SHIVSHAMBHO NARAYAN TRUST, MUMBAI V. DDIT (EXEMPTION) 1(2), MUMBAI

ITA 3029/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7480 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 26-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NEELAM C JADHAV SH
• Keywords: Reopening of assessment; Business income; Depreciation; Business expenditure; Charitable institution; Opportunity of being heard; Principle of natural justice; Earning of tax free income; Capital receipt; Reason to believe; Reassessment proceedings
• Section: 143(3); 12A; 148; 11

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.3029/ MUM/2016 ( / ASSESSMENT YEAR: 2005 - 06) M/S. SHIVSHAMBHO NARAYAN TRUST, GEETAI CHS L TD . , 716/744, PANDHARE CHAWL COMPOUND, DAGDI CHAWL, B.J M ARG, BYCULLA (W), MUMBAI 400011 / V. DDIT (EXMP) 1(2) 5 TH F LOOR, PIRAMAL CHAMBERS , PAREL, LAL BAUG, MUMBAI 40001 3 ./ PAN : AADTS8307B ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI K. SHIVRAM AND MS. NEELAM C. JADHAV REVENUE BY : SHRI. V JUSTIN / DATE OF HEARING : 26 - 02 - 2018 / DATE OF PRONOUNCEMENT : 19 - 04 - 2018 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL , FILED BY THE ASSESSEE, BEING ITA NO. 3029/MUM/2016 FOR ASSESSMENT YEAR 2005 - 06 IS DIRECTED AGAINST THE APPELLATE ORDER DATED 17.03.2016 PASSED BY LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 1, MUMBAI (HEREINAFTER CALLED THE CIT(A)) FOR ASSESSMENT YEAR 2005 - 06, APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM THE ASSESSMEN T ORDER DATED 22.03.2013 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) R.W.S 147 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). I.T.A. NO.3029/MUM/2016 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH TH E INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED 'THE TRIBUNAL') READ AS UNDER - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL'S) HAS ERRED IN CONFIRMING THE RE - OPENING OF THE ASSESSMENT U/S.148 WITHOUT CO - GENT REASON. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL'S) HAS NOT CONSIDERED THE FACT THAT AS PER THE REASON RECORDED IN WRITING WHICH STATES THAT THE APPELLANT HAS NOT FILED THE RETURN OF INCOME, WHEREAS THE APPELLANT HAD FILED THE RE TURN OF INCOME ON 31.10.2005 AND THE PROOF THE SAME WAS SUBMITTED TO THE ASSESSING OFFICER. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL'S) HAS FAILED TO APPRECIATE THE FACT THAT THE REASON RECORDED IN WRITING FOR VERIFICATION OF CASH DEPOSIT DOES NOT ATTRACT THE PROVISION OF SECTION 148. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL'S) WAS NOT JUSTIFIED IN NOT CONSIDERING THE FACT THAT THE APPELLANT HAD DECLARED THE CASH OF RS.34,68,000/ - DEPOSITED IN THE BANK AS THEIR INCOME BEFORE ISSUING THE NOTICE U/S.148 OF THE INCOME TAX ACT. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL'S) WAS NOT JUSTIFIED IN DISALLOWING THE EXPENDITURE OF RS.67,48,467/ - ON THE GROUND THAT THE APPELLANT TRUST IS NOT REGISTERED U/S.12A AS SUCH THE PRIMARY CONDIT ION FOR AVAILING EXEMPTION U/S.1 1 HAS RIGHTLY BEEN DENIED BY THE ASSESSING OFFICER. PARTICULARS AMOUNT EXPENSES ON OBJECT OF THE TRUST 59,86,842 PURCHASE OF PHYSICAL FITNESS EQUIPMENT 5,45,000 RENOVATION OF AMBULANCE 2,16,625 TOTAL 67,48,467 6. THE APPELLANT CRAVES, LEAVE TO ADD TO ALTER OR AMEND THE ABOVE GROUNDS OF APPEAL. 3. THE ASSESSEE HAS RAISED ADDITIONAL GROUNDS OF APPEAL BEFORE THE TRIBUNAL , WHICH READ AS UNDER: - 6. ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT REOPENING IS BAD IN LAW AS THE NOTICE U/S.148 DT.27/03/2012 HAS BEEN ISSUED WITHOUT OBTAINING PRIOR APPROVAL / SANCTION / SATISFACTION AS REQUIRED U/S. 151 OF THE INCOME TAX ACT AND WITHOUT PROVIDING RECORDED REASONS. HENCE , THE REOPENING IS BAD IN LAW. 7. WITHOUT PREJUDICE TO THE ABOVE, NOTICE U/S. 148 DT.27/03/2012 WAS ISSUED BY THE AO 15(1)(2) WHO HAD NO JURISDICTION OVER THE ASSESS E E, I.T.A. NO.3029/MUM/2016 3 HENCE THE NOTICE AND ASSESSMENT BASED ON WRONG JURISDICTION AND WRONG ASSUMPTION IS BAD IN LAW AND LIABLE TO BE QUASHED. 