2013 (8) TMI 736 - AT - Income Tax

Tax Tribunal rules in favor of deceased taxpayer, criticizes Assessing Officer, stresses judicial discipline

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision. It ruled in favor of the deceased taxpayer, finding that the assessment ... Denial of accumulation under section 11(2) of the Act – assessee Society is running educational institute - alleged that assessee did not specify the purpose of accumulation in Form 10B - Held that:- Assessee has accumulated income for the specific purpose and for which the funds have been used accordingly in subsequent years - assessee has applied the accumulation of funds as specified which were in accordance with the object of the trust – disallowance set aside – Following decision of Additional Commissioner of Income-tax, Range - 1, Aligarh Versus Jamia Urdu [2012 (10) TMI 255 - ITAT, AGRA] - Decided against Revenue. Disallowance under section 40A(3) - Held that:- As CIT(A) has deleted the addition holding that the income of the Institution is exempt under section 10(22) the disallowance under section 40A(3) became academic - Following decision of Addl. Commissioner of Income Tax (A. O.) Range-1, Aligarh. Versus Jamia Urdu, [2012 (10) TMI 255 - ITAT, AGRA] - Decided against Revenue. Issues Involved:1. Presumption of acceptance of order by deceased Mohd. Anwar Saeed.2. Deletion of the addition of Rs.34,71,646/- under sections 11 to 13.3. Ignoring the application of section 13.4. Deletion of addition on the basis of protective assessment.5. Applicability of the doctrine of res judicata in income tax proceedings.6. Non-cooperation of the assessee leading to assessment under section 144.7. General grounds for amending, altering, adding, or modifying grounds of appeal.Detailed Analysis:1. Presumption of Acceptance of Order by Deceased Mohd. Anwar Saeed:The Revenue contended that the CIT(A)'s order was perverse due to the presumption that the deceased, Mohd. Anwar Saeed, had accepted the order. However, the Tribunal noted that the assessment order had not become final due to the absconding status of Mohd. Anwar Saeed, which prevented him from challenging the order. The Tribunal found this argument to lack merit and upheld the CIT(A)'s decision.2. Deletion of the Addition of Rs.34,71,646/- Under Sections 11 to 13:The CIT(A) deleted the addition of Rs.34,71,646/- by stating that the income of the assessee, being a registered entity under section 12AA, should be computed in accordance with sections 11 to 13 of the Act. The Tribunal upheld this deletion, emphasizing that the provisions of Chapter IV-D, including section 40A(3), do not apply to institutions registered under section 12A unless they are engaged in business or profession. The Tribunal confirmed that the assessee was not engaged in any business or profession, making the disallowance under section 40A(3) unsustainable.3. Ignoring the Application of Section 13:The Revenue argued that the CIT(A) ignored the application of section 13, which disallows exemption under section 11 if any part of the income benefits certain persons. The Tribunal, however, found that the CIT(A) correctly applied the law, noting that the institution was an educational entity existing solely for educational purposes and not for profit, thus qualifying for exemption under section 10(22) of the Act.4. Deletion of Addition on the Basis of Protective Assessment:The CIT(A) deleted the addition made on a protective basis, which was meant to be taxed substantively in the hands of Shri S. Anwar Saeed. The Tribunal supported this deletion, stating that once the institution is held to be eligible for exemption, the entire income is exempt, making the protective addition irrelevant.5. Applicability of the Doctrine of Res Judicata in Income Tax Proceedings:The Revenue claimed that the CIT(A) erred by not considering that the doctrine of res judicata does not apply to income tax proceedings, where each assessment year is separate. The Tribunal dismissed this ground, reiterating that the CIT(A) had followed the correct legal principles and that the Revenue failed to provide contrary evidence.6. Non-Cooperation Leading to Assessment Under Section 144:The Revenue argued that the assessment under section 144 was due to the non-cooperation of the assessee. The Tribunal found this ground unsubstantial, noting that the case had been thoroughly examined by appellate authorities, including a survey under section 133A and an audit under section 142(2A). The Tribunal affirmed that the CIT(A) had properly addressed all issues and upheld the assessment.7. General Grounds for Amending, Altering, Adding, or Modifying Grounds of Appeal:This ground was deemed general in nature and required no independent finding.Judicial Discipline:The Tribunal emphasized the importance of judicial discipline, criticizing the Assessing Officer for making comments against the ITAT's directions. It warned that such behavior could lead to contempt actions and directed the concerned C.C.I.T. to control such erring officers.Conclusion:The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s order and emphasizing adherence to judicial discipline. The concerned C.C.I.T. was instructed to ensure compliance with appellate authority orders to maintain the integrity of the judicial process.