ADIT (E) II(I), MUMBAI V. M/s. INDIA ITME SOCIETY, MUMBAI

ITA 7189/MUM/2005

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56142 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 13-10-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 08-12-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VIPUL JOSHI
• Keywords: Business income; Charitable institution; Period of limitation; Tangible material; Time period of passing order; Condonation of delay; Reason to believe
• Section: 147; 148; 11; 143(3); 142(1)

Judgement Text

1 INDIA ITME SOCIETY IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI H H H H BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI J SUDHAKAR J SUDHAKAR J SUDHAKAR J SUDHAKAR REDDY, REDDY, REDDY, REDDY, AM & AM & AM & AM & SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO ITA NO ITA NO ITA NO. 7189/MUM/2005 (ASST.YEAR 1997 . 7189/MUM/2005 (ASST.YEAR 1997 . 7189/MUM/2005 (ASST.YEAR 1997 . 7189/MUM/2005 (ASST.YEAR 1997- -- -98) 98) 98) 98) ITA NO. 4168/MUM/2006 ( ITA NO. 4168/MUM/2006 ( ITA NO. 4168/MUM/2006 ( ITA NO. 4168/MUM/2006 (ASST YEAR ASST YEAR ASST YEAR ASST YEAR 2001 2001 2001 2001- -- -02 0202 02) )) ) THE ASST DIRECTOR OF INCOME TAX (E) II (I) MUMBAI VS INDIA ITME SOCIETY 76 MITTAL TOWER B WING, 7THY FLOOR 210 NARIMAN POINT - MUMBAI 21 (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) & && & CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION NO NO NO NOS SS S. 146 & 147/MUM/2011 . 146 & 147/MUM/2011 . 146 & 147/MUM/2011 . 146 & 147/MUM/2011 INDIA ITME SOCIETY 76 MITTAL TOWER B WING, 7THY FLOOR 210 NARIMAN POINT - MUMBAI 21 VS THE ASST DIRECTOR OF INCOME TAX (E) II (I) - MUMBAI (CROSS OBJECTOR) (CROSS OBJECTOR) (CROSS OBJECTOR) (CROSS OBJECTOR) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO. AAATI 2855B AAATI 2855B AAATI 2855B AAATI 2855B ASSESSEE BY SH VIPUL JOSHI REVENUE BY SH GOLI SRINIWAS RAO DT.OF HEARING 13 TH OCT 2011 DT OF PRONOUNCEMENT 12 TH DEC 2011 PER PER PER PER VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, , , , JM JMJM JM THESE APPEALS BY THE REVENUE AND THE CROSS OBJECT IONS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS DATED 28.9.2005 AND 26.4.2006 OF THE CIT(A) FOR THE AYS 1997-98 AND 2001-02 RESPECTIVELY. 2. SINCE THE ASSESSEE HAS RAISED A LEGAL GROUND IN THE CROSS OBJECTION REGARDING THE VALIDITY OF THE REOPENING OF THE ASSE SSMENT; THEREFORE, WE FIRST TAKE UP THE CROSS OBJECTION FILED BY THE ASSESSEE. 2 INDIA ITME SOCIETY CROSS OBJECTIONS NOS 146 & 147/MUM/2011 CROSS OBJECTIONS NOS 146 & 147/MUM/2011 CROSS OBJECTIONS NOS 146 & 147/MUM/2011 CROSS OBJECTIONS NOS 146 & 147/MUM/2011 3 THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE G ROUNDS: THE LD. COMMISSIONER OF INCOME TAX (APPEALS), ! X XXIII, MUMBAI [LD. CIT (A)], ERRED IN NOT ADJUDICATING THE GROUND RAISED BY THE APPELLANT CHALLENGING THE ACTION OF THE ASSESSING OFFICER [A .O.] IN REASSESSING THE INCOME OF THE APPELLANT BY INVOKING THE PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT, 1961 (THE ACT). THE LD. CIT (A) ERRED IN NOT ADJUDICATING THE ALTER NATIVE GROUND RAISED BY THE APPELLANT BEFORE HER WITH RESPECT TO ALLOWABILI TY OF EXEMPTION UNDER SECTION 11 OF THE ACT. 4 THERE IS A DELAY OF 1747 DAYS IN FILING THESE CRO SS OBJECTIONS FOR BOTH THESE ASSESSMENT YEARS. THE ASSESSEE HAS FILED AFFIDAVIT FOR EXPLAINING THE DELAY IN FILING THE CROSS OBJECTIONS. 