Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRIB.M. BIYANI
आदेश/O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 20.05.2022 passed by Commissioner of Income-tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi[“Ld. CIT(A)”], which in turn arises out of assessment-order dated 19.03.2021 passed by learned National E- Assessment Centre, Delhi at the behest of DCIT (Exemption Ward), Bhopal [“Ld. AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year[“AY”] 2018-19, the assessee has filed this appeal, on following grounds :-
Arya Samaj, Bhopal Assessment year 2018-19 “1. That, the addition made by the ld.AO amounting Rs 57,29,219/-, which is upheld by the ld. CIT(A) is arbitrary erroneous and unjustified. 2. That, during the preceding years no such addition has been made, this fact has not been considered by the authorities below.
3. That, the Ld. CIT(A) failed to consider that the amount of Rs. 57,29,219/- has been received under the main object of the Trust and same qualify for exemption as per the provisions of the Act.
That, the addition cannot be made or exemption cannot be denied only on the grounds that separate books of accounts for incidental activities are not maintained by the assessee.
That, the initiation of penalty proceedings u/s 270A is illegal and unjustified.
The appellant reserves the right to add, amend, alter or withdraw any of the grounds of appeal.” 2. Heard the ld. Representatives of both the sides and case records perused.
Briefly stated the facts are such that the assessee is a trust engaged in carrying on educational activities by running schools. For the relevant AY 2018-19, the assessee filed return of income declaring “Nil” income on 31.10.2018, followed by a revised return declaring again “Nil” income on 31.03.2019; in both original and revised returns the assessee claimed exemption u/s 11/12. The case was selected under scrutiny. During the course of assessment-proceedings, on perusal of return of income, Ld. AO observed that the assessee had declared receipts of Rs. 57,29,219/- from incidental activities and Rs. Nil from main objects. When the AO confronted assessee about receipts of Rs. 57,29,219/-, the assessee submitted that those receipts were actually derived from running schools, but, however, the AO did not accept assessee’s submissions precisely for twin-reasons, namely, (i) the assessee has not furnished separate books of accounts for incidental activities, and (ii) the assessee has not filed trust-deed mentioning core
Arya Samaj, Bhopal Assessment year 2018-19 activities and co-activities to fulfill the core activities. The AO also observed that despite several opportunities given, the assessee could not file evidences or substantiate the queries raised by him. Finally, the AO observed that the receipts of Rs. 57,29,219/- was not eligible for exemption u/s 11/12 of the Income Tax Act, 1961; accordingly, he denied exemption and completed assessment at total income of Rs. 57,29,219/- and also initiated penalty proceedings u/s 270A of the Act.
4. Aggrieved, the assessee carried matter in first-appeal whereupon the Ld. CIT(A) recorded submissions of assessee and concluded thus:-
“6.3 In support of his case, the appellant has stated that the appellant is a registered trust and the order passed by the Assessing Officer disallows the exemption on account of large receipts from incidental objects giving the reason of non-furnishing the separate books of accounts for incidental activity and in absence of trust deed. These receipts from incidental objects are nothing but receipts from running the school by the appellant trust. The appellant has submitted that during the course of assessment, it was never asked to produce the books of accounts for activities. The details of all the receipts were submitted by the appellant. The appellant already prepares the separate books of accounts of Samaj and School and also get them duly audited by Chartered Accountant. After individually preparing financial statements, a combined financial statement of Samaj is prepared and audited. The income tax return is filed from combined financial statement. The appellant trust accepts that these school receipts should be mentioned under receipts from main objects. The appellant trust accepts the clerical human error for not mentioning the school receipts in receipts from main objects. The receipts were properly recognized and well accounted in the books of accounts. It is advertently clear from the trust deed that the activities of running the school come under the main objects of the trust. 6.4 I have carefully considered the AO’s view point contained in the assessment order and relevant judicial decisions in the matter. 6.5 It is noticed that the appellant has received large receipts from the sources which is other than main objects. The appellant could not show purpose of charity and received large fees from student under various heads amounting to Rs. 57,29,219/-. Further, the activities of the trust is not in line with the purpose of the trust i.e. charity of general public. Also the assessee has not furnished any Arya Samaj, Bhopal Assessment year 2018-19 supporting documents in respect of trust deed/memorandum of association/social objects the only paper furnished by the appellant in support of objects. The justification given by the appellant is not acceptable as it is one of the main objects of the trust and does not qualify as claimed for receipts under incidental objects due to inability to verify whether this amount has been received towards the incidental activity for attainment of main objectives of the trust due to non- furnishing of separate books of account for incidental activity and in the absence of trust deed/memorandum of association which mention the core activities and co-activities concentrated to fulfill the main activities of the trust. 6.6 In view of the above facts and circumstances of the case, the addition made by ld.AO amounting to Rs. 57,29,219/- due to non furnishing of separate books of accounts for incidental activity and the absence of trust deed/memorandum of association is hereby confirmed and grounds of appeal filed by the appellant is dismissed.”
