TaxTMI 
TaxTMI 
2020 (3) TMI 626
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....iled to appreciate that the re-opening of assessment is bad in law since the said re-opening is not permissible as per the first and second proviso to section 12A [2] of the Act, on the facts and circumstances of the case. 3. The learned Commissioner of Income-tax [Appeals], failed to appreciate that the order of re-assessment passed under section 147 of the Act is bad in law and void-ab-intio as the mandatory conditions to invoke the provision of section 147 did not exist and thereby issuing the notice under section 148 was not present or complied with, on the facts and circumstances of the case. 4. The learned Commissioner of Income-tax [Appeals], failed to appreciate that the order of assessment passed by the learned assessing officer is bad in law for the reason that notice under section 148 of the Act is issued in the name of "M/s. Adi Shakthi Bandanthamma Kalamma Charitable Trust" and the reasons recorded for re-opening of assessment, other statutory notices and the assessment is concluded and framed in the name of "M/s. Bhandanthamma Mathu Kalamma Trust" consequently the entire proceedings become void ab into, on the facts and circumstances of the case. 5. The learned ....
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....s of the appellant Trust, on the facts and circumstances of the case. 11. Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies itself liable to be charged to interest under section 234 B of the Income Tax Act on the facts and circumstances of the case. The appellant contends that the levy of interest under section 234A and 234B of the Act is also bad in law as the period, rate, quantum and method of calculation adopted by the learned assessing officer on which interest is levied are not discernible and are wrong on the facts of the case. 12. The appellant craves leave to add, alter, amend, substitute or delete any or all of the grounds of appeal urged above. 13. For the above and other grounds to be urged during the course of hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice." 3. Briefly stated the facts of the case are that the assessee is a Trust which is constituted under a registered trust deed. The assessee-trust is managing and administering a temple. The assessee has many devotees....
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....sessment are as under: i. The re-opening of assessment is bad in law since the said re-opening is not permissible as per the first and second proviso to section 12A [2] of the Act, on the facts and circumstances of the case. ii. The learned assessing officer is not justified in law in changing the status from AOP [Trust] as per the return to Association of Persons, which is not permissible in law. In fact that the learned assessing officer ought to have issued fresh notice on the alleged AOP and proceeded with the assessment. iii. The order of assessment passed by the learned assessing officer is bad in law for the reason that notice under section 148 of the Act is issued in the name of "M/s. Adi Shakthi Bandanthamma Kalamma Charitable Trust and the reasons recorded for re-opening of assessment, other statutory notices and the assessment is concluded in the case of the appellant is framed in the name of "M/s. Bhandanthamma Mathu Kalamma Trust" consequently the entire proceedings become void ab into. iv. The reasons recorded for re-opening of assessment amount to reason to suspect and do not amount to reason to believe and the said reason do not constitute belief; v. The p....
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....stitution remain the same for such preceding assessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.]". (iii) Thus, as could be seen from the above first and second proviso to section 12A [2] of the Act it is clear that no reopening under section 147 of the Act is permissible for any assessment year preceding the assessment years only for non-registration of Trust under section 12A of the Act and further as per the first proviso if the activities and objects of the Trust remain the same in the preceding years as well the reopening for the preceding years wherein the registration under section 12A of the Act is not available cannot be brought to tax by re-opening the assessment by issuance of a notice under sectio....
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....g is discernable from the order of assessment as to who are the members of the AOP, what is the basis of arriving the said position. [iii]. It is a settled position of law that where the Assessee files the return of income under a particular status and the Assessing Officer wishes to assess the Assessee under a different status, then the Assessee is required to be put on notice about the proposal of the Assessing Officer and invite for objections, if any. [iv]. The Hon'ble Apex Court in CIT v. K. Adinarayana Murthy [1967] 65 ITR 607 [SC] has held that if a notice has been issued to a person having been of a particular status as described in the notice, the reassessment proceedings assessing escaped income of a different status of the assessee is illegal and without jurisdiction. [v]. Reliance is also placed on the following decisions in this regard: [a]. CIT v. Ram Das Deokinandan Prasad reported in 277 ITR 197 (All); [b]. CIT v. Sobhaglal Mishrilal Semlavada reported in 223 ITR 554 (MP); [c]. CIT v. Suresh Chandra Gupta reported in 173 ITR 407 (Raj); [d]. CIT v. Rohtas reported in 311 ITR 460 (P &H); [e]. Sri Nath Suresh Chand Ram Naresh v. CIT reported in 280 ....
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....tion in the name of "M/s. Bhandanthamma Mathu Kalamma Trust". Whereas, the notice under section 148 of the Act is issued in the name of "M/s. Adi Shakthi Bandanthamma Kalamma Charitable Trust". [ii] It is submitted that the notice issued under section 148 of the Act being defective, the subsequent proceedings would not result in a valid assessment even if the assessee had filed the return. Reliance is placed on the parity of reasoning of the decision of the Hon'ble Calcutta High Court in the case of CIT Vs. Bibhuti Bhusan Mallick [1987] 165 ITR 107. [iii] It is further submitted that a valid notice is sine qua non for assumption of a valid jurisdiction and subsequent proceedings. Reliance is placed on the parity of reasoning of the decision of the Hon'ble Allahabad High Court in the case of Sri Nath Suresh Chand Ram Naresh Vs. CIT, reported in [206] 280 ITR 396. [iv] In view of the above submissions the appellant humbly submits that the foundation for re-opening and the subsequent proceedings is bad in law and void abinto and consequently the impugned order of assessment passed under section 143[3] r.w.s. 147 of the Act do not have any legs to stand. 3.9 The reasons ....
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....not the same thing as reason to suspect. The Apex court reiterated its view expressed in the case of Sheo Nath Singh v AAC, 82 ITR 147". [iv] The Hon'ble Supreme Court in Ganga Saran and Sons Pvt Ltd vs ITO and Others [130 ITR 1] has reiterated that : "It is well settled as a result of several decisions of this court that two distinct conditions must be satisfied before. the Income-tax Officer can assume jurisdiction to issue notice under s. 147(a). First, he must have reason to believe that the income of the assessee has escaped assessment and, secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income-tax Officer would be without jurisdiction. The important words under s. 147(a) are " has reason to believe " and these words are stronger than the words " is satisfied ". The belief entertained by the Income-tax Officer must not be arbitrary or irrational. If there is no rational and intelligible nexus between the reasons and the belief, so that, on....
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....o believe' and not 'reason to suspect'. The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements of law should be satisfied". [ix] Confronted with identical situation on facts, the Hon'ble Bombay High Court in Hindustan Lever Limited V. R.B. Wadkar, Assistant Commissioner of Income Tax, [268 ITR 332] has held : "It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to th....
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....h belief. We do not find such nexus". [xi]. In the light of the aforesaid judgments of various High Courts and Supreme Court, it is clear that to reopen an assessment under section 147 of the Act, there should be reason to believe that there is escapement of income and should not be based on suspicion as in the instant case. Hence, the entire reassessment proceedings fails on this count also, it is humbly prayed before this Hon'ble Tribunal to kindly cancel the assessment passed under section 143[3] r.w.s. 147 of the Act for the advancement of substantial cause of justice. 3.10 The procedure contemplated by the statute for reopening of assessment has not been properly followed, adhered or complied to & hence there is no proper assumption of valid jurisdiction, more so when the reasons are recorded by a different officer and notice under section 148 of the Act is issued by different officer. Consequently the entire reassessment proceedings get vitiated as void-ab-initio. [i] It is submitted that the reasons for re-opening under section 147 of the Act is recorded on 16/03/2015 as provided by the learned assessing officer [Ref. Annexure - 4] and the name of the officer who ha....
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....ssued by the officer at Ward - 1[4] Mysuru dated 04/02/2016. [vi] Thus, even on this count as well the entire procedure as adopted by the learned assessing officer under section 148 and 147 of the Act have been without assumption of proper jurisdiction and consequently the entire reassessment which was framed by the learned assessing officer on an invalid assumption of jurisdiction and improper procedure followed requires to be canceled for the advancement of substantial cause of justice. [vii]: It is also contended that for the assessment years 2008-09 & 2009-10 in the reasons recorded it is stated that permission from the additional commissioner has been sought for approval as per the provisions of section 151 of the Act, whether the same has been obtained or not is not discernible from the order sheet noting of the learned assessing officer. [viii]. Wherefore, the appellant humbly state and submit that the entire procedure as contemplated in the statute has not been followed and without assumption of proper jurisdiction and consequently the reassessment orders passed by the learned assessing officer for the above mentioned A.Y's 2008-09 to 2013- 14 requires to be cance....
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....orpus as income is not correct and the same requires to be deleted in toto. [iii] It is submitted that during the course of assessment proceedings and also in the appellate proceedings, it was clearly stated that the said receipts were received by the appellant for a particular purpose and cause and specific direction on the Hundi Box that the said amount are utilized for the construction of temple and Samudaya Bhavan, which the devotes were aware of the construction work-in-progress of the temple and Samudaya Bahavan and thus, they contributed toward s the specific cause. Thus, the said contributions from various devotes would constitute capital receipt in the hands of the appellant which was not appreciated by the learned authorities below. [iv] In this regard the appellant wishes to humbly submit that as facts narrated above which is not disputed by the authorities below, which clearly establish that the amounts received by the appellant from its devotees for a specific purpose of construction of temple and Samudaya Bhavan, which is treated as corpus fund do not constitute income as per the definition of clause [iia] of sub-section [24] of section [2] of the Act. [v] It is....
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....tion 11[1][d] of the Act, corpus donations made with a specific direction or purpose that it shall form part of the corpus of the trust or institution is kept out of the purview of "income". Thus the legal position is that the donations or contributions received by a trust or institution constitutes income but corpus donations made with specific directions will not be treated as income of the Trust or institution. The appellant places its reliance on the Hon'ble Co-Ordinate Bench of Bangalore Tribunal decision in the case of St. Ann's Home for Aged Vs. ITO, reported in 10 TTJ 144. [ix] It is submitted that the voluntary contributions received for a specific purpose cannot be regarded as income, as they do not fall within the ambit of the provisions of section 2[24][iia] of the Act. It is submitted that the principles relating to capital versus revenue have to be considered and the capital receipts cannot be treated as income, irrespective of the fact that whether the assessee is a Trust registered under the provisions of section 12AA of the Act. It is submitted further that the amount received from the devotees of the appellant towards "construction of temple and Samuda....
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....s of the 1TAT, We also find that the Hon'ble Delhi High Court in the case of Basanti Devi Et Sri Chakhan Lal Garg Education Trust vide its order in ITA no.927/09 dt. 23.9.2009 has also affirmed the view taken by the Hon'ble ITAT in holding that corpus donation cannot be regarded as income under section 2(24)(iia) of the Act. 5.3.5. Following the above decisions of the Tribunal (supra), relied upon by the assessee, we hold that voluntary contributions received for a specific purpose cannot be regarded as income under section 2(24)(iia) of the Act since they are capital receipts and tied up grants for specific purposes". [xi] It is submitted that the above order of the Hon'ble Co-Ordinate Bench decision of this Hon'ble tribunal is squarely applicable even to the facts of the present case of the appellant. In the instant case also the amounts contributed by the devotees to the "construction of temple and Samudaya Bhavan" is towards specific purpose. Hence, the appellant treated the said tied up grants or voluntary contributions received by its devotees for a specific purpose amounts to capital receipts and consequently the assessee treated the same as Corpus in its....
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....t is submitted that it seems that the learned assessing officer has levied interest under section 234 B of the Act to the entire amounts determined by the learned assessing officer in the order of assessment. The learned assessing officer ought to have levied interest if at all any interest is to be levied under section 234 B of the Act as per the provisions of section 234 B [3] of the Act on such increased amount on the basis of reassessment. 4. On the other hand, the learned Departmental Representative relied on the orders of the Income Tax Authorities. 5. We have heard the rival submissions and perused the material on record. To understand the issue raised by the assessee, we have to analyze the relevant provision, viz., the amendment to section 12A by the Finance Act, 2014 with effect from 01.10.2014 by way of insertion of proviso to section 12A(2) of the Act, which is reproduced below for ready reference:- "[(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such appli....
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....e applied in the earlier assessment years for which assessment proceedings are pending before the Id. A.O., unless the registration granted earlier is cancelled or refused for specific reasons. The statute also goes on to provide that no action u/s147 could be taken by the AO merely for nonregistration of trust for earlier years. 5.3 The explanatory Memorandum to Finance (No.2) Bill, 2014, which sought to amend section 12A explains the objects and reasons for making such amendments. The explanation makes it clear that it was in order to provide relief to such trusts in respect of which, due to absence of registration u/s 12AA tax liability got attached though otherwise they were eligible for exemption by fulfilling other substantive conditions that the amendment was brought in. That being so, denying such benefit to a trust like the assessee who had obtained registration u/s 12AA during the pendency of the appeals filed against the orders of the assessing authority, by narrowly interpreting the term, 'pending before the assessing officer' so as to exclude its pendency before the appellate authority, will be doing violence to the provisions of the Statute and, as such, liab....