Eenadu Relief Fund, Hyderabad v. DDIT, Hyderabad

ITA 434/HYD/2010 | 2006-2007
Pronouncement Date: 13-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 43422514 RSA 2010
Assessee PAN AAATE0571E
Bench Hyderabad
Appeal Number ITA 434/HYD/2010
Duration Of Justice 9 month(s) 21 day(s)
Appellant Eenadu Relief Fund, Hyderabad
Respondent DDIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 13-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 13-01-2011
Date Of Final Hearing 29-12-2010
Next Hearing Date 29-12-2010
Assessment Year 2006-2007
Appeal Filed On 22-03-2010
Judgment Text
IN THE INCOME TAX APPALLATE TRIBUNAL HYDERABAD BECH A HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.434/HYD/2010 ASSESSMENT YEAR 2006-07 M/S EENADU RELIEF FUND HYDERABAD (PAN AAATE 0571 E) VS DY. DIRECTOR OF IT(E)-II HYDE (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G. SARANG & SHRI C.N. PRA SAD RESPONDENT BY : SHRI T. VENKAT REDDY CIT DR O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) IV HYDERABAD DATED 26 .2.2010 AND PERTAINS TO THE ASSESSMENT YEARS 2006-07. 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGAR D TO REOPENING OF ASSESSMENT. 3. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT T HE ASSESSEE IS A PUBLIC CHARITABLE TRUST REGISTERED U/S12A OF THE IN COME TAX ACT 1961. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASS ESSMENT YEARS 2006-07ON 31.10.2006. NO NOTICE U/S 143(1) AND 143(2) OF THE IT ACT HAS BEEN ISSUED TO THE ASSESSEE. NOTICE FOR REOPENING OF THE ASSES SMENT U/S 148 WAS ISSUED ON 17.10.2007. SINCE THE ASSESSEE HAS FILED RETURN OF INCOME ON 31.10.2006 THERE IS A TIME LIMIT AVAILABLE TO ASSES SING OFFICER TO ISSUE NOTICE U/S 143(2) SO AS TO COMPLETE THE ORIGINAL AS SESSMENT U/S 143(3) WITHIN TIME LIMIT UPTO 31.10.2007. THE ASSESSEE HA S TAKEN THIS PLEA BEFORE THE LOWER AUTHORITIES THAT THE ASSESSMENT MA DE U/S 143(3) READ WITH S.147 IS BAD IN LAW AS THE NOTICE U/S 148 DATE D 17.10.2007 WAS ITR NO.434/H/2010 EENADU RELIEF FUND HYD. 2 2 ISSUED EVEN BEFORE THE EXPIRY OF THE PERIOD FOR ISS UE OF NOTICE U/S 143(2) OF THE ACT I.E. ONE YEAR FROM THE END OF THE MONTH IN WHICH THE RETURN OF INCOME WAS FILED. THIS WAS REJECTED BY THE LOWER A UTHORITIES. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT WHEN THE TIME LIMIT IS AVAILABLE TO THE ASSESSING OFFICER TO COMPLETE THE REGULAR ASSESSMENT BY ISSUE OF NOTICE U/S 143(2) WITHIN THE PERIOD OF 31.10.2007 SINCE THERE IS NO NECESSITY T O REOPEN THE ASSESSMENT WHEN THE ORIGINAL ASSESSMENT HAS NOT BEEN COMPLETED BY THIS TIME. ACCORDINGLY HE SUBMITTED THAT REOPENING OF THE ASS ESSMENT ITSELF IS BAD IN LAW AND THE ASSESSMENT HAS TO BE QUASHED. FOR THIS PURPOSE HE RELIED ON THE FOLLOWING JUDGEMENTS: 1. CIT VS. VED & CO. (302 ITR 328) (DEL.) WHEREIN HELD THAT: UNLESS THE RETURN OF INCOME ALREADY FILED IS DISPOS ED OF NOTICE FOR REASSESSMENT U/S 148 OF THE IT ACT CANNOT BE ISSUED I.E. NO REASSESSMENT PROCEEDINGS CAN BE INITIATED SO LONG AS ASSESSMENT PROCEEDINGS PENDING ON THE BASIS OF THE RETURN ALREADY FILED ARE NOT TERMI NATED. 