ORISSA STATE CO-OPERATIVE BANK EMPLOYEES PENSION FUND,BHUBANESWAR vs. CIT(EXEMPTION), HYDERABAD

आदेश / O R D E R Per Arun Khodpia, AM:

The present appeal is filed by the assessee against the order passed by the CIT(E), Hyderabad, dated 30.03.2021, for the assessment year 2017-2018. 2. Concise facts leading to the present appeal are that the assessee is a trust formed with an aim of regulating the Pension Fund of employees of Orissa State Cooperative Bank and earned interest on investments made out of Pension Fund at its disposal. The assessee trust also earned interest on amounts parked in Savings Bank account. The assessee-trust filed its return of income on 25.01.2018 showing total income at Rs.Nil, claiming the same as exempt u/s.10 (23AAA) of the Act. Subsequently the

2 ITA No.54/CTK/2021 case was selected for Limited Scrutiny through CASS and proceedings u/s 142, 143 of the I.T.Act 1961 were started by ld. AO. During the assessment proceedings, the AO observed that the assessee was required to get the approval of concerned Pr.CIT for claiming exemption u/s.10(23AAA) of the Act. On perusal of the record, the AO found that the assessee applied for approval for the period from 01.04.2016 to 31.03.2019 vide application dated 25.02.2016. During the course of assessment proceedings, the assessee was asked to submit the copy of order granting approval u/s.10(23AAA) of the Act for the year under consideration, however, the assessee could not produce the same. Accordingly, the AO disallowed the claim exemption u/s.10(23AAA) of the Act while framing the assessment u/s.143(3) of the Act for assessment year 2017-2018 observing that the assessee had the approval u/s.10(23AAA) of the Act for the assessment years 2011-2012, 2012- 2013 & 2013-2014 only and the assessee was required to apply for the approval again for the assessment year 2014-2015, however, the assessee was not having approval for the said assessment year. 3. Aggrieved by the order of AO, assessee made an application u/s 264 of the Act to the Principal Commissioner of Income Tax (Exemption), Hyderabad (hereinafter referred to as ‘CIT(E)’). The ld. CIT(E) u/s.264 of the Act, observed that the assessee filed applications for approval u/s.10(23AAA) of the Act before the CIT, Bhubaneswar on 06.02.2013, 25.02.2016 and 19.02.2019, however, the applications dated 25.02.2016 & 06.02.2013 were not made to competent authority, who was having the

3 ITA No.54/CTK/2021 power to decide the fate of the application. The CIT(E) observed that as there is no approval u/s.10(23AAA) of the Act for the year under consideration, therefore, he concurred with the findings recorded by the AO and declined to interfere with the order passed by the AO. 4. Now, the assessee is in appeal before the Tribunal on the following grounds :- i) That, Ld. CIT (Exemption) is wrong both in law as well on fact in upholding the order U/s.143(3) of the LT.Act without applying his judicial mind and without affording the opportunity of rebuttal, thereby the assessment order is devoid of principles of natural justice and thus liable to be quashed and annulled. ii) That, Ld. CIT (Exemption) is wrong in holding that, assessee is not eligible for exemption, due to improper appreciation of facts and non application of judicial mind. iii) That, the Ld. CIT (Exemption) passed the order uls 264 under haste and without considering the submission made by the assessee and completely relying on the order passed by the Ld. AO. iv) On the fact and circumstances of the case, the Ld. Commissioner of Income Tax (Exemption) was not justified to completely ignore the provisions of section 12AA with regard to the deemed approval applicable to Section 10(23AAA) and Rule 16C of the LT. Act, 1961. v) That, the Ld. AO and the Commissioner of Income Tax (Exemption) are wrong in stating that the application under Section 10(23AAA) was not made before the appropriate authority and hence liable to be rejected. vi) That, CIT (Exemption) is wrong both in law as well as in fact in not granting the exemption even u/s 10(25)(iii) being an approved superannuation fund. vii) That, the assessee begs the leave of your respectful authority for modification! alteration of the aforesaid grounds of appeal any time during the course of the appeal proceeding. 5. Ld. AR has filed a paper book containing pages 1-98, wherein he has filed written submissions and copies of relevant documents.

