TMI Blog2020 (3) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... could be taken by the AO merely for non-registration of trust for earlier years. Explanatory Memorandum to Finance (No.2) Bill, 2014, which sought to amend section 12A explains the objects and reasons for making such amendments. The explanation makes it clear that it was in order to provide relief to such trusts in respect of which, due to absence of registration u/s 12AA tax liability got attached though otherwise they were eligible for exemption by fulfilling other substantive conditions that the amendment was brought in. That being so, denying such benefit to a trust like the assessee who had obtained registration u/s 12AA during the pendency of the appeals filed against the orders of the assessing authority, by narrowly interpreting the term, 'pending before the assessing officer' so as to exclude its pendency before the appellate authority, will be doing violence to the provisions of the Statute and, as such, liable to be interfered with. Under the Scheme of the Act, sections 11 and 12 are substantive provisions which provide for exemptions to a religious or charitable trust. Sections 12A and 12AA detail the procedural requirements for making an application to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to appreciate that the re-opening of assessment is bad in law since the said re-opening is not permissible as per the first and second proviso to section 12A [2] of the Act, on the facts and circumstances of the case. 3. The learned Commissioner of Income-tax [Appeals], failed to appreciate that the order of re-assessment passed under section 147 of the Act is bad in law and void-ab-intio as the mandatory conditions to invoke the provision of section 147 did not exist and thereby issuing the notice under section 148 was not present or complied with, on the facts and circumstances of the case. 4. The learned Commissioner of Income-tax [Appeals], failed to appreciate that the order of assessment passed by the learned assessing officer is bad in law for the reason that notice under section 148 of the Act is issued in the name of M/s. Adi Shakthi Bandanthamma Kalamma Charitable Trust and the reasons recorded for re-opening of assessment, other statutory notices and the assessment is concluded and framed in the name of M/s. Bhandanthamma Mathu Kalamma Trust consequently the entire proceedings become void ab into, on the facts and circumstances of the case. 5. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot constitute income in the hands of the appellant Trust, on the facts and circumstances of the case. 11. Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies itself liable to be charged to interest under section 234 B of the Income Tax Act on the facts and circumstances of the case. The appellant contends that the levy of interest under section 234A and 234B of the Act is also bad in law as the period, rate, quantum and method of calculation adopted by the learned assessing officer on which interest is levied are not discernible and are wrong on the facts of the case. 12. The appellant craves leave to add, alter, amend, substitute or delete any or all of the grounds of appeal urged above. 13. For the above and other grounds to be urged during the course of hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice. 3. Briefly stated the facts of the case are that the assessee is a Trust which is constituted under a registered trust deed. The assessee-trust is managing and administer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. 2012-2013 17,56,560 6. 2013-2014 10,65,430 3.2 The assessee being aggrieved by the impugned orders of the A.O. u/s 143(3) r.w.s. 147 of the Act, preferred appeals before the CIT(A). The CIT(A) disposed of the appeals by confirming the additions made by the A.O. 3.3 Aggrieved by the orders of the Income Tax Authorities, the assessee is in appeal before us. 3.4 The learned AR submitted that the issue involved in these appeals is with regard to non-consideration of first and second proviso to section 12A(2) of the Act and thereby reopening the assessment u/s 147 of the Act. 3.5 The contentions of the assessee as regard to the legal issue on re-opening of assessment are as under: i. The re-opening of assessment is bad in law since the said re-opening is not permissible as per the first and second proviso to section 12A [2] of the Act, on the facts and circumstances of the case. ii. The learned assessing officer is not justified in law in changing the status from AOP [Trust] as per the return to Association of Persons, which is not permissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r applicability of sections 11 and 12. (1). ................................... (2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made:] [Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctional High Court in the case of CIT vs. K. Shyamaraju [Trustees] Et Others, reported in 189 ITR 392. [ii]. The appellant wishes to submit that the learned Assessing Officer has issued the statutory notices and conducted the assessment proceedings on the Appellant under the status of AOP [Trust], which is the status under which the Appellant has filed its return of income. Further, the Notice issued under section 148 of the Act specifies the Permanent Account Number which was allotted to the appellant in the status of Trust, which demonstrates that the notice under section 148 of the Act is issued in the status of Trust. However, the learned Assessing Officer has passed the impugned order of assessment for the above mentioned assessment year by holding the Appellant Trust to be Trust treated as AOP. Nothing is discernable from the order of assessment as to who are the members of the AOP, what is the basis of arriving the said position. [iii]. It is a settled position of law that where the Assessee files the return of income under a particular status and the Assessing Officer wishes to assess the Assessee under a different status, then the Assessee is required to be put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings before and consequent order of assessment framed in the name of the Appellant are thus rendered void-ab-initio and bad in law and are required to be quashed in-toto 3.8 The order