2. CIT VS. TCP LTD. ( 323 ITR 346) (MDS. HC) WHER EIN HELD THAT: THE TRIBUNAL WAS RIGHT IN HOLDING THAT NOTICE U/.S 14 8 OF THE ACT COULD NOT BE ISSUED FOR MAKING AN ASSESSMENT U/S 147 OF THE A CT WHEN TIME LIMIT WAS AVAILABLE FOR ISSUE OF NOTICE U/S 143(2) OF THE ACT FOR MAKING AN ASSESSMENT U/S 143(3) OF THE ACT. 5. ON THE OTHER HAND THE LEARNED DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT IN VIEW OF THE AMENDMENT BY WAY EXPL ANATION 2(B) TO SEC.147 THE REOPENING OF ASSESSMENT IS VALID. ACC ORDING TO THE DEPARTMENTAL REPRESENTATIVE THE JUDGEMENTS RELIED B Y THE LEARNED COUNSEL FOR THE ASSESSEE NOT CONSIDERED THIS AMENDMENT ON T HIS ISSUE. 6. THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE FOLLOWING JUDGEMENTS: CIT VS. RAJESH JAVERI STOCK BROKERS (P) LTD.(291 I TR 500) (S.C) ITR NO.434/H/2010 EENADU RELIEF FUND HYD. 3 3 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE DEPARTMENTAL REPRESENTATIVE STRONG LY PLACED RELIANCE ON THE EXPLANATION 2(B) TO SEC.147 WHICH READS AS FOLL OWS: EXPLANATION 2: FOR THE PURPOSE OF THIS SECTION TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT NAMELY: A) . B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE A SSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS DEDUCTION ALLOWANCE OR RELIEF IN T HE RETURN: C) . 7.1. THE DEPARTMENT WANTS TO INTERPRET THE EXPRES SION NO ASSESSMENT HAS BEEN MADE IN THE ABOVE CLAUSE MEAN THAT IT ALSO INCLUDES SITUATION WHERE ASSESSMENT U/S 143(3) IS STILL POSS IBLE BUT NOT YET MADE. IF THIS INTERPRETATION IS TO BE ACCEPTED IT WILL S ET AT NAUGHT THE FUNDAMENTAL PRINCIPLES UNDERLYING S.147 OF THE ACT AND WHICH PRINCIPLES HAVE BEEN FOLLOWED TILL DATE. THESE PRINCIPLES ARE APPLICABLE EVEN TO THE EXTENDED MEANING GIVEN TO THE TERM ESCAPE ASSESSME NT IN THE AMENDED PROVISION. THE ABOVE CLAUSE IS INTENDED TO COVER T HE FOLLOWING TWO SITUATIONS: I) WHERE A RETURN IS FILED AND NO ACTION IS TAKEN EITH ER U/S 143(1) OR U/S 143(3) AND THE TIME LIMIT FOR ISSUING NOTICE U/ S 143(2) HAS EXPIRED. II) WHERE A RETURN IS FILED AND IS PROCESSED U/S 143(1) AND THE TIME LIMIT FOR ISSUING NOTICE U/S 143 (2) HAS EXPIRED. 