TaxTMI 
TaxTMI 
2013 (3) TMI 191
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.... Act. 4. The relevant facts are that the return filed for the A.Y. 1999-2000 under consideration u/s. 139 of the Act was processed u/s. 143(1)(a) at nil income. The A.O initiated re-opening proceedings on the following 4 reasons : a. The first one is that the assessee has filed only the income and expenditure account and the balance sheet with the return and no schedules to the balance sheet are submitted. b. The second reason is that the assessee has earned rent of Rs.9,78,10,785/-. The object of the assessee is to run educational institutions and not to give properties on rent. The rental income is to be taxed as income from house property/business income separately. c. The assessee has shown receipts of Rs. 26,51,778/- on sale of books and Rs.43,83,154/- on account of income from printing press. These receipts are out of the purview of the objects of the trust and are taxable as business income. d. The assessee has shown in the balance sheet 20% profit from Bharati Sahakari Bank and 20% from Bharati Grahak Bhandar amounting to Rs.17,34,764/-. This receipt is taken to the corpus of the trust and it should have been credited to the Income and Expenditure Account. 5. The A.O.....
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....scrutiny assessment on the next day does not make any addition on any of these issues, it indicates that while re-opening the assessment for this year, there was no application of any judicial mind by the A.O. 9. The Ld. A.R. submitted that none of the reasons on which the A.O has reopened the assessment u/s. 147 of the Act justify the re-opening. The Ld. A.R. advanced his argument on each of the reasonings shown by the A.O for the reopening and has referred page nos. 1 to 263 of the paper book filed on behalf of the assessee. These documents are copies of list of institutions run by the trust; registration certificate dated 13.9.73;...trust deed of Bharati Vidyapeeth, order of the I.T.A.T, Pune restoring registration U/s. 12A in the case of assessee trust, letter dated 14.11.2007 of the ld. CIT (C ) as opportunity to the assessee for compulsory audit; assessee's letter dated 29.11.2007 objecting compulsory audit, order granting approval U/s. 142(2A) dated 3.12.2007 of ld. CIT(C ), Pune; A.O's letter dated 18.12.2007; notice U/s. 153C dated 30.03.2007; A.O's letter dated 10.10.2007 enclosing therewith the satisfaction note for proceeding U/s. 153C of I.T. Act in the case of the as....
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....aw. In this regard the ld. D.R. placed reliance on the decision of Hon'ble Supreme Court in the case of Raymond Woolen Mills Ltd. Vs. ITO (1999) 236 ITR 34(SC). He submitted further than no assessment u/s. 143(3) was made during the A.Y. 1999- 00 under consideration, hence there is no question of change of opinion initiating the reopening proceedings under section 147 Explanation 2(b). The ld. D.R. submitted further that every assessment year is an independent unit in itself hence it is not affected by past or future assessment. So far as the first contention of the ld. A.R. is concerned that the A.O initially had supplied reasons for re-opening (made available at page no. 65 of the Paper Book) was not related to the assessee, we do not find substance in this contention of the Ld. A.R. since when it was pointed out by the assessee to the A.O, he realized the mistake and supplied correct copy of the reasons on the basis of which, the A.O had initiated the re-opening proceedings. At the maximum, in our view, it is a case of human error which on realization was corrected by the A.O on its first available opportunity. FINDINGS OF TRIBUNAL ON VALIDITY OF EXISTENCE OF REASONS TO BELIE....
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....has earned rent of Rs.9,78,10,785/-. He observed that the object of the assessee is to run the Educational Institutions and not to give properties on rent. Therefore, the rental income is to be taxed as income from house property/business income separately. The submission of the ld. A.R. in this regard remained that the assessee Trust has many buildings which are used for its Educational Institutions. The institutions show the rent payable to the Head office. This is because, the assessee has to take into consideration the expenditure on rent with institutions and this exercise is required for the purposes of determining the fees structure by the Government Committee. He submitted that out of Rs. 9.78 Crores, the assessee's Head Office has shown Rs. 8.84 Crores as rent received from its own Institutes. Thus, it is not a rental income from a third party, but it is a book entry from the Institute to the Head Office and both are the arms of the assessee Trust. He submitted that the balance rent about Rs. 90 lakhs is receivable by the assessee from Bharati Sahakari Bhandar and Bharati Sahakari Bank which are Co-operative Societies located in the buildings of the assessee Trust. The Ld....
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.... income of the Trust. Besides, such rental income has already been shown by the assessee in its income and expenditure account and hence, it is not a case of escapement of income. We thus find that the reason(b) shown by the A.O for escapement of assessment of income was not having live link with formation of belief that rental income has escaped assessment. Reason No. (c) 13. The next reason shown by the A.O is that the assessee is earning income from sale of books and printing press. The contention of the Ld A.R. on this reason remained that assessee is having students in lakhs. Thus, it has to make arrangements for providing books, exercise books, examination papers and syllabus, study material etc., to the students. It is for that purpose the assessee is having a press and is also having income from sale of books. Thus, this activity is incidental to the object of the Trust. He submitted that this income has been reflected duly in the assessee's income and expenditure account. The Ld. A.R submitted further that Section 11(4A) itself states that a Charitable Trust can have a business income and such income is exempt if it is applied for charity and is incidental to the objects....
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....tance in this reason (c ) as well to form a reason to belief that there was escapement of assessment of income earned from sale of books and printing press to justify the re-opening in this regard by the A.O. Reason No. (d) 14. The fourth and last reason to believe shown by A.O to justify the re-opening is that the assessee Trust is getting 20% profit from Bharati Sahakari Bank and Bharathi Grahak Bhandar as a donation to the corpus and this should have been included in the income and expenditure account. 15. The submission of the assessee remained that both the above Societies i.e. Bharathi Sahakari Bank and Bharathi Grahak Bhandar had passed resolutions long back to the effect that every year they will deposit 20% of their profits to the assessee Trust as a corpus donation. Such donation was received by the assessee for a number of years and it was never taxed by the A.O in the assessee's hands in any of the past years. It was submitted that for the A.Ys. 2000-01 and 2003-04, the same facts were prevalent and the A.O had not taxed these donations in the assessment u/s. 143(3) for these years. Copies of these assessment orders have been made available a page Nos. 66 and 68 of t....
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....O in the reasons recorded has not mentioned any aspect of the search on Shri R.D. Shinde, Accountant or the cancellation of Registration etc., and hence no cognizance thereof can be taken for deciding the validity of re-opening. In support he placed reliance on the decisions cited hereinabove in para no. 9 and the following decisions : 1. Siemens Information System Ltd. Vs. ACIT, 293 ITR 548 (Bom) 2. Devideyal Rolling Mills Vs. ACIT,285 ITR 514 (Bom) 3. CIT Vs. Rainee Singh 330 ITR 417 (Del.) 4. Gwalior Rayon Silk Mfg. Co. Vs. Raghavan 150 ITR 12 (Bom) 5. ITO Vs. Lakmani Mewal Das 103 ITR 437 (SC) 6. Anand Kumar Saharia 232 ITR 533 (Guj.) 7. German Remedies Ltd. 285 ITR 26 (Bom.) 8. CIT Vs. Max India Ltd. 295 ITR 282 (SC) 19. Without prejudice to the above submissions, the Ld. A.R pointed out that the Tribunal vide its order dated 19th day of September 2008, in ITA No. 1793/PN/2008 has already restored the registration u/s. 12A granted to the assessee which was cancelled by the Ld CIT. Copy of the said order of the Tribunal has been made available at page Nos. 18 to 28 of the paper book. 20. The Ld. D.R., on the other hand, tried to justify the validity of re-opening. He ....
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....reason must have a live link with the formation of belief, held the Hon'ble Supreme Court. In the case of Vijaykumar M. Hirakhanwala (HUF) Vs. ITO (Supra), the business of the assessee was being carried on its factories located at four places and was being controlled and managed by its office at Bombay and the expenditure/loss incurred by the Bombay Office had all along been allowed to be set off against other income of the assessee. The Hon'ble Bombay High Court was pleased to hold that A.O. could not reopen the assessment by merely stating that there is hardly any activity at the said office, in the absence of any specific material to show that the expenditure has been erroneously allowed in the past. It was held that reason recorded for reopening the assessment is totally vague and can not constitute material or information so as to form nexus or reason to believe that income has escaped assessment. It was held that reopening is based on pure change of opinion and therefore notice under Section 148 was quashed and set aside. We thus find substance in the contention of the Ld. A.R. that the A.O was not justified in drawing reasons to believe that donation of 20% of their profit t....
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....he decision in the case of CIT Vs. Rajesh Jhaveri Stock Brokers P. Ltd. (Supra) relied upon by the ld. D.R. is an different issue regarding principle relating to 'change of opinion' in the context of return of income processed u/s. 143(1)(a), whereas in the present case validity of existence of reasons has been questioned. In the case of Rallies India Ltd (Supra) after the notice u/s. 148 was issued, there was a retrospective amendment in law and on that basis, the revenue sought to justify the reasons recorded. It was held that the reasons recorded cannot be revalidated by later retrospective amendment to law. It was held by the Hon'ble Bombay High Court that the validity of the notice issued u/s. 148 must be dismissed with reference to the reasons recorded. In the case of Siemens Information System Ltd. Vs. ACIT (Supra), the Hon'ble Bombay High Court while allowing the Writ Petition held that it would be clear from the reasons given that the authority proceeded on the presumption that the law applicable was the law after the amendment and not the law in respect of which, the petitioner had filed the return for the year 1999-2000. This by itself clearly demonstrated that there w....
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....that a Charitable Trust can have a business income and such income is exempt if it is applied for charity and is incidental to the object of the Trust. Thus, earning income from sale of books and printing press mean for providing study materials to the students can be treated as incidental to the objects of the Trust. Similarly, getting 20% profits from Bharati Sahakari Bank and Bharati Grahak Bhandar as a donation to the corpus of the assessee was not required to be included in the income and expenditure account. Under these circumstances, we concur with the contention of the Ld. A.R that there was no reasons to believe on the part of the A.O during the year that some taxable income has escaped assessment, as discussed above. We thus hold that the A.O was not justified in invoking the provisions of Section 147 of the Act to initiate re-opening proceedings in the present case. In consequence, the initiation of re-opening proceedings is not valid and assessment made u/s. 147 read with Section 143(3) of the Act in furtherance thereto is also not valid. It is ordered accordingly. We would like to mention over here that principle of Res judicata is not applicable in the cases of Income....