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TMI Blog2025 (5) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... both the parties and are being disposed off by this consolidated order. 3. At the outset, the ld. AR has submitted that the matter in ITA No. 39/JP/2025 may be taken as a lead case for discussions. Before moving towards the facts of the case we would like to mention that the assessee in this appeal has raised the following grounds; ITA no. 39/JP/2025 1. The impugned order u/s 147/148 rws 144B dated 21.03.2022, as well as the action taken u/s 147/148 and notices are bad in law, illegal, invalid, void-ab-intio on facts of the case, for want of jurisdiction, without proper approval and satisfaction of higher authorities u/s 151 of the Act, and also barred by limitation and various other reasons and hence the same may kindly be quashed. 2. Rs. 28,50,637/-: The ld. CIT(A) has grossly erred in law as well as on the facts of the case in confirming the addition of Rs. 28,50,637/- made by the ld. AO by denying the claim/exemption u/s 10(23C)(iiiad) for which the assessee is or was entitled, also erred in not considering the material available on record in their true perspective and sense. Hence the claim so denied or disallowed by the ld. AO is being totally contrary to the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly all material facts necessary for his assessment for that Assessment year. After recording satisfaction "reasons to believe" and obtaining the prior approval of the competent authority, notice u/s 148 of the Act was issued on 24/03/2021. In the instant case, the record reveals that the assessee has received an interest income of Rs. 26,94,361/- during the year, however, the assessee has not filed return of income for the year under consideration. Therefore, an assessee by issuance of notice u/s. 148 was required to file the ITR within a month of receipt of the notice. In response, the Assessee filed its return of income on 23.04.2021. Thereafter statutory notices were issued to the assessee. Ld. AO noted that the assessee filed a return of income declaring nil income after claiming exemption u/s. 10. During the year, the assessee is in receipt of Income from other sources of Rs 28,50,637/- and the same was claimed exempt u/s. 10 of the Act. By virtue of section 139(4C) every educational institution referred to in sub-clause (ad) or sub-clause (vi) of Section 10(23C) whose total income in respect of which such institutions is assessable, without giving effect to the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12AA of the Act vide Reg.No.CIT Exemption, Jaipur/12AA/2018-19/A/10496 only on 19.02.2019. Thus, ld. AO noted that no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under section (1) of Section 139. Since the return of income for the Assessment Year 2013-14 filed by the assessee after due date i.e., on 30/03/2019, the exemption claimed under section 10 amounting Rs. 28,50,537/- was not considered as allowable. Based on that contention ld. AO prepared the draft assessment order and sent to the assessee to show cause why the assessment should not be completed based on those observations vide show cause dated 12.03.2022. In response thereto, the assessee reiterated the submissions made earlier. The same is not considered for the facts discussed in the order and accordingly ld. AO made disallowance of Rs. 28,50,637/-. 5. Aggrieved from the order of the National Faceless Assessment Center, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: 5.1 I have carefully considered the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified under section (1) of Section 139. Hence, the appeal is hereby disallowed. Further, it is also pertinent to mention that the appellant will be eligible to claim the said deduction if it files a valid return of income for the relevant year after getting the necessary approval from the competent authority under the provision of section 119(2) of the IT Act, 1961. 6. Resultantly, the appeal of the appellant is dismissed. 6. Feeling dissatisfied with the above order of the ld. CIT(A), the assessee preferred the present appeal. In support of the grounds so raised by the assessee, ld. AR of the assessee, has filed the written submissions which reads as follows; "The brief facts of the case are that the assessee is a Society registered under the Raj. Society Act on dt.11.03.2008. Vide Reg. Certificate No. 99/Jhalawar/2007-08 dt.11.03.2008 (PB3-14 ) and Society is having main objects of to general public utility, for the purpose of education training and other advancement of object of general public utility, the photocopy of the registration certificate with Registrar of cooperative societies, Kota along with copy of constitution of the society are enclosed. At present the So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtification of registration u/s. 12A and /or 10(23C) and to explain why the claim of exemption should not be denied as assessee has not filed the return of income within the due date as stipulated u/s. 139(1) of the Act. In response thereto the assessee file reply on dt. on 27.12.2021(PB23-24), by stating that "the society was formed for execution of memorandum of agreement between the President of India, The governor/administrator of the State Rajasthan and as Industrial partner for "upgradation of government Industrial Training Institute (ITI) Jhalawar under "Public Private Partnership: (PPP). We further inform that a certain fund was given to IMC by Central Govt. as Interest free loan for obtaining the purpose of the aforesaid PPP Scheme, IMC made the FDR of the amount received from the Govt. and interest earned on it was utilized for the objects of the society. During the year under consideration, the assessee society is eligible for exemption u/s. 10(23C)(iiiad) of the Act, provides that the income earned by any university or educational institution existing solely for educational purposes and not for the purposes of profit, shall be exempt from tax so assessee is also eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional institute and the receipts is below Rs. 1.00 crore receipts or income is exempt to that extent and after filling the return the income comes Nil. Only due to not filling the return being the income below taxable or nil or exempt it cannot be said that there was escapement of income, Which shows that there was no escapement of income by the assessee,. Hence if there is neither the escapement of income by the assessee nor proved then the notice issued u/s 148 is invalid. However the ld. CIT(A) has not denied our these submissions and not speak any word. 2. Reason to believe and not reason to suspect: 2.1 It is further submitted that even under the amended law by the finance act 1989 the condition precedent or words, which continues right since inception till date, are "reason to believe" and not "reason to suspect". The word "believe" has to be understood in contradistinction of suspicion or opinion. Belief indicates something concrete or reliable. Kindly refer Gangasharan & Sons Pvt. Ltd. 130 ITR 1 (SC), and ITO v. Lakhmani Mewal Das, (1976) 103 ITR 437 (SC). 2.2 The belief of the Officer should be as to escapement of income and the belief should not be a product of imag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brar Ahmed Qasami v/s ITO Ward 46(5) in ITA 3177/Del/2017 dt. 01.06.2018 it has been held that "7. After considering rival submissions, I am of the view that reopening of the assessment is bad in law. The A.O. merely noted in the reasons that since there is an information available on ITD System of the Department that assessee has made cash deposits of Rs. 14,75,000/- in his Bank Account, therefore, income chargeable to tax has escaped assessment. The ITAT, Delhi Bench in the case of Shri Arvind Yadav (supra) considering the identical facts held that the deposit in the bank account per se cannot be the income of the assessee. This is a mere suspicion of the A.O. based on incorrect fact that income chargeable to tax has escaped assessment and accordingly, quashed the reopening of the assessment. The findings of the Tribunal in para 8 of the Order are reproduced as under : "8. In this case the Assessing Officer after obtaining the AIR information wanted to verify the same and issued a letter of enquiry to the assessee. The Assessing Officer thus did not apply his independent mind to the information received from AIR. Since no proceedings were pending before the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment for any assessment year, with respect to which he had "reason to believe" to be so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under s. 147. To put it in other words, if in the course of proceedings under s. 147, the AO were to come to conclusion, that any income chargeable to tax, which, according to his "reason to believe", had escaped assessment for any assessment year, did not escape assessment, then, the mere fact, that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the AO may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under s. 147. It is a different story that for such other income, the AO may have recourse to such other remedies, as may be available to him under law, but then, once it is found, that the income, regarding which he had "reason to believe" to have escaped assessment, is not found to have escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment, if such issue comes to his notice in the course of proceedings under this section even though said issue did not find mention in the reasons recorded and the notice issued under s. 148. Since there was confusion prevailing with regard to the powers of the AO to assess or reassess on the issues for which no reasons were recorded, Expln. 3 came to be inserted as clarificatory. Now, after the insertion of Expln. 3, the position is that the AO may assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under s. 147 though the reasons for such issue were not included in the reasons recorded in the notice under s. 148(2) on the basis of which he had initiated proceedings under s. 147.