7.2. IT DOES NOT ENVISAGE A SITUATION WHERE A RET URN IS FILED AND THE TIME LIMIT FOR ISSUE OF A NOTICE U/S 142(2) HAS NOT EXPIRED. UNLESS THE RETURN FILED BY THE ASSESSEE IS SCRUTINIZED BY THE ASSESSING OFFICER HE CANNOT COME TO THE CONCLUSION OF ANY ESCAPEMENT. I F THE ASSESSING OFFICER ITR NO.434/H/2010 EENADU RELIEF FUND HYD. 4 4 ISSUE NOTICE U/S 143(2) THEN QUITE OBVIOUSLY HE W OULD SCRUTINIZE THE RETURN AND FRAME THE ASSESSMENT U/S 143(3) OF THE A CT. SUBSEQUENTLY HE MAY NOTICE ESCAPEMENT AND ISSUE NOTICE U/S 148 OF T HE ACT. 7.3. BESIDES THIS IN THE ABOVE TWO SITUATIONS AL SO HE WILL HAVE TO LOOK INTO THE RETURN TO SEE WHETHER THERE IS ESCAPE MENT OR NOT. IF HE NOTICES ANY ESCAPEMENT IT CAN BE CALLED AN ESCAPEM ENT ONLY IF IT IS NOTICED AFTER THE PROCEEDINGS HAVE BEEN TERMINATED EITHER BY WAY OF SOME ASSESSMENT EITHER U/S 143(1) OR 143(3) OR WHEN THE TIME LIMIT FOR ISSUE OF A NOTICE U/S 143(2) HAS EXPIRED. BUT IF SUCH TIME LIMIT HAS NOT EXPIRED IT CANNOT BE TERMED AS ESCAPEMENT AND HE CANNOT RESORT TO PROCEEDINGS U/S 147. IN THAT EVENT HE WILL HAVE TO ISSUE NOTICE U/ S 143(2) OF THE ACT. IN A NUTSHELL AS PER THE PRINCIPLES LAID DOWN BY THE SC IN SEVERAL CASES A) THE PROCEEDINGS ARE SAID TO HAVE COMMENCED ONCE THE RETURN IS FILED AND B) THE PROCEEDINGS TERMINATE WHEN I) THE RETURN IS PROCESSED U/S 143(1) AND THE TIME TO ISSUE NOTICE U/S 143(2) IS OVER II)ASSESSMENT IS MADE U/S 143(3) OR III) THE ASSESSMENT IS NO LONGER POSSIBLE U/S 143(3) P ROCEEDINGS U/S 147 CAN BE INITIATED ONLY AFTER THE EARLIER PROCEED INGS HAVE TERMINATED AS MENTIONED IN (B) ABOVE. 8. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUN ENGINEERING WORKS (P) LTD. (1992) (107 CTR ) (SC) 209 (1992) 198 ITR 297 (SC) THAT IT IS NEITHER DESIRABLE NOR P ERMISSIBLE TO PICK OUT A WORD OR SENTENCE FROM THE JUDGEMENT OF THE SC DIVO RCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE A COMPLETE LAW DECLARED BY THE COURT. THE JUDGEMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGEMENT HAVE TO BE CONSIDER ED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THE COURT. IN THIS CON TEXT WE PROCEED TO ITR NO.434/H/2010 EENADU RELIEF FUND HYD. 5 5 EXAMINE THE JUDGEMENT IN THE CASE OF CIT VS. RAJES H JAVERI STOCK BROKERS (P) LTD.(291 ITR 500) (S.C) 9. AS PER THE SUPREME COURT JUDGEMENT IN THE CAS E OF CIT VS. RAJESH JAVERI STOCK BROKERS (P) LTD.(291 ITR 500) ( S.C) THE FAILURE TO TAKE STEPS U/S 143(3) WILL NOT RENDER THE ASSESSING OFFI CER POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION U/S 1 43(1) HAD BEEN ISUED. THE FAILURE OF THE ASSESSING OFFICER WILL B E DEEMED TO HAVE OCCURRED ONLY WHEN THE HANDS OF ASSESSING OFFICER ARE TIED D OWN BY LAW AND HE IS UNABLE TO INITIATE THE PROCEEDINGS U/S 143(3) OF TH E ACT. TILL THE TIME LIMIT TO ISSUE NOTICE U/S 143(2) IS AVAILABLE IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS FAILED TO TAKE STEPS U/S 143(3) OF THE ACT. THE QUESTION OF FAILURE ARISES ONLY WHEN BY OPERATION OF LAW HE C ANNOT TAKE ANY STEPS. FURTHER THIS OBSERVATION OF THE COURT IS IN CONNEC TION WITH INTIMATION U/S 143(1) OF THE ACT. WHAT IT MEANS IS THAT MERE INTI MATION U/S 143(1) AND FAILURE TO TAKE STEPS U/S 143(3) AS DISCUSSED ABOVE WILL NOT BE A BAR FOR THE ASSESSING OFFICER TO INITIATE THE REASSESSMENT PROC EEDINGS. THUS THE JUDGEMENT IN THE CASE OF RAJESH JHAVERI (SUPRA) IS PERFECT IN CONSONANCE WITH THE EARLIER JUDGEMENT OF THE SAME COURT. AND S AME IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 9.1. FURTHER IN THE CASE OF K.M PACHHAYAPAN VS. CIT (304 ITR 264) (MDS. HC) THE ASSESSING OFFICERS ACTION OF I NITIATING PROCEEDINGS U/S 147 WAS NOT UPHELD BY THE MADRAS HIGH COURT WHEN TH E RETURN FILED FOR THE ASSESSMENT YEAR 1997-98 WAS ON 30.3.1999 PROCE SSED U/S 143(1) ON 15.3.2000 THE TIME AVAILABLE FOR ISSUE OF NOTICE I S 31.3.2000. NOTICE U/S WAS ISSUED ON 15.3.2000. 9.2. IN THE CASE OF K.M PACHHAYAPPAN VS. CIT (311 ITR 31) PLACING RELIANCE ON THE DECISION OF SUPREME COURT IN THE CA SE OF RAJESH JHAVERI ITR NO.434/H/2010 EENADU RELIEF FUND HYD. 6 6 STOCK BROKERS (P) LTD. (SUPRA) UPHELD THE ACTION OF THE ASSESSING OFFICER INITIATING THE PROCEEDINGS U/S 147. THE PARTICULA R OF THIS CASE IS AS FOLLOWS: 9.3. RETURN FILED FOR THE ASSESSMENT YEARS 1994- 95 ON 28.3.1996 AND THE SAME WAS PROCESSED U/S 143(1). LATER 148 N OTICE WAS ISSUED ON 18.6.1996 THOUGH TIME AVAILABLE FOR ISSUE OF NOTICE U/S 143(2) WAS UPTO 31.3.1997. 9.4. IN THE CASE OF CIT VS. QATALYS SOFTWARE TEC HNOLOGIES LTD. (308 ITR 249) THE MADRAS HIGH COURT HELD THAT REOP ENING IS IMPROPER WHEN THE TIME LIMIT IS AVAILABLE TO ISSUE NOTICE U/ S 143(2). AS SEEN FROM THE ABOVE IN THE CASE OF K M PACHAYAPPAN (304 ITR 264) AND QATALYS SOFTWARE TECHNOLOGIES LTD. (308 ITR 249) MADRAS HC BY PLACING RELIANCE ON THE JUDGEMENT OF SC IN THE CASE OF RAJESH JHAVER I (SUPRA) HELD THAT THE ASSESSING OFFICER WAS BARRED FROM INITIATING REASSE SSMENT PROCEEDINGS U/S 147 WHEN THE TIME FOR ISSUANCE OF NOTICE U/S 143(2) HAD NOT EXPIRED. HOWEVER TAKEN A DIFFERENT VIEW IN THE CASE OF ITO VS. K M PACHIYAPPAN (311 ITR 31) (MDS.) UPHELD THAT THE ASSESSING OFFIC ER IN INITIATING THE PROCEEDINGS U/S 147 IN SIMILAR CIRCUMSTANCES. HOWE VER IT APPEARS THAT THE IMPORTANT DISTINCTION IN FACT OF THESE TWO CASE S NAMELY TIME AVAILABLE FOR ISSUE OF NOTICE U/S 143(2) HAD NOT EXPIRED IN T HE CASE OF K. M.PACHIAPPAN (311 ITR 31) HAS NOT PLACED BEFORE THE MADRAS HIGH COURT. FURTHER THE TRIBUNAL IN THE CASE OF SUPER SPINNING MILLS LTD. VS. ADDL. CIT TRIBUNAL TAX REPORTED (3 RD MEMBER) (CHENNAI) HELD THAT : THE DEPARTMENT WANTS TO INTERPRET THE EXPRESSION N O ASSESSMENT HAS BEEN MADE IN CLAUSE (B) OF EXPLANATION 2 TO S.147 TO MEAN THAT IT ALSO INCLUDES SITUATION WHERE ASSESSMENT U/S 143(3) IS T ILL POSSIBLE BUT NOT YET MADE. IF THIS INTERPRETATION IS TO BE ACCEPTED IT WILL SET AT NAUGHT THE FUNDAMENTAL PRINCIPLES UNDERLYING S.147 AND WHI CH PRINCIPLES HAVE BEEN FOLLOWED TILL DATE. THESE PRINCIPLES ARE APPLICABLE EVEN TO THE EXTENDED MEANING GIVEN TO THEM TERM ESCAPED AS SESSMENT IN ITR NO.434/H/2010 EENADU RELIEF FUND HYD. 7 7 THE AMENDED PROVISION. THE ABOVE CLAUSE IS INTENDE D TO COVER THE FOLLOWING TWO SITUATIONS (I) WHERE A RETURN IS FILE D AND NON ACTION IS TAKEN EITHER U/S 143(1) OR U/S 143(3) AND THE TIME LIMIT FOR ISSUING NOTICE U/S 143(2) HAS EXPIRED (II) WHERE A RETURN I S FILED AND IS PROCESSED U/S 143(1) AND THE TIME LIMIT FOR ISSUING NOTICE U/S 143(2) HAS EXPIRED. IT DOES NOT ENVISAGE A SITUATION WHER E A RETURN IS FILED AND THE TIME LIMIT FOR ISSUE FOR ISSUE OF NOTICE U/ S 143(2) HAS NOT EXPIRED. UNLESS THE RETURN FILED BY THE ASSESSEE I S SCRUTINIZED BY THE ASSESSING OFFICER HE CANNOT COME TO THE CONCLUSION OF ANY ESCAPEMENT. IF THE ASSESSING OFFICER ISSUES NOTICE U/S 143(2) THE QUITE OBVIOUSLY HE WOULD SCRUTINIZE THE RETURN AND FRAME THE ASSESSMENT U/S 143(3). SUBSEQUENTLY HE MAY NOTICE ESCAPEMENT AND ISSUE NOTICE U/S 148 BESIDES THIS IN THE ABOVE T WO SITUATIONS ALSO HE WILL HAVE TO LOOK INTO THE RETURN TO SEE WHETHER TH ERE IS ESCAPEMENT OR NOT. IF HE NOTICES ANY ESCAPEMENT IT CAN BE CA LLED AN ESCAPEMENT ONLY IF IT IS NOTICE AFTER THE PROCEEDINGS U/S 147. IN THAT EVENT HE WILL HAVE TO ISSUE NOTICE U/S 143(2). IN NUTSHELL (A) THE PROCEEDINGS ARE SAID TO HAVE COMMENCED ONCE THE RETURN IS FILED AN D (B) THE PROCEEDINGS TERMINATE WHEN (I) THE RETURN IS PROCES SED U/S 143(1) AND THE TIME TO ISSUE NOTICE U/S 143(2) IS OVER (II) AS SESSMENT IS MADE U/S 143(3) OR (III) THE ASSESSMENT IS NO LONGER POSSIB LE U/S 143(3). PROCESSING U/S 147 CAN BE INITIATED ONLY AFTER THE EARLIER PROCEEDINGS HAVE TERMINATED AS MENTIONED ABOVE. ORDER U/S 147 R/W.S. 143(3) WAS THEREFORE LIABLE TO BE QUASHED. 10. IN VIEW OF THE ABOVE DISCUSSIONS WE ARE INCL INED TO HOLD THAT UNLESS THE RETURN FILED BY THE ASSESSEE IS SCRUTINI ZED BY THE ASSESSING OFFICER U/S 143(3) WE CANNOT COME TO THE CONCLUSIO N OF ANY ESCAPEMENT THE ASSESSING OFFICER CANNOT INITIATE PROCEEDINGS U /S 147 WHEN THE TIME FOR ISSUANCE OF NOTICE 143(3) HAS NOT EXPIRED. THE CASE LAW RELIED BY THE ASSESSEES COUNSEL LAID DOWN THE SAME PROPOSITION O F LAW. ACCORDINGLY WE ALLOW THE FIRST GROUND OF THE APPEAL OF THE ASSESSE E BY HOLDING THAT THIS REOPENING OF ASSESSMENT BY ISSUE OF NOTICE U/S 148 DATED 17.10.2007 IS BAD IN LAW. 11. THE ASSESSEE RAISED THE SECOND GROUND IN ITS APPEAL AS FOLLOWS: THE CIT(A) OUGHT TO HAVE SEEN THAT THE ASSESSING OFF ICER IS NOT JUSTIFIED IN BRINGING TO TAX AN AMOUNT OF RS.2 25 33 030/- OUT O F RS.2 49 92 963/- GIVEN TO RAMAKRISHNA MUTT ON THE GROUND THAT THE DONATION S TO RAMAKRISHNA MUTT CANNOT BE TREATED AS UTILIZATION IN VIEW OF PROVISO TO SUB SECTION (3A) OF SECTION 11 OF THE ACT. ITR NO.434/H/2010 EENADU RELIEF FUND HYD. 8 8 12. THE CONTENTION OF THE ASSESSEE IS THAT THE DO NATION RECEIVED IS FOR SPECIFIC PURPOSE TO HELP THE T-SUNAMI VICTIMS A ND IT DID NOT BELONG TO THE ASSESSEE AND IT IS A TIED UP DONATIONS FOR SPEC IFIC PURPOSE AND IT CANNOT BE TREATED AS INCOME OF THE ASSESSEE. FOR T HIS PURPOSE HE RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF NIRMALA AG RICULTURAL SOCIETY VS. ITO (71 ITD 152) (HYD.). FURTHER THE ARGUMENT OF THE ASSESSEE IS THAT THE ASSESSEE MADE THE CONTRIBUTION TO RAMAKRISHNA MUTT FOR CONSTRUCTION OF HOUSES FOR T-SUNAMI AFFECTED PEOPLE IN TAMIL NADU D URING ASSESSMENT YEAR 2006-07 OUT OF DONATIONS RECEIVED IN ASSESSMEN T YEAR 2005-06 CANNOT BE SUBJECTED TO TAX IN THE ASSESSMENT YEAR 2 006-07 SINCE THE ASSESSEE HAD EXERCISED ITS OPTIONS AS PER CLAUSE 2 OF EXPLANATION TO SECTION 11(I) OF THE ACT FOR UTILIZING THE DONATION S IN THE ASSESSMENT YEAR 2006-07 OUT OF DONATIONS RECEIVED IN THE ASSESSMENT YEAR 2005-06. ACCORDING TO LEARNED AR THE PROVISO TO SUB SECTION (3A) OF SECTION 11 OF THE ACT HAS NO APPLICATION TO THE FACTS OF THE ASSE SSEES CASE AND THE PROVISIONS OF SECTION 11(I) READ WITH CLAUSE (2) OF EXPLANATION ARE APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. TH E DONATIONS RECEIVED BY THE ASSESSEE FROM PUBLIC IS FOR SPECIFIC PURPOSE OF UTILIZING THE SAME FOR HELPING THE PEOPLE WHO WERE AFFECTED T-SUNAMI. HEN CE SUCH DONATIONS STAND DIVERTED BY OVERRIDING TITLE FOR THE PURPOSE OF UTILIZATION OF T-SUNAMI AFFECTED PEOPLE AND THEREFORE SUCH AMOUNTS SHOULD N OT HAVE BEEN CONSIDERED AS INCOME AT ALL AND HE SUBMITTED THAT THE AMOUNT OF RS.2 25 33 030/- OUT OF RS.2 49 92 963/- GIVEN TO R AMAKRISHNA MUTT AS DEEMED TO BE THE INCOME APPLIED AS PER CLAUSE (2) O F EXPLANATION TO SECTION 11 (I) OF THE ACT AND THEREFORE PROVISIONS OF SECTI ON 11(3A) HAVE NO APPLICATION TO THE ASSESSEES CASE. FURTHER HE REL IED ON THE EXPLANATION 2 OF SEC.11(1) AND SUBMITTED THAT 85% OF THE INCOME D ERIVED DURING THE YEAR CANNOT BE APPLIED FOR ANY CHARITABLE PURPOSES AND I S USED DURING THE IMMEDIATELY FOLLOWING YEAR IN WHICH SUCH INCOME WAS DERIVED AND THE PERSON RECEIVING SUCH INCOME EXERCISES IN WRITING B EFORE THE EXPIRY OF TIME ITR NO.434/H/2010 EENADU RELIEF FUND HYD. 9 9 ALLOWED UNDER SUB SECTION (1) OF SECTION 139 FOR FU RNISHING THE RETURN OF INCOME IT WILL BE DEEMED TO BE INCOME APPLIED FOR CHARITABLE PURPOSE. HE AVERRED THAT SINCE THE ASSESSEE HAS EXERCISED SUCH OPTION ON 5.5.2005 AND FILED THE SAME ALONG WITH THE RETURN OF INCOME ON 1 .11.2005 WHICH WAS BEFORE THE DUE DATE FOR THE ASSESSMENT YEAR 2005-06 IT IS TO BE HELD THAT THE DONATIONS RECEIVED DURING THE FINANCIAL YEAR 20 04-05 WERE UTILIZED FOR CHARITABLE PURPOSE OF CONSTRUCTING HOUSES FOR T-SUN AMI AFFECTED PEOPLE THROUGH RAMAKRISHNA MUTT DURING THE ASSESSMENT YEAR 2006-07 I.E. ASSESSMENT YEAR IMMEDIATELY AFTER ASSESSMENT YEAR 2 005-06 AS PROVIDED IN EXPLANATION. ACCORDING TO THE ASSESSEES COUNSE L THERE IS NO PRESCRIBED FORM UNDER THE INCOME TAX RULES FOR EXERCISING SUCH OPTION AND THE PROVISION ONLY REQUIRES THAT SUCH OPTION HAS TO BE EXERCISED IN WRITING BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. THEREFORE IN THE ABSENCE OF ANY SPECIFIC FORM PRESCRIBED IN THE IT A CT FOR EXERCISING OPTION U/S 11(1) EXPLANATION THE ASSESSEE HAD UTILIZED FO RM NO.10 PRESCRIBED IUN THE RULES FOR THE PURPOSE OF SECTION 11(2). 13. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REP RESENTATIVE RELIED ON THE ORDER OF THE CIT(A) ON THIS ISSUE. 14. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. IN THE PRESENT CASE THE ASSESSEE HAS RECEIVED DONATION FROM THE PUBLIC FOR THE BENEFIT OF THE T- SUNAMI VICTIMS. THE CONTENTION OF THE ASSESSEES COUNSEL IS THAT THE DONATION IS TIED UP RECEIPTS TO BE USED FOR THE PUR POSES OF CONSTRUCTION OF HOUSES FOR T-SUNAMI VICTIMS. HOWEVER WE DO NOT FI ND ANY EVIDENCE HOW THIS FUND WAS USED FOR THE WELFARE OF THE T-SUNAMI VICTIMS AND NO EVIDENCE WAS PLACED BEFORE US REGARDING THE UTILIZATION OF T HIS IMPUGNED AMOUNT FOR THE T-SUNAMI VICTIMS. THE ASSESSEE HAS TAKEN A PLE A BEFORE US THAT THIS FUND HAS BEEN GIVEN TO SHRI RAMAKRISHNA MUTT IN THE SUBSEQUENT YEAR. THE END UTILIZATION HAS NOT FURNISHED BY THE ASSESS EE. BEING SO WE ARE ITR NO.434/H/2010 EENADU RELIEF FUND HYD. 10 10 NOT IN A POSITION TO HOLD IT AS TIED UP GRANT AND A CCORDINGLY THE RATIO LAID DOWN BY THE HYDERABAD BENCH IN THE CASE OF NIRMALA AGRICULTURAL SOCIETY CITED SUPRA CANNOT BE APPLIED. REGARDING THE ACCUM ULATION OF THE SUMS THERE IS NO DISPUTE REGARDING THIS. HOWEVER THE AS SESSEE IS PROHIBITED U/S 11(3A) WITH REGARD TO GIVE DONATION TO SHRI RAMAKRI SHNA MUTT BY THE PROVISO WHICH READS AS FOLLOWS: PROVIDED THAT THE ASSESSING OFFICER SHALL NOT ALL OW APPLICATION OF SUCH INCOME BY WAY OF PAYMENT OR CREDIT MADE FOR THE PUR POSES REFERRED TO IN CLAUSE (D) OF SUB SECTION (3) OF SECTION 11. 15. IN VIEW OF THE ABOVE PROVISO IN OUR OPINION THE DONATION GIVEN TO RAMAKRISHNA MUTT CANNOT BE CONSIDERED AS UTILIZA TION AND THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION AS CLAIMED BY IT. TH E 2 ND GROUND IN THE APPEAL IS DECIDED AGAINST THE ASSESSEE. 16. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO.434/H/2010 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 13.1.2 011 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 13 TH JANUARY 2011 COPY FORWARDED TO: 1. M/S EENADU RELIEF FUND 6-3-570 EENADU COMPLE X SOMAJIGUDA HYDERABAD 2. THE DY. DIT (E)-II HYDERABAD 3. CIT(A)-IV HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP