Income Tax Officer-6(4) , Lucknow V. M/s . Sardar Bhagat Singh Educational, Lucknow

ITA 12/LKW/2013

• Counselvise Citation: 1223714 RSA 2013
• Duration Of Justice: 2 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O N PATHAK
• Assessee Lawyers: K R RASTOGI
• Section: 143(3); 12A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO. 12/LKW/2013 ASSESSMENT YEAR: 2008 - 09 INCOME TAX OFFICER 6(4) LUCKNOW V. M/S SARDAR BHA GAT SINGH EDUCATIONAL WELFARE TRUST 25, AMRIT BAZAR, KHUN KHUNJI ROAD CHOWK, LUCKNOW T AN /PAN : AAGTS8587E (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. O. N. PATHAK, D.R. RESPONDENT BY: SHRI. K. R. RASTOGI, C.A. DATE OF HEARING: 11 03 201 5 DATE OF PRONOUNCEMENT: 25 0 3 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF THE LD. CIT(A) MAINLY ON TWO GROUNDS, WHICH ARE AS UNDE R:- 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE A.O. WAS INVALID. HE FAILED TO APPRECIATE THAT THE AO HAD RIGHTLY INVOKED SECTION 147 FOR RE- COMPUTING THE ESCAPED INCOME TOTALLING RS.19,34,113 /- SINCE THE APPLICATION FOR REGISTRATION U/S 12A HAD ALREAD Y BEEN REJECTED BY COMMISSIONER OF INCOME-TAX-I, LUCKNOW. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO APPRECIATE THAT THE EDUCATIONAL INSTITUTION HAS NOT BEEN SETUP SO FAR. THE PROVISIONS OF SECTION 10(23C)(IIIAD) AR E APPLICABLE ONLY TO INSTITUTIONS EXISTING SOLELY FOR EDUCATIONA L PURPOSES AND NOT FOR THE PURPOSE OF PROFIT. SINCE NO EDUCATIONAL ACTIVITIES :-2-: HAVE COMMENCED THE BENEFIT OF SECTION 10(23C)(IIIAD ) COULD NOT HAVE ALLOWED. 2. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE TH AT THE ASSESSEE HAS FILED ITS RETURN OF INCOME CLAIMING EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHO RT THE ACT'). THE RETURN WAS PROCESSED AND ASSESSMENT WAS COMPLETED. HAVING NOTED THAT THE REGISTRATION UNDER SECTION 12A OF THE ACT SOUGHT BY THE ASSESSEE WAS REJECTED, THE ASSESSING OFFICER HAS REOPENED THE AS SESSMENT AFTER RECORDING THE REASONS THAT THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 11 OF THE ACT KNOWING FULLY WELL THAT REGIS TRATION UNDER SECTION 12A OF THE ACT WAS REJECTED BY THE LD. COMMISSIONER OF INCOME-TAX. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A) WITH THE SUBMISSION THAT THE ASSESSEE HAS NOT CLAIMED EXEMPT ION UNDER SECTION 11 OF THE ACT. THE EXEMPTION CLAIMED WAS UNDER SECTIO N 10(23C)(IIIAD) OF THE ACT, FOR WHICH REQUISITE CONDITIONS WERE FULFILLED BY THE ASSESSEE. THE LD. CIT(A) RE-EXAMINED THE ISSUE IN THE LIGHT OF THE AS SESSEES SUBMISSIONS AND HAS GIVEN A CATEGORICAL FINDING THAT THE ASSESSING OFFICER, WHILE RECORDING THE REASONS UNDER SECTION 147 OF THE ACT, HAS COMPL ETELY OVERLOOKED THE CLAIM OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT MADE IN THE RETURN OF INCOME AND THE REASONS RECORDED UNDER SEC TION 147 OF THE ACT IN FACT INCOMPLETE OBLIVION AND INCORRECT FACTS AS MEN TIONED IN THE RETURN OF INCOME. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A ) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 7(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES O F THE CASE. I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSESSING O FFICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. I FIND THAT THE AO HAS WHILE RECORDING THE REASONS UNDER SECTIO N 147 OF THE ACT COMPLETELY OVERLOOKED THE CLAIM OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT MADE IN THE RETURN OF INC OME. THE REASONS :-3-: RECORDED UNDER SECTION 147 OF THE ACT ARE IN COMPLE TE OBLIVION OF THE FACTS MENTIONED IN THE RETURN OF INCOME. THE AO REF ERS TO THE SURPLUS AS PER INCOME AND EXPENDITURE ACCOUNT AND OBSERVES THE SAME TO BE TAXABLE AS APPLICATION UNDER SECTION 12A OF THE ACT HAS BEEN REJECTED BY THE COMMISSIONER OF INCOME TAX, LUCKNOW. HOWEVER , THE ASSESSEE IS NOWHERE CLAIMING EXEMPTION UNDER SECTIO N 11 OF THE ACT IN THE RETURN OF INCOME. THE ASSESSEE IS CLAIMING E XEMPTION UNDER SECTION 10{23C)(IIIAD) OF THE ACT. THIS MEANS THAT THE AO HAS NOT EXAMINED THE EXEMPTION CLAIMED UNDER SECTION 10(23C )(IIIAD) OF THE ACT AND PROCEEDED TO RECORD THE REASONS UNDER SECTI ON 147 OF THE ACT WITHOUT CONSIDERING THE FACTS ESSENTIAL FOR DET ERMINING THE INCOME ESCAPING ASSESSMENT. 7(5) THE REASONS RECORDED BY THE AO DO NOT IN ANY W AY GIVE RISE TO APPLICATION OF MIND LEADING TO THE FORMATION OF THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT IN SO FAR AS THE CLAIM OF EX EMPTION CLAIMED UNDER SECTION 10(23C)(IIIAD) OF THE ACT HAS NOT EVE N BEEN CONSIDERED WHILE RECORDING THE REASONS UNDER SECTIO N 147 OF THE ACT. I FIND FROM MY EXAMINATION ABOVE THAT AT THE STAGE OF ISSUE OF NOTICE, THE AO HAS CONSIDERED IRRELEVANT MATERIAL T O FORM THE BELIEF OF INCOME ESCAPING ASSESSMENT I.E. THE REJECTION OF APPLICATION UNDER SECTION 12A OF THE ACT BY THE COMMISSIONER OF INCOME TAX, LUCKNOW WAS NOT A RELEVANT CONSIDERATION FOR FORMIN G THE BELIEF OF INCOME ESCAPING ASSESSMENT AS THE ASSESSEE HAD NOT CLAIMED EXEMPTION UNDER SECTION 11 OF THE ACT. THE NOTICE U NDER SECTION 148 OF THE ACT HAS BEEN ISSUED ON THE BASIS OF REASONS, WHICH ARE NOT VALID TO GIVE AN INDICATION OF FORMATION OF BELIEF THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE ASSES SMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 147 O F THE ACT IS BASED ON A NOTICE ISSUED UNDER SECTION 148 OF THE A CT WHICH ITSELF HAS BEEN ISSUED ON THE BASIS OF REASONS RECORDED UN DER SECTION 147, OF THE ACT, WHICH ARE NOT VALID AND DO NOT PROPERLY CONSIDER THE FACTS ON RECORD. THE ASSESSMENT ORDER IS THEREFORE INVALI D. THE GROUND OF APPEAL IS ALLOWED. :-4-: 4. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFO RE THE TRIBUNAL AND DURING THE COURSE OF HEARING, THE LD. D.R. HAS CANDIDLY ADMITTED THE FACTUAL POSITION THAT THE ASSESSEE HAS NEVER RAISED A CLAIM UNDER SECTION 11 OF THE ACT; WHEREAS THE CLAIM OF EXEMPTION WAS RAIS ED UNDER SECTION 10(23C)(IIIAD) OF THE ACT, WHICH WAS NOT TAKEN INTO ACCOUNT BY THE ASSESSING OFFICER WHILE RECORDING THE REASONS FOR R EOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT. 5. THE LD. COUNSEL FOR THE ASSESSEE, BESIDES PLACING R ELIANCE UPON THE ORDER OF THE LD. CIT(A), HAS CONTENDED THAT SINCE T HE REASONS RECORDED BY THE ASSESSING OFFICER ARE ON A DIFFERENT ISSUE, WHI CH IS NOT EVEN BORNE OUT FROM THE ASSESSMENT ORDER OR THE RETURN OF INCOME, THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING OF THE ASSES SMENT IS TOTALLY INVALID. THEREFORE, WITHOUT FORMING A BELIEF THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, THE ASSESSING OFFICER HAS ISSUE D NOTICE UNDER SECTION 148 OF THE ACT FOR REOPENING OF THE ASSESSMENT UNDE R SECTION 147 OF THE ACT. SINCE THE REOPENING IS INVALID, THE ASSESSMEN T FRAMED CONSEQUENT THERETO DESERVES TO BE ANNULLED. 6. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER A UTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UNDISP UTEDLY THE ASSESSEE HAS RAISED A CLAIM OF EXEMPTION UNDER SECTION 10(23C)(I IIAD) OF THE ACT AND NO CLAIM WAS RAISED UNDER SECTION 11 OF THE ACT; WHERE AS WHILE REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT, THE ASSESS ING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS RAISED A CLAIM OF EX EMPTION UNDER SECTION 11 OF THE ACT KNOWING FULLY WELL THAT ITS APPLICATI ON FOR GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT WAS REJECTED BY THE LD . COMMISSIONER OF INCOME-TAX. OUR ATTENTION WAS ALSO INVITED TO THE ASSESSMENT ORDER FOR ASSESSMENT YEARS 2010-11 AND 2011-12 WITH THE SUBMI SSION THAT UPTO ASSESSMENT YEAR 2010-11, THE ASSESSEE HAS CLAIMED E XEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT AND NOT UNDER SEC TION 11 OF THE ACT. THE :-5-: CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT WAS CLAIMED BY THE ASSESSEE ONLY DURING ASSESSMENT YEAR 2010-12 WHEN R EGISTRATION UNDER SECTION 12A OF THE ACT WAS GRANTED TO THE ASSESSEE. IN THE LIGHT OF THESE FACTS, IT IS QUITE EVIDENT THAT THE ASSESSING OFFIC ER HAS RECORDED THE REASONS FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF T HE ACT WITHOUT VERIFYING THE FACTS AND ALSO ON THE WRONG FACT THAT THE ASSES SEE HAS CLAIMED EXEMPTION UNDER SECTION 11 OF THE ACT KNOWING FULLY WELL THAT REGISTRATION UNDER SECTION 12A OF THE ACT WAS REJECTED BY THE LD . COMMISSIONER OF INCOME-TAX. SINCE THE REASONS RECORDED FOR REOPENI NG OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT ITSELF IS BAD, IT CANN OT BE HELD THAT THE ASSESSING OFFICER HAS FORMED A BELIEF THAT THE INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IF THE REOPENING IS NOT VALID, THE ASSESSMENT FRAMED CONSEQUENT THERETO DESERVES TO BE ANNULLED. SINCE THE LD. CIT(A) HAS HELD THE ASSESSMENT TO BE INVALID, WE FIND NO INFIRMITY IN HIS ORDER. ACCORDINGLY WE CONFIRM HIS ORDER. 7. SINCE THE ASSESSMENT HAS BEEN ANNULLED, WE FIND NO JUSTIFICATION TO DEAL WITH THE ISSUE ON MERIT WITH REGARD TO THE CLA IM OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. 8. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISS ED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED ON THE CAPTIONED PAGE. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25 TH MARCH, 2015 JJ:1203 :-6-: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR