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TMI Blog2015 (5) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities below. Even before us no details have been furnished. Therefore, in the absence of any details or evidences, we do not find any justification to interfere with the orders of the authorities below. This ground of appeal of the assessee is accordingly, dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... despite registration u/s. 12AA in force, ignoring that registration under section 12A is a 'fait accompli 'to hold the Assessing Officer back from further probe into the objects of the trust. 4. That the Ld. CIT(A) has erred in law and on facts in upholding the status of Artificial Juridical Person against AOP (Trust) just by following the assessment order for A.Y. 2009-10 to the instant A.Y. which is prior to 1.4.2009, the date from which the amendment to section 2(15) is effective; 5. That the CIT(A) has erred in law and on facts in upholding the reopening by the AO u/s. 147 by invoking retrospectively, the prospective amendment in section 2(15) by insertion of a proviso thereto holding that the appellant is engaged in commercial activity and not any activity for an advancement of general public utility; 6. That the ld. CIT(Appeals) has erred in law and on facts in justifying the approval accorded by the JCIT for issuance of notice under section 147, without there being application of judicious mind by the JCIT." 6. Briefly the facts of the case are that the case was initially processed under section 143(1)(a) of the Act. Later on, during the course of scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced in the assessment order clearly shows that on the basis of information available on record, if was observed that the activity of the trust is in the nature of trade, commerce and business and doesn't fall within the meaning of the words "Advancement of any other object of General Public Utility". The appellant has also relied in this connection on the decision in the case of ASIAN Serc Information Services Pvt. Ltd. v. ITO 293 FTR 271 (Bom) and Purity Tech. Textile Pvt. Ltd. v. ACIT MANU/MH/0297/2010 : 325 ITR 459 (Bom). These cases are distinguishable as the A.O. has formed his opinion on the basis of information on record and earlier the case was processed u/s. 143(1). Further, in the case of ACIT v. Rajesh Jhaweri Stock Progress Pvt. Ltd. MANU/SC/2389/2007 : 291 ITR 500 (SC), it is held that at the initiation stage what is required is reason to believe but not the established fact of escapement of income. At the stage of issue of notice, the only question is where there was relevant material on which a reasonable person could have formed requisite belief. Whether the materials would conclusively prove the escapement of income is not the concern at this stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ANU/SC/0395/1971 : 82 ITR 147 (SC), which says that the reason to believe can't be based on mere suspicion, Gossip or Rumour. The appellant further relied on the case of CIT v. Kalvinator of India MANU/SC/0047/2010 : 320 ITR 561 (SC) and contended that there should be tangible material before coming to the conclusion that income has escaped assessment. Relying on the case of Rajesh Jhaweri Stock Brokers Pvt. Ltd. (Supra), it is contended that there should exist reason to believe. I have considered the submissions made. In the case of Jyoti Prabha Society v. CIT MANU/ID/0114/2003 : 81 TTJ (Del) 942, it is held that "At the time of processing the application seeking registration, the CIT was not expected to go in detail and prima facie the assessee was able to make out a case for registration. Even if registration is granted that will not be precluding the AO to examine in detail the very object of the assessee and to give the finding in assessment proceedings as to assessee had complied with the requirement of s. 11 or not. At the most registration certificate, if granted, will make out a prima facie case in favour of assessee that its activities are of charitable but tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "reason to believe" in Section 147 would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the facts by legal evidence or conclusion. What is required is "reason to believe" but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer." 12. The Hon'ble Bombay High Court in the case of Anusandhan Investment Ltd. v. R. Singh, DCIT & another MANU/MH/0964/2006 : 287 ITR 482 (Bom) held as under: "Held, dismissing the writ petition, that in the assessment order for the assessment year 1993-94 the Assessing Officer had held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration granted under section 12AA of the Act. The ld. CIT(Appeals) recorded the facts of the case on these issues as emanating out of the record as under: "i) During the year the appellant has shown gross receipts at ₹ 51,94,02,004/- and the excess of income over expenditure is ₹ 49,78,82,270/-. It is, therefore, observed that the appellant is earning huge net profit by carrying on business of sale of residential plots as well as sale of commercial plots by auction in a systematic manner. The comparative figures of the net profit FDRs and Bank balance are as under:- Assessment year Gross receipt ts Excess of income over expenditure FDRs Bank Balances 2010-11 17,85,19,764 15,41,68,022 43,38,25,024 14,28,15,935 2009-10 52,46,06,811 50,49,77,952 1,05,60,13,324 17,99,47,679 2008-09 53,28,83,572 22,87,04,250 92,00,50,609 5,82,80,475 2007-08 51,94,02,004 49,78,82,720 57,82,68,124 1,39,46,665 ii) It was further noticed that the appellant is carrying on the business of sale of plots under Joint Development Agreement with OMAXE Ltd. and earns 15% profit from this activity and the balance profit going to M/s. Omaxe Ltd. The figures for last two yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quare yard. Even after considering the developmental expenses etc. the selling price is exorbitantly high. x) The appellant is charging different kind of fees from the allottees as well as penal interest for delayed payment of installments. Processing fee is charged for transfer of plot, addition and deletion of name, no objection certificate etc. Licence fees is also charged. Charging such type of fees clearly shows that the authority is carrying on activity in the trade, commerce or business and therefore, it is not an activity for advancement of any other object of general public utility. xi) Huge amounts have been invested in FDRs and Banks which are increasing year after year. This also shows that the activities are in the nature of trade commerce or business. The assessee is charging different type of fees, Cess, late fees, interest and penalties etc. If the contention of the appellant is accepted then other similar trade, commerce or business done by every person in India will also be termed as an activity of general public utility. The appellant's plea that setting up of integrated township which includes sale of plots is an incidental activity to the main activity co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty created to help it to achieve certain objects. It can be said that it is the duty of the Government to create/provide all these facilities to public at large, which is being done through his agency in a particular area. At the same time, the funds which are provided to the assessee by the Government is again a public money or generated from the public itself. The objects of the assessee, though claimed to be charitable, but actually are of purely commercial nature where profit motive is involved. It is a known fact that the assessee is acquiring the land at very low prices and selling the same land on very higher rates and is earning a profit there from. A new trend has also emerged that the assessee has started auctioning the plots by way of bidding at the market rate and sometimes more than that and charging interest on belated payments. In such a situation, no charity is involved. Rather the assessee has converted itself into a big businessman. Similar development/infrastructure/facilities are also provided by private developers these days, then they will also claim the status of a charitable institution. The facilities which are provided to the plot holders are incidental to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the assessment order for A.Y. 2009-10 wherein the facts are similar as contended by the A.O. that the dominant partner of this Joint Development Agreement i.e. M/s. Omex Ltd. is not claiming any exemption in respect of 85% share of profit receive d through the Joint Development Agreement. It is, therefore, not understood as to how the appellant is claiming exemption u/s. 11 while the activities remain same. 6.3 The appellant has also submitted that PDA is statutory body functioning under statutory provisions and its objectives are of general public utility and further that in the event of dissolution of PDA all the assets vests with State Govt. It has also been argued by the appellant that PDA is set up with the object of development of Patiala and sale of plots in the process of setting up of integrated township is to subserve the main object. The appellant relied on case of Jodhpur Development Authority v. CIT MANU/IO/0048/2012 : 145 TTJ 221 and Jaipur Development Authority v. CIT in ITA No. 27/JB/2007 etc. These cases apparently pertains to registration u/s. 12A/12AA of the IT Act'61. The appellant also contended that the main activity in the case of the assessee is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of the assessee would not fall within the meaning of the word "The Advancement of any other object of general public utility under section 2(15) of the Act". It was further found that huge profit is parted with the builder/developer and in similar cases, the different authorities of Haryana and Punjab were found liable to tax. The ld. DR relied upon decision of ITAT Chandigarh Bench in the case of PUDA v. CIT 103 TTJ 988 (supra) in which it was held as under: "Assessee, a local authority constituted for planned development of the State, acquiring land at nominal rates and selling the same after development to general public at higher rates is engaged in commercial activities of profit motive and cannot be said to be carrying on charitable activities and therefore, registration under s. 12A could not be granted." 19. The ld. DR also relied upon decision of Hon'ble High Court of Jammu & Kashmir in the case of Jammu Development Authority v. Union of India in ITA No. 164/2012 in which the order of the Tribunal has been upheld withdrawing the status of charitable institution given to the assessee and copy of the order of Hon'ble Supreme Court is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be exempt and how the assessee could claim exemption of income under section 11 of the Act. The authorities below have correctly analyzed the facts and material on record before giving adverse finding against the assessee denying exemption u/s. 11 of IT Act. The assessee has not been able to rebut the finding of facts recorded by the authorities below and in the absence of any material on record in favour of the assessee, we do not find any justification to interfere with the orders of the authorities below. Ground of appeal Nos. 2 & 3 of the appeal of the assessee are, accordingly dismissed. -A. On ground No. 4 assessee challenged order of ld. CIT(Appeals) in upholding the status of artificial jurisdictional person against status of AOP (Trust). The ld. CIT(Appeals) noted that facts are similar as were considered in assessment year 2009-10 in which status of assessee has been taken as artificial jurisdictional person. It was also noted that in the similar case of Patiala Improvement Trust for assessment year 2003-04 and 2004-05, ITAT held that the status of assessee should be of artificial jurisdictional person. Therefore, finding the issue to be same, ld. CIT(Appeals) confirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral public utility and in event of dissolution of appellant all the assets vests with the State government. 5. That the Ld. CIT(A) has erred in law in holding that the appellant is not engaged in charitable activities and is involved in the activity in the nature of trade, commerce and business, ignoring that the appellant is carrying out its activities on noncommercial lines with no motive to earn profits, for fulfillment of its aims and objectives which are admittedly charitable in nature. 6. That the appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed of." 27. The ld. DR contended that all these grounds are same as have been considered in preceding assessment years above. Following the reasons for decision in assessment year 2007-08, we dismiss these six grounds of appeal of assessee being identical in nature. 28. In the result, appeal of the assessee is dismissed. ITA 840/CHD/2014 (A.Y. 2011-12) 29. This appeal of the assessee is directed against the order of ld. CIT(Appeals), Patiala dated 20.08.2014 for assessment year 2011-12 on the following grounds: "1. That the Learned CIT(A) has grossly erred in law and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of exemption under section 11 is not allowable. Therefore, the donation of ₹ 11.80 Crore was also not allowable. The ld. CIT(Appeals) further noted that assessee is clearly engaged into the business activity, therefore also such expenditure not related to the business is not allowable (i) As regards expenditure of ₹ 10.47 Crores, the assessee during the assessment and appellate proceedings has simply mentioned that this expenditure is incurred by the assessee on development work in pursuance of objects as per direction/approval of the authority. However, the nature of such expenses and its relation to the business of the assessee was not explained, therefore, findings of the Assessing Officer disallowing expenditure was confirmed by the ld. CIT(Appeals) and dismissed this ground. 32. On consideration of submissions of ld. DR, we do not find any justification to interfere with the order of ld. CIT(Appeals). We have already confirmed orders of the authorities below denying exemption under section 11 of the Act, therefore, donation is not allowable deduction because it is not connected with business activity of the assessee. Further expenditure of ₹ 10.47 Crores ..... X X X X Extracts X X X X X X X X Extracts X X X X
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