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2015 Supreme(Ker) 991
IN THE HIGH COURT OF KERALA AT ERNAKULAM
ANTONY DOMINIC & SHAJI P.CHALY, JJ.
K.K.J.FOUNDATIONS – Appellant
Vs.
THE ASSISTANT DIRECTOR OF INCOME TAX (EXEMPTION), RANGE 4, KOCHI - Respondent
ITA.No. 242 of 2014
Decided on : 8.9.2015
Advocate Appeared:
For the Appellant : SRI.B.ASHOK SHENOY, SMT.C.G.PREETHA, SRI.K.V.GEORGE, SRI.P.N.RAJAGOPALAN NAIR, SRI.P.S.GIREESH
For the Respondent: SRI.P.K.R.MENON,SR. COUNSEL, GOI(TAXES), SRI.JOSE JOSEPH, SC, FOR INCOME TAX
The power under Sec.154 can be invoked only to correct an error and not to disturb a concluded finding.
Headnote:
Rectification - Income Tax - Sec.154 of the Income Tax Act - Sec.12AA, Sec.143(2), Sec.142(1), Sec.11(1)(d), Sec.154
Fact of the Case:
The assessee, a Trust registered under Sec.12AA of the Income Tax Act, filed its return of income for the assessment year 2006-07, declaring nil return. The Assessing Authority treated the entire receipt of the Trust as its income and rejected the claim for exemption under Sec.11 of the Act. The appellant sought rectification under Sec.154, contending that certain funds should be treated as corpus donation and not included in the total income.
Finding of the Court:
The court found that the question raised for invoking Sec.154 was a question that ought to have been raised in a regular appeal and had nothing to do with rectification of any mistake apparent from the record. The court did not find any error apparent from the record which enabled the assessee to invoke the said provision.
Issues: The main issue was whether there was any error apparent from the record so as to invoke the power under Sec.154 of the Act.
Ratio Decidendi: The power under Sec.154 can be invoked only to correct an error and not to disturb a concluded finding. Rectification is a process by which a mistake is set at right, and it is exercised to remove the error and not for disturbing finality.
Final Decision: The appeal was dismissed as the court did not find any illegality or other legal infirmities in the finding entered by the Appellate Tribunal.
Shaji P. Chaly, J.
This appeal is filed by the assessee against the order dated 27.06.2014 of the Income Tax Appellate Tribunal, Cochin Bench in I.T.A.No.756/Coch/2013 for the assessment year 2006-07. By this order, the Appellate Tribunal has allowed the appeal filed by the Revenue and held that there was no mistake apparent from the record in the order of the Assessing Officer so as to seek rectification under Sec.154 of the Income Tax Act.
2. Brief facts required for the disposal of the appeal are as follows:
The assessee is a Trust registered under Sec.12AA of the Income Tax Act, 1961 (hereinafter called “the Act”). Assessee filed its return of income for the assessment year 2006-07 on 31.10.2008, declaring nil return. Notice under Sec.143(2) was issued and since there was no response, notice under Sec.142 (1) of the Act was issued. In response to the same, assessee appeared and produced the books of accounts and other relevant documents called for. Even though opportunity was provided to produce the required documents on various occasions, neither the appellant nor its authorized representatives had furnished the relevant documents of the funds being corpus, apart from a letter which merely indicated the transfer of the loan funds to the capital and did not specify the actual utilization of the funds in the hands of the Trust.
3. The Assessing Authority, after taking into account the facts and circumstances, found that the assessee Trust has no corroborative evidence to prove that the donation received by it was a capital donation and therefore the entire receipt of the Trust during the assessment year in question was treated as its income and the claim of the appellant for exemption under Sec.11 of the Act was rejected and thereupon the assessment was completed accordingly.
4. Aggrieved by the order, appellant had chosen to file an application for rectification under Sec.154 of the Act, seeking to rectify the order of assessment, contending that out of the gross income of Rs.2,66,50,000/- an amount of Rs.84,00,000/- was received during the previous year ending 31.03.2005 from Mr. K.K. Joseph as loan and Rs.1,62,50,000/- was also received as loan from K.K. Joseph during the current year. Further, it was contended that vide book entry dated 31.03.2006, Rs.1,01,00,000/-was shown as corpus donation, and that the appellant vide his letter dated 07.01.2009 had raised objection against the treatment of the same as the income of the Trust by the Assessing Officer.
5. Aggrieved by the order passed by the Assessing Officer, the appellant preferred appeal before the Commissioner of Income Tax (Appeals) and by Annexure-C order, the Commissioner allowed the appeal partly and held that the treatment of Rs.1,00,00,000/- as corpus donation in the hands of the assessee, since the trustee has given letter of consent that the amount of loan earlier given should be treated as corpus donation, this amount that was converted from loan account to corpus donations even though by way of book entry would fall in the category of voluntary contributions as envisaged under Sec.11(1)(d) of the Income Tax Act and hence should not be included in the total income or receipts of the assessee. Since the source of introduction of initial loan that was converted into corpus donation was also treated as explained, the addition made by the Assessing Officer by treating this receipt as income for the purpose of gross receipts was held not correct and thereby the Assessing Officer was directed to exclude the corpus donation from the total income.
6. Aggrieved by the said order, Revenue preferred appeal before the Appellate Tribunal. The Tribunal, without going into the merits of the case, entered into a finding that in case the assessee was aggrieved against the decision of the Assessing Officer, the remedy de facto did not lie before the Assessing Officer. Holding so, it was found that there was no mistake apparent from record in the order of the Assessin
