Jat Education Society, Haryana V. DY. CIT, Rohtak

ITA 3769/DEL/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0383 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 24-12-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Assessee Lawyers: K L GUGLANI
• Keywords: Charitable institution; Audit objection; Difference of opinion; Assessment record; Change of opinion; Capital expenditure
• Section: 143(3); 148; 10; 11

Judgement Text

I.T.A. NO.3769 & 3770 /DEL/08 1/15 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 3769 & 3770/DEL/2008 ASSESSMENT YEAR : 2004-05 & 2003-04 JAT EDUCATION SOCIETY, DCIT, C/O C.R. POLYTECHNIC, ROHTAK CIRCLE, ROHTAK. V. ROHTAK. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.L. GUGLANI, ADVOCATE. RESPONDENT BY : SHRI A.K. MONGA, DR. ORDER PER A.K. GARODIA, AM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST THE COMMON ORDER OF LD CIT(A), ROHTAK DATED 126.10.2008 FOR ASSESSMENT YEAR 2003-04 AND 2004-05 . BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMM ON ORDER FOR THE SAKE OF CONVENIENCE. 2. GROUND NO.1 IN BOTH THE YEARS IS GENERAL GROUND WH ICH DO NOT CALL FOR ANY SEPARATE ADJUDICATION. GROUND NO.2, 3 & 6 ARE REGARDING VALIDITY OF RE-ASSESSMENT PROCEEDING AND SINCE, THESE GR OUNDS ARE IDENTICAL IN BOTH THE YEARS, THE SAME ARE REPRODUCED FROM ASSESSMENT YEAR 2003-04 I.E. IN I.T.A. NO.3770/DEL/2008:- . I.T.A. NO.3769 & 3770/DEL/08 2/15 2. ON THE FACTS AND IN LAW, THE LD CIT(A) HAS ERRED I N HOLDING THAT PROCEEDINGS INITIATED U/S 148 DIDI NOT SUFFER FROM CHA NGE OF OPINION AND WERE FULLY VALID AND LEGAL. 3. ON THE FACTS AND IN LAW, THE LD CIT(A) HAS ERRED I N HOLDING THAT RES JUDICATA IS NOT APPLICABLE TO I.T. PROCEEDINGS AN D THE ASSESSING OFFICER COULD IGNORE THE ORDERS FOR EARLIER YE ARS AND COULD REOPEN ASSESSMENT OF SUBSEQUENT ASSESSMENT YEARS ON THE BASIS OF AUDIT OBJECTION. 6. ON FACTS AND IN LAW, THE LD CIT(A) HAS ERRED IN FA ILING TO DECIDE THE GROUND CONCERNING NON SERVICE OF VALID NOTICE U/ S 148 IN ACCORDANCE WITH SECTION 282 OF THE INCOME TAX ACT, 1 961. 3. BRIEF FACTS OF THE CASE ARE THAT RETURNS OF INCOME FOR ASSESSMENT YEAR 2003-04 AND 2004-05 WERE FILED ON 30.3.2005 (J UST AFTER 1 AND HALF MONTHS OF ORDER U/S 143(3) FOR ASSESSMENT YEAR 2002- 03) DECLARING NIL INCOME AFTER CLAIMING EXEMPTION U/S 10 (23C)(IIIAB). THESE WERE ACCEPTED U/S 143(1) (A) AND NO NOTICE U/S 143(2) WAS ISSUED WITHIN THE STIPULATED PERIOD. NOTICES U/S 148 HAVE BEE N ISSUED IN DECEMBER, 2006. DURING THE COURSE OF RE-ASSESSMENT PROC EEDING, THE ASSESSEE CHALLENGED THE REOPENING OF THE PROCEEDING AND REVERSAL OF THE STAND OF THE DEPARTMENT TAKEN IN ASSESSMENT YEAR 200 2-03. THIS WAS THE FIRST OBJECTION OF THE ASSESSEE REGARDING VALIDI TY OF RE- ASSESSMENT PROCEEDING THAT NOTICES U/S 148 WERE NOT SERVED PROPERLY WHICH IN ITSELF MAKES WHOLE PROCEEDINGS ERRONEOUS IN BO TH THE YEARS. THE SECOND OBJECTION OF THE ASSESSEE WAS THAT THE REOPENI NG IN BOTH THE YEARS IS ON THE BASIS OF CHANGE OF OPINION AND HENC E, FOR THIS REASON ALSO, THE REOPENING IS NOT VALID. THE OBJECTION S RAISED BY THE ASSESSEE AGAINST THE VALIDITY OF RE-ASSESSMENT PROCEEDINGS WE RE REJECTED BY THE ASSESSING OFFICER. THE ASSESSEE HAS RAISED GROUND . I.T.A. NO.3769 & 3770/DEL/08 3/15 BEFORE LD CIT(A) ALSO REGARDING VALIDITY OF RE-ASSESSMEN T PROCEEDINGS BUT WITHOUT SUCCESS AND NOW THE ASSESSEE HAS RAISED THESE G ROUNDS BEFORE US ALSO. 4. IN THE COURSE OF HEARING BEFORE US, IT WAS THE SUBMI SSION OF THE LD AR OF THE ASSESSEE THAT NOTICE ISSUED BY THE ASSESSING OF