2019 (7) TMI 429 - AT - Income Tax

Tax Tribunal affirms CIT(A)'s decision on accrued income. Section 11(1) Explanation-2 claim rejected. Natural justice upheld. Appeal dismissed.

Universal Education Foundation Versus The Assistant Director of Income Tax (Exemption) -II (2), Mumbai

The Tribunal upheld the CIT(A)'s decision that the amount of Rs. 3,55,45,600 accrued and was received by the assessee during the financial year 2010-11. ... Exemption u/s 11 denied - Sale consideration for assignment of lease - Accrual on Income - AO found that the assessee had sold immovable property however the assessee failed to disclose this transaction while filing its return of income for the impugned assessment year - HELD THAT:- The grounds of appeal filed by the assessee can be seen through the lens of deductive inference, in which it is asserted that the conclusion is guaranteed to be true if the premises are true. In the present case, it is the contention of the assessee vide the 2nd ground of appeal that the Ld. CIT(A) failed to note that the amount of ₹ 3,55,45,600/- was not factually received during the year under appeal. This premise is not true as evident from the finding above that the assessee has received ₹ 3,55,45,600/- during the financial year 2010-11 relevant to the impugned assessment year. The inference drawn by the assessee is not a correct one as it is based on wrong premise. In view of the above facts and position of law, we uphold the order of the Ld. CIT(A) in holding that the amount accrued to the Appellant as income for the year under appeal and was also received. - Decided against assessee. Issues Involved:1. Whether the amount of Rs. 3,55,45,600 accrued to the assessee as income for the year under appeal and was also received.2. Whether the assessee's failure to disclose the transaction in its return of income for the assessment year 2011-12 was justified.3. Whether the assessee was entitled to the benefit of Section 11(1) Explanation-2 of the Income Tax Act, 1961.4. Whether the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] provided adequate opportunity for the assessee to be heard.5. Whether the subsequent agreement (addendum) was valid and enforceable.Issue-wise Detailed Analysis:1. Accrual and Receipt of Income:The primary issue was whether the amount of Rs. 3,55,45,600 accrued to the assessee as income for the year under appeal and was also received. The AO found that the assessee had sold immovable property for Rs. 3,55,45,600 but failed to disclose this transaction in its return of income. The AO rejected the assessee's claim that it had not received the consideration, stating that the amount was acknowledged as received in the original deed of assignment dated 19.01.2011, which was duly registered. The CIT(A) upheld this view, noting that the original deed indicated the payment and receipt of the amount, and the subsequent addendum was not registered and lacked the signature of the confirming party. The Tribunal agreed with the AO and CIT(A), noting that the assessee had received the amount during the financial year 2010-11, as evidenced by the deed of assignment and the cheque details.2. Non-disclosure of Transaction:The AO noted that the assessee failed to disclose the transaction in its return of income. The assessee argued that the amount was not received during the year under appeal and that the consideration was contingent upon future events. However, the AO and CIT(A) found that the original deed confirmed the receipt of the amount, and the subsequent addendum was not valid. The Tribunal upheld this finding, stating that the assessee's contention was not supported by evidence and that the amount had indeed accrued and was received during the relevant financial year.3. Benefit of Section 11(1) Explanation-2:The assessee claimed that it was entitled to the benefit of Section 11(1) Explanation-2, as the amount was not received during the year under appeal. The CIT(A) rejected this claim, noting that the assessee did not exercise the option to intimate the AO before the date of filing the return under Section 139(1). The Tribunal agreed, stating that the assessee had not exercised the option under clause (2) of the Explanation to Section 11(1) and that the case was distinguishable from the decisions cited by the assessee. The Tribunal noted that the assessee's main contention was that there was no definite possibility of receipt, which was not a valid ground for not taxing the amount in the relevant assessment year.4. Adequate Opportunity of Being Heard:The assessee argued that the AO and CIT(A) did not provide adequate opportunity for being heard. However, the Tribunal found that the AO and CIT(A) had considered the submissions and evidence provided by the assessee. The Tribunal noted that the assessee had the opportunity to present its case during the assessment and appellate proceedings, and there was no violation of the principles of natural justice.5. Validity of the Subsequent Agreement (Addendum):The assessee presented an addendum dated 20.01.2011, modifying the payment terms. The CIT(A) and the Tribunal found that the addendum was not registered and lacked the signature of the confirming party, M/s Kabra & Associates. Therefore, the addendum was not considered valid or enforceable. The original deed, which was registered and acknowledged the receipt of the amount, was given precedence.Conclusion:The Tribunal upheld the order of the CIT(A), confirming that the amount of Rs. 3,55,45,600 accrued and was received by the assessee during the financial year 2010-11. The assessee's claim for the benefit under Section 11(1) Explanation-2 was rejected as the option was not exercised. The Tribunal found no violation of natural justice and held that the subsequent addendum was not valid. The appeal was dismissed.