TMI Blog2011 (12) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation - It has not been disputed that the furniture and fixed assets, namely, computer, furniture and fixture, building, library, books, vehicles etc. were utilized for the equities of the assessee - It has not been disputed by the Ld.DR that the assessee is solely engaged in the education activity and except running a CBSC recognized secondary school, no other activities were carried out - The assessee being eligible u/s 10(23C), the entire income become exempt as the assessee's receipts are in this year i.e. assessment year 2006-07 is below Re.1 crore - Decided in favor of the assessee - ITA No. 5452/Del./2010 - - - Dated:- 16-12-2011 - R. P. Tolani And K. D. Ranjan, JJ. Anil Jain, CA for the Appellant Salil Mishra, Sr. DR for the Respondent ORDER R. P. Tolani, Judicial Member 1. The assessee has filed concise revised grounds of appeal for adjudication which are as under: 1. That on the facts and circumstances of the case, CIT(A) has erred in upholding the order of the Assessing Officer which was bad in law and void ab initio. 2. On the facts and circumstances of the case and in law, the CIT(A) e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and in the circumstances of the case and in law, the Assessing Officer erred in levying tax on the appellant's income at maximum marginal rate. 3. Ld.Counsel for the assessee contends that the additional grounds Nos.1 and 2 are not new and elaboration of Ground no.3. of the revised grounds in respect of reopening of assessment. Ground nos.3 and 4 are relating to exemption eligible to the assessee u/s 10(23C)(iiiad) of the Act. This was raised before the CIT(A) by way of written submissions. The same has been dealt with by CIT(A) on page 4 of his order, but not decided. No new facts are required for adjudication of this ground and being legal ground may be admitted. 4. Ground no.5 being about tax rate and legal in nature, the same may be admitted. It is pleaded that all these grounds were raised before CIT(A) and are legal in nature they may be admitted in the interest of justice. 5. Reliance is placed on the following judgment for the proposition that the Tribunal may admit additional ground, in the course of appeal even though the same was not raised earlier before the CIT(A) CIT vs. Bharat General Reinsurance Co. Ltd., 81 I.T.R. 303(Del.) Pandit S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A return has been filed declaring nil income. Scrutiny of the return reveals that the auditor has prepared the audit report on the basis of the test check of vouchers. The auditor in his report has stated that one partner has taken construction loan and has also constructed a building. Loan as well as building has not been considered in the balance sheet, which clearly shows that the application of funds is not verifiable. The assessee has faild to produce the books of accounts and vouchers before DGIT(E) during the proceedings u/s 10(23C). In this case, the auditor has not certified in his audit report u/s 10BB that he had verified all the vouchers. I have reasons to believe that in the facts and circumstances of the case, the assessee has not declared true income so far as the application of trust fund is not verifiable. Issuer notice u/s 148. 13. The assessee attended in the re assessment proceeding and produced all the books of account which are verified by the Assessing Officer. Assessing Officer observed that Shri Mohinder Singh (MS) was one of the Governing Body members of Starlex International School. An amount of ₹ 1,75,00,000/- was received by the school f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y aforementioned act of it's, in the course of proceeding u/s 143(3)/147. Accordingly I deny claim for exemption u/s 11 to the assessee and tax it's income as an AOP at the maximum marginal rate. 14. Aggrieved, assessee preferred first appeal where reopening of the assessment was held to be valid. The Assessing Officer's denial of exemption u/s 11 was upheld and the assessee appeal was dismissed. 15. Aggrieved, assessee is before us. Ld.Counsel for the assessee firstly adverted to section 10(23C) of the Act and pleaded that in the year under consideration, the assessee's receipt were less than ₹ 80 lakhs which was below Re.1 crore. Section 10(23C) prescribes as under: (iiiad) any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipts as may be prescribed; It is pleaded that the turnover is prescribed by Rule 2 BC at Re.1 crore. 16. It is further contended that Assessing Officer has not been disputed that the sole object and activity of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Purity Techtextile Private Limited vs. CIT (2010) 325 I.T.R. 459(Bom.) Jindal Photo Films vs. DCIT, 234 I.T.R. 170 (Del.) CIT vs. Kelvinator of India Ltd., 256 I.T.R. 1(Del.) = (2003-TII-19-HC-DEL-INTL-LB) CIT vs. Chamundeshwari, 209 I.T.R. 583 (Mad.) CIT vs. Batra Bhatta Company (2010), 321 I.T.R. 526 (Del.) ITO vs. Dalubrand Coal Co. P. Ltd., 217 I.T.R. 597 (SC) Raymond Woollen Mills Ltd. vs. ITO, 236 I.T.R. 34 (SC). Further reliance is placed on Delhi High Court judgement in the case of Ranbaxy Laboratories Ltd. vs. CIT, 336 I.T.R. 136. In this case, the assessee's return of income was processed u/s 143(1)(a) of the Act. Thereafter the notice u/s 148 was issued on the reasons that club fees, gifts and presents and provision for leave encashment, ought to have been disallowed. While making the re-assessment no addition on that account was made. However, deduction u/s 80HH and 80I were disallowed. Hon'ble jurisdictional High Court held as under : The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of lower authorities no cogent reasons for entries about Mohinder Singh was given is baseless as following explanation was clearly given which has not been perused by him: To. overcame its liquidity crisis, appellant in the financial year ending 31/03/03 received a sum of ₹ 1.75 Crore as loan from one Mr. Mohinder Singh who was engaged in the activity of running school in Gurgaon. The incumbent management in order to attain the objectives of the Society more fruitfully made Mr. Mohinder Singh along with his associates as members of the society. In fact he was made the President of the society. He immediately repaid the Bank loan taken by the society for purchase of land, and lifted the Society from the financial crisis it was undergoing. However after taking over he soon started large expansion plans by indulging in large scale construction of school building. All the approvals for expansion were taken by him in his personal name instead of Society's name. Without holding the meeting of Governing body he pledged the title deeds of the society to the bank from whom he had taken huge loan. When the other governing body members came to know of this fact they imme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of justice rather it works the reverse way. For this proposition Reliance is placed in this regard on the under mentioned decisions:- CIT v KARIMIA TRUST (2008) 302 ITR 57 (JHARKHAND) DCIT v COSMOPOLITAN EDUCATION SOCIETY 244 ITR 494 (RAJ.) SLP dismissed (2000) 241 ITR (St.) 132. The loan was converted into donation the governing body members are unaware of this feature in such circumstances how can the same be explained. The books and minute book for that year are not available with the management. FIR has been lodged against the same. Mr. Mohinder Singh address was provided to the AO and CIT(A), however no explanation was sought from him. The issue here arises whether conversion of loan into donation and its subsequent reconversion into loan tantamount to violation of the provisions of section 13(1)(c) r.w.s 13(3). Kindly note that presently, the matter is pending before the Delhi High Court for adjudication, whether the amount given by Mr. Mohinder Singh is loan or donation and how much amount is payable by the appellant to him on account amount spent on building construction. As per the decision of the Hon'ble High Court the matter will be decided. Kin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer without assigning any reason has disallowed the depreciation claimed by the assessee. It has not been disputed that the furniture and fixed assets, namely, computer, furniture and fixture, building, library, books, vehicles etc. were utilized for the equities of the assessee. Reliance is placed on CBDT circular No.5(LXX-6) dated 19.6.1968. 28. Apropos additional ground about maximum marginal rate, it is contended that the assessee's registration u/s 11 has been wrongly denied and alternatively maximum rate is leviable, income being exempt u/s 10(23C) of the Act. 29. Ld.DR. supported the order of the lower authorities and contends that the Hon'ble Supreme Court in the case of Rajesh Zaveri, 291 I.T.R. 500 has held that an intimation u/s 143(1)(a) cannot be treated as order of assessment. This being so, auditors disclosure that a member of the society had taken loan for construction of building without permission of the society was sufficient for the Assessing Officer to issue notice u/s 148 of the Act. Since Assessing Officer found that specified person covered u/s 13(3) has been provided the funds of the society in contravention of section 13(1)(c). The regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment. There is mention of 2nd reason in the assessment order about any member having taken any building loan. In the order only exemption u/s 11 is denied. Respectfully following Hon'ble Delhi High Court judgment in the case of Ranbaxy Laboratories Ltd., we are of the view that as far as assessment year 2006-07 is concerned, the reopening of assessment is invalid. 33. In the impugned assessment year i.e. 2006-07 both the reasons do not show any application of mind or making record of reasons on any material having any objective bearing. 34. We consider it appropriate to consider the merit of the case. It has not been disputed by the Ld.DR that the assessee is solely engaged in the education activity and except running a CBSC recognized secondary school, no other activities were carried out. In these circumstances also, what section 13 prescribes is not to consider the amount of diversion of income as application of income towards its charitable cause. It does not however, has to be refused exemption u/s 11. Assuming worst against the assessee even if the registration also is held to be refused. The assessee being eligible u/s 10(23C), the entire income bec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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