5 THE ASSESSEE HAS PLEADED THAT IT IS NOT CONVERSAN T WITH THE TECHNICALITIES OF THE APPEAL PROCEEDINGS; THEREFORE, THE ASSESSEE WAS UNDER BONAFIDE IMPRESSION THAT IT WOULD BE ABLE TO TAKE UP THE ISS UES IN THE APPEALS FILED BY THE DEPARTMENT. IT IS ONLY WHEN DISCUSSING THE CASE WI TH THE COUNSEL, THE ASSESSEE REALISED THAT THE ASSESSEE SHOULD HAVE FILED CROSS OBJECTION WITHIN 30 DAYS OF RECEIPT OF THE NOTICE OF THE DEPARTMENT APPEAL. A FTER COMING TO KNOW ABOUT THE CORRECT LEGAL POSITION THESE STEPS WERE TAKEN TO FI LE THE CROSS OBJECTION ON 24.8.2011. IT HAS BEEN PLEADED THAT THE DELAY IS D UE TO BONAFIDE, THOUGH ERRONEOUS, IMPRESSION ABOUT THE LEGAL REMEDY AND TH EREFORE, DUE TO THE CIRCUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE. THE DELAY IS NOT DUE TO ANY DELIBERATE NEGLIGENCE OR CARELESSNESS ON THE PART O F THE ASSESSEE. 5.1 ON THE OTHER HAND, THE LD DR HAS VEHEMENTLY OPP OSED THE CONDONATION AND SUBMITTED THAT THERE IS AN INORDINATE DELAY IN FILING OF THESE CROSS OBJECTIONS AND THE ASSESSEE CANNOT TAKE AN UNDUE ADVANTAGE OF PROCESS OF LAW. HE HAS FORCEFULLY SUBMITTED THAT THE ASSESSEE HAS NOT EXPL AINED THE SUFFICIENT CAUSE FOR 3 INDIA ITME SOCIETY NOT FILING THE CROSS OBJECTIONS WITHIN THE PERIOD O F LIMITATION. HE HAS RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF VARELI TEXTILE INDUSTRIES V. COMMISSIONER OF INCOME-TAX REPORTED IN 284 ITR 238. 5.2 ON REBUTTAL, THE LD AR OF THE ASSESSEE HAS SUBM ITTED THAT THE ASSESSEE CAN RAISE THIS ISSUE EVEN UNDER RULE 27 OF THE ITAT RULES AS THE ASSESSEE RAISED THIS ISSUE BEFORE THE CIT(A), THOUGH THE SAME WAS N OT ADJUDICATED. 6 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD ON CONDO NATION OF DELAY IN FILING THE CROSS OBJECTIONS. THE MAIN GROUND OF DELAY AS EX PLAINED BY THE ASSESSEE IN THE AFFIDAVIT IS THAT THE ASSESSEE WAS NOT CONVERSANT W ITH TECHNICALITIES OF APPEALS AND UNDER BONAFIDE IMPRESSION THAT IT WOULD BE ABLE TO TAKE UP THE ISSUES IN THE APPEALS OF THE DEPARTMENT AND ONLY WHILE DISCUSSING THE CASE WITH THE COUNSEL, IT WAS REALIZED THAT THE ASSESSEE SHOULD HAVE FILED C ROSS OBJECTION. THE ASSESSEE STATED THAT THE NOTICE OF THE APPEAL OF THE DEPARTM ENT WAS RECEIVED ON 12.9.2006. THE ASSESSEE HAS BEEN APPEARING SINCE BE GINNING IN THE APPEALS OF THE DEPARTMENT. THE POWER OF ATTORNEY HAS BEEN GIVE N IN FAVOUR OF THE COUNSEL OF THE ASSESSEE ON 12.11.2008 SINCE THEN; THE LD CO UNSEL OF THE ASSESSEE HAS BEEN REPRESENTING THE CASE OF THE ASSESSEE IN THESE APPEALS FILED BY THE REVENUE BEFORE THE TRIBUNAL. 7 THERE IS A DELAY OF ABOUT 5 YEARS IN FILING THE C ROSS OBJECTIONS BY THE ASSESSEE. IT IS SETTLED PROPOSITION OF LAW THAT TH E COURTS SHOULD TAKE A LIBERAL APPROACH WHILE DECIDING THE CONDONATION OF DELAY BU T AT THE SAME TIME, THE REQUIREMENT OF SUFFICIENT CAUSE FOR DELAY CANNOT BE IGNORED AND IT BECOMES MORE SIGNIFICANT WHEN THE DELAY IS INORDINATE AND ABNORM AL. IT IS NOT THE CASE OF THE ASSESSEE THAT DUE TO SOME WRONG ADVISE BY THE COUNS EL, THE ASSESSEE DID NOT PREFER CROSS OBJECTION BUT THE AVERMENTS IN THE AFF IDAVIT STATE THAT THE SOCIETY IS 4 INDIA ITME SOCIETY NOT WELL