of assessment passed by the assessing officer is bad in law for the reason that notice under section 148 of the Act is issued in the name of M/s. Adi Shakthi Bandanthamma Kalamma Charitable Trust and the reasons recorded for re-opening of assessment, other statutory notices and the assessment is concluded in the case of the appellant is framed in the name of M/s. Bhandanthamma Mathu Kalamma Trust consequently the entire proceedings become void ab into. [i] The entire proceedings initiated under the provisions of section 147 r.w.s. 148 of the Act is void ab inito for the reason that the learned assessing officer has recorded the satisfaction in the name of M/s. Bhandanthamma Mathu Kalamma Trust . Whereas, the notice under section 148 of the Act is issued in the name of M/s. Adi Shakthi Bandanthamma Kalamma Charitable Trust . [ii] It is submitted that the notice issued under section 148 of the Act being defective, the subsequent proceedings would not result in a valid assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot the sufficiency of the reasons, will be justifiable. The expression therefore predicates that the Income-tax Officer holds the belief induced by the existence of reasons for holding such belief, It contemplates existence of reasons on which the belief is founded, and not merely a belief in the existence of reasons inducing the belief; in other words, the Income-tax Officer must on information at his disposal believe that income has been underassessed by reason of failure fully and truly to disclose all material facts necessary for assessment. Such a belief, be it said, may not be based on mere suspicion; it must be founded upon information . [iii] Reliance is also placed on the decision of Hon'ble Apex Court in the case of Indian Oil Corporation Vs. Income Tax Officer, reported in 159 ITR 956 has held as under: reason to believe is not the same thing as reason to suspect. The Apex court reiterated its view expressed in the case of Sheo Nath Singh v AAC, 82 ITR 147 . [iv] The Hon'ble Supreme Court in Ganga Saran and Sons Pvt Ltd vs ITO and Others [130 ITR 1] has reiterated that : It is well settled as a result of several decisions of this court that two d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year. Unless the requirements of clause (a) or clause (b) of section 147 are satisfied, the Income-tax Officer has no jurisdiction to issue a notice under section 148 . [vii] The Hon'ble Supreme Court in ITO V. Lakshmani Mewal Das [103 ITR 437] wherein it was a case arising under section 147[a]. The Hon'ble Supreme Court reiterated that the reasons for the formation of the belief by the ITO, must have a rational connection or relevant bearing on the formation of the belief. It was further explained that this aspect is justicable issue to be examined by the Court. [viii] The Hon'ble High Court of Calcutta in Equitable Investment Co. (P.) Ltd. vs ITO G-Ward And Others [174 ITR 714] has held that : The powers of the Income-tax Officer to reopen assessments though wide, are not plenary. The words of the statute are 'reason to believe' and not 'reason to suspect'. The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of A. Nagappa V. ACIT, wherein the reasons of the Assessing Officer, were elaborate, were reproduced. Yet the Hon'ble High Court proceeded to quash the notice issued to the Assessee under section 148 of the Act. This Order was the subject matter of challenge at the instance of Revenue in W.A. No.928/1991 (unreported) before the Division Bench of the Hon'ble Karnataka High Court which held as under : More than the ADI's report which the learned judge characterized as evasive and speculative, it is the statement of reasons for the reopening which is evasive and speculative. We find no basis therein which could have led the appellant to entertain reasons to believe that income chargeable to tax had escaped assessment for the relevant assessment year. It is imperative that the reasons should have a rational and relevant nexus to the formation of such belief. We do not find such nexus . [xi]. In the light of the aforesaid judgments of various High Courts and Supreme Court, it is clear that to reopen an assessment under section 147 of the Act, there should be reason to believe that there is escapement of income and should not be based on suspicion as in the instant ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tio and the same requires to be cancelled. The appellant places reliance on the decision of the Hon'ble Gujarat High Court in the case of M/s. Hyoup Food and Oil Industries Limited Vs. ACIT, [2008] 307 ITR 115. [v] It is further contended that the reasons recorded by the learned assessing officer and the notice issued under section 148 of the Act assessing officer are without assumption of proper jurisdiction. It is submitted that the assessing officer who has recorded the reasons for re-opening on 16/03/2015 and the officer issuing notice under section 148 of the Act dated 23/03/2015 did not possess requisite jurisdiction as is evident from the Transfer Memorandum for transfer of case as submitted by the learned assessing officer to the another assessing officer at Ward - 1[4], Mysuru, which was given to the appellant alongwith the notice of change in incumbent issued by the officer at Ward - 1[4] Mysuru dated 04/02/2016. [vi] Thus, even on this count as well the entire procedure as adopted by the learned assessing officer under section 148 and 147 of the Act have been without assumption of proper jurisdiction and consequently the entire reassessment which was framed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this regard the appellant wishes to state and submit that the appellant is a religious Trust and the appellant has many followers and devotes. The appellant was in the process of constructing a samudhaya bhavan and was collecting contributions for the same. The appellant during the impugned assessment years had collected the monies from various donors for a specific purpose of construction of Samudhaya Bhavan for the benefits of its devotees. [ii] It is submitted that the receipts which has been treated by the learned assessing officer as income and brought to tax are receipts which is capital receipts and for a specific purpose for construction