2020 (12) TMI 20 - AT - Income Tax

Validity of assessment order - statutory notice u/s 143(2) was not served on the assessee - HELD THAT - We fail to understand that when assessee in the return of income for the impugned assessment year has mentioned the office address, then what prompted the Department to issue notice under section 143(2)/143(1) of the Act for the impugned assessment year on an address different from the officie address of the assessee. AR has made a statement at the Bar that the assessee at no point of time has intimated the address to the Department on which the statutory notice under section 143(2) was sent and there has been no change in the office address of the assessee. Departmental Representative stated that the Department is under major restructuring drive and further due to COVID-19 pandemic it would be difficult to retrieve the records at an early date. Taking into consideration entirety of facts, we deem it proper not to decide ground No.1 at this stage. The issue is left open to be adjudicated at a later point of time, if need arises. Exemption u/s 11 denied - activities carried by the assessee fall within the realm of object of general public utility , hence, proviso to section 2(15) gets attracted - HELD THAT - As decided in own case after considering various judicial pronoucements and different facets of the arguments raised by rival sides, the Tribunal concluded that the activities carried out by the assessee fall within the ambit of charitable purpose under section 2(15) of the Act and the proviso to said section does not get attracted.The Tribunal while deciding the issue of assessee s eligibility to claim benefit of section 11 and 13 of the Act was alive to the fact that assessee is a creation of statute and is an extended arm of State Government.

Summary

Issues Involved:
1. Lack of Jurisdiction
2. Denial of Exemption under Section 11
3. Applicability of Proviso to Section 2(15)
4. Excess Capitalization of Interest
5. Levy of Interest under Section 234B

Detailed Analysis:

1. Lack of Jurisdiction:
The assessee argued that the assessment order dated 27th February 2015 was invalid due to improper service of the notice under section 143(2) of the Income Tax Act, 1961. The notice was sent to an incorrect residential address rather than the office address provided by the assessee. The Department could not counter this due to the unavailability of records. The tribunal noted that valid service of notice under section 143(2) is mandatory before passing the assessment order, referencing the Supreme Court’s decision in Hotel Bluemoon and the Bombay High Court’s decision in ACIT vs. Gene Pharmaceuticals Ltd. The tribunal decided not to adjudicate this issue at this stage, leaving it open for future consideration if necessary.

2. Denial of Exemption under Section 11:
The Assessing Officer denied the exemption under section 11, claiming the assessee’s activities fell within the realm of "object of general public utility," invoking the proviso to section 2(15). The tribunal referred to its previous decision for the assessment year 2010-11, where it concluded that the assessee's activities were charitable in nature and not for profit, thus eligible for exemption under section 11. The tribunal found the facts for the assessment year 2012-13 to be identical to those of 2010-11 and concluded that the assessee's activities were charitable, allowing the exemption under section 11.

3. Applicability of Proviso to Section 2(15):
The tribunal examined whether the assessee’s activities fell under the proviso to section 2(15), which would disqualify it from exemption under section 11. The tribunal reiterated its findings from the 2010-11 assessment year, noting that the assessee’s activities did not constitute trade, commerce, or business with a profit motive. The tribunal applied several tests to confirm that the assessee’s activities were charitable and for public utility, thereby not attracting the proviso to section 2(15). Consequently, the tribunal allowed the appeal, declaring that the proviso to section 2(15) did not apply to the assessee.

4. Excess Capitalization of Interest:
The assessee contested the excess capitalization of interest amounting to ?9,82,68,290. However, the assessee acknowledged that the Assessing Officer had already passed an order giving effect to the CIT(A)’s order, and the assessee was in appeal before the CIT(A) regarding this. Therefore, the assessee did not press this ground, and the tribunal dismissed it.

5. Levy of Interest under Section 234B:
The assessee challenged the levy of interest under section 234B, arguing it was not obligated to pay advance tax. The tribunal noted that the charging of interest under section 234B is mandatory and consequential. Therefore, this ground of appeal was dismissed.

Conclusion:
The tribunal partly allowed the appeals for both assessment years 2012-13 and 2014-15, granting the exemption under section 11 and confirming that the proviso to section 2(15) did not apply to the assessee. The issues regarding jurisdiction and excess capitalization of interest were either left open or dismissed, and the levy of interest under section 234B was upheld.