John Secondary School vs ITO

This is an appeal by the assessee against order dated 23.02.2018 of learned Commissioner of Income Tax (Appeals), Meerut for the assessment year 2014-15.

When the appeal was called out for hearing, none appeared on behalf of the assessee. Even, there is no application on record seeking adjournment. On perusal of record, it is observed, though, the appeal was fixed on a number of occasions earlier, however, assessee had neither responded to the notices of hearing issued repeatedly nor has appeared even on a single occasion. These facts show complete apathy and lack of interest of the assessee in pursuing the present appeal. Since, multiple opportunities have been extended to the assessee, which it has failed to avail, I proceed to dispose off the appeal ex parte qua the assessee after hearing the learned Departmental Representative and based on materials available on record.

The only effective ground raised by the assessee reads as under:

“That on the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals) was not justified in not allowing benefit of setting apart the amount of accumulated amount under section 11(2) of the Income Tax Act.”

Briefly the facts are, the assessee stated to be a society is assessed in the status of Association of Person (AOP). As observed by the Assessing Officer, assessee runs a school in the name and style of St. John Senior Secondary School. The assessee has been granted registration under section 12AA of the Income Tax Act, 1961 as well. For the assessment year under dispute, assessee filed its return of income claiming exemption under section 11 of the Act. In course of assessment proceeding, the Assessing Officer noticing that the assessee had claimed depreciation called upon the assessee to justify it as, according to him, it will amount to double deduction, once as application of income and again as depreciation. Further, he found that the assessee has debited development fee of Rs. 18,00,000/- to the profit and loss account. He also pointed out various other deficiencies in the accounts of the assessee. Ultimately, the Assessing Officer concluded that in the year under consideration, the assessee was required to apply Rs.3,61,60,431/-towards its charitable objects. Whereas, it has applied Rs.3,19,59,489/-. Accordingly, the amount of Rs.42,00,940/-alleged to have been short applied was treated as income of the assessee and taxed at the maximum marginal rate. The assessee contested the above said addition before learned Commissioner (Appeals). After taking note of the submissions of the assessee, learned Commissioner (Appeals) allowed the development fee paid to another group organization. However, he upheld the decision of the Assessing Officer with regard to short application of income for charitable purpose in terms of Section 11(2) of the Act. While coming to such conclusion, he observed that the assessee failed to demonstrate that it has complied with the provisions of section 11(2) of the Act by filing Form 10B in the mode and manner prescribed under the statute. Accordingly, he disallowed assessee’s claim of setting apart of accumulated funds as provided under section 11(2) of the Act.

I have heard learned Departmental Representative and perused the materials on record. From the observations of the departmental authorities in their respective orders, it is evident that the assessee has not complied with the statutory provision while claiming setting apart and accumulation of surplus funds under section 11(2) of the Act. Even before me, the assessee has not brought any material to controvert the factual finding of the departmental authorities. In such a scenario, I do not find any reason to interfere with the decision of learned First Appellate Authority. Ground is dismissed.

In the result, appeal is dismissed.