2011 (3) TMI 569 - AT - Income Tax

Reassessment - change of opinion - application of principal of res judicata - proper service of notice u/s 148 - Held that - When the receipt of notice in question by an authorized person of the assessee is not being disputed the dispute raised by the assessee on the basis of signature on acknowledgement of such notice is not valid Change of opinion - assessee s society and all educational institutions run by it were assessed as a single entity and exemption was allowed u/s 10(23C)(iiiab) for earlier years but assessed separately during the reassessment proceedings - Held that - no opinion was formed by the Assessing Officer till assessment year 2001-02. - remedial action is being taken in that year and merely on the basis of wrong view taken by the Assessing Officer in assessment year 2002-03 it cannot be held that the Department is precluded from taking a correct view of matter in subsequent years. Deduction u/s 10(23C)(iiiab) - Clubbing of turnover - gross receipt in excess of Rs. 1 crores - Held that - As per the provisions of this sub-clause (iiiad) of clause (23C) of section 10 that the term aggregate annual receipts of each educational institution is relevant and if any assessee is having more than one educational institution then the aggregate annual receipt of each of such educational institution has to be considered separately - the income of these three institutions are also exempt u/s sub-clause(iiiad) of clause (23C) of section 10 because aggregate income of each of these institutions in each of these two years is below Rs. 1 crore. The requirement of approval of CCIT under sub-clause (vi) of clause (23C) of section 10 is for those who are not covered by sub-clauses (iiiab) or (iiiad) of clause (23C) of section 10. Since these three institutions are covered by clause (iiiad) clause (vi) is not applicable.

Issues Involved:
1. Validity of reassessment proceedings.
2. Service of notice under Section 148.
3. Allegation of change of opinion.
4. Exemption under Section 10(23C)(iiiab) and Section 10(23C)(iiiad).

Detailed Analysis:

1. Validity of Reassessment Proceedings:
The appellant contended that the reassessment proceedings initiated under Section 148 were invalid due to a change of opinion and improper service of notice. The Tribunal observed that the returns for the assessment years 2003-04 and 2004-05 were accepted under Section 143(1)(a) without issuing any notice under Section 143(2) within the stipulated period. Notices under Section 148 were issued in December 2006, and the appellant challenged this reopening, arguing it was based on a change of opinion and improper service.

2. Service of Notice under Section 148:
The appellant argued that the notices under Section 148 were not served properly, as the acknowledgment signatures were not from any authorized person. The Tribunal noted that the Assessing Officer recorded that the notices were served on 14.12.2006, and the appellant responded by requesting the previously filed returns be considered in response to these notices. The Tribunal concluded that the service of notice was valid as the authorized person of the appellant acknowledged receipt and acted upon it. The Tribunal rejected the appellant's objection, stating that the service of notice is not dependent on the acknowledgment signature when the notice has been received by an authorized person.

3. Allegation of Change of Opinion:
The appellant claimed that the reassessment was invalid due to a change of opinion, as the status of the society and its educational institutions had been accepted in earlier years, and exemption was allowed under Section 10(23C)(iiiab). The Tribunal found that no scrutiny assessment was done up to the assessment year 2001-02, and the Assessing Officer did not form any opinion. For the assessment year 2002-03, the Assessing Officer allowed the exemption, but remedial action was being taken. The Tribunal held that the reassessment was not due to a change of opinion, as no opinion was formed in earlier years, and the department was not precluded from taking a correct view in subsequent years.

4. Exemption under Section 10(23C)(iiiab) and Section 10(23C)(iiiad):
The appellant argued that the income of the institutions run by the society should be exempt under Section 10(23C)(iiiab) and Section 10(23C)(iiiad). The Assessing Officer noted that the society itself did not receive any government grants, and only individual institutions received grants. Three institutions did not receive any government grants and had gross receipts exceeding Rs. 1 crore, making them ineligible for exemption under Section 10(23C)(iiiab) and Section 10(23C)(vi) due to the lack of approval from the CCIT. The appellant contended that if each institution's gross receipts were considered separately, they would be below Rs. 1 crore, making them eligible for exemption under Section 10(23C)(iiiad).

The Tribunal agreed with the appellant that the gross receipts of each educational institution should be considered separately for exemption under Section 10(23C)(iiiad). The Tribunal concluded that the aggregate annual receipts of each institution were below Rs. 1 crore, making them eligible for exemption under Section 10(23C)(iiiad). The Tribunal held that the requirement of CCIT approval under Section 10(23C)(vi) was not applicable as the institutions were covered under Section 10(23C)(iiiad).

Conclusion:
The Tribunal rejected the appellant's objections regarding the validity of reassessment proceedings and improper service of notice. However, it accepted the appellant's contention regarding the exemption under Section 10(23C)(iiiad), holding that the income of the institutions was exempt as their annual gross receipts were below Rs. 1 crore. Consequently, the appeals were partly allowed.

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