TaxTMI 
TaxTMI 
2023 (4) TMI 1406
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....ssessee on technical grounds without discussing the merits of the issues involved in the assessment order considering the facts and circumstances of the case. 5 The CIT(Appeals) erred in holding that the AO has not followed the 1st Proviso of the Section 143(3) of the Act. The CIT(Appeals) has not considered the fact that the Assessee is not only an approved Educational Institution u/s 10(23C) of the Act but also a registered trust u/s 12A or 12AA of the Act. It has also filed Audit reports in Form 10B (to be furnished by a charitable or religious trust or institution that has been registered u/s 12A), Form 10BB (Audit report under section 10(23C) of the Act) and the Form 3CD. The afore-mentioned facts were also brought under the order of the CIT(A). The assessee is claiming exemptions available to both 10(23C)(vi) and 12A registered entities and moreover the assessee is also availing the benefits provided to entities registered under 12A/12AA such as exemption of Corpus fund donations etc., Further, at para 21 of the impugned order of the AO, the Assessing officer also referred to the Section 11 of the Act, as under: "21. The above mentioned amo....
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....2 of the Income-tax Act,1961 ['the Act' for short] was conducted in the case of the assessee on 16.12.2015. Subsequent to the notice u/s 148 of the Act, the assessee requested the AO vide letter dated 31.5.2016 to treat the original return of income filed on 29.9.2009 as return of income filed in response to notice u/s 148 of the Act. The AO completed the assessment u/s 143(3) r.w.s. 147 of the Act determining total income at Rs. 15,48,20,850/-. 3. Against this assessee went in appeal before ld. CIT(A) challenging the issue with regard to reopening of the assessment and also merit of addition made by AO. The assessee also raised additional grounds before ld. CIT(A) vide letter dated 16.2.2022 as follows:- "The appellant prays that the Assessment order passed under section 143(3) r.w.s. 147 of the Act may please be treated as voidab- initio as the same is passed without considering the provisions of First Proviso to section 143(3) of the Act. The Learned AO has erred in passing the assessment order without giving effect to the provisions of section 10(23C) of the Act, as the assessee is an educational institution which has filed the return u/s 139(4C) of the Act.....
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.... but not accounted for in the books of Navodaya Medical College, could not have been applied for the: purpose of education. Therefore, the Navodaya Education Trust is not eligible, for exemption u/s 10(23C)(iv) or u/s 11 of the I.T. Act, 1961 on this amount of Rs. 12,49,08,600/-. Therefore, the entire unaccounted receipts of Rs. 12,49,08,600/- is proposed to be brought to tax as the income of the Navodaya Education Trust for the. AY- 2009-10. In response - Reply filed by the assessee vide letter dated 2.12.2016 Penultimate Paragraph: Your good selves have stated that our trust is not eligible to claim for exemption u/s 10(230riv) of the act, therefore the entire unaccounted receipt of Rs. 12,49,08,600/- is proposed to be brought to tax as the income, in this regards we wish to state that when we have not received such donation at all the claiming of any such exemption-does notarise." Accordingly, the Assessing Officer at para no. 21 / page no.12 of the Assessment Order u1s 143(3) r.w.s 147 dated: 30112/2016 has made a clear-mention above the eligibility of exemption u/s 10(23C)(iv) or 11 of the act, as under: "21. The above-mentioned amo....
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....tion 10 of the act, in respect of the cases where the assessee/institution is approved under provisions and clauses of section 10 of the Act by the. Competent Authority and the said assessee filed its return u/s 139(4C) of the Act. 3.1 Further, it is also mentioned that no order shall be made by the Assessing Officer without giving effect to the provisions of Section 10 unless the Assessing Officer has intimated to the competent authority about the contraventions of the said provisions by the assessee and the. approval granted by the Competent Authority has been withdrawn or notification issued for rescinded of the said trust or institution. 4. It is hereby bought to the notice that as per records available, the assessee trust has been granted approval under sub-clause (vi) of clause (23C) of Section of the I. T. Act, 1961 by the Chief Commissioner of Income-tax, Hubli vide order in Lr.F.No. CCCIT-HBL/10(23C)(4/16/2009-09 dated 13/02/2009 i.e. Wef Asst. Year 100910. in light of the above discussion and plain reading of the contents of the Section 143(3) the assessment should have, been completed as per first proviso to section 143(3) of the I T Act in the assessee....
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....o 10B, 10BB and 3CD are available on record of the Learned AO. We believe that the act of the Learned AO, while passing the assessment order u/s 143(3) r.w.s. 147 of the. Act, is bad in law as, the same is not in accordance with the provisions of section 143(3) of-the Act, which reads "(3) On the specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment: Provided that in the case of a- (a) research association referred to in clause (21) of section 10; (b) news agency referred to in clause (22B) of section 10; (c) association or institution referred to in clause (23A) of section 10; (d) institution referred to in clause (23B) of section 10; (e) fund or insti....
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....so that notwithstanding anything contained in the first and the second provisos, no effect shall be given by the Assessing Officer to the provisions of clause (23C) of section 10. in the case of a trust or institution for a previous year, if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in such. previous year, whether or not the approval granted to such trust or institution or notification issued in respect of such trust or institution has been withdrawn or rescinded." On a plain reading of the provisions above, it can be observed that the Assessee Trust being an entity registered u/s 10(23C)(vi) of the Act, the First Proviso to. section 143(3) of the Act is applicable in the given case. As per the First Proviso to section 1430) of the Act, in case of an Assessee who is registered/ recognised / approved u/s 10(23C) of the Act and is required to file a. return of income u/s 139.(4C) of the Act, it is pertinent to the Learned AO to give effect to provisions of section 10 while passing the assessment order u/s 143(3) of the Act. However, it may be observed that while passing the assessment order u/s 143(3....
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....t in the instant case, the Learned AO has not considered the provisions of section 143(3) of the Act while passing the assessment order u/s 143(3) r.w.s. 147 of the Act and therefore, the entire assessment order is liable to be quashed as the same is void-ab-initio. The order of approval u/s 10(23C) of the. Act was a existence and in force for the subject year and therefore, passing an assessment order without obtaining approval from appropriate authority for denial of exemption u/s 10(23C) of the Act is absolutely Further, the Assistant Director of Income. Tax (Inv.), Ballari (the Investigating Dicer) in the course of the Search Proceedings cancelled the approval u/s 10(23C) of the Act for the period from AY 2010-11 to AY 2016- 17. The approval u/s 10(23C) was not cancelled by the investigating officer for AY 2009-10 and that the same is in force and valid for the said year. Thus, the Learned AO was bound. to pass the assessment order by giving effect to provisions of section 10(23C) to the amount added to the income for the year as additional income over and above the regular income reported by the. Assessee the return of income filed. The Investigating Officer,....
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....tant case the benefit of the Section 10 was not given to the appellant. 3.6. The ld. CIT(A) observed that the remand report confirms that no assessment order under Section 143(3) of the Act shall be passed without giving effect to the provisions of 'the Section 10 of the Act in respect of the cases where the assessee/institution is approved under provisions and clauses of Section 10 of the Act by the competent Authority. The remand report further states as under: "In light of the above discussion and plain reading of the contents of the Section 143(3) the assessment should have been completed as per first proviso to section 143(3) of the IT Act in the assessee case for the Asst.Year-2009-10". 3.7 The report therefore concludes that the assessment in this case should have been Completed as per the-provisions of first proviso to section 143(3) of the I T Act, which has manifestly not been done. 3.8 While the AO has further observed that provisions of first proviso to section.143(3) of the Act have not been followed in this case, however, the remand report is silent on the effect of third proviso to section 143(3) of the Act which became effective from Assessment....
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....er object of general public utility: Provided that the advancement of any other object of general public utility, shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity Provided further that the first proviso shall apply if the aggregate value of the receipts from the activities refer to therein is twenty-five lakh rupees or less in the previous year; " From the above, it may be observed that the proviso to section 2(15) deals with a case where a Trust- is involved in advancement of any other object of general public utility. In the instant case, the Trust is not involved in carrying out any other object of general, public utility The Trust has been involved in rendering charitable activity, in the, field of education alone for the subject year. In the assessment order passed under section 143(3) r.w.s. 147 of the Act also nowhere it- has been held that th....
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....ment order u/s 143(3) r.w.s. 147 of the Act.' 3.10 The ld. CIT(A) has considered the Para 2.1 of CBDT Circular No.11/2008, dated 19.12.2008 wherein states as under: "2.1 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 of commercial activities." 3.11 Apart from this, the ld. CIT(A) relied on judgements of various courts wherein held as under: * In the case of Malco Vidyalaya Matriculation Higher Secondary School v. Chief Commissioner of Income-taxi" 0191 103 taxmann.com 104 (Madras), the Hon'ble High Court of Madras held that where assessee, running a higher secondary school, claimed exemption under section 10(23C)(vi), in view of fact that assessee was not carrying on any other activity apart from imparting education and, moreover, surplus generated had been utilised for school development purposes, claim so raised by assessee was to be all....
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....rgely deals with cases where there is activity of trade, commerce or business. The ld. CIT(A) was of the view that in the instant case, as the trust is not carrying on any other object of general public utility other than education or medical relief, the third proviso to Section 143(3) is not applicable. 3.13 The ld. CIT(A) further noted that in the course of the search proceedings, approval u/s 10(23C) of the Act was cancelled by the concerned authority AY 2010-11 to AY 2016-17. The approval u/s 10(23C) was not cancelled for AY 2009-10 and the same remained in force and valid for the said year. The assessee had filed their return of income u/s 139(4C) of the Act. The additions have been made in the assessment order on account of anonymous donation and unaccounted donation on the ground that these are not eligible for exemption u/s 10(23C)(vi) / section 11 of the Act. But these additions are made without following the appropriate procedure for denial of benefit u/s 10(23C) of the Act. The available exemptions could have been denied only with the approval of the Prescribed Authority by way of cancellation of recognition u/s 10(23C) of the Act, the way it was done for AY 2010-11 t....
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....t order u/s 143(3) of the Act should have been completed as per first proviso to section 143(3) of the Act as the assessee has satisfied the conditions of the proviso of said section as the assessee filed return of income u/s 139(4C) of the Act and he relied on the remand report submitted by the AO, which is placed on record in pages 137 to 140. He also relied on the judgement of jurisdictional High Court in the case of Shri D.M. Purnesh in ITA No.346/2010 dated 17.2.2020, wherein held as under: 8. "Section 250(4) of the Income Tax Act provides that the Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the (Assessing) Officer to make further inquiry and report the result of the same to the Commissioner (Appeals). When the assessee produced the material before the Commissioner of Income Tax (Appeals), the Commissioner, in exercise of power under Section 250(4) of the Act, directed the Assessing Officer to submit the Remand Report. The relevant extract of the remand report reads as under: "Addition as long term capital gain Rs. 2,94,26,600/- (point 7) The assessee's argument in this reg....
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.... of the Act prescribes various eventualities under which an assessee files the return. Sub-section (1) provides the filing of voluntary return of the Act within prescribed time. Sub-section (2) authorizes the ITO to call for return from an assessee who is assessable to income tax. In this case, the return has to file from 30 days from the issue of notice by ITO. However, the section 139(2) of the Act has been omitted w.e.f. 1.4.1989. Sub-section (3) provides that if no notice under subsection (2) was served upon the assessee, who has sustained a loss under the head "business", he is required to file the loss returned within the time allowed under sub-section (1) or till such further extended time as allowed by the ITO, if he claims the loss to be carried forward. Under section 139(4) of the Act any person who has not furnished return within the time allowed to him under sub-section (1), or within time allowed under a notice issued under sub-section (1) of section 142 of the Act, may furnish the return for any previous year at any time before expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier. Now under the re....
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....d assessment. But at the same time, we cannot overrule the right of the assessee to file the return filed u/s 139(4C) of the Act. In our opinion, it cannot be taken away or whittle down by the revenue by issuing a notice u/s 148 of the Act. Notice u/s 148 of the Act as aforesaid is issued to assess or reassess the escaped income and notice should be deemed invalid if ultimately that there was a loss, the whole basis of issue of notice u/s 148 of the Act falls down and the notice, therefore, becomes for all practical purposes invalid. It should be deemed as if it was never issued. As a natural consequence, therefore, it has to be assumed that there was no notice u/s 148 of the Act if it is so. Now we have to see whether the assessee has filed return u/s 139(4C) of the Act. For that purpose, we have to see the original assessment order passed u/s 143(3) of the Act on 18.11.2011, which is reproduced herein below: 6.2 There was no claim of the assessee u/s 10(23C)(vi) of the Act. The assessee's claim is only u/s 11 of the Act. This assessment order has been reached finality and the assessee never pursued the claim of section 10(23C) of the Act. However, the same claim made by assess....
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....onnected with escapement of income. Being so, in our opinion the ld. CIT(A) is not justified in entertaining the new claim in the reassessment proceedings by holding that first proviso to section 143(3) of the Act is applicable and he exceeded his jurisdiction in admitting the additional grounds of appeal. 6.4 Further, the ld. A.R. relied on the judgement of jurisdictional High Court in the case of Shri D.M. Purnesh cited (supra) for the proposition that the AO has accepted that the assessment should have been completed as per the first proviso to section 143(3) of the Act in the AY 2009-10. In our opinion, there is no base in this argument of the ld. A.R. In exercising the discretion by court, the Court has to certify its judicial conscience alike other instances of exercise of such discretion by the Court. Secondly, the admission must be clear, unequivocal, unconditional and unambiguous so that there may not be necessity for the Court to wait determination of other question. Thirdly, the admission must be taken as a whole unless the part of the claim which the Court proposes to allow on admission is severable from other parts of the plaintiff's claim. Reliance was placed upon ....
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....rits. 7. In the result, the appeal of the revenue is partly allowed for statistical purposes. Order pronounced in the open court on 6th Apr, 2023. ============= Document 1 Page No.1 of 2 M/s Navodaya Educational Trust AO ACITIC-1/RAICHUR Raichur AY 2009-2010 INCOME-TAX DEPARTMENT 1 Name & address of the assessee 21 PAN Number 3 Ward/Circle 4 Status 5 Assessment Year 6 Previous Year 7 Whether Resident 8 Nature of Business(s) 9 Method of Accounting 10 Date(s) of Hearing 11 Date of Order 12 Assessment Section M/s Navodaya Educational Trust, Clo Navodaya Medical College Mantralayam Road, Raichur-584 101 AAATS5719R ACIT C-1 Raichur Educational Trust 2009-2010 2008-2009 Resident Running Educational institutions Mercantile System 11-08-2011, 19-10-2011, 28-10-2011 & 18-11-2011 18-11-2011 143(3) of the Income Tax Act 1961 ASSESSMENT ORDER In this case the assessee who is a Trust has filed it's return of... income 29-09-2009 by disclosing a net loss of Rs 1.69.85,100 & a net agricultural income of Rs 0- for rate purposes. The assessee trust has got its accounts audite....