4 ITA No.54/CTK/2021 6. Ld. AR of the assessee, also drew our attention to the paper book page No.47, which is the copy of application filed by the assessee before the Pr.CIT, Bhubaneswar enclosing the particular of documents in connection with the approval of the assessee-trust u/s.10(23AAA) of the Act for the period from 01.04.2016 to 31.03.2019, which has been acknowledged as received by the department on 25.02.2016. Further, the ld. AR drew our attention to the page No.48 of the paper book, which is the copy of an application filed with the Department on 06.02.2013 for approval of the assessee trust 10(23AAA) of the Act, for the period from 01.04.2014 to 31.03.2016 . Further in pursuance to the notice issued by the AO on 03.12.2019, the assessee submitted that the assessee had made proper application before the competent authority for granting exemption u/s.10(23AAA) of the Act. Both the applications of the assessee are pending for disposal before the competent authority. Neither the authority has rejected the application nor the same has been disposed by the authority. Placing reliance upon the decision of the Hon’ble Apex Court in the case of CIT Vs. Society for the Promotion of Education, Allahabad [(2016) 382 ITR 6 (SC)], ld. AR submitted that if the application of the assessee is not disposed off within the prescribed time limit, then it is to be deemed an approval as per the law laid down by the Hon’ble Supreme Court in the above case. Ld. AR submitted that without considering the above, both the authorities have committed gross error in denying the claim made by the assessee u/s.10(23AAA) of the Act,

5 ITA No.54/CTK/2021 therefore, ld. AR submitted that both the orders of the authorities below deserves to be dismissed. 7. On the other hand, ld. CIT-DR supported the orders of both the authorities below. 8. Having heard to the rival contentions of both the parties and perusing the relevant materials available on record, we found that the AO denied the claim of the assessee made u/s.10(23AAA) of the Act on the ground that the assessee has approval only for three years i.e. for A.Y.2011-2012, 2012-2013 & 2013-2014 and the assessee has made the application on 25.02.2016 for approval for A.Y.2014-2015 and onwards after a lapse of three years. Ld AO’s findings are as under: 4. Despite various notices issued to the assessee, there is only part response from the from the assessee. Though the assessee has said that it will furnish the details later on the same has not been filed. The assessee has finally Filed a reply on e-portal on 06.12.2019 submitted by the authorised representative of the assessee. In the said submission the assessee has stated that the assessee has made the application as per rule 16C in due course. In the submission, rule 16C was reproduced and the reliance is placed on the judgment of Hon’ble Supreme Court in the case of Commissioner of Income Tax, Kanpur and Ors. Vs. Society for the promotion of the education, Allahabad, dated 16.02.2016 reported in [2016] 382 ITR 6 (SC). In this regard, it is stated that the case law mentioned by the assessee is not relevant to the assessee’s case on the facts as well as on the legal front. Firstly, the assessee trust was created on 20.09.1996. The assessee has provided the copy of the order u/s.10(23AAA) passed on 30.03.2011 which is applicable for the A.Y.2011-12, 2012-13 & 2013-14. As the approval was for the three years only, the assessee was required to apply for the approval again in F.Y.2013- 14. From the records it is seen that the assessee has made the application on 25/02/2016 i.e. after the lapse of almost 3 years which means that there was no approval to the assessee u/s 10(23AM) for the A.Y. 2014-15 and onwards. Further the assessee has not given the copy of any earlier orders in this regards. This shows that the assessee has approval only for three years. In the section 10(23AAA) of the I.T. Act it is specifically mentioned that any such approval shall at anyone time have effect for such

