TaxTMI 
TaxTMI 
2019 (6) TMI 595
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.... exemption u/s. 11 would be allowed only if returns of income is filed within the due date specified u/s. 139(1). The Commissioner(Appeals) should have known that it is only from assessment year 2018-19 that the section 12A of the Act has been amended to provide that no exemption would be allowable if the return of income is not filed within the due date u/s. 139(1) and hence belated filing of such return is not fatal to the claim for exemption u/s. 12A till assessment year 2017-18. 3. The facts of the case are that there was a search u/s. 132 of the IT Act at the business and connected institutions on 31/10/2011 on the strength of warrant of authorization dated 27/10/2011 issued by Director of Income-tax(Investigation), Cochin. The search revealed that there was violation of section 13(1)(c) and 11(4) of the Act and the income of the Trust was chargeable to tax. M/s. Kunhitharuvai Memorial Charitable Trust popularly known as KMCT is a Trust established in 1999. The Trust was granted registration u/s. 12AA of the Act by the CIT, Calicut on 21/01/2002. Dr. K. Moidu is founder and the Managing Trustee of the Trust. The other trustees are Mrs. Amina Moidu, W/o Dr. K. Moidu and t....
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....essment years including AY 2006-07. The return of income for AY 2006-07 was filed on 06/07/2012, i.e., almost 6 years from the due date of filing of the return. It was observed that search was conducted in this case on 31/10/2011, which only goes to prove that the return for AY 2006-07 was filed 8 months after the date of search. According to the CIT(A), such an inordinate delay in filing the return of income proved that the books of accounts were not properly maintained by the assessee and they were also not complete and correct. In the light of the above findings, the CIT(A) confirmed the denial of exemption u/s. 11 of the Act to the assessee. 5. Against this, the assessee is in appeal before us. The Ld. AR submitted that u/s. 11 of the Act, filing of return of income belatedly would not lead to denial of exemption u/s. 11 of the Act even at the stage of appellate proceedings. The Ld. AR relied on the judgment of the Punjab & Haryana High Court in the case of CIT vs. Shahzadanand Charity Trust (228 ITR 292) wherein it was held that it is not mandatory to furnish the audit report alongwith the return of income u/s. 12A(1)(b) of the Act and the same could be furnished at a later....
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....139(4A) of the Act. The assessee has filed the return of income u/s. 153A(a) of the Act consequent to search u/s. 132 of the Act for all the assessment years as under: Assessment Year Date of filing of ROI 2006-07 06/07/2012 2007-08 15.01.2013 2008-09 15.01.2013 2009-10 15.01.2013 2010-11 22.05.2013 2011-12 21.08.2013 2012-13 09.12.2013 7.1 According to the Revenue authorities, even if the assessee is having valid registration u/s. 12AA of the Act, the assessee is required to file return of income accompanied by Form No. 10 of the I.T. Act so as to claim exemption u/s. 11 of the I.T. Act. It is clear from the reading of sub-section 2 of section 11 that it is mandatory for the assessee-Trust claiming exemption u/s. 11 to intimate the Assessing Officer particulars required under Rule 7 in Form No. 10. If during the assessment proceedings, the Assessing Officer does not have necessary information, the question of excluding such income from assessment does not arise at all. As a matter of fact, excluding the particulars of income from the net of tax arises from sec. 11 and is subject to the conditions specified therein. Therefore, it i....
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....sessee, a charitable trust registered with the CIT filed its return on 17th Sept., 1984, declaring a deficit of Rs. 1,61,452. The return so filed was not accompanied by audited accounts and audit report in Form No. 10B as required under s. 12A of the Act. The audit report dt. 12th Nov., 1984 was, however, filed by the assessee in the prescribed form on 6th March. 1987, before the completion of the assessment. The ITO while completing the assessment refused to allow the benefit of exemption under s. 11 of the Act to the assessee on the ground that audit report in Form No. 10B was not filed along with the return. Income of the assessee was put to tax. Order of the ITO was upheld by the CIT(A) against which assessee filed further appeal before the Tribunal which was accepted. On these facts, it was held that the IT authority had taken hyper-technical view of the matter where the assessee has complied with the provisions of the Act in the course of assessment by curing the defect in the return by filing an audit report. The ITO cannot ignore such audit report or the return in completing the assessment. The delay in getting the account audited and in filing the return ....
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.... find no merit in this submission. The CBDT by issuing the Circular dt. 9th Feb., 1978 has treated the provision regarding furnishing of auditor's report along with the return to be procedural and, therefore, directory in nature. By showing sufficient cause, the auditor's report could be produced at any later stage either before the ITO or before the appellate authority. 14. In view of the Board's Circular dt. 9th Feb., 1978, the requirement of filing auditor's report in Form 10B as provided in s. 12A(b) r.w.r. 17B of the Rules, the ratio of the law laid down by this Court in Jaideep Industries case (supra) would not apply to the present case. 15. In view of the above, therefore, we find no merit in the argument of the Revenue that the assessee was not eligible for exemption u/s. 11&12 on account of not having complied with the requirements of section 12A(1)(b) of the Act. Since this was the sole basis for upholding the validity of the reassessment proceedings resorted to, we hold that the reassessment resorted to in the present case was invalid, on account of the second proviso to section 12A(2) of the Act, which specifically debarred resort to th....
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....in the time allowed under that section." 7.7 In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under: "as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed u/s 139 of the Act or otherwise. In order to provide clarity in this regard, it is proposed to further amend section 12A so as to provide for further condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Act. These amendments are clarificatory in nature. These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent years." 7.7 Further, an excerpt of circular No..02/2018 dated 15.0,2013 "Explanatory Notes to t....
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....e computer. For example, in the case of Akhil Murali, the accounted amount is Rs. 10,75,000/- and in the case of Rinu Raheed the accounted portion is Rs. 8,29.100/- as against the actual receipts of Rs. 25 Lakhs and 28 Lakhs respectively. Why such discrepancies happened in the account in not only the above cases but in almost all of the 50 MBBS admission cases for the academic year 2011-12? Ans. A portion of the fees/amount collected from management and NRI seats of MBBS are not accounted in the accounts due to various stipulation of law. I am not able to explain the above discrepancies. 8.2 In view of the unearthing of the chart evidencing collection of capitalization fees from management and NRI quota seats and the statement of Shri. Shibu, the Assessing Officer held that the assessee had been collecting capitation charges from the aspiring students. According to the Assessing Officer, collection of capitation fees is a common knowledge and in the instant case, it was supported by documentary evidence, found and seized from the premises of the assessee and further supported by the statement of administrative officer of the assessee concern. 8.3 On appeal, before th....
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....eat in AY 2008-09, there was no reason to make an estimated addition in that year. Therefore, the CIT(A) deleted the addition made in AY 2008-09 for Rs. 6,25,000/-. However, the CIT(A) confirmed the additions for AYs 2009-10 onwards. 8.5 Against this, the assessee is in appeal before us. The Ld. AR submitted that during search, there was no incriminating material found regarding collection of additional fees for the assessment years and the additions were made by extrapolating backwards the figures relating to the subsequent years. 8.6. The Ld. DR submitted that there was seized material representing the unaccounted collection of fees for these assessment years under consideration. He submitted that judgment of the Jurisdictional High Court in the case of CIT vs. Hotel Meriya (332 ITR 537) is applicable to the facts of the assessee's case. 9. We have heard the rival submissions and perused the record. In the present case, there was a seized material found during the course of search marked as CHN/21/VJ-1-A which contained the details of students admitted for BBS, BDS and BMS courses and money collected from each student was recorded in the laptop of the Administrativ....
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....2 For making the above addition, the Assessing Officer relied on the judgment of the Jurisdictional High Court in the case of CIT vs. Hotel Meriya (332 ITR 537) and also the judgment of the Andhra Pradesh High Court in the case of Rajnik & Co.vs. ACIT (251 ITR 561). 9.3 In the case of Meriya Hotel cited supra which is a bar cum restaurant, there was a search conducted u/s. 132 of the Act on 28th June, 2001. During the search, a seized material was found showing undisclosed sales turnover. The cash book was seen recorded upto 25th June, 2001. The cash book showed cash balance of Rs. 21,31,523/- but the physical cash balance was Rs. 34,552/-. On enquiry of the Managing Partner and the employee, it was revealed that only 80% actual sales turnover in respect of liquor was recorded in the cash book. In this case, the partner of the hotel had in ambiguous terms stated that 20% of the sales turnover was suppressed and only 80% was recorded in the books of accounts of the assessee and it was a practice from the beginning. So, the High Court was of the opinion that it is just and appropriate to presume that there was uniform concealment of income in all the assessment years during the bl....
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....ating: 1. The amount of Dr. K.M. Navas of Rs. 1,70,00,000/- which was shown in the Form 10B attached with the return of income for the assessment year 2012- 13. 2. Details of lease hold land obtained and investment made by the Trust on this lease hold land. 3. The amount paid for property purchase at Valanchery and the method of accounting to accommodate them on money payment and cash settlement made between the trustees as on 01/11/2011. 9.5. The assessee vide letter dated 17/01/2014 stated that in the assessment year 2011-12 they had not collected any additional fees we have only collected some advance fees which was accounted in the books. In the assessment year 2012-13, it was stated that they had collected additional fees from MBBS and BAMS students which have been accounted as additional fees. Now the assessee has admitted the receipt of additional fees during the previous year relevant to the assessment year 2012-13. 9.6 Coming to the judgment of the Andhra Pradesh High Court in the case of Rajnik & Company cited supra, the High Court held that assessment of undisclosed income is based on relevant material and there is absolutely no merit in ....
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.... of the Trust, Shri Shibu and later details were furnished by the assessee at the time of assessment. Hence, there was no incriminating evidence regarding the receipt of additional fees either found or seized during the search. What was found was the seized material CHN/21/VJ-1-A showing the details of students admitted to MBBS, BDS. BAMS and the money collected from each student recorded in the laptop of the administrative officer, Shri Shibu and printouts of the same for financial year 2011-12 relevant to assessment year 2012-13. Later, the assessee furnished details of fees collected in the year 2010-11 in the tabular form. From this, the Assessing Officer arrived at the additional fees collected by the assessee. However, the assessee vide letter dated 10/12/2013 stated that the assessee had not collected any additional fees and only collected advance fees. Being so, whatever was found was the break up of number of students who were admitted under different quotas in various courses. Therefore, there cannot be any addition in the hands of the assessee towards additional fees collected in the absence of any material seized or found during the search for the assessment years 20....
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....g Officer is to restrict the addition towards collection of additional fees for the assessment year 2012-13 to the extent of the seized material found during the course of search. This ground of appeal in ITA No. 261/Coch/2018 relating to the addition towards collection of additional fees is partly allowed for statistical purposes. 9.9.1 Further, the provisions of section 11 of the Act was considered by the Tribunal while restoring the registration granted to the assessee u/s. 12AA of the I.T. Act in assessee's own case in ITA No.246/Coch/2014 dated 16/01/2017 wherein it was held as under: "19. Coming to other observations of the CIT for cancellation of registration of trust u/s 12AA(3). The CIT observed that the trust js not maintaining proper books of account and not filed regular returns of income as prescribed under law. As regards observations of the CIT with regard to non maintenance of books of account and non filing of regular returns of income it was submitted that it is true returns of income from the A.Y. 2007-08 have not been filed regularly and such returns have been filed after search but before the Commissioner issued her show cause notice on 6-9-2013 whi....
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....rpose. There are enough safeguards provided in Sees.12 and 13 of the Act to ensure that personal benefits of the persons in control of the trusts are not treated as having applied for charitable purpose and for being brought to tax like provisions of Sec.13(1)(c) of the Act which restricts unreasonable and excessive payments to certain category of persons connected with a trust or other institution. In such circumstances, we are of the view, that the order u/s 12AA(3) of the Act, cannot be sustained." 20. The allegations of the Revenue that the Trust was collecting additional fees, Donations and siphoning off of income of the Trust for the benefit of the Trustees. As regards collection of additional fees from certain students and diversion of funds to trustees, these are passing remarks by the CIT which cannot be considered as non genuine activities. The trust has collected fee from students as prescribed by the authorities. In some cases, additional fees collected from students admitted under management quota and such additional fees has been accounted for in the books of accounts and also applied for objects of the trust. The trust has collected additional fees ....
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....ed by cogent evidence are established by the Revenue to prove that the trustees have siphoned off the income of the Trust. It is also not established before us by the Revenue that the trustees who have received funds by siphoning off the undisclosed income of the trust are brought to tax. On the other hand, the assessee proves that allegations made by the CIT are baseless and without any cogent materials. The activities conducted by the assessee Trust are only promoting education within the ambit of Section 2(15) of the Act and it was not engaged in any other activity other than imparting education. Therefore, we are of the view that the other reasons given by the CIT in the order u/s. 12AA(3) of the Act, do not make out a case, which can show the activities of the assessee are genuine or that the activities of the assessee are not being carried out in accordance with the objects of the trust or institution. 21. Unquestionably, the onus for proving the existence of factors calling for cancellation of registration granted to an institution is on the Department rather than on the institution. In the present case, the CIT has miserably failed to discharge such onus. No materi....
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....sutilised. Thus, the cancellation of the registration granted to the assessee Trust has been erroneously ordered. 9.9.2 In view of the above discussions, we are inclined to allow this ground of appeals of the assessee in ITA Nos. 258-260/Coch/2018 for the assessment years 2009-10 to 2011-12. On the other hand, the appeal of the assessee in ITA No.261/Coch/2018 for assessment year 2012-13 is partly allowed for statistical purposes. 10. The next common ground, Ground No. 4 in ITA Nos. 258-261/Coch/2018 reads as follows: Without prejudice to the above, it is submitted that the CIT(A) should have noted that since the assessee is a charitable trust registered u/s. 12A, the only precondition in granting exemption u/s. 11 was mandatory application of 85% o the income received, towards the objects of the trust. The CIT(A) should have noted that for an institution which is charitable in nature, once it has complied with the condition that it should compulsorily spend 85% of the income received during the same year, then there is no scope for denial of exemption in total. As long as this amount has been applied for the purposes of the objects of the Trust, the same cannot be h....