8. WITHOUT PREJUDICE TO THE ABOVE, DONATION OF RS.79,73,282/ - IS A CAPITAL RECEIPT NOT LIABLE TO THE TAX EVEN THOUGH THE ASSESSE HAS WRONGLY SHOWN IN THE TAX COMPUTATION. THEREFORE CONFIRMING THE TAX ON THE DONATION RE CEIVED AS AN INCOME OF THE ASSESSEE AND DISALLOWANCE OF EXPENDITURE MADE BY TREATING DONATION AS INCOME IS NOT CORRECT AS PER LAW. HENCE THE DISALLOWANCE OF EXPENDITURE CONFIRM BY THE CIT(A) MAY BE DELETED . 9. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, A LTER OR DELETE ANY OR ALL THE ABOVE GROUNDS OF APPEAL. T HE ASSESSEE HAS RAISED ADDITIONAL GROUNDS AS ABOVE AND PRAYED FOR ADMISSION OF ADDITIONAL GROUNDS OF APPEAL . IT IS THE CLAIM OF THE ASSESSEE THAT THESE ARE GROUNDS WITH GOES TO THE ROOT OF THE MATT ER AS THESE GROUNDS ARE IN RESPECT OF SUBJECT MATTER OF THE TAX PROCEEDINGS BEFORE US AND HENCE MAY BE ADMITTED IN THE INTEREST OF JUSTICE. 4 . THE LD. DR DID NO T OBJECTED TO THE ADMISSION OF THE AFORESAID ADDITIONAL GROUNDS OF APPEAL . K EEPING IN VIEW RA TIO OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA V. CIT (1991) 187 ITR 688 (SC) AND AHMADABAD ELECTRICITY COMPANY LTD. V CIT (1993) 199 ITR 351 (BOM.) , WE DIRECT ADMISSION OF THE SE ADDITIONAL GROUNDS AS THEY ARE IN RESPECT OF SUBJECT MATTER OF THE TAX PROCEEDINGS BEFORE US . WE ORDER ACCORDINGLY. 5 . THE ASSESSEE IS A TRUST AND THE CASE OF THE ASSESSEE WAS REOPENED UNDER THE PROVI SION OF SECTION 147 OF THE ACT WHEREIN REASONS FOR REOPENING OF THE CONCLUDED ASSESSMENT WERE REC ORDED BY THE AO , AS UNDER: - 'OUT OF THE LIST RECEIVED I.E. LIST OF NON FILERS BASED ON AIR INFORMATION, IT IS VERIFIED FROM THE SYSTEM THAT ABOVE MENTIONED ASSESSES HAS NOT FILED RETURN OF INCOME FOR A. Y.2005 - 06 EVEN THOUGH THERE IS TAXABLE INCOME. IN THIS CASE THE AIR INFORMATION I S AS FOLLOWS: ASSESSE E HAS DEPOSITED CASH OF RS. 10 LAKHS OR MORE IN SB A/C I.E. RS. 34,68,000/ - THEREFORE I HAVE REASON TO BELIEVE THAT THE INCOME TO THE EXTEN T OF RS 34,68,000/ - TO CHARGEABLE TO TAX IN A. Y. 2005 - 06, AS ESCAPED ASSESSMENT AND I PROPOS E TO RE - OPEN THE ASSESSMENT BY INVOKING THE PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT, 1961. HENCE , NOTICE U/S 148 OF I T ACT, 1961 IS BEING ISSUED TO THE ASSESSES' THUS IT IS MAINLY BASED UPON THE LIST OF THE NON FILERS OF THE RETURN OF INCOME REC EIVED BY THE AO BASED ON AIR INFORMATION THAT THE ASSESSEE HAD I.T.A. NO.3029/MUM/2016 4 DEPOSITED CASH OF RS. 3 4,68,000/ - IN THE SAVING BANK ACCOU NT LEADING TO FORMATION OF BELIEF BY THE AO THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 LED TO REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 OF THE 1961 ACT. T HE ASSESSEE IN ITS REPLY SUBMITTED THAT IT FILE D IS RETURN OF INCOME FOR IMPUGNED ASSESSMENT YEAR 2005 - 06 , WHEREIN INCOME FROM OTHER SOURCES WERE DECLARED TO THE TUNE OF RS. 81,18,098/ - W HICH WAS CLAIMED AS AN EXEMPT INCOME . T HE SAID RETURN OF INCOME WAS FILED IN FORM NO. 3A SHOWING NIL INCOME AFTER CLAIMING EXEMPTION. T HE ASSESSEE ALSO FILED COPIES OF BALANCE S HEET AS ON 31.03.2005, AND INCOME OF EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31.03.2005. THE ASSESSEE COULD NOT PRODUCE BOOK S OF ACCOUNTS BEFORE THE AO AS THE SAID BOOK OF ACCOUNTS WERE ALREADY SEIZED BY POLICE D EPARTMENT FOR WHICH NECESSARY DOCUMENTATION WAS SUBMITTED BY ASSESSEE BEFORE THE AO TO EVIDENCE THAT BOOKS OF ACC OUNTS ARE IN THE CUSTODY OF POLICE DEPARTMENT. THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSEE HAD FILED REQUEST LETTER TO THE SENIOR INSPECTOR EOW UNIT - 3 WITH A REQUEST TO SUPPLY PHOTOCOPY OF THE BOOKS OF ACCOUNTS WHICH AS CLAIMED BY THE ASSESSEE WERE NOT S UPPLIED TO THE ASSESSEE BY THE POLICE DEPARTMENT. THE ASSESSEE ALSO POINTED OUT BEFORE THE AO FROM THE AUDIT REPORT DATED 25.10.2005 THAT IT MAINTAI NED PROPER BOOKS OF ACCOUNTS AND IT IS ONLY DUE TO THE REASONS AS STATED ABOVE THE SAME COULD NOT BE PRODUCE D BEFORE THE AO . THE ASSESSEE SUBMITTED BEFORE THE AO THAT IT IS NOT REGISTERED U/S. 12A AND HENCE INCOME IS TO BE ASSESSED AS BUSINESS INCOME AND PARAMETERS OF ALLOWABILITY OF BUSINESS EXPENSES AS PROVIDED UNDER THE INCOME TAX A CT, 1961 NEED S TO BE FOLLO WED. THE ASSESSEE SUBMITTED THAT IT RECEIVED DONATION OF RS. 79,73,282/ - , INCOME FORM PHYSICAL FITNESS OF RS. 1,37,000/ - AND INTEREST OF RS.7,816/ - , TOTALLING TO RS. 8 1,18,098/ - . THE ASSESSEE SUBMITTED THAT IT HAD CLAIMED FOLLOWING EXPENSES AGAINS T THE SAID INCOME, A S UNDER: - PARTICULARS AMOUNT (RS) EXPENSES ON OBJECT OF THE TRUST 59,86,842 ADMINISTRATIVE EXPENSES 1,93,393 PURCHASE OF PHYSICAL FITNESS EQUIPMENT 5,45,000 I.T.A. NO.3029/MUM/2016 5 IT WAS CLAIMED THAT THESE EXPENSES WERE INCURRED TOWARDS OBJECT OF THE TRUST AND WERE PAID BY ACCOUNT PAYEE CHEQUE. THE ASSESSEE HAD SUBMITTED COPY OF BANK STATEMENT AND CASH SUMMARY. THE ASSESSEE , HOWEVER, AGREED THAT RS. 7,70,863/ - CLAI MED U/S 11(2) SHOULD BE DISALLOWED . I T WAS ALSO SUBMITTED THAT ASSESSEE DOES NOT HAVE ANY ASSETS PHYSICALLY WITH IT AS ALL THE ASSETS WERE SEIZED BY POLICE D EPARTMENT INCLUDING PH YSICAL FITNESS INSTRUMENTS AND AMBULANCE V AN. IT WAS ALSO SUBMITTED BY ASSESSEE BEFORE THE AO THAT THE ECONOMIC O FFENCE WING OF CB - CID HAS STOPPED ALL THE TRANSACTION S IN THE BANK ACCOUNT OF THE ASSESSEE. THE AO REJECTED THE CONTENTION S OF THE AS SESSEE BY HOLDING AS UNDER: - I HAVE CONSIDERED THE SUBMISSION OF THE AR OF THE ASSESSEE TRUST AS ABOVE CAREFULLY, HOWEVER, THE CONTENTION OF THE AR THAT THE INCOME AND EXPENDITURE HAS TO BE TREATED AS BUSINESS INCOME AND ONLY THE DEDUCTION U/S 11(2) IS NOT ALLOWED TO THE ASSESSEE IN THE ABSENCE OF THE CERTIFICATE U/S 12A, THE ENT IRE EXPENSES CANNOT BE DISALLOWED SIMPLY ON THE TRUST IS NOT REGISTERED U/S 12A IS NOT TENABLE AND ACCEPTABLE DUE TO THE REASONS AS UNDER: - UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961 AS AMENDED FROM TIME TO TIME, WHEREAS ALL THE EXPENSES WHOLLY AND E XCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION ARE ALLOWABLE EXPENSE, THE EXPENSES INCURRED FOR PERSONAL NON - BUSINESS AND EXPENSES OF CAPITAL IN NATURE ARE NOT DEDUCT ABLE. I. IT MAY BE SEEN FROM THE COMPUTATION OF INCOME FILED ON RECORD AND DETAILS OF INCOME AND EXPENDITURE GIVEN UNDER PARA 4 (A) AND (B) OF ARS LETTER DATED 19.02.2013 THAT THE EXPENSES ON THE OBJECT OF THE TRUST OF RS.59,86,642/ - CANNOT TREATED AS EXPENSES INCURRED FOR THE PURPOSE OF BUSINESS CARRIED OUT BY THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, AS SUCH THE SAME ARE DISALLOWED IN VIEW OF THE PROVISIONS OF IT ACT 1961 REFERRED TO ABOVE. II. IN REGA RD TO EXPENSES INCURRED FOR THE PURCHASE OF PHYSICAL F ITNESS EQUIPMENT OF RS. 5,45,000 / - , IT IS STATED THAT THE SAME ARE EXPENSES OF CAPITAL IN NATURE, AS SUCH CAPITALIZED AND NOT ALLOWED AS REVENUE EXPENSES III. SO FAR EXPENSES INCURRED ON REN OVATI ON OF AMBULANCE OF RS. 2,16,625/ - IS NON - BUSINESS EXPENSES AS SUCH DISALLOWED. RENOVATION OF AMBULANCE 2,16,625 DEPRECIATION 4,05,375 TOTAL 73,47,235 I.T.A. NO.3029/MUM/2016 6 IN VIEW OF THE FACTS DISCUSSED ABOVE, THE FOLLOWING EXPENSES ONLY ARE DEDUCTABLE FROM THE TOTAL INCOME OF RS.81,81,098/ - (RS. 79,73,282/ - DONATION + PHYSICAL FITNESS RS.1370 00/ - AND INTEREST RS.7816/ - ) ADMINISTRATIVE EXPENSES RS.193393/ - AND (II) DEPRECIATION RS.405375/ - SUBJECT TO THE ABOVE REMARKS, THE TOTAL INCOME OF THE ASSESSEE TRUST IS COMPUTED AS UNDER : - AMOUNT IN RS. TOTAL RECEIPTS AS PER INCOME & EXPENDITURE A/C FOR THE YEAR ENDED 31 - 03 - 2005 81.18.098/ - LESS: ALLOWABLE EXPENSES AS DISCUSSED ABOVE (I) ADMINISTRATIVE EXPENSES (II) DEPRECIATION 193393/ - 405375/ - 5,98,768/ - TOTAL INCOME 75,19,330/ - ____________ 6 . THE ASSESSEE WENT IN APPEAL BEFORE THE LD . CIT - A CHALLENGING THE ADDITIONS MADE BY THE AO , WHEREIN THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT - A AS UNDER: - 5.1. DURING THE COURSE OF APPELLATE PROCEEDINGS, APPELLANT MADE SUBMISSIONS WHICH ARE SUMMARISED A S UNDER - I. THE APPELLANT SUBMITTED THAT IT HAD FILED RETURN OF INCOME ON 31.10.2005 WITH ADIT(E)I(2) SHOWING NIL INCOME. THE RETURN WAS FILED ALONG WITH ITS AUDITED ACCOUNTS SHOWING THE ALL THE RECEIPTS AND PAYMENTS MADE BY THE TRUST. THE ASSESSMENT FO R A.Y.2005 - 06 WAS REOPENED U/S. 148 VIDE NOTICE DATED 27.03.2012.THE ASSESSMENT WAS COMPLETED U/S. 143(3)/147 ON 22.03.2013 ASSESSING TOTAL INCOME AT RS.75,19,330/ - . WHILE PASSING THE ABOVE ASSESSMENT ORDER THE ASSESSING OFFICE DISALLOWED THE ENTIRE EXPENS ES BY WAY OF DONATION PAID BY THE TRUST TOWARDS ITS OBJECTS SIMPLY ON THE GROUND THAT THE TRUST WAS NOT REGISTERED U/S. 12A. II. THE APPELLANT WITH REFERENCE TO THE REOPENING OF ASSESSMENT STATED THAT GROUNDS MENTIONED FOR RE - OPENING OF THE ASSESSMENT WAS NOT CORRECT AS THE APPELLANT HAD ALREADY FILED IT'S RETURN OF INCOME ON 31.10.2005 WITH ADIT(E)I(2) SHOWING NIL INCOME ALONG WITH AUDITED ACCOUNTS. THE ABOVE ASSESSMENT WAS ALSO RE - OPENED FOR VERIFICATION OF CASH DEPOSITS OF RS.34,68,000/ - IN THE BANK ACC OUNT. THE ABOVE REASON DOES NOT INDICATE THAT THE APPELLANT INCOME HAS NOT FULLY DISCLOSED ITS TRUE INCOME. THE SAME CANNOT BE THE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS.34,68,000/ - CHARGEABLE TO TAXED HAS ESCAPED ASSESSMENT. SIM PLY VERIFICATION OF DEPOSIT CAN NOT BE THE BASIS I.T.A. NO.3029/MUM/2016 7 FOR REOPENING OF THE ASSESSMENT. THE APPELLANT RELIED ON THE ORDER IN ITA N0.3814/DEL/11 FOR A.Y.2008 - 09 PASSED BY ITAT DE LHI A' BENCH IN THE CASE OF BIR BAHADUR SINGH SIJWALI V/S. ITO WHEREIN SIMILAR FACTS WERE CONSIDERED BY THE HONORABLE ITAT WHO HAS ALLOWED THE APPEAL BY STATING THAT THE REASONS RECORDED BY THE ASSESSING OFFICER, AS SET OUT EARLIER, WERE NOT SUFFICIENT REASONS FOR RE - OPENING OF THE ASSESSMENT PROCEEDINGS. FROM THE ABOVE FACTS IT IS CLEAR THAT THE RE - OPENI NG PROCEEDINGS ARE BASED ON WRONG INFORMATION. THE ASSESSMENT ORDER PASSED U/S. 143(3)/147 IS ILLEGAL AND IS LIABLE TO BE CANCELLED. III. THE APPELLANT WITHOUT PREJUDICE SUBMITTED THAT ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT THE TRUST ACCOUNTS WER E DULY AUDITED BY THE CHARTERED ACCOUNTANT AND WERE FILED WITH THE CHARITY COMMISSION. HE HAS NOT ALLOWED THE DEDUCTION OF VARIOUS EXPENSES INCURRED BY THE APPELLANT SUCH AS DONATION PAID BY THE TRUST TOWARDS ITS OBJECTS SIMPLY ON THE GROUND THAT THE TRUST WAS NOT REGISTERED U/S, 12A.FROM THE ABOVE FACTS WE REQUEST YOUR HONOR TO KINDLY DIRECT THE ASSESSING OFFICER TO ALLOW THE VARIOUS EXPENSES CLAIMED BY THE APPELLANT TOWARDS THE OBJECT OF THE TRUST. 