-Vipan Khanna vs. CIT (2002) 175 CTR (P&H) 335 : (2002) 255 ITR 220 (P&H) and Travancore Cements Ltd. vs. Asstt. CIT (2008) 219 CTR (Ker) 359 : (2008) 305 ITR 170 (Ker) held no longer good law. The heading of s. 147 is "Income escaping assessment" and that of s. 148 "Issue of notice where income escaped assessment". Sec. 148 is supplementary and complimentary to s. 147. Sub-s. (2) of s. 148 mandates reasons for issuance of notice by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt-Scope-Addition in respect of items other than the one on which notice in given-Income alleged to have escaped assessment in reasons recorded not having been actually found to. (e) Also refer AVG Construction Pvt. Ltd v/s ITO Ward 6(2) Jaipur in ITA no. 90/Jp/2020 dt. 02.09.2021 under the same facts and circumstances copy is enclosed. (f) Recently the Hon'ble ITAT Jaipur Bench in the case of Shri Shambhu Dayal Saraf v/s IT in ITA No. 558/Jp/2013 dt 02.07.2018 58 TW 355(Jp), has also held the same view copy of order is enclosed (g) Also refer latest decision of this Hon'ble ITAT in the case of Pappu Qureshi v/s ITO in ITA No. 314//Jp/2019 dt. 28.04.2020 Sec. 292B is no applicable: S. 292B could not be invoked to correct a foundational/substantial error as it was meant so as to meet jurisdictional requirement-Therefore, both impugned notice and impugned order were quashed and set aside-It was made clear that this order would not prohibit Revenue from issuing a fresh notice for reassessment, if requirement of Ss 147/148 were satisfied, including limitation period therein Kindly refer Sumit Balkrishan Gupta v/s ACIT 104 CCH379(Bom.HC)(2019). Thus, cannot be said that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-Therefore, Assessing Officer held that these amounts are to be taxed separately at Maximum Marginal Rate in terms of proviso to Section 164(2)- Total amount was treated as income by invoking Section 13(1)(b) read with Section 11(5)-Amount said to have received as donation was added back to income of assessee under Section 69A-CIT(A) affirmed view taken by Assessing Officer except for granting partial relief such as with regard to claim for carry forward of depreciation etc-Tribunal after taking note of factual position, more particularly, that addition which was made in reassessment proceedings having been deleted by CIT(A) reassessment on heads which were not part of reasons recorded for reopening assessment is not sustainable-Held, in case of GKN Driveshafts (India) Ltd. Versus Income-Tax Officer and Ors., (2003) 259 ITR 19 (SC) it was held that assessing officer is bound to furnish reasons within a reasonable time and noticee is entitled to file their objection to such notice and assessing officer is bound to dispose of same by passing a speaking order- Though Explanation 3 inserted by amendment empowers assessing officer to assess income in respect of any issue which has esca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt squarely applies to facts of case since Assessing Officer did not make any addition for which reopening was made-Assessing Officer made various other additions other than addition for which assessment was reopened-In view of above, respectfully following above decision of jurisdictional High Court, reassessment order passed by Assessing Officer under Section 143(3) read with Section 147 is bad in law-Assessee's grounds allowed. Prayer: Thus in view of the above facts, circumstances and the legal position of law the proceedings so initiated and assessment so passed may kindly be quashed. 4. The ld. AO has denied the exemption u/s 10(23C)(iiiad) only on the reasons that the assessee has not filed the ITR in the stipulated time limit u/s 139(i). Only on this reasons the ld. AO denied the exemption u/s 10(23C)(iiiad) of the act and the ld. CIT(A) has also confirmed the action of the ld. AO in very summarily manner without rebutting our WS and details. 5. No denial of exemption u/s 10(23C)(iiiad) for the reason not filling the ITR u/s 139: 5.1 It is submitted that ld. AO has disallowed the exemption on the ground that the assessee has not filed its ROI u/s 139 and Audit rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of provisions of Sec. 10(23C)(iiiad) has not filled the ITR and under impression that the receipts/income below the limit. However when the notice u/s 148 has come to the notice of the assessee it filed its ROI income and Audit report which are a valid return rather accepted by the ld. AO. Hence for the same institute must not be punished. 6. However it is also settled legal position of law that if an assessee has not filed his ROI and filed ROI and not shown any claim or deduction in the ROI filed and claim the same during the course of assessment proceedings even although during the course of appellate proceedings. The Hon'ble courts has allowed the same by stating that if the assessee is entitled for any claim as per law cannot be denied for the reason that he has not claimed in the ROI. For this purpose kindly refer. 6.1. In the case of Amina Ismi lRangari vs. ITO (2017) 51 CCH 0595 MumTrib it has been held that Capital gains-Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house-Rejection of claim of exemption-Case of assessee was re-opened and notice u/s 148 was issued-Assessee filed her return of income d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor of Income Tax (Exemption) v/s Manav Bharati Child Institute & Child Psychology 20 SOT 517(Del) held that though filing of Form No. 10 in respect of accumulation of Income of surplus income is mandatory to claim exemption u/s 11 and 12, the same can be filed at any time during the pendency of assessment proceeding and benefit of accumulation of income cannot be denied. * In the case of Haryana Welfare Board v/s CIT 83 CCH 268(P&H) it has been held that information in form 10 was required to be furnished at any time before the finalization of the assessment proceedings. * In the case of Association of Corporation & Apex Societies of Handlooms v/s ADIT 351 ITR 287(Del) it has been held that when the revenue re-open the assessment by invoking S. 147 of the said Act the assessee would not be remediless and would not be barred from furnishing Form -10 during those assessment