9911796707
TMI Blog2015 (5) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the AO, it is clearly stated that, For the asst. yr. 2001-02, the assessee has not filed any income-tax return. Moreover, no returns for the asst. yrs. 2002-03 and 2003-04 have been filed. On the contrary, the AO himself has admitted in the assessment orders that the returns for all the three years under consideration were filed by the assessee. Not only this, even the learned CIT(A) has affirmed this fact. It is relevant to observe here that the reasons recorded for reopening of the assessments reproduced by the AO in the assessment order and by learned CIT(A) in para 3.1 of the impugned order are not the actual/original reasons recorded by the AO for reopening of the assessments. These are the findings given by the learned CIT-I, Ludhiana for refusing to grant registration to the assessee trust. It is clear that both the authorities below have wrongly considered the findings given by the learned CIT-I, Ludhiana as reasons recorded for reopening of the assessments. Therefore, on this score alone, the reassessment orders are not sustainable. - Decided in favour of assessee - ITA Nos. 444 to 446/CHD/2014 - - - Dated:- 29-5-2015 - SHRI H.L.KARWA, HON'BLE VICE PRESID ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit by resorting to delay. However, the delay in filing the appeals has occurred due to the abovestated reasons which were beyond the control of the assessee. There is no material on record to controvert the abovestated submissions of the assessee. I am fully satisfied with the explanation tendered for the delay as reasonable and acceptable. At the same time I may observe here that it is also well settled law that the jurisdiction to condone the delay should be exercised liberally. The matter relating to condonation of delay should be judged broadly and not in a pedantic manner. Considering the reasons submitted by the assessee for the delay in filing the appeals and also the settled legal position, I hold that delay of 27 days in filing three appeals deserves to be condoned, and hence, the delay is condoned. 4. Vide common ground Nos. 1 and 2 of the appeals, the assessee has challenged the validity of reopening of the assessments under s. 147/148 of the IT Act, 1961 (in short 'the Act'). Briefly the facts of the case are that the assessee trust was founded by Late Shri Jagpal Singh S/o Shri Kartar Singh Dukki, a great patriot, freedom fighter and educationist to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2011, and the Tribunal vide its order dt. 20th Sept., 2011 observed that the impugned order was passed in hasty manner without affording adequate opportunity of being heard to the assessee. Also that no report of the AO and the Jt. CIT, Range-II, Ludhiana is confronted. Therefore, the order of the learned CIT was set aside by the Tribunal and matter was remanded to him with the direction to decide the same afresh. In compliance to the order of the Tribunal passed in ITA 509/Chd/2011, the learned CIT-I, Ludhiana passed a fresh order on 27th Dec., 2011 under s. 12AA of the Act The learned .CIT was not satisfied with the objects and genuineness of the activities of the assessee Trust. He, therefore, refused to grant the registration to the assessee Trust within the meaning of s. 12AA of the Act. The assessee challenged the order dt. 27th Dec., 2011 passed by learned CIT-I, Ludhiana before the Tribunal, Chandigarh Benches 'A' Chandigarh in ITA No. 40/Chd/2012 and the Tribunal vide its order dt. 27th June ,2012, directed the learned CIT to grant registration to the assessee Trust under s. 12AA of the Act, observing as under: 13 Now coming to the facts of the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re allowed. 5. The revenue challenged the order of the Tribunal dated 27.06.2012 by way of appeal before the Hon'ble Punjab Haryana High Court in ITA No. 2 of 2013, and the Hon'ble High Court vide its order dated 08.10.2013 affirmed the order of the Tribunal in granting registration under section 12AA of the Act to the assessee Trust and the appeal filed by the revenue was dismissed. 6. The assessee filed the return of income for all the assessment years under consideration declaring income at Rs. 'nil' after claiming exemption under s. 10(23C)(iiiab) of the IT Act, 1961 and the returns were processed under s. 143(1) of the Act. Subsequently, the assessments were reopened under s. 147 and notices under s. 148 were issued since the assessee was not granted registration under s. 12AA of the Act by the learned CIT-I, Ludhiana vide his order dt. 30th Nov., 2007. The registration was refused mainly for the following reasons: ....that the trust came into existence on 4th Feb., 2000 and application for registration was filed on 31st May, 2007. The assessee has submitted that the delay in filing of application under s. 12A was unavailability of counsel of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,565 and ₹ 16,724 for asst. yrs. 2001-02, 2002-03 and 2003-04 respectively. According to AO, the income of the Trust was not exempt under s. 10(23C)(iiiab) of the Act, he, therefore, observed that the income of the assessee is taxable in the status of AOP, which fact was brought to the notice of the assessee during the course of assessment proceedings. The AO further observed that as far as the claim of the expenses against the income from FDRs is concerned, none of these are relatable to the income derived under the head 'Income from other sources'. The AO held that the expenses claimed by the assessee were not admissible under s. 57 of the Act. He, therefore, disallowed the expenditure claimed by the assessee against the income of FDR interest and the total income of the assessee under the head 'Income from other sources' was assessed to tax. The AO assessed the income at ₹ 1,63,541, ₹ 1,18,125 and ₹ 1,57,500 for the asst. yrs. 2001-02, 2002-03 and 2003-04 respectively. 8. Aggrieved by the reassessment orders passed by the AO, the assessee preferred three separate appeals before the learned CIT(A)-II, Ludhiana, who vide his consolidated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Shri Tej Mohan Singh submitted that initiation of proceedings under s. 147/148 on a non-existent ground cannot be sustained. Reliance was placed on the decision of the Hon'ble Gujarat High Court in the case of Sagar Enterprises Vs. Assstt. Commissioner (2002)257 ITR 335 (Guj). 12. Shri Tej Mohan Singh, learned counsel for the assessee vehemently argued that as per the reasons recorded for the reopening of the assessment dt. 29th Jan., 2008 for all the three years referred to the opening balance of the trust funds at ₹ 15,92,245 leading to the formation of belief that a part of the above donations exceeding ₹ 1 lac, being the income as per s. 2(24)(iia) has escaped assessment, whereas the returns of income already stood filed show that no donation exceeding ₹ 1 lac having been escaped assessment, which establishes clearly that the very basis of forming belief had no rational connection or relevant bearing on the formation of the belief. Shri Tej Mohan Singh further submitted that it is well settled law that if the very basis and origin of initiation goes to the ground, reopening cannot be sustained or the very basis is found to be incorrect or did not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Departmental representative submitted that the reopening of the assessments was valid and therefore, common ground Nos. 1 and 2 of the appeals may be rejected. 15. I have carefully considered the rival submissions and have also perused the materials available on record. Sec. 147 of the Act reads as under : 147. If the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income and also my other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in ss. 148 to 153 referred to as the relevant assessment year): 16. From the above provisions, it is clear that the power of the AO under s. 147 is to be exercised subject to the provisions of s. 148. under s. 148(1), the AO is required to serve on the assessee a notice before making assessment, reassessment or computation under s. 147. Sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of notices under s. 148 is income having escaped assessment for not having filed the returns of income for the asst. yrs. 2001-02 to 2003- 04 , whereas claim of deduction under s. 10(23C)(iiiab) or rejection of application under s. 12AA by the learned CIT was much later (application having been filed on 24th May, 2007) was only a narrative or passing reference having no rational connection or relevant bearing on the formation of the belief. From the facts narrated hereinabove, it is clear that the application dt. 24th May, 2007 filed by the assessee for grant of registration under s. 12AA of the Act was rejected by the learned CIT-I. Ludhiana without granting an opportunity of being heard to the assessee and the said order was set aside by the Tribunal in ITA No. 609/Chd/2011 vide its order dt. 20th Sept., 2011 observing that the impugned order was passed in hasty manner without affording adequate opportunity of being heard to the assessee. The Tribunal directed the learned CIT to decide the matter afresh in accordance with law. The order passed by the learned CIT-I, Ludhiana dt. 30th Nov., 2007 was not a final order but an ex parte order which was passed without considerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of notice under s. 148 since the assessee was not granted registration under s.12AA(1)(b)(ii) of the IT Act, 1961 - - 18. In the reason recorded by the AO dt. 29th Jan., 2008 (for all the three assessment years) he has referred to the opening balance of the Trust fund at ₹ 15,92,245 which is the basis of formation of belief that a part of the above donation exceeding ₹ 1 lac, being the income as per s. 2(24)(iia) has escaped assessment; whereas the returns of income already stood filed as stated hereinabove with no donation exceeding ₹ 1 lac having escaped assessment demonstrating clearly that the very basis of forming the belief had no rational connection or relevant bearing on the formation of the belief. In other words, the belief entertained by the AO was not at all bona fide. In fact, the opinion formed is based on wrong and incorrect facts and suspicion. In my opinion, the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) is not applicable to the facts of the present case. In the said case, it has been held that the reopening of assessment completed originally under s. 143(1) is permissible wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment of income. However, the material on record showed that the return had been filed. In such circumstances, it could not be said with certainty as to which facts would have weighed with the officer concerned and once it was shown that an irrelevant fact had been taken into consideration, to what extent the decision was vitiated would be difficult to say. Moreover, the ITO had stated that the payment which was stated to be undisclosed income relevant for the asst. yr. 1991-92 could have been made during the financial year 1990- 91 relevant to the asst. yr. 1991-92 and hence 'to cover up that probability, protective addition was made in the asst. yr. 1992-93'. The first appellate authority decided the appeal for the asst. yr. 1992-93 on January, 1996, and the reasons had been recorded thereafter on 18th Aug., 1997. The notice of reassessment was not valid and was liable to be quashed. 19. In view of the above discussion, I hold that the AO had taken an irrelevant fact into consideration and reopened the assessments on the basis of suspicion. Furthermore, the AO proceeded for reopening of the assessment on non-existent and factually incorrect basis/reasons and has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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