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2017 (1) TMI 1146 - AT - Income TaxReopening of the assessment - Held that - We find that the reasons are contrary to the records. The assessee has, during the course of original assessment furnished all its accounts, Balance Sheets and the Revenue account before the AO. Therefore, there is no material suggesting that the assessee has not disclosed the material facts fully and truly for his assessment. Therefore, respectfully following the judgment of the Hon ble Bombay High Court rendered in the case of Dynacraft Air Controls vs. Sneha Joshi & Others, (2013 (6) TMI 312 - BOMBAY HIGH COURT ), we hereby quash the assessment being invalid. This ground of the assessee is allowed. Benefit of section 11 denied - Held that - We find that the Coordinate Bench has dealt with the identical issue elaborately in the case of Hoshiarpur Improvement Trust & Others vs. ITO 2015 (9) TMI 902 - ITAT AMRITSAR as held that as long as broader public cause is served, whether by the State funding or by efficient regulation of the affairs, it is an object of general public utility. Authorities below were not justified in declining the benefit of section 11 read with section 2(15) to the assessee, and in holding that the assessee trust was not covered by advancement of any object of general public utility. The Coordinate Bench has held that even if the activities in the nature of trade, commerce or business etc. are undertaken in the course of actual carrying out of advancement of any object of general public utility, till the end of the previous year relevant to the assessment year 2016-17, the activities will continue to be covered by the scope of Section 2(15). Addition on the basis of conjectures and surmises without any basis and the profit is estimated @ 30% on sale price which as per the AO was not accounted for in the P&L account - Held that - Addition has been made at 30% without any basis with the presumption that the profit of 30% should have been earned on auction of commercial properties by the Board. This finding of fact is not controverted by the revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere in the order of ld. CIT (A), which is hereby confirmed. Disallowance of expenses on Haj Yatris - Held that - We find that the ld. CIT (A) has accepted the contention of the assessee on the ground that it will not make any difference even if such addition Application of income by the Board during the year of ₹ 232,59,28,849/- as specified in Form 10B Audit Report is much more than the total income of the appellant shown at ₹ 98,90,80,448/- in the statement of total income filed with the return. This finding of fact is not controverted by the revenue. Therefore, we do not see any reason to interfere in the order of ld. CIT (A), which is hereby confirmed. Reopening of assessment - Held that - The basis of reopening of the assessment was that the proviso 1 & 2 to section 2(15) of the Act were held to be applicable to the facts of the case. As per section 147 of the Act, the assessment can be reopened if the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Therefore, the reason of the AO was based upon his belief that provisions of section 2(15) were applicable on the facts of the case. Therefore, in our considered view, the AO was justified in reopening the assessment. This ground of the assessee is dismissed. Disallowance on account of Contingency and Equalization Reserve - Held that - The appellant has been held as a charitable organization and its income to the extent of application as mentioned in section 11 is exempt from taxation u/s 11, therefore there is no justification for making the disallowance specially when the Reserve has been informed created from the sale proceeds of houses and not appropriated from profit shown in the P&L account called Revenue account as presumed by the AO
Issues Involved:
1. Reopening of assessments under section 147. 2. Disallowance of Contingency and Equalization Reserve (CER). 3. Exemption under section 11 and applicability of section 2(15). 4. Disallowance of depreciation. 5. Addition of undisclosed profit from auctioned property. 6. Disallowance of expenses on Haj Yatris. Issue-wise Detailed Analysis: 1. Reopening of Assessments under Section 147: The assessee challenged the reopening of assessments on the grounds of change of opinion and lack of new material facts. The Tribunal found that the reopening was invalid as the Assessing Officer (AO) did not demonstrate that the assessee failed to disclose all material facts necessary for assessment. The Tribunal quashed the reopening of assessments for A.Y. 2005-06 and 2006-07, following the judgment of the Bombay High Court in Dynacraft Air Controls vs. Sneha Joshi & Others, which mandates that the AO must have reason to believe that income chargeable to tax has escaped assessment due to the assessee's failure to disclose material facts fully and truly. 2. Disallowance of Contingency and Equalization Reserve (CER): The AO disallowed CER, considering it a contingent liability. The Tribunal noted that CER was not debited in the Profit & Loss (P&L) account and was created from the sale proceeds of houses, not appropriated from profits. The Tribunal upheld the CIT(A)'s decision to restrict the disallowance to the unutilized portion of CER, stating that the provision was an estimate and not an ascertained liability. The Tribunal allowed the assessee's appeal for A.Y. 2005-06, 2006-07, 2010-11, 2011-12, and 2012-13, deleting the disallowance of CER. 3. Exemption under Section 11 and Applicability of Section 2(15): The AO denied exemption under section 11, arguing that the assessee's activities were commercial. The Tribunal disagreed, citing the assessee's charitable activities in providing housing, including subsidized schemes for economically weaker sections. The Tribunal followed the decision in Hoshiarpur Improvement Trust & Others vs. ITO, which held that activities serving a broader public cause are charitable. The Tribunal upheld the CIT(A)'s decision to allow exemption under section 11 for A.Y. 2009-10 to 2012-13, rejecting the AO's view that the assessee's activities were commercial. 4. Disallowance of Depreciation: The AO disallowed depreciation, arguing it would result in double deduction. The Tribunal upheld the CIT(A)'s decision to allow depreciation, following the Punjab & Haryana High Court's judgment in CIT vs. Tiny Tots Education Society, which stated that depreciation should be reduced from income for determining the percentage of funds applied for charitable purposes. The Tribunal dismissed the revenue's appeals on this issue for A.Y. 2009-10 to 2012-13. 5. Addition of Undisclosed Profit from Auctioned Property: The AO estimated profits from auctioned properties at 30%, adding it to the income. The Tribunal found the addition baseless and unsupported by evidence. The CIT(A) had deleted the addition, noting that the AO's estimation was arbitrary. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeals for A.Y. 2009-10 to 2012-13. 6. Disallowance of Expenses on Haj Yatris: The AO disallowed expenses on Haj Yatris, questioning their relevance to the assessee's charitable activities. The Tribunal upheld the CIT(A)'s decision to allow the expenses, noting that the total application of income was much higher than the income shown, and the expenses were within the objectives of the assessee. The Tribunal dismissed the revenue's appeals on this issue for A.Y. 2009-10 and 2011-12. Conclusion: The Tribunal allowed the assessee's appeals on the issues of reopening assessments, disallowance of CER, exemption under section 11, and disallowance of depreciation. It dismissed the revenue's appeals on the addition of undisclosed profits from auctioned properties and disallowance of expenses on Haj Yatris. The Tribunal's decisions were based on legal precedents and the factual matrix of the assessee's charitable activities.
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