TMI Blog2017 (4) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 31.03.2007, amounted to ₹ 52,01,115.28, i.e., much below the prescribed limited of ₹ 1 crore. The above apart, it is patent on record that in the case of Arya Shiksha Mandal, the governing body of the assessee school, in scrutiny assessment, vide order dated 29.11.2012 (APB 2007-08 Pg 12 – 13), the status as well as the nature of service of the Mandal was accepted as that of a charitable educational society. From the above discussion, it is evident that both the reasons recorded by the AO for reopening the completed assessments of the assessee are based on factual errors, rendering the notice issued u/s 147, finding its basis in the aforesaid reasons, to be an invalid notice - Decided in favour of assessee - ITA Nos.154 & 155(Asr)/2016, & S.A. Nos.5 & 6(Asr)/2016 - - - Dated:- 15-7-2016 - SH. A.D. JAIN, JUDICIAL MEMBER, AND, SH. T.S. KAPOOR, ACCOUNTANT MEMBER For the Appellant : Sh.Y.K. Sud, CA For the Respondent : Sh. A.N. Mishra, DR ORDER PER A.D. JAIN, JM: These two appeals filed by the assessee are directed against the separate orders of ld. CIT(A), Jalandhar, each dated 23.02.2016 for the assessment years 2007-08 2008-09, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 10(23C)(vi) of the Act filed by the assessee institution for the A.Y. 2012-13 was rejected by the ld. Chief Commissioner of Income Tax, Ludhiana vide his office order dated 04.09.2013, on the ground that the society, namely, Arya Shiksha Mandal, which runs the assessee institution, has aims and objectives which are partly religious in nature and also on the ground that the assessee institution did not exist solely for educational purposes. The assessee institution was also not found to be registered under section 12A/12AA of the Act. Accordingly, proceedings under section 147 of the Act were initiated by the Assessing Officer in this case by issuance of notice under section 148 of the Act on 06.03.2014, which was stated to be served on the assessee institution on 07.03.2014. In response to the notice under section 148 of the Act, the assessee institution, vide letter dated 31.03.3014, had submitted that the return of income for the A.Y. 2007-08, filed by the assessee institution on 29.10.2007, may be treated as its return in response to the notice under section 148 of the Act. During the assessment proceedings, the assessee institution had also been provided with the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee institution is not existing solely for educational purposes, which is the precondition for getting approval under section 10(23C)(vi) of the Act. In other words, it was concluded that the assessee institution was not utilizing the whole of its receipts for the purposes of the aims and objectives of the assessee institution. While coming to the said conclusion, the Memorandum of Association of the Arya Shiksha Mandal, which runs the assessee institution, was also taken into consideration. According to this Memorandum, the money/fund of the society was also to be utilized for teaching Vedic Dharma, Brahmacharya, Aryan Culture, Classical Sanskrit and the Vedas. Accordingly, it was held by the ld. Chief Commissioner of Income Tax, that for the purpose of exemption under section 10(23C)(vi) of the Act, the institution had to exist solely for educational purposes and exemption was not to be granted if the assessee did not exist solely for educational purposes. 3.2 It was also noticed that the assessee institution had filed a writ petition before the Hon ble High Court against the order of refusal, which is still pending for adjudication. 3.3. In view of the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (APB 20); that the ld. CIT(A) has failed to consider that for A.Y. 2010-11, the assessee was allowed exemption u/s 10(23C)(iiiad) of the Act and there was no reason for the department to take a different stand for the year under consideration and for that purpose, to reopen the completed assessment illegally; that the ld. CIT(A) has erred in overlooking the fact that the Tribunal, for the assessment years 2006-07, 2007-08 2009-10, vide its order dated 20.03.2015, took due note of the assessee s contention that despite the existence of the religious aims and objects of Arya Shiksha Mandal, the governing body of the assessee s school, the assessee had not engaged in the promotion of any such object of religious nature and it had only imparted education based on the educational courses by the Guru Nanak Dev University, Amritsar and that no religious teaching having been imparted by the assessee as education, the requirement of section 10(23C)(iiiad) of the Act was met; that the ld. CIT(A) has also failed to consider that in the case of Arya Shiksha Mandal too, for the assessment year 2010-11, vide order passed u/s 143(3) of the Act, exemption u/s 10(23)(iiiad) was allowed, as is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by assessee u/s 10(23C)(vi) for Assessment Year 2012- 13 and onwards has also held vide her order No. CCIT/Ldh/JB/10(23C)(vi)/218/2013- 14/2050 dated 04.09.2013 that the assessee institution is not existing solely for educational purposes . It is pertinent to mention here that the assessee institution is neither registered u/s 12AA nor approved u/s 10(23C)(vi) of the Income Tax Act, 1961 for the year under consideration. In view of above stated facts, I have reason to believe that income/surplus of the assessee chargeable to tax to the tune of ₹ 22,18,321/- has escaped from assessment for the assessment year 2007-08. Therefore, approval under section 151(2) of Income Tax Act is sought to initiate assessment proceeding in this case for A.Y. 2007-08. Date: 05.03.2014 (Ratinder Kaur) Dy. Commissioner of Income tax, Circle-II, Jalandhar. 