2017 (1) TMI 180

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....ool Society. It is running a Model Public School at Bhiwadi. The assessee filed its return of income for the relevant period declaring income at NIL after claiming exemption u/s 10(22) of the Act of Rs. 16,15,090/- and Rs. 9,76,030/- for the A.Y.1997-98 and 1998-99 respectively. The returns was processed u/s 143(1) of the Act at NIL income. The AO subsequently found that the assessee had not obtained an approval from the appropriate authority for claiming exemption from tax u/s 10(23C)(iv)/10(22). He accordingly issued a notice u/s 148 of the Act on 25.03.2004 after recording reasons in this regard. The ld. CIT(A) vide para 4.3 to 8 of his order observed that he is of the opinion that the impugned notice has been issued on mere pretext with....

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....of the assessee for the impugned year, therefore, cannot be said to have escaped assessment. The words 'reason to believe' in section 147 contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons. 3. This Court while admitting the appeals framed the following substantial questions of law: DB INCOME TAX APPEAL NO.98/2008 "(i) Whether under the facts and circumstances of the case and in law the order of the Tribunal is perverse in quashing the proceedings initiated u/s.147/148 of the Act.?" "(ii) Whether under the facts and circumstances of the case and in law the order of the Tribunal is perverse in not giving any finding with regard to the activities of the assessee so....

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....and has given finding in paragraph 64 & 65 more particularly in Para 66 and 67 which reads as under: "(64) In Ground No.5, the assessee is aggrieved that the ld. CIT (A) has erred in holding that the interest income of Rs. 18,11,744/- was not exempt u/s 11 and 12 of the I.T. Act and was taxable under the head Income from other sources." "(65) The Brief facts in the grounds are that the AO has taxed the building fund amounting to Rs. 3,16,500/-, development fund amounting to Rs. 7,79,250/- annual fees amount to Rs. 10,01,500/- and interest on FDRs amounting to Rs. 18,11,744/-. It has been argued by the ld. AR that building fund and development funds were received by the assessee towards specific objects. Therefore, it cannot be equated w....