as the same is incorrect, irregular, improper, unlawful and oppose to the law and facts of the case. 2 That the Learned Appellate Commissioner erred in not taking cognizance of the fact that the Appellant had committed certain errors and omissions in filling up the Return of Income which ought to have been substituted with the correct figures to arrive at the taxable income, if any and as such the impugned order is liable to set aside.
2 ITA No. 764/Bang/2024 Kodava Education Society 3 That the Learned Appellate Commissioner erred in upholding the action of the AO in considering the Net Mess Receipts of Rs.1,15,562/- and disregarded the fact that the Gross Receipts of Rs.1,22,58,937/- ought to have been considered for computing the deduction u/s 11(1)(a) and as such the impugned order is liable to set aside. 4 The Learned Appellate Commissioner erred in rejecting the Appellant's claim of deduction u/s 11(1)(d) in respect of Corpus Donations of Rs.70,01,601/- upholding the action of the AO in not considering the Voluntary Contributions by way Corpus Donations received aggregating to Rs. 70,01,601/- as against the sum of Rs.60,15,732/- erroneously shown in the Return of Income as Voluntary Contributions and as such the Impugned order is liable to set aside. 5 The Learned Appellate Commissioner erred in upholding the AO's action of allowing mandatory deduction of 15% u/s 11(1)(a) to the extent of Rs.1,10,15,702/- as against the actual amount of Rs.1,19,34,849/- allowable under the Act and as such the impugned order is liable to set aside. 6 The Learned Appellate Commissioner erred in disregarding the Remand Report Issued by the AO dated 19.01.2023 confirming the claim of the Appellant regarding Gross Mess Receipts and Expenditure, Corpus Donations and as such the impugned order is liable to set aside. 7 The Learned Appellate Commissioner erred in disregarding the fact that his powers u/s 250 are not, in any way, hindered by the decision of the Apex Court in Goetze (India) Ltd. v. CIT (2006) 204 CTR (SC) 182/(2006) 284 ITR 323 (SC). 8 The Learned Appellate Commissioner erred in upholding the AO's order in contravention of Article 265 of the Constitution of India. 9 The Learned Appellate Commissioner erred in upholding the AO's action of levying interest of Rs.1,52,559/- u/s 234B even when the Appellant is not liable there for under the law. 10 The Learned Appellate Commissioner erred in upholding the AO's action of levying interest of Rs.18,200/- u/s 234D even when the Appellant is not liable there for under the law.” 3. The brief facts of the case are that the assessee being a charitable trust providing technical education in the rural area of Kodagu district for all the students irrespective of their income, caste, colour, language or religion. The
3 ITA No. 764/Bang/2024 Kodava Education Society assessee trust has also been granted registration u/s 12A of the Act by the ld. CIT, Mysore vide No.100/12A/CIT/MYS/98-99 Vide Order dated 10/02/1999 and have been filing its returns of income for the past 15 years. The return of income for the assessment year 2017-18 was filed on 31.10.2017 declaring total income at Nil. For the year under consideration, the assessee trust in its return of income had declared voluntary contributions other than corpus of Rs. 60,15,732/-, Income U/s 11 & 12 excluding voluntary contributions of Rs.6,74,22,285/-, application on account of revenue expenditure of Rs.6,98,90,881/- and application on account of capital expenditure of Rs.42,88,937/- ( Pages 77 & 78 of the Paper book No.1). Thereafter the case of the Trust was selected for scrutiny through CASS. During the course of the assessment proceedings it was noticed by AO that the assessee trust had claimed depreciation amounting to Rs. 1,50,15,191/- in its return of Income which is included in the total Revenue expenditure claimed as application of income amounting to Rs. 6,98,90,881/- Accordingly the Assessing Officer (AO) completed the assessment under Section 143(3) of the Act by disallowing the depreciation claimed as application of Income amounting to Rs. 1,50,15,191/- as per the provisions contained in section 11(6) of the Act as the assessee has also claimed capital expenditure as application of income and thus assessed on a total taxable income of Rs.32,57,688/- as against the returned income of Rs. Nil. Therefore, the only disallowance made by the AO is the depreciation allowed as application of income as it violates s. 11(6) of the Act, since the assessee has also claimed capital expenditure as application of income on which the depreciation has been claimed.
