TaxTMI 
TaxTMI 
2012 (7) TMI 683
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....as deducted at source of Rs.2,82,744/- but it was deposited in the Government Account on 30.03.2007. Therefore, the assessee is not entitled for deduction of the expenditure of Rs.16,80,000/- and the same was to be disallowed. It was also noted that the assessee society debited Rs.16,20,000/- in the account of the society but Rs.60,000/- has not been reflected therein. Therefore, the AO had reason to believe that income chargeable to tax has escaped assessment. The assessee objected to the reopening of the assessment before the AO on the reasons that income of the society is exempt, rent paid was not a business expenditure and that the AO did not have sufficient material to form the belief of escapement. The AO did not accept the contention of the assessee because the CCIT rejected the application u/s. 10(23C) of the IT Act and as such, the income of the assessee had taken the shape of business expenditure and there was sufficient material with the AO to believe that income had escaped assessment. The AO, accordingly, disallowed Rs.16,80,000/- u/s. 40(a)(ia) of the IT Act. The AO made further addition of Rs.54,826/-, which is deleted by the ld. CIT. 3.1 The assessee chall....
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....nected, therefore, the same are decided together. 5. The ld. counsel for the assessee referred to the reasons for reopening of the assessment recorded by the AO on 30.05.2008 and the same is reproduced in the written submissions filed before the ld. CIT(A) at page 2 of the paper book. The reasons for reopening of assessment dated 13.05.2008 read as under : "While processing the return of income of Shri Kailash Narayan Gupta for A.Y. 2006-07, it was noticed that the society has paid rent of Rs.16,80,000/- on 17.03.2006. On this amount, society has deducted tax at source of Rs.2,82,744/-. Tax deducted at source has been deposited by the society in the government account on 30.03.2007. The tax deducted at source by the society has not been deposited within prescribed time in government account. Therefore, deduction of rent paid by the society i.e. Rs.16,80,000/- is not allowable. The society has also filed an application for exemption u/s. 10(23C) from F.Y. 2007-08. The society has enclosed Income & expenditure account for the period F.Y. 2005-06. According to it, the society has excess of expenditure over income of Rs.7,52,091/- the society has debited Rs.16,20,000/- as rent....
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....he assessee relied upon the decision of Hon'ble Supreme Court in the case of ITO vs. Lakhmani Mewal Das, 103 ITR 437, in which it was held - "The grounds or reasons which lead to the formation of the belief contemplated by section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once thee exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of grounds which induce the Income-tax Officer is, therefore, no a justifiable issue. It is, of course, open to the assessee to contend that the officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression "reason to belief" does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot ....
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....erefore, addition has rightly been made against the assessee and further, the assessee has not satisfied the requirement of law. Therefore, income of the assessee is not exempt and that the sufficiency of reasons cannot be questioned at the stage of reopening of assessment. Therefore, the orders of the authorities below are justified and the appeal of the assessee may be dismissed. 6. We have considered the rival submissions and the material on record. It is not in dispute that in subsequent assessment year 2007-08, the AO accepted the claim of the assessee that the assessee is an educational society and running school and therefore, the income of the assessee was found to be exempt u/s. 10(23C) of the IT Act because the receipts of the assessee were below Rs. 1.00 crore. The assessee filed income and expenditure account at page 43 of the paper book which shows that the total receipts of the assessee are below Rs.1.00 crore. Therefore, the provisions of section 10(23C)(iiiad) of the Act would be attracted, which provides that following income would not form part of the total income of the assessee and following income shall not be included in the income of assessee "any universi....
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....iated in proper perspective. Hon'ble Punjab & Haryana High Court in the case of Pinegrove International Charitable Trust vs. Union of India, 327 ITR 73 held - As long as an institution exists solely for educational purposes it would qualify for grant of exemption under section 10(23C)(vi) of the Act. Merely because profits have resulted from the activity of imparting education that would not change the character of the institution existing solely for educational purposes. 6.1 Hon'ble Delhi High Court in the case of DIT (Exemption) vs. Raunaq Education Foundation, 294 ITR 76 held - "The words "derived from" (or some other similar words) do not occur in section 10(22) of the Income-tax Act, 1961, and, therefore, the word "income" as occurring in section 10(22) cannot be given a restrictive meaning and must be given its natural meaning or the meaning ascribed to it in section 2(24). Hence, an assessee who is entitled to exemption under section 10(22) can claim the benefit threof for the purpose of income deemed to be chargeable to tax under section 68." Therefore, even if the assessee has not deposited the TDS on the payment of rent, but if the assessee has satisfie....