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Issues: (i) Whether the reassessment proceedings were validly initiated after the expiry of four years; (ii) Whether the assessee educational institution was entitled to exemption under section 10(23C)(iiiab) as being substantially financed by the Government.
Issue (i): Whether the reassessment proceedings were validly initiated after the expiry of four years.
Analysis: The reassessment was founded on the same material that was already before the Assessing Officer in the original assessment. In the absence of any new tangible material and where the original assessment had already examined the relevant issue, reopening after four years was not sustainable. The statutory bar contained in the first proviso to section 147 applied because there was no failure to disclose fully and truly all material facts necessary for assessment.
Conclusion: The reassessment proceedings were invalid and void.
Issue (ii): Whether the assessee educational institution was entitled to exemption under section 10(23C)(iiiab) as being substantially financed by the Government.
Analysis: The expression "substantially financed" was construed on the basis of the overall governmental support received by the institution and not by applying a rigid 75% test from section 14(1) of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 in isolation. The Tribunal followed the view that governmental grants exceeding 50% of the expenditure could constitute substantial finance for the purposes of section 10(23C)(iiiab), and held that the assessee satisfied the statutory requirement.
Conclusion: The assessee was entitled to exemption under section 10(23C)(iiiab).
Final Conclusion: The Revenue's appeals failed on both validity of reopening and merits of exemption, and the orders in favour of the assessee were sustained.
Ratio Decidendi: Reassessment beyond four years cannot be sustained absent fresh tangible material and failure of full and true disclosure, and "substantially financed by the Government" under section 10(23C)(iiiab) is to be judged contextually on the overall level of governmental aid.
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