Aggrieved by order of the AO passed under Section 143(3) of the Act dated 21.12.2019 the assessee preferred appeal before the CIT(A).
Before the ld.CIT(A) the assessee contested the disallowance of depreciation mainly on the ground that the depreciation was not included in
4 ITA No. 764/Bang/2024 Kodava Education Society the application of income as per the return of income and therefore, there is no question of disallowing the same while computing application of income on revenue expenses. As this contention was not raised before the AO, the case was remanded back by the ld. CIT(A) for a comprehensive report thereon. Before the AO the Assessee admitted that it had erred in claiming the entire depreciation of Rs.1,50,15,191/- as application of income and therefore it was being withdrawn. Under the above mentioned facts & circumstances, the CIT(A) was of the view that as the issue on which the present appeal was filed has already been ceded by the appellant and therefore no cause of action arises on the impugned assessment order. Further ld. CIT(A) was also of the view that in the grab of raising additional grounds of appeal, the appellant seeks to recast its accounts afresh and also recompute the income and application and the exempt income thereof without filing a revised return which is not admissible in law. Further, by relying on the decision of the Tribunal in the case of ITO v. Rajiv Sareen in ITA No. 613/Ind/2017 and ITA No. 618/Ind/2017, the ld. CIT(A) is of the view that no new claim can be made before the AO otherwise than by way of claiming the same in the return of income. Reliance is also placed on the decision of Goetze (India) Ltd. v. CIT [2006] 204 CTR (SC) 182/ [2006] 284 ITR 323 (SC) wherein the Hon'ble Supreme Court had held that the assessee can make a claim for deduction which has not been claimed in the return only by filing a revised return within the time allowed and accordingly dismissed the appeal filed by the assessee trust. Aggrieved, assessee filed the present appeal before the Tribunal.
The assessee has filed paper book no.1 comprising 122 pages enclosing various documents as well as supplementary written submission enclosing therein Statement of Income, copy of the Audit report along with the Audited financials & copy of ITR-V, as well as hard copy of ITR-7 for the Asst. Year 2016-17. Before us the assessee has not raised any grounds for claim of depreciation as raised before CIT(A) instead the AR of the assessee
5 ITA No. 764/Bang/2024 Kodava Education Society vehemently submitted that the assessee had committed certain errors and omissions while filing the return of income which ought to have been substituted with the correct figures to arrive at the taxable income. Further, the ld. A.R. submitted that the ld. CIT(A) erred in rejecting the assessee’s claim of deduction under Section 11(1)(d) of the Act in respect of corpus donations of Rs. 70,01,601/- as against the sum of Rs.60,15,732/- erroneously shown in the return of income as voluntary contribution and as such the impugned order is liable to be set aside. Further, the ld. A.R. also submitted that the learned CIT(A) erred in considering the net mess receipts of Rs. 1,15,562/- and disregard the fact that the gross receipts of Rs.1,22,58,937/- ought to have been considered for computing the deduction under Section 11(1)(a) of the Act. Lastly the learned A.R. of the assessee submitted that the learned CIT(A) erred in not allowing mandatory deduction of 15% under Section 11(1)(a) amounting to Rs.1,19,34,849/- allowable under the Act as against NIL claimed in the return & Rs. 1,10,15,702/- allowed by the AO and vehemently submitted that the learned CIT(A) erred in disregarding the remand report submitted by the AO dated 19.01.2023 confirming the claim of the assessee regarding gross mess receipts and expenditure, corpus donations and as such the impugned order is liable to be set aside.
On the other hand, the ld. D.R. supported the orders of the authorities below and submitted that the assessee has neither claimed all the above in its original return nor filed any revised return. Further, the assessee has not made all these claims before the AO also during the course of the assessment proceedings. Therefore, the CIT(A) has no power to entertain the fresh claims in the grab of raising additional grounds in view of the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd v. CIT. (supra).
We have heard the rival contentions, perused the material on record and meticulously gone through the orders of the authorities below. Before
6 ITA No. 764/Bang/2024 Kodava Education Society proceeding further, we are summarizing the issues involved in a tabular form for ease of reference and understanding:-
Sl. Particulars As per return of As computed by AS has to be No. income AO computed under the Act 1. Rent received 56,09,100 56,09,100 56,09,100 2. Voluntary contributions 60,15,732 60,15,732 -- 3. Corpus Donations -- -- 70,01,601 4. School Fee receipts 5,74,68,001 5,74,68,001 5,74,68,001 5. Mess receipts 1,15,562 1,15,562 1,22,58,937 6. Interest on bank deposits 28,90,747 28,90,747 28,90,747 7. Miscellaneous income 13,38,875 13,38,875 13,38,875 8. Total Gross Receipts 7,34,38,017 7,34,38,017 8,65,67,261 9. Less : Deductions 10. Corpus deductions -- -- 70,01,601 u/s.11(1)(d) 11. Deemed to be applied for -- 1,10,15,702 1,19,34,849 charitable purpose u/s.11(1)(a) – 15% of gross receipts excluding corpus donations. 12. Applied for charitable 7,41,79,818 5,91,64,627 7,13,08,002 purpose (Capital & Revenue) 13 Total Income applied 7,41,79,818 7,01,80,329 9,02,44,452 14 Net Income (-) 7,41,801 32,57,688 (-) 36,77,191
Before us, the ld. AR of the assessee vehemently submitted that the assessee had committed certain errors and omissions while filing the return of income which ought to have been substituted with the correct figure to arrive at the correct taxable income in respect of the following:-
(i) Income from Mess operation – Instead of disclosing the gross Mess receipts of Rs.1,22,58,937, the assessee inadvertently declared net income from Mess amounting to Rs.1,15,562 after deducting Mess expenditure of Rs.1,21,43,375.
(ii) Fail to claim 15% deduction of Rs.1,19,34,849 u/s.11(1)(a) of the Act although the AO has allowed deduction of Rs.1,10,15,702 in the assessment order passed u/s.143(3) of the Act.
7 ITA No. 764/Bang/2024 Kodava Education Society
(iii) Fail to deduct corpus donations of Rs.70,01,601 u/s.11(1)(d) of the Act.
Now we take up all these issues one by one which are serially as detailed below:-
(i) As regards the first issue of mistake in adopting the figures of Net Mess receipts of Rs. 1,15,562/- instead of disclosing gross Mess receipts amounting to Rs.1,22,58,937/- and the Mess expenditure of Rs.1,21,43,375/- separately the AR of the assessee drew our attention on page No.20 of the paper book No.1 wherein the AO in his remand report observed as follows:-
“3. Income from Mess Operations: In Sch.AI of the return of income filed for the A.Y.2017-18, under the head Any Other Income, the assessee had declared Rs.1,15,562/- as income from Mess operations. During the course of hearing, the AR submitted that while filing the Return of income for the AY 2017-18 there was a mistake in adopting the figures of Mess Receipts. Instead of disclosing Gross Mess Receipts of Rs.1,22,58,937/-, the assessee inadvertently declared Net income from Mess amounting to Rs.1,15,562/- after deducting Mess expenditure of Rs.1,21,43,375/-. The details of income from mess operations were submitted as under:-
Particulars Amount Mess receipts as per extract of ledger 1,32,21,792 Add : (as appearing in Hostel Balance Sheet) 1,14,522 - Advance Mess receipts (Current liabilities) - Mess receivable balance as on 31.03.2017 (under current 17,27,830 assets) Sub-Total 15,60,64,144 Less : Mess receivable balance as on 31.03.2016 (under current 28,05,207 assets in balance sheet) Total Mess receipts for the FY 2016-17 1,22,58,937
The details of Mess expenditure during the FY 2016-17 were submitted as under:-
Mess Expenditure particulars Amount Amount Cooking Gas 7,41,431 Cooks Salaries 11,09,027 Milk Expenses 15,08,145 Vegetable purchases 17,39,451 Electricity charges 13,60,850
