2022 (12) TMI 248 - AT - Income Tax

Reopening of assessment u/s 147 - Reason to believe - assessment was reopened after 4 years from the end of relevant assessment years - HELD THAT - As seen from the reasons recorded by AO for reopening the assessment, there was no allegation by AO that there was any failure on the part of the assessee to disclose fully or truly all material facts necessary for the assessment. It is also noted that assessment for the assessment year 2008-09 has been originally completed u/s 143(3) of the Act vide order dated 3.12.2010. Similarly, the assessment for 2009-10 has been completed vide assessment order passed u/s 143(3) dated 23.12.2011. At the time of completion of original assessment, the assessee furnished all the details and there was no failure on the part of the assessee to disclose all material facts fully and truly for the purpose of assessment and even in the reasons recorded for reassessment, there was no allegation by AO that assessee has failed to disclose all material facts fully and truly. In this situation, it cannot be said that the assessee had failed to disclose all material facts fully and truly required for the assessment. Therefore, we are of the opinion that there is no negligence on the part of the assessee in furnishing the required details for completing the original assessment. Being so, by placing the decision of coordinate bench in the case of Kochaniyan Unnithan and Anr 2019 (3) TMI 2001 - ITAT COCHIN we quash the assessment for assessment year 2008-09 and 2009-10. Receipt of corpus donation - A.Y. 2010-11 - In this case, the original assessment has been completed u/s 143(3) of the Act on 27.3.20123. Later, it was found that there was a difference between opening and closing balance of the general fund amounting to Rs.64.22 lakhs, which has not been verified in the assessment order made u/s 143(3) of the Act. For that reason, the AO has reopened the assessment by issuing notice u/s 148 and added back the difference in general fund which had been claimed by assessee as corpus donation. In our opinion, all the material already available on record at the time of completion of original assessment and there was no material to come to the conclusion that income escaped assessment - In our opinion, since there was no material brought on record by to come to the conclusion that income escaped assessment while recording the reasons for reopening of assessment and it is only a change of opinion. Quantum of accumulation and carry forward - amount that can be accumulated and carried forward should be ascertained at 15% of gross receipts of the appellant for the year - HELD THAT - After hearing both the parties, we are of the opinion that this issue came for consideration before the coordinate bench in the case of Divine Trust, Chalakudy 2016 (1) TMI 1492 - ITAT COCHIN held on a plain reading of section 11(1)(a) of the Act, it can be seen that 85% of the income of the trust to be applied for charitable/religious purposes and upto15% is permitted for accumulation in order to avail full exemption. There is no condition stated/s 11(1 )(a) of the act to invest the 15% accumulated income in the modes specified as per section 11(5) of the Act. Section 11(2) of the Act is for giving relief to unapplied income which is short of 85% with a condition of keeping such surplus in the specified mode as per section 11(5) of the Act. Voluntary contributions OR corpus donations - HELD THAT - After hearing both the parties, we are of the opinion that this issue is squarely covered by the decision of DIT Vs. Sri Ramakrishna Seva Ashram 2011 (10) TMI 369 - KARNATAKA HIGH COURT held centres were started in the year 1992 with due registration and had been working since then for the welfare of needy people and the first project of it was leprosy eradication project. Likewise, they had 14 projects, which were started in rural areas. The contributions received were kept in fixed deposit. It showed that the intention of the assessee was to treat these contributions as corpus and the income derived from the corpus was used for carrying on the activities. The assessee was entitled to renewal of registration - thus we allow the ground taken by the assessee and direct the AO to consider the contribution of Corpus donations. Setoff of excess of application of earlier years - excess application of the appellant over 85% of the gross receipts during the earlier years was eligible to be carried forward and set off during this year against the gross receipts - HELD THAT - The Hon ble Supreme Court in the case of CIT(Exemption) Vs. Subros Educational Society 2018 (4) TMI 1622 - SC ORDER has decided the similar issue, wherein held any excess expenditure incurred by trust/charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years by invoking section 11 - In view of the above, we allow the ground taken by the assessee.

Summary

Issues Involved:
1. Reopening of assessment for the assessment years 2008-09, 2009-10, and 2010-11.
2. Computation of percentage of income that can be accumulated under 15% for the assessment year 2013-14.
3. Treatment of certain contributions as voluntary contributions or corpus donations for the assessment year 2013-14.
4. Disallowance of contributions and donations made by the appellant for the assessment year 2013-14.
5. Carry forward and set off of excess application of earlier years for the assessment year 2013-14.

Detailed Analysis:

1. Reopening of Assessment for the Assessment Years 2008-09, 2009-10, and 2010-11:
Assessment Years 2008-09 & 2009-10:
The primary issue was whether the reopening of assessments for these years was justified. The reasons recorded by the AO for reopening did not allege any failure on the part of the assessee to disclose fully or truly all material facts necessary for the assessment. The original assessments were completed under section 143(3) of the Act, and all necessary details were furnished by the assessee. Citing the case of Kochaniyan Unnithan and Anr. Vs. DCIT, it was concluded that there was no negligence on the part of the assessee. Thus, the assessments for these years were quashed.

Assessment Year 2010-11:
The assessment was reopened within four years, and the AO recorded reasons based on discrepancies in the opening balance of the "General Fund." The reassessment was challenged on the grounds that it was based on materials already available during the original assessment, constituting a mere change of opinion. Citing the Supreme Court's decision in ACIT Vs. ICICI Securities Primary Dealership Ltd., it was held that reassessment based on a mere change of opinion is not permissible. Hence, the assessment for 2010-11 was also quashed.

2. Computation of Percentage of Income that can be Accumulated under 15% for the Assessment Year 2013-14:
The dispute was whether the 15% accumulation should be calculated on gross receipts or net income. The assessee argued for gross receipts, supported by CBDT Circular No.5P (LXX-6) and the Supreme Court's decision in CIT vs. Programme for Community Organization. However, the AO computed it on net income. The Tribunal referred to the decision in Divine Trust, Chalakudy Vs. PCIT, concluding that 15% should be calculated on gross receipts. Thus, the assessee's claim was allowed.

3. Treatment of Certain Contributions as Voluntary Contributions or Corpus Donations for the Assessment Year 2013-14:
The assessee contended that certain contributions were corpus donations, not subject to the application of 85% towards the objects of the trust. The Tribunal referred to the Karnataka High Court's decision in DIT Vs. Sri Ramakrishna Seva Ashram and the case of DCIT (Exemptions) Vs. Chinmaya Mission Educational & Charitable Trust. It was concluded that the contributions should be treated as corpus donations, and the AO was directed to consider them as such.

4. Disallowance of Contributions and Donations Made by the Appellant for the Assessment Year 2013-14:
The assessee argued that disallowing Rs.3,43,894/- in contributions and donations was unjustified. However, no arguments were put forth during the hearing, leading to the dismissal of this ground.

5. Carry Forward and Set Off of Excess Application of Earlier Years for the Assessment Year 2013-14:
The assessee claimed that excess application from earlier years should be set off against current year receipts. The CIT(A) dismissed this, stating it could lead to double deductions. The Tribunal, however, referred to the Supreme Court's decision in CIT(Exemption) Vs. Subros Educational Society, which allows excess expenditure to be set off against subsequent years' income. Thus, the assessee's claim was allowed.

Conclusion:
The appeals for the assessment years 2008-09, 2009-10, and 2010-11 were allowed by quashing the reassessments. For the assessment year 2013-14, the Tribunal allowed the computation of 15% accumulation on gross receipts, treated certain contributions as corpus donations, and permitted the carry forward of excess application from earlier years. The disallowance of contributions and donations was dismissed due to lack of arguments.