RAJIV GANDHI UNIVERSITY OF HEALTH SCIENCES,BANGALORE vs. ASSISTANT COMMISSIONER OF INCOME-TAX(EXEMPTIONS), CIRCLE-1, BANGALORE

4. The learned CIT(A), NFAC has erred in confirming the addition made by the Assessing Officer amounting to Rs. 25,88,49,124/- as unexplained income on account of Short Accounting of net receipts holding that there were no serious objections raised by the Appellant for the addition and the addition was made based on the findings of the special audit report. The addition as made / confirmed are contrary to facts and law applicable are to be deleted. 5.1 The learned CIT(A), NFAC has erred in confirming the addition made by the Assessing Officer amounting to Rs. 5,76,27,775/- as unaccounted receipts in an undisclosed Bank account in the name of the Appellant with State Bank of Mysore based on the special audit findings without properly appreciating the facts of the case. There is no undisclosed Bank account and on the facts and circumstances of the case and the law applicable, the addition as made / confirmed are erroneous and same is to be deleted. 5.2 In any case, the Authorities below have erred in not appreciating the fact that the sum of Rs. 5,76,27,775/- in the internal parking account maintained by the Bank for aggregating online receipts and payments to be credited to the respective accounts of the Appellant and that of the Payees'. The transactions in such account cannot be treated as unaccounted receipts in the hands of the Appellant. The conclusion drawn is on erroneous premise and same is to be disregarded. 6.1 The learned CIT(A) has erred in confirming the addition of Rs. 1,74,93,100/- on account of unaccounted receipts as made by the Assessing Officer by merely relying up on the special audit report and holding that the receipts in three accounts in Axis Bank are unaccounted in the books of account of the Appellant. On proper appreciation of the facts and law applicable, these three accounts were pass through in nature for PGET Counselling and Admission and the Appellant having duly accounted these transactions in the books of account, the addition as made / confirmed are erroneous and same is to be deleted. 6.2 In any case, the addition made is erroneous and excessive. 7.1 The learned CIT(A), NFAC has erred in holding that the addition of Rs 36,37,128/-made by the Assessing Officer on account of non remittance of TDS stands settled due to Page 4 of passing of the rectification order. The conclusion drawn by the CIT(A), NFAC being wholly erroneous both on facts and law applicable, since the amount was erroneously as income taxed and in rectification order passed was not on this issue. 7.2 In any case, there being no provision under the Income Tax Act, 1961 to treat the TDS amount as income due to non remittance of TDS to the Central Government, the addition as made by the Assessing Officer is to be deleted. 8.1 The learned CIT(A), NFAC has erred in confirming the addition made by the Assessing Officer amounting to Rs.87,776/- being the cost of Printers which were not accounted as addition to fixed assets. The cost of Printers were duly accounted in the books of account and same is to be considered and the addition made on account of undisclosed investment being erroneous on facts is to be deleted. 8.2 In any case, the Authorities below have erred in not appreciating the fact that though the cost of Printers were inadvertently accounted under the head Maintenance Expenditure, same being entitled to be allowed as application of income and same is to be allowed without any variation.

with respect to allowability of accumulation u/s 11(2) of the Act and the learned Assessing Officer has erred in not giving any finding with respect to the amount considered as accumulation u/s 11(2) of the Act. On proper appreciation of facts and figures, the amount adopted by the AO as accumulation u/s 11(2) of the Act being erroneous and infact relates to AY 2015-16 is to be rejected and the correct accumulation as claimed in the revised Form 10 by the Appellant is to be allowed.

10. The learned CIT(A), NFAC has erred in confirming the disallowance of depreciation of Rs 64,91,659/- as made by the Assessing Officer (Sic., should be Rs.28,08,484/-) holding that the amendment to section 11(6) is applicable from AY 2014-15 and relying upon the decisions which are rendered in different context. On proper appreciation of the facts and law applicable, the amendment to section 11(6) of the Act is applicable from AY 2015-16 and the Appellant having rightly claimed the depreciation as application of income, is to be allowed without any variation.

