ITO (E), Dehradun V. M/s ICFAI University, Dehradun

ITA 3657/DEL/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5117 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 05-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Section: 12AA; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: B, NEW DELHI) BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER AND SH. N. K. BILLAIYA, ACCOUNTANT MEMBER ITA NO:-3657/DEL/2015 ( ASSESSMENT YEAR: 2008-09) INCOME TAX OFFICER (E XEMPTION ) INCOME TAX OFFICE, 13A, SUBHASH ROAD, DEHRADUN VS. ICFAI UNIVERSITY, RAJAWAL ROAD, CENTRAL HOPE TOWN, SELAQUI DEHRADUN APPELLANT RESPONDENT APPELLANT BY : MS. ASHIMA NEB, SR. DR RESPONDENT BY : NONE DATE OF HEARING : 21.05.2019 DATE OF PRONOUNCEMENT : 23.05.2019 ORDER PER: N. K. BILLAIYA, AM THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS], DEHRADUN, DAT ED 13.03.2015 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE GRIEVANCE OF THE REVENUE READ AS UNDER :- 2 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE BY OBSERVING THAT FAILURE TO ADDRESS THE OBJECTIONS OF THE ASSESSEE BY PASSING A SPEAKING ORDER HAS VITIATED THE PROCEE DINGS AND RENDERED IT LIABLE TO BE QUASHED SINCE THE REASONS FOR RE-OPENING THE CASE U/S. 148 WERE BASED ON PROPER REASONING AN D ADEQUATE FACTS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS BY DELETING THE DISALLOWANCE OF RS.718.49 LAKHS BY OBSERVING TH AT THE SPONSOR SOCIETY IS ALSO A SOCIETY REGISTERED U/S.12 AA OF THE I. T. ACT, 1961. DONATIONS BY ONE SOCIETY TO ANOTHER HAV ING SIMILAR OBJECTS ARE CONSIDERED A LEGITIMATE APPLICATION OF INCOME BY A CHARITABLE SOCIETY. EVEN IF WE VIEW THE SPONSOR SOC IETY, ESPECIALLY IN VIEW OF THE FACTS THAT IS HAS AN OBJECTIVE OF IM PARTING HIGHER EDUCATION AND IS CREATING INFRASTRUCTURAL FACILITIE S FOR THE SAME FOR USE OF THE UNIVERSITY. 3. FACTS RELATING TO GROUND NO.1 SHOW THAT THE ASSE SSMENT HAS BEEN REOPENED ON THE INSTRUCTIONS FROM C&AG. C & AG IN T HE COURSE OF AUDIT OF ACCOUNTS HAS OBJECTED TO THE TREATING THE SUM OF RS .71848612/- AS APPLICATION OF INCOME WHICH WAS THE PAYMENT MADE TO THE SPONSOR SOCIETY. THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME. 4. IN ITS REPLY THE ASSESSEE EXPLAINED THAT THE SUM OF RS.71848612/- CAN ONLY BE TREATED AS APPLICATION OF INCOME AND TH E C& AG PROCEEDED ONLY 3 ON PARTIAL INFORMATION. THE ASSESSEE EXPLAINED THE ENTIRE FACTUAL POSITION LEADING TO THE IMPUGNED PAYMENT MADE TO THE SPONSOR SOCIETY. 5. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENT ION OF THE ASSESSEE AND PROCEEDED TO COMPLETE THE REASSESSMENT PROCEEDI NGS. 6. BEFORE CIT(A) THE ASSESSEE STRONGLY CONTENDED TH AT THE ASSESSING OFFICER HAS NOT DISPOSE OF THE OBJECTION TO THE NOT ICE U/S. 148 BY PASSING A SPEAKING ORDER BUT INSTEAD STRAIGHTWAY PROCEEDED TO FINALISE THE ASSESSMENT. STRONG RELIANCE WAS PLACED ON THE JUDG MENT OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHARFTS INDIA LIMITED 125 TAXMAN 963. 7. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS THE CIT(A) OBSERVED AS UNDER :- A PERUSAL OF THE ASSESSMENT ORDER DOES NOT REVEAL THAT THE A.O. ISSUED ANY SUCH SPEAKING ORDER BUT SIMPLY PROCEEDED TO REI TERATE THE REASONS FOR INITIATING THE PROCEEDINGS U/S. 148 AND MADE THIS T HE BASIS OF THE ADDITION AGAINST THE ASSESSEE SOCIETY. 