TaxTMI 
TaxTMI 
2008 (7) TMI 987
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....venience. 2. The facts of the case common to all the assessment years are that the assessee filed the returns of income for the assessment years 1994-95, 1995-96, 1996-97,1997-98 and 1998-99 on 1-7-1994, 30-6-1995, 28-6-1996, 27-6-1997 and 17-8-1998 respectively declaring therein Nil income, as the assessee had claimed exemption in respect of its income under section 10(22) of the Income-tax Act, 1961 (for short 'the Act') on the plea that the assessee was an Educational Institution. These returns were processed under section 143(1)(a)/143(1) of the Income-tax Act, 1961. Subsequently, it appears that the AO carried out inquiries with the prior permission of the CIT under sub-section (6) of section 133 of the Act. Such inquiries revealed that assessee was not running any Educational Institution/School/College/Vocational Institute at village Sarai Naga or its surrounding areas. There was only a sign board of its name, placed outside a room occupied by security guard of Brar Family. The AO observed that in the absence of any Educational Institution/School or building for educational purposes, the assessee was not entitled to exemption as claimed under sub-section (22) of section 10 o....
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....ly mentioned such names in the assessment order. He also observed that assessee reimbursed a meagre sum of ₹ 1,41,305 by way of tuition fee to some students out of available funds of ₹ 79,41,734 collected by the assessee. He also observed that though the Society was registered with the Registrar of Societies in 1993, the only action taken by the assessee was the purchase of the land for an amount of ₹ 15,41,250. The balance amount was invested in share application money and also deposits in various companies of Brar Family who were members of the assessee Society. He also observed that major chunk of donations amounting to ₹ 54,00,000 had been received from Tilok Tirath Vidyawati Chuttani Charitable Trust, of which Dr. Chuttani was a founder member and he had very close relations with Brar Family. He also observed that the assessee was not entitled to exemption under section 10(22) of the Act because it was not running any educational Institute/School/College/Vocational Institute itself. 4. The AO also observed that in the present case, the assessee has not been able to establish its own institution though it had been in existence for the last 8 years. That....
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..... The Departmental Representative also submitted before the CIT(A) that inquiries made during the course of assessment proceedings revealed that the assessee had not established any Educational Institution/School/College/Vocational Institute and, therefore, the assessee was not entitled to exemption under section 10(22) of the Act. Further, the donations received were also diverted to business concerns of Brar Family and were not utilized for the objects for which the Trust was set up. Members of Brar family were the Members of the assessee society. It was, therefore, submitted that the assessments had been rightly reopened and claim for exemption in respect of its income under section 10(22) of the Act has also been rightly denied by the Assessing Officer. The issue regarding completion of assessments in the status of an AOP with code No. 07 was contested and it was contended that assessee was a trust and therefore, the assessment was to be made in the status of a trust with Code No. 8. The ld. CIT(A) considered these submissions and held that since the Trust was set up for running an Educational Institution/School/College or Vocational Institute and the same was not found in exis....
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....ions of ₹ 25 lakhs and ₹ 29 lakhs respectively. The assessee did not challenge the order of CIT(A) for the assessment year 1996-97. 8. During the course of proceedings before the Tribunal, the assessee was also allowed to raise the following additional grounds being purely legal in nature : "(i)That the order under appeal is void ab initio as legal requirements for supplying copy of reasons recorded have not been supplied and the reasons as mentioned by the learned CIT(A) in his order does not show that any income has escaped assessment. It only talks of the inapplicability of the provisions of section 10(22) of the Income-tax Act. (ii)Neither the status of the assessee can be changed in proceeding under section 148 nor any assessment can be framed without including income which is alleged to have escaped assessment or under assessed." 9. It was submitted by the assessee before the Tribunal that it was mandatory on the part of the AO to communicate the reasons recorded under section 148 so as to enable the assessee to make its submissions on the legal aspect of reopening the assessments. He further referred to the identical stereotyped reasons recorded b....
