9911796707
TMI Blog2012 (3) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bombay Public Trust Act, 1950. The Petitioner has been granted an exemption under the provisions of Section 10(23B) onwards from assessment year 1975-76. The Petitioner filed its return of income for assessment year 2004-05 on 17 March 2005. The income and expenditure account which was filed together with the return of income disclosed total sales of Rs.288.47 crores. The excess of income over expenditure was to the extent of Rs.6.54 crores or approximately 2.27% of the total sales. By a letter dated 16 March 2005, the State Director in the office of the Commissioner for Khadi & Village Industries Commission informed the Commissioner of Income Tax that Petitioner No.1 has undertaken the Village Industries Programme approved by the Commissioner for Khadi and Village Industries Commission. It was recommended that instructions may be issued for grant of an exemption under Section 10(23B) of the Income Tax Act, 1961. A letter of approval had earlier been issued to the Petitioner on 11 March 2005. 4. During the course of the assessment proceedings a notice was issued to the Petitioner under Section 143(2) on 30 May 2006. The Petitioner was called upon to disclose inter alia the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember 2011 for reopening the assessment for assessment year 2004-05 are as follows: "On examination of the assessee's Income and Expenditure Account and Balance Sheet as on 31 March 2004 and 31 March 2005 and notes on account contained in Auditor's Report for the year ended 31 March 2004 and 31 March 2005 keeping in view the conditions for claiming exemption u/s. 10(23B) of the IT Act and the assessee's registration with Charity Commissioner the following is noticed: i) The assessee Institution is running for the purpose of profit and earned the profit of Rs.654.47 lakhs during the previous year relevant to A.Y. 2004-05. As per IT Act the income of the institution will not form part of income if the Institution carried out the activities not for the purpose of profit. Therefore, the assessee institution is not entitled for exemption u/s. 10(23B) of the IT Act. ii) The assessee institution had not incurred any expenditure to achieve the object as approved by the Charity Commissioner i. e. Expenditure on educational activities like giving scholarship to the poor deserving student. iii) No expenditure for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The Assessing Officer has on the basis of these reasons stated that the activities carried on by the assessee do not cover any public charity but are commercial activities for which the Petitioner is not entitled to an exemption under Section 10(23B). The assessment is sought to be reopened beyond a period of four years by a notice dated 21 March 2011.The Assessing Officer has in the following extract from his reasons proceeded to also state that there was a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment: "The assessee institution has failed to provide the information in the return such as expenditure incurred to achieve the object as approved by the Charity Commissioner i. e. Expenditure on educational activities like giving scholarship to the poor deserving student, expenditure for rendering and to provide medical aid, relief to the poor of below poverty line (BPL) had been incurred, expenditure for raising the standard of living of women specially residing in villages to undertake activities in connection with village industries, expenditure for providing services for general /public utili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pointed out that the payments which were made to the members which stood at Rs.30.94 crores for financial year 2000-01, increased to Rs.88.66 crores for 2010-11. The most important aspect which was emphasised is that the assessee provides employment to women who cannot go to offices for earning their livelihood. As a result of the activities, 40,000 women are provided self-employment resulting in improvement of their standard of living. As regards the fifth reason, it has been stated that the trust had set up branches in villages where they were initially opened. Subsequently, as the villages were converted into towns and cities, branches located in the villages were converted into urban locations. However, the Director of Legal Affairs of the KVIC had in his communication informed the Deputy Director of Income Tax that under Section 2(i) of the KVIC Act any industry recognized as a village industry located in an area other than a rural area at any time before the commencement of the KVIC (Amendment ) Act, 1987 shall continue to be a village industry under the Act. Since the units of the Petitioner were established prior to 1987 in areas which are now termed as urban areas, they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment for 2004-05, the Assessing Officer in his order of assessment dated 23 December 2011 for assessment year 2009-10 has accepted the entitlement of the assessee to an exemption under Section 10(23B) and has assessed the assessee under Section 143(3) to a Nil return of income. 9. On the other hand, Counsel appearing on behalf of the Revenue submitted that the primary requirements of Section 10(23B) are i) Approval of the Khadi and Village Industries Commission; ii) Existence of the Institution solely for the development of Khadi and Village Industries: Counsel urged that (a) in the order of assessment that was passed by the Assessing Officer under Section 143(3), no enquiry was made as to whether the assessee has fulfilled the conditions requisite for the grant of exemption under Section 10(23B); (b) No disclosure was made by the assessee fully and truly of all material facts to show that the assessee exists solely for development of khadi and village industries; (c) Whereas, the objects of the assessee would show that the assessee was set up for carrying out educational activities, rendering medical aid and for upgrading the standard of women, none of those objects we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the expenses incurred by the trust, of the investments made in movable and immovable properties and in regard to the funds expended inter alia for making donations, for providing medical aid for scholarships were also disclosed. The Assessing Officer accepted the claim of the assessee to the benefit of the exemption under Section 10(23B) after being duly satisfied that the assessee has fulfilled the requisite conditions. Now the reasons for reopening the assessment need to be considered in this background. The entire basis for reopening the assessment, set out in the reasons communicated to the assessee is the income and expenditure account and the balance sheet of the assessee. The inferences which the Assessing Officer has drawn are based on the material filed with the return of income. That being the position, there is merit in the submission made on behalf of the assessee that the primary requirement, which is of a jurisdictional nature, for reopening of an assessment beyond a period of four years has not been fulfilled. Beyond a period of four years, the Assessing Officer before proceeding to reopen an assessment must be satisfied that is there is a failure on the part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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