Page 6 of 2.2 The Assessee was granted registration u/s 12A of the Act by the Director of Income Tax (Exemptions), Bangalore vide no. Trust/718//10ANol.A.IIITT-271/96-97/CIT-11 vide order dated 01.11.1996.

2.3 The Assessee filed the original return of income for the year under consideration on 28.03.2015 declaring Nil income. The return was filed with Deputy Director of Income Tax (Exemptions), Circle-17(2). Bengaluru. This return was revised on 10.11.2016 declaring NIL income after claiming exemption u/s 11 of the Act.

2.3.1 The Assessee's case was subsequently referred to Special Audit u/s 142(2A) of the Act, and the special audit report was submitted on 02.06.2017. The assessee thereafter filed detailed objections to the Audit Report before the Assessing Officer on 30.06.2017.

2.3.2 The assessment was concluded u/s 143(3) r.w.s. 142(2)(A) of the Act assessing the income of the Assessee at Rs 64,95,30,466/- after granting application of income and accumulation u/s 11(2) of the Act.

2.4 The assessee submitted that there has crept in some factual errors in the assessment order. In Paras 12 to 14 of the assessment order, the Ld.AO stated that, the registration granted to the assessee u/s 12AA of the Act had been cancelled vide order 08/11/2011 by the DIT(E). It is submitted that, no such Page 7 of Assessee. Infact, the Assessee had filed a letter before the Assessing Officer on 09/10/2017 to the effect that the Assessee had not received any communication with respect to cancellation of registration u/s 12A of the Act. Copy of this letter is available at Page no. 164 of the Paper Book-2.

2.5 Further, the assessee submitted that there is a reference to assessment order dated 22.11.2011 passed u/s 143(3) for AY 2009-10. It is clarified by the assessee that in the case of the Assessee, the assessment for AY 2009-10 was concluded on 31.03.2015 u/s 143(3) rws 147 of the Act and there is no order passed u /s 143(3) of the Act for AY 2009-10. Copy of the assessment order for AY 2009-10 is available at Page no. 158-163 of Paper Book-2 Against the assessment order, the assessee preferred an appeal before the CIT(A).

Page 8 of The ld Assessing Officer erred in the manner in which he passed the order dated 25.7.2017 under Section 143(3) r.w.s 142(2A) (hereinafter referred to as the impugned order) without assuming valid jurisdiction, thereby rendering the entire assessment proceedings and the impugned order null, void ab initio and being bad in law is to be set aside. 17.2 The Appellant wishes to make the following additional submissions in relation to Additional Ground No. 1 relating to non assumption of valid jurisdiction by the learned Assessing Officer and thus the impugned order being bad in law is void ab initio and is to be set aside. The learned Assessing Officer without issuing the mandatory notice u/s 143(2), proceeded with the scrutiny assessment and concluded the same by the issue of the impugned order. Detailed submissions have been made in regard to the illegality of the scrutiny proceedings due to non assumption of the jurisdiction by the learned Assessing Officer supported by the judicial pronouncements vide Pages 5 to 26 and Paras 3.02 to 4.01 of the submission no. 1 dated 7.12.2022. 17.3 In the matter, the Appellant likes to place reliance upon the decision of the Hon'ble ITAT, "B" Benches, Bangalore in the Appellant's own case for AY 2013-14 in similar facts and circumstances as that of AY 2014-15 i.e. assessment u/s 143(3) r.w.s S.142(2A) being concluded by the Assistant Commissioner of Income Tax, Exemptions, Circle-1, Bangalore being concluded without assuming jurisdiction by issue of S. 143(2) notice. The Hon'ble Tribunal by its order dated 16.5.2023 in between the Rajiv Gandhi University of Health Sciences, Bangalore V. The ACIT (Exemptions), Circle 1, Bangalore (Ann. T Pages 153-156) quashed the scrutiny assessment order dated 16.11.2016 issued u/s 143(3) r.w.s 142(2A) by the Assistant Commissioner of Income Tax, Exemptions, Circle 1, Bangalore for non issue of the mandatory notice u/s 143(2). (i) S. 143(2) notice was issued by the Income Tax Officer (Exemptions), Ward-1, Bengaluru (Ann. K Pages 101-102) who had no jurisdiction over the Appellant, the Appellant case being borne on the files of the Exemption Circle having been registered u/s 12A(a) and regularly assessed from AY 2007-08 & onwards in the Exemption Circle u/s 11 to 13. (ii) notwithstanding the invalidity of the mandatory notice at Ann. K Pages 101-102 due to the jurisdiction issue, the said notice was defective and incomplete, in as much as it was issued through e- mail without signature of the officer issuing the same. The notice also did not make reference to the return on income in respect of which it was issued, as is required under the Act and also not in compliance with the CBDT instructions as to the necessary

