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Income Tax Appellate Tribunal, VISAKHAPATNAMBENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
अपीलधथी की ओर से/ Appellant by : Shri G.V.N.Hari, AR प्रत्यधथी की ओर से/ Respondent by : Dr.Satyasai Rath, CIT(DR) सुनवधई की तधरीख/ Date of Hearing : 02.05.2024 घोर्णध की तधरीख/Date of Pronouncement : 28 .05.2024 आदेश /O R D E R Per Bench : Condonation of Delay : These appeals are filed by the assessee against the orders of Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi in DIN & Order No. ITBA/NFAC/S/250/2023-24/1059723878(1), 1059724799(1), 1059724646(1), 1059724512(1) and 1059724341(1), alldated 15.01.2024, arising out of orders passed u/s 147 r.w.s. 144 of the Income Tax Act, 1961 (in short ‘Act’) dated 07.03.2022 for the Assessment Years (A.Y.) 2013-14 to 2017-18 respectively, with the delay of 17 days. The assessee filed petition for condonation of delay and submitted that the appeals against the orders of the Ld.CIT(A) dated 15.01.2024 ought to have been filed before the Tribunal on or before 15.03.2024, but the assessee could file the appeals with the delay of 17 days due to the fact that the assessee being a statutory body, constituted for the purpose of planning and coordination of higher education in the state of Andhra Pradesh was to implement a ‘edX Programme’ for 4 lakh students of higher education during the period from 15.02.2024 to 27.03.2024,which required massive efforts from the secretary of the assessee council, in coordinating with the universities and all colleges in the State of Andhra Pradesh and the students. Also, the ‘Model Code of Conduct’ of General Elections 2024 has come into force w.e.f. 16.03.2024 and the assessee being a nodal agency for all universities was occupied in ensuring that all the stake holders adhere to the Model Code of Conduct. The assessee submitted a copy of the contract copy and copy of letter dated 15.03.2024 issued by the Chief Electoral Officer as proof and submitted that the delay in filing of the appeals was due to the fact that 3 to 134/Viz/2024, A.Y.2013-14 to 2017-18 Andhra Pradesh State Council of Higher Education, Guntur the assessee was pre-occupied with the reasons as narrated above, which were neither intentional nor deliberate. It has therefore, pleaded to condone the delay and admit the appeals for hearing in the interest of justice. We have gone through the condonation petition filed and find that there is a valid and sufficient cause for the assessee to file the appeals belatedly. We therefore, condone the delay and admit the appeals for hearing in the interest of justice. Since the grounds raised in all the appeals are identical in nature, these appeals are clubbed, heard together and a common order is being disposed of for the sake of convenience as under. Facts are extracted from I.T.A.No.130/Viz/2024, A.Y.2013-14.
2. Brief facts of the case are that the Assessing Officer(AO) received information regarding non filing of return of income by the assessee and therefore based on the information obtained from NMS data, the Ld.AO invoked provisions of section 147 of the Act, stating that the assessee has held an amount of Rs.56,99,79,042/- in savings bank account during the relevant A.Y.2013-14 and thereafter concluded that there is reason to believe that the income from cash deposits to the tune of Rs.56,99,79,042/- has escaped assessment within the meaning of provisions of 147 of the Act in the hands of the assessee. After obtaining necessary approval for issuance of notice u/s 148 of the Act, the Ld.AO issued various show cause notices on various dates and concluded that the assessee has failed to respond to any of the notices. Final show cause notice dated 13.01.2022 was issued and served upon the assessee, proposing to pass best judgement assessment u/s 144 of the Act and determined tax payable by the assessee on the basis of material evidence collected during the assessment proceedings. Since, no details were furnished by the assessee, the AO was left with no other option and completed the best judgement assessment on the basis of the facts of the case and material available on record. The Ld.AO, on going through the ITS information, found that during the A.Y.2013-14, the assessee has made cash deposits of Rs.18,99,93,014/- in Andhra Bank Nalla Kunta Vidyanagar, Hyderabad savings bank account Nos.150810100029163 & 233810100017575. Since the nature of source of cash deposits made in the bank account of the assessee remained unexplained due to non compliance of the assessee, the Ld.AO invoked the provisions of section 69A of the Act and treated the entire cash deposits as unexplained money and added to the income of the assessee u/s 69A of the Act.
