THE IMPROVEMENT TRUST SANGRUR,SANGRUR vs. DCIT, CHANDIGARH

In the present appeal Assessee has raised the following grounds:

The brief facts of the case are that the assessee is an artificial Juridical person having income from planning, development and improvement of cities and the same was shown as income from other sources. The assessee has been granted registration u/s 12AA of the I.T. Act. The Assessing Officer held that the assessee was carrying on business of sale & purchase of residential houses, multi- storeyed houses and commercial plots by way of auction, which is in the nature of trade, commerce and business, but does not fall within the meaning of words "the advancement of any other object of general public utility" u/s 2(15) of the Income Tax Act, 1961. However, the assessee trust has stated during assessment proceedings that it was not carrying on any business activity that but that the object of trust is planning, development and improvement of city. The Assessing Officer further observed that the contention of the assessee was not correct in view of amendment of section 2(15) of the Income Tax Act, 1961 by the Finance Act, 2008 & 2010, w.e.f 01.04.2009 i.e. A.Y.2009-10 and also in view of the fact that the business activities were carried out for sale of residential plots/houses & commercial plots/complex by auction and charging of huge fees from the clients in the nature of compounding fee, late construction fees, misc. income and interest income etc.

The Ld. CIT(A) based on the orders of the Tribunal and also the order of the Hon’ble Punjab & Haryana High Court in the case of CIT(E) Vs. Improvement Trust Moga in ITA NO. 147/CHD/2016 dt. 23/12/2016 allowed the exemption claimed by the assessee under section 11 r.w.s 12A of Income Tax Act,1961.

Before us, the assessee contended that the addition made by the AO on account of notional interest of Rs. 1,14,12,209/- calculated @ 12% of Rs. 9,51,00,243/-, which were given as advances and shown as sundry debtors during the year under consideration ought to have been deleted by the Ld.CIT(A) as no addition could be sustained once the exemption under section 11 has been allowed on the Income of the Trust by considering activities of the Trust as Charitable in nature.

We have gone through the records before us, the Ld. CIT(A) held that during the course of assessment proceedings, the assessee did not file any reply or explanation on this issue. Therefore, the AO made the impugned addition u/s 13(l)(d) rw Sec. 11(5) and 164(2) of the Act. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Director of Income Tax,

Having heard the arguments of both the parties and after considering the facts available on record, grounds taken by the assessee before the Ld. CIT(A) and also the reasoning given by the Ld. CIT(A) in the para 6.1 of his order that the assessee did not press the issue nor filed any submissions with regard thereto and also held that that it is presumed that the assessee has accepted the action of the Assessing Officer and on this ground Ld. CIT(A) dismissed the grounds. Whereas the assessee has come before us on the grounds that once the charitable activity has been accepted by the Ld. CIT(A) no addition of any kind could have been made. Hence keeping in view this paradoxical situation, we hold that the interest of justice would be well served if the matter is remanded back to the file of the Ld.CIT(A) to adjudicate on this issue. We also direct the assessee to furnish all the submissions which he may rely on before the Ld. CIT(A) during the course of proceedings.

As a result the appeal of the Assessee is set aside.