2015 (10) TMI 2232 - AT - Income Tax

Tribunal upholds CIT(A) decisions on reassessment invalidity and grants exemption to educational institution

Asst. Director of Income-tax (Exemption) -1 (2), Mumbai Versus Tata Institute of Social Science

The Tribunal dismissed the revenue's appeals, upholding the CIT(A)'s decisions on the invalidity of the reassessment proceedings and granting exemption ... Reopening of the assessment - exemption allowed u/s 10(23C)(iiiab) disallowed - CIT(A) allowed the claim - Held that:- The facts and circumstances are identical for the assessment year under consideration and the CIT(A) has decided the issue of validity of reopening by following the order of this Tribunal in the assessee’s own case. Accordingly, we do not find any error or illegality in the impugned order of the CIT(A) qua this issue. The same is upheld. claim of exemption u/s 10(23C)(iiiab) - The Tribunal in the assessee’s own case for assessment year 2007-08 [2012 (9) TMI 947 - ITAT MUMBAI] has considered the grant of more than 50% as substantial finance by Government. There is no dispute that the assessee received Government grant of more than 50% of the expenditure during the year. Therefore, this issue is covered in favour of the assessee by the order of this Tribunal in the assessee’s own case. Accordingly, we do not find any reason to interfere with the findings of the CIT(A) qua this issue. - Decided in favour of assessee. Issues Involved:1. Reopening of assessment.2. Exemption under section 10(23C)(iiiab) of the Income Tax Act.Detailed Analysis:1. Reopening of Assessment:The revenue challenged the CIT(A)'s decision that reopening the assessment was bad in law, referencing the Tribunal's decision for the assessment year 2003-04. The Tribunal had previously determined that the reassessment proceedings initiated under section 148 were invalid as they were based on a 'mere change of opinion' and lacked 'tangible material' to justify the reopening. The Tribunal emphasized that the Assessing Officer (AO) must have evidence proving that material facts were not disclosed during the original assessment. The Tribunal cited the Supreme Court's decision in CIT vs. Kelvinator of India, which underscored the necessity of 'tangible material' for reopening assessments to prevent arbitrary use of power by the AO.The Tribunal also noted that the reassessment notice was issued after the four-year limit, making it void as per section 149(1)(a). The Tribunal referenced several judgments, including those from the Bombay High Court, which supported the invalidity of reopening assessments based on previously available information. Consequently, the Tribunal upheld the CIT(A)'s decision that the reassessment proceedings were invalid.2. Exemption under Section 10(23C)(iiiab):The issue of whether the assessee, an educational institution, was entitled to exemption under section 10(23C)(iiiab) was also contested. The AO had denied the exemption, arguing that the institution was not 'substantially financed by the Government' as the government grant was less than 75% of the total expenditure. The AO had relied on section 14(1) of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971, which defines 'substantially financed' as not less than 75%.The Tribunal, however, rejected the AO's interpretation, stating that importing provisions from another legislation was incorrect. The Tribunal referred to the Karnataka High Court's decision in National Education Society, which considered a grant of 36.42% as substantial finance. The Tribunal noted that the assessee received a government grant of more than 50% of its expenditure, which was deemed substantial based on the Karnataka High Court's rulings.The Tribunal concluded that the AO erred in denying the exemption and upheld the CIT(A)'s decision to allow the exemption under section 10(23C)(iiiab). The Tribunal emphasized that the assessee's government grant exceeded 50% of its expenditure, meeting the criteria for substantial financing.Conclusion:The Tribunal dismissed the revenue's appeals, affirming the CIT(A)'s decisions on both the invalidity of the reassessment proceedings and the entitlement to exemption under section 10(23C)(iiiab). The Tribunal's judgment was pronounced in the open court on 16th September 2015.