AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2013 (5) TMI 943
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....39;s report submitted by the assessee. This method of valuation is incorrect and unacceptable. In these circumstances the value of building estimated by the AO and the addition on a/c of Investment construction from undisclosed sources to be restored. 2. The CIT(A) has failed to appreciate that the so called "anonymous donation" of ₹ 75 Lakhs received during the year is nothing else but capitation fees received under another name, in the ease of Vodithala Education Society vs Addl. DIT (Exemption) II, Hyderabad 20 SOT 353 (Hyd.) it was held that if an assessee charged capitation fees, it was a case of sale of education by the assessee to earn profit and it could not be considered to be a charitable organization u/s 2(15) of the I.T. Act. Hence exemption u/s 11 is not available to the assessee. 3. The CIT(A) has failed to appreciate that since the assessee is not a charitable organisation as per section 2(15) of the I.T. Act exemption u/s 11 was not available to it, and the entire surplus of ₹ 63,78,176 was taxable. 4. The CIT(A) has failed to appreciate that anonymous donations are separately taxable u/s 115 BBC read with section 13(7) of the I.T. Act 19....
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.... 55,70,700 2003-04 39,49,078 42,27,250 2004-05 88,58,225 41,30,000 2005-06 92,62,880 99,15,350 2006-07 1,34,12,860 1,43,57,700 2007-08 1,74,48,051 1,86,77,100 2008-09 2,76,61,171 2,96,09,650 2009-10 1,60,65,050 1,71,96,700 2010-11 45,45,080 48,66,050 Total 10,14,07,253 10,85,50,500/- 5. A copy of the DVO's report was supplied to the assessee for his comments and in response thereto it was contended on behalf of the assessee that difference in investment as shown by the assessee in its books of account and investment in construction estimated by the DVO was ₹ 12,29,049 which is 6.58% of the cost of construction shown in this year and the difference in the investments made and estimated by the DVO in various financial years are taken together into consideration, the final difference comes to ₹ 71,43,247 which is again 6.58% of the total investment. It was further stated on behalf of the assessee that the assessee has already made a surrender of a sum of ₹ 65 lakhs towards the cost of investment for construction of the building over and above shown in the books of account and if the said amount is taken into account, the difference would ....
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....der section 143(3) of the Act in so far as the investment in cost of construction of college building is concerned. The AO has therefore rightly rejected the books of accounts under section 145(3) of the Act and is justified in making the reference to the D.V.O. under section 142A of the Act. The contention of the appellant that specific defects were not pointed out while rejecting the books of accounts carries no force. The ground of appeal number 2.3 fails and is rejected. 6.7.1 As regards the addition of ₹ 4,14,19,828/- made by the AO is concerned, I find that the addition for the difference in the cost of construction was made by the AO on the basis of his own valuation rather than the addition being made on the basis of the difference worked out on the basis of report of the DVO requisitioned under section 142A of the Act. The addition made by the AO was necessitated as the report of the DVO requisitioned under section 142A of the Act was not received till the date of passing of the assessment order under section 143(3) of the Act. The report of the DVO received subsequently has estimated the cost of construction of college building at ₹ 10,85,50,500/- as against....
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....s to be ignored in view of the decisions cited supra. The addition of ₹ 4,14,19,829/- made by the Assessing Officer under section 69B of the Act is directed to be deleted. The appellant gets consequential relief of ₹ 4,14,19,828/-. The grounds of appeal are allowed." 6. During the course of hearing of the appeal, the ld. CIT (DR) has placed heavy reliance upon the assessment order. However, no specific defect in the order of the ld. CIT(A) has been pointed out by him. 7. The ld. counsel for the assessee, on the other hand, has contended that since the ld. CIT(A) has examined the issue in the light of the DVO's report and the assessee's contention, no interference is called for in the order of the ld. CIT(A). 8. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the lower authorities, we find that undisputedly the DVO's report was not submitted to the Assessing Officer by the DVO before the end of the assessment proceedings and he estimated the cost of construction on his own having applied the C.P.W.D. rates. The DVO's report was admittedly received during the pendency of the appeal before the ld. CIT(A) and....
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....ization for charitable activities as per section 11(1)(a) of the Act. It is also undisputed fact that the assessee is registered under section 12A of the Act and once the assessee has been recognized as a charitable institution under section 12A of the Act, its income has to be computed as per sections 11 to 13 of the Act and there is no dispute that the assessee has utilized its funds for construction of the building in order to achieve its object for imparting education. The Assessing Officer has nowhere alleged that the said college building was used for the purpose other than educational activities. The assessee himself has admitted receipt of ₹ 75 lakhs as anonymous donation and the prescribed rate of tax under section 115BBC of the Act has been paid. Therefore, the entire amount cannot be treated as capitation fee for denying benefit of exemption under section 11 of the Act. The ld. CIT(A) has properly examined this aspect before allowing the claim of the assessee that it is a charitable institution and it has already paid prescribed rate of tax as per law. Since no specific defect in the order of the ld. CIT(A) has been pointed out during the course of hearing of the a....
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....profit making activity and is not charitable in nature is not justified as the profit making is not a criteria for denial of exemption any more under section 11 of the Act. It has been held by the Andhra Pradesh High Court in the case of Governing Body of Rangaraya Medical College v. ITO [1979] 117 ITR 284, 287 that where no finding was recorded that any surplus arising from the operations of the Institution was distributed by way of profit to any individuals, the assessee-trust, the sole object of which was managing and maintaining the medical college, was an educational institution without any motive of private or personal profit. It was also observed that ".....Merely because certain surplus arises from its operations, it cannot be held that the institution is being run for the purpose of profit so long as no person or individual is entitled to any portion of the said profit and the said profit is used for the purposes and for the promotion of the objects of the institution....." 10.4.2 In the impugned case, the expenditure has been incurred for the educational activities for which the appellant has been granted registration under section 12A of the Act. The expendit....
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....d supra, the appellant is eligible for exemption under section 11 of the Act on the strength of registration granted to it under section 12A of the Act. Therefore, the appellant has to be treated as exempt in view of section 11(1)(a) of the Act. The AO is directed to recompute the income under section 11 of the Act. As an abundant precaution, it is imperative to mention here that the amount of ₹ 75,00,000/- offered by the appellant as additional amount for taxation is included in total income of the appellant under section 13(7) of the Act and taxed at prescribed rate under section 115BBC of the Act. However, this amount is to be considered for the purpose of section 11(1)(a) of the Act and the surplus, if any, has to be separately computed in accordance with the provisions of section 11(1)(a) of the Act as exemption is available to the appellant by virtue of registration granted to it under section 12A of the Act. The grounds of appeal are allowed." 12. The ld. CIT (DR) except raising a general argument has not pointed out any specific instance to establish that the assessee-institution is being run for the purpose of profit. 13. The ld. counsel for the assessee, besides p....
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....hat provisions of section 147 of the Act empowers the Assessing Officer to reopen the assessment if he has reason to believe that any income chargeable to tax has escaped assessment. The process of formation of belief has to be independent application of mind by the Assessing Officer. Where an assessment has been completed, the reopening of assessment solely on the basis of a report of DVO will amount to change of opinion and will be based on the application of mind by the DVO rather than the Assessing Officer as envisaged in the provisions of section 147 of the Act. The ld. CIT(A) examined this issue in the light of various judicial pronouncements and finally came to the conclusion that the reasons recorded by the Assessing Officer being final for reopening of assessment as held by various Courts, the notice issued under section 148 of the Act is invalid. Therefore, the Assessing Officer is not justified in completing the assessment on the basis of insufficient reasons recorded for the purpose of reopening of assessment under section 147 of the Act. He accordingly annulled the assessment framed on the basis of reasons recorded relying upon the DVO's report. The relevant observatio....
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....within three years. On the basis of the D.V.O.'s Report, which was sought during the previous assessment year, the Assessing Officer has made the addition in the earlier assessment year but the same were deleted by the C.I.T.(A). However, during the assessment year under consideration, impugned notice for reopening the assessment was issued along with the reasons which were solely based on the D.V.O.'s Report. In the light of above settled legal position, we set aside the impugned notice issued by the Department under section 148 of the I. T. Act as the same was issued solely based on the D.V.O.'s Report. In the result, the writ petition is allowed. No order to costs." 6(6)(v) Finally, Hon'ble Supreme Court in its order dated 16th February, 2010 in Civil Appeal No. 9468/2003 (reported as Assistant Commissioner of Income Tax Vs. Dhariya Construction Co. (2010), 236 CTR (SC) 226 : (2010) 47 DTR (SC) 288- ED., 328 I.T.R. 515] has held as under - 'Having examined the record, we find that in this case, the Department sought reopening of the assessment based on the opinion given by the District Valuation Officer (DVO). Opinion of the DVO per se is not an ....