8 ITA No. 764/Bang/2024 Kodava Education Society Provision purchases: Opening Stock 2,54,724 Add : Purchases 42,29,795 Less : Closing Stock (2,65,244) 42,39,275 Other material purchases 13,97,881 Other expenses 47,315 Total 1,21,43,375
The Net Income from Mess Operations during the F.Y. 2016-17 works out to Rs. 1,15,562/-. The AR explained that in Schedule Al of the Return instead of entering the Gross Receipts of Rs.1,22,58,937/- the Net Income figure was entered inadvertently. 3а. The A.R. submitted that during the F.Y.2016-17 the assessee had maintained separate ledgers for Head Office, College and Hostel. The assessee had been asked to draw individual Income and Expenditure A/c in respect of the above three divisions and also to draw a consolidated Income and Expenditure a/c of the assessee as per the audited financial statements for the F.Y.2016-17. 3b. During the course of Hearing, the A.R. produced the ledger extracts of Mess Bill Receipts and Mess Expenditure. The Consolidated Income and Expenditure a/c of the Society along with the divisional break up of Head Office, College and Hostel was furnished. Sample receipts and vouchers in respect of mess operations were produced. 3d. The receipts and vouchers produced were test checked. The ledger extracts were perused. On verification of the details and documents, the assessee's claim regarding the Mess receipts for the F.Y.2016-17 is found to be correct.”
Thus, only after perusing the ledger extract and test checking of receipts and vouchers produced, the AO was of the opinion that the assessee’s claim regarding Mess receipt for the financial year 2016-2017 is found to be correct.
(ii) Further with regard to the second issue that the assessee failed to claim 15% deduction of Rs.1,19,34,849 u/s.11(1)(a) of the Act whereas the AO has allowed Rs.1,10,15,702 U/s 11(1)(a) of the Act in the assessment order, the AO in his remand report stated that commenting on the eligibility of the assessee towards exemption u/s.11(1)(a) is beyond the authority of the undersigned and hence no comments are being made on the same. We found that the Assessee has sought for rectification of deduction U/s 11(1)(a) due to
9 ITA No. 764/Bang/2024 Kodava Education Society the consequential changes in Contribution towards Corpus fund to be treated as exempt U/s 11(1)(d) of the Act as well as inadvertently declaring the Net Income from Mess.
(iii) With regards to the third issue i.e. failed to deduct corpus donations of Rs.17,01,601 u/s.11(1)(d) of the Act, the AO in his remand report dated 19.01.2023 has also found the same to be correct with the following observations:-
Contributions towards Corpus: In Part B-TI of the return filed for the AY 2017-18, the assessee declared as under:
Voluntary contribution forming Rs. Nil part of corpus as per sec.11(1)(d) 2. Voluntary contributions other Rs.60,15,732 than corpus
The A.R. submitted that there was an error in filling up these columns. Amount of voluntary contributions other than corpus received by the assessee during the F.Y.2016-17 was Nil. However, during the F.Y.2016-17 the assessee had received Rs.70,01,601/- as Corpus Fund Donations but there had been an error in not disclosing the same in Return and not claiming deduction u/s.11(d) of the Act. The Summary of the contributions towards Corpus received by the assessee during the F.Y.2016-17 is submitted as under:
Name of the fund Opening balance Contributions Closing balance during the year Development Fund 4,19,40,384 44,81,616 4,64,22,000 (Vidya Vikas Fund) Building Fund 3,65,49,884 15,34,116 3,80,84,000 Old Student (Alumni) 41,49,878 6,45,869 47,95,747 Fund Membership fund 2,06,10,000 3,40,000 2,09,50,000 Total 70,01,601
The AR submitted the audited balance sheet of the assessee as on 31.03.2017 along with Schedules. The ledger extracts of the concerned Funds were produced. Sample receipts were produced and test checked.