5. Before us, Ld. AR submitted that the assessee-trust is duly registered u/s 12AA as well as u/s 80G of the Income Tax Act, 1961 (copies of registration-orders are placed at Page 91 to 92 of Paper-Book).He submitted that the assessee is engaged in running schools and educational activities and its books of accounts are duly audited by a C.A. and the return of income supported by audited accounts was filed as required under law (copies placed at Page 76 to 80 of Paper-Book). He submitted that the assessee has been claiming exemption u/s 11/12 in respect of income derived by it from running of schools and educational activities; such exemption was regularly allowed year after year by department without any objection and it was for the first year, in which the AO has denied exemption. Regarding 1streason of denial advanced by AO that the assessee derived receipts of Rs. 57,29,219/- from incidental activities, Ld. AR submitted that those receipts were in fact derived from main activities, namely from schools run by assessee, and not from any kind of incidental activity. But due to inadvertent error having crept in filing return of income, the impugned receipts were wrongly mentioned against item No.2 of Schedule AI “Receipts from incidental objects” in place of item No. 1 of the same schedule marked for “Receipts from main objects”. Ld. AR submitted that this is a pure human error, otherwise the true fact is that the assessee is engaged in Arya Samaj, Bhopal Assessment year 2018-19 advancing education only and the impugned receipts were derived from main objects which is very much evident from copies of Receipt& Payment A/c and Income & Exp. A/c filed to AO (copies placed at Page No. 81 and 82 of Paper-Book). Referring to the order of first-appeal, Ld. AR submitted that this human error was also brought to the notice of Ld. CIT(A) during first appeal, but the Ld. CIT(A) has also not accepted assessee’s submission without any valid reason. Regarding 2nd reason of denial advanced by AO that the trust-deed was not filed, Ld. AR submitted that the assessee misunderstood the requirement of AO and instead submitted a summary of the objects of trust in a letter duly signed by its Secretary. He submitted that the assessee is having its Memorandum and Rules (copy placed at Page No. 1 to 13 of the Paper-Book) and there is no hesitation or problem in submitting before AO at any time. Ld. AR submitted that during first appeal, the assessee has submitted a copy of same to CIT(A) too. Thus, Ld. AR submitted, the exemption claimed by the assessee u/s 11/12 qua the receipts of Rs. 57,29,219/- from running of schools must be allowed or alternatively, the case may be remanded back to the file of AO with necessary direction for re-doing assessment in accordance with law.
6. Ld. DR representing the revenue fairly agreed that in the interest of justice, he has no objection if the case is remanded back to AO.
We have considered the orders of lower authorities as well as the documents filed in Paper-Book. After careful consideration, we find that the assessee is a trust engaged in educational activities and eligible for exemption u/s 11/12 of the Act. On a careful consideration, we observe that the assessee has been claiming exemption year after year and this is the first year in which exemption has been denied on mere technical reasons, namely for inadvertent declaration of income from ancillary activities instead of main activities and for non-filing of trust-deed. Therefore, in the circumstances, we feel that one more opportunity should be given to the assessee to Arya Samaj, Bhopal Assessment year 2018-19 present its case before AO. This will neither harm the department nor assessee because after considering all documents, the AO shall be able to make a proper assessment in accordance with law. Therefore, we remand this matter back to the file of AO for a fresh assessment. Needless to mention that the assessee shall extend full cooperation to AO by providing required details/documents and the AO shall pass order afresh in accordance with law without being influenced by his previous order.
Resultantly, this appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 20/06/2023.