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Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
The captioned appeal filed by the assessee is directed against the order of the CIT(A)-6, Mumbai dated 07/04/2014 pertaining to the assessment year 2009-10, which in turn has arisen from an order passed by the Assessing Officer dated 19/12/2011 under section 143(3) of the Income Tax Act 1961 (in short “the Act”).
In this appeal the assessee Trust has raised the following grounds of appeal:-
1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) -1, Mumbai ("the CIT (A)") erred in not accepting and adjudicating the contention raised under additional ground that the order passed under section 143(3) of the Income- tax Act, 1961 ("the Act") and the special auditor's report were barred by limitation and hence were bad in law. 1.2 In doing so, the 011(A) held that the objections and issues on special audit were not subject matter of appeal under section 246A of the Act. 1.3. The appellant prays that the order passed under section 143 (3) of the Act be treated as null and void and accordingly be set aside.
2.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in denying the benefit of exemption under section 11 of the Act to the appellant on the alleged ground that activities of the appellant are covered under business/ commerce within the meaning of section 2(13) of the Act. 2.2 In doing so, the CIT(A) erred in holding following: The appellant is a non-charitable institution in the context of activities covered under the term 'medical relief' in view of provisions of section 11 of the Act read with section 2 (15) of the Act. The appellant spent only 2.42% of gross receipts on charity without appreciating that during the financial year 2008-09, the appellant made a loss and despite the loss, it had spend 2.42% of gross receipts on charity. The appellant made profits year after year without considering the detailed submissions filed before him demonstrating that the appellant had incurred losses, year after year. 2.3 The appellant prays that the exemption under section 11 of the Act be granted to the appellant.
3.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition made by the assessing officer amounting to Rs. 8,91,34,131/- on account of non
(Assessment Year : 2009-10) recording of bills raised on Indigent/Weaker section and on staff and doctors which were treatments not charged for.
In doing so, the CIT(A) also erred in not allowing the expenditure 3.2 of Rs. 8,91,34,131/- against such billing.
3.3 The appellant prays that the aforesaid addition of Rs. 8,91,34,131 be deleted. 3.4. Without prejudice, the expenditure incurred in connection with aforesaid revenue be allowed as deduction in case corresponding revenue is taxed.
4.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition made by assessing officer amounting to Rs. 16,14,755/- due to mismatch in the bills raised and books of account on the alleged ground that efficacious alternative remedy of rectification under section 154 of the Act is available to the appellant. 4.2 Further, the CIT (A) erred in ignoring the fact that the appellant had already considered the said income in its books of accounts which resulted in double taxation of the same income.
4.3 The appellant prays that the aforesaid addition of Rs. 16,14,755 be deleted.”
Briefly, the relevant facts are that the assessee Trust is engaged in running hospital and research centre in the city of Mumbai. For the assessment year under consideration it filed a return of income declaring ‘nil’ income, wherein the entire income was, inter-alia, claimed as exempt under section 11/12 of the Act. The return of income filed by the assessee was subject to scrutiny assessment under section 143(3) of the Act dated 26/6/2012, whereby the total income has been assessed at Rs.23,11,35,230/-, wherein exemption under section 11/12 and 13 of the Act was denied. The appeal of the assessee before the CIT(A) was also dismissed and the action of the Assessing Officer has since been affirmed. By way of aforestated Grounds of (Assessment Year : 2009-10) appeal, the assessee Trust has challenged the action of the income tax authorities in denying exemption under section 11/12 and 13 of the Act as well as computing the final income at Rs.23,11,35,230/-. Apart from the aforesaid grievances the first and foremost grievance of the assessee Trust is to the effect that the assessment order passed by the Assessing Officer under section 143(3) of the Act dated 25/6/2012 is bad in law in as much as it is barred by limitation.