VERSED WITH THE TECHNICALITIES OF THE APPE AL PROCEEDINGS BEFORE THE TRIBUNAL AND THEREFORE, UNDER BONAFIDE IMPRESSION, IT WOULD BE ABLE TO TAKE UP THIS ISSUES IN THE APPEALS OF THE DEPARTMENT. THIS STATEMENT IN THE AFFIDAVIT IS SELF-CONTRADICTORY BECAUSE ON THE ONE HAND THE ASSE SSEE SOCIETY CLAIMS TO BE NOT WELL VERSED WITH THE TECHNICALITIES OF THE APPEAL P ROCEEDINGS AND ON THE OTHER HAND IT WAS UNDER BONAFIDE IMPRESSION IT WOULD TA KE UP THESE TWO ISSUES IN THE APPEALS OF THE DEPARTMENT. IN OUR VIEW, RAISING TH E ISSUES, WHICH ARE DECIDED AGAINST THE ASSESSEE IN THE APPEALS OF THE DEPARTME NT UNDER ITAT RULES IS MORE TECHNICAL THEN FILING OF APPEAL OR CROSS OBJECTION AGAINST THE IMPUGNED ORDER OF THE CIT(A), IF THE ASSESSEE IS AGGRIEVED. WHEN THE ASSESSEE ENGAGED THE COUNSEL WAY BACK ON 12.8.2008 THEN, IN THE ABSENCE OF ANY DETAIL, AS ON WHICH DATE DURING THE DISCUSSION WITH THE COUNSEL, THE AS SESSEE REALIZED THAT THE CROSS OBJECTION SHOULD HAVE BEEN FILED WITHIN 30 DAYS. 7.1 IN THE ORDINARY COURSE, THE CASE IS DISCUSSED WHEN THE BRIEF IS HANDED OVER TO THE COUNSEL AND A LETTER OF AUTHORITY/VAKAL ATHNNAMA IS SIGNED BY THE ASSESSEE. THE ASSESSEE HAS NOT UTTERED A SINGLE WOR D REGARDING THE DELAY FROM 12.11.2008 WHEN THE COUNSEL WAS ENGAGED TILL 24.8.2 011 WHEN THE CROSS OBJECTIONS WERE FILED. THEREFORE, THE EXPLANATION N ARRATED IN THE AFFIDAVIT IS NOT SUPPORTED BY THE FACT ON RECORD. THOUGH, A LENIENT VIEW HAS TO BE TAKEN WHILE INTERPRETING SUFFICIENT CAUSE OF DELAY; HOWEVER, TH IS DOES NOT MEAN THAT THE LITIGANT HAS A FREE LICENSE TO APPROACH THE COURT O N ITS WILL. 8 IN THE ABSENCE OF ANY SATISFACTORY OR COGENT EXPL ANATION, THE PLEA OF CONDONATION OF DELAY DESERVES DISMISSAL. THE ASSESS EE HAS NOT FILED ANY MATERIAL OR EVIDENCE IN SUPPORT OF ITS EXPLANATION, WHICH OT HERWISE APPEARS TO BE VAGUE AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THERE IS NO PARTICULAR DATE GIVEN ON WHICH THE ASSESSEE DISCUSSED THE MATT ER WITH THE COUNSEL. 5 INDIA ITME SOCIETY 9 THE PROVISIONS OF LIMITATION HAVE TO BE GIVEN EFF ECT WITH ALL ITS VIGOUR. NEVERTHELESS, MAY HARSHLY AFFECT THE PARTICULAR PAR TY. 9.1 THE HONBLE SUPREME COURT IN THE CASE OF LACHHM AN DAS ARORA V GANESHI LAL (1999) 8 SCC 532 HAS OBSERVED AS UNDER: THERE IS NO GAIN SAYING THAT THE LAW OF LIMITATION MAY HARSHLY EFFECT A PARTICULAR PARTY BUT IT HAS TO BE APPLIED WITH ALL ITS VIGOUR WHEN THE STATUTE SO PRESCRIBED. THE COURTS CANNOT EXTENT THE PERIOD OF LIMITATION ON EQUITABLE GROUNDS. 9.2 UNDER SUB SEC. 5 OF SEC 253, THE TRIBUNAL MAY P ERMIT FILING OF CROSS OBJECTION AFTER THE EXPIRY OF PRESCRIBED PERIOD, IF IT IS SATISFIED THAT THERE WAS SUFFICIENT CAUSE FOR NOT PRESENTING IT WITHIN THAT PERIOD. THUS, THIS PROVISION OF ALLOWING OF FILING OF CROSS OBJECTION AFTER THE PER IOD OF LIMITATION IS DISCRETIONARY IN NATURE AND THE PARTY CANNOT SEEK CONDONATION OF DELAY UNDER THIS PROVISION AS A MATTER OF RIGHT; BUT HAS TO SATISFY THE TRIBUNAL BY EXPLAINING THE SUFFICIENT CAUSE FOR THE DELAY. THE AVERMENTS IN THE AFFIDAVI T AND SUBMISSIONS OF THE LD AR OF THE ASSESSEE DO NOT MAKE OUT A CASE OF SUFFICIEN T CAUSE FOR SUCH AN INORDINATE DELAY IN FILING THE CROSS OBJECTION. THE ASSESSEE HAS FAILED TO BRING OUT THE SUFFICIENT CAUSE BY FURNISHING THE NECESSARY DETAIL S AND EXPLANATION AS TO HOW THE ASSESSEE WAS PREVENTED FROM FILING THE CROSS OB JECTION EVEN AFTER 12.11.2008 WHEN THE ASSESSEE ENGAGED THE COUNSEL TO DEFEND THE PRESENT CASE. 9.3 FROM THE FACTS AND CIRCUMSTANCES OF THE CASE AN D FROM THE CONDUCT OF THE ASSESSEE IT APPEARS THAT THE ASSESSEE TOOK THE PROV ISIONS OF CONDONATION OF DELAY IN A CASUAL MANNER AND GRANTED. IT IS WELL SETTLED THAT THE COURT HELPS VIGILANT AND NOT INDOLENT. HENCE, WE ARE OF T HE VIEW THAT THE ASSESSEE HAS NOT DISCLOSED A REASONABLE/GOOD MUCH LESS A SUFFICI ENT CAUSE FOR NOT FILLING THE CROSS OBJECTIONS WITHIN THE PERIOD OF LIMITATION AN D THE DELAY OF ABOUT 5 YEARS. 6 INDIA ITME SOCIETY 10 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DECLINE TO CONDONE THE DELAY OF 1747 DAYS IN FILING THE CROSS OBJECTIONS. ACCORDINGLY, THE PRAYER FOR CONDONATION OF DELAY IS REJECTED. CONSEQ UENTLY, THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED AS TIME BARRED. 11 THE ASSESSEE HAS ALSO RAISED AN ALTERNATIVE PLEA THAT THIS ISSUE CAN BE RAISED UNDER RULE 27 OF THE ITAT RULES, ,, , EVEN WITHOUT FILING THE CROSS OBJECTION OR APPEAL AGAINST THE ORDER OF THE CIT(A). 12 THE LD AR OF THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF B R BAMASI V. CIT REPORTED IN 83 ITR 223. THE LD AR OF THE ASSESSEE THEN SUBMITTED T HAT THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING OF THE ASSESSM ENT DOES NOT SHOW ANY COGENT REASON TO BELIEVE THAT INCOME ASSESSABLE TO TAX HA S ESCAPED ASSESSMENT. HE HAS REFERRED THE REASONS RECORDED AT PAGE 79 AND 80 OF THE PAPER BOOK. THUS, THE LD AR OF THE ASSESSEE HAS RELIED UPON THE DECIS ION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRASHANT JOSHI VS ITO REPORTED IN 324 ITR 154 AND SUBMITTED THAT EVEN IF THERE IS NO ASSESSME NT U/S 143(3), THE REOPENING U/S 147 IS BAD, IF THERE ARE NO PROPER REASON TO BE LIEVE RECORDED BY THE ASSESSING OFFICER. THE NOTICES ISSUED U/S 148 IS BAD IN THE A BSENCE OF ANY MATERIAL OR INFORMATION ON THE BASIS OF WHICH THE ASSESSING OFF ICER COULD BELIEVE THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. I N SUPPORT OF THE CONTENTION, THE LD AR HAS RELIED UPON THE DECISION OF THE HONB LE MADRAS HIGH COURT IN THE CASE OF BAPALAL & CO VS JCIT REPORTED IN 289 ITR 37 (MAD) AND THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS MANOHARLAL GUPTA REPORTED IN 213 CTR 193. HE HAS ALSO REFERRED VARIOUS DECISIONS OF THIS TRIBUNAL ON THIS POINT. 7 INDIA ITME SOCIETY 12.1 THE LD DR, ON THE OTHER HAND HAS SUBMITTED THA T THERE WAS NO ASSESSMENT FOR THE AY 2001-02 BECAUSE THE ASSESSMENT FRAMED U/ S 143 (3) WAS ANNULLED BY THE CIT(A) ON THE GROUND THAT NOTICES ISSUED U/S 14 3(2) AND 142(1) ARE BEYOND THE LIMITATION PERIOD. THUS, THE RETURN BECOMES ONL Y PROCESSED U/S 143(1)(A). HE HAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER RE LIED UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RA TNA BHAI N K DUBA REPORTED IN 2003 J 101 80 HC. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFF ICER. 13 WE HAVE CONSIDERED THE RIVAL CONTENTION AND CARE FULLY PERUSED THE RELEVANT MATERIAL ON RECORD AS WELL AS THE DECISION S RELIED UPON BY BOTH THE PARTIES. THE HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF B R BAMASI (SUPRA) HAS HELD AS UNDER BUT EVEN IF THE ASSESSEE HAD NOT MADE SUCH A STATE MENT, THE ABOVE JUDGMENT SHOWS THAT THE ASSESSEE WOULD B E ENTITLED TO RAISE A NEW GROUND, PROVIDED IT IS A G ROUND OF LAW AND DOES NOT NECESSITATE ANY OTHER EVIDENCE TO BE RECORDED, THE NATURE OF WHICH WOULD NOT ONLY BE A D EFENCE TO THE APPEAL ITSELF, BUT MAY ALSO AFFECT THE VALID ITY OF THE ENTIRE ASSESSMENT PROCEEDINGS. IF THE GROUND SUCCE EDS, THE ONLY RESULT WOULD BE THAT THE APPEAL WOULD FAIL . THE ACCEPTANCE OF THE GROUND WOULD SHOW THAT THE ENTIRE ASSESSMENT PROCEEDINGS WERE INVALID, BUT YET THE TR IBUNAL WHICH HEARS THAT APPEAL WOULD HAVE NO POWER TO DIST URB OR TO SET ASIDE THE ORDER IN FAVOUR OF THE APPELLANT A GAINST WHICH THE APPEAL HAS BEEN FILED. THE GROUND WOULD S ERVE ONLY AS A WEAPON OF DEFENCE AGAINST THE APPEAL. IF THE RESPONDENT HAS NOT HIMSELF TAKEN ANY PROCEEDINGS TO CHALLENGE THE ORDER IN APPEAL, THE TRIBUNAL CANNOT SET ASIDE THE ORDER APPEALED AGAINST. THAT ORDER WOULD STAND AND WOULD HAVE FULL EFFECT IN SO FAR AS IT IS AGAIN ST THE RESPONDENT. THE TRIBUNAL REFUSED TO ALLOW THE ASSES SEE TO TAKE UP THIS GROUND UNDER AN INCORRECT IMPRESSION OF LAW THAT IF THE POINT WAS ALLOWED TO BE URGED AND SUCC EEDED, THE TRIBUNAL WOULD HAVE NOT ONLY TO DISMISS THE AP PEAL, BUT ALSO TO SET ASIDE THE ENTIRE ASSESSMENT. THE PO INT WOULD HAVE SERVED AS A WEAPON OF DEFENCE AGAINST TH E APPEAL, BUT IT COULD NOT BE MADE INTO A WEAPON OF ATTACK AGAINST THE ORDER IN SO FAR AS IT WAS AGAINST THE ASSESSEE. 13.1 THUS IT IS CLEAR FROM THE OBSERVATION OF THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF B R BAMASI (SUPRA) THAT THE EF FECT OF THE PLEA RAISED BY THE 8 INDIA ITME SOCIETY ASSESSEE AGAINST THE VALIDITY OF THE REOPENING WOUL D BE ONLY TO THE EXTENT OF DEFENCE AGAINST THE APPEAL AND IF ASSESSEE SUCCEEDS IN THE SAID GROUND THEN, THE APPEAL OF THE REVENUE WOULD FAIL. 14 FOR THE AY 2001-02, THE ASSESSING OFFICER HAS TA KEN RECOURSE TO THE PROVISIONS OF SEC. 147 AS THE ONLY REMEDY AVAILABLE AFTER THE ASSESSMENT FRAMED U/S 143(3) WAS ANNULLED BY THE CIT(A) ON THE ISSUE OF LIMITATION OF NOTICES ISSUED U/S 143(2) AND 142(1). CONSEQUENTLY, THERE WAS NO A SSESSMENT AND THE RETURN BECOMES ONLY PROCESSED U/S 143(1)(A). 14.1 IT IS PERTINENT TO NOTE THAT THE NOTICE ISSUED U/S 148 WAS ISSUED WITHIN FOUR YEARS FROM END OF THE RELEVANT ASSESSMENT YEAR; THE REFORE, THE CASE DOES NOT FALL UNDER THE FIRST PROVISO TO SEC. 147 OF THE I T ACT. 15 SIMILARLY, FOR THE AY 1997-98, THE RETURN WAS PR OCESSED U/S 143(1) AND THERE WAS NO ASSESSMENT. THE ASSESSING OFFICER EXER CISED THE POWER U/S 147 ON THE REASON THAT IN THE COURSE OF ASSESSMENT PROCEED INGS FOR THEAY2001-02, THE INCOME ARISING OUT OF EXHIBITION BROUGHT TO TAX AS BUSINESS INCOME. 16 IT IS RELEVANT TO NOTE HERE THAT THE NOTICE OF R EOPENING FOR THE AY 1997-98 WAS AFTER THE FRAMING OF THE ASSESSMENT U/S 143(3) FOR THE AY 2001-01 AND BEFORE THE SAME WAS ANNULLED BY THE CIT(A) ON THE G ROUND OF LIMITATION. THEREFORE, AT THE TIME OF ISSUING THE NOTICE U/S 14 8 FOR THE AY 1997-98, THE ASSESSMENT FRAMED U/S 143(3) FOR THE AY 2001-02 WAS VERY MUCH IN EXISTENCE. THE CASE FOR THE AY 1997-98 ALSO DOES NOT FALL UNDE R THE FIRST PROVISO TO SEC. 147 BECAUSE THERE WAS NO ASSESSMENT; BUT ONLY THE