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Income Tax Appellate Tribunal, NAGPUR BENCH,
Before: SHRI SANDEEP GOSAIN, JM & SHRI ARUN KHODPIA, AM
IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SANDEEP GOSAIN, JM & SHRI ARUN KHODPIA, AM ITA No. 55/NAG/2021 Assessment Year: 2015-16 Vasundhara Bahuudeshiya Vs. C.I.T.(Exemptions) Samajik Sanstha, Pune at Nagpur. 1, Vasundhara, Madhav Nagar, Khamgaon-444303. PAN No.: AAABV 0305 P Appellant Respondent Assessee by: Shri Mahavir Atal (CA) Revenue by : Shri Piyush Kolhe (CIT-DR) Date of Hearing: 27/04/2022 Date of Pronouncement: 28/06 /2022 ORDER PER: SANDEEP GOSAIN, J.M. This appeal has been filed by the assessee against the order of the ld. C.I.T.(Exemptions), Pune at Nagpur dated 23/03/2021 passed U/s 263 of the Income Tax Act, 1961 (in short, the Act) for the A.Y. 2015-16 wherein following grounds have been raised by the assesee. “1. Whether the revision order passed by the ld. Pr.CIT by taking a recourse to Section 263 is illegal and bad in law, when the A.O. has made sufficient enquiries during the assessment procedure. 2. Whether the revision order passed by the ld. Pr.CIT, without considering appellant’s submission is illegal and bad in law. 3. Whether the revision order passed by the ld. Pr.CIT even though if it is termed as erroneous but it is not prejudicial to the interest of Revenue. As the donation has been duly disclosed by the appellant in their
2 ITA 55/NAG/2021_ Vasundhara Bahuudeshiya Samajik Sanstha Vs CIT(E) financial statements and same has been statutorily applied for the purpose of object of the society (charity). 4. Whether the ld. Pr.CIT was justified in setting aside the entire assessment order for fresh assessment instead on the issues on which according to him additional verification should have been done. 5. Assessee craves leave to add and alter any other ground that may be taken at the time of hearing.” 2. At the outset of hearing, the Bench noted that there is delay of 37 days in filing the present appeal for which the assessee has filed an application for condonation of delay, praying therein as under.
“The statute provides 60 days from the date of service of order of Commissioner of Income Tax appeals for filing appeal before the Income Tax Appellate Tribunal. In this case order has been received by the Appellant on 30/03/2021 and the appeal was filed on 28/06/2021 i.e. beyond the limit provided by the statute. However, the Hon’ble Supreme Court vide the order dated 27/04/2021 in Miscellaneous Application No. 665/2021 has extended the period of limitation as prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings till the further orders. Therefore, the period of limitation from 01/03/2020 to 19/07/2021 has been excluded till the further order by the Hon’ble Supreme Court. The Hon’ble Supreme Court has further adjourned the case to 19/07/2021.
In case of present appeal, the period of limitation falls within the aforementioned period. Therefore, the appeal filed by the Appellant are not barred by limitation. I humbly request your kindness to accept our appeal. For this act of kindness we shall always remain obliged.”
3 ITA 55/NAG/2021_ Vasundhara Bahuudeshiya Samajik Sanstha Vs CIT(E) 3. On the other hand, the ld CIT- DR opposed the condonation application but could not rebut the facts submitted by the assessee before us for seeking condonation of delay.
We have heard the rival contentions and pursued the material available on record. There is no dispute and is an admitted fact that there has been a delay in filing the present appeal by 37 days. It is also an undisputed fact that the Hon’ble Supreme Court vide the order dated 27/04/2021 in Miscellaneous Application No. 665/2021 has extended the period of limitation as prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings till the further orders. There is also no dispute that under section 253(5) of the Income Tax Act, 1961 (in short, the Act) the Tribunal may admit an appeal filed beyond the period of limitation where it is satisfied that there exists a sufficient cause on the part of the assessee for not presenting the appeal within the prescribed time. The explanation of the assessee therefore becomes relevant to determine whether the same reflects sufficient and reasonable cause on his part in not presenting the present appeal within the prescribed time.
