2022 (1) TMI 39 - AT - Income Tax

Tribunal directs Assessing Officer on PAN, assessments, deductions, and financial statements

The Tribunal remanded the case back to the Assessing Officer, directing to accept both PAN numbers belonging to the same entity, verify surrender and ... Exemption u/s 11 denied - assessee herein has used the registration granted u/s 12AA of the Act to another entity - Two PAN numbers - HELD THAT:- In the present appeal has also been filed by the revenue under new PAN number only. However, it is the case of the assessee that it has surrendered new PAN number before the completion of assessment. Since the AO did not accept the explanations that both PAN numbers belong to same entity (Church), he has passed the assessment order under new PAN number and the present appeal has also been filed under new PAN number. Under these facts, we are of the view that the following action needs to be carried out in order to resolve this controversy. Since the explanations offered by the assessee before Ld CIT(A) as to the necessity of obtaining new PAN number has been accepted by the first appellate authority after carrying out field verification and since the AO has not brought any material on record to controvert the said findings, we are of the view that the AO should accept the fact that both PAN numbers belong to the same assessee. The assessee has claimed that it has surrendered new PAN number. The AO should verify this fact and ensure that the new PAN number is cancelled in the system also. Since the assessee has been granted registration u/s 12AA of the Act under the old PAN number and since the new PAN number has been claimed to have been surrendered, it is appropriate to pass the assessment order under Old PAN number only. Accordingly, the AO may regularize the return filed under new PAN number substituting old PAN number in accordance with the procedure prescribed for dealing with such kind of situation. As noticed earlier that the assessee has filed three returns of income under Old PAN number also. It has filed two returns of income under New PAN number also. Thus, there are five returns in total for the same assessee for the same assessment year. Since all income belonging to the assessee and arising for the same year has to be assessed in a single assessment order, it is necessary for the AO to take cognizance of returns of income filed under Old PAN number also and accordingly pass a single assessment order incorporating income declared in all the returns of income. Assessee has explained that it was constrained to file returns of income under old PAN number in order to get refund of TDS amount. It was also submitted that the relevant interest income has already been offered in the return of income filed under new PAN number. Accordingly, while combining the income declared in all the returns, it has to be ensured that the double assessment of same income should be avoided. The assessee has made adhoc deduction of ₹ 11,50,000/- in the return of income filed to rectify the defect u/s 139(9) of the Act. This adhoc deduction cannot be allowed, since the same is not backed by any material. With regard to building fund, it is the claim of the assessee that it has maintained separate receipts and payments account. In the normal course, it is advisable to incorporate building fund also in the common Balance Sheet. In any case, it is imperative for the assessee to furnish Income and expenditure account and Balance sheet for Building fund along with the return of income, if it has been decided to keep this account in separate books of account. Accordingly, we direct the assessee to furnish the I & E a/c and Balance Sheet of Building Fund books to the AO along with audit report relating to the same. We direct the assessee and the AO to carry out above said exercise in order to settle the disputes of the year under consideration. Appeal filed by the revenue is treated as allowed for statistical purposes. Issues Involved:1. Eligibility for exemption under Section 11 of the Income-tax Act, 1961.2. Validity of deduction claimed under Section 11(1)(d) of the Income-tax Act, 1961.3. Legitimacy of multiple PAN numbers for the same entity.4. Filing and acceptance of multiple returns of income under different PAN numbers.5. Maintenance and reporting of separate books of accounts for corpus donations.Issue-wise Detailed Analysis:1. Eligibility for Exemption under Section 11 of the Income-tax Act, 1961:The revenue challenged the decision of the CIT(A) granting exemption under Section 11 to the assessee, a trust running a church. The AO had denied this exemption on the grounds that the assessee had used the registration granted under Section 12AA for another entity. The AO observed that the assessee had two PAN numbers and concluded that the assessee was not entitled to the exemption in the absence of registration under Section 12AA for the new PAN number. The CIT(A), however, conducted field verification and found that both PAN numbers pertained to the same entity, thus granting the exemption.2. Validity of Deduction Claimed under Section 11(1)(d) of the Income-tax Act, 1961:The assessee claimed a deduction of Rs. 2,38,34,654 under Section 11(1)(d) for corpus donations collected under the 'Building Fund.' The AO denied this deduction, citing that the building fund was not reflected in the financial statements and was kept outside the regular books of account. The CIT(A) accepted the assessee's explanation that separate books were maintained for the building fund and directed the AO to allow the deduction.3. Legitimacy of Multiple PAN Numbers for the Same Entity:The AO questioned the existence of two PAN numbers for the same entity, suspecting the misuse of the registration granted under Section 12AA. The CIT(A) verified through field inquiries that there was only one church entity with two PAN numbers. The CIT(A) concluded that the new PAN was obtained due to the loss of the original PAN card and the inability to obtain a duplicate due to missing formation dates.4. Filing and Acceptance of Multiple Returns of Income under Different PAN Numbers:The assessee filed returns under both PAN numbers due to complications in obtaining refunds for TDS deducted under the old PAN number. The CIT(A) validated the revised return filed under the new PAN number within the due date and accepted the necessity of filing returns under the old PAN number to claim TDS refunds. The AO was directed to aggregate the income declared in all returns and ensure no double assessment of the same income.5. Maintenance and Reporting of Separate Books of Accounts for Corpus Donations:The assessee maintained separate books for the building fund, which were not incorporated into the main balance sheet. The CIT(A) accepted this practice but emphasized the need for the assessee to furnish the income and expenditure account and balance sheet for the building fund along with the return of income. The AO was instructed to verify these documents during reassessment.Conclusion:The Tribunal set aside the CIT(A)'s order and remanded the case back to the AO for fresh examination of the issues, directing the AO to:- Accept that both PAN numbers belong to the same entity.- Verify the surrender of the new PAN number and ensure its cancellation.- Pass the assessment order under the old PAN number.- Combine the income declared in all returns and avoid double assessment.- Disallow any ad-hoc deductions not backed by material evidence.- Ensure the assessee furnishes the financial statements for the building fund along with the audit report.The appeal filed by the revenue was allowed for statistical purposes, and the AO was directed to re-examine the issues in light of the new evidence and explanations provided.