TaxTMI 
TaxTMI 
2026 (8) TMI 443
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1(1.1 & 1.2) raised by the assessee is general in nature and requires no adjudication. 5. Ground No. 2 (2.1 to 2.5) raised by the assessee in challenging the action of the ld. CIT(A) in not considering the submissions of the assessee in respect of validity of reassessment order passed under section 147 r.w.s. 144B of the Income Tax Act, 2961 ["Act" in short] in the facts and circumstances of the case. 6. The ld. AR Shri G. Baskar, Advocate submits that the reopening of scrutiny assessment is barred by limitation under first proviso to section 147 of the Act. He submits that the assessee filed the return of income declaring NIL income by claiming exemption under section 11 of the Act and the Assessing Officer completed the scrutiny assessment vide order dated 03.12.2016 passed under section 143(3) of the Act accepting the returned income. He argued that the order of the reassessment is firstly illegal as no action shall be taken under section 147 of the Act after the expiry of four years from the end of the relevant assessment year. He submits that the end of the relevant assessment year is 31.03.2015 and notice under section 148 of the Act was issued on 31.03.2021. He argued....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ciously provided gist of the reasons recorded rather than actual reasons. He placed reliance on the order of Mumbai Benches of the ITAT in the case of Tata International Ltd. v. DCIT [2012] 23 taxmann.com 18 (Mumbai) and submits that the reassessment completed without furnishing the reasons actually recorded by the Assessing Officer is not sustainable under the law as the Assessing officer is duty bound to supply the same within reasonable time as held by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO (supra). He argued that the actual copy submitted by the ld. DR during the course of hearing before the Tribunal would not make good of the legality sufficient for reopening of the assessment. He argued that since the Assessing Officer furnished with mere gist of the reasons claiming them to be actual reasons recorded, the same is illegal making the order of reassessment, is liable to be quashed. 8. Further, thirdly, Shri Baskar submits that the reassessment is illegal for the reason that the Assessing Officer has reopened the assessment only on the basis of "change of opinion" to review his earlier order of scrutiny assessment. He drew our attention t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rect educational activities despite questioning". She submits that such information was embedded in a manner requiring due diligence to uncover attracting Explanation 1 to section 147 of the Act. Further, she submits that as the Explanation 1 provides that the production of books or evidence does not constitute disclosure if material evidence could not be discovered with due diligence. She referred to the decision of the Hon'ble High Court of Madras in the case of Karur Kongu Charitable Trust v. ITO [2023] 147 taxmann.com 73 (Madras) which held that "mere production of accounts does not amount to disclosure if material facts are not explicitly brought to the AO's notice". Further, the survey statement of 25.02.2019 provided critical evidence that the assessee's activities were commercial, not charitable, which was not disclosed earlier. 10. She argued vehemently that the decision in the case of Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) as relied on by the ld. AR is misplaced as it applies to cases where all primary facts are disclosed. She submits that in the present case, the assessee failed to disclose the nature and extent of its activities necessitating reasse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er section 133A of the Act on 25.02.2019, wherein, Shri V. Rajendran, Chairman of the assessee Trust stated on oath that the Trust's activities were limited to the sale of books, notebooks and uniforms run by DAV School Trust. The said information reveals that the assessee was not engaged in the dominant activity of education, contrary to its claim for exemption under section 11 of the Act. She referred to original assessment order and submits that the Assessing Officer has not specifically examined the dominant activity of the Trust and the issue of assessee's activities constituted charitable education was not at all adjudicated. She referred to notice dated 02.06.2016 issued under section 142(1) of the Act and submits that it only contains general queries and assessee's reply dated 17.06.2016 did not address on specific issue of dominant activities. She argued that the Hon'ble Supreme Court in the case of Kelvinator of India Ltd. (supra) held that reopening is permissible if there is tangible material to believe income had escaped assessment and not merely on the change of opinion on the same facts and in the present case, she argued that the survey statement constitutes fresh