Digamber Jain Atikshaya Keshtra VPO Bada Vs ITO (ITAT Jaipur)
ITAT Jaipur held that reassessment of income under section 147 of the Income Tax Act other than income in respect of which AO has formed a reason to believe that the income has escaped assessment is unsustainable in law.
Facts- Vide the present appeal, the assessee has mainly contested the CIT(A) has erred in confirming the action of AO of reopening the assessment u/s 147 of the Income Tax Act. Assessee states that action of CIT(A) is illegal, unjustified, arbitrary and against the fact of the case.
Conclusion- The words ‘such income’ refer to the income chargeable to tax which has escaped assessment and in respect of which the AO has formed a reason to believe that it has escaped assessment. Hence, the assessment or reassessment must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other income which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the reason to believe, is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
This appeal filed by the assessee is directed against the order of the ld. CIT(A) dated 28-09-2022, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2010-11 wherein the assessee has raised the following grounds of appeal.
“1. In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the action of ld. AO of reopening the assessment u/s 147 of Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal and without any basis.
2. In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the action of Id. AO of not providing copy of reasons recorded, for reopening of the case of the assessee trust, thereby depriving the assessee trust from objecting to such reasons recorded, which is against the principle of natural justice. The action of the ld. CIT(A) is illegal, unjustified arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal and without any basis.
3. In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the action of ld. AO of issuing notice u/s 148 of Income Tax Act, 1961 without obtaining proper sanction u/s 151 of the Income Tax A ct, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal and without jurisdiction.
4. In the facts and circumstances of the case and in law, Ld CIT(A) has erred in confirming the action of ld. AO of not allowing exemption to the assessee trust in accordance with section 11(2). The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by allowing exemption under section 11(2).
5. In the facts and circumstances of the case and in law, Id. CIT(A) has erred in confirming the action of Id. AO of rejecting the claim of the assessee trust, under section 24(a), being 30 percent of the rental income, amounting to Rs. 4,93,435 carmed by the assessee trust. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case Relief may please be granted by allowing such claim of the assessee trust.
6. In the facts and circumstances of the case and in law, the d. CIT(A) has orred in confirming the action of Id. AO of not allowing the claim of depreciation, of Rs. 1,80,824, made by the assessee trust on the premises that the said trust had already claimed capital expenditure on such asset as application of Income while computing its income. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by allowing the claim of depreciation of Rs. 1,89,824 while computing its income.
7. In the facts and circumstances of the case and in law, the d. CIT(A) has erred in deciding the appeal ex-parte. The action of Id.CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by providing opportunity to assesee trust of being heard.
2.1 At the outset of hearing, the Bench observed that there is delay of 10 days in filing the appeal by the assessee for which the ld. AR of the assessee filed an application for condonation of delay with following prayers:-
“ Aggrieved by the said order the assessee trust filed appeal before Id. CIT(A). The appeal was then decided by Id. CIT(A) ex-parte vide order dated 28.09.2022. Accordingly, the appeal was to be filed on or before 27.11.2022 as per the provisions of Section 253(3).
It is submitted that the assessee is a trust running Digamber Jain Mandir in Padampura.Two events namely Mahamastakabhisheka and Panchkalyanaka were organized at national level at Shree Mahavir Ji, Karauli. The said events were one of their kind and first in the 21st Century. Therefore, all the Digamber Jain Mandir Trusts had participated in organizing the said events. Accordingly, the assessee trust was also occupied in the preparations of events as well as in attending the events. First, event Panchkalyanaka was from 24.11.2022 to 28.11.2022. Thereafter, the Second event Mahamastakabhisheka was from 27.11.2022 to 04.12.2022. It is submitted that the last date for filling appeal was 27.11.2022 i.e. the date falling between the dates of aforementioned two national level events. The assessee trust and its trustees because of the preparation of events and on the dates of events were so occupied that they could not file the appeal within the stipulated time. As per the provisions of sections 253(5), if there is sufficient cause for delay in filing of appeal, Hon’ble ITAT may condone such delay.
In the above legal and factual background it is submitted that preparation for national level events and attending such national level events of Digambar Jains was sufficient cause for not filing appeal within the stipulated time by Digambar Jain Mandir i.e. assessee trust It is submitted that the delay was not deliberate.
As soon as the trustees got free from events on 05.12.2022 necessary actions were taken for filing of appeal. The appeal could be filed on 07.11.2022.
In view of above, it is humbly prayed that delay in filing of appeal of 10 days may please be condoned.
Reliance is placed on the following judicial pronouncement of the Hon’ble Supreme Court:
Collector, Land Acquisition vs. Mst. Katiji [1987] 167 ITR 471
“The legislature has conferred the power to condone delay by enacting S.5 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on “merits”. The expression “sufficient cause” employed by the legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserve the end of justice that being the life-purpose of the existence of the institution of courts.”
