2021 (10) TMI 739 - AT - Income Tax

Reopening of assessment u/s 147 - unaccounted receipts on account of donation - Exemption u/s 11 denied - commercializing the education and thus violating the objects for which it was created - assessee was charging capitation fees from the students seeking admission in MBBS/PG courses - As submitted assessee is a charitable trust carrying on activities in the field of education as a part of Santosh Group, which is also engaged in the field of education in Medical, Dental, Para-medical and other courses - HELD THAT:- Correlation between the underlying material and the information, which was available in the balance sheet and income and expenditure account of the assessee, was clearly not made. Therefore the formation of belief by the Income-tax Officer that income of the assessee chargeable to tax had escaped assessment, was unreasonable and irrational, as it could not be related to the underlying information ; something which was discernible from a bare reading of the order recording reasons.

AO also failed to correlate the statement of Mr. Mahalingam with the reasons recorded by the learned assessing officer and resultant amount of escapement of income. The facts in this case are similar to the facts decided by the honourable Delhi High Court in case of Sinfonia Tradelinks private limited [2021 (3) TMI 1177 - DELHI HIGH COURT] where the honourable Delhi High Court quashed reassessment wherein even the assessment was earlier not made u/s 143 (3) of the act for not correlating the information available in the original return filed by the assessee. In the present case the assessment was already made u/s 143 (3) of the act, therefore, the case of the assessee is on much stronger footing against the facts of the case decided by the honourable Delhi High Court.

We do not have any hesitation in holding that the learned assessing officer has not applied his mind at the time of recording of the reason u/s 148 of the act and therefore the reopening is quashed.

Exemption u/s 11 - In respect to the allowing the exemption u/s 11 of the income tax act we find that the assessee is registered u/s 12 A of the act as well as u/s 10 (23C) (IV) of the act also. This registration certificate is still valid and not withdrawn. Assessee is also held to wholly exist for the purpose of education. The addition of the donation is not been made in the hence of the assessee u/s 68 of the income tax act but as income of the charitable trust denying the exemption u/s 11 of the act. We find that there is no reason to deny assessee benefit of Section 11 of the act when the assessee is registered u/s 12 A as well as u/s 10 (23C)(iv) of the act. It is the case of the revenue that assessee is not utilizing the sum so received towards educational activities. In view of this, we do not find any reason that assessee should not be allowed exemption u/s 11 is and 12 of the income tax act as assessee is doing a charitable activity. - Decided in favour of assessee.

Computing excess of income over the expenditure of the assessee - CIT – A has adopted the findings of the settlement commission in case of the assessee for deriving at the set-off of the expenditure. There is no reason to hold that that the reason given by the settlement commission which is adopted by the learned CIT – A is not a plausible way of computing excess of income over the expenditure of the assessee. CIT – A correct held that a sum of ₹ 2 77,57,629/– after applying the ratio laid down by the settlement commission is an unaccounted excess of income over the expenditure of the assessee. Further, the trustee has disclosed a sum of ₹ 3 crores in his hands has also been granted as a set of against the above addition based on the decision of the coordinate bench in case of the assessee. - Decided against revenue.