TaxTMI 
TaxTMI 
2026 (6) TMI 923
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.... 1. On the facts and circumstances of the case and in law, the Hon'ble ADDL/JCIT(A) erred in confirming the Order u/s 154 of the Act without giving the Appellant the Opportunity of being heard through Video Conference. 2. The Hon'ble ADDL/JCIT(A) failed to appreciate that the Appellant had requested for a personal hearing through Video Conferencing in all its submissions. The Hon'ble ADDL/JCIT(A) failed to give an opportunity for personal hearing through video conferencing as is mandated by Rule 12(1) & 12(2) of the Faceless Appeal Scheme 2021. 3. The Appellant prays that the Order made by the Hon'ble ADDL/JCIT(A) in violation of principle of Natural Justice, and/or the mandatory requirements of personal hearing be held to be bad in law and consequently or otherwise be cancelled and set aside and the Hon'ble ADDL/JCIT(A) be directed to decide the appeal of the Appellant in accordance with law. WITHOUT PREJUDICE OF GROUND NO. I ABOVE GROUND NO. II: INVOKING AND RECTIFYING ORDER U/S 154 BASED ON AUDIT OBJECTION 1. On the facts and circumstances of the case and in law, the Hon'ble ADDL/JCIT(A) erred ....
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....s. 57,89,046/- by construing it as Inter Charity Donation. 2. The Hon'ble ADDL/JCIT(A) erred in failing to correctly appreciate the fact that as the money has been actually spent on different projects under the control and supervision of the Appellant and that too during the year itself, there is no rolling over of exemption through inter charity transfer and hence, question of multiple accumulation, the mischief sought to be remedied does not arise in the case 3. The Hon'ble ADDL/JCIT(A) further failed to appreciate that in the Appellant's case, as the QCI (set up jointly by government of India with ASSOCHAM, CII, and FICCI) and TERI, etc. are only executing the projects of the Appellant, the fact that they are registered u/s 12AA of the Act is not relevant and accordingly question of violation of Provisions of Section 11(2) r.w.s 11(3)(d) of the Act does not arise. 4. The Hon'ble ADDL/JCIT(A) further erred in ignoring the submission of the Appellant that, in the Appellant own case for A.Y. 2018/19, in the course of scrutiny assessment under e-assessment scheme on the similar issue of accumulation of the Income by the Appellant and its ut....
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....ing hit by the same statutory prohibition contained in section 11(2) read with section 11(3)(d) of the Act. The Assessing Officer therefore formed a view that there existed a mistake apparent from the record resulting in under-assessment of income and accordingly, the Assessing Officer initiated rectification proceedings under section 154 of the Act. After issuing notice and granting an opportunity of hearing, the Assessing Officer observed that no substantive explanation had been furnished by the assessee and consequently passed a rectification order under section 154 of the Act treating the amount of Rs.57,89,046 as deemed income under section 11(3)(d) of the Act. The Assessing Officer enhanced the assessed income to Rs.63,89,046 comprising the original addition of Rs.6,00,000 made in the assessment proceedings and the further addition of Rs.57,89,046 made in rectification proceedings u/s 154 of the Act. The reasoning of the Assessing Officer was that once income accumulated under section 11(2) of the Act is paid or credited to another trust registered under section 12AA of the Act, the Statute itself deems such amount to be taxable income of the donor trust and no further enquir....
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.... is paid or credited to another charitable institution automatically loses its exempt character and becomes taxable as income of the donor trust in the year of payment. According to the CIT(Appeals), the language employed by the legislature is unambiguous since it uses the broad expression "paid or credited" and not merely "donated". Therefore, the Statute does not permit any distinction based on the nomenclature of the payment or the purpose for which it is made. The CIT(Appeals) held that once the recipient is another institution registered under section 12AA of the Act and the source of payment is accumulated income under section 11(2) of the Act, the deeming provisions are automatically attracted. While dealing with the assessee's argument that the payments were in relation to project expenditure rather than donations, the CIT(Appeals) held that such distinction was not supported by the Statutory language. The CIT(Appeals) observed that if Parliament intended to carve out an exception in respect of payments made for project execution, consultancy services or implementation of charitable programmes through another trust, it would have expressly incorporated such exception in....
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.... is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. 10. Before us, the Counsel for the assessee submitted that the very foundation of the impugned rectification proceedings under section 154 of the Act is misconceived inasmuch as the issue sought to be rectified had already been examined by the Assessing Officer during the course of the original assessment proceedings under section 143(3) of the Act. The Counsel for the assessee submitted that while framing the original assessment, the Assessing Officer had called for complete details regarding utilization of accumulated funds and, after examining the nature of the payments made to TERI and Quality Council of India, had consciously formed a view that such payments were the expenditure incurred for carrying out the charitable activities of the assessee and did not fall within the ambit of section 11(3)(d) of the Act. According to the Counsel, what has been sought to be done through the rectification order is merely a change of opinion on the very same set of facts, which is impermissible within the limited scope of section 154 of the Act. The Counsel for the assessee took us thr....
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....itable institution with another charitable institution, thereby enabling indefinite retention of exempt income without actual application towards charitable purposes. The Counsel for the assessee submitted that the legislative intent behind the provision was to prohibit mere transfer of accumulated funds from one charitable organization to another and not to disallow genuine expenditure incurred for execution of charitable projects through expert agencies. In the present case, there was no rolling over or parking of funds, as the amounts paid to TERI and Quality Council of India stood fully utilized for the specific purposes for which they were released. The funds were not retained by the recipient organizations as part of their corpus or accumulated income but were spent for carrying out the designated assignments entrusted by the assessee. Therefore, according to the Counsel, the mischief sought to be addressed by section 11(3)(d) was completely absent on the facts of the case. It was thus contended that at the very least the issue involved a highly debatable question as to whether the impugned payments constituted inter-charitable organization transfers attracting section 11(3)(....
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....ranted and the assessee's contentions were duly considered. Accordingly, Ground No. I is dismissed. Ground No. II challenges the jurisdiction assumed by the Assessing Officer under section 154 of the Act. 14. According to the assessee, the Assessing Officer had consciously examined the issue during the original assessment proceedings and therefore the subsequent rectification amounts to an impermissible review of the assessment order. We are however unable to accept this contention. 15. The assessment records shows that while framing the original assessment, the Assessing Officer had already invoked the provisions relating to accumulation under section 11(2) of the Act and disallowed a sum of Rs.6,00,000 on account of transfer of accumulated funds to another charitable institution. Subsequently, the Assessing Officer observed from the very same assessment records that additional payments amounting to Rs.57,89,046 had also been made out of accumulated funds to institutions registered under section 12AA of the Act but had escaped consideration in the assessment order. Thus, the rectification proceedings were not initiated on the basis of any fresh investigation or subseq....
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....v. Tara Agencies (2007) 292 ITR 444 (SC) (On a clear construction and interpretation of section 35B(1A), the assessee's activity amounted to 'processing' only and the same did not amount to either 'production' or 'manufacture'. The term 'processing' has not been included in section 35B(1A), therefore, the assessee was not entitled to weighted deduction under section 35B(1A) and Commissioner of Customs v. Dilip Kumar & Co. (2018) 95 taxmann.com 327 (SC), wherein it was held that where Statutory language is plain and unambiguous, courts must give effect to the legislative mandate and cannot create exceptions on equitable considerations. Therefore, the distinction sought to be introduced by the assessee between donations and project expenditure is not borne out from the language of section 11(3)(d) of the Act. 20. The assessee has argued that TERI and Quality Council of India acted merely as implementing agencies and rendered services against consideration. However, acceptance of such an interpretation would substantially defeat the object behind the statutory provision. If transfers of accumulated funds could escape section 11(3)(d) of the Act m....
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....the supervision of the donor trust, raises invoices or provides reports and deliverables. The Tribunal cannot introduce into the Statute qualifications which Parliament has consciously omitted. 25. The learned Counsel for the assessee made detailed and persuasive submissions before us that the funds were not available for unrestricted use by the recipient institutions and were earmarked for specific projects. In our view, such considerations are legally irrelevant for the purposes of section 11(3)(d) of the Act. The Legislature has not made the actual utilization of funds by the recipient institution a determinative factor. The statutory trigger is the act of payment or crediting of accumulated income to another institution enjoying charitable registration. Once that event occurs, the deeming provision comes into operation irrespective of the purpose, modality or contractual structure of the transfer. 26. We also find considerable force in the reasoning adopted by the CIT(Appeals) that acceptance of the assessee's interpretation would facilitate abuse, avoidance and subversion of the legislative framework through artificial arrangements. Every transfer of accumulated inco....
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....the Act was enacted. While section 11(1)(a) is concerned with the concept of "application" of current income, section 11(3)(d) regulates the manner in which income accumulated under section 11(2) of the Act can thereafter be utilized. The legislative focus under section 11(3)(d) of the Act is not whether the recipient institution applies the funds for charitable purposes, but whether the trust which enjoyed the statutory benefit of accumulation has transferred such accumulated income to another exempt institution. Therefore, the Legislature has consciously treated accumulated income under section 11(2) of the Act differently from current income governed by section 11(1)(a) of the Act. The very object of section 11(3)(d) of the Act is to ensure that a trust which obtains the benefit of accumulation does not discharge its statutory obligation by merely routing the accumulated funds through another charitable institution enjoying exemption. 29. Viewed in this context, the assessee's argument effectively seeks to import principles applicable to section 11(1)(a) into a field specifically governed by section 11(2) and section 11(3)(d). Such an approach would blur a distinction con....
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....pient institution acts as a consultant, research partner, project executor or implementing agency, nor has it made the retention of supervision or control by the transferor trust a relevant consideration. Acceptance of the assessee's interpretation would require the Tribunal to read into the provision qualifications which are conspicuously absent and would make the applicability of section 11(3)(d) dependent upon the manner in which parties choose to structure their arrangements. Such an interpretation would dilute the plain language of the provision and undermine the legislative objective underlying the restrictions governing utilization of accumulated income under section 11(2) of the Act. Accordingly, we are unable to accept the contention that the impugned payments fall outside the ambit of section 11(3)(d) merely because the recipient institutions are described as implementing agencies or because the payments are characterized as project expenditure. 31. The above view taken by us is also supported by the decision of the Punjab & Haryana High Court in the case of Maharaja Ranjit Singh War Museum Trust 121 Taxmann.com 90 (Punjab and Haryana). In that case, the High Court....
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....fied in confirming the addition of Rs.57,89,046 under section 11(3)(d) of the Act. Ground No. III is dismissed. 32. Ground No. IV relates to levy of interest under sections 234A and 234B of the Act. The levy of interest under the aforesaid provisions is mandatory and consequential in nature. The Assessing Officer shall re-compute the same, if required, while giving effect to this order. Accordingly, this ground is dismissed. 33. Ground No. V being general in nature does not call for any separate adjudication. 34. In the result, the appeal filed by the assessee is dismissed. ITA No. 446/Mum/2026, A.Y 2015-16 35. Assessee has raised the following grounds of appeal: GROUND NO. I: VIOLATION OF PRINCIPLE OF NATURAL JUSTICE 1. The Hon'ble ADDL/JCIT(A) erred in law in passing the impugned order without affording the Appellant an opportunity of being heard, and by deciding the appeal solely on the basis of the Statement of Facts filed, thereby violating the principles of natural justice. 2. The Hon'ble ADDL/JCIT(A) failed to appreciate that the Appellant had requested that the proceedings for AY 2015-16 be kept in abeyance till proceedings ....
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....ary to the rules of natural justice and/or is bad in Law and consequently/otherwise be cancelled. GROUND NO. III: ADDITION OF Rs. 37,43,575/- U/S 11(2) OF THE ACT 1. On the facts and circumstances of the case and in law, the Hon'ble ADDL/JCIT(A) erred in confirming the addition of Rs. 37,43,575/- on the basis that the expenses of this amount were hit by section 11(3)(d). 2. The Hon'ble ADDL/JCIT(A) failed to appreciate and ought to have held that: a) in the Appellant's case, as the QCI (set up jointly by government of India with ASSOCHAM, CII, and FICCI) and TERI, etc. were only executing the projects of the Appellant, the fact that they are registered u/s 12AA of the Act is not relevant and accordingly question of violation of Provisions of Section 11(2) r.w.s 11(3)(d) of the Act does not arise; and b) as the money has been actually spent on different projects under the control and supervision of the Appellant and that too during the year itself, there is no rolling over of exemption through inter charity transfer and hence, question of multiple accumulation, the mischief sought to be remedied does not arise in the case. ....