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Income Tax Appellate Tribunal, CH1ANDIGARH BENCHES ‘A’, CHANDIGARH
Before: SHRI SANJAY GARG & Ms. ANNAPURNA GUPTA
Per Bench:
The present bunch of appeals have been preferred by the
assessee against the common order dated 08.05.2014 of the
Commissioner of Income Tax (Appeals), [hereinafter referred to as
CIT(A)], Shimla.
Since the issues involved in all the appeals are identical in
nature, hence, the same have been heard together and are being
disposed of by this common order.
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 2 3. Identical grounds have been taken in all the appeals, hence, for the sake of convenience, ITA No. 664/Chd/2014 for assessment year 2006-07 is taken as a lead case, wherein following grounds
have been raised by the assessee:-
That the Ld. Commissioner of Income Tax (Appeals) has erred in law in upholding the reopening of assessment framed by the Assessing Officer resorting to the provisions of Section 148 of the Act without complying with the mandatory requirements of the said section which is arbitrary and unjustified and as such the assessment merits annulment. 2. That there being no escapement of income leading to formation of reason to believe, the resort to the provisions of Section 148 of the Act is illegal, arbitrary & unjustified. 3. Without prejudice to the above, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding that the assessee society is not eligible to claim exemption u/s 10(23C)(iiiad) as it was not existing solely for educational purpose which is contrary to the facts on record and as suchthe order of Commissioner of Income Tax(Appeals) is arbitrary and unjustified. 4. That all the reasons mentioned in the order to deny exemption are based only on suspicion, conjectures and surmises and have been picked up only from the order of the Chief Commissioner denying exemption u/s 10(23C)(vi) without any independent application of mind by both the Commissioner of Income Tax(Appeals) and Assessing Officer. 5. That the Ld. Commissioner of Income Tax(Appeals) has further erred in holding that the assessee Society does not fulfill the required conditions for claiming exemption u/s 11 to 13 of the Act which is arbitrary and unjustified.
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 3 6. That the Ld. CIT(A) has further erred in upholding the addition of Rs. 6,09,784/- brushing aside the explanation rendered during the course of appellate proceedings which is arbitrary and unjustified.
That the Ld. CIT(A) has further erred in upholding the charging of interest u/s 234-A, B and C of the Act which is not chargeable in the face of the case.
That the order of the Ld. CIT(A) is erroneous, arbitrary, opposed to law and facts of the case and is, thus untenable.
The Ld. Counsel for the assessee has invited our attention to
the grounds of appeal. The assessee in this appeal has taken as
many as eight grounds of appeal. Ground Nos. 1 & 2 are regarding
the legal issue challenging the reopening of the assessee u/s 148 of
the Income-tax Act, 1961 (in short 'the Act'). Ground No.3 is
relating the claim of the assessee for exemption u/s 10(23C)(iiiad)
of the Act. Ground No.4 is relating to the claim of exemption u/s
10(23C)(vi) of the Act. Ground No. 5 is relating to the claim of
exemption as per the provisions of section 11 to 13 of the Act. Vide
ground No.6, the assessee has agitated the addition of Rs.
6,09,784/- on merits, in the facts and circumstances of the case.
Ground No.7 is relating to the charging of interest u/s 234A, B and
C of the Act. Ground No.8 is General in nature.
Now coming to ground Nos. 1 & 2 of the appeal, which are
relating to the reopening of the assessment, the Ld. counsel has
reiterated the submission as were made before Ld. CIT(A) on this
issue. The brief facts relating to the issue is that the assessee had
applied for approval u/s 10(23C)(vi) of the Act for assessment year
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 4 2011-12 but the same was rejected by the competent authority on
the ground that the assessee society does not exist solely for
educational purposes but for the purpose of making profit also.
Since the identical condition for running the educational institution also finds mention under the provisions of section 10(23C)(iiiad)
also, hence, the Assessing officer noticed that for earlier
assessment years the assessee had been wrongly claiming
exemption u/s 10(23C) (iiiad) of the Act, he, therefore, reopened the assessments for assessment years 2006-07 to 2009-10 and
assessment year 2011-12.
The contention of the assessee before CIT(A) was that no
fresh material had come to the Assessing officer to reopen the
assessments and that the Assessing officer had not applied his mind independently to form an opinion that income of the assessee had
escaped assessment.