6 ITA No.54/CTK/2021 assessment year or years not exceeding three assessment years as may be specified in the order of approval. Thus in the statute itself it is mentioned that the approval is only for three years and not more than that. Whereas in subsection 2 of section 12AA it is mentioned that every order granting or refusing registration shall be passed before the expiry of six months from the end of the month in which the application was received. Therefore the same principle could not be applied to other sections unless it is mentioned in the Act. Considering all the above facts the claim of the assessee of exemption u/s 10(23AM) is denied. As per the income and expenditure statement the assessee has earned excess of income over expenditure to the tune of Rs.8,49,57,408/- which is treated as net profit for the taxation purpose and the same is taxed accordingly. As the assessee has mis-reported its income penalty proceedings u/s 271AAC of the Income Tax Act, 1961 are initiated separately.” 9. On the revision application filed by the assessee, the CIT(E) passed order u/s.264 of the Act declining to interfere with the order passed by the AO u/s.143(3) of the Act. Last para of order of the CIT(E) is reproduced hereunder : 7. The facts of the case are that the assessee filed application for approval u/s.10(23AAA) of the Act before the CIT, Bhubaneswar on 06.02.2013, 25.02.2016 and 19.02.2019. However, it is seen that application dated 25.02.2016, 06.02.2013 was not made to competent authority, who has power to decide the fate of the application. As there was no approval u/s.10(23AAA) of the Act for the assessment year under consideration, the AO rejected the claim of exemption u/s.10(23AAA) of the Act. As there was no prima facie error in the assessment order u/s.143(3) of I.T.Act, passed by the AO, for the A.Y. 2017-18, the application of the assessee for revision of assessment order u/s 143(3) of the Act passed by the AO is therefore erroneous. Therefore, needs no revision and I therefore decline to interfere in thematter. 10. On perusal of impugned orders passed by the Ld AO and the CIT(E), it is observed that Ld AO had made the addition based non approval for exemption U/s 10(23AAA), but Ld CIT (E) has refused to interfere with finding of the Ld AO basis that applications were not made to competent Authority, having power to decide the fate of the application. We have also perused the applications of the assessee filed for approval

7 ITA No.54/CTK/2021 u/s.10(23AAA) of the Act, placed at page No.47 & 48, which have been received by the department on 25.02.2016 and 06.02.2013, respectively. From the contents of both the applications, it is clear that the assessee has made applications for approval u/s.10 (23AAA) of the Act for the period 01.04.2016 to 31.03.2019 and for the period 01.04.2013 to 31.03.2016, respectively. There is nothing on record being brought by the ld. CIT-DR before us to justify as to whether the application filed by the assessee before CIT, has either been rejected or disposed off in compliance of the provisions of Rule 16C of the I.T.Rules, 1962. 11. In the above peculiar facts of the case, we found merit in the contention of the ld. AR of the assessee that the applications filed by the assessee should have been disposed off by the authorities in terms of Rule 16C of I.T.Rules, 1962. We, thus, restore the issue back to the file of ld. CIT(E) to decide the matter on merits considering the relevant documents placed on record after providing sufficient opportunity of hearing to the assessee. The assessee is also directed to cooperate with the CIT(E) for early disposal of the case. 12. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 02/03/ 2022.

Sd/- Sd/- (C.M.GARG) (ARUN KHODPIA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनाांक Dated 02/03/2022 Prakash Kumar Mishra, Sr.P.S.

8 ITA No.54/CTK/2021

आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीलाथी / The Appellant- 1. Orissa State Cooperative Bank Employees Pension Fund, At/PO: OSCB Building, Unit-IV Jawaharlal Nehru Marg, Bhubaneswar-751001 प्रत्यथी / The Respondent- 2. CIT(Exemption), Hyderabad आयकि आयुक्त(अऩील) / The CIT(A), 3. आयकि आयुक्त / CIT 4. ववभागीय प्रनतननधध, आयकि अऩीलीय अधधकिण, कटक / DR, 5. ITAT, Cuttack आदेशािुसार/ BY ORDER, गार्ा पाईल / Guard file. 6. सत्यावऩत प्रनत //True Copy// (Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack