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TMI Blog2015 (5) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... r s. 148 to be valid without appreciating that it was mandated to be issued in the status of AOP and not trust. 4. That the learned CIT(A) has further erred in allowing eligibility of claim under s. 10(23C)(iiiad) when the appellant trust was conceived and formed for the sole purpose of dissemination of education." 3. It is observed that these appeals were filed late by 27 days. The assessee submitted three separate applications for condonation of delay of 27 days in filing the appeals. In support of the reasons for late filing of the appeals, the assessee submitted three separate affidavits of Shri Nachhatar Singh who is managing the affairs of Baba Kartar Singh Dukki Educational Trust since its formation as Secretary of the trust. It is stated that at the relevant time he was 76 years old and on account of various health issues as are usually associated with the growing age was experiencing regular knee and back problems. The consolidated order passed by CIT(A)-II, Ludhiana was received well within time but the same could not be handed over to the counsel at Ludhiana for the abovestated reasons. Further, the assessee has little knowledge that the order as received by him was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , coolers, gym and for improving literacy. To augment the income of the trust, settler of the trust Shri Jagpal Singh Dukki donated another sum of Rs. 10 lakhs to the corpus of the trust on 26th Dec., 2003 by issue of a cheque drawn of his savings bank account with Union Bank of India bearing No. 302 which was again got converted into fixed deposit for. five years with the same stipulation of quarterly interest to be credited to the current account of the trust to be utilized as above and was so utilized. The accounts of the trust were being regularly audited from inception of its formation on 4th Feb., 2000 and returns of income along with audit report as prescribed as per r. 17B in Form No. 10B from the asst yr. 2000-01 were being filed declaring income at 'nil' by claiming exemption under s. 10(23C)(iia)/l0(23C)(iiiad) of the Act being an educational institution. The assessee filed an application under s. 12A/12AA of the Act for registration as a charitable trust which was not followed up with the issue of registration remaining in a state of flux. Finally, another application dt. 31st May, 2007 under s. 12AA for grant of registration was filed before, the CIT, who vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook into the objects of the trust and whether the trust is carrying on the said objects of the trust. The objects of the present assessee trust were in the line of education and the assessee was running both school and college. Once a trust is engaged in the activities of providing education by way of setting up school and college, which is one of the recognized object of charitable activity and/no evidence having being brought on record, that the said activities of the trust were not genuine, the said trust is entitled to registration under s. 12AA of the Act. The satisfaction of conditions of ss. 11 to 13 of the Act is to be gone into by AO, while determining the income of trust at the time of assessment and not to be gone into by CIT, while granting registration under s. 12AA of the Act. The next objection of the CIT is that the assessee is both trust and society is recognized system and once it is registered as trust, provision of election are not applicable to trusts. The next objection of the CIT that trustee and their successor were lifelong member and hence activities of trust being not genuine are not correct, as the rule against perpetuity is not applicable in case of pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal purpose and wholly or substantially financed by the Government. The conduct of the assessee is thus not in accordance with the provisions of law. Keeping in view the above facts and circumstances of the case, a letter No. 3385, dt. 6th Nov., 2007 was issued to the Trust for hearing on 15th Nov., 2007 at 4.30 PM but nobody attended the office. Again a letter was issued to the Trust for hearing on 26th Nov., 2007 at 4.30 PM, which was served on 22nd Nov., 2007. In response to this letter also, nobody attended the office nor filed any written reply in support of its application for registration. In view of the above facts and circumstances of the case, registration under s. 12AA of the IT Act, 1961 is hereby rejected." 7. Notices under ss. 143(2) and 142(1) of the Act along with detailed questionnaire were issued to the assessee. In response to the notices, the assessee submitted the requisite information. During the course of assessment proceedings, the AO asked the assessee as to why the status of the assessee should not be treated as AOP as registration has not been granted by the learned CIT, Ludhiana. The AO observed that during assessment years under consideration, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elief. According to the learned counsel for the assessee, rational connection postulates that there must be direct nexus or live link between material coming to the notice of the AO and the formation of belief that there has been escapement of the income of the assessee from assessment in the particular year. Reliance was placed on the decision of Hon'ble Kolkata High Court in the case of Berger Paints (2004) 266 ITR 462 (Cal). He also submitted it is well settled law that it is not any and every material, however vague and indefinite or distant, or remote and far fetched which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. Shri Tej Mohan Singh, learned counsel for the assessee further submitted that as per reasons recorded by the AO, the assessee trust had opening balance of Rs. 15,59,245 and since no returns have been filed for the preceding years, prima facie there were reasons to belief that a part of the donations exceeding Rs. 1 lac had been received by the assessee trust during the asst. yrs. 2001-02, 2002- 03 and 2003-04 which is/was per se unfounded and incorrect as the returns of income for all these thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y when the Tribunal had allowed registration under s. 12AA and has been upheld by the Hon'ble jurisdictional High Court, may not be inferred escapement of the income. 