of Samudaya Bhavan and the said receipts are towards the corpus of the appellant Trust. Consequently the additions made by the learned assessing officer and confirmed by the learned Commissioner of Income-tax [Appeals], treating the corpus as income is not correct and the same requires to be deleted in toto. [iii] It is submitted that during the course of assessment proceedings and also in the appellate proceedings, it was clearly stated that the said receipts were received by the appellant for a particular purpose and cause and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. Section 12 of the Act contains an exclusionary provision which exempts from treatment as income any donation made with a specific direction what is shall form part of the corpus of the trust. The words not being contributions made with specific direction that they shall form part of the corpus of the trust or institution appearing in the parenthesis in section 12 of the Act clearly exempt corpus donations made to a trust or institution. [viii] It is further submitted that the provisions of section 11[1][d] of the Act also exempts corpus donations. Thu, the combined reading of sections 2[24][iia], 11[1][d] and 12 of the Act makes it clear that donations or contributions received by a trust or institution is though income in the hands of the trust or institution, yet by virtue of the exclusionary provisions contained in section 12 of the Act and also in view of the provisions of section 11[1][d] of the Act, corpus donations made with a specific direction or purpose that it shall form part of the corpus of the trust or institution is kept out of the purview of income . Thus the legal position is that the donations or contributions received by a trust or institution consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to be treated as income and bought the same to tax accordingly. The learned CIT[A] allowed the appeals preferred by the assessee and held that the voluntary contributions received for the specific purposes does not fall within the definition of income under section 2[24][iia] of the Act. That being aggrieved by the order of the learned CIT[A] the department preferred appeal before this Hon'ble Tribunal and the Hon'ble Tribunal vide its order dated 14/08/2015, held as under at para 5.3.4 5.3.5 at page 13 of the said order. 5.3.4.1n coming to the aforesaid conclusion the Hyderabad Bench of the ITAT has also relied upon the decisions of the ITAT, Delhi Bench in the case of Smt. Basanthi Devi (supra) and Sri Charon Lal Garg Education Trust (sura) and in the case of Gaudiya Granth Anved Trust (supra) wherein similar issue raised has been considered by both the Delhi and Agra Benches of the 1TAT, We also find that the Hon'ble Delhi High Court in the case of Basanti Devi Et Sri Chakhan Lal Garg Education Trust vide its order in ITA no.927/09 dt. 23.9.2009 has also affirmed the view taken by the Hon'ble ITAT in holding that corpus donation cannot be regarded as inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 152 [Hyd. Tribunal]; [xiv]. In view of the above submissions the appellant humbly pray and submit that the corpus collections received by the appellant which has been treated as income by the learned assessing officer for the assessment years 2008-09 to 2013-14 and erroneously confirmed by the learned Commissioner of Income-tax [Appeals], requires to be deleted for the advancement of substantial cause of justice. 3.13 Levy of Interest Under Section-234 A and 234 B of the Act: [i], The levy of interest under section 234 A 234 B are not in accordance with law as the rate, period and quantum on which interest has been levied is not discernible. The levy is not in accordance with law and further the appellant was not given the basis and method of calculation of interest under section 234 A and 234 B of the Act for the purpose of verification of the correctness of the charge of interest. [ii]. It is submitted that it seems that the learned assessing officer has levied interest under section 234 B of the Act to the entire amounts determined by the learned assessing officer in the order of assessment. The learned assessing officer ought to have levied interest if at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astened even though they may otherwise be eligible for exemption and fulfill other substantive conditions. However, the power of condonation of delay in seeking registration was not available. 5.2 This clearly goes to prove that the first proviso to section 12A(2) was brought in the statute only as a retrospective effect with a view not to affect genuine charitable trusts and societies carrying on genuine charitable objects in the earlier years and substantive conditions stipulated in section 11 to 13 have been duly fulfilled by the said trust. The benefit of retrospective application alone could be the intention of the legislature and this point is further strengthened by the Explanatory Notes to Finance (No.2) Act, 2014 issued by the Central Board of Direct Taxes vide its Circular No. 01/2015 dated 21.1.2015. Apparently, the statute provides that registration once granted in subsequent year, the benefit of the same has to be applied in the earlier assessment years for which assessment proceedings are pending before the Id. A.O., unless the registration granted earlier is cancelled or refused for specific reasons. The statute also goes on to provide that no action u/s147 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole and accordingly the said insertion of first proviso to section 12A(2) of the Act with effect from 1.10.2014 should be read as retrospective in operation with effect from the date when the condition of eligibility for exemption under section 11 12 as mentioned in section 12A provided for registration u/s.12AA as a pre-condition for applicability of section 12A. 5.6 Further, the Kolkata Tribunal observed as under: 6.11. We also hold that though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quam pereat, i.e to make it workable rather than redundant. Applying this legal maxim, it would be just and fair to hold that the amendment in section 12A is brought in the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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