7 . THE LEARNED CIT - A CONSIDERED THE CONTENTION S OF THE A SSESSEE AND REJECTED TH E SAME BY HOLDING AS UNDER: - 5.2. I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, GONE THROUGH THE ASSESSMENT ORDER OF THE A.O AND THE SUBMISSIONS OF THE APPELLANT AND ALSO DISCUSSED THE CASE WITH THE AR OF THE APPELLA NT. THE CONTENTIONS AND SUBMISSIONS OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED HERE IN UNDER: I. THE APPELLANT HAS AGITATED REOPENING OF ASSESSMENT U/S. 147 OF THE INCOME TAX ACT IN GROUNDS OF APPEAL NO. 1 TO 3. OBJECTING TO THE REOPENING OF ASSESSMENT U/S. 147 IT WAS STATED THAT ON THE BASIS OF AIR INFORMATION ASSESSMENT CANNOT BE REOPENED FOR VERIFICATION OF CASH DEPOSITS. THE APPELLANT IN THIS REGARD HAS RELIED UPON THE JUDGMENT OF HON'BLE ITAT IN THE CASE OF BIR BAHADUR SINGH SIJWALI (SUPR A). HOWEVER, ON PERUSAL OF THIS JUDGMENT IT IS NOTED THAT THE FACTS IN THESE TWO CASES ARE DISTINGUISHABLE. IN THE CASE BEFORE HON'BLE ITAT THERE WAS NO INFORMATION RECEIVED FROM AIR WHILE IN THE CASE OF THE APPELLANT THE INFORMATION HAS BEEN RECEIVED FROM AN INDEPENDENT SOURCE ON THE BASIS OF WHICH THE AO HAS FORMED THE BELIEF TO REOPEN THE ASSESSMENT U/S. 147. FURTHER IT IS NOTED THAT IN THE CASE BEFORE HON'BLE ITAT, THE REASONS WERE RECORDED AFTER THE NOTICE WAS SERVED ON THE APPELLANT AND HENCE HON'BLE ITAT OBSERVED THAT REASONS ARE TO BE RECORDED BEFORE ISSUANCE OF NOTICE AND IN ABSENCE THEREOF THE REASSESSMENT PROCEEDINGS WERE NOT VALID. NO SUCH FACT IS THERE IN THE CASE OF THE APPELLANT AS EVIDENT FROM THE REASONS RECORDED AND QUOTED IN THE ASSESSMENT ORDER. IN VIEW OF THESE DISTINGUISHABLE FACTS THE RATIO OF JUDGMENT RELIED UPON BY THE APPELLANT IS NOT APPLICABLE TO ITS FACTS. II. FURTHER IT IS NOTED THAT APPELLANT IN ITS RETURN OF INCOME HAS CLAIMED ITS STATUS AS 'CHARITABLE TRUST' WHICH IS GOVE RNED BY SPECIAL PROVISIONS CONTAINED UNDER SECTIONS 11 TO 13 OF THE INCOME TAX ACT. IN THE COMPUTATION OF INCOME FILED ALONGWITH THE RETURN IT HAS CLAIM ED I.T.A. NO.3029/MUM/2016 8 APPLICATION OF INCOME U/S. 11 (1 )(A) @ 15%. RELIANCE IN THIS REGARD IS PLACED UPON THE JUDGMENT OF HON 'BLE ALLAHABAD HIGH COURT IN THE CASE OF FATEH CHAND CHARITABLE TRUST, 36 TAXMANN.COM 67 WHEREIN IT WAS HELD THAT REOPENING OF THE ASSESSMENT WHEREIN NO OPINION WAS EXPR ESSED BY THE AO REGARDING DONATION DISCLOSED BY THE ASSESSEE TRUST WAS VALID. DEALING W ITH THIS ISSUE HON'BLE COURT OBSERVED AS UNDER : '17. AT THIS STAGE, WE MAY REFER THE JUDGEMENT OF THE APEX COURT IN THE CASE OF ASSTT. CIT V. RAJESH JHAVERI STOCK BROKERS (P.) LTD. [2007] 291 ITR 500/161 TAXMAN 316. THE APEX COURT HAS NOTED THE DIFFEREN CE IN BETWEEN THE PRE - EXISTING SECTION 147 PRIOR TO 1ST OF APRIL, 1989 AND ITS SUBSTITUTION THEREAFTER. IT HAS ALSO CONSIDERED THAT AT THE STAGE OF NOTICE AS THE CASE H ERE IS WHAT IS REQUIRED IS 'REASON TO BELIEVE' BUT NOT THE ESTABLISHED FACT OF ESCAPEMEN T OF INCOME. AT THIS 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 THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT CONCERNED AT T HAT STAGE. THIS IS SO BECAUSE THE FORMATION OF THE BELIEF BY THE ASSESSING OFFICER IS IN THE REALM OF SUBJECTIVE SATISFACTION.' FROM THE ABOVE JUDGEMENT IT MAY BE INFERRED THAT THE RECEIPT OF INFORMATION BY WAY OF AIR WAS SUFFICIENT FOR THE AO TO FORM RE QUISITE BELIEF THAT THE INCOME RELATING TO DONATIONS HAS ESCAPED ASSESSMENT. ALSO IN THE CASE OF ROHILKHAND EDUCATIONAL CHARITABLE TRUST 42 TAXMANN.CO. 586, HON'BLE ALLAHABAD HIGH COURT HELD THAT WHERE ASSESSEE TRUST RUNNING HOSPITAL HAD NOT PRODUCED LIST OF DONORS AND EXPENDITURES CLAIMED WERE REPORTED BY MEDICAL COUNCIL TO BE BOGUS, INITIATION OF PROCEEDINGS U/S. 147 WAS JUSTIFIED. IN THE CASE UNDER CONSIDERATION ALSO THE INFORMATION HAS BEEN RECEIVED FROM AIR. FURTHER IN THE CASE OF RAJAT EXPORT IMPORT I NDIA PVT. LTD. VS. ITO 252 CTR 307 HON'BLE DELHI HIGH COURT OBSERVED AS UNDER: 'AT THIS STAGE, THE COURT IS NOT CONCERNED WHETHER THE MATERIAL BEFORE THE AO IS SUFFICIENT FOR THE FORMATION OF THE BELIEF. AT THIS STAGE, THE COURT IS CONCERNED WITH WHETHER THE MATERIAL BEFORE THE AO IS RELEVANT FOR FORMING THE PRIMA