2001 (11) TMI 230 - AT - Income Tax

Appeal allowed with income as nil under Section 13A of IT Act

The appeal was allowed, setting aside the assessment and directing that the income be taken as nil since no voluntary contribution exceeding Rs. 10,000 ... - Issues Involved:1. Exemption under Section 13A of the IT Act, 1961.2. Maintenance of proper books of accounts.3. Filing of revised returns.4. Levy of interest.Issue-wise Detailed Analysis:1. Exemption under Section 13A of the IT Act, 1961:The appellant, a political party, contested the denial of exemption under Section 13A of the IT Act by the Assessing Officer (AO). The AO had concluded that the party failed to comply with statutory requirements, specifically the maintenance of proper books of accounts and disclosure of all bank accounts. The AO relied on the Delhi High Court decision in O.P. Malhotra vs. CIT and the Supreme Court's decision in Common Cause vs. Union of India & Ors., asserting that the party's failure to comply with the law disqualified it from exemption. However, the Tribunal found that the appellant had maintained audited books of accounts, and no voluntary contribution exceeded Rs. 10,000. The Tribunal noted that the appellant's accounts were audited and the requirements of Section 13A were met, thus entitling the appellant to the exemption.2. Maintenance of Proper Books of Accounts:The AO and CIT(A) argued that the appellant did not maintain proper books of accounts, which would enable the AO to deduce the income accurately. The AO pointed out the absence of a full set of books like ledgers and registers and noted that several bank accounts were not initially disclosed. The Tribunal, however, found that the appellant had maintained cash books and other necessary records, which were audited and found to be in order. The Tribunal emphasized that the books of accounts were sufficient to meet the requirements under Section 13A, and the AO's objections regarding manual numbering of receipts and non-disclosure of certain bank accounts were not substantial enough to deny the exemption.3. Filing of Revised Returns:The AO rejected the revised return filed by the appellant, stating that it was not valid as the original return was filed in response to a notice under Section 142(1) and not under Section 139(1) or 139(4B). The Tribunal observed that the return filed pursuant to Section 142(1) was accompanied by an auditor's certificate and that the revised return did not alter the reported income, which was nil. The Tribunal concluded that the revised return was valid and the appellant had complied with the requirements by submitting consolidated accounts before the assessment was completed.4. Levy of Interest:The appellant challenged the levy of interest, arguing that the AO's direction to 'charge interest' was casual and mechanical. The Tribunal referred to the decisions of the Patna High Court in Uday Mistan Bhandar vs. CIT and the Supreme Court in CIT vs. Ranchi Club Ltd., which held that such casual directions for charging interest were not sustainable. The Tribunal allowed the appellant's plea to a limited extent, directing the AO to allow consequential relief while giving effect to the order.Conclusion:The appeal was allowed, setting aside the assessment and directing that the income be taken as nil since no voluntary contribution exceeding Rs. 10,000 was reported. The Tribunal found that the appellant fulfilled the requirements under Section 13A of the IT Act and was entitled to the exemption. The issue of interest was also decided in favor of the appellant to a limited extent, with directions for consequential relief.