In view of above, a very humble prayer is made for condoning the delay.”
2.2 During the course of hearing, the ld. DR fairly not objected to assessee’s application for condonation of delay and prayed that Court may decide the issue as deem fit and proper in the interest of justice.
2.3 We have heard the contention of the parties and perused the materials available on record. The prayer made by the assessee for condonation of delay of 10 days has merit and we concur with the submission of the assessee. Thus the delay of 10 days in filing the appeal by the assessee is condoned in view of the decision of Hon’ble Supreme Court in the case of Collector, land Acquisition vs. Mst. Katiji and Others, 167 ITR 471 (SC) as the assessee is prevented by sufficient cause.
3.1 Apropos Ground of appeal of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:-
‘’5. Ground No. 1: This ground is general in nature and requires no adjudication. This will be covered by the specific grounds raised by the appellant.
6. GROUND Nos.2&3:- In these grounds the appellant has stated that the A.O. has not provided reasons for opening or taken requisite sanction for the same. However in the Assessment order it is stated:-
“Since, the assessee was having total income exceeding maximum amount not chargeable to tax, proceeding were started under section 147 of the I.T. Act, 1961 and notice under section 148 of the I.T. Act, 1961 was issued on 31.03.2017 after recording reasons in writing and obtaining necessary approval from Commissioner of Income Tax (Exemption), Jaipur.
In response to notice under section 148 of the IT. Act, 1961, Authorized Representative of the assessee filed reply on 14.11.2017-
“In this connection, I am to bring to your kind notice that the assessee has already been filed his return on income on 31-03-2011 with ITO Ward-7(2), Jaipur showing income at Rs. NIL.
It is therefore respectfully requested before your good-self to kindly treat return filed in response to notice U/s 148 of the IT. Act, 1961.”
Since, the return of income filed by the assessee is beyond the time limit provided under section 148 of the LT Act, 1961. No cognizance is taken and assessment is completed under section 144 of the I.T. Act, 1961.
Notices under section 142(1) of the IT. Act, 1961 along with query letter were issued.
In response thereto, Shri Narendra Kumar Go swami, Advocate and Authorized Representative of the society attended the proceeding from time to time and furnished the requisite details/submission. The case discussed with him.”
Hence, there is no merit in the same, and these grounds are DISMISSED.
7. GROUNDS No. 4:- In this ground the appellant claim that the Ld AO has erred in not allowing exemption to the assessee trust in accordance with section 11(2).
7.1 OBSERVATION OF THE A.O.:- In the assessment order. Assessing Officer observed as given below:
“It is also noted that amount of Rs.1,11,000/- has been claimed to be exempted under section 11(2) of the 1.T. Act, 1961 on account of amount set apart for specified purpose. Therefore, assessee was requested to file the copy of form No.10 filed alongwith return of income. In compliance to which Id. Authorized Representative of the assessee filed written reply on 27.11.2017 stating that no form No.10 was prepared and filed.
As per the provisions of section 11(2), in order to claim benefit pl accumulation of income in excess of 15% of the income, filing of Form No.10 along with return of income is mandatory requirement and assessee has failed to fulfil the same, hence no benefit under section 11(2) is allowed to the assessee.
Penalty proceedings under section 271(1)(c) of the IT. Act, 1961 are initiated separately for concealment and furnishing of inaccurate particular of income.”
Since it is well known fact that in order to claim the exempted income under section 11(2) of the I.T. Act, 1961, it is mandatory for the trusts to file Form No. 10. During the course of assessment proceedings the Authorized Representative of the assessee filed a written reply stating that no form No.10 was prepared and filed. During appellate proceedings no submission/explanation has been fumished in spite of various opportunities therefore it is assumed the appellant has no explanation to offer. Hence, the ground does not stand and the same is DISMISSED.
8. GROUND No. 5: In this ground the appellant claim that the Ld AO has erred in rejecting the claim of the assessee trust, under section 24(a), being 30 percent of the rental income, amounting to Rs. 4,93,435 earned by the assessee trust.
8.2 OBSERVATION OF THE A.O. In the assessment order. Assessing Officer observed as given below:-
“There is no provision in the Act with regard to trusts which allows application of income on notional basis. In fact section 11 is so worded that it talks of only exempting an income from a property held under trust subject to certain conditions and does not go beyond in giving authority for computing total income. In the case of an assosseo rogistered u/s 12A of the Act, its total income is required to be computed in accordance with section 11, 12 & 13 of the Act and provision of these sections do not envisage any notional application of income. In the case of trusts/institutions, their income is exempt from tax under section 11 and 12 of the Act. Therefore, in these cases national deduction cannot be treated as application of income.
Therefore keeping in view the settled position of land no deduction under section 24(a) is allowable as application of income.”
The assessment of the A.O. found to be conclusive and no submission/explanation has been furnished by the appellate during the appellate proceedings.
9. GROUND No. 6:- In this ground the appellant claim that the Ld AO has erred in not allowing the claim of depreciation, of Rs. 1,89,824, made by the assessee trust on the premises that the said trust had already claimed capital expenditure on such asset as application of Income while computing its income.
9.2 OBSERVATION OF THE A.O. :- In the assessment order, Assessing Officer observed as given below:-
“It is noticed that the assessee society has claimed depreciation on fixed assets at Rs.1,89,824/-in the income and expenditure account. It has also claimed capital expenditure as application of income in the computation income. The assessee is a charitable institution registered under section 12AA claiming exemption in respect of income of application under section 11 and further has claimed depreciation on capital assets on ground that though the income was allowed as application of income of under section 11 of the IT. Act. The assessee has claimed the said depreciation under section 32 of the IT Act, 1961, which was applicable only in respect of the assets which was used for the purpose of business. Admittedly, the assessee is a charitable institution and not doing any business. If the assessee is engaged itself in business activity, then it would not be eligible for exemption under section 11 of the IT. Act, 1961. It was not the case of the assessee that any business undertaking was held under the assessee trust.
Depreciation claimed by the assessee was not in respect of any assets which was used for business purpose but was admittedly used for assessee’s charitable activities. Hence, section 32 is not applicable here because the assessee was not carrying of any business activity, nor the depreciation claimed in respect of any asset which was used for business purposes. Section. 32 is not applicable. Considering the facts and circumstances of the case as well as above discussion, claim of depreciation made by the assessee at Rs.1,89,824/- is hereby disallowed.”
The assessment of the A.O. found to be conclusive and no submission/explanation has been furnished by the appellate during the appellate proceedings.
10. GROUND No. 7:- In this ground the appellant craves to add, amend or alter any of the grounds on or before the hearing. No such option has been exercised by the appellant during the appellate stage. Therefore, this ground is not adjudicated. This ground is treated as DISMISSED for statistical purpose.
It is noteworthy that the order passed by the A.O. was u/s 144 of the I.T. Act, 1961. Even during the appellate proceedings no explanation has been put forward. This show the recalcitrant attitude of the appellate towards the legal proceedings initiate by the department.
11. In the result, the appellant’s appeal is DISMISSED.”
3.2 During the course of hearing, the ld. AR of the assessee prayed that reassessment proceedings are illegal, without jurisdiction and therefore deserve to be quashed for which following detailed written submission has been filed by the ld. AR of the assessee.
‘’I The appellant trust is managing Digamber Jain Mandir in Padampura, Jaipur. The trust was granted approval u/s 12AA vide letter no 967 dated 04.10.1989.
II. The assessee trust filed its return of income on 31.03.2011 declaring total income of Rs NIL. Assessment u/s 147 was completed on 30.11.2017 by assessing income of Rs 4,27,780 as against Nil Income.
III. Ld. CIT(A) has confirmed the above additions by passing an ex-parte order dated 28.09.2022.
GROUNDS OF APPEAL
GROUND NO.1: REOPENING OF ASSESSMENT U/S 147 OF THE ACT
GROUND NO.2: NOT PROVIDING COPY OF REASONS RECORDED
1. ASSESSING OFFICER
Ld. AO reopened the case of the assessee trust alleging that the return of income had not been filed by the assessee trust and also did not provide copy of reasons recorded during the assessment proceedings.
2. COMMISIONER OF INCOME TAX (APPEALS) CIT(A) has upheld the decision of ld. AO.
3. SUBMISSION:
3.1. The sole reason for reopening of the assessment is said to be not filing of return of income by the assessee trust for AY 2010-11. The said reason is evident from Page 1 of the order of Ld. AO
3.2. The very fact of non-filing of return is patently wrong. The return of income for AY 2010-11 was filed on 31.03.2011. This fact is evident from Para 3 at Page 2 of the assessment order. The relevant evidence for filling of return of income is placed at [PB 1-2]
3.3. The assessee trust was not provided copy of reasons during the assessment proceedings and due to the same, the assessee trust was deprived from filing the objections against the reasons recorded.
3.4. It is important to note that the ld. AO has computed the income on the basis of return of income filed by the assessee trust, which, as per the reasons recorded was said to be have not been filed by the assessee trust.
3.5. In the view of above, the jurisdiction u/s 147 is wrongly assumed and therefore the entire reassessment is without jurisdiction and deserves to be quashed. Reliance is placed on the following judicial pronouncements where re-opening was quashed if the same was based on wrong facts:
