Case Law Details
Young Women’s Christian Association of Delhi Vs ITO (ITAT Delhi)
ITAT Delhi held that Article 265 of the Constitution mandates that no tax shall be levied or collected except by authority of law. If tax has been paid in excess, same has to be refunded to the assessee.
Facts- The assessee is a society registered under Societies Registration Act, 1860. It is registered under section 12A of the Income Tax Act, 1961 and claims exemption u/s. 11 and 12 of the Act. In the assessment order framed by the AO on 18.03.2015 under section 143(3) of the Act, the Ld. AO gave the finding that the assessee’s income from running of non recognized courses by Women Training Institute computed by him at Rs. 99,30,938/- is not education within the meaning of section 2(15) of the Act and added the same to the income of the assessee.
CIT(A) deleted the impugned addition and directed AO to grant full exemption under section 11 along with consequential benefits. However, in view of decision of Hon’ble Supreme Court in CIT vs. Shelly Products & Another 261 ITR 367 (SC), the Ld. CIT(A) held that since the assessee paid tax on the impugned income of Rs. 99,97,872/- declared in the return, tax paid thereon will not be refunded even though the said income is eligible for exemption under section 11 of the Act.
Being aggrieved, the present appeal is filed.
Conclusion- Held that Article 265 of the Constitution mandates that no tax shall be levied or collected except by authority of law. If tax has been paid in excess, same has to be refunded to the assessee. Accordingly, we set aside the order of the CIT(A) in so far it relates to the issue of denial of refund of tax paid on the returned income and direct the Ld. AO to grant refund in accordance with law.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal of the assessee arises out of the order dated 01.02.2017 of the Ld. Commissioner of Income Tax (Appeals)- 40, Delhi (“CIT(A)”) pertaining to the assessment year (“AY”) 2012-13.
2. The assessee has taken the following grounds:-
“1. That on the facts and circumstances of the case, the Commissioner of Income tax, (Appeals)-40, New Delhi [‘the CIT(A)] having held that non recognized courses conducted by Women Training Institute (WTI) of the Appellant also constituted ‘education’ within the meaning of section 2(15) of the Income Tax Act, 1961 (“the Act”) has erred in holding that tax paid on income from imparting education through non recognized courses shall not be refunded to the Appellant.
2. That on the facts and circumstances of the case and in law, the CIT(A) did not appreciate the ratio of CIT vs. Shelly Products & another (2003) 261 ITR 367(SC). It was not appreciated that inclusion of exempt income or income not in contemplation of law as income liable to tax either by way of mistake or inadvertent or ignorance are not covered by the ratio of judgment in Shelly Products (supra).
3. That on the facts and circumstances of the case and in law, the observation made by the CIT(A) in para 4.2.4 that “tax paid on the returned income will not be refunded” was without jurisdiction being outside the scope of subject matter of appeal.”
3. The facts in brief are that the assessee is a society registered under Societies Registration Act, 1860. It is registered under section 12A of the Income Tax Act, 1961 (the “Act”) and claims exemption under section 11 and 12 of the Act. In the assessment order framed by the Ld. Assessing Officer (“AO”) on 18.03.2015 under section 143(3) of the Act, the Ld. AO gave the finding at page 10-11 of his order that the assessee’s income from running of non recognized courses by Women Training Institute (“WTI”) computed by him at Rs. 99,30,938/- is not education within the meaning of section 2(15) of the Act and added the same to the income of the assessee.
4. On appeal by the assessee, the Ld. CIT(A) discussed this issue in para 4.2 (pages 17-18) of his appellate order and following the decision of Hon’ble Delhi High Court in ITA No. 509/2016 dated 02.08.2016 in assessee’s own case and order of the ITAT for AY 2009-10 held that in the case of the assessee the primary objective is imparting education to the poor women of the society, either vocational or non-vocational. Therefore, any surplus generated from other activities of the assessee even if they are in the nature of commercial activities are allowable for exemption if used for the objectives of the society. Accordingly, he deleted the impugned addition and directed the Ld. AO to grant full exemption under section 11 along with consequential benefits. However, in para 4.2.4 (page 18) of his order, in view of decision of Hon’ble Supreme Court in CIT vs. Shelly Products & Another 261 ITR 367 (SC) the Ld. CIT(A) held that since the assessee paid tax on the impugned income of Rs. 99,97,872/- declared in the return, tax paid thereon will not be refunded even though the said income is eligible for exemption under section 11 of the Act.
5. The assessee is aggrieved by the above finding of the Ld. CIT(A) and is in appeal before the Tribunal. All the grounds of appeal of the assessee relate thereto.