m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ination of the income and expenditure statement at page 114 of the paper book relevant to period 01.04.2013 to 31.03.2014, clearly disclose the income of the assessee under the head "direct income - with reference to belts, books fees, uniform fees & stitching fees" which was admittedly available before the Assessing officer during the course of original assessment. It is noted that the ld. DR referred to the statement of Chairman of the assessee trust and argued that he himself admitted on oath a statement recorded during survey under section 133A of the Act on 25.02.2019 stating that the trust activities were limited to sale of books, notebooks and uniforms, which clearly supports the items which are placed under "direct income" in the income and expenditure statement at page 114 of the paper book. Therefore, we hold that no new tangible information has reached the Assessing officer vide statement recorded during the course of survey and in fact, as stated above such statement is corroborating with the items mentioned under income and expenditure statement. Therefore, the case law relied on by the ld. DR in the case of Karur Kongu Charitable Trust v. ITO (supra) has no applicatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctual copy of reasons recorded, but, not gist of the reasons recorded. Admittedly, in this case, on perusal of the copy of the actual reasons recorded placed on record during the course of hearing, clearly demonstrates it is different from the gist of reasons mentioned in the notice dated 22.06.2021. Therefore, we find force in the argument of the ld. AR for non furnishing of actual reasons recorded for reopening of the assessment and the reassessment made thereon fails. In this regard, we find the order of the Mumbai Benches of ITAT in the case of Tata International Ltd. (supra) and relevant para 9 is reproduced herein below: 9. The order of this Tribunal was upheld by the Hon'ble jurisdictional High Court as mentioned in the decision in the case of Videsh Sanchar Nigam Ltd (Supra). Even the SLP filed by the revenue against the decision of Hon'ble jurisdictional High Court has also been dismissed by the Hon'ble Supreme Court vide order dated 16 July 2007. Thus, it is settled proposition as laid down by the Hon'ble Supreme Court as well as Hon'ble High Court that the reasons as recorded by the Assessing Officer are required to be furnished to the assessee and the reasons r....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., Please furnish unit-wise break up and details of income & expenditure and Receipts & Payments and Balance Sheet, with previous year figures and also the consolidated I&E, R&P and Balance Sheet; and lastly vide item No. 17 "Furnish copy of investments made u/s. 11(5) of the IT Act, if applicable". It is noted vide reply dated 20.06.2016, placed at pages 74 & 75 of the paper book, wherein, the assessee replied to the specific questions. On perusal of page 74 & 75 of the paper book, it is noted that copy of the trust deed, amendment deed, audited books of account for FY 2013-14 (AY 2014-15) were furnished vide Annexure I and soft copy respectively in response to the question Nos. 1 & 5 of the questionnaire issued under section 142(1) of the Act. Further, it is noted that the assessee replied that no assets acquired during the year under consideration in respect of question No. 7 as details of capital assets acquired. Against question No. 12 of the questionnaire, vide item No. 10 of its reply, the assessee stated that the details of income accumulated under clause 2 of section 11(1)/11(2) having bearing on this assessment in the prescribed format, will be submitted at the earliest an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'ble High Court of Bombay followed the above said decision in the case of Gujarat Power Corpn. Ltd. (supra) and held merely because the order of the assessment was silent on a particular claim of the assessee could not by itself means the same was not scrutinised or that the Assessing Officer has not formed an opinion with respect to the same. Thus, on careful reading of the above said two decisions as relied on by the ld. AR, we find in the present case that the Assessing Officer having formed an opinion that the assessee was eligible for claiming exemption under section 11 of the Act during the original scrutiny assessment, after considering assessee's explanation with reference to the questionnaire under section 142(1) of the Act and verification of relevant books of accounts and other details, in our opinion, reopening of assessment for denying the exemption is a mere change of opinion and it is not justified. Thus, the reassessment order dated 21.03.2022 under section 147 r.w.s. 144B of the Act made by the Assessing Officer and confirmed by the ld. CIT(A) fails firstly on barred by limitation under the first proviso to section 147 of the Act, secondly the reassessment is inval....
