2014 (11) TMI 136 - AT - Income Tax

Reopening of assessment u/s 147/148 Held that - If an assessment is reopened and on the basis of the reasons and no additions are made by the AO, then, the issues for which it was reopened, AO will be denuded from his powers to make any other addition on the issues which came to his notice during the reassessment proceedings the AO has observed that assessee is not entitled to exemption u/s 11(1A) - It has not disclosed the capital gain on sale of capital assets - CIT(A) has confirmed the addition to the extent of capital gain arose to the assessee on actual sales consideration received by it - the assessment was reopened for two reasons and on one of the reason, addition was confirmed by the CIT(A) Decided against assessee. Denial of benefit of section 10(23C)(iiiad) - Sale of land as capital gain - Whether the assessee society is an educational institution or not Held that - The society has neither been registered u/s 12AA nor has ever done any educational activity - benefit under sec. 10(23C)(iiiad) is solely not dependent on the actually functioning of an educational institution - The expression existing employed in this section does not convey the meaning of actual functioning of the institution - A society can be considered as existing for educational purposes during the construction period of the building etc. Whether assessee has actually worked in the field of education or grant of benefit under sec. 10(23C)(iiiad) is dependent on the fate of actually functioning of the school or it can be granted to the assessee during the construction period Held that - In the Memorandum of Association, assessee has only prescribed the objects pertaining to education of poor and needy people - It has provided that in order to fulfill its main objects of education, to give donations to the society/institution, who are in similar lines - When assessee had purchased this plot in the year 1999, no addition on account of unexplained investment was made - It was considered for the objects of the society - The assessee has given donations to Suhail Garg Siksha Sansthan which has already been registered under sec. 12AA - The assessee has produced copy of the letter dated 04.02.2008, assessment order of Suhail Garg Siksha Sansthan for AY 2008-09 and copy of the minutes of the assessee society passing a resolution for giving education. If at the commencement of the society, its objects are for educational purposes and its investment in the land was not considered as unexplained investment and treated for advancement of educational objects then, how on sale of that plot and giving a corpus donation to a similar society as per the aims and objects, can be without educational purposes, not discernible in the order of the CIT(A) - it was sold after a considerable time but if, in a society, there were donations towards corpus for construction of building etc. but that was not sufficient and society decides to close its activity; and give those amounts as donation to another society having charitable and similar activity then those amounts would not be taxable - assessee had donated the funds to an educational society whose credential had not been doubted by the Assessing Officer who happens to be the same officer - assessee is entitled for exemption under sec. 10(23C)(iiiad) of the Act on the alleged capital gain arising to it Decided in favour of assessee.

Issues Involved:
1. Reopening of assessment under sections 147/148.
2. Taxation of sale of land as capital gain and denial of benefit under section 10(23C)(iiiad).
3. Incorrect assessment of Rs. 3,700 as income from business or profession.
4. Charging of interest under sections 234A, 234B, and 234C.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Sections 147/148:
The assessee challenged the reopening of the assessment, arguing it was unsustainable both in law and on merits. The reopening was based on two reasons: (a) a discrepancy in the sales consideration for computing capital gain as per section 50C, and (b) the society's failure to invest the sale proceeds in a capital asset, violating section 11(1A). The tribunal noted that the actual sales consideration was close to the fair market value determined by the DVO, thus section 50C was not applicable. However, since one of the reasons for reopening (non-compliance with section 11(1A)) was upheld by the CIT(A), the reassessment was deemed valid. Consequently, grounds 1 and 2 were rejected.

2. Taxation of Sale of Land as Capital Gain and Denial of Benefit under Section 10(23C)(iiiad):
The assessee claimed exemption under section 10(23C)(iiiad), arguing that the society existed solely for educational purposes. The CIT(A) denied this exemption, stating the society had never conducted any educational activities nor registered under section 12AA. The tribunal, however, observed that the exemption under section 10(23C)(iiiad) does not require actual functioning of an educational institution but rather its existence for educational purposes. The assessee had purchased land for educational purposes and later donated the sale proceeds to another educational society. The tribunal concluded that the assessee was entitled to the exemption under section 10(23C)(iiiad), thus allowing this ground of appeal.

3. Incorrect Assessment of Rs. 3,700 as Income from Business or Profession:
The assessee contended that Rs. 3,700 was wrongly assessed as income from business or profession. The tribunal agreed, noting that the assessee did not conduct any business activities. Given the exemption under section 10(23C)(iiiad), this amount was also not assessable. Thus, this ground of appeal was allowed.

4. Charging of Interest under Sections 234A, 234B, and 234C:
The assessee challenged the charging of interest under sections 234A, 234B, and 234C but did not advance any arguments. The tribunal held that the charging of interest is consequential in nature and rejected this ground of appeal.

Conclusion:
The appeal was partly allowed. The tribunal upheld the reopening of the assessment but granted the exemption under section 10(23C)(iiiad) and ruled that the Rs. 3,700 assessed as business income was not assessable. The challenge to the charging of interest was rejected.

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