FICER U/S 148 WAS NOT SERVED ON THE ASSESSEE PROPERLY. AT THIS JUNCT URE, IT WAS POINTED OUT BY THE BENCH THAT IT HAS BEEN NOTED BY THE ASSESSING OFFICER IN PARA NO.2(I) OF THE RE-ASSESSMENT ORDER FOR ASSESSMENT YEAR 2003-04 THAT NOTICE ISSUED BY THE ASSESSING OFFICER U/S 14 8 WAS PROPERLY SERVED UPON THE ASSESSEE ON 14.12.2006 AND IN R ESPONSE TO THIS NOTICE, THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFF ICER THAT THE RETURN ALREADY FILED ON 30.3.2005 MAY BE CONSIDE RED IN RESPONSE TO NOTICE U/.S 148 OF THE ACT. IT IS ENQUIRED BY THE BE NCH AS TO WHETHER THIS OBSERVATION OF THE ASSESSING OFFICER IS NOT CORRECT IN THE ASSESSMENT ORDER. IT IS ALSO POINTED OUT BY THE BENCH TH AT IN THE ASSESSMENT ORDER 2004-05 ALSO ON PAGE NO.3 OF THE ASSESSMEN T ORDER, IT HAS BEEN OBSERVED BY THE ASSESSING OFFICER THAT NOTICE U/S 148 WAS ISSUED AND SERVED UPON THE ASSESSEE AND IN RESPONSE, THE ASSESSE E HAS FURNISHED A REPLY ON 1.1.2007 STATING THAT THE RET URN ALREADY FILED ON 30.3.2005 MAY BE TREATED AS A RETURN SUBMITTED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THE QUERY OF THE BENCH WA S AS TO WHETHER THIS OBSERVATIONS OF THE ASSESSING OFFICER IN THE RE-ASSESSME NT ORDER FOR BOTH THE YEARS ARE CORRECT OR NOT AND IF IT IS CO RRECT, THEN HOW IT CAN BE CONTENDED BY THE ASSESSEE THAT THERE WAS NO PROPER SER VICE OF NOTICE ISSUED BY THE ASSESSING OFFICER U/S 148 OF THE ACT. IN REPLY, IT WAS SUBMITTED BY THE LD AR OF THE ASSESSEE THAT AS PER THE ASSESSMENT RECORD, THE SIGNATURE OF THE PERSON REGARDING ACKNOWLEDGEMENT OF THIS NOTICE IN BOTH THE YEARS IS NO T OF ANY AUTHORIZED PERSON AND THEREFORE THE SERVICE OF NOTICE IS NOT PROPER. REGARDING THE ALLEGATION OF CHANGE OF OPINION, SAME ARGUMNTS WERE . I.T.A. NO.3769 & 3770/DEL/08 4/15 REITERATED, WHICH WERE RAISED BEFORE LD CIT(A). RELI ANCE WAS PLACED ON THE FOLLOWING JUDGMENTS:- A) ACIT V. VISION INC. REPORTED IN 130 TTJ 696. B) CIT V. MANI KAKKAR REPORTED IN 18 DTR 145 (DEL.). C) CIT V. RAJESH KUMAR SHARMA REPORTED IN 311 ITR 235 (DEL.). 5. AS AGAINST THIS, LD DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD AND THE JUDGMENTS CITED BY THE LD AR OF THE ASSESSEE. WE FIND THAT THE OBJECTION OF THE ASSESSEE R EGARDING IMPROPER SERVICE OF NOTICE ISSUED BY THE ASSESSING OFFICER U/S 148 IS ON THE BASIS THAT THE SIGNATURE OF THE RECIPIENT OF THE NOTICE IS NOT OF ANY AUTHORIZED PERSON BUT THE FACT AS NOTED BY THE ASSESSING OFFICER IS THAT THE NOTICE WAS DULY RECEIVED BY THE AUTHORIZED PERSON OF THE ASSESSEE BECAUSE SUCH AUTHORIZED PERSON HAS WRITTEN LETTER TO TH E ASSESSING OFFICER IN BOTH THE YEARS ASKING THE ASSESSING OFFICER T O CONSIDER THE RETURN FILED BY THE ASSESSEE ON 30.3.2005 AS A RETURN FU RNISHED IN RESPONSE TO THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 1 48 OF THE ACT. NO DEFECT HAS BEEN POINTED OUT BY THE LD AR OF THE ASSESSEE THIS NOTING OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER FO R BOTH THE YEARS. IT IS NOT THE CASE OF THE LD AR OF THE ASSESSEE THA T SUCH LETTER SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS N OT BY ANY AUTHORIZED PERSON. WHEN AN AUTHORIZED PERSON OF THE ASSESSEE IS SUBMITTING BEFORE THE ASSESSING OFFICER TO TREAT THE RET URN FILED BY THE ASSESSEE ON 30.3.2005 IN BOTH THE YEARS AS A RETURN SUBMIT TED BY THE ASSESSEE IN RESPONSE TO NOTICE ISSUED BY THE ASSESSING OFFICER U/S 148 IN BOTH THE YEARS, THIS ARGUMENT IS NOT ACCEPTABLE THA T THE NOTICE IN QUESTION ISSUED BY THE ASSESSING OFFICER U/S 148 IN BOTH TH E YEARS WAS NOT SERVED UPON THE ASSESSEE. SERVICE OF NOTICE IS NOT D EPENDENT ON . I.T.A. NO.3769 & 3770/DEL/08 5/15 THE SIGNATURE REGARDING ACKNOWLEDGEMENT OF NOTICE WH EN THE NOTICE HAS BEEN IN FACT RECEIVED BY THE AUTHORIZED PERSON OF THE ASSESSEE. WHEN THE RECEIPT OF NOTICE IN QUESTION BY AN AUTHORI ZED PERSON OF THE ASSESSEE IS NOT BEING DISPUTED, THE DISPUTE RAISED BY THE ASSESSEE ON THE BASIS OF SIGNATURE ON ACKNOWLEDGEMENT OF SUCH NOTIC E IS NOT VALID. 