8. AFTER OBSERVING AS MENTIONED ABOVE THE CIT(A) HE LD AS UNDER :- 19. IN VIEW OF THE AFORESAID DECISIONS OF THE HONB LE COURT, AND THE SELF EVIDENT FACT OF THE A. O. NOT PASSING ANY SPEAKING ORDER IN DISPOSING THE ASSESSEES OBJECTIONS AGAINST THE NOTICE U/S 148, I T IS HELD THAT THE 4 SUBSEQUENT ASSESSMENT ORDER IS BAD IN LAW AND DESER VING OF BEING QUASHED. 9. BEFORE US THE DR STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER AND PLACED RELIANCE ON THE DECISION OF THE HONBLE HIGH COURT OF MADRAS IN WRIT PETITION NO.1019 OF 2017. IT IS THE SAY OF THE DR THAT THE SLP FILED BY THE ASSESSEE IN THIS CASE HAS BEEN DIS MISSED BY THE HONBLE SUPREME COURT. THE DR SUPPLIED THE COPIES OF THE O RDER. 10. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE THAT THE ASSESSING OFFICER HAS NOT DISMISSED THE OBJECTIONS OF THE ASSESSSEE BY ANY SPEAKING ORDER. THIS IS CLEARLY IN VIOLATION OF THE RATIO LAID DOWN BY THE HONBLE SUP REME COURT IN THE CASE OF M/S. GKN DRIVESHARFTS (SUPRA) WHEREIN THE HONBLE S UPREME COURT CLEARLY LAID DOWN THAT WHERE THE NOTICE U/S. 148 WAS ISSUED AND THE ASSESSEE FILED OBJECTIONS. THE ASSESSING OFFICER WAS BOUND TO DIS POSE OF THE SAME BY A SPEAKING ORDER. 11. THIS WAS SUBSEQUENTLY FOLLOWED BY THE HONBLE G UJARAT HIGH COURT IN THE CASE OF GARDEN FINANCE LIMITED REPORTED IN 268 ITR 48 WHERE BY A MAJORITY OPINION IT WAS LAID DOWN BY THE HONBLE HI GH COURT : WHAT THE SUPREME COURT HAS NOW DONE IN THE GKN DRI VESHAFTS (INDIA) LTD.S CASE [2003] 259 ITR 19 IS NOT TO WHITTLE DOW N THE PRINCIPLE LAID DOWN BY THE CONSTITUTION BENCH OF THE APEX COURT IN CALCUTTA DI SCOUNT CO. LTD. CASE [1961] 41 5 ITR 191 BUT TO REQUIRE THE ASSESSEE FIRST TO LODGE PRELIMINARY OBJECTION BEFORE THE ASSESSING OFFICER WHO IS BOUND TO DECIDE THE PRELIM INARY OBJECTIONS TO ISSUANCE OF THE REASSESSMENT NOTICE BY PASSING A SPEAKING ORDER AND, THEREFORE, IF SUCH ORDER ON THE PRELIMINARY OBJECTIONS IS STILL AGAINST THE ASSESSEE, THE ASSESSEE WILL GET AN OPPORTUNITY TO CHALLENGE THE SAME BY FILING A WRIT PETITION SO THAT HE DOES NOT HAVE TO WAIT TILL COMPLETION OF THE REASSESSMENT PR OCEEDINGS WHICH WOULD HAVE ENTAILED THE LIABILITY TO PAY TAX AND INTEREST ON R EASSESSMENT AND ALSO TO GO THROUGH THE GAMUT OF APPEAL, THE SECOND APPEAL BEFO RE INCOME-TAX APPELLATE TRIBUNAL AND THEN REFERENCE/TAX APPEAL TO THE HIGH COURT. VIEWED IN THIS LIGHT, IT APPEARS TO ME THAT THE RI GOUR OF AVAILING OF THE ALTERNATIVE REMEDY BEFORE THE ASSESSING OFFICER FOR OBJECTING TO THE REASSESSMENT NOTICE UNDER SECTION 148 HAS BEEN CONSIDERABLY SOFT ENED BY THE APEX COURT IN GKN DRIVESHAFTS (INDIA) LTD.S CASE [2003] 259 ITR 19 IN THE YEAR 2003. IN MY VIEW, THEREFORE, THE GKN DRIVESHARFTS (INDIA) LTD. S CASE [2003] 259 ITR 19 DOES NOT RUN COUNTER TO THE CALCUTTA DISCOUNT CO. LTD. C ASE [1961] 41 ITR 191 (SC) BUT IT MERELY PROVIDES FOR CHALLENGE TO THE REASSESSMEN T NOTICE IN TWO STAGES, THAT IS, (I) RAISING PRELIMINARY OBJECTIONS BEFORE THE ASSES SING OFFICER AND IN CASE OF FAILURE BEFORE THE