8. Thus, there were two reasons recorded by the AO as reasons to believe escapement of income. The first reason was that the objectives of the assessee school are partly religious in nature, since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above stated facts and in the circumstances of the case, 1 am of the considered opinion that the Assessing Officer is fully justified in reopening the assessment in the case of the assessee institution in view of the fact that the exemption claimed by the assessee society under section 10(23)(iiiad) of the Act was not available to it and as the assessee institution was not existing solely for education purposes. In the result, the grounds No. 1, 2 and 3 of appeal taken by the assessee institution are dismissed. 10. Thus, the ld. CIT(A) upheld the two reasons recorded by the AO to be good reasons for reopening the assessments. The assessee has challenged both these reasons, as above. Let us examine the merits of the assessee s challenge. 11. Apropos the AO s first reason to believe escapement of income, i.e., since the governing body of the assessee school has partly religious aims and objects, the objectives of the assessee school are also partly religious in nature, the assessee had raised objections to the reasons recorded for reopening the assessment for the A.Y. 2007-08. A copy of these objections is at APB for AY 2007-08, pages 3 4. In para 4 thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 10(23c)(iiiad). Furthermore, the assessee has not filed the accounts of the society as a whole and has tried to mislead the department by submitting the accounts of the school only in the return of income. The provisions of the section as narrated below is very clear that exemption u/s 10(23C)(iiiad)are available to an educational institution if it exists solely for educational purposes if the educational institution does not exist solely for educational purpose and exist for other purpose also , the exemption u/s 10(23C)(iiiad) cannot be allowed . 14. Hence, the AO was of the view that since the parent body of the assessee school has objects which are of a religious nature and since the assessee school does not have any objectives of its own, the objectives of the assessee school are also partly religious in nature, whereas exemption u/s 10(23C)(iiiad) of the Act is available to an educational institution, if it exists solely for educational purposes. The ld. CIT(A) dittoed this view of the AO. 15. However, neither of the Authorities below, nor the ld. DR before us has been able to repudiate the assessee s categorical assertion that no religious education has ever been i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act; that the reasoning that the trust had intention to carry out business and the institution was not existing solely for educational purposes, would amount to giving a very narrow meaning to the section, whereas the predominant object test was to be applied; that it was not that the Chief CIT had come to the conclusion that the trust was doing some other business and the business was generating substantial amounts which would override the main objectives of the trust, which pertained mainly to the cause of education; that in the absence of any finding that the trust was doing business, the application could not have been rejected only on this ground that one of the clauses in the objectives provided such right to the trust; that the prescribed authority could have made it conditional by holding that if any such business was carried out, the registration granted was liable to be cancelled; that, therefore, the order refusing to grant approval of exemption u/s 10(23C) could not be justified solely on the ground that in view of a clause which provided that the trust could run a business, it would be debarred as such from registration on the ground that it was not existing solel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence that any amount has been spent for any purpose other than education. It is important to point out here that PSEB while granting affiliation to the school w.e.f. 16.03.2004 has recognized that school as educational institution worth granting affiliation after satisfying the fulfillment of their conditions where as on the other hand the CCIT while considering the registration application in Assi. Year 2012- 2013 has given a baseless finding without any evidence that school is not existing solely for education purpose. This finding of the CCIT cannot be made a base for re-opening the assessment for Asst. Year 2007-2008. 22. The AO met this objection, observing as follows: Point no.3: The Worthy CCIT, Ludhiana rejected the application filed by the assessee u/s 10(23C)(vi) of the Act for the A.Y. 2012-13 o the same ground that the assessee society is not existing solely for education purposes. There is no difference under section 10(23C)(iiiad) except than that of monetary limit of Rs. one crore. The societies having receipts less than one crore are not required to get the registration but the assessee-society must exist solely for education purposes. 23. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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