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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. Nos. 363 & 364/JP/2023
vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM These two appeals are filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 13/04/2023 [here in after (ld. CIT(A)/NFAC)] for assessment year 2019-20 which in turn arise from the order dated 08.09.2021 passed under section 143(3) of the Income Tax Act, by the Addl./Jt./Dy./Asst. Commissioner of Income Tax/ITO, NeAC, Delhi and penalty order dated 02.02.2022 passed under section 270A of the Income Tax Act by the NFAC, Delhi .
2. In 363/JP/2023, the assessee has raised following grounds:-
“1. In the facts and circumstances of the case and in law, Id. CIT- (A) has erred in confirming the action of Id. AO in not allowing benefit of deduction u/s 11 & 12 of the Income tax Act and thereby not allowing application of income of Rs. 7,38,768/-. The action of Id. CIT-(A) is unjustified, arbitrary and against the facts of the case. Relief may please be granted by allowing deduction u/s 11 & 12 and accepting returned income of the assessee trust.
2. In the facts and circumstances of the case and in law, Id. CIT-(A) has erred in confirming the action of the Id. AO in denying the benefit of deduction u/s 11 and not computing the income correctly as per the provisions of Income Tax Act, 1961. The action of Ld. CIT-(A) is illegal, unjustified, arbitrary and against the facts of the case. Appropriate relief may please be granted.
3. In the facts and circumstances of the case and in law, Ld. CIT-(A) has erred in confirming the action of Ld. AO in not allowing any amount as deduction u/s 57 of the Income tax Act, 1961. The action of Ld. CIT- (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by allowing appropriate deduction u/s 57.
The assessee Trust craves its right to add, amend or alter any of the grounds on or before the hearing.”
2.1 In the assessee has raised following grounds:-
“1. In the facts and circumstances of the case and in law, ld. CIT(A), has erred in confirming the action of ld. AO in levying penalty of Rs. 1,15,247 u/s 270A of the Income Tax Act, 1961. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said penalty of Rs.1,15,247/- imposed u/s 270A.
In the facts and circumstances of the case and in law the ld. AO
has erred in imposing penalty u/s 270A without specifically pointing out whether the penalty was proposed on underreporting of income or underreporting is in consequence of any misreporting of income. The action of the ld. AO is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the penalty imposed u/s 270A.
3. The assessee Trust craves its right to add, amend or alter any of the grounds on or before the hearing.”
In the fact as culled out from the records is that return of income for the A.Y 2019-20 was filed by the assessee vide Ack. No. 879846690240819 dated 24.08.2019.
Notice u/s 143(2) dated 24.09.2020 was duly served on assessee through electronic mode and further questionnaire u/s 142(1) of the I.T. Act vide dated 21.01.2021, 25.02.2021 and 15.03.2021 for furnishing the required information. In response to these notices, no compliance was made by the assessee. However, again there has been no compliance on the part of the assessee. Further, the assessee was non compliant towards the online faceless assessment proceedings, a no response letter dated 26.03.2021 was also issued. The assessee made compliance on 31.03.2021 and submitted requisite details in response to the earlier notices issued u/s 142(1) of the I.T. Act, 1961.
3.1 In the fact as culled out from the records is that the assessee filed its return of income for the Rs. 24,665/-. Thereafter, the case of the assessee was taken up under compulsory scrutiny due to the reason “Cases where registration/approval under various sections of the Income-tax Act, 1961 such as 12A, 35(1)(ii)/(iia)/(iii), 10(23C) etc. of the Income-tax Act, 1961 have not been granted or have been cancelled/withdrawn by the competent authority, yet the assessee has been found to be claiming tax-exemption/deduction in the return. However, where such orders of withdrawal of the registration/approval have been reversed/set-aside in appellate proceedings, those cases will not be selected under this clause”.
The AO has assessed the income u/s 143(3) at Rs. 7,63,433/- by making an addition of Rs. 7,38,768/-, because assessee’s registration u/s 12A was rejected by the Commissioner of Income Tax (Exemption) and assessee has claimed exemption of Rs. 7,38,768/- in accordance with section 11(1)(a) of the Income Tax Act, 1961. During the course of assessment proceedings it was noticed that, the CIT(Exemption), Jaipur vide order under section 12AA(1)(b)(ii) of the Income Tax Act, 1961 dated 16.02.2019 had already cancelled the registration of the trust. Despite the cancellation of registration, the assessee still filed its ITR in form 7 and claimed the exemptions under various sections of the Income Tax Act, 1961.
4. In aggrieved from the order of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A)/NFAC. A propose to the grounds so raised the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below:
“4.2 It may be seen from the reply of the appellant during the course of assessment proceedings wherein he had clarified that the application for seeking registration u/s 12AA was rejected by the Commissioner of Income Tax (Exemption), Jaipur. The appellant does not have even the copy of the cancelled or withdrawal order of the same. Since the registration of the trust was already cancelled by the CIT(Exemption), Jaipur, the appellant cannot be eligible for claiming exemptions under various sections of the Income tax Act, which are available only to a trust registered as per the provisions of Income Tax Act, 1961. Since the appellant has not been granted certificate 12A, this office does not find any affirmative to interfere with the finding and conclusion made by the assessing officer in the assessment order. Hence, I do not find merit in the argument of the appellant. Therefore, these grounds i.e. 1, 2 and 3 are decided in negative and hence these grounds are dismissed. The ground no. 4 is general in nature. Hence this ground need not be adiudicated.
6. In the result, the appeal of the appellant is dismissed.”
4.1 In aggrieved from the order of the Assessing Officer for levy of penalty, assessee preferred an appeal before the ld. CIT(A)/NFAC. A propose to the grounds so raised the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below:
It may be seen from the reply of the appellant during the course of assessment proceedings wherein he had clarified that the application for seeking registration u/s 12AA was rejected by the Commissioner of Income Tax (Exemption), Jaipur. The appellant does not have even the copy of the cancelled or withdrawal order of the case. Since the registration of the trust was already cancelled by the CIT(Exemption), Jaipur, the appellant cannot be eligible for claiming exemptions under various sections of the Income Tax, which are available only to a trust registered as per the provisions of Income Tax Act, 1961. Since the appellant has not been granted certificate 12A, the exemption claimed by the appellant cannot be allowed. Therefore, I do not agree with the various arguments of the appellant in which he has tried to justify his claim of exemption. Therefore, penalty imposed under section 270A for underreporting of income is hereby confirmed. In the result, the appeal of the appellant is dismissed.
The ld. AR of the assessee relied upon the detailed submission filed before the ld. CIT(A). In addition to that submission the ld. AR of the assessee submitted that assessee has filed return of income claiming benefit of section 11 and 12 of the Act. But the assessee was not aware about the fact that their application for registration u/s 12AA of the Act was rejected by ld. CIT(E) vide order dated 16.02.2019, this fact is not disputed. While filling the ITR it left the attention while filling the return of income.
Based on that non disputed fact the ld. AR of the assessee taking an alternative plea that of granting the benefit of expenditure incurred while charging the income the expenditure should have been allowed by the lower authority when the assessee is treated as an association of person. He further submitted that the income alone cannot be taxed and the relevant expenditure incurred in earning or in connection with the said income is required to be considered while computing the income of the assessee. The ld. AR of the assessee submitted a chart stating that assessee has undertaken three types of charitable and general public utility services i.e., charitable activity, publishing the informative calendar and service related to the medical services. A propose to all these activities, the assessee has received income in the form of donations/fees which is tabulated in the order of ld. CIT(E) and the same is also reiterated herein below so as to clarify the issue of hand chart:
Chandraprabh Charitable Sansthan Charitable Activities Profit and loss A/c 01.04.2018 to 31.03.2019 Particulars Amount Particulars Amount Assistance to needy person 47,477.00 Discount received 5,200.00 Surplus from Charitable 5,78,146.00 Donation received 5,36,473.00 Activities Interest from Bank 1,716.00 Add: Assistance to needy Interest received on 47,477.00 69,534.00 person not allowed as FDR expenditure Life time membership 12,700.00 Net surplus from charitable 6,25,623.00 activities after disallowance of above expenditure
Total 6,25,623.00 Total 6,25,623.00
Chandraprabh Charitable Sansthan Calendar Activities Profit and loss A/c 01.04.2018 to 31.03.2019
Particulars Amount Particulars Amount Calendar Printing Expenses 35,200.00 Receipt from Calendar 35,140.00 Deficit from Calendar 60.00 Activities Total 35,200.00 Total 35,200.00
Chandraprabh Charitable Sansthan Medical Activities Profit and loss A/c 01.04.2018 to 31.03.2019
Particulars Amount Particulars Amount Accounting Charges 2,100.00 Receipt from Patients 1,02,670.00 Bank Charges 265.00 Deficit from Medical 4,38,905.00 Activities Depreciation 3,445.00 Freight 4,850.00 General Expenses 21,370.00 Medical Expenses 1,93,198.00 Printing & Stationary 2,683.00 Salary 3,13,664.00 Total 5,41,575.00 Total 5,41,575.00
On going through the separate profit & loss account drawn and submitted before the ld. CIT(E), the fact as it is clear that while computing income of the assessee the relevant expenditure incurred for each activities has not been considered. The loss / excess of income or excess of expenditure needs to be adjusted internally and then finally the income of the assessee if any is required to be charged to tax and for that contention, the ld. AR of the assessee submitted following calculations.
Charitable Activities –Surplus (+) Rs. 6,25,623.00 2. Calendar Activities-Deficit (-) Rs. 60.00 3. Medical Activities – Deficit (-) Rs. 4,38,905.50 Total Rs. 1,86,657.50
On perusal of the separate activity wise Income and expenditure account and the above calculation of inter head adjustment the income which is net remains is required to be taxed in the case of the assessee as the benefit of sections 11 and 12 of the Act are denied. Considering that facts in this case the remaining taxable income amounting to Rs. 1,86,657.50 is to be taxed instead the 7,38,768/-. The ld. AR of the assessee considering that aspects of the matter stated that the relief which the lower authority has not given be considered. that the assessee was aware about the cancellation/denial of registration for sections 11 and 12 of the Act. Even though the assessee claimed benefit and ld. CIT(A) has given a detailed finding on all the issues raised by the assessee and therefore, ld. DR supported the order of lower authorities.
We have heard the rival contentions and perused the material placed on record. It is not disputed that the assessee has computed the income based on the 3 activities i.e. Charitable Activities, Calendar Activities & Medical Activities and in one activity, there is a profit/surplus and other two activities as deficit so while calculating the income of the assessee in the year under consideration, the claim of the assessee adjusting inter head surplus/deficit is netted off in accordance with law and there is no provision under the act to charge tax on gross income of the assessee. Therefore, we find no reason to deny that benefit to the assessee for the claim of expenditure therefore, plea of the assessee for inter head adjustment of the surplus or deficit is required to be netted off and finally income shall be charged to tax if any remain to be taxed. In light of these facts and circumstances of the case stated herein above ground no. 3 raised by the u/s. 11 & 12 is not argued before us because the registration was denied to the assessee and there is no argument on the issues, we considered ground no. 1 & 2 as not pressed and the same are dismissed as not pressed.
In the result, appeal of the assessee in ITA No. 363/JP/2023 is partly allowed.
The appeal in is related to the levy of penalty of Rs.1,15,247/- u/s 270A of the Act for which as we have considered the plea of the assessee that the income which is taxed net income and levy of penalty by the lower authorities on gross assessed income at Rs. 7,63,433/- is in correct appreciation of fact.
Since, we have considered the expenditure incurred by the assessee to be adjusted while computing the income taxable in we direct lower authority to grant the necessary relief to the assessee while giving effect to that order in ITA No. 363/JP/2023 and give consequential relief to the assessee In ITA No. 364/JP/2023. Considering these facts and circumstances of the for statistical purposes.
Order pronounced in the open Court on 18/08/2023 Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judcial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 18/08/2023 *Ganesh Kumar, PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Shri Chandraprabh Charitable Sanstha, Jaipur 1. izR;FkhZ@ The Respondent- ITO, Exemption Ward-01, Jaipur 2. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File { & 364/JP/2023} vkns'kkuqlkj@ By order सहायक पंजीकार@Aेेज. त्महपेजतंत