2019 (5) TMI 1389 - AT - Income Tax

Reopening of assessment u/s 147 - disposal of objection by AO - CIT held assessment order is bad in law and quashed the same as A. O. has not passed any speaking order in disposing the assessee s objections against the notice u/s 148 - HELD THAT - There is no dispute that the Assessing Officer has not dismissed the objections of the assesssee by any speaking order. This is clearly in violation of the ratio laid down by the Hon ble Supreme Court in the case of M/s. GKN Drivesharfts 2002 (11) TMI 7 - SUPREME COURT clearly laid down that where the notice u/s. 148 was issued and the assessee filed objections. The Assessing Officer was bound to dispose of the same by a speaking order. We find that the CIT(A) has rightly considered the decisions of Hon ble Supreme Court (supra) and the Hon ble High Court Gujarat 2003 (10) TMI 17 - GUJARAT HIGH COURT , therefore, no interference is called for Exemption u/s 11 - Application of income by a charitable society - Uttaranchal legislature passed an Act called the ICFAI University Act, 2003, permitting ICFAI to set up a University in Uttaranchal - HELD THAT - If the objections of the assessee are considered in the light of the factual matrix in their true perspective there remains no doubt that the payment being made to the sponsor society is on account of the MOU entered into between the sponsor society and the university with regard to the creation of infrastructure for the university and its ultimate transfer to the university after clearing of all liabilities in this regard. Therefore, it can be safely concluded that the assessee is right when it says that that all the money expenditure is applied for creation that infrastructure facilities of the university. The sponsor society is also registered u/s. 12AA of the Act which means that contributions by the one society to another having similar objects have to be considered a legitimate application of income by a charitable society. No error or infirmity in the findings of the CIT(A). Ground No. 2 is dismissed.

Summary

Issues:
1. Failure to address objections of the assessee by passing a speaking order in a reassessment proceeding.
2. Disallowance of a payment made to the sponsor society as an application of income.

Issue 1: Failure to address objections of the assessee by passing a speaking order in a reassessment proceeding:
The appeal by the revenue was against the order of the Commissioner of Income Tax [Appeals] pertaining to Assessment Year 2008-09. The grievance of the revenue was related to the failure of the Assessing Officer to address the objections of the assessee by passing a speaking order during the reassessment proceedings initiated under section 148. The CIT(A) observed that the absence of a speaking order by the Assessing Officer vitiated the proceedings and rendered the subsequent assessment order as bad in law. The DR supported the findings of the Assessing Officer, citing a decision of the Hon'ble High Court of Madras. However, the ITAT Delhi held that the failure to pass a speaking order on the objections of the assessee was in violation of the principles laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts India Limited. The ITAT Delhi dismissed the appeal, upholding the decision of the CIT(A) based on the legal precedents.

Issue 2: Disallowance of a payment made to the sponsor society as an application of income:
The second issue involved the disallowance of a payment of &8377; 718.49 Lakhs made to the sponsor society by the assessee. The Assessing Officer disallowed this amount, stating that it could not be considered as an application of income since the cost of infrastructure was not reflected in the balance sheet of the assessee. However, the CIT(A) overturned this disallowance, noting that the payment was made in accordance with an MoU between the sponsor society and the university for creating infrastructure facilities. The CIT(A) also highlighted that the sponsor society was registered under section 12AA of the Income Tax Act, making such contributions a legitimate application of income by a charitable society. The ITAT Delhi upheld the decision of the CIT(A), emphasizing that the payment was for creating infrastructure for the university and was a valid application of income by the assessee society.

In conclusion, the ITAT Delhi dismissed the appeal filed by the revenue, affirming the decisions of the CIT(A) on both issues. The judgment highlighted the importance of passing a speaking order on objections raised by the assessee during reassessment proceedings and upheld the validity of the payment made to the sponsor society as an application of income by the charitable society.