In case of Collector, Land Acquisition, Anantnag & Anr. Vs Mst. Katiji and others (1987) 2 SCC 107, the Hon'ble Supreme Court has
4 ITA 55/NAG/2021_ Vasundhara Bahuudeshiya Samajik Sanstha Vs CIT(E) held that the expression ‘Sufficient Cause’ employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner to sub-serves the ends of justice that being the life-purpose of the existence of the institution of Courts. It was further held by the Hon’ble Supreme Court that such liberal approach is adopted on one of the principles that refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. Another principle laid down by the Hon’ble Supreme Court is that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay. It was also held by the Hon’ble Supreme Court that there is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of male fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. In the instant case, applying the same principles, we find that there is no culpable negligence or malafide on the part of the assessee in delayed filing of the present appeal and it does not stand to benefit by resorting to such delay more so considering the fact that it has applied for settlement of present
5 ITA 55/NAG/2021_ Vasundhara Bahuudeshiya Samajik Sanstha Vs CIT(E) dispute and payment of appropriate taxes. Therefore, in the factual matrix of the present case, we find that there exists sufficient and reasonable cause for condoning the delay in filing the present appeal and as held by the Hon’ble Supreme Court, where substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserved to be preferred.
In light of aforesaid discussions, in exercise of powers under section 253(5) of the Act, we hereby condone the delay in filing the present appeal as we are satisfied that there was sufficient cause for not presenting the appeal within the prescribed time and the appeal is hereby admitted for adjudication on merits.
The brief facts of the case are that the assessee is registered as a Public Charitable Trust under the Bombay Public Trust Act, 1950 and Societies Registration Act, 1860. The assessee Trust is engaged in the field of education and it is also registered U/s 12AA of the Act. The assessee filed its return of income on 22/01/2016 declaring NIL income after claiming exemption U/s 11 of the Act. The case of the assessee was selected for scrutiny under CASS and statutory notices were issued and served upon the assessee. Finally the assessment was completed and the A.O. made addition of Rs. 8,55,633/- on account of anonymous donation and to be
6 ITA 55/NAG/2021_ Vasundhara Bahuudeshiya Samajik Sanstha Vs CIT(E) taxed @ 30%. Thereafter, the ld. CIT(E) invoked the proceedings U/s 263 of the Act and notice dated 17/02/2021 was issued to the assessee for submission of the document in respect of the stand of the assessee. In response to the notice issued by the ld. CIT(E), the assessee filed its reply dated 09/03/2021 and finally the ld. CIT(E) passed order U/s 263 of the Act by holding that the assessment order passed by the A.O. U/s 143(3) of the Act is erroneous in so far as it is prejudicial to the interest of the Revenue and directed the A.O. to pass the assessment order de novo.
Now the assessee is in appeal before the ITAT against the impugned order passed by the ld. CIT(E) on the grounds mentioned above.
The ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and further submitted that the assessment order has been set aside as the ld PCIT was of the opinion that the Assessing Officer has erred in not making adequate enquiries and therefore order is prejudicial to the interest of revenue. The ld. AR has further submitted that it is a case of change of opinion. The Assessing Officer considering the high number of donors issued notices to 20% (i.e.) 145 donors and the results of this verification were extrapolated to entire donations. The method of sample verification and its extrapolation is an accepted practice of verification in the scrutiny assessment and moreover,
7 ITA 55/NAG/2021_ Vasundhara Bahuudeshiya Samajik Sanstha Vs CIT(E) the sample size of 145 donors chosen by the Assessing Officer is itself highlights the fact about the thorough investigation carried out by the learned Assessing Officer. In nutshell even though the donors who have donated in aggregate Rs 2,33,000/- have denied the transaction or have returned notices, but the Assessing Officer extrapolated findings and added a total amount of Rs 14,72,083/- . He further submitted that it is settled jurisprudence that the Section 263 cannot be invoked on the basis of Change of opinion. The ld. AR relied on the decisions of the Hon’ble Bombay High Court in the case of CIT Vs Nirav Modi 390 ITR 292 (Bom)(HC) and Grasim Industries Vs CIT 321 ITR 92 (Bom)(HC). He has also submitted that as the assessment has been set aside on change of opinion and prayed to quash the proceedings U/s 263 of the Act.
On the other hand, the ld. CIT-DR has vehemently supported the order of the ld. CIT(E) and submitted that notices with regard to the verification of the donors, the assessee had not replied the same and it is very much important and relatable to the facts of the case. He has further submitted that the A.O. had failed to verify the genuineness of the donors and the ld. CIT(E) was right to invoke the provisions of Section 263 of the Act. The. CIT-DR has strongly relied on the order of the ld. CIT(E).
8 ITA 55/NAG/2021_ Vasundhara Bahuudeshiya Samajik Sanstha Vs CIT(E) 11. We have considered the rival contentions and carefully perused the material placed on record. From perusal of the record we observed that the assessee is a charitable trust, duly registered under section 12A of the Act. The assessee trust received donation of Rs 1,23,29,000/- from 725 persons and the assessee submitted details of the doners, with their names and addresses. The A.O. issued 145 notices to the 20% of the donors to verify the veracity of the donations. Out of 145 donors, 102 donors confirmed the transactions, 10 donors denied the transactions, notices issued to three donors were returned by donors and 30 notices could not be served. For sake of clearance, facts are tabulated as under: Particular Number of Donation Amount donors Amount Total donations 725 1,23,29,000/-
Total notices issued u/s 133(6) 145 24,32,000/-
Donations Confirmed 102 17,18,000/- Donations Denied 10 1,79,000/- Notices Returned 3 54,000/-
We also observed from perusal of the record that the A.O. noted that during the course of assessment proceedings, the assessee was informed about the enquiries made by the A.O. which was conducted to verify the genuineness of donors of corpus fund and building fund. The assessee was
9 ITA 55/NAG/2021_ Vasundhara Bahuudeshiya Samajik Sanstha Vs CIT(E) also informed that some letters have been returned unserved and some donors have denied that they have not given any donation to the assessee trust. The authorized representative of the assessee was asked to state whether the assessee desires to cross examine the persons who have denied giving donation to the Trust. In response to this, the assessee informed that it does not wish to cross examine the persons who have denied giving donation to the assessee trust. The A.O. in para 5 of the assessment order, extrapolated the outcome of the investigation and made a proportionate disallowance to the entire donations.
We further observed that the A.O. compared total number of donors who have denied donations or returned notices to the total number of the donors who have responded to the notices. It was found that out of 115 donors, who have responded to the notices 13 donors have denied the transactions. Therefore, percentage wise 11.94% of the donors have denied the transaction. The A.O. applied 11.94% on the total donations and made a total disallowance of 14,72,083/- (1,23,29,000 X 11.94%) and all these facts are mentioned in Para 5 of the assessment order. The A.O. therefore, instead of restricting donations to the donors who have denied the transactions, extrapolated the findings of the investigation and accordingly proportionately denied the donations received by the assessee trust. From
10 ITA 55/NAG/2021_ Vasundhara Bahuudeshiya Samajik Sanstha Vs CIT(E) the above, it can be said that the order has been passed by the A.O. after thorough investigation and proper application of mind and we are of the view that A.O. considering the high number of donors issued notices to 20% (i.e.) 145 donors and the results of this verification were extrapolated to entire donations. The method of sample verification and its extrapolation is an accepted practice of verification in the scrutiny assessment and moreover, the sample size of 145 donors chosen by the A.O. is itself highlights the fact about the thorough investigation carried out by the A.O. Even though the donors who have donated in aggregate Rs 2,33,000/- have denied the transaction or have returned notices, but the A.O. extrapolated findings and added a total amount of Rs 14,72,083/- in the income of the assessee trust. In this regard, we draw strength from the decision of the Hon’ble Bombay High Court in the case of CIT Vs Nirav Modi 390 ITR 292 (Bom)(HC) wherein it has been held as under: “9. It was next submitted that no enquiry was done by the Assessing Officer to find out whether the donor Mr Deepak Modi (father) had received money from M/s. Chang Jiang as claimed. Nor any inquiry was done to find out whether the sister had in fact earned amounts on account of Foreign Exchange Transactions as claimed by her. We find that this enquiry of a source of source is not the requirement of law. Once the Assessing Officer is satisfied with the explanation offered on inquiry, it is not open to the CIT in exercise of his revsional powers direct that further enquiry has to be done. At the very highest, the case of the Revenue is that this is a case of inadequate inquiry and not of "no enquiry." It is well settled that the jurisdiction under Section 263 of the Act can be exercised by the CIT only when it is a case of lack of enquiry and not one of inadequate enquiry. This view has been taken by this
11 ITA 55/NAG/2021_ Vasundhara Bahuudeshiya Samajik Sanstha Vs CIT(E) Court in the matter of CIT v. Shreepati Holdings & Finance (P.) Ltd. [ITA 1879 of 2013 dated 5th October, 2013], by the Delhi High Court in CIT v. Vikas Polymers [2012] 341 ITR 537/194 Taxman 57 and in D.G. Housing Projects (supra). In fact the Delhi High Court in D.G. Housing Projects (supra) while so holding placed reliance upon the decision of this Court in Gabriel (India) Ltd. (supra). It is very important to note that the CIT in his order under Section 263 of the Act has recorded the fact that there has been no adequate inquiry. Thus, this is not a case of no inquiry, warranting order under Section 263 of the Act. Thus, this objection on the part of the Revenue, is also not sustainable. 10. …………………… 11. ………………………. 12. In the present facts, the Assessing Officer was satisfied, consequent to making an enquiry and examining the evidence produced by the Assessing Officer, establishing the identity and creditworthiness of the donor as also the genuineness of the gift. The CIT in his order of Revision, does not indicate any doubts in respect of the genuineness of the evidence produced by the Assessee. The satisfaction of the Assessing Officer on the basis of the documents produced is not shown to be erroneous in the absence of making a further enquiry. It is made clear that our above observations should not be inferred to mean that it is open to the Assessing Officer to enquire into the source of source for the purpose of the present facts. This is a case where a view has been taken by the Assessing Officer on enquiry. Even if this view, in the opinion of the CIT is not correct, it would not permit him to exercise power under Section 263 of the Act. In fact, the Apex Court in Amitabh Bachchan (supra) has observed that there can be no doubt that where the view taken by the Assessing Officer is a possible view, interference under Section 263 of the Act, is not permissible.” We also draw strength from the decision of Hon’ble Bombay High Court in the case of Grasim Industries Vs CIT 321 ITR 92 (Bom)(HC) wherein the Hon’ble Court has held as under:
“15. In these circumstances, when the Assessing Officer took a possible view, while passing an order of assessment, the Commissioner exceeded his jurisdiction in
12 ITA 55/NAG/2021_ Vasundhara Bahuudeshiya Samajik Sanstha Vs CIT(E) seeking recourse to his power under section 263. At the least, it must be held that the question as to whether the liability of the assessee had ceased in the previous year relevant to the assessment year 1982-83, was an issue on which a possible view was that there was no final or irrevocable remission or cessation of liability, within the meaning of section 41(1) of the Act, during assessment year 1982-83. This view could not, by any stretch of logic, be regarded as being unsustainable in law. The condition precedent to the exercise of jurisdiction under section 263, is that the order sought to be revised must be erroneous insofar as it is prejudicial to the interests of the revenue. Following the judgments of the Supreme Court in Malabar Industrial Co. Ltd.'s case (supra) and Max India Ltd.'s case (supra), it is now a settled principle that where the Assessing Officer has adopted one of the courses permissible in law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Assessing Officer is unsustainable in law. In the present case, two views were inherently possible and the assessee, therefore, cannot be subjected to the exercise of the jurisdiction under section 263. The Tribunal, with respect, has adopted a rather simplistic view of the matter, in coming to the conclusion that the liability had ceased to exist, consequent upon the judgment of the Kerala High Court, dated 15-4-1981. This clearly overlooks the checkered history of the litigation. The fact that the litigation had a checkered history was noted in the interim order of the Supreme Court, which also referred to the "attendant uncertainties" and to the possibility of a "further long drawn out litigation".” Considering the totality of the facts and circumstances, we are of the considered view that the assessee has fully explained his entire case and we agree with the ld. AR’s submission and entire details were duly examined by the A.O. which were evident from the assessment order U/s. 143(3) of the Act and no ambiguity has been found by us. The case laws relied upon by the ld. AR also finds support of the contentions made by him. Therefore, the
13 ITA 55/NAG/2021_ Vasundhara Bahuudeshiya Samajik Sanstha Vs CIT(E) order passed by the ld. CIT(E) U/s. 263 of the Act is hereby quashed and the assessment framed by the A.O. U/s. 143(3) of the Act is upheld.
In the result, this appeal of the assessee stands allowed. Order pronounced in the open Court on 28 /06 /2022
Sd/- Sd/- (ARUN KHODPIA) (SANDEEP GOSAIN) Accountant Member Judicial Member Nagpur Dated:- 28 /06 /2022 *Mishra Copy of the order forwarded to: The Appellant- Vasundhara Bahuudeshiya Samajik Sanstha, 1. Khamgaon The Respondent- The C.I.T.(Exemptions) Pune at Nagpur. 2. CIT 3. The CIT(A) 4. DR, ITAT, Nagpur 5. Guard File (ITA No. 55/Nag/2021) 6. By order,
Asst. Registrar