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Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
Before: SHRI S. V. MEHROTRA & SMT. BEENA PILLAI
Date of hearing: 18.04.2016 Date of Pronouncement: 03.05.2016 ORDER
PER BEENA PILLAI, JM:
The present appeal has been filed by the revenue against the order of Ld. CIT(A) Rohtak vie order dated 23.10.2013 for the Assessment Year 2010-11 on the following grounds of appeal: “1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in cancelling order of the A.O.
2. On the facts and in the circumstances of the case, CIT(A) has erred in not appreciating the position that order of the AO has been passed by exercising bona-fide legal powers vested in the A.O.
3. On the facts and in the circumstances of the case, CIT(A) has erred in not appreciating the position that the assessee did not make claim of exemption
2 I.T.A.No.338/Del/2014 u/s 11 in the return of income. Nor such claim was made by way of revised return of income inspite of the fact that assessee had ample time and opportunity at its disposal for doing so.
On the facts and in the circumstances of the case, ClT(A) has erred in not appreciating the position that inspite of having ample time and opportunity for making claim of exemption u/s 11 during assessment proceedings, the assessee did not make any such claim before AO.
5. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in assuming powers of the AO and not appreciating correct position of law laid down by Hon'ble Supreme Court of India in M/s Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 0324 that AO cannot entertain a claim made otherwise than by way of Revised Return of Income.
On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in not appreciating the correct position Of law that the fresh claim of exemption under section 11 of the Income-tax Act, 1961 cannot be entertained at appeal stage as the AO did not have any opportunity to carry out due process of examination and adjudication regarding claim of exemption u/s 11 of the I.T. Act including examination of conditions of eligibility for availing the exemption u/s 11 of the I.T. Act, 1961.
On the facts and in the circumstances of the case, CIT(A) has erred in not appreciating correct position of law that such claim u/s 11 cannot be adjudicated at appeal stage as the claim is not borne out from facts already on record.
On the facts and in the circumstances of the case, CIT(A) has erred in not allowing opportunity of being heard to the AO.”
The brief facts of the case as recorded by Ld. CIT(A) are as under:-
3 I.T.A.No.338/Del/2014 2.1 Vaish Model Primary School is run by Vaish Model Primary School Educational Society, Laharu Road, Bhiwani a society Registered from Distt. Registrar Firms & Societies under Society Registration Act, 1860. The assessee had filed his return of income on dt. 27.09.2010 declaring income of Rs. Nil as per details mentioned here below:- Excess of income over expenditure from running school under the name of Vaish Model Primary School, Bhiwani Rs. 41,02,736.00 Less: - Exemption u/s 10(23C)(vi) Rs. 41,02,736.00 Nil 2.2 The assessee society was also entitled to deductions under section 11 and 12 of the, income tax act, 1961 in view of the registration granted under section 12A by Commissioner of income tax, Hissar w.e.f. financial year 2009-10. 2.3 The said return of income had been processed by issuing notice under section 143(2) dated 26.09.2011. The Assessing Authority treated the Building Fund and Building Maintenance fund total of Rs. 28,37,500/ - as revenue receipts and added to the income of the assessee. 2.4 The Assessing Officer disallowed the depreciation of Rs.46,825/- claimed under the pretext that on purchase of Shisham Wood of Rs. 4,68,246/- has not been put to use till the closing of the year. 2.5 The Assessing Officer also disallowed vouchers for a total sum of Rs130131/- as related to Vaish Sen Sec. School and not found them genuine as fund of the assessee society are not utilized for the society itself.
4 I.T.A.No.338/Del/2014
Aggrieved by the order of the Assessing Officer, the assessee filed appeal before Ld. CIT(A). 3.1 Before Ld. CIT(A), assessee took up an additional ground of allowability of claim of deduction u/s 11 & 12 of the I.T. Act, 1961, which was originally not considered at the time of filling of return, in view of the fact that its registration u/s 12A was received much after the return of income was filed. 3.2 It was argued that the amount of tax involved and number of entries in the return of TDS are as under: i) Assessee had filed income tax return claiming exemption u/s 10(23C)(vi) when the application for grant of approval of exemption was pending before Ld. CCIT, Panchkula. As the society is fulfilling all the terms and conditions of section 10(23C)(vi) of income tax Act, 1961, therefore assessee is eligible to claim the said exemption under section 10(23C)(vi), which wrongly denied by the Ld. Assessing Officer'. ii) From the aims and objects-running from 1 to 15 it can be observed that the sole aim of the assessee is education and thus charitable in nature. The Assessing Officer failed to consider the same. 3.3 Assessee argued before Ld. CIT(A) that the application that applications for approval of exemption was denied by C.C.I.T Panchkula but later on Hon'ble High Court Punjab & Haryana has passed an order dated 03.10.2011 in assessee’s case allowing own grant of 5 I.T.A.No.338/Del/2014 approval under section 10(23C)(vi) of Income Tax Act, 1961. Hon'ble High Court Punjab & Haryana allowed writ petition filed by the assessee and impugned orders declining the application for exemption under section 10(23C) (vi) of the Act quashing the claim of exemption under section 10(23C)(vi), is justified.