RETUR N WAS PROCESSED U/S 143(1). THEREFORE, THE PREREQUISITE CONDITION FOR EXERCISE OF POWERS U/S 147 FOR BOTH THE AYS IS EXISTENCE OF REASONS TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. THE SUFFICIENCY OF REASONING IS NOT RE QUIRED TO BE TESTED AS CONCLUSIVELY PROVED AT THE STAGE OF REOPENING U/S 1 48. EVEN OTHERWISE, THE CASE 9 INDIA ITME SOCIETY OF REOPENING FOR THESE TWO YEARS FALLS UNDER EXPLAN ATION 2(B) OF SEC. 147 WHICH CREATES A DEEMING FICTION. ACCORDINGLY, THE DETAIL ED ENQUIRY MADE AND INCOME FROM EXHIBITION WAS ASSESSED TO TAX IN THE ASSESSME NT PROCEEDINGS U/S 143(3) FOR THE AY 2001-02 AND SUBSEQUENTLY ANNULLED BY THE CIT(A), IS A SUFFICIENT TANGIBLE MATERIAL FOR FORMING BELIEF THAT THE INCOM E ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. WHEN THE ISSUE OF ASSESSMENT OF EXHIBITION INCOME WAS ALREADY IN THE KNOWLEDGE OF THE ASSESSEE, AS IT WAS DISCUSSED AND ADJUDICATED IN THE ASSESSMENT PROCEEDINGS U/S 143(3) FOR THE AY 20 01-02, THEN, IT CANNOT BE SAID THAT THE ASSESSING OFFICER, AT THE TIME OF REO PENING, HAS RELIED UPON SOMETHING, WHICH WAS NOT IN THE KNOWLEDGE OF THE AS SESSEE OR KNEW TO THE ASSESSEE. WHEN THE ASSESSEE WAS VERY MUCH AWARE AN D CONTESTED THE ASSESSMENT OF EXHIBITION INCOME IN THE ASSESSMENT P ROCEEDINGS U/S 143(3) FOR THE AY 2001-02 THEN, THE REOPENING OF THE ASSESSMEN T IS FOUNDED ON THE MATERIAL AND INFORMATION, WHICH WAS PART OF THE ASS ESSMENT AND KNOWN TO THE ASSESSEE. 16.1 IN THE CASE RELIED UPON BY THE LD AR OF THE AS SESSEE THE ONLY REQUIREMENT IS THAT THERE SHOULD BE A TANGIBLE MATERIAL ON THE BASIS OF WHICH THE ASSESSING OFFICER CAN FORM A BELIEF THAT THE INCOME ASSESSABL E TO TAX HAS ESCAPED ASSESSMENT. 16.2 THE HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF MULTISCREEN MEDIA PRIVATE LIMITED V. UNION OF INDIA REPORTED IN 324 I TR 54 HAS HELD AS UNDER: WHAT IS MATERIAL IS THAT ON THE BASIS OF A DETAILE D INQUIRY WHICH TOOK PLACE DURING THE COURSE OF THE ASSESSMEN T YEAR 2005-06, THE CLAIM OF THE ASSESSEE OF DEDUCTION OF THE ENTIRE EXPENSES WAS NOT ACCEPTED AND DISALLOWANCE W AS MADE TO THE EXTENT OF EXPENDITURE INCURRED OVER AND ABOVE 18.75 PER CENT. THE ASSESSING OFFICER DID SO ON THE BASIS OF FRESH MATERIAL WHICH CAME BEFORE HIM IN V IEW OF THE NOTICE DATED NOVEMBER 26, 2008 IN PURSUANCE OF WHICH THE ASSESSEE FILED A DETAILED REPRESENTATION ELUCIDATING THE RELEVANT PARTICULARS OF THE BUSINE SS OF THE 10 INDIA ITME SOCIETY ASSESSEE AND THE REASONS FOR THE EXPENDITURE. WHETH ER THE ASSESSING OFFICER WAS JUSTIFIED IN THE DECISION WHI CH HE TOOK FOR THE ASSESSMENT YEAR 2005-06 IS AGAIN NOT A MATTER TO BE CONSIDERED AT THIS STAGE OF THE PROCEE DINGS. THE POINT IS THAT ON THE BASIS OF THE ADDITIONAL MA TERIAL WHICH WAS AVAILABLE ON RECORD, THE ASSESSING OFFICE R ISSUED A NOTICE FOR REOPENING THE ASSESSMENT FOR THE ASSES SMENT YEAR 2004-05. IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER DID HAVE TANGIBLE MATERIAL TO REOPEN THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND TO FORM A REASON TO BELI EVE THAT INCOME HAD ESCAPED ASSESSMENT. CLAUSE (C)(IV) OF EXPLANATION 2 TO SECTION 147 CREATES A DEEMING FIC TION WHERE THOUGH THE ASSESSMENT HAS BEEN MADE, INCOME CHARGEABLE TO TAX IS UNDER ASSESSED. IN SUCH A CASE , LAW DEEMS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. FOR THESE REASONS, WE ARE OF THE VIEW T HAT RECOURSE TO THE PROVISIONS OF SECTION 147 CANNOT BE FAULTED. 