TaxTMI 
TaxTMI 
2017 (4) TMI 339
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....iate that the A.O. before reopening the assessment failed to form any belief that income had escaped assessment and he has no tangible material in his possession by which a reasonable belief could be formed for escapement of income. 3. That the ld. CIT(A0 failed to appreciate that the AO has failed to dispose off the objections raised by the assessee in respect to the reasons recoded for reopening by way of speaking order. 4. That the CIT(A) was not justified in sustaining the action of the AO of denial of exemption amounting to Rs. 22,18,321/- claiming u/s 10(23C) (iiiad) by the assessee. 5. That the ld. CIT(A) has passed a non-speaking order by ignoring all the judgments relied upon by the assessee including that of this Bench and jurisdictional Punjab & Haryana High Court." 3. The brief facts of the case are that the assessee institution/school, which is being run by a society, namely, Arya Shiksha Mandal, had filed its return of income for the year under consideration on 29.10.2007, declaring therein Nil income after claiming the excess of income over expenditure as exempt under section 10(23C)(iiiad) of the Act. The excess of income over expenditure had been shown ....
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....discussion made in the assessment order. 3.1. The Assessing Officer noticed that the assessee institution had been claiming its entire income (excess of income over expenditure) as exempt under section 10(23C)(iiiad) of the Act, as the receipts of the assessee institution in earlier years were less than Rs. 1,00,00,000/. When the receipts of the assessee institution exceeded Rs.I.00.00,000/- in A.Y. 2012-13, it applied to the competent authority for getting approval under section 10(23C)(vi) of the. Act. However, approval to the assessee institution under section 10(23C)(vi) of the Act for the A.Y. 2012-13 was refused by the ld. Chief Commissioner of Income Tax, Ludhiana, vide order dated 04.09.2013, on the ground that the assessee institution did not exist solely for educational purposes and the society which runs the assessee institution has aims and objectives which are religious in nature. The Assessing Officer further noticed that the society which runs the assessee institution had aims and objectives other than that of providing education and the aims and objectives are also of a religious nature. It had also been noticed by the Assessing Officer that on an identical issue....
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....sed income of Rs. 22,18,321/-. While completing the assessment, the Assessing Officer had made an addition of Rs. 22,18,321/- to the returned income of the assessee institution, which represents excess of income over expenditure disclosed by the assessee institution and claimed as exempt under section 10(23C)(iiiad) of the Act. 3.4 The action of the Assessing Officer in reopening the assessment under section 147 of the Act, with regard to denial of exemption under section 10(23C)(iiiad) of the Act and thereafter bringing the excess of income over expenditure declared by the assessee institution at Rs. 22,18,321/- to tax was challenged by the assessee institution before the ld. CIT(A). 4. By virtue of the impugned order, the ld. CIT(A) dismissed the assessee's appeal, bringing the assessee in further appeal before us. 5. Apropos Ground no.1, the ld. counsel for the assessee has contended that the ld. CIT(A) has gone wrong in confirming the AO's action of reopening the completed assessment of the assessee; that while doing so, the ld. CIT(A) has erred in basing his conclusion on two factors, i.e., that the Chief Commissioner of Income Tax rejected the assessee's application ....
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.... DR has placed strong reliance on the impugned order. It has been contended that since the CCIT had rejected the assessee's application for the A.Y. 2012-13, for grant of approval u/s 10(23C)(vi) of the Act and since the main aims and objectives of the governing body of the assessee school, i.e., Arya Shiksha Mandal, are religious in nature, which fact has nowhere been denied, the AO had a perfectly good prima facie reasonable cause to reopen the completed assessment of the assessee, which action of the AO has rightly been upheld by the ld. CIT(A). 7. We have heard the rival contentions on this preliminary issue challenging the ld. CIT(A)'s action of confirming the reopening of the completed assessment of the assessee. We have also perused the material placed on record. The AO recorded the following reasons of belief of escapement of income in the assessee's case, for the A.Y. 2007- 08 (APB-2): "Reasons for reopening u/s 147 The Return of income for the assessment year 2007-08 was filed by the assessee on 29.10.2007 declaring total income of Rs. Nil after claiming the entire surplus as exempt u/s 10. The return was processed u/s 143(1) of the Income Tax Act. As per info....
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....sing Officer as made by him in the assessment order as well as in the remand report. I have also considered the written submissions of the assessee filed vide letter dated 24.10.2015 as well as its counter comments on the report of the Assessing Officer. I have also considered various judicial pronouncements relied upon by the assessee institution including that of the order of the Hon'ble jurisdictional ITAT in the cases of Doaba College and KMV College for the A.Ys. 2006-07 & 2007-08 also run by the society namely Arya Shiksha Mandal and other material placed by the assessee institution on record. On careful consideration of the rival contentions, it has been noticed that Worthy Chief Commissioner of Income Tax, Ludhiana who is a quasi-judicial authority for granting approval under section 10(23C)(vi) of the Act vide his order dated 04.09.2013 has rejected application of the assessee institution for the A.Y. 2012-13 for granting approval under section 10(23)(vi) of the Act. In view of refusal to the assessee institution for the A.Y. 2012-13 for claiming exemption under section 1-0(23)(vi) of the Act and a/so in view of the fact that part of the main aims and objectives of the soc....
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....g education on the pattern on PSEB which is a recognized pattern in India for education purposes. This fact can be verified from the audited accounts of the school. Even otherwise without prejudice to the submissions made above teaching of Sanskrit and Vedas, Aryan culture and Brahmcharya is not religious as alleged by you. Even for argument sake these objects are treated to be religious also no cognizance can be taken to these objects since the school has not carried out any activity according to these objects during the year or ever since its inception and even till date. In this regard your kind attention is drawn towards the latest judgment of Allahabad High Court in cases reported in 359 ITR 322 and 360 ITR 168 which support the contention of the assessee." 12. This objection of the assessee stands reproduced in para 2.2 of the assessment order for the A.Y. 2007-08 also. 13. This objection of the assessee was rejected by the AO, by holding as follows: "There is no doubt that the Assessee is running a school and the gross receipts of the school are less than Rs. One crore. The Assessee claimed exemption under section 10(23C)(iiiad). From the information provided by the....
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....on 2004-05. It has been contended that this affiliation continues hitherto, in situ. There is no dispute about the aforesaid affiliation of the assessee school with the PSEB, confirming the assessee's stand that the assessee school is imparting education under the PSEB pattern, which is a duly recognized educational pattern all over the country, having been prescribed in the State of Punjab as the Government recognized Sr. Secondary pattern of education. 16. The Department has not made out any case that the assessee school has been imparting any religious education. The only basis adopted by the Authorities below is that the objects of the assessee's school are absent and it is the objects of its governing body, Arya Shiksha Mandal, which are also the objects of the assessee school and these objects include propagation of Vedic teachings and other teachings of religious nature, i.e., Vedic Dharma, Bramcharya, Aryan culture classic Sanskrit and the Vedas. Now, it is incomprehensible as to how the mere existence of certain objects which, in the opinion of the Taxing Authorities, amount to objects of a religious nature, could form the basis for nursing a belief of escapement of inc....
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....sibility that the society may, in the future, pursue activities which are not charitable, or closely connected with education, for making profit, cannot be a ground to reject grant of approval u/s 10(23C)(vi) of the I.T. Act. In the present case also, the best case of the Authorities below is that since the objects of the governing body of the assessee school are partly religious in nature, income has escaped assessment. This, in keeping, with 'C.P. Vidya Niketan Inter College Shiksha Society' (supra), is unsustainable in law. 19. 'C.P. Vidya Niketan Inter College Shiksha Society' (supra), was followed in 'Neeraj Janhitkari Gramin Seva Sansthan vs. CCIT & others', 360 ITR 168 (All.). 20. It is thus evident that the AO's first reason to believe escapement of income is a non est reason. It is trite that a reason of belief of escapement of income has to be a plausible reason, and the reason here, as discussed herein before, is not a plausible reason. This reason is, accordingly, set aside and cancelled. 21. The other reason recorded by the AO was that the assessee's application for grant of approval u/s 10(23C)(vi) filed for the A.Y. 2012- 13, was rejected by the ld. CCIT. In....