6. At the very outset the Ld. AR submitted that the Ld. CIT(A) misunderstood the decision of Hon’ble Supreme Court in Shelly Products & Another (supra) which has no applicability and in fact, it supports the case of the assessee. In Shelly Products & Another (supra) the assesee had admitted their liability to pay tax paid by them. They had not contended that the tax of which refund is claimed was not chargeable or payable. They claimed refund on the sole ground of the failure of the authorities to pass an order of assessment. The Ld. AR argued that it was in the backdrop of the above factual matrix that the Hon’ble Supreme Court held that liability to pay income tax chargeable under the Act is not dependent on assessment. The assessee is himself required to compute his total income and pay his income tax thereon. If assessment cannot be made in accordance with the provisions of the Act, it amounts to deemed acceptance of return of income furnished by the assessee.
6.1 The Ld. AR submitted that the facts of the assessee’s case are not similar to those in Shelly Products & Another (supra). In the case of the assessee, addition in respect of surplus income for running of non recognized courses by WTI has been made consistently in the last preceding AYs 2009-10, 2010-11 and 2011-12. Therefore, the assessee declared the said income in the return for AY 2012-13 with a view to ensure that penalty is not levied, for by the time return for AY 2012-13 was filed on 27.09.2012 appeal for AY 2009-10 was sub-judice before the ITAT. The assessee never admitted its liability to pay tax on income from running of non recognized courses by WTI.
6.2 The AR invited our attention to the observation of the Hon’ble Supreme Court in Shelly Products & Another (supra) made at page 382 therein which according to him obliges the Ld. AO to grant refund of the tax paid in access under the circumstances enumerated therein.
6.3 The Ld. AR submitted that there is no estoppel against the statute and referred to the following decisions:-
(i) CIT vs. Bharat General Reinsurance Co. Ltd. (1971) 81 ITR 303 (Del)
(ii) SR Kosti vs. CIT (2005) 276 ITR 165 (Guj)
(iii) Nirmla L Mehta vs. A. Balasubramaniam 269 ITR 1 (Bom)
6.4 Reference was also made to the decision of Mumbai Bench of the Tribunal in Srikant G. Shah vs. ITO (2007) 108 ITD 577 (Mum).
6.5 In support of the assessee’s case reliance was placed on the following decisions also:-
(i) Kalvindee Rail Nirman (Engineers) Ltd. vs. CIT & Another (2017) 394 ITR 684 (Raj); and
(ii) Raghvan Nair vs. ACIT & another (2018) 402 ITR 400 (Ker)
6.6 The Ld. DR, on the other hand supported the order of the Ld. CIT(A). According to him, the decision of Hon’ble Supreme Court in Shelly Products & Another (supra) applies to the case of the assessee as held by the Ld. CIT(A).
7. We have given our careful thought to the rival submissions and perused the material available in the records. It is an admitted position and the Ld. CIT(A) eloquently says so that the income from unrecognized courses amounting to Rs. 99,97,872/- has been declared in the return (for AY 201213) on which tax has also been paid. It is also not disputed by the Ld. CIT(A) and in fact following the order dated 15.02.2016 of the Hon’ble Tribunal in ITA No. 1019/Del/2015 and the decision dated 02.08.2016 of the Hon’ble Delhi High Court in ITA No. 509/2016 for AY 2009-10 in the assessee’s own case, he has directed the Ld. AO to grant exemption under section 11 along with consequential benefits. Having held so, the Ld. CIT(A) denied the assessee refund of tax paid on the said income declared by the assessee in its return filed on 27.09.2012 solely on the basis of Hon’ble Supreme Court’s decision in Shelly Products & Another (supra).
7.1 To say the least the Ld. CIT(A) misapplied the decision (supra) of the Hon’ble Supreme Court to the facts of the assessee’s case in which facts were altogether different. In Shelly Products & Another (supra) the facts were that the assessee, after having paid the advance tax filed its return for AY 1976-77. The AO framed assessment under section 143(3) r.w.s 144B of the Act. The CIT(A) partly allowed the appeal and rejected the assessee’s contention that the AO was acting without jurisdiction. On further appeal, the Tribunal held that the assessment order was void ab initio as the AO lacked jurisdiction. Reference against the Tribunal’s order was pending before the High Court. In the meantime, pursuant to Tribunal’s order, the assessee applied to the AO for refund of tax paid by it. Taxes were not refunded. Appeal was preferred to the Appellate Commissioner which was allowed. The AO was directed to refund to the assessee advance tax and self assessment tax also. The Tribunal, on appeal affirmed the order of the Appellate Commissioner. On reference, the High Court also affirmed the order of the Tribunal. The Revenue filed appeal before the Hon’ble Supreme Court.
7.2 It is in the above factual background that we have to appreciate the decision (supra) of the Hon’ble Supreme Court keeping in view the caution of the Hon’ble Supreme Court in CIT vs. Sun Engineering Works P. Ltd. 198 ITR 297 (SC) wherein their Lordships observed that the judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the Supreme Court.
7.3 In Shelly Products & Another (supra) the Hon’ble Supreme Court (in para 27) set out the issue before them as under:-
“27. In the cases in hand the question is only with regard to the refund of tax paid by way of advance tax or self-assessment tax which was paid by the assessees themselves admitting their liability to pay such tax. The assessees do not contended that the tax of which refund is claimed was not chargeable or payable, but claim refund on the sole ground of the failure of the authorities to pass an order of assessment.”
7.4 Thus, the fact situation before the Hon’ble Supreme Court was –
(i) that the assessee themselves had admitted their liability to pay tax in respect of which refund was sought and that they never contended that such tax was not chargeable or payable by them;
(ii) that the sole ground of claim of refund of tax was failure by the tax authorities to pass an order of assessment
7.5 Does such a fact situation exist in the case of the assessee society which we are presently considering ? The answer is no. The assessee society had all along claimed that the activity of running of non recognized courses by WTI was ‘education’ within the meaning of the expression charitable purpose defined under section 2(15) of the Act and income from such activity was exempt under section 11. The assessee society never admitted its tax liability relatable to the said income. It has been contesting the addition of the said income to its total income on the ground that tax was not chargeable or payable by it in respect of such income. On the contrary the Revenue has been holding year after year right from the AY 2009-10 that the impugned income does not fall within the ambit of ‘education’ and thus ‘charitable purpose’ under section 2(15) of the Act. It is only at the stage of the Tribunal that the assessee got relief when its appeal for the AY 2009-10 was decided in its favour vide the Tribunal’s decision dated 15.02.2016 in ITA No. 1019/Del/2013.
7.6 Till then i.e. 15.02.2016 the assessee’s appeals for AY 2009-10 and subsequent AYs 2010-11 and 2011-12 were still pending for decision before the Tribunal. It was in such a precarious situation that the assessee society in its return for AY 2012-13 filed on 27.09.2012 declared the said income and paid taxes thereon, though retaining its claim of exemption of such income under section 11 of the Act. The Ld. AO did make addition of the Said income in the assessment order of AY 2012-13 framed by him on 18.03.2015 which has been deleted by the Ld. CIT(A) vide his appellate order dated 01.02.2017 following the order dated 15.02.2016 of the Tribunal (supra) and the decision dated 02.08.2016 of the Hon’ble Delhi High Court in the assessee’s own case for AY 2009-10. The quantum appeal filed by the Revenue against the order dated 01.02.2017 of the Ld. CIT(A) for AY 201213 has already been dismissed by the Tribunal vide its order dated 16.02.2021 in ITA No. 2760/Del/2017. Thus, as at present the dispute between the Revenue and the assessee on the issue of addition in respect of receipt from running of non-recognized courses by WTI has been put to rest by the decision (supra) of the Tribunal and the decision of Hon’ble Delhi High Court in ITA No. 509/2016 for AY 2009-10 in the assessee’s own case.
8. It is, thus amply manifest that the Ld. CIT(A) misapplied the decision of the Hon’ble Supreme Court in Shelly Products & Another (supra) and misdirected himself in denying the assessee’s claim of refund of taxes paid by it relatable to the impugned income exempt under section 11 of the Act. The facts of the assessee’s case are altogether different from those of Shelly Products & Another (supra) decided by the Hon’ble Supreme Court. A close look into the decision of the Hon’ble Supreme Court in Shelly Products & Another (supra) will show that in para 31 the Hon’ble Supreme Court observed as under:-
“In a case where an assessee chooses to deposit by way of abundant caution advance tax or self-assessment tax which is in excess of his liability on the basis of return furnished or there is any arithmetical error or inaccuracy, it is open to him to claim refund of the excess tax paid in the course of assessment proceedings. He can certainly make such a claim also before the concerned authority calculating the refund. Similarly, if he has by mistake or inadvertence or on account of ignorance, included in his income any amount which is exempted from payment of income-tax, or is not income within the contemplation of law, he may likewise bring this to the notice of the assessing authority, which if satisfied, may grant him relief and refund the tax paid in excess, if any.”
9. The above observation of the Hon’ble Supreme Court in Shelly Products & Another (supra) squarely applies to the facts of the assessee’s case. The case laws cited by the Ld. AR also support the contentions of the assessee raised in its appeal before the Tribunal.
10. Needless to say that Article 265 of the Constitution mandates that no tax shall be levied or collected except by authority of law. If tax has been paid in excess, same has to be refunded to the assessee.
11. Accordingly, we set aside the order of the CIT(A) in so far it relates to the issue of denial of refund of tax paid on the returned income and direct the Ld. AO to grant refund in accordance with law.
12. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 6th April, 2023.
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