TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 739
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....as charging capitation fees from the students seeking admission in MBBS/PG courses thereby indulging in commercializing the education and thus violated the objects for which it was created. 4. On the facts and circumstances of the case, the CIT (A) has erred in deleting the addition of Rs. 10,16,64,790/- of unaccounted receipts. 5. On the facts and circumstances of the case, the CIT (A) has erred in relying on the order of ITSC, when the order of ITSC itself is being contested on account of perversity of facts. 6. On the fact and circumstances of the case, the CIT (A) has erred in holding that the impounded documents don not pertain to trust and hence the trustee Mr. Mahalingam was justified in declaring additional income on that basis. 7. On the fact and circumstances of the case, the CIT (A) has erred in holding that Mr. Mahalingam has declared income on the basis of these documents, when he has not been able to establish direct nexus between entries in the documents and calculation of additional income. 8. The appellant craves leave to add, amend any/all the ground of appeal before or during the course of hearing of the appeal. " 3. Briefly stated the facts are that a....
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....n the returns of income filed. Thereafter reasons were recorded by the ld. Assessing Officer on 7.11.2013 and notice under Section 148 of the Act was issued on 27.11.2013. The approval of the Commissioner of Income Tax was also obtained under Section 151 of the Act. Vide letter dated 26.12.2014 assessee submitted that the return filed originally on 31st October, 2007 may be treated as return of income filed in response to notice under Section 148 of the Act. Consequently, notice under Section 143(2) of the Act was issued on 10.10.2014. The assessee raised objection vide letter dated 24.11.2014. On 02nd February 2015, the objections of the assessee were communicated and disposed of as rejected. Thus assessment proceedings continued. 7. During the course of assessment proceedings, learned Assessing Officer noted that assessee is a trust established on 6.01.1993, Dr. P. Mahalingam is the managing trustee, and Smt. Kuilambal was the settler. Subsequently, the trust deed was amended on 4.03.1996 and the sole object of the assessee was converted to education only. The assessee was also granted approval under Section 10(23C)(vi) of the Act as per order dated 27th March 2009 with effect f....
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....0/- is already included by the assessee in the income and expenditure account as fees , thus , net unaccounted income of fees not declared in the income and expenditure account works out to Rs. 103,830,790/-. Other contention of the assessee were not accepted and learned AO held that amount of fees not declared in the return of income works out to Rs. 10,38,30,790/-. The ld. Assessing Officer thereafter made an addition of Rs. 10,38,30,790/- to the total income of the assessee i.e. excess of expenditure over expenditure of Rs. 10,80,98,671/-. The learned assessing officer further held that exemption u/s 11 of the income tax act to assessee is also not allowable and the income of the assessee was assessed in the status of Association Of Persons. Learned AO assessed assessee at a total income of Rs. 21,19,29,461/- by order under Section 143(3) read with Section 148 of the Act dated 19th March 2015. 10. The assessee aggrieved with the order of the ld. Assessing Officer preferred an appeal before the CIT (Appeals)-24, New Delhi. The assessee challenged the assumption of jurisdiction under Section 148 of the Act as well as the addition made by the Assessing Officer on its merits. Asses....
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....er states that the re-assessment further suffers from jurisdictional error, as it does not meet the requirement of first proviso to Section 147 of the Act. 14. The ld. DR vehemently objected to the invocation of Rule 27 of the ITAT Rules stating that if assessee is so aggrieved by upholding the re- assessment proceedings by the first appellate authority, it should have filed an appeal. 15. We have carefully considered the contentions of the parties and find that Rule 27 provides that though the respondent might not have appealed against on any of the grounds decided against him, he can support the order of the learned CIT - A . Honourable High Court in case of Sanjay Sawhney vs. PCIT in ITA No. 834/2019 dated May 18, 2020 has held that: i. Rule 27 does not mandate an application to be made in writing, hence oral application cannot be refused. ii. The word 'thereon' used in section 254 (1) implies that the tribunal has to confine itself to the 'subject matter' of appeal only. However, the 'subject matter' is comprehended so as to encompass the entire controversy between the parties which is sought to be got adjudicated upon by the Tribunal. iii. Rule 27 cannot to be applied ....
