2019 (3) TMI 797 - AT - Income Tax

Consistency key in tax assessments: ITAT Delhi upholds CIT(A)'s decision for assessee's exemption claim

The ITAT Delhi upheld the CIT(A)'s decision to allow the appeal of the assessee, dismissing the Department's appeal. The ITAT emphasized the importance of ... Disallowance exemption u/s 11 and 12 - violation of provision of FCRA Guidelines - amounts were received by the assessee as commercial fee - applicability of proviso to amended Section 2(15) - private gain - HELD THAT:- In subsequent assessment years 2013-2014 and 2014-2015 considered similar objects of assessee and after examining the details found that assessee is registered under section 12AA and that objects of the assessee company are charitable, within the meaning of Section 2(15). The returned Nil income was thus accepted. It is well settled Law that though the principles of res judicata do not apply to the income tax proceedings, but, rule of consistency shall have to be applied by the Income Tax Authorities. We rely upon decision of the Hon’ble Supreme Court in the case of Radha Soami Satsang [1991 (11) TMI 2 - SUPREME COURT]. CIT(A) examined the entire issue in detail and have given a specific finding of fact in favour of the assessee that the assessee is engaged in the charitable activities and that the amount in question have been spent for charitable activities. Even if some amount have been received by assessee, that was received for charitable purposes only and no personal gain have been obtained by the assessee company. The finding of fact recorded by the CIT(A) have not been rebutted through any evidence on record. We, therefore, do not find any error in the order of the CIT(A) in allowing exemption under section 11 - Decided against revenue. Issues involved:1. Allowance of appeal by ignoring FCRA guidelines violation2. Allowance of appeal by ignoring commercial fee receipt without proper permission3. Allowance of appeal by ignoring the nature of projects undertaken by the assesseeIssue 1: Allowance of appeal by ignoring FCRA guidelines violationThe assessing officer disallowed exemption under sections 11 and 12 of the Income Tax Act, citing violation of FCRA guidelines. The AO observed that certain transactions involving soft loans and remittances violated FCRA provisions. However, the CIT(A) held that FCRA violations are irrelevant for Income Tax Act purposes. The CIT(A) emphasized that as long as no private gain was involved in charitable activities approved under section 12AA, the exemption could not be denied. The CIT(A) also highlighted that the assessing officer's observations did not support the denial of exemption based on FCRA violations.Issue 2: Allowance of appeal by ignoring commercial fee receipt without proper permissionThe AO disallowed certain amounts received by the assessee as commercial fees, stating that they should have been received through the Foreign Contribution Regulation Account with permission from the Ministry of Home Affairs. However, the CIT(A) examined the details provided by the assessee and found that the fees were for charitable purposes and no private gain was involved. The CIT(A) noted that the assessing officer's disallowance lacked a proper basis and, therefore, deleted the additions made by the AO.Issue 3: Allowance of appeal by ignoring the nature of projects undertaken by the assesseeThe assessee challenged the AO's findings, arguing that the disallowances were based on surmises and conjectures. The CIT(A) reviewed the projects undertaken by the assessee and found that they were related to relief for the poor, medical assistance, education, and environmental causes. The CIT(A) emphasized that the assessing officer failed to establish any private gain in the charitable activities of the assessee. The CIT(A) concluded that the assessee was entitled to exemption under section 11 of the Income Tax Act, as the projects were carried out for charitable purposes without personal gain.In conclusion, the ITAT Delhi upheld the CIT(A)'s decision to allow the appeal of the assessee, dismissing the Department's appeal. The ITAT emphasized the importance of consistency in tax assessments and cited the rule of consistency in accepting the assessee's claim for exemption under section 11 based on similar facts in subsequent assessment years. The ITAT confirmed that the assessee was engaged in charitable activities without personal gain, warranting the exemption under the Income Tax Act.