7. IN THE LIGHT OF THESE FACTS, NOW WE WOULD DISCUSS AND EXAMINE THE APPLICABILITY OF VARIOUS JUDGMENTS CITED BY THE LD AR OF THE ASSESSEE. THE FIRST JUDGMENT IS THE TRIBUNAL DECISION REND ERED IN THE CASE OF ACIT V. VISION INC. (SUPRA). THIS TRIBUNAL DEC ISION IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DI FFERENT. IN THAT CASE, IT WAS REPORTED BY THE ASSESSING OFFICER IN THE REM AND REPORT THAT THE NOTICE WAS SERVED UPON THE PERSON WHO WAS AVAI LABLE AT THE ADDRESS AND IT IS SPECIFICALLY NOTED BY THE ASSESSING OFFIC ER HIMSELF THAT SHRI MANOJ GUPTA WAS NOT PRESENT SINCE HE WAS OUT OF STATION. IT IS ALSO NOTED BY THE TRIBUNAL THAT THERE IS NO MENTION A BOUT THE OTHER PARTNER MISS SHALU GUPTA BUT THE CLAIM OF THE ASSESSEE IS THAT BOTH PARTNERS WERE OUT OF STATION. IT IS ALSO OBSERVED BY TH E TRIBUNAL THAT IF THE NOTICES WOULD HAVE BEEN SERVED ON THE SECOND PARTN ER, IT IS QUITE NATURAL THAT THE ASSESSING OFFICER COULD HAVE SAID SO IN THE REMAND REPORT INSTEAD OF SAYING THAT THE NOTICE WAS SERVED ON THE PERSON AVAILABLE ON THIS ADDRESS AND SHRI MANOJ GUPTA WAS OUT OF STATION AND HENCE, IT IS APPARENT THAT THE NOTICE WAS NOT SERVED O N ANY PARTNER OF THE ASSESSEE FIRM. IN THAT CASE, THE REVENUE COULD NOT ESTABLISH THAT ANY AUTHORIZED PERSON OF THE ASSESSEE WAS IN FACT IN RECE IPT OF THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 148 WHEREAS IN THE PRESENT CASE, WE HAVE SEEN THAT AN AUTHORIZED PERSON OF THE ASSE SSEE WAS IN FACT IN RECEIPT OF THE NOTICE ISSUED BY THE ASSESSING OFF ICER U/S 148 OF THE ACT IN BOTH THE YEARS IN THE PRESENT CASE AND ON T HE BASIS OF SUCH NOTICE, HE HAS REQUESTED THE ASSESSING OFFICER IN BOTH TH E YEARS TO CONSIDER THE RETURN OF INCOME FILED BY THE ASSESSEE ON 3 0.3.2005 AS RETURN FILED BY THE ASSESSEE IN RESPONSE TO NOTICE U/S 148 OF THE ACT. . I.T.A. NO.3769 & 3770/DEL/08 6/15 BECAUSE OF THIS DIFFERENCE IN FACT, THIS TRIBUNAL DECI SION IS OF NO HELP TO THE ASSESSEE IN THE PRESENT CASE. 8. THE SECOND DECISION CITED BY THE LD AR OF THE ASSESSEE IS THE DECISION OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT V. MANI KAKKAR (SUPRA). IN THAT CASE, IT HAS BEEN NOTICED BY THE HON'BLE HIGH COURT OF DELHI IN PARA NO.3 OF THE JUDGMENT THAT FA CTUAL POSITION IS THAT NO NOTICE WHATSOEVER WAS SERVED ON THE ASSESSEE PRIOR TO T HE REOPENING OF THE ASSESSMENT PROCEEDINGS. THE FACTS IN THE PRESENT CASE ARE DIFFERENT BECAUSE WE HAVE ALREADY NOTED THAT IN THE PRESENT CASE, NOTICE IN QUESTION FOR BOTH THE YEARS WAS DULY RE CEIVED BY THE AUTHORIZED PERSON OF THE ASSESSEE AND ACTION WAS TAKEN BY HIM ON SUCH NOTICES AND THEREFORE, THIS JUDGMENT OF HON'BLE H IGH COURT OF DELHI IS NOT APPLICABLE IN THE PRESENT CASE. 9. THE THIRD DECISION RELIED UPON BY THE LD AR OF TH E ASSESSEE IS ANOTHER JUDGMENT OF HON'BLE DELHI HIGH COURT RENDER ED IN THE CASE OF CIT V. RAJESH KUMAR SHARMA (SUPRA). IN THAT CASE, IT WAS THE CASE OF THE ASSESSEE THAT NO NOTICE WAS ACTUALLY RECEIVED BY THE ASSESSEE. IT WAS NOTED IN THAT CASE THAT WHEN THE NOTICE WAS SENT TH ROUGH NOTICE SERVER, IT WAS RECEIVED BY ONE SHRI LAL MANI.IT WAS TH E SUBMISSION OF THE