ASSESSING OFFICER; (II) CHALLENGING THE SPEAKING ORDER OF THE ASSESSIN G OFFICER UNDER SECTION 148 OF THE ACT. 12. IN A SUBSEQUENT JUDGMENT THE HONBLE GUJARAT HI GH COURT IN THE CASE OF ARVIND MILLS LIMITED REPORTED IN 270 TIR 469 FOL LOWING THE AFORESAID DECISION CONCLUDED AS UNDER :- THAT ONCE THE SUPREME COURT STATED THAT THE AO WAS BOUND TO DISPOSE OF THE OBJECTIONS BY PASSING A SPEAKING ORDER, IT WAS NOT OPEN TO THE AUTHORITIES TO CONTEND THAT IN THE ABSENCE OF ANY PROVISION IN THE ACT, THE AUTHORITIES COULD NOT 6 HAVE PASSED A SPEAKING ORDER. HON'BLE DELHI HIGH CO URT IN THE CASE OF DELHI TOURISM & TRANSPORT DEVELOPMENT CORPORATION LTD. VS . ACIT [2004] 141 TAXMAN 361 (DELHI), WHILE RELYING UPON THE AFORESAID DECISION OF THE HON'BLE APEX COURT IN GKN DRIVESHARFTS (INDIA) LTD.(SUPRA) DIRECTED TO FOLLOW THE PROCEDURE LAID DOWN BY THE HON'BLE APEX COURT AND PASS A SPEAKING ORDER BEFORE PASSING THE ASSESSMENT ORDER. 13. AFTER THE AFORESAID DECISIONS BY THE HONBLE SU PREME COURT AND THE HONBLE GUJARAT HIGH COURT ARE READ ALOGNWITH DECIS ION OF THE HONBLE MADRAS HIGH COURT RELIED UPON BY THE DR, WE FIND TH AT THE DECISION OF THE HONBLE MADRAS HIGH COURT IS BY A SINGLE JUDGE AND THAT TO IN WRIT PETITION WHEREAS THE DECISION OF HONBLE SUPREME COURT AND T HE HONBLE GUJARAT HIGH COURT ARE IN CIVIL APPEALS BY DIVISION BENCH. MOREOVER THERE BEING NO DIRECT JUDGMENT OF THE JURISDICTIONAL HIGH COURT OF DELHI WE ARE INCLINED TO FOLLOW THE DECISION OF HONBLE SUPREME COURT AND HO NBLE GUJARAT HIGH COURT AS DISCUSSED HERE IN ABOVE. 14. WE FIND THAT THE CIT(A) HAS RIGHTLY CONSIDERED THE DECISION OF HONBLE SUPREME COURT AND THE HONBLE HIGH COURT GUJARAT, T HEREFORE, NO INTERFERENCE IS CALLED FOR. GROUND NO.1 IS ACCORDI NGLY DISMISSED. 15. COMING TO GROUND NO.2, FACTS ON RECORD SHOW THA T THE FACTS OF THE CASE ARE THAT THE UTTARANCHAL LEGISLATURE PASSED AN ACT CALLED THE ICFAI UNIVERSITY ACT, 2003, PERMITTING ICFAI TO SET UP A UNIVERSITY IN UTTARANCHAL. AS PER THIS ACT ALL THE MOVABLE, AND IMMOVABLE PROP ERTIES ACQUIRED, CREATED, ARRANGED OR BUILT BY THE UNIVERSITY FOR TH E PURPOSE OF THE 7 UNIVERSITY IN THE STATE OF UTTARANCHAL WOULD VEST I N THE UNIVERSITY AND WOULD NOT BE USED FOR ANY OTHER PURPOSE OTHER THAN THE PURPOSE FOR WHICH IT WAS ACQUIRED. DUE TO THE DIFFICULTY IN RAISING F INANCE BY A UNIVERSITY WHICH WAS A NEW STARTUP VENTURE, THE ICFAI SOCIETY TOOK UP THE TASK OF RAISING FINANCE FOR CREATING THE INFRASTRUCTURE OF THE UNIVERSITY AND PROVIDING ASSISTANCE TO IT TILL SUCH TIME AS IT BEC AME SELF SUFFICIENT. ON THE BASIS OF ITS RESOLUTION, IT ACQUIRED LAND FROM THE GOVT, OF UTTARANCHAL OUT OF ITS OWN RESOURCES. IT ALSO APPROACHED A COMMERCIAL BANK FOR LOAN FOR CONSTRUCTING THE INFRASTRUCTURE OF THE UNIVERSITY. THE BANK SANCTIONED THE LOAN SUBJECT TO ICFAI ENTERING INTO A MOU WITH THE UNIVERSITY. ACCORDINGLY, AN MOU WAS CONCLUDED THAT COMMITTED ICFAI TO RAISIN G FUNDS ON BEHALF OF THE UNIVERSITY AND MAKING PAYMENT OF ALL' LOANS ETC . UNTIL SUCH TIME AS THE LOANS AND OTHER FUNDS PROVIDED BY ICFAI COULD BE RE PAID BY THE UNIVERSITY OUT OF ITS OWN RESOURCES. ACCORDINGLY, BOTH THE PAR TIES AGREED THAT UPON