13. In view of the above, Shri Tej Mohan Singh, learned counsel for the assessee submitted that the reassessment orders passed by the AO and confirmed by the learned CIT(A) are liable to be quashed. Accordingly, it was submitted that the reassessment orders may be quashed being invalid. 14. Shri Manjit Singh, learned Departmental Representative, on the other hand, submitted that the grounds taken by the assessee before Tribunal have been appropriately adjudicated by the learned CIT(A) by relying upon various case laws. He further submitted that as the returns filed by the assessee were processed under s. 143(1) of the Act only, these cases were rightly subjected to reassessment proceedings as per the ratio laid down by the Hon'ble apex Court in the case of ACIT Vs Rajesh Jhaveri Stock Brokers (P) Ltd. 291 ITR 500 (S.C). shri Manjit Singh, Id. DR also relied on the decision of Hon'ble apex Court in the case of Raymond Woollen Mills Ltd. v. ITO 236 ITR 34 (S.C) wherein the Hon'ble Supreme Court held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy the assessment records/returns of income submitted by the assessee prior to recording of the reasons. For all the three years, AO reopened the assessments for the following reasons (similar reasons for asst. yrs. 2002-03 and 2003-04) as recorded under s. 148(2) of the Act: "The assessee trust was created on 4th Feb., 2000. For the relevant period the assessee has not filed any IT return. Moreover no returns for the asst. yrs. 2002-03 and 2003-04 have been filed. The perusal of IT return filed for asst. yr. 2004-05 further reveals that the assessee had shown opening balance of trust funds at Rs. 15,92,245. As no returns have been filed for years preceding to asst. yr. 2004-05, prima facie I have reasons to believe that a part of above donation/trust fund exceeding Rs. 1 lakh have been received by the assessee during asst. yr. 2001-02. The same is income of the assessee as per s. 2(24)(iia) of IT Act, 1961 which has escaped assessment. I have therefore reasons to believe that the assessee' s income of more than Rs. 1 lakh has escaped assessment. Thus proceedings are initiated under s. 147 of IT Act, 1961 by issuing notice under s. 148. (Sd/-) (Rajesh Patwal) Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three years had been filed on 26th Dec., 2003 in Form No. 3A. This fact is clearly borne out from the assessment orders for asst. yrs. 2001-02 to 2003-04 as are being reproduced hereunder: Assessment Year 2001-02 "Return declaring income of Rs. nil, after claiming exemption of Rs. 73,996 under s. 10(23C)(iiiab) of the IT Act, 1961, filed and processed under s. 143(1) of the IT Act, 1961. Subsequently the case was reopened under s. 147 and issue of notice under s. 148 since the assessee was not granted registration under s. 12AA(1)(b)(ii) of the IT Act, 1961 by the CIT- I, Ludhiana vide order dt 30th Nov., 2007." Assessment Year 2002-03 "Return declaring income of Rs. nil, after claiming exemption of Rs. 91,565 under s. l0(23C)(iiiab) of the IT Act, 1961, filed and was processed under s,143(l) of the IT Act, 1961. Subsequently the case was reopened under s. 147 and issue of notice under s. 148 since the assessee was not granted registration under s. 12AA(1)(b)(ii) of the IT Act, 1961"___ Assessment Year 2003-04 "Return declaring income of Rs. nil, after claiming exemption of Rs. 16,724 under s. 10(23C)(iiiab) of the IT Act, 1961 filed and was processed under s. 143(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessments. In fact, these are the findings given by the learned CIT-I, Ludhiana for refusing to grant registration to the assessee trust. It is clear that both the authorities below have wrongly considered the findings given by the learned CIT-I, Ludhiana as reasons recorded for reopening of the assessments. Therefore, on this score alone, the reassessment orders are not sustainable. For argument sake, if the reasons recorded for reopening reproduced by the AO in the assessment orders and by the learned CIT(A) are ignored, even then the reasons recorded on 29th Jan., 2008 by the AO for reopening of the assessments for the year under consideration, are invalid because the AO proceeded for reopening of the assessments on non-existent and factually incorrect basis and has not applied his mind and did not verify the assessment records/returns of income submitted by the assessee prior to recording of reasons. In the case of Sagar Enterprises (supra), the Hon'ble Gujarat High Court held (headnote) as under: "That it was apparent that the fact of non-filing of the return for the asst. yr. 1991-92 had weighed with the respondent for arriving at the satisfaction about the failu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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