We are not convinced by the above submissions of Ld. AR on
this issue. Since the application for approval u/s 10(23C) (vi) of
the Act was rejected by the CCIT, hence, the reasonable conclusion was that the assessee was not running the institution solely for
educational purposes. In view of this, there was a reasonable belief
to the Assessing officer that income of the assessee had escaped assessment because of the wrong claim of the exemption u/s
10(23C)(iiiad) of the Act for the aforesaid assessment years. In
view of this, we do not find any merit in ground Nos. 1 & 2 of the
appeal and the same are accordingly dismissed.
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 5 8. Now coming to the ground No.3 of the appeal, which is
relating to the claim of exemption u/s 10(23C)(iiiad) of the Act, the
Ld. AR of the assessee has been fair enough to furnish a copy of
the decision of the Hon'ble Jurisdictional High Court of Himachal
Pradesh at Shimla passed in CWP No. 7235 of 2012 vide order
dated 4.3.2015 and submitted that, in fact, the assessee had
challenged the denial of approval u/s 10(23C)(vi) before the
Hon'ble High Court by way of writ petition, which has been
dismissed by the Hon'ble High Court holding that the assessee was
not running the institution solely for educational purposes but
profit element was involved. Since, the essential parameter of
running of institution solely for educational purposes and not for
profit is also there as a pre-condition under the provisions of
section 10(23C)(iiiad) of the Act, hence, the findings arrived at by
the Hon'ble High Court vide order dated 4.3.2015 (supra) would
squarely apply to the issue regarding the claim of exemption u/s
10(23C)(iiiad) of the Act also. There is no merit in the ground and
the same is accordingly dismissed.
So far as the ground No.4 is concerned, the decision of the
Hon'ble High Court dated 4.3.2015 is squarely applicable, hence,
ground No. 4 of the appeal is accordingly dismissed.
So far as the ground No.5 is concerned, admittedly, the
assessee is not registered as a charitable institution under the
provisions of section 12A of the Act, hence, the assessee is not
entitled to the exemption as per the provisions of sections 11 to 13
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 6 of the Act. In view of this, ground No.5 of the appeal is also
dismissed.
Now coming to ground No.6 of the appeal, the Ld. counsel has
invited our attention to the impugned order of the Assessing
officer to state that the Assessing officer has made the impugned
addition of Rs. 6,09,784/- into the income of the assessee on
account of corpus fund received as contribution from the members.
The Ld. Counsel has submitted that even though the assessee may
not be found eligible to claim exemption under the provisions of
section 10(23C) and / or sections 11 to 13 of the Act, however, it
was incumbent upon the Assessing officer to examine the nature of
the receipts. The Ld. Counsel has submitted that the assessee’s
claim is that the said receipts were capital in nature and further
that even if the same are to be treated as a Revenue receipts, the
assessee would be entitled to the deduction of eligible expenditure.
The Ld. Counsel has submitted that the Assessing officer has not
examined the nature of the receipts. He has further submitted that
the matter be restored to the file of the Assessing officer to
examine the nature of receipts. The Ld. counsel has further brought
our attention to the impugned order of the CIT(A) to state that even
the Ld. CIT(A) has not deliberated on this aspect of the nature of
the income.
The Ld. DR though has vehemently relied on the findings of
the lower authorities.
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 7 13. After considering the rival submissions, we find merit in the
submissions of the assessee. Though the assessee may not be
entitled to the claim of exemption under the exemption provisions
as claimed by the assessee, however, still the nature of receipts /
income is required to be examined at the hands of the Assessing
officer. We, therefore, restore the issue raised vide ground No.6 of
the appeal to the file of the Assessing officer for adjudication
afresh.
Ground No.7 is regarding levy of interest u/s 234A, B and C
of the Act, which is consequential is nature, does not require any
adjudication at this stage.
Ground No. 8 is general in nature and does not need any
adjudication.
The appeal of the assessee stands partly allowed
ITA No. 665/Chd/2014 (A.Y. 2007-08)
Now coming to the assessee’s appeal for assessment year 2007-08. The Ld. Counsel for the assessee, at the outset, has
submitted that so far as ground Nos. 1 to 5 are concerned, they are
identical as taken by the assessee in appeal for assessment year
2006-07. In view of our findings given above, grounds Nos. 1 to 5
of the appeal are accordingly dismissed.
So far as ground Nos. 6 & 7 are concerned, the Ld. Counsel
for the assessee has pleaded that the same are required to be
restored to the file of the Assessing officer for adjudication afresh
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 8 in respect of the nature of receipts and taxability of income as
directed while adjudicating ground No.6 of the appeal of the
assessee for assessment year 2006-07.
In view of our findings given above while adjudicating the
ground No. 6 of the appeal for assessment year 2006-07, ground
Nos. 6 &7 of this appeal are restored to the file of the Assessing
officer for decision afresh.
Ground No.8 which is relating to charging of interest u/s
234A, B & C of the Act, which is consequential in nature, whereas,
ground No.9 is general in nature and need not to be adjudicated.
In view of this, the appeal of the assessee for assessment year
2007-08 is also treated as partly allowed.
ITA No. 666/Chd/2014 (A.Y 2008-09)
In this appeal, the assessee has taken as many as 08 grounds
of appeal, which are almost identical as taken by the assessee in its
appeal for assessment year 2006-07.
In view of our observations made above, ground No.6 of the
appeal is restored to the file of the Assessing officer for
adjudication afresh whereas other grounds of appeal are dismissed
in view of our findings given in the appeal of the assessee for
assessment year 2006-07.
The appeal of the assessee is partly allowed.
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 9 ITA No. 667/Chd/2014 (A.Y. 2009-10)
In this appeal, the assessee has raised as many as 10 grounds
of appeal. The Ld. counsel for the assessee was fair enough to
admit that the ground Nos.1 to 5 of the appeal are identical to that
have been taken in assessee’s appeal for assessment year 2006-07.
In view of our findings given above for the earlier assessment year
i.e. assessment year 2006-07, ground Nos.1 to 5 of the appeal are
hereby dismissed.
Ground Nos. 6 & 7 & are relating to the disallowance made by
the Assessing officer under the provisions of section 40A(3) of the
Act on account of payments made more than the prescribed limit by
cash on a single day.
The Ld. counsel, in this respect, has submitted that this issue
was specifically raised through grounds of appeal before the Ld.
CIT(A). However, Ld. CIT(A) has failed to adjudicate on the same.
The Ld. counsel has further submitted that since the assessee was
under bonafide belief that the assessee was entitled to exemption
u/s 10(23C)(iiiad) of the Act, hence, the assessee could not furnish
the relevant evidences / explanation for making payments more
than prescribed limit in cash. The Ld. Counsel has further
submitted that the assessee be given an opportunity to present its
case before the Assessing officer in this respect.
The Ld. DR, on the other hand, has relied on the findings of
the Assessing officer on this issue.
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 10 25. We have considered the rival submissions. The fact on the
file is that the Ld. CIT(A) has failed to adjudicate on this issue.
The other appeals of the assessee have already been restored to the
file of the Assessing officer though on different issue. The assessee
has submitted that to avoid multiplicity of the litigation, the issue
may be restored to the file of the Assessing officer so that he may
be able to furnish the necessary explanation / evidences on this
issue.
Considering the overall facts and circumstances of the case,
we are of the view, that no prejudice will be caused to the Revenue
if the issue is restored to the file of the Assessing officer for
adjudication afresh; we order accordingly.
Now, coming to ground Nos. 8 of the appeal. The assessee
has agitated the addition for Rs. 2.5 lacs made by the Assessing
officer on account of unsecured loans applying the provisions of
section 68 of the Act.
The Ld. Counsel for the assessee has submitted that in this
respect, the assessee may be given an opportunity to furnish
explanation / evidences regarding the unsecured loan of Rs. 2.5
lacs. The Ld. DR, on the other hand, has relied on the findings of
the authorities below and has submitted that the assessee has failed
to furnish the requisite explanation before the lower authorities on
this issue.
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 11 28. After considering the rival submissions and in view of the
submissions of the assessee that it could not furnish the requisite
information during assessment proceedings, because of the entire
stress of the assessee was on the claim of exemption provisions. In
our view, the assessee should be given an opportunity to furnish
the explanation / evidences on this issue also. This issue is also
accordingly restored to the file of the Assessing officer for fresh
adjudication.
Ground No. 9 relating to charging of interest under section
234-A, B and C which is consequential in nature, whereas, ground
No.10 is general in nature and need not to be adjudicated.
In view of this, the appeal of the assessee is treated as partly
allowed.
ITA No. 668/Chd/2014 (A.Y. 2011-12)
30 Now coming to assessee’s appeal for assessment year 2011-12.
The assessee in this appeal has taken as many as 12 grounds of
appeal, which are reproduced below:-
That the Ld. Commissioner of Income Tax (Appeals) has erred in law in upholding the reopening of assessment framed by the Assessing Officer resorting to the provisions of Section 148 of the Act without complying with the mandatory requirements of the said section which is arbitrary and unjustified and as such the assessment merits annulment. 2. That there being no escapement of income leading to formation of reason to believe, the
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 12 resort to the provisions of Section 148 of the Act is illegal, arbitrary & unjustified. 3. Without prejudice to the above, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding that the assessee society is not eligible to claim exemption u/s 10(23C)(iiiad) as it was not existing solely for educational purpose which is contrary to the facts on record and as such the order of Commissioner of Income Tax(Appeals) is arbitrary and unjustified. 4. That all the reasons mentioned in the order to deny exemption are based only on suspicion, conjectures and surmises and have been picked up only from the order of the Chief Commissioner denying exemption u/s 10(23C)(vi) without any independent application of mind by both the Commissioner of Income Tax(Appeals) and Assessing Officer. 5. That the Ld. Commissioner of Income Tax(Appeals) has further erred in holding that the assessee Society does not fulfill the required conditions for claiming exemption u/s 11 to 13 of the Act which is arbitrary and unjustified.
That the Ld. CIT(A) has further erred in upholding the addition of Rs. 92,997/- disallowing the depreciation brushing aside the explanation rendered during the course of appellate proceedings which is arbitrary and unjustified.
That the Ld. CIT(A) has further erred in upholding the addition of Rs. 60,551/- disallowing the petrol expenses for alleged perusal use by the Principal brushing aside the explanations rendered during the course of appellate proceedings which is arbitrary and unjustified.
That the Ld. CIT(A) has further erred in upholding the addition of Rs. 8,000/- disallowing the refreshment expenses brushing aside the
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 13 explanations rendered during the course of appellate proceedings which is arbitrary and unjustified.
That the Ld. CIT(A) has further erred in upholding the addition of Rs. 1,09,470/- disallowing 1/5th of the expenditure claimed under the heads telephone, sanitary, repair, printing and stationery, pantry and advertisements and publicity brushing aside the explanations rendered during the course of appellate proceedings which is arbitrary and unjustified.
That the disallowances / additions challenged in ground 6 to 9 are uncalled for as the assessee is not carrying out any business or profession as provided for in Chapter IV Part D of the Act and as such the additions made are illegal, arbitrary an unjustified.
That the Ld. CIT(A) has further erred in upholding the charging of interest u/s 234-A, B and C of the Act which is not chargeable in the face of the case.
That the order of the Ld. CIT(A) is erroneous, arbitrary, opposed to law and facts of the case and is, thus untenable.
The Ld. Counsel for the assessee has been fair enough to state that ground Nos. 1 to 5 are identical to the grounds taken by the assessee in appeal for assessment year 2006-07. In view of our findings giving above, while adjudicating the appeal for assessment year 2006-07, ground Nos. 1 to 5 of this appeal are accordingly
dismissed.
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 14 32. Vide ground Nos. 6 to 9 of the appeal, the assessee has
agitated various additions / disallowance made the Assessing
officer.
We have heard the rival submissions. The Ld. DR had drawn
our attention to the impugned order of the Assessing officer and
stated that Assessing officer has discussed in detail regarding the
various additions / disallowances made by the Assessing officer
which have been agitated before us through ground Nos. 6 to 9 of
the appeal. She has also invited our attention to the impugned order
of the CIT(A) on this issue. We have gone through the impugned
order of the CIT(A). The Ld. CIT(A) after considering the
submissions of the assessee has given observation that the assessee
is not entitled to the depreciation of Rs. 92,997/- since the building
was not ready for use. We do not find any infirmity in the order of
the CIT(A) on this issue and, hence, ground No. 6 of the appeal is
dismissed.
Now coming to ground Nos. 7 to 9 of the appeal, which are
relating to the certain expenses regarding which the assessee could
not furnish the justifiable explanation. The Ld. CIT(A )has
disallowed a part of the expenses claimed by the assessee, the
same being unverifiable and personal in nature.
After hearing the Ld. representatives of the parties, we do not
think that the order of the CIT(A) on this issue is required any
ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 15 interference at this stage. Hence, grounds Nos. 7 to 9 of the appeal
are accordingly dismissed.
Ground Nos. 10 and 12 are general in nature and do not
require any specific adjudication.
Ground No. 11 relates to charging of interest u/s 234A B and
C of the Act which is consequential in nature, does not require any
adjudication at this stage.
This appeal of the assessee for assessment year 2011-12
accordingly stands dismissed.
In the result, the appeals of the assessee in ITA Nos.
664/Chd/2014 to 667/Chd/2014 for assessment years 2006-07 to
2009-10 are party allowed whereas ITA No. 668/Chd/2014 for
assessment year 2011-12 is hereby dismissed.
Order pronounced in the Open Court.
Sd/- Sd/-
(ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 23.04.2018 Rkk Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR