East Point Education Society, New Delhi V. ADIT(E), New Delhi

ITA 3367/DEL/2011

• Counselvise Citation: 336720114 RSA 2011
• Duration Of Justice: 2 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 29-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Keywords: Reopening of assessment; Depreciation; Principle of natural justice; Maximum Marginal Rate; Additional evidence; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C NEW DELHI BEFORE SHRI R.P.TOLANI, JM AND SHRI J.SUDHAKAR REDDY, AM ITA NO: 3367/DEL/2011 AY : - 2007-08 EAST POINT EDUCATION SOCIETY VS. ADIT (E) FC 26, VASUNDHARA ENCLAVE TRUST CIRC LE II NEW DELHI AAYAKAR BHAWAN, DT.CENTRE PAN: AAATE 2296 E LAXMI NAGAR NEW DELHI 92 (APPELLANT) (RES PONDENT) APPELLANT BY : SHRI PIYUSH KAUSHIK, ADV. RESPONDENT BY: SHRI SAMEER SHARMA, SR.D.R. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XXI, N EW DELHI DATED 28.4.2011 PERTAINING TO THE ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN UPHOLDING THE ASSESSMENT MADE BY AO WHICH WAS BAD I N LAW AND VOID AB INTIO. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT (A) HAS ERRED IN UPHOLDING ASSESSING OFFICER'S ACT IN REOPE NING APPELLANTS ASSESSMENT FOR THE YEAR UNDER CONSIDERATION DESPITE THE FACT THAT AO DID NOT HAVE ANY REASON TO BELIEVE THAT APPELLANTS INCOME FOR THE YEAR UNDER C ONSIDERATION HAD ESCAPED ASSESSMENT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT (A) HAS ERRED IN UPHOLDING THE AO'S ACT OF REOPENING THE ASSESSMENT U/S 147 WHEN AO'S REASON PAGE 2 OF 6 TO BELIEVE THAT APPELLANT INCOME HAS ESCAPED ASSESS MENT WERE EXTRANEOUS TO THE FACTS ON RECORD AND HAD NO LIVE LINK WITH THE BELIE VE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) ERRED IN UPHOLDING ADDITIONS MADE IN ASSESSMENT DESPITE THE FACT THAT NO ADDITION OF A SINGLE RUPEE WAS MADE ON THE BASIS OF REASONS RECORDED FOR REOPE NING ASSESSMENT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) ERRED IN UPHOLDING ENTIRE DISALLOWANCE OF RS 10,06,8961- OUT OF APPELL ANTS GENUINE EXPENDITURE ON ADHOC BASIS IN REASSESSMENT PROCEEDINGS. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) ERRED IN GIVING A FINDING THAT THE APPELLANT DID NOT ATTEND PROCEEDIN G BEFORE DGIT(E) U/S 10(23C) OF THE I.T. ACT WHEN THAT FINDING WAS NOT RELEVANT FOR DEICING THE APPEAL BEFORE HIM NEITHER HIS FINDING WAS BASED ON ANY MATERIAL. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) ERRED IN UPHOLDING THE REOPENING ON THE PLEA WHICH WAS NEVER RAISED BY THE APPELLANT. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) ERRED IN NOT ADMITTING ADDITIONAL GROUND RAISED BY THE APPELLANT . 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) ERRED IN REJECTING ADDITIONAL EVIDENCE SUBMITTED BY THE APPELLANT. 10. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN UPHOLDING AO'S ACT OF DENYING BENEFIT OF SECTION 11 & 12 OF THE I.T. ACT TO THE APPELLANT. 11. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN UPHOLDING THE AO'S ACT OF HOLDING THAT APPELLANT HA S VIOLATED PROVISION OF SECTION 13(1)(C) OF THE ACT WHEN NO ACTUAL PAYMENT OF INTER EST WAS MADE BY THE APPELLANT TO ITS MEMBER. 12. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN UPHOLDING AO'S ACT OF DISALLOWING DEPRECIATION CLAI M OF RS 1,69,087/- AS APPEARING IN SOCIETY ACCOUNT ON ASSETS USED FOR THE PURPOSES OF RUNNING THE SCHOOL OF THE SOCIETY. PAGE 3 OF 6 13. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN UPHOLDING AO'S ACT OF DISALLOWING ENTIRE EXPENDITUR E OF SOCIETY AMOUNTING TO RS 8,37,809/- INCURRED IN ATTAINING ITS OBJECTIVES. 14 ON THE FACTS AND CIRCUMSTANCES OF THE CIT (A) HA S ERRED IN UPHOLDING THE AO'S ACT OF CHARGING TAX ON APPELLANTS INCOME AT MAXIMUM MARGINAL RATE. 15. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN PUNISHING APPELLANT FOR THE MISCONDUCT OF ONE OF TH E MEMBER OF THE APPELLANT SOCIETY. 16. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN UPHOLDING AO'S ACT OF LEVYING INTEREST U/S 2348 ON THE APPELLANT. 17. ON THE FACTS AND CIRCUMSTANCES OF THE CASE CIT (A) HAS ERRED IN UPHOLDING THE ORDER OF THE AO WITHOUT CONSIDERING EVIDENCE ON RECORD AND MERITS OF THE CASE. 18. ON THE FACTS AND CIRCUMSTANCES OF THE CASE T HE ORDER OF LEARNED CIT(A) WAS ERRONEOUS AS HE FAILED TO CONSIDER ANY SUBMISSI ON OR CASE LAW CITED BY THE APPELLANT. 19. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ENTIRE APPELLANT ORDER WAS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 20. APPELLANT CRAVES FOR GRANT OF PERMISSION TO A DD, ALTER OR WITHDRAW ANY GROUND OF APPEAL AT OR ANY TIME BEFORE THE HEARING. 2. WE HAVE HEARD MR.PIYUSH KAUSHIK, THE LD.COUNSEL FOR THE ASSESSEE AND MR.SAMEER SHARMA, THE LD.SR.D.R. ON BEHALF OF THE R EVENUE. 3. WE FIRST ADJUDICATE THE ISSUE OF REOPENING. THE REASONS FOR REOPENING ARE AS FOLLOWS. EAST POINT EDUCATION SOCIETY : ASSESSMENT YEAR 2007- 08: PAGE 4 OF 6 A RETURN HAS BEEN FILED DECLARING NIL INCOME. SCR UTINY OF THE RETURN REVEALS THAT THE AUDITOR HAS PREPARED THE AUDIT REPORT ON THE BA SIS OF THE TEXT CHECK OF VOUCHERS. THE AUDITOR IN HIS REPORT HAS STATED THA T ONE PARTNER HAS TAKEN CONSTRUCTION LOAN AND HAS ALSO CONSTRUCTED A BUILDI NG. LOAN AS WELL AS BUILDING HAS NOT BEEN CONSIDERED IN THE BALANCE SHEET, WHICH CLEARLY SHOWS THAT THE APPLICATION OF FUNDS IS NOT VERIFIABLE. THE ASSESS EE HAS FAILED TO PRODUCE THE BOOKS OF ACCOUNTS AND VOUCHERS BEFORE DGIT(E) DURING THE PROCEEDINGS U/S 10(23C). IN THIS CASE, THE AUDITOR HAS NOT CERTIFI ED IN HIS AUDIT REPORT U/S 10BB THAT HE HAD VERIFIED ALL THE VOUCHERS. I HAVE REAS ONS TO BELIEVE THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE HAS NOT DECLARED TRUE INCOME, SO FAR AS THE APPLICATION OF TRUST FUND IS NOT VERIFIA BLE. ISSUE NOTICE U/S 148. SD/- (VS KAPOOR) DDIT(E), TC II, N.DELHI DT. 26.3.20 09 3.1. THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR TH E ASSESSMENT YEAR 2006- 07, WHILE CONSIDERING THE ISSUE OF REOPENING, HAS HELD THAT THE REOPENING IS BAD IN LAW. AT PARA 30 TO 33 PAGES 14 AND 15, IT IS HE LD AS FOLLOWS. 30. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. IT IS UNDISPUTED THAT THE ORIGINAL ASSESSME NT WAS COMPLETED U/S 143(1) OF THE ACT. THE REVENUE PLEADED THAT IN THIS CASE T HE ASSESSING OFFICER POSSESSED WIDE POWERS OF REOPENING POWERS AND THE A UDITORS DISCLOSURE WHICH IS AS UNDER AMOUNTED TO INFORMATION: 'ONE MEMBER OF THE SOCIETY, HAS TAKEN LOAN FOR CON STRUCTION OF BUILDING AND BUILDING WAS PARTLY CONSTRUCTED. THE L OAN WAS TAKEN WITHOUT PERMISSION OF SOCIETY. THE EXECUTIVE COMMITTEE OF T HE SOCIETY HAS DECIDED NOT TO ACCOUNT FOR ANY BOOKS THIS LOAN , ACCOUNT AND CONST RUCTION OF BUILDING FROM THIS LOAN.' PAGE 5 OF 6 31. ACCORDING TO THE REVENUE, THIS INFORMATION CO NSTITUTED SUFFICIENT REASONS FOR THE ASSESSING OFFICER TO ISSUE NOTICE U/S 148. ASSESSEE CONTENDS THAT THE ASSESSING OFFICER'S POWER TO REOPEN THE ASSESSMENT, EVEN IN THE CASE OF SECTION 143(1) IS SUBJECT TO CONDITIONS WHICH HAVE BEEN ENU NCIATED' BY THE VARIOUS HIGH COURTS INCLUDING JURISDICTIONAL HIGH COURT IN THE C ASE OF RANBAXY LABORATORIES LTD. VS. CIT (SUPRA), WHEREIN IT HAS BEEN HELD IF T HE REASONS FOR INITIATION OF PROCEEDINGS CEASE TO SURVIVE, ASSESSING OFFICER REA SSESSMENT IS BAD IN LAW. THE POINT FOR CONSIDERATION BEFORE US IS WHETHER THE AS SESSING OFFICER HAD SUFFICIENT REASONS TO REOPEN PROCEEDINGS FOR ASSESSMENT YEAR 2 006-07. THE REASONS RECORDED FOR BOTH THE YEAR~ I.E. ASSESSMENT YEARS 2 006-07 AND 07-08 ARE MECHANICALLY IDENTICAL. THE PROCEEDINGS U/S 10(23C) WERE UNDISPUTEDLY TAKEN UP ONLY IN ASSESSMENT YEAR 2007-08 AND THE FACTUM OF A LOAN DISPUTED CONVERSION OF DONATION OF ONE OF THE GOVERNING BODY MEMBERS, M OHINDER SINGH WAS EFFECTED IN THE BOOKS OF ACCOUNT IN ASSESSMENT YEAR 2005-06 AND NOT IN 2006- 07. IN OUR VIEW, THE MERE NOTE ABOUT THE AUDIT BEIN G ON THE BASIS OF TEST CHECK VOUCHER AND AUDITOR'S AUDIT DOES BECOME THE BASIS O F REOPENING OF ASSESSMENT OF 2006-07 AS THE SAME IS THE STANDARD AUDITING PR ACTICE. 32. IN CASE OF SECTION 143(1) ASSESSMENT, THE THEOR Y OF CHANGE OF OPINION MAY NOT BE APPLICABLE BUT THE NEXUS OF REASONS AND APPLICATION OF MIND ARE STILL IMPERATIVE FOR UPHOLDING THE ACTION TO REOPEN THE A SSESSMENT. THERE IS MENTION OF 2 ND REASON IN THE ASSESSMENT ORDER ABOUT ANY MEMBER HA VING TAKEN ANY BUILDING LOAN. IN THE ORDER ONLY EXEMPTION U/S 11 IS DENIED. RESPECTFULLY FOLLOWING HONBLE DELHI HIGH COURT JUDGEMENT IN THE CASE OF RANBAXY LABORATORIES LTD., WE ARE OF THE VIEW THAT AS FAR A S THE AY 2006-07 IS CONCERNED, THE REOPENING OF ASSESSMENT IS INVALID. 33. IN THE IMPUGNED ASSESSMENT YEAR I.E. 2006-07 BOTH THE REASONS DO NOT SHOW ANY APPLICATION OF MIND OR MAKING RECORD OF RE ASONS ON ANY MATERIAL HAVING ANY OBJECTIVE BEARING. PAGE 6 OF 6 3.2. THE LD.COUNSEL FOR THE ASSESSEE HAS ALSO BROUG HT TO OUR NOTICE THE ORDER OF THE B BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE DR. 13.9.2013 IN ITA 968/DEL/2013 FOR THE ASSESSMENT YEAR 2009-10 WHEREI N THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2006-07 WAS FOLLOWED. CONSISTENT WITH THE VIEW TAKEN THEREIN THAT THE REOPENING IN QUESTION IS BAD IN LAW, WE ALLOW THIS GROUND OF THE ASSESSEE. SINCE IT HAS BEEN HELD THAT THE R EOPENING IS BAD IN LAW, WE DO NOT GO INTO THE OTHER ASPECTS. 4. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND JUNE,2014. SD/- SD/- - (R.P. TOLANI) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 02 ND JUNE, 2014 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR