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2019 (6) TMI 595 - AT - Income TaxExemption u/s. 11 - filing of return of income belatedly - returns of income were filed consequent to the notice u/s. 153A - the assessee has not filed the regular return of income u/s. 139(4A) but filed the return of income u/s. 153A(a) consequent to search u/s. 132 - HELD THAT - Compliance of requirement of the Act will have to be at any time before the completion of assessment proceedings. However, for claiming the benefit of exemption u/s. 11 on the basis of information supplied consequent to the completion of the assessment proceedings would mean that the assessment order will have to be re-opened. The Act does not contemplate such reopening of the assessment. However, in the present case, it was filed consequent to the notice issued u/s. 153A(a). Further, in the present case, exemption u/s. 11 was denied because of non filing of return of income on time and also due to the discrepancies mentioned above. In our opinion, the returns of income were filed consequent to the notice u/s. 153A. The sections 11 12 of the Act nowhere prescribe filing of return by any due date for the assessment years under consideration so as to grant exemption u/s. 11. Therefore, the findings of the CIT(A) that the assessee having not filed its returns of income within the prescribed time had failed to comply with the requirement prescribed under the Act, is not tenable. - Decided in favour of assessee Addition on account of collection of capitation fee - during search, there was no incriminating material found regarding collection of additional fees for the assessment years - HELD THAT - In the present case, there is no evidence collected by the Department for the assessment year 2006-07 to 2011-12 and there was evidence only in the assessment year 2012-13. As said in earlier paras of this order, there was no admission by any of the Trustees of the assessee-Trust. In the present case, addition towards additional fees collected by the assessee was solely based on the statement of one of the employees 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 2006-07 to 2011-12. However, we direct the Assessing Officer to confine the addition to the extent of seized material found during the search for the assessment year 2012-13. Central Board of Direct Taxes had issued instructions by Circular No. 286/2/2003-IT, wherein it had been directed that the search party should not obtain confessions. So the admission made u/s 132(4) by the Administrative Officer cannot be treated as a valid piece of evidence. Moreover, there was no proof that the assessee had collected additional fees in the guise of donation and there was no violation of Prohibition of Collection of Capitation fees act, 1992. The donation voluntary given by anybody to a Trust towards its corpus was a permissible and legal activity, and not an illegal activity resulting in denial of exemption u/s. 11. There was no evidence on record to show any link between the investment made in the hands of various trustees with the Trust s activities under the provisions of section 164(1) r.w.s. 13(1)(c) and 13(1)(d). In our opinion, for the assessment year 2011-12, the additional fees or advance fees which was offered for taxation by the assessee by accounting the same, cannot be brought to tax once again which amounts to double taxation. Similarly for the assessment year 2012-13, it was admitted by the assessee that it had collected additional fees from MBBS and BAMS students which have been accounted by the assessee, hence, for this assessment year also, the Assessing Officer cannot bring to tax once again. For this assessment year, the Assessing Officer has to verify whether it is duly accounted for the assessment year 2012-13 only. Hence, we are not in a position to uphold the order of the CIT(A) on the issue of collection of additional fees for the assessment years 2009-10 to 2011-12. Assessing 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 relating to the addition towards collection of additional fees is partly allowed for statistical purposes. Further, the provisions of section 11 was considered by the Tribunal while restoring the registration granted to the assessee u/s. 12AA in assessee s own case for the assessment years 2009-10 to 2011-12.
Issues Involved:
1. Denial of exemption under Section 11 due to late filing of returns. 2. Addition on account of collection of capitation fees. 3. Compliance with conditions under Section 12A for claiming exemption under Section 11. 4. Application of income towards charitable purposes. Detailed Analysis: 1. Denial of Exemption under Section 11 due to Late Filing of Returns: The CIT(A) upheld the denial of exemption under Section 11 on the grounds that the assessee had not finalized the books of accounts and had not filed returns timely until the date of search. The returns were filed belatedly in response to notices under Sections 153A/148. The CIT(A) noted that Section 12A did not have a specific provision requiring timely filing of returns for exemption under Section 11 until the assessment year 2018-19. The search revealed violations under Sections 13(1)(c) and 11(4), leading to the income of the Trust being chargeable to tax. The CIT(A) observed that the returns for AY 2006-07 were filed almost six years late, indicating improper maintenance of books of accounts. The Tribunal, however, held that the sections 11 and 12 do not mandate filing returns by a due date for the assessment years under consideration to grant exemption under Section 11. It referred to the judgment in CIT vs. Shahzadanand Charity Trust, which held that the audit report could be furnished later, and delay could be condoned. The Tribunal concluded that the CIT(A)'s findings were not tenable, as the returns were filed in response to notices under Section 153A, and the requirement to file returns timely was only applicable from AY 2018-19 onwards. Hence, this ground of appeals was allowed. 2. Addition on Account of Collection of Capitation Fees: During the search, it was found that the assessee was collecting capitation fees in addition to regular fees from students. The details were recorded in the laptop of the administrative officer and confirmed by his statement. The CIT(A) noted that the evidence for capitation fees was found for FY 2011-12, indicating a practice of collecting unaccounted fees. The CIT(A) confirmed the additions for AYs 2009-10 onwards, except for AY 2008-09 where no MBBS seats were available. The Tribunal found that there was no incriminating material for AYs 2006-07 to 2011-12, and the addition was based on the statement of an employee and subsequent details provided by the assessee. It held that the addition for these years could not be sustained due to the lack of evidence. However, for AY 2012-13, the addition was to be restricted to the extent of the seized material. Hence, the appeals for AYs 2009-10 to 2011-12 were allowed, and for AY 2012-13, it was partly allowed for statistical purposes. 3. Compliance with Conditions under Section 12A for Claiming Exemption under Section 11: The Tribunal referred to the case of CIT vs. Shahzadanand Charity Trust, which clarified that the requirement to file an audit report along with the return under Section 12A(b) was procedural and directory, not mandatory. The Tribunal also noted the amendment to Section 12A effective from AY 2018-19, which required filing returns within the time allowed under Section 139 to claim exemption under Section 11. For the assessment years under consideration, this requirement was not applicable. Therefore, the Tribunal held that the assessee was entitled to exemption under Section 11 despite the late filing of returns. 4. Application of Income Towards Charitable Purposes: The Tribunal noted that the assessee had applied the income towards charitable activities, fulfilling the condition of applying at least 85% of the income towards the objects of the Trust. The Tribunal referred to earlier decisions where it was held that as long as the income was applied for charitable purposes, exemption under Section 11 could not be denied. The Tribunal concluded that the assessee's activities were in line with its charitable objects, and there was no evidence of personal benefits to trustees or violations warranting denial of exemption. Conclusion: The appeals were disposed of with the following outcomes: - ITA Nos. 255 to 257/Coch/2018 - Allowed. - ITA Nos. 258 to 260/Coch/2018 – Partly allowed. - ITA No. 261/Coch/2018 – Partly allowed for statistical purposes.
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