Page 9 of Income Tax Officer (Exemptions), Ward-1, Bengaluru was not in possession of the return of income filed by the Appellant nor had accessed and reviewed it to ascertain the status of the Appellant, source of income and income returned to decide whether or not the Appellant was under the jurisdiction of the ITO, WARD-7(2)(1) (Status was evident from the PAN: AAALF0023C as also ITR Vs which clearly stated designation of AO (Ward / Circle) DDIT(Exemption) - Circle 17(2) (Ann. J Pages 99-100) leading to the inference that the Appellant would be claiming exemption u/s 10, or 11 to 12, as the case may be, in which case there will be no taxable income returned, before issue of the mandatory notice, as required by the relevant sub section. (iii) Language of the sub section is very clear that the notice is to be issued by the Assessing Officer, that too after studying/analysing the return of income filed and concluding that it is necessary and expedient, to ensure that the assessee has not understated income or has not computed excessive loss or not under paid the tax in any manner. Several judicial pronouncements have held that notice issued without reference to the return of income and/ or not in possession of the return of income to be invalid. (iv) It is reasonable to presume that based on the letter filed by the Appellant at Ann. Page to the effect that it was registered u/s 12A(a) and the annual receipts exceed Rs 10 crore and jurisdiction was with the Exemption Circle, the ITO, Ward - 7(2)(1) has transferred the case to the Exemptions Ward, Bengaluru, without proper authority and compliance with the S. Provisions. (v) As would be observed from the Ann. 0 Page 106, even after the case reached the Exemption Ward, it has changed hands before reaching the desk of the Income Tax Authority, who had jurisdiction over the Appellant i.e. from ITO, Exemptions Ward 2 to ITO. Exemptions Ward-1 and ITO. Exemptions Ward-1 to the AC IT, Exemptions Circle-1. (vi) On the case reaching the desk of the ACIT, Exemptions Circle -1, he did not issue the mandatory notice u/s 143(2) to assume valid jurisdiction over the Appellant. Even if it were to be issued. such notice would have been invalid as it would not have been issued before 30.9.2015, last date stipulated for issue of the notice u/s 143 (2) with reference to the return of income filed on 28.3.2015. (vii) As the mandatory notice u/s 143(2) was not issued and served in relation to AY 2014-15 by the learned Assessing Officer having and exercising jurisdiction over the Appellant, all the subsequent actions by the Assistant Commissioner of Income Tax(Exemptions),

Page 10 of Circle — 1, Bengaluru beginning with issue of the letters dated 19.7.2016 at Ann. P Pages 107-109 calling for information, subsequent referral to the special audit u/s 142(2A) and the learned Assessing Officer, assuming that he succeeded the Assistant Commissioner of Income Tax(Exemptions), Circle-1, Bengaluru, in the absence of any intimation u/s 129 of the Act by him, culminating in the impugned order u/s 143(3) rws 142(2A) (Ann. B Pages 30-42) without assuming valid jurisdiction over the Appellant by issue of the mandatory notice u/s 143(2) within the stipulated time, are bad in law, vitiated, null & void ab initio and thus the impugned order is liable to be set aside in its entirety. 17.4 In support of its contention. the Appellant relies upon the decision of the Apex Court in Assistant Commissioner of Income Tax & Anr V. Hotel Blue Moon on 2 February, 2010 (Ann. S Pages Pages 124-143) and a host of other legal pronouncements holding that issuance and service of notice under section 143(2) within the prescribed time is mandatory and not procedural and invalidity of the assessment framed without complying with the mandatory notice issue u/s 143(2), as per attached note (Ann. 1/7.12.2022 Pages 18-26 below). DISCUSSION BY THE CIT (APPEALS) 18. The order of ITAT in assessee's own case issued by the jurisdictional HC for AY 2013-14 under identical circumstances is binding on the department. But the difference between the Assessment year 2013-14 and current AY 2014-15 is that 143(2) notice was issued by ITO, Ward — 7(2)(1), Bengaluru which is an unsigned notice under section 143(2) dt 21/9/2015 by the mail dt 24/9/2015 under e-mail id: shamala.m@incometax.gov.in to which the appellant replied on 14/10/2015 by enclosing copy of return of income filed on 28/3/2015. The issue which was applicable to assessment year 2013-14 is not applicable to Assessment year 2014-15. The appeal is decided on the grounds raised by the taxpayer as well as the additional grounds raised.”

3.1 The Ld.CIT(A) thus dismissed the plea of assessee. As on merits, exemption u/s. 11 claimed by the assessee, denied by the Ld.AO was upheld. Aggrieved by the order of Ld.CIT(A), assessee is in appeal before this Tribunal.

4.1 The Ld.AR filed affidavit dated 20.11.2023 of the assessee as under:

4.2 She thus prayed for the delay to be condoned and appeal to be heard on grounds of appeal raised by the assessee.

4.3 The Ld.DR though opposed for condonation of delay, but could not controvert the reasons submitted for delay.

Page 13 of We have perused the submissions advanced by both sides in the light of records placed before us.

4.4 In our opinion there is sufficient and reasonable cause to condone the delay as observed by Hon’ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471 in support of his contentions.

4.5 Considering the circumstances under which the delay occurred in filing the appeal before this Tribunal, we are of the opinion that, there was no malafide intention of the revenue in causing the delay to file the appeal.

4.6 Considering the submissions by both sides and respectfully following the observation by Hon’ble Supreme Court, we find it fit to condone the delay caused in filing the present appeal as it is not attributable to the revenue. Accordingly, the delay in filing the appeal before this Tribunal stands condoned.

Page 14 of Exemption Circle. She placed reliance on the copy of acknowledgment of the returns of Income placed in the paper book. The Ld.AR submitted that, the assessee holds valid registration u/s. 12AA of the act under Certificate no. TRUST/718/10A/VOL.A-III/T-217/96-97/CIT-11 dated 01.11.1996. She emphasized that assessee was always assessed by the Exemption Circle -17(2)/Circle – 1 in all the preceding assessment years.

5.1 The Ld.AR submitted that, for the year under consideration, Income Tax Officer, Ward -7(2)(1) issued an unsigned notice u/s. 143(2) dated 21.09.2015 on mail dated 26.09.2015. Scanned herewith is the copy of the mail received by assessee on 26.09.2015.

5.2 She submitted that assessee responded vide letter dated 14.10.2015 through its representatives, which is placed at page 8 of the paper book (small) filed before this Tribunal. Scanned herewith is the copy of said letter.

5.3 Subsequently, another notice was issued on 23.06.2016 u/s. 142(1) by the Office of ITO(E), Ward – 1 requiring assessee to furnish the details called for fixing the hearing on 07.07.2016. Scanned herewith is the copy of the said notice issued, placed in the paper book at page 9 of the paper book.

Page 19 of 5.4 The Ld.AR submitted that, the assessee once again responded to the said notice to the ITO(E), Ward – 1 vide letter dated 06.07.2016 submitting that the gross annual receipts of the assessee exceeds Rs. 10 crores, thereby indicating that ITO(E), Ward -1 did not have the pecuniary jurisdiction over the assessee. Scanned herewith is the copy of the letter filed by the assessee on 06.07.2016 5.5 The Ld.AR submitted that, subsequently, the assessee’s case was transferred to ACIT(E), Circle – 1 by the ITO(E), Ward – 1 on 16.07.2016, indicating that the assessment of the assessee for the year under consideration is getting time barred by 31.12.2016. Scanned herewith is the copy of the said letter issued by the ITO(E), Ward – 1 which is placed at page 11 of the paper book.

Page 21 of 5.6 The Ld.AR submitted that, the ACIT(E), Circle – 1 upon receipt of the files pursuant to transfer, issued intimation u/s. 142(1) 19.07.2015 calling upon the assessee to furnish details and fixed the hearing on 26.07.2016. The Ld.AR at this juncture pointed out that the date mentioned in the letter shows the year as 2015 instead of 2016, which is typographic mistake. Scanned and annexed herewith the copy of the said letter issued by the ACIT(E), Circle – 1 which is placed at page 12 of the paper book.

Page 22 of 5.7 The Ld.AR submitted that the ACIT(E), Circle – 1 called upon various details in respect of the exemption claimed by the assessee which is issued vide letter wherein the date is entered wrongly to be 19.07.2015 instead of 19.07.2016. Scanned and annexed herewith is the said letter calling for various details from assessee which is placed at page 13 of the paper book.

5.8 The Ld.AR submitted that the ACIT(E), Circle – 1 who had jurisdiction over the assessee did not issue 143(2) notice, instead proceeded on the 143(2) notice issued by the non-jurisdictional officer being ITO, Ward – 7(2)(1). She placed reliance on following decisions in support of her argument.  Arwa Hararwala Bangalore vs ITO  DCIT v Hothur Mohamed Iqbal 131 taxmann.com 25 (Bang)

Page 24 of ACIT vs Hotel Blue Moon 321 ITR 362(SC)  CIT vs Laxman Das Khandelwal 108 taxmann.com 183(SC)  The decision of Hon'ble Supreme Court in case of ACIT vs. S.K. Industries reported in (2022) 141 taxmann.com 569.  Decision of Hon’ble Lucknow Bench of this Tribunal in case of DCIT vs. Sahara India Financial Corporation reported in (2004) 2 SOT 733.

5.9 The Ld.AR submitted that, there was no proper / legal jurisdiction assumed by the ACIT(E), Circle – 17(2) to pass the assessment order in case of the assessee. She placed heavy reliance on the decisions of Hon'ble Supreme Court in case of CIT vs Laxman Das Khandelwal (supra) and in case of ACIT vs Hotel Blue Moon (supra) that further clarifies this submissions made by the assessee.

5.10 The Ld.AR placed reliance on recent most decision of Hon'ble Karnataka High Court in case of Adarsh Developers vs. DCIT, reported in (2024) 158 taxman.com 81. She submitted that, Hon'ble Court in this decision has held that, the jurisdiction in any case cannot be challenged beyond the period of one month from the receipt of a notice issued by a non-jurisdictional officer. In this connection, she submitted that, in the present facts of the case at every stage, the assessee had challenged various notices issued by the non-jurisdictional officers, in lieu of which, necessary steps were adopted by the authorities, thereby transferring the case to the ACIT(E), Circle – 1.

5.11 The Ld.AR thus vehemently submitted that, notice u/s. 143(2) issued by a non-jurisdictional officer cannot be taken cognizance of by the jurisdictional officer to complete the Page 25 of assessment. She thus prayed to hold the assessment proceedings to be bad in law and the assessment order to be declared as passed without assuming jurisdiction over the assessee by the ACIT(E), Circle – 1.

5.12 On the contrary, the Ld.DR vehemently opposed the arguments of the Ld.AR and relied on the objections of the Ld.CIT(A). He placed on record various correspondences called by him from the assessing officer in respect of assumption of jurisdiction by the Ld.ACIT(E), Circle – 1 over the assessee.

5.12.1 Referring the mail dated 28.11.2023 filed in the paper book at page 1, he submitted that, the notice u/s. 143(2) was issued on 21.9.2015 by the then ITO, Ward – 7(2)(1), as the PAN of the assessee was lying with the ITO, Ward – 7(2)(1). It is submitted by the Ld.CIT.DR that, as scrutiny assessment was selected through CASS, the notice u/s. 143(2) was generated in the system and was dispatched by mail to the email id provided by the assessee as per the return data. The Ld.CIT.DR submitted that this mail clarifies the position with ITO, Ward – 7(2)(1) correctly issued notice u/s. 143(2) as the PAN was lying with ITO, Ward – 7(2)(1). Scanned and annexed herewith copy of the mail sent by ACIT(E) to the Ld.CIT.DR.