ASSESSEE THAT SHRI LAL MANI SHUKLA IS AN EMPLOYEE OF THE ASSESSEE BUT NOT SHRI LAL MANI. THE DECISION OF HON'BLE DELH I HIGH COURT IS BASED ON THIS THAT EVEN ASSUMING THAT SHRI LAL MANI IS A N EMPLOYEE OF THE ASSESSEE, IT CANNOT BE HELD THAT RECEIPT OF NOTICE BY SHRI LAL MANI AMOUNTED TO THE SERVICE OF NOTICE ON THE ASSESSEE. IN P ARA NO.12 OF THE SAID JUDGMENT, IT IS OBSERVED BY HON'BLE DELHI HIG H COURT THAT REGARDING THE REQUEST OF THE REVENUE THAT SINCE THE N OTICE WAS NOT RETURNED UN-DELIVERED, IT HAS TO BE PRESUMED THAT IT WAS ACTUALLY SERVED ON THE ASSESSEE AND IT IS OBSERVED BY HON'BLE DELHI HIGH COURT THAT THEIR LORDSHIPS ARE NOT IN A POSITION TO MAKE AN Y SUCH ASSUMPTION BECAUSE OF THE CATEGORICAL STAND OF THE ASSESSEE THAT HE HAD NOT . I.T.A. NO.3769 & 3770/DEL/08 7/15 RECEIVED THE NOTICE. IT IS ALSO OBSERVED BY THE HON'BL E DELHI HIGH COURT IN THAT CASE THAT THE REVENUE HAS NOT BEEN ABLE TO SHO W THAT ENVELOPE CONTAINING NOTICE WAS CORRECTLY ADDRESSED. HENCE, IT IS SEEN THAT THIS WAS NOT A FACT OF THAT CASE THAT THE NOTICE IN QUESTIO N WAS ACTUALLY RECEIVED BY AN AUTHORIZED PERSON OF THE ASSESSEE WHO HAS TAKEN ACTION ALSO ON THE SAID NOTICE AS IN THE PRESENT CASE. HENCE, THIS JUDGMENT IS ALSO OF NO HELP TO THE ASSESSEE IN THE PRESENT CASE. 10. IN VIEW OF OUR ABOVE DISCUSSION, WE HAVE SEEN THAT NONE OF THE JUDGMENTS CITED BY THE LD AR OF THE ASSESSEE IS RENDERIN G ANY HELP TO THE ASSESSEE. WE HAVE ALSO SEEN THAT THE FACTUAL POSITION IS THIS THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 148 IN BOTH THE YEARS WAS ACTUALLY RECEIVED BY AN AUTHORIZED PERSON OF THE ASSESSEE WHO HAD TAKEN ACTION ALSO ON SUCH NOTICE IN BOTH THE YEAR S AND THEREFORE, THIS OBJECTION OF THE ASSESSEE THAT THE REOPENING IS NOT VALID BECAUSE THERE IS NO PROPER SERVICE OF NOTICE IS LIABLE TO BE R EJECTED AND WE REJECT THE SAME. 11. THE SECOND OBJECTION OF THE ASSESSEE REGARDING VALID ITY OF THE RE- ASSESSMENT PROCEEDING IS THAT IT IS NOT VALID BECAUSE IT I S DUE TO CHANGE OF OPINION. REGARDING THIS CLAIM OF CHANGE O F OPINION, IT IS SUBMITTED BEFORE US THAT STATUS OF ASSESSEE SOCIETY IS IN AL L EARLIER YEARS, IT WAS ACCEPTED THAT THE ASSESSEES SOCIETY AND ALL EDUCATIONAL INSTITUTIONS RUN BY IT ARE A SINGLE ENTITY AND EXEMPTI ON WAS ALLOWED U/S 10(23C)(IIIAB) AND FOR ONE YEAR I.E. ASSESSMENT YEAR 20 02-03, THE ASSESSMENT WAS U/S 143(3). HENCE, IN THE PRESENT TWO YEARS, THE STAND OF THE REVENUE TO TREAT THE ASSESSEE SOCIETY SEPARATELY A ND EACH EDUCATIONAL INSTITUTION SEPARATELY IS NOTHING BUT CHAN GE OF OPINION AND THEREFORE, REOPENING IS NOT VALID. 12. REGARDING THIS ASPECT, IT IS NOTED BY THE LD CIT(A ) ON PAGE NO.5 OF THE IMPUGNED COMBINED ORDER FOR BOTH THE YEARS TH AT THE RETURNS OF THE ASSESSEE HAVE BEEN PROCESSED U/S 143(1)(A) OF THE IT ACT UP TO ASSESSMENT YEAR 2001-02 AND HENCE, THE DEPARTMENT DID N OT HAVE THE . I.T.A. NO.3769 & 3770/DEL/08 8/15 OPPORTUNITY TO EXAMINE THE CLAIM OF THE ASSESSEE WHETHE R ITS INCOME WAS EXEMPT AND WHETHER ALL THE CONDITIONS REQUIRED FO R GIVING EXEMPTION WERE FULFILLED. REGARDING ASSESSMENT YEAR 200 2-03, IT IS NOTED BY THE LD CIT(A) ON PAGE NO. 6 OF THE IMPUGNE D ORDER THAT THE ASSESSING OFFICER HAS ALLOWED EXEMPTION TO THE ASSESSEE IN ASSESSMENT YEAR 2002-03 IN THE ASSESSMENT ORDER PASSED BY HI M U/S 143(3). IT IS FURTHER OBSERVED BY THE LD CIT(A) THAT DURING APPEAL PROCEEDINGS, THE ASSESSING OFFICER HAS CONVEYED THAT HE W OULD BE LOOKING INTO THE FACTS OF THE CASE FOR ASSESSMENT YEAR 20 02-03 AND WOULD BE TAKING REMEDIAL ACTION ON THE SAME LINE IN THAT YEAR, IF REQUIRED. IN VIEW OF THESE FACTS, WE ARE NOT SATISFIED THAT THERE IS ANY CHANGE OF OPINION IN THE PRESENT TWO YEARS BECAUSE ADM ITTEDLY, THERE WAS NO SCRUTINY ASSESSMENT TILL ASSESSMENT YEAR 2001-02 AND HENCE, NO OPINION WAS FORMED BY THE ASSESSING OFFICER TILL ASSESSME NT YEAR 2001-02. REGARDING ASSESSMENT YEAR 2002-03, IT IS ALREAD Y REPORTED THAT REMEDIAL ACTION IS BEING TAKEN IN THAT YEAR AND MERELY ON THE BASIS OF WRONG VIEW TAKEN BY THE ASSESSING OFFICER IN ASSES SMENT YEAR 2002-03, IT CANNOT BE HELD THAT THE DEPARTMENT IS PR ECLUDED FROM TAKING A CORRECT VIEW OF MATTER IN SUBSEQUENT YEARS. THEREFORE, ON THIS ASPECT ALSO, THE CLAIM OF THE ASSESSEE IS NOT ACCEPTA BLE THAT REOPENING IS NOT VALID BECAUSE OF CHANGE OF OPINION. HENCE, ALL THESE GROUNDS OF THE ASSESSEE ARE REJECTED IN VIEW OF OUR ABOV E DISCUSSION. 13. THE REMAINING GROUNDS ON MERIT ARE GROUND NO.4 & 5 WHICH ARE INDENTICAL AND HENCE THE SAME ARE REPRODUCED FROM ASSE SSMENT YEAR 2003-04 IN I.T.A. NO.,3770/DEL/2008:- 4. ON THE FACTS AND IN LAW, THE LD CIT(A) HAS ERRED I N COMING TO THE FINDING THAT THE OBSERVATIONS OF AUDIT THAT ASSESSEE WAS NOT ENTITLED TO EXEMPTION U/S 10(23C)(IIIAB) ARE THOSE ON FACTS AND DO NOT DEAL WITH ANY LEGAL ISSUE . . I.T.A. NO.3769 & 3770/DEL/08 9/15 5. ON FACTS AND IN LAW, THE LD CIT(A) HAS ERRED IN CONFIRMING THE CONCLUSION OF THE ASSESSING OFFICER THAT INCOME OF INSTITUTIONS RUN BY THE SOCIETY IS TO BE TAXE D SEPARATELY AND NOT IN THE HANDS OF THE SOCIETY WHICH D OES NOT RECEIVE ANY GOVT. GRANT AND IS NOT ENTITLED TO EXEMPTION U/S 10(23C)(IIIAB) AND HENCE NO DEDUCTION/EXEMPTION IS ALLOWABLE TO THE INSTITUTIONS U /S 10(23C)(VI) AS THESE HAVE NOT BEEN APPROVED BY CCIT. 14. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY TH E ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT NO GRANT IS BEING RECEIVED BY THE ASSESSEE SOCIETY I.E. JAT EDUCATION SOCIETY, ROHTAK AND THE WHOLE AND SUBSTANTIAL GRANT IS RECEIVED BY THE INDIVIDUAL INSTIT UTION AND NOT BY THE SOCIETY ITSELF. IT IS ALSO NOTED THAT THE GRANT RECEIVE D BY THE INDIVIDUAL SCHOOL OR COLLEGE IS ACCOUNTED FOR IN THE INCOME AND EXPENDITURE ACCOUNT OF THAT PARTICULAR SCHOOL OR COLLEGE AND NOT IN THE INCOME AND EXPENDITURE ACCOUNT OF THE SOCIETY. IT IS FURTHER NOT ED THAT THE INCOME OF THE SOCIETY IS FROM MEMBERSHIP FEES AND DONATION ONL Y AND NO GRANT IS RECEIVED BY IT FROM THE GOVT. THEREAFTER, IT IS A GAIN NOTED BY THE ASSESSING OFFICER THAT JAT MHA SR. SECONDARY SCHOOL, JA T EDUCATION SOCIETY AND CRM PUBLIC SCHOOL, ROHTAK ARE THREE INST ITUTIONS (OUT OF TOTAL SEVEN INSTITUTIONS) WHICH ARE NOT GETTING ANY GR ANT FROM THE GOVT. IT IS HELD BY THE ASSESSING OFFICER THAT BECAUSE OF THIS R EASON, THESE THREE INSTITUTIONS ARE NOT COVERED BY THE PROVISIONS OF SECTION 10(23C)(IIIAB) OF THE INCOME TAX ACT, 1961 AS THESE A RE NOT WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVT. IT IS ALSO NOTED BY THE ASSESSING OFFICER THAT THE GROSS RECEIPT OF THESE THREE INSTITUTI ONS EXCEED `. 1 CRORE AND THE SAME IS NOT APPROVED BY THE CCIT AS REQU IRED U/S 10(23C)(VI) OF THE ACT. THE ASSESSING OFFICER HELD THAT THEIR INCOME IS NOT EXEMPT IN THE ABSENCE OF APPROVAL OF CCIT. THE ASSESSING OFFICER . I.T.A. NO.3769 & 3770/DEL/08 10/15 ALSO HELD THAT IT IS CLEAR THAT ONLY A FEW UNITS OF TH E ASSESSEE WERE BEING SUBSTANTIALLY FINANCED BY THE GOVT. AND INCOME OF OTHER UNIT WAS TAXABLE. THE ASSESSING OFFICER HAD NOTED THE GROSS RECEI PT OF THESE THREE INSTITUTIONS AND FURTHER NOTED THAT THE TOTAL I NCOME OF THE SAME IS MORE THAN `.1 CRORE AND SINCE NO GRANT IS RECEIVED BY THESE INSTITUTIONS AND NO AMOUNT IS FINANCED BY THE GOVT., T HESE INSTITUTIONS ARE NOT ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB). I T IS HELD BY THE ASSESSING OFFICER THAT THE ASSESSEES CASE IS NOT COVERED BY T HE PROVISIONS OF SECTION 10(23C)(VI) OF THE ACT AND INCOM E IS LIABLE TO BE TAXED. THE ASSESSING OFFICER ASSESSED THE INCOME OF THESE I NSTITUTIONS AS TAXABLE INCOME OF THE ASSESSEE AND WHILE EXAMINING TH E EXPENSES INCURRED BY THESE THREE INSTITUTIONS, IT IS NOTED BY TH E ASSESSING OFFICER THAT REGARDING JAT EDUCATION SOCIETY, ROHTAK OUT OF TOTAL EXPENSES OF `.11,98,883/-, AN AMOUNT OF `.9.5 LAKHS IS SALARY DIVE RTED TO POLYTECHNIC AND THEREFORE THE NET EXPENSES HAS BEEN CONSIDERED BY H IM AT `.2,93,883/- AND NET SURPLUS WAS ASSESSED AT `.5,15,517/-. REGARDING JAT MHA SR. SECONDARY SCHOOL, ROHTAK DEDUCTION ON A CCOUNT OF EXPENSES AS PER CLAIM OF `.57,31,688/- WAS ALLOWED AND THE NET INCOME ASSESSED AT `.1,93,485/- FOR ASSESSMENT YEAR 2003-04. FOR C RM PUBLIC SCHOOL, ROHTAK, IT IS NOTED BY THE ASSESSING OFFICER TH AT OUT OF TOTAL EXPENSES OF `.52,09,965/-, THE AMOUNT OF `.19,87,949/ - IS ON ACCOUNT OF CAPITAL EXPENDITURE AND HENCE THE SAME IS NOT ALLOWAB LE EXPENDITURE. AFTER EXCLUDING THIS AMOUNT, HE WORKED OUT THE NET S URPLUS OF THIS INSTITUTION AT `.18,58,551/- FOR ASSESSMENT YEAR 2003-0 4. IN THIS MANNER, HE MADE TOTAL ASSESSMENT OF `.25,67,553/- FOR A SSESSMENT YEAR 2003-04. 15. IN ASSESSMENT YEAR 2004-05, HE HAS ASSESSED THE TOTAL IN COME OF THE ASSESSEE AT `.25,88,220/- ON THE BASIS OF GROSS RECEIPT S AND EXPENSES CLAIMED BY THE ASSESSEE. BEING AGGRIEVED, THE A SSESSEE . I.T.A. NO.3769 & 3770/DEL/08 11/15 CARRIED THE MATTER IN APPEAL BEFORE LD CIT (A) FOR BOTH THE YEARS BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL B EFORE US. 16. IT IS SUBMITTED BY THE LD AR OF THE ASSESSEE THAT ADM ITTEDLY, IF THESE THREE INSTITUTIONS ARE TAKEN TOGETHER, ANNUAL R ECEIPT IS MORE THAN `.1 CRORE AND CCIT APPROVAL IS NOT THERE. IT IS ALSO SU BMITTED BY HIM THAT ADMITTEDLY, SECTION 11 IS NOT APPLICABLE IN THE PRESENT TWO YEARS BUT THE CLAIM WAS THAT IF EACH INSTITUTIONS GROSS RECEI PT IS CONSIDERED SEPARATELY, THE SAME IS BELOW `.1 CRORE AND HENCE, THE PROVISIONS OF SECTION 10(23C)((IIIAD) ARE APPLICABLE. IT IS ALSO SUBM ITTED THAT CAPITAL EXPENDITURE CANNOT BE DISALLOWED AND IN SUPPORT OF TH IS, RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT RENDERED IN THE CASE OF PINE GROW CHARITABLE TRUST & OTHERS V,. UNION OF INDIA AND OTHERS AS REPORTED IN 230 CTR 477. 17. AS AGAINST THIS, LD DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE T HROUGH THE MATERIAL AVAILABLE ON RECORD AND THE JUDGMENTS CITED BY THE LD AR OF THE ASSESSEE. REGARDING THIS SUBMISSION OF THE ASSESSEE THAT T HE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB) , WE WOULD LIKE TO REPRODUCE THE PROVISIONS OF SECTION 10(23C)(IIIAB) WHI CH IS AS UNDER:- ANY INCOME RECEIVED BY ANY PERSON ON BEHALF OF - ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTI NG SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT AN D WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVT.; OR 19. FROM THE PROVISIONS OF SECTION 10(23C)(IIIAB) AS RE PRODUCED ABOVE, IT IS SEEN THAT WE HAVE TO EXAMINE THE POSITION ON THE BASIS OF INDIVIDUAL INSTITUTION AND NOT WITH RESPECT TO AN ASSES SEE SOCIETY HAVING SEVERAL EDUCATIONAL INSTITUTIONS BEING RUN BY IT. HENCE, WE DO . I.T.A. NO.3769 & 3770/DEL/08 12/15 NOT FIND ANY MISTAKE IN THE