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....53A of the Act. Thus, he submitted that the action of the Assessing Officer of invoking Section 147 of the Act is clear violation of Section 153A of the Act. For this proposition, he relied on following judicial precedents:- i. Cargo Clearing Agency vs. JCIT 307 ITR 1 (Guj); ii. Rajat Shubra Chatterji v. ACIT (ITA 2430/Del/2015) 47 CCH 0135; iii. ACIT v. Arun Kapur - 140 TTJ 249 (Amritsar); iv. Sangeeta Chhabravs ITO (ITA 1853/Del/2017 Dated 21.04.2017) ; v. G Koteswara Rao vs DCIT 64 Taxmann.com 159 (Viz Bench of ITAT); vi. Shri Navratan Kothari Vs ACIT(ITA 425/JP/2017 Dt 13.12.2017); vii. Sushil Gaur and Shelly Agarwal vs ITO in ITA No.1500& 1501/Del/2017 Dated 08.08.2017 reported in 58 ITR 57 (Del); viii. ITO vs Kamlesh Kumar ITA 86/Agra/2017 Dated:31.08.2018; ix. Girish Chandra Sharma vs ITO ITA987/Del/2018Dt:30.11.2018; x. M/s. Saurashtra Color Tones Pvt. Ltd. v. ITO ITA No 6276/Del/2018 dt 22.01.2020; xi. Shri Adarsh Agrawal v. ITO 2020 ITA No.777/DEL/2019 dt: 14.01.2020 (DB); xii. Nawal Oils & Containers P Ltd v ITO ITA No852/Del/2019 dated04.03.2020; xiii. City Life Projects P Ltd vs ITO ITA No.2668/Del/2019 dt; 17.09.2021. 18. He further refer....
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....tioning the incorrect income proves that the Assessing Officer has not examined the returned income of the assessee as well as consequent appellate order and mentioning of such incorrect fact shows non-application of mind both by the Assessing Officer and by the authorities granting sanction. To support his contention, he referred to the decision of the Hon'ble Delhi High Court in Residing Asia PTE Ltd. Vs. DDIT in WPC No. 614/2014 dated 31.08.2017 and passed Cyber City Pvt. Ltd. Vs. ITO in WPC No. 12360/2018 dated 21.05.2019. He further referred to para No. 10 at Page Nos. 18 to 25 of the decision of Omkar Developers Vs. ITO in ITA. No. 6862/Del/2018 dated 11.05.2021. He further referred to the following judicial precedents of the co-ordinate benches to support his contentions:- i. Smt Kalpana Shantilal Haria Vs ACIT W.P.(L) No.3063/2017 dated 22.12.2017 (Bom); ii. M/s Ganesh Ganga Investments P Ltd vs ITO ITA No.1579/Del/2019 dt: 07.11.2019; iii. M/s VRC Township P Ltd vs ITO ITA No.1503/Del/2017 dt: 14.10.2020; iv. M/s Maheshwari Roller Flour Mills P Ltd vs ITO ITA No.4257/Del/2019 dt: 17.12.2020; v. M/s Madhu Apartments P Ltd vs ITO ITA No.3869- 3780/Del/2018 dt: 01.....
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....ation of mind is further evident from the fact that the Assessing Officer failed to consider the important answers given by Dr. P. Mahalingam. He referred to page Nos. 21 to 45 of the Paper book. He stated that Dr. P. Mahalingam never admitted any un-accounted in the hands of the appellant trust, but he has admitted unaccounted receipts in the hands of M/s. Santosh Trust. He further stated that the reasons shown that as per Annexure A-62 to A-64 and the other annexure such as A-58 to A-61 are not pertaining to this year, but to assessment year 2008-09 to assessment year 2013-14. Thus, the recording of the reasons for Annexure A-58 to A-64 is devoid of any merit demonstrates non-application of mind as Annexure A-58 to A-61 does not pertain to assessment year 2007-08. He further stated that the figure stated in Annexure A-63 and A-64 of Rs. 318.30 lakhs and Rs. 61.60 lakhs does not match with the amounts with the above Annexure, which are Rs. 139.50 lakhs and Rs. 60.10 lakhs. He submitted that this is blatant non-application of mind by the Assessing Officer. He submitted that in Pr. CIT Vs. Meenakshi Overseas Pvt. Ltd. (supra) Hon'ble Delhi High Court has held that reproduction of in....
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....TR 363 (MP); iii. CIT vs M/s S.Goyanka Lime and Chemicals Ltd 231 Taxman 0073 Dated 15.10.2014 (MP) approved by Hon'ble Supreme Court in 64 taxmann.com 313 (SC). iv. Pr. CIT vs. N. C. Cables Ltd 391 ITR 11 (Del) v. Maruti Clean Coal& Power Ltd Vs ACIT WP(T) No.346 of 2017 Dated 03.01.2018 (Chattisgarh High Court); vi. German Remedies Ltd. vs. Dy. CIT (2006) 287 ITR 494 (Bom); vii. United Electrical Company PLtd. vs. CIT & Ors(2002) 258 ITR 317 (Del)"; viii. Central India electric Supply Co. Ltd. Vs .ITO, 333 ITR 237 (Del); 26. He further submitted that the first proviso to Section 147 of the Act is clearly applicable as first assessment under Section 143(3) of the Act was already made on 31st December 2009 and more than four years have elapsed from the end of the assessment year at the time of invoking jurisdiction under Section 147 of the Act. Assessee has disclosed the complete facts and there is no allegation that assessee failed to disclose truly and fully all material facts during the assessment proceedings. For this proposition, he relied upon several judicial precedents such as :- i. CIT vs Viniyas Finance & Investment Pvt Ltd ITA No.271/2012 (Del) dt: 11.02....
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....t High Court 405 ITR 512 , Ankit Aggarwal of Hon'ble Rajasthan High Court and Mona Mahesh BHojani [2017] 83 taxmann.com 363 (Gujarat) of Hon'ble Gujarat High Court. d. at the time of recording of the reasons, the Assessing Officer is not required to correctly state the quantum of escaped income otherwise what is left to be done at the time of the assessment. It was further stated that the reasons are required to be noted by preponderance of probabilities and it cannot be 'cast iron' figures at the time of recording such reasons. She further relied upon the decision of the Hon'ble Delhi High Court in the case of Paramount communications Limited . She also referred to the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri. e. This assessment year was beyond the set of years covered u/s 153A of the act and therefore there is no bar in invoking provision of section 147/148 of the act. She submitted that bar " Notwithstanding ' clause applies only with respect to the six years contained in 153 A proceedings. This AY 2007-08 is 7th prior years, which is validly covered u/s 147 of the Act. she submitted that provisions of Section 153A of the Act mandate only the re-as....
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....ed, it is submitted that as per proviso to sec 2(15), the applicability of this section is restricted to the entities pursuing any other objects of public utility implying that the institutions engaged in education/medical relief are not within the ambit of the above proviso. The CBDT Circular No.11/2008 dt: 19.12.2008 in para 2.1 clarifies that "The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute 'charitable purpose' even if it incidentally involves the carrying on of commercial activities." Reliance is placed in the decision of DIT(E) vs Sabarmati Ashram Gaushala Trust TA No.1162 of 2013 (dt: 15.01.2014 (Guj). ii. On the objection of Ld AO that the institution was run by profit motive drawing support from the charge of capitation fee from the students, the respondent seeks to submit that the respondent trust is under obligation to apply the income including capitation fee for the purpose of advancement of education/medical relief. He....
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....ears including the AY under appeal to allow exemption u/s 11 of IT Act. He referred to para 4.1.5 at internal page 13-14. In the context of sec 11 of IT Act, the Hon'ble Apex Court in case of CIT Vs. Andhra Pradesh State Road Trpt. Road Corpn. 159 ITR 1 (SC) have held that a trust or institution may run on commercial lines. If the dominant object is to carry out charitable activities and not to earn profit, the purpose would not loose charitable character merely because some profit arose from the activity. No doubt, profit may result in the running of the enterprises, but the balance of the income by way of profit was again to be spent for a purpose of charitable activity. If that is the case, it was held to be entitled to exemption. During assessment, the AO can only determine whether the income has been applied for charitable purpose. The reasons for denying exemption in the present 4 case is that the assessee is earning surplus year after year even though the assessee has submitted that it had applied 85% of its income every year for charitable purposes. Once the Commissioner had made the determination that the trust was a charitable one, the AO is not entitled to re-examine the....
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....may be applicable. Where all the objects of these trusts are educational, and the surplus, if any, from running the educational institution is used for educational purposes only, it can be held that the institution is existing for educational purposes and not for purposes of profit. However, if the surplus can be used for non-educational purposes, it cannot be said that the institution is existing solely for educational purposes and such institutions will not be liable for exemption u/s 10(22). But, in such cases, the applicability of section 11 can be examined and if the conditions laid down therein are satisfied, the income will be exempt u/s 11." iv. With respect to Ground Nos.4 to 7 In the above ground, the department is aggrieved by the deletion of addition of Rs. 10,16,64,790/- of unaccounted receipts. The department has computed the unaccounted receipts on the basis of seized annexure A-58 to A-64 (PB 17-19 of reasons recorded). The Ld CIT(A) has taken into account-seized annexure A-21 (Back Page 114) which is complete summary of unaccounted receipts and unaccounted expenditure. In the annexure A-21, a higher amount of collection and receipts are shown which is Rs. 24.21 C....
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....the issue of taxability of the above sum is also correctly decided by the learned CIT - A. In the result he submitted that appellant prays that the reopening of the assessment proceeding is held to be invalid and even otherwise on the merits of the addition the issue is correctly decided by the learned CIT - A. 31. We have carefully considered the rival contentions and perused the orders of the lower authorities. Both the parties have referred to plethora of judicial precedents. We have considered all those decisions during the course of our adjudication process. Though all these judicial precedents have been decided on the facts of their own case however, The relevant judicial precedents are referred to at the places where we found them to be relevant. 32. In this case we find that in assessment order u/s 143 (3) of the income tax act was passed by the additional director of income tax exemption for assessment year 2007 - 08 on 31st of December 2009 by assessing the total income of the assessee at Rs. 150,347,006/-. This assessment was framed pursuant to survey u/s 133A of the income tax act was conducted on the assessee on 10 August 2006 where certain documents were impounded. ....
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....rce of such receipts which were in addition to the regular fees, is in the form of unaccounted fees /donations from various students who are allowed admission in various courses of the institution. In view of the above I have reason to believe that assessee has failed to disclose truly and fully all metal facts in his return of income for above assessment year, the income chargeable to tax for financial year 2006 - 07 relevant to assessment year 2007 - 08 has escaped assessment within the meaning of Section 147 of the act. I, deem it, proper to initiate the proceedings Under the provisions of Section 147 of the act 1961. If approved notice u/s 148 may be issued for the assessment year 2007 - 08, in this case the assessment u/s 143 (3) has been completed wide order dated 31/12/2009. Hence approval of CIT ( C ) -I , New Delhi is requested as per provisions of Section 151 (1) of the IT Act, for issuance of notice u/s 148 of the act, 1961." 34. Based on the above reasons notice u/s 148 of the income tax act was issued to the assessee on 27/11/2013. The above reasons were also given to the assessee along with the pro forma for obtaining approval u/s 151 of the income tax act. In th....
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.... explained before the learned assessing officer that the fee recorded in the reasons for reopening of Rs. 196,497,500 by the learned assessing officer based on the investigation wing report is incorrectly mentioned and the correct figure is Rs. 149,446,000 the assessee also submitted the detailed reconciliation, which was also verified by the learned assessing officer. It was submitted that out of total sum of Rs. 196,497,500, a sum of Rs. 170,85,000 pertains to financial year 2005 - 06 (assessment year 2006 - 07) and further amount of Rs. 2 90,36,000 as stated in the seized document itself is not at all received and further a sum of Rs. 1 5,26,500 is pertaining to financial year 2007 - 08 (pertaining to assessment year 2008 - 09) which is already been taken care of in the case of application before the settlement commission. Further, there is a difference of Rs. 4,296,000 in seized document itself. Therefore the amount pertains to financial year 2006 - 07 is only Rs. 149,446,000 against which the assessing officer has recorded in the reasons the amount of Rs. 196,497,500. 38. It was stated that out of the above sum of Rs. 149,446,000/- a sum of Rs. 74,651,210/- has already been t....
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....rs also with the details furnished by the assessee. He also verified these details from the hard disk containing accounts of the assessee seized during the search. (Paragraph number 5 of the assessment order). 40. Therefore the learned assessing officer noted in the assessment order in paragraph number 5 as Under:- " since, the amount of Rs. 196,497,500/- was worked out by the investigation wing during post search proceedings, this information was sent to the concerned DDIT (investigation) why this office letters dated 2 - 2 - 2015 and 5 - 3 - 2015. Copies of reconciliation furnished by the assessee, relevant photocopies of the registers (where discrepancies were found,) and printouts of hard disk were sent to him. He was requested to intimate observation if any to this office. The DDIT wide is letter dated 13/3/2015 stated that " since all the seized and impounded material has been handed over to you by this unit, you are requested to take due cognizance of the material available with you and arrive at your own independent conclusions please." 41. Thereafter the learned assessing officer made his own exercise after examining the copy of the reasons again as stated in paragraph....
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....r, for assessment year 2007 - 08 which is prior to the period of six assessment years covered u/s 153A of the act could be disturbed by invoking the provisions of Section 147 of the act or not. This issue is squarely covered against the assessee by the decision of the honourable but the progress High Court in case of Radha ballabh Gupta versus ACIT 288 ITR 347 wherein it has been held that where be on the block assessment years (six specified assessment years u/s 153A) if other conditions are satisfied, the learned assessing officer can invoke provisions of Section 147/148 of the income tax act. The learned assessing officer is only barred to issue notice u/s 148 where assessment years are covered and jurisdiction is rightly assumed u/s 153A/153C of the act. Accordingly, we uphold the action of the learned assessing officer so far this issue is concerned. 44. The next ground taken by the learned authorised representative is that as the approval granted by the learned Commissioner of income tax merely states that "yes, I am satisfied that it is a fit case for issue of notice u/s 148 of the IT act." Is invalid. We find that this issue is squarely covered against the assessee by the ....
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....n the reasons on the basis of which sanction was sought could not be assailed and even an appellate authority is not required to give reasons when it agrees with the finding unless statute or rules so requires. The decision in United Electrical Co. P. Ltd. v. CIT [2002] 258 ITR 317 (Delhi), as relied upon by the petitioner is distinguishable from the present case, as in the said case, there was no material on record to provide foundation for Assessing Officer's reasons to believe. Therefore, it was held that the recording of the satisfaction by the Assessing Officer was unjustified and without independent application of mind. However, there is no requirement to provide elaborate reasoning to arrive at a finding of approval when the Principal Commissioner is satisfied with the reasons recorded by the Assessing Officer. Similarly, in Virbhadra Singh v. Deputy Commissioner [2017] 9 ITR-OL 519 (HP) ; [2017] 88 taxmann.com 888 (HP) where the competent authority was in agreement with the reasons assigned by the Assessing Officer, so placed before him, which came to be considered and sanction accorded with proper application of mind, by recording "I am satisfied that it is a fit case ....
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....for themselves. (See observations made Commissioner of Police, Bombay v. Gordhandas Bhanji, AIR 1952 SC 16 and Mohinder Singh Gill v. Chief Election Commissioner, New Delhi [1978] 1 SCC 405." Therefore, on careful reading of the above provision we find that both the above decisions held that if the satisfaction is recorded on the correct state of reasoning. Therefore, the crux of the issue is that if the reasons are correct and are irrefutable, the manner of recording the approval by the higher authority generally could not be held to be invalid. Therefore, on this reasons we find that there cannot be any fault found with the approval authority if it is mentioned that "yes, I am satisfied that it is a fit case for issuance of notice u/s 148 of the IT act." Therefore, subject to finding whether there is an application of mind by the learned assessing officer in recording the satisfaction u/s 147 of the act, we hold that the approval has been correctly provided by the higher authority. 46. Now we come to the another argument of the learned authorised representative that in paragraph number eight (A) of the performer the learned assessing officer has mentioned the income originally ....
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....ial made available to him. It is also true that if the learned assessing officer applies his mind to the material based on which is going to reopen the case, the, recorded as escaped income will not go for a toss. It will also not be wayward. More so when the reasons recorded when the assessee is originally assessed u/s 143 (3) of the act, the AO will have the complete assessment records before him also. 48. In this case, the fact emerges shows that AO has recorded reasons stating that a sum of Rs. 196,497,500 has escaped the assessment. In reason, the learned AO stated that the detailed working of unaccounted receipts on account of donation has been prepared on the basis of these materials. AO also noted that the list of Year wise, annexure by summary of such unaccounted receipt was also worked out. The learned AO also referred 7 annexure (annexure A - 58 to A - 64). The learned assessing officer further referred to the statement of Mr. P Mahalingam. Raised in all these the learned AO recorded the reason that he has reason to believe that assessee has failed to disclose truly and fully all material facts in its return of income. He also noted that the above sum has escaped assess....
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....Rs. 196,497,500/-. This clearly proves that when the learned assessing officer has recorded the reasons for reopening of the assessment, he did not look at the assessment records. The income and expenditure account from which he agreed that assessee has already recorded a sum of Rs. 74,651,210/- as the fee, in the reasons itself he should have reduced the above sum as escaped income. Thus including the sum, which is already been disclosed by the assessee in its profit and loss account (income and expenditure account) was only scrutinized posts survey u/s 133A of the act and thereafter the assessment order u/s 143 (3) was passed, as escaped income and that too the extent of Rs. 74,651,210/- most 40% of the escaped income clearly shows that there is nonapplication of mind by the learned assessing officer at the time of recording of reasons. 51. In the reasons recorded, the learned assessing officer has referred 7 annexures for determining the sum of Rs. 196,497,500 as escaped income. Out of these, seven annexures, only annexure A - 62 to A - 64 related to the impugned assessment year 2007 - 08. Other annexures did not belong to the impugned assessment year. This argument raised by t....
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....f the assessee chargeable to tax had escaped assessment, was unreasonable and irrational, as it could not be related to the underlying information ; something which was discernible from a bare reading of the order recording reasons. Further, the learned assessing officer also failed to correlate the statement of Mr. Mahalingam with the reasons recorded by the learned assessing officer and resultant amount of escapement of income. The facts in this case are similar to the facts decided by the honourable Delhi High Court in case of Sinfonia Tradelinks private limited versus ACIT (2021) 435 ITR 642 (Delhi) where the honourable Delhi High Court quashed reassessment wherein even the assessment was earlier not made u/s 143 (3) of the act for not correlating the information available in the original return filed by the assessee. In the present case the assessment was already made u/s 143 (3) of the act, therefore, the case of the assessee is on much stronger footing against the facts of the case decided by the honourable Delhi High Court. 55. In view of the above facts, we do not have any hesitation in holding that the learned assessing officer has not applied his mind at the time of rec....
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....apitation fees as well as unaccounted expenditure for the assessment years 2007 - 08, 2008 - 09 and 2009 - 10. Honourable settlement commission while dealing with the application of the applicant for assessment year 2008 - 09 and 2009 - 10 has taken cognizance of the very same document as evidence of both unaccounted receipts and unaccounted expenditures. After considering the seized documents, honourable settlement commission has held that undisclosed the surplus has to be taken at the rate of 22% of the expenditure shown in the seized documents annexure A - 21 Page - 114. I am of the view that the seized document at A - 21, page 11 constitutes evidence that the appellant has incurred undisclosed expenditure as well, as held by the honourable settlement commission. I also of the view that the value of excess over expenditure at the rate of 22% as adopted by the Honourable Commissioner though not binding, is salutary and reasonable and requires to be followed for the assessment year 2007 - 08 also. The total expenditure shown for assessment year 2007 - 08 in the seized document A - 21, page 11 is Rs. 24.86 crores, thus the taxable amount is Rs. 54,692,000. This amount is to be set-....