proceedings. * Also refer Raghavan Nair vs. ACIT 402 ITR 0400 (Ker) (2018) The ratio of the above judgments are also applicable in the present case. 6.4. In the case of CIT v/s Hardeodas Agarwalla Trust 198 ITR 511(Cal) it has been held that It is now well-settled that a procedural provision, ordinarily, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d original return claiming exemption under s. 10(23C)-Later, when it was known that it was not eligible for exemption under s. 10(23C), filed a revised return claiming exemption under s. 11 along with supporting documents like audit report-AO treated the revised return as non est, as original return has been filed after due date and completed assessment on the basis of original return denying exemption under s. 11-Not justified-AO himself had passed the order under s. 143(3) in respect of the original return- AO was aware that the assessee was entitled to exemption under s. 11, if not under s. 10(23C)-Department should not take advantage of the ignorance of the assessee-Duty cast on the AO to ask information at the time of scrutiny-AO had not done so in the instant case-Filing of audit report is only procedural and not mandatory-Same can be furnished before completion of assessment- Assessee is entitled to exemption under s. 11 6.4. In the case of Kunhitharuvai Memorial Charitable Trust vs. DCIT (2019) 6 TMI 595 (Cochin) it has been held that Exemption u/s. 11 - filing of return of income belatedly - returns of income were filed consequent to the notice u/s. 153A - the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2017" on insertion of clause (ba) in Sub section (1) of section 12A is quoted as under: "the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income-tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income-tax Act." "Thus, for a trust registered u/s 12AA of the Act to avail the benefit of exemption u/s 11 shall inter-alia file its return of income within the time allowed u/s 139 of the Act. Accordingly, orders u/s 143(1)(a) in those cases in which demand has been raised on this issue may please be rectified." 7. Hence, the Assessing Officer cannot deny the grant of exemption u/s. 10(23C)(iiiad) 8. The Coordinate Bench of ITAT, Delhi Bench in the case of United Educational Society v. JCIT (2019) 7 TMI 738 (ITAT Delhi) has held as under: Reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of which were still to be filed. Thus, the Legislature has thought fit to make this amendment applicable from next assessment years onwards and not even to the current A.Y. 2017-18. While interpreting the amendment made by the Finance Act No. 2 of 2014 whereby section 11 (6) was inserted so as to exclude such assets while computing depreciation in respect of which deduction has been allowed as an application of income u/s 11. In view of the above, we hold that AO was not justified in denying the benefit of the exemption u/s 11 of the Act and we direct the AO to compute the income in accordance with the provision of section 11. Ground no.6 is accordingly allowed. Here also the position are the same. 9. On perusal of the ld. CIT(A) order it is clear that he has not given any adverse finding on our contentions, plea judgments etc. He passed the order in very summarily manner. Which show he was not having any adverse judgments against the assessee on the issue. 9. Prayer : In view of the above facts, submissions and legal position your honours are requested to delete the entire additions/disallowance and quash the order of the ld. AO and oblige. Note : we also would lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A). Ld. DR stated that no benefit be given if the assessee do not file the ITR. 10. In the rejoinder the ld. AR of the assessee submitted that once the income is exempt under the provision of the Act and it does form part of total income and requirement to file the ITR was not made applicable for the year under consideration. 11. We have heard the rival contentions and perused the material placed on record. Vide ground no. 1 the assessee challenges the impugned order on its legality and vide ground no. 2 the assessee challenges the impugned order on its merits. Record reveals that the assessee is a trust / society undertaking Educational activities and falls under the provision of section 10(23C)(iiiad) and even the ld. AO did not dispute that claim of the assessee. For the year under consideration based on the information in possession of revenue ld. AO noted that the assessee had income chargeable to tax has escaped assessment. Therefore, there were reasons to believe that the Assessee has not disclosed fully and truly all material facts necessary for his assessment for that Assessment year. After recording satisfaction "reasons to believe" and obtaining the prior appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Foundation for Communal Harmony; or (iiiaa) the Swachh Bharat Kosh, set up by the Central Government; or (iiiaaa) the Clean Ganga Fund, set up by the Central Government; or xxxxx xxxxx xxxx (iiiad) any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of the person from such university or universities or educational institution or educational institutions do not exceed five crore rupees; or As is evident from the above provision and as it was applicable for the year under consideration the limit of aggregate annual receipt for the year under consideration was made applicable was up to Rupee one crore. Now