In order to understand the aforesaid preliminary grievance, it is necessary to refer to certain factual aspects which were canvassed by the assessee in its application before the CIT(A) for raising of such additional ground. As per the assessee, it filed a return of income originally on 30/09/2009 and accordingly, the time period permissible for passing an order under section 143(3) was on 31/12/2011. However, on 19/12/2011 the assessee was show caused as to why a special audit under section 142(2A) of the Act should not be done. The assessee resisted the conduct of special audit but vide direction dated 29/12/2011 Assessing Officer communicated carrying out of special audit under section 142(2A) of the Act. It transpires that the Special Auditor furnished his report on 03/05/2012, which as per the appellant is belated. In this context, it was explained that starting from 29/12/2011, the report of the Special Auditor was to be furnished by 28/02/2012 i.e. within 60 days from 29/12/2011. Vide order dated 28/3/2012, the Assessing Officer extended the time limit by 45 days starting from 01/03/2012 till 15/04/2012. The Ld. Representative for the assessee explained that without any further communication on the subject the Assessing Officer has erroneously regarded 30/04/2012 as (Assessment Year : 2009-10) the extended due date for furnishing of the audit report because neither the Assessing Officer passed an order extending the period beyond 15/04/2012 nor the assessee made any request for such extension; therefore, the report furnished by the Special Auditor dated 03/05/2012 was, in any case, barred by limitation. Furthermore, it is pointed that in terms of section 153 of the Act an assessment order under section 143(3) of the Act was to be finalized within 60 days from the period extended for furnishing the report by Special Auditor and, thus, by taking the date for submission of audit report as 15/04/2012, the assessment order ought to have been passed by 14/06/2012, whereas in the present case, the assessment order has been passed on 25/06/2012, which is barred by limitation.
4.1 On the basis of aforesaid submissions, the plea of the assessee is that the assessment order passed under section 143(3) as we all as the report of the Special Auditor are barred by limitation and hence bad in law.
In the context of the aforesaid dispute, we find that the same was not raised by the assessee while filing the appeal before the CIT(A) but was raised before him as an Additional Ground of appeal vide communication dated 19/08/2013, a copy of which is on record. The CIT(A) has dealt with the Additional Ground of appeal raised by the assessee in the following manner:-
“9. The additional Ground of appeal on the issue of time barred assessment in relation to Special Audit u/s. 142(2A) was originally not raised in this appeal. The objections and issues on Speal Audit u/s. 142(2A) of the I.T. Act, 1961 are not the subject matter of appeal under section 246A. Therefore, for this reason also, the additional Ground of appeal is not accepted/allowed, hence dismissed.”
(Assessment Year : 2009-10) 5.1 In this background, the first and the foremost submission of the Ld. Representative for the assessee was that the CIT(A) has erred in not accepting and adjudicating the contention raised by the assessee in its Additional Grounds of appeal. Quite clearly, the manner in which the CIT(A) has addressed himself to the aforesaid Additional ground of appeal is quite unjustified. The issues raised in the Additional Ground of appeal, namely, limitation for furnishing the special audit report u/s. 142(2A) of the Act and passing the assessment order, are issues which go to the root of the matter and are determinative of ultimate tax liability of the assessee. We are also convinced that the CIT(A) has misdirected himself in concluding that the “objections and issues on Special Audit u/s. 142(2A) of the I.T. Act, 1961 are not the subject matter of appeal under section 246A”, because what assessee has sought to raise is violation of the time limit for completion of assessment prescribed in section 153 of the Act and not the objections and issues contained in the special audit carried out under section 142(2A) of the Act. Therefore, the order of the CIT(A) on this preliminary aspect, in our view, is unsustainable.
At the time of hearing Ld. Departmental Representative appearing for the Revenue has merely reiterated what the CIT(A) has discussed in para-9 of his order qua the aforesaid preliminary issue. Ld. Representative for the assessee submitted that the assessee would be satisfied at the present stage if the matter is remanded back to the file of the CIT(A) for appropriate adjudication on the issues raised in the Additional Ground of appeal. This prayer of the assessee has not been seriously opposed by the by the Ld. Departmental Representative.
(Assessment Year : 2009-10) 7. Having considered the rival stands as well as the relevant material on record with regard to Ground of appeal No.1 raised before us, we find ourselves in consonance with the plea of the assessee that the matter deserves to be remanded back to the file of the CIT(A) for appropriate adjudication in accordance with law. Notably, the CIT(A) has misdirected himself in not appreciating the Additional Ground of appeal raised by the assessee in its proper perspective. Therefore, we deem it fit and proper to set aside the order of the CIT(A) and restore the appeal in its entirety back to his file with direction to consider and adjudicate, first, the Additional ground of appeal relating to the limitation and, thereafter, decide the other Grounds, in accordance with law. Needless to mention, the assessee shall be allowed appropriate opportunity of being heard and only thereafter the CIT(A) shall pass an order afresh in accordance with law.
7.1 Before parting, we may clarify that our action of remanding the appeal in its entirety ( including Ground of appeal nos. 2 to 4) back to the file of CIT(A) is not to be construed as any reflection on the merits of the Grounds, which shall be addressed by the CIT(A) in accordance with law.
In the result, appeal of the assessee is treated as partly allowed for statistical purposes.
Order pronounced in the open court on 16/10/2015.