FACIE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS ALSO WELL SETTLED THAT AT THAT STAGE, THAT IS AT THE STAGE WHEN REASONS ARE RECORDED FOR REOPENING THE ASSESSMENT, THE AO IS NOT REQUIRED TO BUILD A FOOLPROOF OR A FORT - LIKE CASE FOR MAKING THE ADDITION TO THE ASSESSEE'S INCOME; ALL THAT HE IS REQUIRED AT THAT STAGE IS TO FORM A PRIMA FACIE OPINION OR BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. THE RELEVANCY OF THE MATERIAL B EFORE THE AO IS TO BE JUDGED ONLY FROM THAT PERSPECTIVE AND NOT FROM THE PERSPECTIVE AS TO WHETHER THE MATERIAL IS SUFFICIENT OR ADEQUATE TO SUSTAIN THE ADDITION ULTIMATELY. THAT WILL BE AN ASPECT WHICH THE AO WILL EXAMINE AND DECIDE IN THE COURSE OF THE R EASSESSMENT PROCEEDINGS AFTER HEARING THE ASSESSEE IN THE MANNER REQUIRED BY LAW.' I.T.A. NO.3029/MUM/2016 9 RELYING UPON THESE JUDICIAL PRONOUNCEMENTS IT IS HELD THAT THE AO HAD REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT . REOPENING OF THE A SSESSMENT IS, THEREFORE, UPHELD. III. THE APPELLANT HAS NOT MADE ANY SUBMISSION WITH REGARD TO NON SUPPLYING OF THE REASONS RECORDED. IN VIEW OF THE FACTS AND LEGAL POSITION AS DISCUSSED ABOVE GROUNDS OF APPEAL NO. 1 TO 3 ARE DISMISSED. IV. IN GROU NDS OF APPEAL NO. 4 TO 7, THE APPELLANT HAS OBJECTED TO DISALLOWANCE OF EXPENSES. IT WAS STATED THAT THE TRUST ACCOUNTS WERE DULY AUDITED BY THE CHARTERED ACCOUNTANT AND WERE SIMPLY DISALLOWED SINCE IT WAS NOT REGISTERED U/S. 12A. IN THIS REGARD, IT IS MEN TIONED THAT HOLDING VALID REGISTRATION U/S. 12A IS THE PRIMARY CONDITION FOR AVAILING EXEMPTION U/S. 11 WHICH HAS RIGHTLY BEEN DENIED BY THE AO. FURTHER, IT IS NOTED THAT THE AO HAS TAXED THE APPELLANT'S INCOME ON COMMERCIAL PRINCIPLES AND HAS ALLOWED DEDU CTION FOR ADMINISTRATIVE EXPENSES AND DEPRECIATION. FURTHER, IT IS NOTED THAT THE APPELLANT COULD NOT PRODUCE COMPLETE BOOKS OF ACCOUNTS BEFORE AO. FURTHER, IT COULD NOT PROVE THAT THE EXPENSES OF RS. 59.86 LAKHS WERE INCURRED FOR THE PURPOSE OF BUSINESS. IT WAS ALSO NOTED THAT THE EXPENDITURE OF RS. 5.45 LAKHS WAS CAPITAL IN NATURE AND THE EXPENDITURE OF RS. 2.16 LAKHS WAS FOR NON - BUSINESS PURPOSES. THESE OBSERVATIONS OF THE AO HAVE NOT BEEN REBUTTED EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS. ACCORDI NGLY, I HAVE NO REASON TO DEVIATE FROM THE FINDINGS GIVEN BY THE AO IN HIS ORDER. GROUNDS OF APPEAL NOS. 4 TO 7 ARE, THEREFORE, DISMISSED. 6. GROUND NO. 8 OF APPEAL IS VAGUE, GENERAL AND HAS NOT BEEN AVAILED. THEREFORE, SAME NEEDS NO SEPARATE ADJUDICATIO N AND IS ACCORDINGLY DISPOSED OFF. 8 . A GGRIEVED BY THE APPELLATE ORDER DATED 17 - 03 - 2016 PASSED BY LEARNED CIT(A) , THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL . THE ASSESSEE RAISED ADDITIONAL GROUNDS BEFORE THE TRIBUNAL WHICH ARE RAISED FOR THE FIRST TIME AS THE SAME WERE NOT RAIS ED BEFORE THE AUTHORITIES BELOW. WE HAVE ALREADY ADMITTED THESE ADDITIONAL GROUNDS IN THE INTEREST OF JUSTICE KEEPING IN VIEW RATIO OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA V. CIT (SUPRA) AND DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF AHMADAB AD ELECTRICITY CO. LTD. V. CIT (SUPRA), AS THESE GROUNDS HAVE ARISEN IN RESPECT OF SUBJECT MATTER OF THE TAX PROCEEDINGS . THE ASSESSEE VIDE ADDITIONAL GROUNDS IS AGITAT ING THAT THAT NOTICES U/S. 148 WAS ISSUED BY THE AO WITHOUT OBTAIN ING PRIOR A PPROVAL AS IS REQUIRED U/S. 151 AND WITHOUT PROVIDING RECORDED REASONS. T HE OTHER CONTENTION WHICH IS RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL IS THAT DONATION OF RS. 79,73 ,282/ - WAS A CAPITAL RECEIPT AND IT IS CLAIMED THAT EVEN IF THERE IS NO REGISTRATION OF THE ASSESSEE U/S. 12A , STILL THE SAME CANNOT BE BROUGHT TO I.T.A. NO.3029/MUM/2016 10 TAX WITHIN PROVISIONS OF THE 