3.4 Assessee had submitted before Ld. CIT(A) that assessee society is entitled to get deduction u/s 11 and 12 of the I.T. Act, 1961. Since the assessee was registered u/s 12A vide letter dated 23.09.2010 w.e.f. 30.03.2010 issued by Ld. CIT himself, the same was applicable for the Assessment Year 2010-11. Ld. A.R. had submitted that at the time of filing of return of income on 27.09.2010 for the Assessment Year under consideration, the registration letter u/s 12A of the I.T. Act, 1961 was pending awaiting registration under the registration letter received on 30.09.2010. So, at the time of filing of return of income, the appellate authority was not aware that the society was eligible for deduction u/s 11 & 12 of the I.T. Act, 1961. Thus, it was contended by the assessee that deduction u/s 11 & 12 of the I.T. Act, 1961, in the absence of exemption letter could not be claimed. Ld. A.R. relied upon the following decisions:- i) CIT Vs Pruthvi Brokers & Shareholders (P) Ltd. 252 CTR 152 (Bom.) ii) Jute Corporation of India Ltd. Vs CIT & Anr. 88 CTR 66 (S.C.)
6 I.T.A.No.338/Del/2014 iii) Kedarnath Jute Manufacturing Company Ltd. Vs CIT 82 ITR 363. iv) CIT Vs Jai Parabolic Springs Ltd. 6 DTR 233 (Del.) (Delhi H.C.).
3.4 Ld. CIT(A) after considering the decisions and judgements relied upon by the Ld. A.R., held as under:- “4.3 It is indeed a question of exercise of discretion whether or not to allow an assessee to raise a claim which was not raised when the return was filed or the assessment order was made. As held by Supreme Court there may be several factors justifying the raising of a new plea in the appeal and each case must be considered on its own acts. However, such cases includes those were the grounds though available when the return was filed or the assessment order was made, was not taken or raised for the reason which the appellant authority may considered valid. In other words, the jurisdiction of appellant authorities to considered a fresh or new ground or claim is not restricted to cases were such a ground did not exists when the return was filed and the assessment order was made. 4.4 In view of the facts discussed above and decisions by various courts and the explanation and the production of letter of granting registration under section 12A which subsequent to the filing of return of income, I hold that the assessee society was entitled to claim deduction under section 11 & 12 which I allow based on the additional claim now made by the assessee society. The appeal is allowed in favour of assessee society on this ground.”
4. Aggrieved by the order of Ld. CIT(A), the Revenue is in appeal before us now. 4.1 Ld. D.R. submitted before the Bench that the first appellate authority erred in not appreciating the position
7 I.T.A.No.338/Del/2014 that the assessee did not make the claim of exemption u/s 11 before the Assessing Officer and therefore, there was no opportunity that was granted to the Ld. Assessing Officer to verify such claim. He submitted that Ld. CIT(A) has erred in assuming the powers of the Assessing Officer without appreciating the correct position of law as laid down by Hon'ble Supreme Court in the case of M/s. Goetze (Indi) Ltd. Vs CIT reported in 284 ITR 324. He vehemently argued that the Assessing Officer could not entertain the claim made otherwise then by way of revised return and therefore the claim made by the assessee u/s 11 & 12 of the Act. Almost it is a fresh claim which could not be entertained at the first appellate stage as the Assessing Officer did not have any opportunity to carry out due process of examination and adjudication regarding the claim of exemption u/s 11 of the Act including the examination of condition of eligibility for availing the exemption u/s 11 of the Act. 4.2 On the contrary, Ld. A.R. referred to section 12A(1) proviso (ii) which reads as under: “12A. (1) The provisions of section 11 and section n12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:- …………… Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of section 11 and 12 shall apply in relation to the income of such trust or institution,- (i) from the date of the creation of the trust
8 I.T.A.No.338/Del/2014 or the establishment of the institution if the commissioner is, for reasons to be recorded in writing, satisfied that he person ion receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons; … (2) Where an application ahs been made on or after the 1st day of June, 2007, the provisions of section 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made.
4.3 Ld. A.R. submitted in its application for exemption u/s 11 & 12 of the Act that the letter for exemption was issued on 30.03.2010 and the same was applicable for the Assessment Year 2010-11. Ld. A.R. further submitted that the powers of Commissioner (Appeals) u/s 2521(1)(a) is synonymous with the powers of the Tribunal u/s 154 of the Act. He submitted that the decision relied upon by Ld. D.R. in the case of Goetze India Ltd. Vs CIT (supra), the Hon'ble Supreme Court had decided the issue relating to the powers of Assessing Officer for allowing a particular claim. He submitted that the issue before this Bench for the year under consideration in the assessee’s case is different vis a vis the issue dealt by Hon'ble Supreme Court in Goetze India Ltd. Vs CIT (supra). Ld. A.R. relied upon the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs Sam Global Securities Ltd. in I.T.A.No. 214/2013 wherein the Hon'ble High Court held as under: “The power of the tribunal in dealing with appeals is thus expressed in the widest possible terms. The 9 I.T.A.No.338/Del/2014 purpose of the assessment proceedings before the taxing authorizes is to assess correctly the tax liability of an assessee in accordance with law. We do not see any reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the CIT(A). Both the assessee as well as the Department have a right to file an appeal / cross objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.”
We have perused the orders passed by authorities below, the arguments advanced by both the parties and the judgements relied upon by them. The issue before us for consideration is, whether the Ld. CIT(A) was right in allowing the claim of deduction raised by the assessee by way of an additional ground u/s 11 & 12 of the Act. When no such claim was made by the assessee in original return of income filed on 27.09.2010, it is clear from the above stated facts there is no dispute that the assessee has been granted the certificate u/s 11 & 12 of the Act on 30.03.2010 which was effective for the Assessment Year 2010-11 (the year under consideration before us). Section 251(1)(a) gives coterminous powers to the Commissioner (Appeals) in an appeal against the assessment order to confirm, reduce, enhance or annul the assessment so made. Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. Vs CIT 187 ITR 688 has held as under:
10 I.T.A.No.338/Del/2014
“An appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions in the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the ITO. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The AAC must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The AAC should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also."
5.1 The decision in the case of Goetze India Ltd. Vs CIT (supra) has been distinguished in the case of Jai Parabolic Springs Ltd. (Supra) as under: “In Goetze (India) Ltd. V s. err [2006] 284 ITR 323 (SC) wherein deduction claimed by way of a letter before the Assessing Officer, was disallowed on the ground that there was no provision under the Act to make amendment in the return without filing a revised return. Appeal to the Supreme Court, as the decision was upheld by the Tribunal and the High Court, was dismissed making clear that the decision was limited to the power of the assessing authority to entertain claim for deduction otherwise than by a revised return, and did not impinge on the power of the Tribunal."
11 I.T.A.No.338/Del/2014 5.2 Hon’ble Jurisdictional High Court in the case of CIT Vs Sam Global Securities Ltd (supra) has observed that the decision in Goetze India Ltd. was again relied upon by the Revenue in CIT Vs Zindal Saw Pipes Ltd. 328 ITR 338 (Del.). However, Hon’ble Delhi High Court observed that the contention was not accepted by the Hon’ble Court observing that the Tribunal jurisdiction is comprehensive and assimilates issues in the appeal from the order of CIT(A) and the tribunal has the discretion to allow a new ground to be raised. Thus, in the present case in hand before us, the additional ground has been raised before the first appellate authority regarding the claim of deduction u/s 11 & 12 for the Act for the first time. However, this was so because the claim of deduction u/s 11 & 12 was not made in the original return of income filed and, therefore, the claim was not there before the Assessing Officer. Hon'ble Supreme Court in the case of Goetze India Ltd. (supra) holds that if the Assessing Officer looks into a particular claim once the assessee has filed original return of income it is possible only by way of filing a revised return. There was no claim under law from the assessee to file the revised return to raise the claim of deduction u/s 11 & 12 before the first appellate authority who has coterminous powers with the Assessing Officer. Hon'ble Bombay High Court in the case of CIT Vs Pruthvi Brokers and Share holders (P) Ltd., (supra) has held that the assessee is entitled to raise additional ground not 12 I.T.A.No.338/Del/2014 merely in terms of legal submissions but also an additional claim not made in the return of income inadvertently, cannot be faulted for more than one reason. In view of above discussion, the ratio laid down by Hon'ble Supreme Court in various judgements and Hon'ble High Courts, we are inclined to dismiss the grounds raised by the Revenue.
6. In the result, appeal filed by the revenue stands dismissed. Order pronounced in the open court on 03rd May, 2016.
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