CLEARING OF SUCH LIABILITY, THE TITLE TO THE PROPER TY AND INFRASTRUCTURE OF THE UNIVERSITY WOULD PASS TO THE UNIVERSITY. HOWEVER, T HE DE FACTO OWNERSHIP OF THE PROPERTY WOULD REMAIN WITH THE UNIVERSITY. I N ACCORDANCE WITH THE SAME, THE SOCIETY HAS TAKEN LOAN FROM ORIENTAL BANK OF COMMERCE AND ALSO CONTRIBUTED FROM ITS OWN RESOURCES FOR SETTING UP T HE UNIVERSITY. THE PROPERTY ACQUIRED AND THE INFRASTRUCTURE CREATED IS BEING USED BY THE UNIVERSITY, ENTIRELY FOR ITS OBJECTS AS LAID DOWN I N THE ICFAI UNIVERSITY ACT OF 2003. ON ACCOUNT OF THIS PROPERTY, THE ICFAI SOC IETY HAS PAID BACK TO THE BANK AN INSTALLMENT OF RS.201,57,750/- AND THIS EXPENDITURE HAS BEEN REIMBURSED TO THE SOCIETY BY THE UNIVERSITY OUT OF ITS DEVELOPMENT FUND. FURTHERMORE, AS THE SOCIETY HAD INVESTED A SUM OF R S.5.17 CRORES OUT OF ITS OWN FUNDS IN THE SETTING UP OF THE UNIVERSITY UPTO 31.3.2008, THIS ENTIRE 8 AMOUNT HAS BEEN REFUNDED TO THE SOCIETY BY THE UNIV ERSITY DURING THE COURSE OF THE YEAR. THE UNIVERSITY HAD HELD THAT TH IS REPAYMENT TO THE SOCIETY IS SOLELY ON ACCOUNT OF THE PROPERTIES WHIC H ARE IN ITS DE FACTO CONTROL/OWNERSHIP AND DE JURE TITLE OF WHICH WOULD PASS TO THE SOCIETY AS PER THE MOU, ON PAYMENT OF THE REMAINING OUTSTANDIN G LIABILITY. 16. THE BONE OF CONTENTION IS THAT THE CLAIM OF THE PAYMENT OF RS.71848612/- TRANSFERRED TO THE ICFAI UNIVERSITY, HYDERABAD BY THE ASSESSEE AND CLAIMED AS APPLICATION OF INCOME. THE ASSESSING OFFICER WAS OF THE CONSIDERED VIEW THAT THIS REPAYMENT CANNOT B E CONSIDERED AS APPLICATION OF INCOME SINCE THE COST OF INFRASTRUCT URE IS NOT REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE NOR THE LIABILITIES A RE SHOWN IN THE BALANCE SHEET. 17. IF THE OBJECTIONS OF THE ASSESSEE ARE CONSIDERE D IN THE LIGHT OF THE FACTUAL MATRIX IN THEIR TRUE PERSPECTIVE THERE REMA INS NO DOUBT THAT THE PAYMENT BEING MADE TO THE SPONSOR SOCIETY IS ON ACC OUNT OF THE MOU ENTERED INTO BETWEEN THE SPONSOR SOCIETY AND THE UN IVERSITY WITH REGARD TO THE CREATION OF INFRASTRUCTURE FOR THE UNIVERSITY A ND ITS ULTIMATE TRANSFER TO THE UNIVERSITY AFTER CLEARING OF ALL LIABILITIES IN THIS REGARD. THEREFORE, IT CAN BE SAFELY CONCLUDED THAT THE ASSESSEE IS RIGHT WHEN IT SAYS THAT THAT ALL THE MONEY EXPENDITURE IS APPLIED FOR CREATION THAT INFR ASTRUCTURE FACILITIES OF THE UNIVERSITY. 9 18. MOREOVER THE SPONSOR SOCIETY IS ALSO REGISTERED U/S. 12AA OF THE ACT WHICH MEANS THAT CONTRIBUTIONS BY THE ONE SOCIETY T O ANOTHER HAVING SIMILAR OBJECTS HAVE TO BE CONSIDERED A LEGITIMATE APPLICATION OF INCOME BY A CHARITABLE SOCIETY. 19. CONSIDERING THE TOTALITY OF THE FACTS FROM ALL POSSIBLE ANGLES, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE CIT(A). GROUND NO. 2 IS DISMISSED. 20. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.05.2019. SD/- SD/- (BHAVNESH SAINI) (N.K.BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23.05.2019 NEHA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 10 DATE OF DICTATION 21.05.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 21.05.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 2 3 . 0 5 . 2 0 1 9 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER