Ita/951/2006 Of The Commissioner Of Income Tax v. M/S Bangalore Orthopaedic Society

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 19TH DAY OF JULY 2012 PRESENT THE HON'BLE MR. JUSTICE K.SREEDHAR RAO AND THE HON'BLE MR. JUSTICE B.MANOHAR ITA No.951/2006 BETWEEN : 1 THE COMMISSIONER OF INCOME TAXCENTRAL CIRLE, C.R.BUILDINGQUEENS ROAD, BANGALORE.CENTRAL CIRLE, C.R.BUILDINGQUEENS ROAD, BANGALORE. 2 THE DEPUTY COMMISSIONER OF INCOME TAX (INV), CIRCLE 2(1)C R BUILDING, QUEENS ROADBANGALORE. .. APPELLANTS (By Sri E I SANMATHI, ADV.) AND : M/s.BANGALORE ORTHOPAEDIC SOCIETYC/o. Dr.S.P.HEGADE, ORTHOPAEDIC SURGEONAMBEDKAR MEDICAL COLLEGEK.G.HALLI, BANGALORE. ...RESPONDENT ( By Sri S PARTHASARATHI, ADV.) This ITA is filed under Section 260A of the Income Tax Act, 1961, praying to set aside the order passed by the Income Tax Appellate Tribunal, Bangalore in IT(SS)A.No.9/Bang/2003 dated 29.9.2005 confirming the order of the Appellate Commissioner and confirm the order passed by the Deputy Commissioner of Income Tax, Circle-2(1), Bangalore. This ITA coming on for hearing this day, K.SREEDHAR RAO, J, delivered the following: JUDGMENT This appeal is by the revenue challenging the order dated 29.9.2005 passed in IT(SS)A.No.9/Bang/2003 by the Income Tax Appellate Tribunal, Bangalore confirming the order of the Appellate Commissioner. 2.The facts disclose that the department conducted a search of the premises of Dr.V H Hanumanthaiah on 24.3.1999 and found certain documents indicating the income and expenditure account and balance sheet relating to amounts collected by way of donations for conducting a conference of orthopaedic surgeons in 1994. A notice was issued to the respondent under Section 158BC read with Section 158BD of the IT Act. It is the contention that for the block assessment period from 1989-90 to 1999-2000, the income tax due to the appellants was not disclosed. Therefore, the block assessment was proposed by the notice. The amount was belonged to the respondent and it was kept as fixed deposit. The amount was transferred to respondent and the same was invested to purchase a site for the purpose of constructing a building for the society. 3.The facts disclose that the orthopaedic conference was held at Bangalore by IOA in collaboration with the BOA. The Assessing Officer had stated that the IOA did not take responsibility for collection of fund or incurring any financial expenditure. The responsibility was given to the BOA. The facts further reveal that Dr.V H Hanumanthaiah was the President of the respondent and at that time, a separate account was opened for the purpose of conference. The amount of Rs.53,72,054/- was collected. After meeting the expenditure, there was a surplus amount of Rs.16,93,911/- that was credited in fixed deposit. The DIT (Inv) in its order vide Annexure-C at page-10 made the following: Total amount credited Rs.26,05,000 4.It is the contention of the revenue that the respondent had conducted the conference, the amounts were collected by the respondent and the respondent did not file returns. It is only after search of the premises of Dr.V H Hanumanthaiah, this amount was noticed as an escaped income. Therefore the respondent is liable for penalty of block assessment and the tax thereon. Total amount credited Rs.26,05,000 4.It is the contention of the revenue that the respondent had conducted the conference, the amounts were collected by the respondent and the respondent did not file returns. It is only after search of the premises of Dr.V H Hanumanthaiah, this amount was noticed as an escaped income. Therefore the respondent is liable for penalty of block assessment and the tax thereon. 5.On meticulous scrutiny of the facts and the material available on record, it discloses that the conference was held by the IOA with the assistance of BOA and the BOA was given all the responsibilities of organising the conference. With regard to collection of funds, the material discloses that the President of the respondent had maintained a separate account for the conference. The amounts were received to the said account. After meeting the expenditure of the conference, a sum of Rs.16,93,911/- was levied, which was kept in fixed deposit. The conference was held in the year 1994. The order of the AO discloses that the respondent received the amount to its account only in the months of August and September, 1998. Till the date, the amounts of the conference were never credited to the account of the respondent and they were in the account of its President, Dr.V H Hanumanthaiah. There is no material collected by the IOA to know what was the nature of account Dr.V H Hanumanthaiah held with the Bank and whether the said account had any nexus with the respondent. But the order of AO extracted supra if read carefully, it reveals that the amount collected for the conference was never credited to the account of the respondent till July to September, 1998. It is in the said year the respondent made an application for registration under Section 12A of the IT Act and for exemption. The DIT rejected the application. But ultimately the Tribunal by its order dated 8.4.2011 in ITA No.397(Bang.)/2002 has granted registration under Section 12A of the IT Act. The registration will be effective from the date of presentation of the application. The Tribunal held that the respondent is entitled for registration retrospectively w.e.f. the date of its inception as a society. It is not in dispute that the Tribunal has jurisdiction to issue registration certificate with retrospective effect. The said jurisdiction is, however, taken over w.e.f. 1.6.2007. 6.The order of the Tribunal has been confirmed by this Court in ITA No.356/2011. The above facts categorically disclose that the respondent although held the conference did not receive the surplus amount to its account till the financial year 1998. The respondent had filed returns for the assessment year 1999-2000. Further the respondent invested the amount to purchase a site for construction of a building. Therefore, the respondent had no surplus fund to file returns. In that view of the matter, the respondent cannot be faulted for non-filing of returns and non-disclosure of income. In fact, the surplus funds were in the possession of the President, Dr.V H Hanumanthaih and he had not accounted the said amount to the account of the respondent. Therefore, in respect of undisclosed income, in the hands of Dr.V H Hanumanthaiah, he should have been made liable and not the respondent. The fact that Dr.V H Hanumanthaiah was the President and that by itself could be construed as amount in the account of respondent. The respondent cannot be faulted for non-disclosure income, which is not received till the financial year 1998. In that view of the matter, the impugned order dated 29.9.2005 passed in IT(SS)A9/Bang/2003 by the ITAT, Bangalore is bad in law. The question of law is answered against the revenue. Accordingly, the appeal is dismissed. Sd/-JUDGE Sd/-JUDGE bkm.