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TMI Blog2013 (3) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... 148 is not valid - Reassessment order on the basis of a invalid notice is null and void - Decided in favor of assessee. - ITAs . No 916 & 1027/PN/2010 - - - Dated:- 23-1-2012 - Shri I.C. Sudhir and D.Karunakara Rao, JJ. Assessee by : S/Shri Sunil Pathak/Nikhil Pathak Department by : Shri S.K. Singh ORDER Per I.C. Sudhir, JM In the above appeals preferred by the assessee and Revenue, the first appellate order dated 26/3/2010 has been questioned on several grounds. 2. In the appeal preferred by the Revenue, grounds relating to merits have been raised, whereas in the appeal of the assessee grounds relating to merits as well as legal issues have been raised. In such grounds in ground nos. 1(a) and 2.1(a) to (e) the assessee has questioned the validity of initiation of reopening proceedings and assessment made u/s. 147 read with Section 143(3) in consequence thereto. Since it goes to the root of the matter, we preferred to adjudicate the same, first. 3. In ground Nos. 1 2.1(a) to (e), the assessee has raised an issue regarding validity of the reopening and re-assessment made u/s. 147 read with Section 143(3) of the Act. 4. The relevant fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-assessment is null and void. 7. The Ld. A.R. submitted that all the facts on the basis of which, the A.O has noted the reasons of his belief that income has escaped assessment to justify the re-assessment were prevailed in the case of the assessee Trust over the last number of years. In those years, there has not been any addition warranted or made in the assessments. 8. The Ld. A.R. pointed out that A.O has completed the assessment for the A.Y. 2003-04 on 30th March 2006, the very next day after the present re-opening on 29th March 2006 and this assessment order u/s. 143(3) has been made available at page number 68 of the paper book. From the same, it can be noted that the same A.O has assessed assessee Trust on nil income by granting exemption u/s. 11 of the Act. No addition on the basis of any of the reasons is made in the A.Y. 2003-04 when the similar facts were in existence. The Ld. A.R. contended that the very next day, the A.O is of the opinion that no addition is warranted on any of these issues, and hence, his belief that income had escaped assessment for A.Y. 1999-2000 is not correct. The Ld. A.R. contended further that if the same A.O in the scrutiny assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening the Ld. A.R. has placed reliance on the following decisions : 1) ACIT Vs. O.P. Chawla , 114 ITD 69 (Del.) (TMr) 2) Lajwanti Sial Vs. CIT, 32 ITR 526 (Bom) 3) CIT Vs. Institute of Banking Personnel Selection, 264 ITR 110(Bom) 4) ACIT Vs. Thanthi Trust etc., (247 ITR 785 (SC) (Supra) 5) Vijaykumar Hirakhanwala (HUF) Vs. ITO, 287 ITR 443 (Bom) 6) Prashant S.Joshi Dattaram Shridhar Bhosale Vs. ITO Anr.324 ITR 154 (Bom) 7) Chunnilal Surajmal Vs. CIT ,160 ITR 141 (Pat.) 8) Rallies India Ltd. Vs. ACIT anr., 323 ITR 54 (Bom) 9) Raymond Woolen Mills Ltd. Vs. ITO ,236 ITR 34 (SC) 10) JYOTI Prasad Vs. State of Haryana 1192- (SR 3)-GJX -0652 SC 11) CIT Vs. Sun Engineering Works P.Ltd., 198 ITR 297 (SC) 12) CIT Vs. Jet Airways (I) Ltd., Jet Airways, 331 ITR 236 (Bom) 13) CIT Vs. Kelvinator of India Ltd., 320 ITR 561 (SC) The Ld. D.R. has basically tried to justify the orders of the authorities below on the issue of reopening. He submitted that reasons for escapement of assessment of taxable income recorded by the A.O. for reopening is prima facie belief of the A.O. at initial stage, sufficiency of which can not be questioned before any Court of Law. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions, we find that the Delhi Bench of the Tribunal in the case of ACIT Vs. O.P. Chawla (Supra) has held that reopening of assessment by the A.O on the ground that Balance Sheet of the assessee reveal that he had received certain amount by way of gift from an NRI for which no details had been filed was not sustainable. It was held that there was no investigation or evidence collected by the A.O or Department having a nexus or live link or rational connection with income escaping assessment, the reasons recorded by the A.O were only a pretence, an excuse to enquire into gifts received by assessee, hence Ld CIT(A) was justified in holding that re-opening of assessment was void ab-initio, held the Tribunal. In the present case, the first reason that no schedules to the balance sheet was submitted with income and expenditure account and the balance sheet filed with the return, in our view, is not sufficient to come to a conclusion or form a reasonable belief that there was escapement of assessment of income. In our view, at the most, it was a subject for making enquiries. Thus it can not be a basis for reopening of the assessment. Reason (b) 12. The A.O noted that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 11 that a Charitable Trust cannot give its properties on rent. For example, if a Charitable Trust has rental income from a number of properties and such rental income is spent on charitable activity, this income would be exempt u/s. 11 of the Act. We thus concor with the contentions of the Ld. A.R. that A.O was not justified in holding a reason that there is an escapement of income because its rental income was high. We are also of the view that the A.O was not justified in holding that the rental income is to be assessed as income from house property/business income in the hands of the assessee since in our view, in the case of a Charitable Trust u/s. 11, it is an established proposition of law that income is to be computed as per the commercial principles and not under the various heads of income prescribed in the Act. In this regard, we find support from the decision of Hon ble jurisdictional High Court in the case of CIT Vs. Institute of Banking Personnel Selection (Supra) relied upon by the Ld. A.R. holding that income of the Trust is required to be computed u/s. 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust as a part of its corpus was not carried on in the course of actual accomplishment of the charitable object of the Trust, bar of Section 13(1)(bb) was applicable and assessee Trust was not entitled to exemption u/s. 11 for A.Ys. 1979-82, 1983-84. The ratio laid down in the decision of Hon ble Supreme Court supports the case of assessee as there was no tangible material as on the date of recording of the reason to come to the conclusion that there was escapement of income from assessment regarding sale of books and running printing press by the assessee as the same was not towards making arrangement for providing the books, exercise books, examination paper, syllabus, study material etc., to its students. The contention of the Ld. A.R that the business was carried on in the course of the actual carrying out of the primary purpose of the Trust i.e. imparting of education, as , in the last number of years, the A.O has been granting exemption on such income, has not been rebutted by the revenue before the Tribunal. Besides, the income in question has been included by the assessee in the income and expenditure account and such income is also exempt u/s. 11 of the Act. We thus find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause the Registration u/s. 12A was cancelled by the Ld CIT on 8.11.2007 which was after the assessment was re-opened. The Ld. A.R. submitted that the Ld CIT(A) has held that there was search on the Accountant Shri R.D. Shinde and which indicated that the assessee was charging capitation fee and the assessee has been denied registration and such income has been taxable. He submitted that the validity of re-opening is to be judged only on the basis of reasons recorded and not on the basis of any other fact. The Ld. A.R. submitted that apart from the fact that the allegation of Ld CIT(A) that the assessee has been charging donation for admissions are incorrect, the reasons to believe cannot be supplemented to the reasons already recorded for justifying the validity of re-opening. In this regard, the Ld A.R. placed reliance on the following decisions : 1. Prashant S.Joshi Dattaram Shridhar Bhosale Vs. ITO Anr. 324 ITR 154(Bom) 2. Hindustan Lever Ltd. V/s. ACIT Others,268 ITR 332 (Bom) 3. Chunnilal Surajmal v. CIT, 160 ITR 141 (Patna) 4. Rallies India Ltd. Vs. ACIT Anr.,323 ITR 54 (Bom) 5. Manoj Kumar Gupta Vs. ITO (2008) 114 TTJ (Jp) 253 18. The Ld. A.R. submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In this regard, we find strength from the decisions of Hon ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. (Supra) and from the decision of Hon ble jurisdictional Bombay High Court in the case of Vijaykumar M. Hirakhanwala (HUF) Vs. ITO (Supra). The Hon ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. (Supra) has been pleased to hold that if the concept of Change of Opinion is removed, review would take place in the garb of reopening of assessment. Concept of Change of Opinion is an in built test to check abuse of power by the A.O. Hence after 1.4.1989 AO has power to reopen the assessment under S. 147 provided there is tangible material to come to the conclusion that there is escapement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O is empowered to make additions on those new heads also along with the additions made on the heads which remained the subject matter of reasons to believe for initiation of re-assessment proceedings u/s. 147 of the Act, but when initiation of reopening based upon the reasons to belief recorded by the A.O is questioned it is inevitable to examine validity of existence of each of those reasons as on the date when it was recorded. To examine the validity of the existence of reason it is to be seen that the reason must be of an honest and prudent person based upon reasonable grounds and should not be based upon mere suspicion, gossip or rumour. In our view sufficiency of reasons follows validity of existence of the reasons. So far as sufficiency of reasons is concerned, we fully agree with the contention of Ld. D.R. that we are not supposed to examine the same as even a prima facie believe as of a prudent person under the circumstances of a case regarding escapement of assessable income is sufficient to initiate reopening proceedings. The decision of Hon ble Supreme Court in the case of Raymond Woolen Mills Ltd. Vs. ITO (Supra) relied upon by the ld. D.R in this regard is not rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar addition has been made. This fact clearly indicates that the reasons recorded by the A.O are not based on proper appreciation of the facts of the case and are on presumption and surmises only. When the same A.O accepts similar claims of the assessee in the A.Y. 2003-04, it clearly establishes that re-opening has been made on the issues which do not justify the re-opening of the case. Besides above, it is also an admitted fact that the A.O had made reassessment keeping in mind the later development that registration u/s. 12A granted to the assessee was cancelled during the course of re-assessment proceedings which was later on restored by the Tribunal vide its order dated 19th September 2008 in ITA No. 1793/PN/2008 (Supra). We are also of the view that there is no prohibition in Section 11 of the Act that a Charitable Trust can not give its properties on rent. The requirement is that the Trust is doing activity to fulfill its aims and objects for which it has been granted registration u/s. 12A of the Act. It also remained the case of the assessee that such rental income was already shown by it in its income and expenditure account and it was not a case of escapement of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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