ORDER OF LD CIT(A) OR I N THE ORDER OF THE ASSESSING OFFICER AS PER WHICH THEY PROCEEDED ON THE BASI S OF EACH EDUCATIONAL INSTITUTION SEPARATELY BEING RUN BY THE A SSESSEE SOCIETY. NOW, WE HAVE TO CONSIDER THE PROVISIONS OF SECTION 10(2 3C)(IIIAD) WHICH IS AS UNDER:- ANY INCOME RECEIVED BY ANY PERSON ON BEHALF OF ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTI NG SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCAT IONAL INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECEI PTS AS MAY BE PRESCRIBED 20. REGARDING PRESCRIBED AMOUNT OF ANNUAL RECEIPT, W E FIND THAT AS PER RULE 2BC SUCH PRESCRIBED LIMIT IS `.1 CRORE. NOW, WE FIND THAT THE ASSESSING OFFICER HAS CONSIDERED THE TOTAL RECEIPTS OF THR EE EDUCATIONAL INSTITUTION BEING RUN BY THE ASSESSEE SOCIETY WHEREAS THE CLAIM OF THE ASSESSEE IS THAT THE SAME SHOULD BE CONSIDERED SEPARATELY AN D IF IT IS DONE THEN, THE INCOME OF THESE INSTITUTIONS IS FULLY EX EMPT U/S 10(23C)(IIIAD). HERE, WE ARE IN AGREEMENT WITH LD A R OF THE ASSESSEE THAT WE HAVE TO CONSIDER THE CLAIM OF THE ASSESSEE ON TH E BASIS OF EACH EDUCATIONAL INSTITUTION SEPARATELY. HENCE, FOR THE PU RPOSE OF SECTION 10(23C)(IIIAD), THE ANNUAL GROSS RECEIPTS OF THREE EDU CATIONAL INSTITUTION BEING RUN SEPARATELY BY THE ASSESSEE SOCIETY C ANNOT BE CLUBBED TOGETHER FOR EXAMINING THE FULFILLMENT OF T HE CONDITIONS OF RECEIPT BEING LESS THEN THE PRESCRIBED LIMIT OF ANNUA L GROSS RECEIPTS. IF THE ANNUAL GROSS RECEIPTS OF THESE THREE EDUCATIONAL IN STITUTIONS ARE CONSIDERED SEPARATELY, THE SAME IS BELOW `.1 CRORE IN E ACH YEAR FOR EACH OF THESE EDUCATIONAL INSTITUTIONS. THE SAME IS AS UN DER:- SL. NO. NAME GROSS GROSS RECEIPT RECEIPT 2003-04 2004-05 . I.T.A. NO.3769 & 3770/DEL/08 13/15 --------------------------------------------------- ----------------------------------------------- 1. JAT EDUCATION SOCIETY, ROHTAK 809399 1056800 2. JAT HMAS SR.SECONDARY SCHOOL,ROHTAK. 5925873 540 4275 3. CRM PUBLIC SCHOOL, ROHTAK., 5080287 - 4. JAT HSAS HIGH SCHOOL,ROHTAK. ( 3341210 GRANT FROM GOVT. ( 1627100 -------------- TOTAL 11815559 94,29,385/- 21. REGARDING JAT HSAS HIGH SCHOOL, ROHTAK FOR ASSESSME NT YEAR 2004-05, THE ASSESSING OFFICER HAS HELD THAT NOT WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVT. AS THE GRANT IS JUST 1/3 RD OF THE TOTAL EXPENDITURE APPROXIMATELY. REGARDING THE OTHER THRE E INSTITUTIONS, THERE IS NO GRANT FROM THE GOVT. AND FOR EACH OF THE YEAR, THE ASSESSING OFFICER HAS CONSIDERED THE AGGREGATE GROSS RECEIPTS OF T HESE THREE INSTITUTIONS IN EACH YEAR AND SINCE THE SAME WAS MORE TH AN `.1 CRORE IN EACH YEAR TAKEN THREE INSTITUTIONS TOGETHER, IT WAS H ELD BY THE ASSESSING OFFICER THAT EXEMPTED IS NOT AVAILABLE TO THE ASSESSEE WITH REGARD TO THESE THREE INSTITUTIONS BECAUSE THE ASSESSEE HA S NOT OBTAINED THE STATUTORY APPROVAL OF CCIT AS REQUIRED U/S 10(23C)(VI) OF THE ACT. NOW, THE QUESTION IS AS TO WHETHER THESE INSTI TUTIONS ARE COVERED BY SUB CLAUSE (IIIAD) OF CLAUSE 23C OF SECTION 10. AS PER THE SAME, ANY INCOME RECEIVED BY ANY PERSON ON BEHALF OF ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING WHOLLY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT IF THE AGGREGAT E ANNUAL RECEIPT OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUTION DO NOT E XCEED THE AMOUNT OF ANNUAL RECEIPT AS MAY BE PRESCRIBED IS EXEMPT. THE AMOUNT OF `.1 CRORE HAS BEEN PRESCRIBED AS PER RULE 2(BC). AS PER THE PROVISIONS OF THIS SUB CLAUSE (IIIAD) OF CLAUSE 23C OF SECTION 10, WE ARE OF THE CONSIDERED OPINION THAT THE TERM AGGREGATE ANNUAL