5.12.2 The Ld.DR relied on the copy of the PAN application filed by the assessee in the year on 30.06.2005, attached with the submissions filed by the Ld.CIT.DR before this Tribunal dated 24.01.2024. He also placed reliance on the decision of Hon'ble

Page 27 of Supreme Court in case of PCIT vs. I-VEN Interactive Ltd. reported in (2019) 110 taxmann.com 332 in support of this argument.

5.12.3 He submitted that, Hon'ble Supreme Court rejected similar argument of the assessee in case of PCIT vs I-VEN Interactive Ltd. (supra). He submitted that, Hon'ble Supreme Court observed that, the notice u/s. 143(2) was issued by the assessing officer therein at the address mentioned in the PAN database and the same was within the period of limitation, and that, as the assessee did not intimate the assessing officer with respect to the change of address, the address as per PAN database continues. The Ld.CIT.DR thus submitted that, Hon'ble Supreme Court emphasized when the notice is issued as per PAN database the same cannot be subjected to challenge.

5.12.4 The Ld.DR, however admittedly agreed to the submissions of the assessee that, no notice u/s. 143(2) was issued to the assessee by ACIT(E), Circle – 1 who completed the assessment. And that, the only notice issued u/s. 143(2) to the assessee was by ITO, Ward – 7(2)(1). He also placed reliance on the decision of this Tribunal in case of Shri Rahul Udaya Shankar vs. ITO in for A.Y. 2017-18 by order dated 10.01.2024 and the decision of Hon'ble Karnataka High Court in case of Adarsh Developers vs. DCIT & Ors. reported in (2024) 158 taxman.com 81 in support of his argument.

5.12.5 The Ld.DR vehemently argued that, during the relevant period the PAN of the assessee was lying with the said ITO, Ward

Page 28 of Hon'ble Supreme Court in case of PCIT vs. I-VEN Interactive Ltd. (supra), he submitted that no error could be found as the ACIT(E), Circle – 1 being the jurisdictional AO, completed the assessment based on the notice issued by ITO, Ward – 7(2)(1) which was valid.

We have perused the submissions advanced by both sides in the light of records placed before us.

6.1 Further, on a query raised to the revenue regarding any notice issued to the assessee u/s. 143(2) on the revised return, the Ld.CIT.DR answered in negative. This has also been affirmed by the ACIT(E), Circle – 1 vide letter dated 09.05.2024 that is filed by the Ld.CIT.DR at the time of hearing conducted on 10.05.2024. Also it is necessary to note at this juncture that admittedly the Ld.ACIT(E), Circle – 1 processed the revised return filed on 10.11.2016 during the assessment proceedings, though

Page 29 of 09.05.2024, she has held the revised return to be belated. Scanned herewith is the letter dated 09.05.2024 filed by the Ld.CIT.DR 6.2 It is noted that the fact that the revised return is subjected to processing during assessment as per the above letter dated 09.05.2024. Also, we note that the said revised return is said to be belatedly filed by the assessee. All these situations has not been addressed by the Ld.CIT(A) while considering the additional ground raised at the time of hearing in the impugned order. We note that the Ld.CIT(A) has dismissed the issue by holding that an unsigned notice issued u/s. 143(2) dated 21.09.2015 by email will not vitiate the proceedings. In our opinion, this issue and the arguments raised by both sides before us needs to be properly verified by the Ld.CIT(A). Having regards to the fact that Page 31 of the revised return i.e. belatedly filed by the assessee was processed during the assessment proceedings for which no notice u/s. 143(2) has been issued. In our considered opinion, we direct the Ld.CIT(A) to decide the legal issue raised by assessee based on the above admitted facts in accordance with law. We therefore restrain from deciding the issue on merits at this stage and the same is kept open. Accordingly, the appeal stands remitted to the Ld.CIT(A) for fresh consideration on ground nos. 2.1-2.2 raised by assessee before this Tribunal. In the result, the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on 28th June, 2024.