X X X X Extracts X X X X
X X X X Extracts X X X X
....only when the Assessing Officer revisits previously assessed facts. 24. Heard both the parties and perused the material available on record. We note that the assessee filed its return of income declaring a total income at Rs. Nil on 29.06.2015. Admittedly that there was no scrutiny assessment in the year under consideration, which is not disputed by the ld. AR. Thus, it is clear, the Assessing Officer accepted the return of income at Rs. Nil without there being examination of facts for the year under consideration and when there was no examination of the facts with reference to the claim of the assessee, we find force in the arguments of the ld. DR that there was no change of opinion of the Assessing Officer for the year under consideration and thus, the ground No. 2 (2.1 to 2.5) raised by the assessee fails and are dismissed. 25. Ground No. 3(3.1 to 3.7) raised by the assessee on merits of the case challenging the action of the ld. CIT(A) in confirming the order of the Assessing Officer in denying the claim of exemption under section 11 of the Act. 26. The Ld.AR submits that on merits the Assessing Officer and the CIT(A) failed to see the assessee is indeed involved in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ied out. On the basis of such understanding, the Assessing Officer held for all these years that the assessee has been functioning on commercial lines without having any commercial activity and the Assessing Officer came to this conclusion only due to his narrow appreciation of the activities of assessee and failed to consider its activities as a quote. The Assessing Officer conveniently did not mention all these facts in the assessment order and prayed to declare the same is unjustified. 28. The Ld. AR submits that the status of assessee still remains as a charitable institution and would lose charitable nature only in the event that main object of education is lost. He argued once it is established that the assessee is still a charitable institution, is not precluded from carrying out any activity which may be of a commercial nature if the same are being carried out towards the achievement of the main charitable object. He submits that the carrying out of commercial activity is prohibited only in the cases where a trust is held to be operating for general public utility (GPU). 29. The Ld. AR further submits that the charitable institution can carry on business activities an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xemption under section 11 of the Act as it contributes to students development and aligns with its trust deed, is incorrect. The Assessing Officer analyzed assessee's operation and found that its primary activity in AY 2015-16 with no direct educational activities such as operating a school or college. She submits education under section 2(15) of the Act requires systematic inspection, schooling or training as defined by the Hon'ble Supreme Court in the case of Sole Trustee, Lok Shikshanath Trust reported in 101 ITR 234 (SC) as the process of training and developing the knowledge, skill, mind and character of students by normal schooling. The sale of materials lacks these elements such as curriculum or by oversight educational authorities. The assessee's arguments that supplying text books contributes to education requiring no physical school is untenable. The supply of materials to DAV School Trust Students is a separate entity, which is a commercial transaction, but, not education. The ld. CIT(A) observed that the assessee was a supplier, not a teacher, generating significant revenue. She argued vehemently that the object to provide teaching aids at concessional rate does not cha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Court of Karnataka in the case of Fr. Mullers Charitable Institutions reported in 363 ITR 230 (Kar). She supported the orders of Assessing Officer and the ld. CIT(A) as the assessee's commercial sales were not educational under section 2(15) of the Act disqualifying exemption and despite registration as the registration is irrelevant. 36. The ld. DR submits that the assessee's arguments that its history of running a Teachers Educational College until AY 2013-14 and intend to start a school in Coimbatore evidenced by Form 10 accumulation supporting charitable status is immaterial. She argued that the exemption under section 11 of the Act is assessed based on current year activities but not past or future intention as held by the Hon'ble Supreme Court in the case of Baba Banda Singh Bahadur Education Trust reported in [2023] 150 Taxmann.com 40 (SC). 37. The ld. DR further submits that the assessee's claim that accumulation under section 11(2) of the Act for school construction supports charitable intent is irrelevant, the exemption under section 11 of the Act requires charitable activities and the ld. CIT(A) rightly held that the commercial activity made accumulation immateria....
X X X X Extracts X X X X
X X X X Extracts X X X X
....maintain and run boarding house and residential institutions for students both connected with the institution". We find no dispute with regard to objects of the assessee mentioned hereinabove from the AO, CIT(A) and ld. DR and their objection is only that there was no charitable activity in the form of education during the years under consideration and section 11 exemption is not available. We find the contention of the assessee that there was no educational activity but however the assessee decided to continue its charitable activity by purchasing land and constructing school building thereof. 41. According to the Assessing Officer in reassessment proceedings, on examination of the objects and income and expenditure statement issued show cause notice as to why exemption under section 11 of the Act should not be denied by observing as main activity of supplying uniform and note books is not a charitable activity as defined in section 2(15) of the Act. We find the assessee furnished reply dated 20.03.2020 which is reproduced in page no.3 of the assessment order. On perusal of the same, it is noted the assessee primarily contended that it was initially running a teaching training ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n limbs of the section 2(15) of the Act, being education, but, held the sale of uniform, textbook is unarguably in the nature of business activity and by stretch of imagination cannot be called a charitable act, thereby denied exemption under section 11 of the Act, by giving benefit to expenditure, brought to tax excess of income over expenditure. It is pertinent to mention that the assessee generating revenue out of sale of books etc. to utilize the same in construction of school but however the Assessing Officer formed an opinion when there is no educational activity, exemption under section 11 of the Act is not available, in our opinion, is not justified. 44. We find the ld. CIT(A) discussed the issue by framing issue as whether appellant is engaged in education? from page No.19 of the impugned order. We note that by following the decision in the case of Ahmadabad Urban Development Authority reported in (2022) 143 taxmann.com 278 SC), the ld. CIT(A) observed that an assessee advancing general public utility cannot engage itself in any trade, commerce or business or provide service in relation thereto for any consideration. Further, he observed that in the course of achieving ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the assessment order, decided to construct and run a school at Coimbatore resultantly funds generated out of sale of books and uniform have been actively utilized towards the goal of construction of said school. It is also not in dispute as we find from the submissions of the assessee before the Assessing Officer and the ld. CIT(A), but the sale of note books contributed a major revenue to assessee from AY 2014-15 onwards w.r.t. income and expenditure statement at page No.114 of the paper book, entire monies are invested in acquiring a land, balance held in fixed deposits with nationalized banks enabling the assessee utilize the same effectively for construction of building. We find no dispute with regard to said fact from the orders of the Assessing Officer, the ld. CIT(A) and the submissions of the Ld. DR. In support of the same, we find the assessee filed Form-10 as mandated under section 11(2) of the Act for setting apart funds for the purpose of establishing the school at page No.85 of paper book for AY 2014-15, at page Nos.117 and 131 respectively for AYs 2015-16 and 2018-19. There is no adverse reference regarding setting apart funds generation out of sale of books and uni....
X X X X Extracts X X X X
X X X X Extracts X X X X
....amaraju Shastra Prathistha Trust v. ACIT (supra) as relied on by the ld. AR are applicable. 48. Further, as relied on by the ld. AR, the Hon'ble Jurisdictional High Court of Madras in the case of CIT v. Sri Magunta Raghava Reddy Charitable Trust [2016] 72 taxmann.com 214 (Madras), on an identical issue, held that the profit from sale of land owned by assessee, an educational trust, could not be treated as business income and was eligible for exemption under section 11 read with section 2(15) of the Act as activity of sale of land was incidental to objects of trust and said profit had been applied for objects of trust. The relevant portion of the above said decision is reproduced herein below: 37. What emerges from the reading of the provisions and the Circular is that a trust or institution, whose purpose is advancement of any other object of general public utility, and recognised as charitable, under the fourth limb of Section 2(15) of the Income-Tax Act, and predominantly engages in activities in the nature of trade, commerce or business, should not be permitted to escape from taxability, with the mask, "charitable". In the case on hand, the glaring omission on the pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g medical college and old age homes, but, however, enormous delay crept in obtaining necessary permission for starting these institutions. In the meantime, attempts at encroachment of the land began being made by various elements and it was decided to abandon the idea of medical college and old age home and decided to confine to running junior and degree colleges, drinking water and mortuary vans in the district of Nellore and Prakasam in A.P. When the above referred land was proposed to be disposed of, there were no buyers in view of the huge stretch of land. Therefore, the assessee obtained permission from town planning authorities, converted the land into small plots and started selling the land in the layout from the financial year 1994-95 and utilized the same for the charitable activities of the trust. It is therefore submitted that there was no business motive when the "assessee acquired the land and the sale of land in the form of plots is only to make the land better saleable and also to realize better price, which had been thoroughly scrutinized in the assessment of earlier years and the assessee passed the test convincingly. After considering the submissions of the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....permission which is evident from Form-10 disclosure available before AO. Therefore, we find the facts and circumstances on hand and the facts and circumstances before the Hon'ble High Court in the case of CIT v. Sri Magunta Raghava Reddy Charitable Trust (supra) are similar and identical, and thus, in the present case, we find the revenue generated through sale of books, uniform etc. could not be said to be not incidental to the attainment of objects of the assessee. In view of the above decision of the Hon'ble High Court of Madras in the case of CIT v. Sri Magunta Raghava Reddy Charitable Trust (supra), the submissions made by the ld. DR in the written submissions at pages 8 to 12 of the paper book Volume II are not acceptable. Thus, respectfully following the decision of the Hon'ble High Court of Madras in the case of CIT v. Sri Magunta Raghava Reddy Charitable Trust (supra), we hold the activity of sale of uniforms, textbooks, etc. and the excess of income over expenditure arising thereon which are disclosed in Form-10A are incidental to the attainment of objects of the assessee. Therefore, the assessee is entitled to the benefit of section 11 of the Act for the year under consi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ok. 55. The ld. DR Ms. Gouthami Manivasagam, JCIT referred to the written submissions dated 01.05.2025 and relied on the same. She supported the orders of the ld. CIT(A) and prayed to dismiss the legal ground raised by the assessee. 56. Heard both the parties and perused the material available on record. We note that the assessee filed return of income under section 139(1) of the Act declaring a total income of Rs. NIL on 14.08.2017. Thereafter, the assessee filed revised return of income on 22.08.2018 declaring the same NIL income under section 139(5) of the Act and it is clear that the Assessing Officer has to consider the revised return of income for completing assessment for the year under consideration. In this regard we may refer to the chart having date and event in para 7.2 of the written submissions of the assessee which is reproduced hereunder: # Date Event 1. 14.08.2017 ROI filed u/s. 139(1) of the Act 2. 07.11.2017 Extended due date for filing ROI u/s. 139(1) of the Act 3. 22.08.2018 Revised ROI filed u/s. 139(5) of the Act 4. 30.09.2018 Limitation for issuance of notice u/s. 143(2) of the Act for ROI u/s. 139(1) of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l was right in holding that reassessment proceedings are not valid since the Assessing Officer is barred in initiating the proceedings under section 148 when the time for issuance of notice under section 143(2) had not expired?" We find the facts and circumstances in the present case are identical to the facts and circumstances before the Hon'ble High Court of Madras in the cases of K.M. Pachayappan (supra) and CIT v. Qatalys Software Technologies Ltd. (supra), therefore, respectfully following the same, we hold that the notice dated 23.09.2019 issued under section 148 of the Act is not maintainable and the reassessment order dated 25.03.2021 under section 147 of the Act is not valid and hence quashed. Thus, ground No. 2(2.1 to 2.5) raised by the assessee are allowed. 59. The ld. AR and the ld. DR admits the facts and circumstances on merits are similar and identical to AY 2015-16, therefore, considering the same, the facts and circumstances on merits though identical to AY 2015-16, no finding is given on merits in view of our decision in legal ground in favour of the assessee in quashing the reassessment order dated 25.03.2021 passed under section 147 of the Act and thus, groun....