coming to the requirement of filling the return of income by these institution section 139(4C) would be applicable which reads as under: (4C) Every- (a) research association referred to in clause (21) of section 10; (b) news agency referred to in clause (22B) of section 10; (c) association or institution referred to in clause (23A) of section 10; (ca) person referred to in clause (23AAA) of section 10; (d) institution referred to in clause (23B) of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport from the following judicial precedents ; CIT v. Children's Education Society [2013] 34 taxmann.com 285/358 ITR 373 (Karnataka)Section 10(23C) of the Income-tax Act, 1961 - Charitable/religious purpose (Society running institutions for educational purpose) - Assessment year 2005-06 - Whether where assessee- society runs several educational institutions, in terms of section 10(23C)(iii)(ad), income from each educational institution if they are not receiving any aid from government wholly or substantially in respect of which aggregate annual receipt does not exceed Rs. 1 crore received by assessee, is not included while computing annual total income of assessee - Held, yes [Para 22] [In favour of assessee] Jat Education Society v. Dy. CIT [2011] 10 taxmann.com 127/47 SOT 35 (Delhi) Section 10(23)(iiiab) of the Income-tax Act, 1961, r.w.r 2BC of the Income-tax Rules, 1962 - Educational institutions - AYs 2003-04 and 2004-05 - Assessee society was running several educational institutions - In course of assessment, AO found that aggregate of annual gross receipts of three educational institutions run by assessee exceeded monetary limit of Rs. 1.00 crore as prescribed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are setting aside the order of the ld.CIT(A) by allowing the ground no 2 raised by the assessee. Ground no. 1 challenges the re-opening of the case of the assessee since we have considered ground no. 2 on merits ground no. 1 raised by the assessee becomes academic. Ground no. 3 charge of interest is consequential and ground no. 4 is general. In the results, the appeal of the assessee in ITA no. 39/JP/2025 stands allowed. 12. The facts of the case in ITA Nos. 41/JP/2025 are similar to the facts of the case in ITA No. 39/JP/2025 and we have heard both the parties and persuaded the materials available on record. The bench has noticed that the issues raised by the assessee in this appeal No. 41/JP/2025 is equally similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts and various grounds raised by both the parties. Hence, the bench feels that the decision taken by us in ITA No. 39/JP/2025 for the Assessment Year 2013-14 shall apply mutatis mutandis in the case of Institute Management Committee ITI Jhalawar in ITA Nos. 41/JP/2025 for Assessment Year 2014-15. In terms of these observations, the appeal of the assessee in ITA No. 41/JP/2024 is also all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtunity to the assessee to furnish reply. Thereafter, the Assessing Officer prepared draft assessment orders and sent the same to the assessee in respect of each assessment year. Show cause notices dated 11.02.2022 were also issued. However, the assessee did not furnish any response to the said draft assessment order/show cause notices. That is how, the two assessment orders were passed. Challenge to the Assessment Orders 7. When the matters came up in appeals by the assessee, challenging the above said assessment orders, Learned CIT(A) dismissed the appeals. Ground for disallowing of exemption claimed under sec. 10 8. The department has disallowed exemption claimed u/s 10 of the Act on the ground: "the assessee having failed to furnish returns of income in each assessment year or before the due date specified under subsection (1) of Section 139 of the Act" For the same reason, Learned CIT(A) has upheld the assessment orders. Contentions 9. Ld. AR for the assessee-appellant has contended that the assessee was not required to file any income tax return, relating to the any of the two assessment years as the assessee had entered into agreement with the Government for upgrad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imum amount, which is not chargeable to income tax. Sub-section (4C) further provides that all the provisions of this Act shall, so far as may be, apply as if such return were a return required to be furnished under sub-section (1). 13. Significantly, sub-section (1) of Section 139 provides that a return of income during previous year is to be furnished on or before the due date. 14. Herein, nothing has been brought to our notice from the side of the department that the total income of the assessee-appellant (without giving effect to the provisions of section 10) exceeded the maximum amount not chargeable to income tax. In this situation, there is merit in the contention raised on behalf of the assessee-appellant that the assessee was not required to furnish a return of income either u/s 139(1) or section 139(4C) of the Act. Was there any Time limit prescribed under the Act for filing of Return of Income under section 148 during the relevant Assessment Years? 15. Admittedly, the assessee was required to file return(s) of income for the said 2 Assessment Years, and that too, in reponse to the notices under section 148 of the Act. Notices u/s 148 of the Act were issued on 24.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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