R ECEIPTS OF EACH EDUCATIONAL INSTITUTION IS RELEVANT AND IF ANY ASSESSEE I S HAVING MORE THAN ONE EDUCATIONAL INSTITUTION THEN THE AGGREGATE ANNUAL RECEIPT OF . I.T.A. NO.3769 & 3770/DEL/08 14/15 EACH OF SUCH EDUCATIONAL INSTITUTION HAS TO BE CONSIDER ED SEPARATELY BECAUSE THIS SUB CLAUSE (IIIAD) OF CLAUSE 23C OF SECTION 10 DOES NOT SAY THAT IF AN ASSESSEE IS HAVING MORE THAN ONE EDUCATIONAL INSTITUTION THEN THE GROSS ANNUAL RECEIPT OF ALL OF THEM SHOULD B E CONSIDERED TOGETHER. THE TERM AGGREGATE ANNUAL RECEIPTS IN T HIS SUB CLAUSE, IN OUR OPINION, DOES NOT SAY THAT AGGREGATE OF ALL EDUCA TIONAL INSTITUTIONS SHOULD BE CONSIDERED TOGETHER. IN OUR OPINION, THIS T ERM IS USED HERE TO AGGREGATE ANNUAL RECEIPTS OF EACH EDUCATIONAL INST ITUTIONS FROM ALL SOURCES AND ON ALL ACCOUNT AND HENCE, WE FEEL THAT TH E AGGREGATE GROSS RECEIPT OF EACH EDUCATIONAL INSTITUTION HAS TO BE CONSIDERED SEPARATELY AND IF THAT IS DONE, EACH OF THEM IS HAVING ANNUAL GROSS RECEIPTS OF LESS THAN `.1 CRORE, IN EACH OF THE YEAR, WHICH ARE UNDER CONSIDERATION BEFORE US. WE ALSO FIND THAT THE APPLICA BILITY OF SUB CLAUSE (IIIAD) OF SECTION 23C OF SECTION 10 WAS NOT EXA MINED BY THE ASSESSING OFFICER OR BY THE LD CIT(A). IN FACT, THE ASSESSE E HAS CLAIMED EXEMPTION UNDER SUB CLAUSE (IIIAB) OF CLAUSE (23C) OF SECTION 10 AND THE ASSESSEE ALSO DID NOT CLAIM EXEMPTION UNDER SUB CLAUSE (IIIAD) OF CLAUSE (23C) OF SECTION 10. THE ASSESSING OFFICER AND LD CIT(A) HAS CONSIDERED THE APPLICABILITY OF CLAUSE (VI) OF CLAUSE (23C) OF SECTION 10 BUT THEY HAVE ALSO NOT DISCUSSED REGARDING APPLICABILIT Y OF SUB CLAUSE (IIIAD) OF CLAUSE (23C) OF SECTION 10 ALTHOUGH THE ASSE SSING OFFICER HAS WORKED OUT THE GROSS RECEIPTS OF THESE THREE INSTITUTIO NS TAKEN TOGETHER AT ABOVE `.1 CRORE AND HAS HELD THAT THEREFORE, THE ASSESSEE WAS REQUIRED TO OBTAIN THE APPROVAL OF CCIT UNDER SUB CL AUSE (VI) OF CLAUSE (23C) OF SECTION 10 WHICH MEANS THAT HE IS IMPLIEDLY R ULING OUT THE APPLICABILITY OF SUB CLAUSE (IIIAD) OF CLAUSE 23C OF SECTION 10 OF THE ACT. WE HAVE SEEN THAT REGARDING THIS REQUIREMENT OF THIS SU B CLAUSE THAT THE AGGREGATE ANNUAL RECEIPT BELOW `.1 CRORE HAS TO BE SEEN FOR EACH EDUCATIONAL INSTITUTION SEPARATELY AND FOR THAT PURPO SE, THE ANNUAL GROSS RECEIPTS OF ALL THE THREE EDUCATIONAL INSTITUTION S CANNOT BE CONSIDERED COLLECTIVELY TO BE ELIGIBLE FOR EXEMPTION UNDER SUB CLAUSE . I.T.A. NO.3769 & 3770/DEL/08 15/15 (IIIAD) OF CLAUSE (23C) OF SECTION 10. THE ASSESSING OFFI CER HAS NOT RAISED ANY OBJECTION ABOUT ANY OTHER REQUIREMENT I.E . THE EDUCATIONAL INSTITUTION SHOULD BE EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT. HENCE, IN OUR CONSIDERED OPINI ON, THE INCOME OF THESE THREE INSTITUTIONS ARE ALSO EXEMPT U/S SUB CLAUSE(II IAD) OF CLAUSE (23C) OF SECTION 10 BECAUSE AGGREGATE INCOME OF EACH OF THESE INSTITUTIONS IN EACH OF THESE TWO YEARS IS BELOW `. 1 CR ORE. THE REQUIREMENT OF APPROVAL OF CCIT UNDER SUB CLAUSE (VI) OF CLAUSE (23C) OF SECTION 10 IS FOR THOSE WHO ARE NOT COVERED BY SUB CLAUSES (IIIAB) OR (IIIAD) OF CLAUSE (23C) OF SECTION 10. SINCE, THESE TH REE INSTITUTIONS ARE COVERED BY CLAUSE (IIIAD), CLAUSE (VI) IS NOT APPLICAB LE. WE, THEREFORE, HOLD THAT INCOME OF THESE THREE INSTITUTIONS IS ALSO EXE MPT. 22. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. 23. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY O F 11TH FEBRUARY, 2011. SD/- SD/- (I.P. BANSAL) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 11.2.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. (ITAT, NEW DELHI).