Being aggrieved by the order of the Ld.AO, the assessee filed an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee contested reopening of the assessment u/s 147 of the Act, stating that the assessee is a statutory body and falls within the definition of ‘State’ as per Article 12 of the Constitution of India, and is exempted from filing of Income Tax Returns. Considering the submissions made by the Ld.AR, the Ld.CIT(A), by relying on the various judicial pronouncements as detailed in his order, dismissed the appeal of the assessee.
Aggrieved by the order of the Ld.CTI(A), the assessee is in appeal before us by raising the following revised grounds of appeal :
The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) ought to have held that the notice issued u/s 148 of the Act is not in accordance with law and ought to have quashed the consequent reassessment proceedings as void-ab initio. 3. (a) The learned Commissioner of Income Tax (Appeals) erred in holding that the appellant is not an instrumentality of state as per Article 12 of Constitution of India. (b) The learned Commissioner of Income Tax (Appeals) ought to have held that the income of the appellant is exempt from tax as the appellant is an ‘instrument of state’ as per Article 12 of the Constitution. 4. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.18,99,93,014/- made by the assessing officer u/s 69A of the Act towards unexplained cash deposits in the bank accounts.
Any other grounds may be urged at the time of hearing. 5. Ground No.1 and 5 are general in nature, which does not require specific adjudication.
Firstly, we take up ground No.3, wherein, the assessee has stated that the assessee is an instrument of state, as per Article 12 of Constitution of India and exempt from tax and filing of return of income. On these grounds, the Ld.AR argued that the assessee was granted PAN wrongly in the status of ‘firm’ and wrote a letter dated 27.09.2016 to the Income Tax Officer, Ward-7(1), Hyderabad, requesting to cancel the PAN wrongly allotted in the name of the assessee, considering it as a partnership firm. The Ld.AR further submitted that the assessee is a statutory body established under AP State Council of Higher Education(in short APSCHE) Act 16 of 1988. The Ld.AR further submitted that the AP Reorganisation Act, 2014 was passed, resulting in bifurcation of State into two states i.e. State of Andhra Pradesh and State of Telangana. The assessee has discharged the functions in respect of both the States, till the agreement was reached between the two States. However, the State of Telangana adopted the Act, 1988 and brought into existence Telangana State Council of Higher Education (TSCHE) to discharge the functions of the assessee in the state of Telangana. Subsequent to the formation of 7 to 134/Viz/2024, A.Y.2013-14 to 2017-18 Andhra Pradesh State Council of Higher Education, Guntur TSCHE, the bank account in the name of the assessee was frozen. On appeal by the assessee, the Hon’ble Supreme Court vide it’s order dated 18.03.2016, directed the two states to divide the assets of the assessee in the ratio of 58:42 (58% to APSCHE and 42% to TSCHE) as provided in the Reorganization Act. It was further submitted by the Ld.AR that the entire assets and funds are in the custody of TSCHE. The assessee does not have any access to the same. He, therefore, pleaded that the non-compliance before the Ld.AO is not intentional, but due to the fact that the notices were not received by the assessee. The Ld.AR further submitted that the APSCHE is similar to other government departments. The Ld.AR submitted that as per section 4 of APSCHE Act, the Board consists of a Chairman, a Vice-Chairman to be appointed by the Government, the Secretary to Government, Education Department, the Secretary to Government, Finance Department, the Secretary to Government, Labour, Employment and Technical Education, the Secretary or any other officer of the University Grants Commission (UGC) not below the rank of a Joint Secretary nominated by the Chairman, University Grants Commission, other members to be appointed by the Government, including nominated members and technical experts. It was submitted that the functions of the Council is to coordinate and determine the standards in institutions of 8 I.T.A. No.130/Viz/2024 to 134/Viz/2024, A.Y.2013-14 to 2017-18 Andhra Pradesh State Council of Higher Education, Guntur Higher Education or Research and Scientific and technical institutions in accordance with the guidelines issued by the UGC from time to time. The Ld.AR submitted that the functions of the Council include planning and coordination, academic functions, advisory functions to the Govt. of Andhra Pradesh. The Ld.AR submitted that from the above facts, the assessee is a “State” and is fully governed by the Article 289 of Constitution of India. The Ld.AR read out Article 289, which produced hereunder for reference.
Article 289 in Constitution of India 289. Exemption of property and income of a State from Union taxation (1) The property and income of a State shall be exempt from Union taxation. (2) Nothing in clause (1) shall prevent the Union from imposing, or authorising the imposition of, any tax to such extent, if any, as Parliament may by law provide in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith (3) Nothing in clause (2) shall apply to any trade or business, or to any class of trade or business, which Parliament may by law declare to be incidental to the ordinary functions of Government. He reiterated that income or property belonging to a State is exempt from taxation. The Ld.AR further submitted that Article 289, sub clause (2), which is the exception to Article 289 (1), it is important to note that the Parliament by law provide to tax the property or income in relation to only trade or business of any kind carried on by or on behalf of 9 to 134/Viz/2024, A.Y.2013-14 to 2017-18 Andhra Pradesh State Council of Higher Education, Guntur the Government of a State or any operations connected therewith or any property used or occupied for the purposes of such trade or business or any income accruing or arising in connection therewith. The Ld.AR submitted that the nature of activity of the assessee is neither trading nor of business of any goods or services. The assessee is a body entrusted with the responsibility of administration of technical education department of the State of Andhra Pradesh. It has also argued that meaning of State as per Constitution of India Article 12 of Constitution, the word “State” has different meanings depending upon the context in which it is used. By the express terms of Article 12, the expression “the State” includes :
1. The Government and the Parliament of India 2. The Government and Legislature of each state 3. All local or other Authorities within the territories of India 4. All local and other authorities under the control of the government of India In Article 12, the expression ‘other authorities’ is used after mentioning a few of them such as, the Government, Parliament of India, the Government and Legislature of each of the States and all local authorities. The assessee also submitted that the expression ‘other authorities’ is wide enough to include all authorities created by the Constitution or Statute on whom powers are conferred by law, as held by 10 to 134/Viz/2024, A.Y.2013-14 to 2017-18 Andhra Pradesh State Council of Higher Education, Guntur the Hon’ble Apex Court in Electricity Board in Electricity Board, Rajasthan vs. Mohan Lal. The Ld.AR also further submitted that the assessee also made an application u/s 10(46) of the Act, which is pending before the revenue authorities.
Per contra, the Ld.DR fully supported the orders of the lower authorities and submitted that the assessee has not applied for exemption u/s 10(46) of the Act. He, therefore, pleaded that since the exemption is not granted to the assessee, the orders of the lower authorities may be upheld.
We have considered the submissions of both the parties and gone through the orders of the authorities below. Ground No.2 relates to invalidity of notice issued u/s 148. The Ld.AR has not made any submission with regard to ground no.2, therefore, the ground No.2 is treated as not pressed and dismissed as not pressed.
With respect to Ground No.3, it relates to the assessee, not liable to tax, as being a State under Article 289 of the Constitution of India engaged in public utility services. The AO was of the view that the assessee is a partnership firm, having perpetual succession. However, the assessee is an Artificial Juridical person as defined u/s 2(31) of the Act.
We have examined the APSCHE Act, 1988. The State Legislature enacted the APSCHE Act, 1988 to provide for the constitution of State Council to advice the Government in matters relating to higher education in the state and to oversee development with prospective planning and for matters connected therewith not incidental thereto. Section 4 of the APSCHE Act constitutes the State Council shall consist of the following members namely :
I. Full Time Members : (i) a Chairman and (ii) *two Vice-Chairmen to be appointed by the Government from among eminent educationists II. Ex-Officio Members : (i) The Secretary to Government, Education Department (ii) The Secretary to Government, Finance Department (iii) The Secretary to Government, Labour, Employment and Technical Education (iv) The Secretary or any other officer of the University Grants Commission not below the rank of a Joint Secretary nominated by the Chairman, University Grants Commission (v) The Vice Chancellors of the Osmania University, Andhra University, Sri Venkateswara University, Sri Krishnamadevaraya University, Acharya Nagarjuna University, Kakatiya University and Jawaharlal Nehru Technological University.
The functions of the Council include, planning and co-ordination for development of higher education in the state and to encourage and promote the functions including, improving the standards of examinations conducted by the Universities, academic cooperation to college teachers to conduct examinations and to prepare overview report of the working of the universities and the colleges in the State Council and furnish a copy of report to the UGC. The functions also include advisor to the Government regarding maintenance, grants, setting of a Research board, liaisoning with AICTE in the formulation of schemes in the states to any other functions necessary for the furtherance of the State. Section 22 of APSCHE Act may by notification make rules for carrying out all or any of the purposes of this Act, which shall be laid before the Legislative Assembly of the State. The assessee is under obligation to furnish report and statement relating to any matter connected to its work as the Government may call for. From the above, we note that every activity of the assessee is governed subject to the superintendence, instruction and control of the State Government. Therefore, in our view the assessee has complete superintendence and control of the state government financially as well as administratively by the Government and thus falls under the definition of ‘State’ as per Article 12 of Constitution. The co-ordinate bench of Tribunal in Smt.Sapna Sanjay Roisoni (supra) while considering the scope of Article 12 of the Constitution of India gave the following finding :
“11. The definition of the State under Article 12 has come for the consideration on number of occasions before the Hon’ble Supreme Court. The State consists of three departments, the Legislature, the Executive and the Judiciary. We need not go into all the limits of the State as only the limited issue before us is whether the term Government used in clause(b) to Rule 6DD includes even the autonomous bodies which partakes the character of instrumentalities of the Government. The core test to be applied whether a particular Corporation which is autonomous body is a part of Government, to be seen in the context of degree of control over management and policy decisions. “ We find that in the instant case, APSCHE is incorporated under Special Legislation i.e. APSCHE Act, 1988. As per the said Act, the State Government is only having power to appoint Chairman and other members in the Government Council, i.e. full control of the State Government on the policy decisions as well as management. The Hon’ble Supreme Court has therefore held that the autonomous bodies like State Transportation Corporation or Warehousing Corporation, where there is full control by the Government either State or Central, theseare instrumentalities of State only. Further perusal of Article 12 shows that the definition of ‘the State’ given in Article is inclusive and not exhaustive. ‘The State’ includes : (a) the Government and Parliament of India (b) the Government and the Legislature of each of the States
(c) all local and other authorities within the territory of India and (d) all local and other authorities under the control of the Government of India The expression ‘other authorities’ used in Article 12 is neither defined in the Constitution of India nor in any other statute. Therefore, the Hon’ble Supreme Court of India and the Hon’ble High Court have interpreted this expression in various judgements. The Hon’ble Supreme Court of India while interpreting the expression “other authorities” in the case of Som Prakash Rekhi v. Union of India reported as AIR 1981 SC 212 have culled out certain tests to determine as to when a Corporation should be said to be an instrumentality or Agency of the Government. The tests laid down by the Hon’ble Apex Court are summarized as under :
1. If the entire share capital of the corporation is held by the Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of the Government.
Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. 3. Whether the Corporation enjoys monopoly status which is State conferred or State protected. 4. If the functions of the corporation are of public importance and closely related to governmental functions. It would be a relevant factor in classifying the corporation as an instrumentality or agency of the Government. 5. If a department of a Government is transferred to a corporation, it would be a strong factor supporting this inference of 15 to 134/Viz/2024, A.Y.2013-14 to 2017-18 Andhra Pradesh State Council of Higher Education, Guntur the corporation being an instrumentality or agency of the Government.
After applying the cumulative effect of all the relevant factors mentioned above, if the body is found to be an instrumentality of the agency of the Government, it would be an authority included in term ‘State’ under Article 12 of the Constitution of India. However, the tests indicated by the Hon’ble Apex Court in the case of Som Prakash Rekhi are merely indicative and not absolute and thus, have to be applied discretely. If any Body or organisation falls within the criteria as laid down by the Hon’ble Apex Court it can be considered that it falls within the term “State”.