10 ITA No. 764/Bang/2024 Kodava Education Society 4c. On verification of the details and documents, the assessee's claim that it had received Corpus Donations amounting Rs.70,01,601/- during the F.Y.2016-17 is found to be correct.”
Thus from the above, we are of the view that no fresh/new claims has been made by the assessee trust before the ld.CIT(A) as observed by him. We are also of the opinion that in case of the first issue there is a bonafide mistake in adopting the figures of Net Mess receipts of Rs. 1,15,562 instead of disclosing gross Mess receipts amounting to Rs.1,22,58,937 and claimed the Mess expenditure of Rs.1,21,43,375 as application separately. Further with regard to the second issue the assessee trust sought for 15% exemption U/s 11(1)(a) wrongly allowed by the AO amounting to Rs.1,10,15,702/- & thirdly the assessee trust sought for exemption U/s 11(1)(d) wrongly claimed as Voluntary contribution amounting to Rs. 60,15,732/-. We are also of the opinion that distinction is required to be made between the additional / fresh claim made and revision of claim. In cases where necessary evidences in respect of the claim is already on record but the section / mode / method / quantum of deduction needs revision due to various factors, such claims should be accepted by the AO. Further the ld.CIT(A) relied upon the judgment of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC) which in our opinion would not apply to the present case as the assessee trust had not made a new claim but had asked for re-computation of the deduction. In Goetze (India) Ltd. (supra), the Hon’ble Apex Court held that new claims need not be accepted by the Assessing Officer when made by the assessee through a letter if the same is not claimed in the return filed u/s.139 of the Act. In the said case, the Apex Court had clarified that the issue in this case limited to the power of the assessing authority and does not impinges on the power of the ITAT u/s.254 of the Income-tax Act, 1961. We also cannot brush aside the fact that by the time the assessee trust noted the errors and deficiency in the return of income, the time specified for filing the revised return of income has already been expired. We
11 ITA No. 764/Bang/2024 Kodava Education Society are completely agree with the submission of the AR of the assessee that the ld.CIT(A) erred in considering the remand report dated 19.01.2023 called for by him partly by picking and choosing the points which are suitable to him & completely ignored other relevant observations of the Report.
Further, Article 265 of the Constitution of India, lays down that no tax shall be levied except accepted by the authority of law. Hence, the only legitimate tax can be recovered and even the concession by a tax payer does not give the authority to tax collector to recover more than what is due from him under the law. Here we would also like to draw attention of an old very Circular No. 14 (XL-35) dated 11/04/1955 issued by the CBDT with regard to the departmental attitude towards assessment section 143. The relevant extracts are given below :-
“3. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should :— (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) freely advise them when approached by them as to their rights and reliefs.”
“6. The intention of this circular is not that tax due should not be charged or that any favour should be shown to anybody in the matter of assessment, or that where investigations are called for, they should not be made. Whatever the legitimate tax it must be assessed and must be collected. The purpose of this circular is merely to emphasise that we should not take advantage of an assessee's ignorance to collect more tax out of him than is legitimately due from him.”
12 ITA No. 764/Bang/2024 Kodava Education Society 13. In view of the above discussions & considering the fact that the trust has been grated Registration U/s 12A of the Act we set aside the order of the CIT(A) and direct the AO to re-compute the total income of the assessee-trust. Further we also direct that in case of the claim of Rs. 70,01,601/- u/s 11(1)(d) the AO shall also verify whether the specific direction that voluntary contributions shall form part of the corpus has been received from the Donors & the corpus funds are invested or deposited in one or more of the forms or modes specicified u/s 11(5) maintained specifically for such corpus. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 16th July, 2024.
Sd/- Sd/- (Chandra Poojari) (Keshav Dubey) Accountant Member Judicial Member Bengaluru, Dated: 16th July, 2024 n.p. Copy to: 1. The Appellant 2. The Respondent 3. The CIT, concerned 4. The DR, ITAT, Bengaluru 5. Guard File By Order //True Copy// Assistant Registrar ITAT, Bengaluru