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....as against AOP taken by AO and allowing exemption in respect of donation of ₹ 25 lakhs and ₹ 29 lakhs received from Tilok Tirath Vidyawati Chuttani Charitable Trust during the accounting year relevant to assessment years 1995-96 and 1996-97 respectively which were liable to tax as the assessee was not liable to exemption in respect of such donations under sections 10(22), 11 and 13 of the Act. While allowing these appeals of the Revenue, the Tribunal also held that the CIT (A) had relied on additional evidence in violation of provisions of Rule 46A of the Income-tax Rules, 1962, while taking into account the certificate dated 2-5-2002 from the assessee without complying with the provisions of Rule 46A of the Income-tax Rules, 1962 and without giving any opportunity to the Revenue to rebut the same. Vide impugned order, the appeals of the Revenue for the years 1995-96 and 1996-97 were accepted and order of the CIT(A) was set aside in the following terms:- "Having regard to these facts and circumstances of the case and the legal position discussed above, we are of the considered opinion that the learned CIT(A) was not justified in deleting the additions of ₹ ....
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....1 and thus denying it proper opportunity in complete defiance of the judgment of Hon'ble Supreme Court of India as GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19/[2002] 125 Taxman 963? (v) Whether under the facts and circumstances of the present case, the orders of the ITAT in concurring with the authorities below in confirming their action by denying exemption under section 10(22) and/or sections 11 and 12 of the Income-tax Act, 1961 by holding that the appellant trust/society is not involved in educational activities is bad in law ? (vi)Whether under the facts and circumstances of the present case, the orders of the ITAT in concurring with the authorities below in confirming their action by denying exemption under section 10(22) and/or sections 11 and 12 of the Income-tax Act, 1961 without appreciating the fact that the society has been duly registered under section 12A by the CIT and also exemption under section 80G of the Income-tax Act, 1961 was duly allowed considering the appellant society as a genuine educational society and thus the impugned order of the ITAT is bad in law? (vii) Whether under the facts and circumstances of the present case, the orders of the ....
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.... Act, 1961 was duly allowed considering the appellant society as a genuine educational society and thereby holding donations of ₹ 2,40,051 as taxable income and thus the impugned order of the ITAT is bad in law ? (xi) Whether under the facts and circumstances of the present case, the orders of the ITAT in view of above explained facts and circumstances and contentions is perverse, bad in law and needs to be quashed by the interference by this Hon'ble Court? (xii) Whether on the facts and in the circumstances of the case and in view of legal provisions, the ITAT was justified in denying the benefits of section 10(22) of the Income-tax Act, 1961 for the reason that the society is not having any educational building but has purchased land within eight years of its establishment and has reimbursed tuition fees to deserving and needy students? 12. Mr. S.K. Mukhi, Advocate, learned counsel for the appellant has argued that the re-assessment proceedings were initiated under section 147 of the Act by issue of notices under section 148 of the Act on 2-3-2000 without supplying the reasons recorded for initiating the reassessment proceedings which has vitiated the proceedings again....
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....visions of sections 148 to 153 of the Act. In such a case, the AO is empowered to assess or reassess such income. Such escapement of income could be due to omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The proviso to section 147 of the Act provides that in case the assessment completed under section 143(3) or 147 of the Act is to be reopened after the expiry of four years from the end of the relevant assessment year, the AO could take recourse to such action only if the escapement of income chargeable to tax was on account of assessee's failure to disclose fully and truly all material facts necessary for assessment. In case such assessment completed under section 143(3) or 147 is to be reopened within a period of four years from the end of the relevant assessment year or the assessment was completed under section 143(1)(a) or 143(1), it is not necessary to establish the escapement of income due to omission and failure on the part of the assessee to disclose fully and truly all material facts. But the conditions precedent for initiating the reassessment proceedings must exist before such action could be i....
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....ssessment would be without jurisdiction and bad in law. 18. The basis for initiating the reassessment proceedings is to be judged solely on the basis of reasons recorded by the AO and the material and information referred to, by him in the reasons for initiating such action. It is settled law that AO cannot initiate the reassessment proceedings merely on the basis of suspicion or for the purpose of making roving and fishy inquiries. The AO cannot support the reopening of the assessment by collecting the material or by making inquiry subsequently after the date of initiation of the proceedings. Thus, the reopening of the assessment is to be seen on the date when the AO initiated action under section 147 of the Act. But at the same time the formation of the belief of the AO is a prima facie belief on the date when he initiated the reassessment proceedings. It is not necessary that AO must establish the factum of concealment/escapement of income on the date of initiation of the reassessment proceedings itself. The assessment reopened by the AO is subject to normal procedure of assessment where the AO is required to examine the case by issue of notices under section 143(2)/142(1) of t....
