Good Shepherd Church Vs ITO (ITAT Mumbai)
The dispute between Good Shepherd Church and the Income Tax Officer (ITO) reached the Mumbai Income Tax Appellate Tribunal (ITAT) over the reassessment for the assessment years 2010-11 and 2011-12. The core issue revolved around the validity of the reassessment initiated by the ITO.
The case stemmed from the ITO’s decision to reopen the assessment under Section 147 of the Income Tax Act, 1961, citing the non-filing of income tax returns by Good Shepherd Church for the assessment year 2010-11. However, it was later revealed that the church had indeed filed its returns within the stipulated time frame. Despite this, the ITO proceeded with the reassessment based on erroneous grounds.
During the assessment proceedings, it was also noted that the church’s claim for depreciation was not contested. However, the ITO raised concerns regarding the filing of returns beyond the prescribed deadline. The church argued that the delay was unintentional and sought condonation, emphasizing its compliance with audit requirements and its longstanding registration under Section 12A of the Act.
The Commissioner of Income Tax (Appeals) upheld the ITO’s decision, citing a judgment that seemed to justify denying exemptions for belatedly filed returns. However, this decision was based on an amendment introduced in the assessment year 2018-19, which was not applicable to the case at hand.
The ITAT, upon careful examination, found that both the reassessment and the appellate order were flawed. The reassessment was deemed invalid due to its faulty premise, as the church had indeed filed its returns on time. Additionally, the application of amended provisions by the appellate authority, which were irrelevant to the assessment years in question, rendered the decision legally untenable.
In a significant ruling, the Mumbai ITAT invalidated the assessment against Good Shepherd Church, emphasizing the importance of accurate grounds for reassessment. The case underscores the necessity for tax authorities to adhere to procedural fairness and the correct application of relevant provisions. As the church emerges victorious in this legal battle, the decision serves as a reminder of the significance of due process in tax matters.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. These appeals are filed by the assessee against different orders of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] dated 04.2023 for the A.Ys.2010-11 & 2011-12.
2. Since the issues raised in both these appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA. No. 2181/MUM/2023 for Assessment Year 2010-11 as a lead appeal.
ITA No. 2181/MUM/2023 (A.Y. 2011-12)
3. Brief facts of the case are, the case of the assessee was re-opened u/s 147 of Income-tax Act, 1961 (in short “Act”) after recording reasons and approval under section 151(1) of the Act from the Commissioner of Income Tax (Exemptions), The Assessing Officer has reproduced the reasons for reopening at Page No. 1 of the assessment order, as per which Assessing Officer has recorded the reasons that as per ITD system assessee has not filed its Return of Income for A.Y.2010-11. It was found that assessee has received interest other than interest on securities and made a cash deposits of ₹.17,19,600/- in a saving Bank account.
4. Subsequently, notice u/s 148 was issued and served on the In response authorised representative of the assessee confirmed the receipt of notice issued under section 148 of the Act and filed return of income under section 139(1) of the Act dated 13.12.2013. Subsequently notices under section 143(2) and 142(1) of the Act along with questionnaire were issued and served on the assessee. In response authorised representative of the assessee attended and submitted the relevant information as called for.
5. The assessee Trust is Registered with the Director of Income Tax (Exemption), Mumbai under section 12A of the Act. It was submitted before Assessing Officer on 20.08.2017 that assessee is a more than 100 years old Trust and original documents are not traceable, which includes Trust Deed, Certificate of Registration under section 12 of the Act, Certificate under section 80G of the Act. It was stated that main object of the trust is Gospel, Charity, Education, Medical relief, Fellowship, Men’s Fellowship, Sunday School Activities, Youth Counselling for the education purpose, Talent Fiesta and Bible Studies, Counselling etc.
6. During the course of assessment proceedings, Assessing Officer observed that the assessee has claimed depreciation of ₹.4.20,932/-, since the issue of depreciation is not contested before us, therefore, we are not inclined to discuss on this issue.
7. During the course of the assessment, the Assessing Officer observed that assessee neither filed its return of income nor it was audited. After receipt of notice under Non-Filers Monitoring System, assessee has made its account audited on 25.11.2013 and filed its Return of Income on 12.2013. Under the above circumstances, the assessee was show caused vide order sheet noting dated 21.08.2017 as to why section 12A(1)(b) be not invoked and section 11 be denied to the assessee.
8. In response assesse filed its response on 18.09.2017, for the sake of clarity it is reproduced below: –
“As per the reasons received from your office vided letter No. ITO(E)- 1(3)148/2017-18 dated 26/07/2017 it is stated that the assessee trust has not filed its return of Income for A.Y. 2010-11. However, this is not correct. Our client had filed its Return of Income for A.Y.2010- 11 on 13.12.2013. Please note that our client has disclosed RRs.33,57,247/- as voluntary contribution and Rs.2,40,007/-as other income. Please note that cash deposited in Bank account is out of these receipts. We therefore state that there is no income which has escaped assessment and hence object to the re-opening of the assessment.”
9. After considering the above submissions, Assessing Officer observed that assessee has made its account audited on 25.11.2013 and filed its Return of Income on 13.12.2013 for A.Y.2010-11. As per Section 139 of the Act, the last date of filling of Return of income for A.Y.2010-11 was 03.2012. Since assessee has filed after period of limitation therefore the contention of the assessee is not tenable. Accordingly, by relying on section 12A(1)(b) of the Act, he held that assessee is not eligible to claim deduction under section 11 of the Act. Accordingly, he brought the total income to tax by recomputing the income of the assessee as under: –