1961 ACT . THE ASSESSEE HAS AVERRED BEFORE THE TRIBUNAL THA T NO PRIOR APPROVA L /SANCTION WAS OBTAINED BY AO BEFORE REOPENING OF THE CONCLUDED ASSESSMENT U/S. 147 AND HENCE THE ENTIRE PROCEEDINGS ARE BAD IN LAW. THE ASSESSEE FILED ASSESSMENT ORDER DATED 22 - 03 - 2013 PASSED BY THE AO U/S. 143(3) R.W.S. 147 WHICH WAS DU LY CERTIFIED BY M/S. R. K CH A UDHARY & ASSOCIATES , CHARTERED ACCOUNTANTS, KAMANWALA CHAMBERS, 3RD FLOOR, SIR P . M ROAD, FORT, MUMBAI - 400001 . SINCE THERE WAS SOME CONFUSION AS TO THE COMPLETENESS OF THE SAID ASSESSMENT ORDER W.R.T. SECOND PAGE (ASSESSMENT ORDER IS NOT NUMBERED BY THE AO) , THE ASSESSEE WAS ASKED TO PRODUCE CERTIFIED COPY OF THE SAID ORDER FROM THE AO. THE ASSESSEE FILED CERTIFIED COPY OF THE ASSESSMENT ORDER DULY CERTIFIED BY SHRI SANJ AY KAMBLE, ITO(E ) - 2(3), MUMBAI WHICH IS ON RECORD , WHEREIN RELEVANT EXTRACT WHERE THERE IS SOME CONFUSION(MARKED A S ???), IS REPRODUCED HEREUNDER : - INCOME TAX DEPARTMENT NAME OF THE ASSESSES ; SHIV SHAMBHU NARAYAN TRUST ADDRESS 716/744 PANDHARE COMPOUND DAGDI CHAWL, B.J. MARG, BYCULLA, MUMBAI - 400011. PAN I AADTS 8307 B WARD/CIRCLE/RANGE ', ADIT (E) - LL(2), MUMBAI. STATUS * TRUST ASSESSMENT YEAR I 2005 - 200 6 WHETHER RESIDENT/RESIDENT BUT NOT ORDINARILY RESIDENT/ NON RESIDENT ' RESIDENT METHOD OF ACCOUNTING ; MERCANTILE PREVIOUS YEAR : 31.05,2005 DATES(S) OF HEARING ! AS PER ORDER SHEET NOTING I.T.A. NO.3029/MUM/2016 11 DATE OF ORDER ', 22/03/2013 SECTION AND SUB - SECTION UNDER WHICH THE ASSESSMENT IS MADE ' - ASSESSED U/S 143(3) R W S 147 OF THE L.T.ACT, 1961 ASSESSMENT ORDER THIS CASE HAS BEEN RECEIVED ON TRANSFER FROM I.T.O. 15(1)(2), MUMBAI VIDE TRANSFER MEMO RECEIVED IN THIS OFFICE DATED 02.01.2013 FOR COMPLETING THE ASSESSMENT FOR THE A.Y. 2005 - 06 U/S. 143(3) RWS 147 OF IT ACT, 1961 RECORDING THE REASONS AS UNDER: - 'OUT OF THE LIST RECEIVED I.E. LIST OF NON FILERS BASED ON AIR INFORMATION, IT IS VERIFIED FROM THE SYSTEM THAT ABOVE MENTIONED ASSESSEE HAS NOT FILED RETURN OF INCOME FOR A.Y. 2 005 - 06 EVEN THOUGH THERE IS TAXABLE INCOME. IN THIS CASE THE AIR INFORMATION IS AS FOLLOWS: ASSESSEE HAS DEPOSITED CASH OF RS. 10 LAKHS OR MORE IN SB A/C I.E. RS. 34,68,000/ - THEREFORE I HAVE REASON TO BELIEVE THAT THE INCOME TO THE EXTENT OF RS 34.68.000/ - TO CHARGEABLE TO TAX IN A. Y. 2005 - 06, AS ESCAPED ASSESSMENT AND I PROPOSE TO RE - OPEN THE ASSESSMENT BY INVOKING THE PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT, 1961, HENCE , NOTICE U/S 148 OF I T ACT, 1961 IS BEING ISSUED TO THE ASSESSEE' ????? ????? ALONGWITH THE FOLLOWING DOCUMENTS : - I. COPY OF THE NOTICE U/S 148 DATED 27.03,2012 II. COPY OF THE FIRST PAGE OF THE RETURN OF INCOME FOR A.Y.2005 - 06 IN FORM NO. 3A SHOWING NIL INCOME AFTER CLAIMING EXEMPTION III. COPIES OF AUDITED BALANCE SHEET AS ON 31.03.2005 AND INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31.03.2005 *** *** *** PENALTY PROCEEDINGS U/S 271(1)(C) FOR FURNISHING IN ACCURATE PARTICULARS OF INCOME IS INITIATED SEPARATELY. I.T.A. NO.3029/MUM/2016 12 ASSESSED ACCORDINGLY U/S 143(3) O F THE I.T.ACT. ALLOW CREDIT OF PREPAID TAXES AFTER VERIFICATION. CHARGE INTEREST AS PER LAW. TAX CALCULATION AS PER ITNS - 150 IS PART OF THIS ORDER. ISSUED DEMAND NOTICE/ RO ACCORDINGLY. SD/ - (T.A. KHAN) DEPUTY DIRECTOR OF INCOME TAX (EXEMPTION) - 1(2), MUMBAI COPY TO ASSESSEE: SD/ - DEPUTY DIRECTOR OF INCOME TAX (EXEMPTION) - 1(2), MUMBAI NOW, WE PROCEED WITH THE ASSESSMENT ORDER FINALLY FILED BY THE ASSESSEE DULY CERTIFIED BY ITO TAKING IT TO BE COMPLETE ORDER AND WE FOUND THAT THERE IS NO RECORDING OF ANY FACT IN THE SAID ASSESSMENT ORDER AS TO THE OBTAINING OR NON OBTAINING OF THE SATISFACTION/APPROVAL OF THE REQUISITE AUTHORITY BY THE AO U/S 151 OF THE ACT BEFORE RE OPENING THE CONCLUDED ASSESSMENT U/S 147 . THE ASSESSEE HAD AL SO FILED RTI APPLICATIONS WITH APPROPRIATE AUTHORITIES AS WELL RELEVANT APPELLATE BODIES ALONG WITH THE ORDERS OF THE AUTHORITIES UNDER RTI ACT , 2005 WHICH ARE PLACED IN PAPER BOOK PAGE NO. 41 TO 49 . AS PER THESE APPLICATIONS, THE ASSESSEE HAD SOUGHT TO OBTAIN RECORDS FROM THE REVENUE AS TO THE NOTICE ISSUED U/S 148 WITH REASONS RECORDED AS TO THE REOPENING OF THE CONCLUDED ASSESSMENT U/S 148 ALONG WITH COPY OF SANCTION OBTAINED BY THE AO U/S 151, BUT THE SAME COULD NOT BE OBTAINED AS THE AUTHORITIES COU LD NOT AT THE TIME OF DISPOSAL OF THE APPLICATION OBTAIN THE SAID RECORD SOUGHT BY THE ASSESSEE FROM THE OFFICIAL RECORD KEEPERS OF THE DEPARTMENT WHO WERE HAVING CUSTODY OF THE RECORD . THUS, NEITHER THE ORDERS OF THE AUTHORITIES BELOW HAD MENTIONED ABOUT THE PRIOR APPROVAL U/S 151 HAVING BEEN OBTAINED OR NOT BEFORE REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 NOR THE ASSESSEE COULD OBTAIN THE SAID INFORMATION UNDER RTI ACT ,2005 AND IT IS QUITE STRANGE THAT THE ASSESSEE IS MAKING ALLEGATIONS AGAINST THE RE VENUE WITHOUT ANY EVIDENCE ON RECORD . IT IS NOT DISCLOSED BY THE ASSESSEE FROM WHERE THE ASSESSEE GOT THE INFORMATION AS TO THE NON OBTAINING OF THE REQUISITE PRIOR PERMISSION U/S 151 BY THE AO FROM THE RELEVANT AUTHORITY. THE ASSESSEE IS ALLEGING THAT RE VENUE HAS NOT OBTAINED THE NECESSARY REQUISITE PERMISSIONS U/S 151 AND ONUS IS ON THE ASSESSEE TO BRING SOME I.T.A. NO.3029/MUM/2016 13 EVIDENCE TO JUSTIFY ITS ALLEGATIONS . THE ASSESSEE IS ALSO CONTEMPLATING AT THIS STAGE THAT ITS DONATIONS WERE CAPITAL RECEIPT AND HENCE COULD NO T BE BROUGHT TO TAX . THESE CONTENTIONS ARE RAISED FOR THE FIRST TIME BEFORE THE TRIBU NAL. THE DETAILS OF THE SAID DONATION AS TO ITS NATURE IS NOT EMANATING FROM THE RECORDS. THE ASSESSEE HAS TO BRING O N RECORD SUFFICIENT EVIDENCES TO PROVE THAT THESE RECE IPTS ARE CAPITAL DONATIONS AND THAT THE SAME IS NOT CHARGEABLE TO TAX WITHIN THE PROVISIONS OF THE 1961 ACT . THE ASSESSEE IS NOT REGISTERED U/S 12A. THE ONUS IS ON THE ASSESSEE TO PROVE ITS CONTENTIONS . ADDITIONAL GROUNDS OF APPEAL ARE RAISED BEFORE THE TR IBUNAL FOR THE FIRST TIME WHICH WERE NOT RAISED BEFORE THE LOWER AUTHORITIES BUT SINCE THESE GROUNDS GOES TO THE ROOT OF THE MATTER TO DECIDE THE CONTROVERSY BETWEEN THE RIVAL PARTIES, THE SAME WERE ADMITTED AS THEY HAVE ARISEN IN RESPECT OF SUBJECT MATTER OF THE TAX PROCEEDINGS . THUS KEEPING IN VIEW TOTALITY OF THE MATTER AND IN THE INTEREST OF JUSTICE, THIS MATTER IS REQUIRED TO BE SET ASIDE A ND RESTORED TO THE FILE OF LEARNED CIT - A FOR REDETERMINATION OF ALL THE ISSUES AFRESH ON MERITS INCLUDING ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL AND ALSO EVIDENCES /EXPLANATIONS SUBMITTED/TO BE SUBMITTED BY THE ASSESSEE WHICH SHALL BE ADMITTED BY LEARNED CIT(A) IN THE INTEREST OF JU S TICE . THUS THE ENTIRE MATTER /ISSUES IN THIS AP PEAL ARE RESTORED TO BE FILE OF LD. CIT - A FOR FRESH ADJUDICATION ON MERITS IN ACCORDANCE WITH LAW WHEREIN ALL THE CONTENTIONS ARE KEPT OPEN AND ASSESSEE WILL DISCHARGE ITS ONUS BEFORE THE LEARNED CIT - A AND THE MATTER WILL BE DECIDED BY LD. CIT - A ON MERITS IN ACCORDANCE WITH LAW AFTER PROVIDING PROPER AN D ADEQUATE OPPORTUNITY OF BEING HEARD IN ACCORDANCE WITH LAW KEEPING IN VIEW PRINCIPAL OF NATURAL JUSTICE . NEEDLESS TO SAY THAT LEARNED CIT(A) HAS POWERS CO - TERMINUS WITH THE POWERS OF THE AO. WE ORDER ACCOR DINGLY. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 9 .04.2018 1 9 .04.2018 S D / - S D / - (MAHAVIR SINGH ) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 1 9 .04.2018 I.T.A. NO.3029/MUM/2016 14 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI