2023 (3) TMI 52 - HC - Income Tax

Reopening of assessment u/s 147 - validity of order u/s 148A(d) - Petitioner was unable to prove that it is substantially financed by the Government in order to claim exemption under Section 10(23C)(iiiab - HELD THAT - When the respondent themselves have accepted that the petitioner is a Section 10(23C)(iiiab) institution entitled for exemption in respect of the subsequent Assessment Years 2016-17, 2017-18 and 2018-19, they cannot now contend that the petitioner has not been able to establish that they are an educational institution solely for the purpose of education and not for the purpose of making profits. Admittedly, the petitioner is a Deemed University in existence from 1957 onwards which is catering to the needs of several lakhs of students and is having a huge infrastructure. Therefore, the reasons given by the respondent for passing the order under Section 148A(d) are arbitrary and illegal and has been passed by total non application of mind. Here is the case, where, by total non application of mind to the fact that in respect of subsequent Assessment Years 2016-17, 2017-18, 2018-19, it has been accepted by the respondent that the petitioner is a Section 10(23C)(iiiab) institution and is entitled for exemption, the impugned Assessment Order has been passed. However, the re-opening of the assessment pertains to the Assessment Year 2015-16, which is arbitrary and illegal. Therefore, the Anshul Jain decision 2022 (10) TMI 3 - SC ORDER relied by the learned Standing counsel for the respondent has no applicability for the facts of the instant case. As per judgment Red Chilli International Sales 2023 (1) TMI 674 - SC ORDER it is very clear that this Court is having the power to consider a challenge being made to an order passed under Section 148 A(b) of the Income Tax Act. For the foregoing reasons, the impugned order passed u/s 148A(d) and the consequential notice have to be quashed and the writ petition will have to be allowed. Decided in favour of assessee.

Summary

Issues:
Challenge to order under Section 148A(d) of the Income Tax Act, 1961 for Assessment Year 2015-16.

Analysis:
The petitioner, a Society registered under the Tamil Nadu Societies Registration Act, 1975 and a Deemed University, challenged the order passed by the respondent under Section 148A(d) of the Income Tax Act for the Assessment Year 2015-16. The respondent re-opened the assessment alleging that income had "escaped assessment." The petitioner, being a Section 10(23C)(iiiab) institution, claimed exemption from filing returns till 2015-16, supported by subsequent Assessment Orders accepting their status. The respondent, however, issued the impugned order based on fixed deposits and lack of government financing proof.

The respondent argued that due procedure under Sections 148A and 148 was followed, and the petitioner failed to prove substantial government financing for exemption. They claimed the order was preliminary, allowing the petitioner to prove exemption during further proceedings under Section 147. The petitioner's counsel highlighted relevant provisions and previous favorable Assessment Orders, citing a Supreme Court decision allowing challenges to orders under Section 148A(d).

The Court noted the petitioner's long-standing existence as an educational institution, the lack of necessity to file returns till 2015-16, and subsequent Assessment Orders accepting their exemption status. The reasons given for the impugned order were deemed arbitrary and illegal, as the respondent previously acknowledged the petitioner's exemption eligibility. The Court distinguished a cited Supreme Court case, emphasizing the unique circumstances of the present case.

Relying on a recent Supreme Court decision supporting challenges to orders under Section 148A(b), the Court quashed the impugned order and consequential notice, allowing the writ petition. The Court found the order under Section 148A(d) for the Assessment Year 2015-16 to be arbitrary and lacking proper application of mind, considering the respondent's prior acceptance of the petitioner's exemption status for subsequent years.

In conclusion, the Court ruled in favor of the petitioner, quashing the impugned order and allowing the writ petition without costs, emphasizing the arbitrary nature of the respondent's decision and the petitioner's established exemption eligibility for subsequent years.