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2013 (3) TMI 191 - AT - Income TaxReassessment - Charitable Trust set up for educational activities - held that - there is no rebuttal to the claim of the ld. A.R that assessee had been receiving 20% profit from Bharati Sahakari Bank and Bharati Grahak Bhandar as a donation to the corpus of the assessee for the last number of years and it was not taxed by the A.O. It is also worth noting that same A.O had framed assessment for A.Y. 2003-04 and the assessment order for that year was passed just one day after the re-opening initiated by the same A.O for the A.Y. under consideration i.e. A.Y. 1999-2000. In the later years, i.e. A.Y. 2000-01 and 2003-04, the A.O has accepted the donations from the above 2 Societies as corpus. Under these circumstances, when the Department has been accepting a similar donation in past and future years, the reopening of the assessment on the basis that the said donation remained to be taxed for the A.Y. under consideration i.e. under 1999-2000 is nothing but mere change of opinion, which is not allowed as a basis for initiating re-opening proceedings. - Notice u/s 148 is not valid - Reassessment order on the basis of a invalid notice is null and void - Decided in favor of assessee.
Issues Involved:
1. Validity of initiation of reopening proceedings and assessment made under Section 147 read with Section 143(3). 2. Merits of the additions and disallowances made by the Assessing Officer (AO). Issue-wise Detailed Analysis: 1. Validity of Initiation of Reopening Proceedings and Assessment under Section 147 read with Section 143(3): The primary issue raised by the assessee was the validity of the reopening proceedings and the subsequent assessment made under Section 147 read with Section 143(3) of the Income Tax Act. The Tribunal examined the reasons provided by the AO for reopening the assessment, which included non-filing of schedules to the balance sheet, rental income, income from the sale of books and printing press, and corpus donations from Bharati Sahakari Bank and Bharati Grahak Bhandar. Reason (a): Non-filing of Schedules to the Balance Sheet: The Tribunal found that non-filing of schedules does not imply income escapement. It was a subject for making enquiries but not a valid reason for reopening the assessment. The Tribunal referred to the decision in ACIT Vs. O.P. Chawla, where it was held that reopening based on such grounds was not sustainable. Reason (b): Rental Income: The AO noted that the assessee earned significant rental income, which should be taxed separately. The Tribunal found that the rental income was from the assessee's own institutions and cooperative societies essential for the students and staff. The Tribunal held that there is no prohibition in Section 11 against a Charitable Trust earning rental income, and such income should be computed on commercial principles, not under specific heads of income. The Tribunal referred to CIT Vs. Institute of Banking Personnel Selection, supporting the assessee's case. Reason (c): Income from Sale of Books and Printing Press: The AO considered income from the sale of books and printing press as business income. The Tribunal found that this activity was incidental to the trust's educational objectives and thus exempt under Section 11. The Tribunal referred to ACIT Vs. Thanthi Trust, which supports the assessee's position that such income is exempt if applied for charity and incidental to the trust's objectives. Reason (d): Corpus Donations: The AO argued that 20% profit donations from Bharati Sahakari Bank and Bharati Grahak Bhandar should be included in the income and expenditure account. The Tribunal found that these donations were consistently treated as corpus donations in past assessments. The Tribunal held that reopening based on this reason was a mere change of opinion, which is not permissible. The Tribunal referred to CIT Vs. Kelvinator of India Ltd., emphasizing that reopening requires tangible material indicating income escapement. Conclusion on Reopening Proceedings: The Tribunal concluded that the AO was not justified in initiating reopening proceedings as the reasons provided did not establish a valid belief of income escapement. The Tribunal held that the reopening and the subsequent assessment were invalid and ordered accordingly. The Tribunal emphasized the need for consistency in the revenue's approach on similar issues under similar facts. 2. Merits of Additions and Disallowances: Since the Tribunal found the reopening proceedings and the subsequent assessment invalid, the other grounds on merits raised by the assessee and the revenue became academic and did not require adjudication. These grounds included issues like additions towards un-recovered debit balances, liabilities written back, disallowance of capital expenditure, denial of exemption under Section 11, and deductions under Section 80L, among others. Final Orders: The Tribunal allowed the appeal preferred by the assessee and dismissed the appeal preferred by the revenue, holding that the notice issued under Section 148 was not valid and the assessment made in furtherance thereto was null and void.
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