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.... position before initiating the reassessment proceedings under section 147 of the Act and somehow the assessee has not fully complied with such information. On the contrary, the claim for exemption under section 10(22) of the Act was reiterated. 20. A perusal of the reasons recorded by the competent authority show that the basis of the initiation of such action was with regard to exemption claimed under section 10(22) of the Act. The AO has referred to the results of inquiries made in this case which revealed that the assessee was not running any such Educational Institution/School/College or vocational institute at the given place and there was only a sign board of its name outside the room occupied by the Security Guards of family of Shri H.S. Brar. The AO has mentioned that in the absence of such Educational Institution, the assessee was not entitled to exemption under section 10(22) of the Income-tax Act, and, therefore, he had reason to believe that income chargeable to tax in the form of donations, subscription and interest had escaped assessment. The same are the reasons for the subsequent assessment years with variation in the amounts. The results of inquiries incorporated....
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....ng the course of reassessment proceedings. In fact, the letters dated 19-4-2001, 16-7-2001 and 30-9-2001 of the AO to the assessee forming part of the assessment order and assessee's reply dated 30-9-2001 at Annexure-1 show that assessee was aware of the basis of action for initiating the reassessment proceedings. Therefore, there does not appear to be any merit in the submission of the assessee that reasons were not communicated to the assessee. Since the assessee has already been supplied copies of reasons recorded and its objections have been considered while deciding these appeals, this grievance no longer survives. As regards decision of ITAT, Bombay Bench in the case of Dy. CIT v. Maharashtra State Corpn. 101 ITJ 1108 relied upon by the Ld. AR, a copy of the same has not been supplied. Therefore, we are unable to refer to this decision. Thus, taking into account the fact that the assessee has already been supplied copies of reasons and objections have been taken into account and the reassessments have been completed after allowing opportunity to the assessee, we are of the opinion that this plea is also devoid of any merit. Hence rejected. 22. The next grievance of the asse....
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....d the contention of the assessee that once the Trust was registered under section 12 of the Act and the income of the Trust has not been utilized for the objects of the Trust, the income accrued from the property of the Trust could alone be denied exemption and the amounts received by way of donations for the corpus qualify for exemption under section 11(1)(d) of the Act. During the course of proceedings before the CIT(A), the assessee furnished a certificate dated 2-5-2002 from Tilok Tirath Vidyawati Chuttani Charitable Trust, stating that the donations of ₹ 54 lakhs given by the said Trust to the assessee in the accounting years relevant to assessment years 1995-96 and 1996-97 were for its corpus. Relying on the certificate, the CIT(A) allowed exemption in respect of amount of ₹ 25 lakhs and ₹ 29 lakhs received in the accounting year relevant to assessment years 1995-96 and 1996-97 respectively, despite the fact that he has accepted the findings of the AO that funds have not been utilized for the objects for which Trust was set up. However, in regard to the remaining amounts received by way of donations, the CIT(A) observed that these were invested in the busine....
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....these appeals, the grievance of the revenue was that the CIT(A) was not justified in allowing status of the Trust as against AOP taken by the Assessing Officer. However, this ground of the revenue was rejected by the Tribunal and it was held that the assessee was allowed the status of the Trust correctly. Against these findings of the Tribunal, the Revenue has not filed any appeal before this Court. The grievance of the revenue common to both the assessment years was that the CIT(A) was not justified in allowing exemption in respect of donations of ₹ 25 lakhs and ₹ 29 lakhs received from Tilok Tirath Vidyawati Chuttani Charitable Trust , during the accounting year relevant to assessment years 1995-96 and 1996-97 respectively which were liable to tax. Further grievance of the Revenue is that the assessee was not entitled to exemption in respect of such donations under sections 10(22), 11 and 13 of the Act. Connected with this is the ground of appeal of the Revenue that while taking such view, the CIT(A) has admitted and relied on additional evidence in violation of provisions of Rule 46A of Income-tax Rules, 1962. It was also argued that the certificate dated 2-5-2002 fr....
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....thout giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission. (3) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the AO has been allowed a reasonable opportunity- (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty, whether on his own motion or on the request of the AO under clause (a) of sub-section (1) of sect....