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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 17, Chennai, dated 26.03.2015 and pertains to assessment year 2011-12.
Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the assessee-Sangam was registered as charitable institution under Section 12AA of the Income-tax Act, 1961 (in short 'the Act').
During the year under consideration, the assessee claimed depreciation on the capital asset. However, the Assessing Officer disallowed the claim of the assessee and granted exemption under Section 10(23C)(vi) of the Act. The assessee challenged the order of the Assessing Officer before the CIT(Appeals) as far as it relates to disallowance of depreciation on the capital asset. The CIT(Appeals) without considering the grounds raised before him, proceeded on the presumption that there was violation of Section 13(1)(b) of the Act. The CIT(Appeals) found that the assessee- Sangam was established for the benefit of a particular caste and accordingly found that the assessee-Sangam is not eligible for exemption under Section 11 of the Act. Referring to the order of the CIT(Appeals), more particularly para 4.1, the Ld.counsel submitted that the CIT(Appeals) is not correct in saying that the aim of the assessee-Sangam is not solely for education. According to the Ld. counsel, the object of the Sangam is primarily for education. The Sangam is also pursuing institutional activity apart from the primary object of education. Therefore, the assessee-Sangam is eligible for exemption under Section 11 of the Act. Since the primary object is for education, the assessee-Sangam is also eligible for exemption under Section 10(23C)(vi) of the Act.
The Ld.counsel for the assessee further submitted that the CIT(Appeals) observed in the impugned order that by his letter dated 17.03.2015, the assessee was asked to furnish objection, if any, for not granting exemption to the extent of `1,21,55,545/-. The CIT(Appeals) also claims that working was provided to the assessee. In fact, according to the Ld. counsel, the letter dated 17.03.2015 was not served on the assessee. The working said to be made by the CIT(Appeals) was also not furnished to the assessee. Therefore, the assessee could not file any objection before the CIT(Appeals). Even assuming for argument sake that so-called letter dated 17.03.2015 was served on the assessee, still the time given to the assessee was not sufficient to give objection since the CIT(Appeals) passed the order on 26.03.2015.
The Ld.counsel for the assessee further submitted that when the issue raised by the assessee before the CIT(Appeals) is only depreciation on the capital asset, the CIT(Appeals) cannot travel beyond the grounds of appeal raised by the assessee before him.
Referring to the grounds of appeal filed before the CIT(Appeals), the Ld.counsel submitted that other than disallowance of depreciation in respect of capital asset, no other issue was raised before the CIT(Appeals). Therefore, the CIT(Appeals) exceeded his jurisdiction for disallowing the claim of exemption under Section 11 of the Act, since such a power was not conferred on the CIT(Appeals). The CIT(Appeals) is expected to adjudicate the issue raised by the assessee in the grounds of appeal. Unfortunately, according to the Ld. counsel, the CIT(Appeals) has not discussed anything about the issue of depreciation and disallowed the claim of the assessee under Section 11 of the Act. Therefore, according to the Ld. counsel, the CIT(Appeals) is not justified.
5. On the contrary, Sh. P. Radhakrishnan, the Ld. Departmental Representative, submitted that no doubt, the assessee claimed depreciation on capital asset which was disallowed by the Assessing Officer. On appeal, the CIT(Appeals) found that there was violation of Section 13(1)(b) of the Act, hence, he found that the assessee is not eligible for exemption under Section 11 of the Act.
The CIT(Appeals), by letter dated 17.03.2015, asked the assessee to furnish its objection. The CIT(Appeals) has also furnished working for assessing the income of `1,21,55,545/-. The assessee claimed before the Assessing Officer that it was entitled to exemption under Section 11 and Section 10(23C)(vi) of the Act.
This objection was overruled. On a query from the Bench whether the letter dated 17.03.2015 was furnished to the assessee, the Ld. D.R. very fairly submitted that he has to call for records from the CIT(Appeals) to verify whether the letter was in fact served on the assessee or not. The Ld. D.R. further submitted that even assuming for argument sake that the letter was served on the assessee, the assessee claimed before the Tribunal that the time provided to the assessee is not sufficient enough to file its objection.
Therefore, he submitted that he leaves the matter to the discretion of the Tribunal.
Referring to the contention of the Ld.counsel for the assessee that the CIT(Appeals) has exceeded his jurisdiction in holding that the assessee is not entitled for exemption under Section 11 of the Act, the Ld. D.R. submitted that the power of the CIT(Appeals) is co-terminus with that of the Assessing Officer.
Therefore, according to the Ld. D.R., what the Assessing Officer omitted to consider, the CIT(Appeals) can very well consider the same provided an opportunity given to the assessee. In the case before us, according to the Ld. D.R., the Assessing Officer has not considered the violation of Section 13(1)(b) of the Act. Therefore, he had no occasion to examine whether the assessee is eligible for exemption under Section 11 of the Act or not. This omission on the part of the Assessing Officer was rectified by the CIT(Appeals).
Such an exercise of his power is permissible under the scheme of the Act. Therefore, according to the Ld. D.R., it is not correct to say that the CIT(Appeals) has exceeded his jurisdiction in denying exemption under Section 11 of the Act, especially, when the issue before him was grant of depreciation on the capital asset.
We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the Assessing Officer allowed exemption under Section 10(23C)(vi) of the Act, however, disallowed the claim of the assessee for depreciation on the capital asset. It is not in dispute that the assessee filed appeal before the CIT(Appeals) only in respect of the claim of depreciation. The CIT(Appeals), while considering the appeal of the assessee in respect of depreciation, found that there was violation of Section 13(1)(b) of the Act since the institution was established for the benefit of a particular community. The Assessing Officer has not examined the provisions of Section 13(1)(b) of the Act. The fact remains that the Director of Income Tax (Exemptions) granted registration under Section 12AA of the Act after considering the object of the Sangam and the purpose for which it was established. The CIT(Appeals) by letter dated 17.03.2015 asked the assessee to furnish its objection, if any, for disallowing the claim under Section 11 of the Act or Section 10(23C) of the Act. The assessee now claims before this Tribunal that the letter dated 17.03.2015 was not served on it and the working said to be provided to the assessee by the CIT(Appeals) was also not furnished. Admittedly, the CIT(Appeals) passed the order on 26.03.2015. Therefore, from the date of issue of letter and the date of passing the order, the time limit available was only 9 days. If the CIT(Appeals) dispatched the letter dated 17.03.2015 by post, then the same would have been received after two or three days. Then, the available time would be only 5 or 6 days. If for any reason, the letter could not be served on the assessee within two or three days, then the time limit available to the assessee for furnishing objection would be reduced proportionately. Therefore, this Tribunal is of the considered opinion that even assuming for argument sake, the letter dated 17.03.2015 was served on the assessee, the time given to the assessee for filing objection is not sufficient enough. Therefore, the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to examine the matter afresh in the light of the objection raised by the assessee and thereafter decide the same in accordance with law after giving reasonable opportunity to the assessee. It is made clear that the Assessing Officer shall decide the issue independently without being influenced by the observation made by the CIT(Appeals) in the impugned order.
In the result, the appeal of the assessee is allowed for statistical purposes.