9911796707
TMI Blog2019 (7) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... the preamble of the assessment order is an error which is apparent on the face of the order and requires to be rectified. Therefore, the corrigendum dated 22.01.2015 is legal and valid. Cancellation of registration u/s 12AA with retrospective effect - withdrawal of approval granted u/s 10(23C)(vi) with retrospective effect - order of cancellation was passed based on recommendation made by AO while making assessment of AY 2010-2011 - HELD THAT:- Admittedly, the business premises of the assessee was subjected to search during the assessment year 2010-2011. The AO while completing the assessment found large scale diversion of funds and several improper actions on the part of the assessee in direct conflict to the terms of the Deed of Trust and conditions of registration/exemption. Therefore, it was recommended to the competent authority to initiate proceedings for cancellation of the exemption/registration. The matter was decided after due opportunity to the assessee and speaking orders have been passed and obviously these orders will take effect from the assessment year 2010-2011 and it is a mis-nomer to state that the orders are retrospective or retroactive. The lis which was the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed by the Commissioner of Income Tax (Appeals) (CIT(A)) dated 12.01.2017 who had confirmed the assessment order passed by the Assistant Commissioner of Income Tax, Central Circle-II(3), Chennai dated 28.03.2013 for both the assessment years. I.T.A.No.370/CHNY/2017 was filed challenging the order passed by the Principal Commissioner of Income Tax, Central-II, Chennai dated 07.12.2016 under Section 12AA(3) of the Act, whereby the registration granted to the assessee Trust under Section 12AA vide order dated 22.10.2002 passed by the Director of Income Tax (Exemption), Chennai was cancelled with effect from 01.04.2009, i.e. from the assessment year 2010-2011 onwards. To be noted that an order dated 18.11.2014 passed by the Director General of Income Tax (Investigation), Tamil Nadu & Puducherry withdrawing the exemption under Section 10(23C)(vi) from the assessment year 2010-2011 onwards had not been challenged by the appellant assessee by way of any independent proceedings. 3.These appeals have been filed raising the following substantial questions of law: 1. Whether assessment can be carried out under Section 143(3) of the Income Tax Act, 1961 on the appellant without duly follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s heads on the ground that they were unaccounted expenses/investments consequently demands were raised for both the assessment years under consideration. The assessee preferred appeals before the CIT(A) primarily contending that the mandatory pre-condition prescribed under Section 143(3) of the Act was not adhered to by the Assessing Officer thereby rendering the assessment untenable in law. During the pendency of the appeals before the CIT(A), the Director General of Income Tax (Instigation) issued show cause notice dated 16.07.2013 calling upon the assessee to explain as to why approval granted under Section 10(23C)(vi) should not be withdrawn. The assessee submitted their reply. The reply was not accepted and the approval granted under Section 10(23C)(vi) was withdrawn by order dated 18.11.2014 with effect from the assessment year 2010-2011. The assessee filed a petition for rectification under Section 154 of the Act. The Department initiated recovery proceedings which was challenged by the assessee by filing W.P.Nos.3376 and 3377 of 2014. Subsequently, the attachment of the bank account of the assessee was lifted by the Department. The Assessing Officer issued a corrigendum da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 19.06.2018 and passed final orders on 27.05.2019. Thus, aggrieved by the common order passed by the Tribunal the assessee is before us by way of these tax case appeals. 5.Mr.Anirudh Krishnan, learned counsel appearing for the appellant/assessee assisted by Mr.Adith Narayan and Mr.Adarsh Subramanian, elaborately referred to the factual position, much of which has been set out by us in the preceding paragraphs. The learned counsel prefaced his submission by contending that it may be true that the assessee has not laid a separate challenge to the order dated 18.11.2014 withdrawing the approval granted under Section 10(23C)(vi) of the Act, the same can be challenged in a collateral proceedings i.e. while challenging the order cancelling the registration under Section 12AA of the Act and while challenging the correctness of the assessment orders dated 28.03.2013 and the order of the CIT(A) dated 12.01.2017. It is the submission of Mr.Anirudh Krishnan that when an order is a nullity, the assessee is not estopped from questioning the correctness of the said order in collateral proceedings. 6.The first contention advanced by Mr.Anirudh Krishnan is by submitting that the corrig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was placed on the decision of the High Court of Calcutta in Maya Debi Bansal vs. Commissioner of Income Tax ([1979] 117 ITR 125 (cal)). To support his contention that the orders cancelling the registration under Section 12AA of the Act having been done with retrospective effect is illegal, reliance was placed on the decision of the High Court of Allahabad in Assistant Commissioner of Income Tax-I vs. Agra Development Authority ([2018] 407 ITR 562 (Allahabad)). Further with regard to the procedure to be followed by the Assessing Officer while passing an order withdrawing the exemption under Section 10(23C)(vi) of the Act, reliance was placed on the decision of the High Court of Karnataka in the case of Commissioner of Income Tax, Central Circle, Bangalore vs. Peoples Education Society ([2014] 42 taxmann.com 353 (Karnataka)). On the facts of the case, Mr.Anirudh Krishnan, learned counsel submitted that the decision in the case of Director of Income Tax (Exemptions) vs. Sri Belimatha Mahasamsthana Socio Cultural and Educational Trust ([2011] 336 ITR 694 (Karnataka)) and the decision of the Division Bench of this Court in the case of Commissioner of Income Tax vs. Balaji Educational an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 10). The learned Senior Standing Counsel also referred to the decision of the Hon'ble Supreme Court in the case of Visveswaraya Technological University vs. Assistant Commissioner of Income Tax ([2016] 384 ITR 37). To sustain the finding regarding the cancellation of the exemption granted under Section 10(23C)(vi) of the Act, reliance was placed on the decision of the High Court of Karnataka in Navodaya Education Trust vs. Union of India ([2018] 405 ITR 30). 9.We have heard the learned counsels for the parties. 10.The first issue to be decided is with regard to the effect of corrigendum dated 22.01.2015. The assessee's contention is that the assessment having been completed under Section 143(3) r/w. 153(A) of the Act by way of a belated corrigendum the assessment cannot be treated to be one under Section 144 of the Act. 11.The following facts would be relevant to decide this issue. A search under Section 132 of the Act was conducted on 02.07.2010 at the premises of the assessee. Notice under Section 153A of the Act was issued and served on the assessee and in response, return of income was filed on 09.11.2011 declaring total income at NIL. Subsequently notices under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nan, learned counsel for the petitioner would contend that the assessment cannot be treated as a best judgment assessment under Section 144 of the Act as the mandatory provision under the Proviso to Section 144(1) of the Act has not been complied with. 14.We have noted the averments set out in paragraph 4 of the assessment order dated 28.03.2013, from which, it is seen that notice under Section 142(1) of the Act was issued as early as on 12.02.2013, wherein details were called for from the assessee, the assessee did not respond, summons under Section 131 of the Act was issued directing the Chairman of the assessee Trust to be present, the Chairman did not honour the summons nor submitted any details, subsequently the General Manager (Finance) of the assessee appeared but did not submit any details and subsequently, the Chairman appeared and stated that he will give the details by 21.03.2013 which commitment he did not honour. Before all these events could happen the assessee received notice under Section 153A of the Act, filed his return of income on 09.11.2011, responded to the subsequent notice issued under Sections 143(2) and 142(1) of the Act, appointed a Chartered Accountant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of the Act. In the said factual background, the Court held that the provision of Sections 143 and 144 of the Act cannot be said to be in parimateria. Section 144 of the Act provides for circumstances under which in the absence of a return, a best judgment assessment can be made and the duties of the ITO in making such best judgment assessment are well known and there is no question of any reliance or reference to any return in that case. However, in an assessment under Section 143(3) of the Act as was done in the said case the basis is the return. In the instant case, the return of income was filed on 09.11.2011 declaring the total income at NIL. Subsequently, notices were issued under Sections 143(2) and 142(1) of the Act. On account of the assessee's non-compliance and non-cooperation in the assessment proceedings which clearly fall within the Clauses (b) and (c) of Section 144(1) of the Act, the assessment made on the appellant assessee are indeed best judgment assessments. 19.The next contention of Mr.Anirudh Krishnan is that the cancellation of the exemption under Section 10(23C)(vi) of the Act and cancellation of the registration under Section 12AA of the Act wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal when the assessee challenged the cancellation of the assessee's registration under Section 12AA of the Act. Two submissions were made to state that the order of withdrawal of approval under Section 10(23C)(vi) of the Act is a void order. Firstly on the ground that such order with retrospective effect is bad in law and void. The second argument is that there was no basis for withdrawal of the approval under Section 10(23C)(vi) of the Act. On the first issue, we have already held that the order of withdrawal of approval is not an order with retrospective effect but with effect from the assessment year in which cause of action arose for such withdrawal, i.e. after issuance of show cause notice based on the material unearthed during the course of search operations which was conducted on 02.07.2010. Therefore, the first contention of the learned counsel for the assessee is rejected. In support of his contention, the learned counsel referred to the decision in the case of Nawabkhan Abbaskhan of the Apex Court. With all humility we observe that the decision in the case of Nawabkhan Abbaskhan can be never be relied on by the assessee to substantiate their case. 22.The questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s raised by the learned counsel for the assessee has to necessarily fail. 23.The decision in the case of Sri Belimatha was rendered considering the fact that there were no materials which was available on record and the Court found that based on presumption the Assessing Officer cannot conclude that the Trust has received donations merely because it was running a professional courses. In the case of Balaji Educational and Charitable Public Trust, the fact situation was more or less identical as that of Sri Belimatha. The Tribunal on appreciation of the factual details found that the finding rendered by the Assessing Officer was hypothetical and based on surmises and conjunctures. A bare perusal of the orders dated 18.11.2014 and 07.12.2016 will clearly show that there has been large scale diversion of funds disentitling the assessee to approval/registration. 24.We have also perused the annexures which were tagged along with the order cancelling the registration under Section 12AA of the Act. The annexures are photocopies of the various diary notings and hand written notings. In an event there was no endeavour on the part of the assessee to go into the factual thicket to substant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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