2011 (5) TMI 953 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening the assessment u/s 147.
2. Entitlement to exemption u/s 10(23C)(iiiad) and u/s 11.
3. Allowability of depreciation.
4. Deduction for the amount transferred to the building reserve fund.

Summary:

1. Validity of Reopening the Assessment u/s 147:
The assessee contended that the reopening of the assessment after four years from the end of the relevant assessment year was invalid and without jurisdiction as there was no failure on their part to disclose fully and truly all material facts. The Tribunal held that reopening based on the Revenue Audit Party's observations constituted a mere change of opinion, which is not a valid ground for reopening u/s 147. The Tribunal emphasized that there must be tangible material to justify the belief that income has escaped assessment, and mere reappraisal of existing records does not suffice. Consequently, the reopening was deemed invalid.

2. Entitlement to Exemption u/s 10(23C)(iiiad) and u/s 11:
The CIT(A) held that the assessee's activities of coaching students for competitive exams did not qualify as 'education' u/s 2(15) and thus denied exemption u/s 10(23C)(iiiad). However, the Tribunal noted that the assessee was registered u/s 12A and had complied with all relevant conditions, including furnishing an audit report u/s 12A(B). The Tribunal found that the Assessing Officer's denial of exemption was based on a change of opinion without new material evidence, rendering the reopening invalid.

3. Allowability of Depreciation:
The CIT(A) allowed depreciation of Rs. 3,01,159/-, while the Revenue contended that it should be disallowed based on the Supreme Court's decision in Escorts Ltd. The Tribunal upheld the CIT(A)'s decision, noting that the income of the trust is computed in accordance with sections 11 to 33, not sections 28 to 44, and thus the Supreme Court's decision was not applicable.

4. Deduction for Amount Transferred to Building Reserve Fund:
The assessee claimed a deduction for Rs. 10 lakhs transferred to the building reserve fund, which was invested in specified modes u/s 11(5). The Assessing Officer disallowed this, treating it as an unspecified investment. The Tribunal found that the amount was indeed invested in a specified mode and should be allowed as a deduction.

Conclusion:
The Tribunal concluded that the reopening of the assessment was invalid, rendering the Revenue's appeal infructuous. The assessee's appeal was partly allowed, and the Revenue's appeal was dismissed. The order was pronounced in the open court on 13.5.2011.