16.3 THE HONBLE HIGH COURT HAS GIVEN THE ABOVE FIN DINGS AFTER CONSIDERING VARIOUS DECISIONS OF THE HONBLE SUPREME COURT AND EARLIER DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT ITSELF. IT IS O BSERVED BY THE HIGH COURT THAT THE ASSESSING OFFICER WHILE SEEKING TO REOPEN AN ASSESS MENT U/S 147 IS NOT PRECLUDED FROM RELYING ON AN ORDER OF ASSESSMENT IN THE SUBSEQUENT YEAR WHERE ADDITIONAL MATERIAL HAS EMERGED BEFORE THE ASSESSIN G OFFICER TO LEAD TO THE FORMATION OF A BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. WHILE OBSERVING SO, THE HONBLE JURISDICTIONAL HIGH COURT HAS CONSIDERED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SRI KRISHNA PVT LTD VS ITO REPORTED IN 221 ITR 538 AND NOTED THAT THE HONBLE SUPREME COURT HAS HELD THAT AT THAT STAGE IT WAS ONLY A REOPENING OF ASSESSME NT AND WHILE IT WAS TRUE THAT THE ASSESSING OFFICER COULD HAVE INVESTIGATED THE TRUTH OF THE ASSERTION OF THE ASSESSEE, WHICH HE ACTUALLY DID IN SUBSEQUENT ASSES SMENT YEAR, THE QUESTION AS TO WHETHER THE LOAN ALLEGED TO HAVE BEEN TAKEN BY THE ASSESSEE WAS TRUE OR FALSE, WAS A MATERIAL FACT AND NOT A MERE INFERENCE TO BE DRAWN FROM THE GIVEN FACTS. 11 INDIA ITME SOCIETY 16.4 THE HONBLE JURISDICTIONAL HIGH COURT ALSO DIS CUSSED THE CASE OF SUPREME COURT IN THE CASE OF ESS ESS KAY ENGINEERING CO PVT LTD REPORTED IN 247 ITR 818 AND NOTED THAT THE SUPREME COURT HAS HELD THAT IT W OULD BE OPEN TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT, BASED O N THE FINDING OF FACT MADE ON THE BASIS OF FRESH MATERIAL GATHERED IN THE COUR SE OF ASSESSMENT PROCEEDINGS FOR A SUBSEQUENT YEAR. 16.5 THE HONBLE HIGH COURT HAS ALSO DISCUSSED A DE CISION IN THE CASE OF ANUSANDHAN INVESTMENTS LTD VS DCIT REPORTED IN 287 ITR 482 AND NOTED THAT IN THE SAID DECISION A DIVISION BENCH HAS HELD THAT IT IS A WELL ESTABLISHED POSITION OF LAW THAT AN ASSESSMENT CAN BE REOPENED ON THE BASIS OF INFORMATION CONTAINED IN AN ASSESSMENT OF A SUBSEQUENT YEAR. THE HONBLE JUR ISDICTIONAL HIGH COURT, WHILE DECIDING THE ISSUE ALSO CONSIDERED THE DECISION OF THE SUPREME COURT IN THE CASE OF KELVINATOR REPORTED IN 320 ITR 561. 17 IN VIEW OF THE ABOVE DISCUSSION AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE INF ORMATION AND THE MATERIAL GATHERED DURING THE COURSE OF ASSESSMENT PROCEEDING S AND ASSESSMENT OF EXHIBITION INCOME FOR THE AY 2001-01 U/S 143(3) CON STITUTE A TANGIBLE MATERIAL FOR COMING TO THE CONCLUSION THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. HENCE, THE REOPENING FOR THE AY 2001-0 2 AND 1997-98 IS VALID AND AS PER LAW. 18 NOW, WE WILL TAKE UP THE APPEALS OF THE REVENUE IN ITA NOS. 7189/MUM/2005 (ASST.YEAR 1997-98) AND ITA NO. 4168/ MUM/2006 (ASST YEAR 2001-02) 19. THE GROUNDS RAISED IN THE APPEAL FOR ASSESSMENT YEAR 2001-02 ARE COMMON TO THE GROUNDS IN THE APPEAL FOR ASSESSMENT YEAR 1997-98; THEREFORE, 12 INDIA ITME SOCIETY FOR THE SAKE OF CONVENIENCE, BOTH THESE APPEALS ARE DISPOSED OFF BY THIS COMPOSITE ORDER. 20 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THE APPEAL FOR ASSESSMENT YEAR 1997-98: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , AQD IN LAW, THE CIT(A), MUMBAI HAS ERRED IN ALLOWING EXEMPTION TO THE ASSES SEE EVEN THOUGH THE ACTIVITY OF CARRYING ON THE EXHIBITION WAS A DOMINA NT ACTIVITY AND NOT AN INCIDENTAL ONE AND CARRIED ON IN A SYSTEMATIC WAY S O AS TO CONSTITUTE BUSINESS INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE CIT(A), MUMBAI HAS ERRED IN DIRECTING THE ASSESSIN G OFFICER TO ALLOW EXEMPTION TO THE ASSESSEE EVEN THOUGH PERUSAL OF IN COME AND EXPENDITURE ACCOUNT REVEAL THAT INCOME GENERATED TH ROUGH HOLDING OF EXHIBITIONS WERE NOT UTILIZED FOR CHARITABLE PURPOS ES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, 1 I1. LAW, THE CIT(A), MUMBAI HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW EXEMPTION TO THE ASSESSEE EVEN THOUGH THE ASSESSEE HAD NOT MAINT AINED SEPARATE BOOKS PF ACCOUNTS AS PRESCRIBED BY THE ACT/RULES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE CIT(A), MUMBAI HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW CONTRIBUTION OF RS. 25 LAKHS TO ITT, POWAI ON THE G ROUND THAT IT HAD BECOME INFRUCUOUS. 21 GROUND NOS 1 & 3 ARE COMMON IN BOTH THE ASSESSME NT YEARS. 21.1. BRIEFLY STATED THE FACTS OF THIS CASE ARE T HAT THE ASSESSEE SOCIETY WAS FORMED ON 20 TH JULY 1980 AND REGISTERED UNDER THE SOCIETIES ACT 1 860. THE OBJECTS OF THE ASSESSEE SOCIETY ARE; (I) TO ORGANISE INTERNATIONAL TEXTILE MACHINERY EX HIBITIONS (II) TO ORGANISE TECHNICAL AND OTHER SYMPOSIA ON T EXTILE ENGG. INDUSTRIES (II) TO COORDINATE AND ASSET BUREAU OF INDIAN STAN DARD TO PROMOTE TEXTILE STANDARDISATION; AND (IV) TO WORK IN COOPERATION WITH THE INST ITUTION HAVING SIMILAR AIMS AND OBJECTS AND ENCOURAGE OTHER F OR HAVING SIMILAR AIMS TO JOIN SUCH INSTITUTIONS AND HELPED THEM. 21.2 THE CBDT VIDE ITS NOTIFICATION DATED 16.5.1994 HAD GRANTED EXEMPTION TO THE ASSESSEE SOCIETY U/S 10(23C)(IV) OF THE INCOME TAX ACT 1961 FOR THE 13 INDIA ITME SOCIETY ASSESSMENT YEARS 1993-94 TO 1995-96. THE SAID EXEMP TION HAS BEEN FURTHER RENEWED FROM TIMED TO TIME AND LASTLY IT HAS BEEN G RANTED FOR THE AY 2003-04 AND 2004-05. 21.3 DURING THE FINANCIAL YEAR 2000-01, THE ASSESSE E HAD ORGANIZED AN EXHIBITION FROM 1.12.2000 TO 10.12.2000 CALLED AS INTERNATIONAL TEXTILE MACHINERY EXHIBITIONS 2000 (ITME) AND EARNED A PROF IT OF RS. 12,52,75,120/-. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR ASSESSM ENT YEAR 2001-02 ON 30.7.2001 DECLARING TOTAL INCOME AT NIL AS THE EXEM PTION U/S 10(23C)(IV) WAS CLAIMED. THE ASSESSMENT FOR THE ASSESSMENT YEAR 20 01-02 WAS COMPLETED U/S 143(3) ON 30.1.2004 BY TREATING THE EXEMPTED INCOME AS BUSINESS INCOME. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE CIT(A). THE CIT(A) VIDE HIS ORDER DATED 5.7.2004 ANNULLED THE ASSESSMENT ORDE R ON THE GROUND THAT THE NOTICE U/S 143(2) WAS SERVED AFTER 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN OF INCOME WAS FURNISHED. CONSEQUE NTLY, THE ASSESSMENT WAS REOPENED U/S 148. 21.4 IN THE MEANTIME, THE RETURN OF INCOME FOR THE AY 1997-98 FILED ON 30.9.1997 WAS PROCESSED U/S 143(1). HOWEVER, SINCE FOR THE ASSESSMENT YEAR 2001-02, THE EXEMPTED INCOME WAS TREATED AS BUSINES S INCOME, THE ASSESSMENT FOR THE ASSESSMENT YEAR 1997-98 WAS ALSO REOPENED U /S 147 BY ISSUING NOTICE U/S 148 DT 10.3.2004. 21.5 THE ASSESSEE MAINTAIN COMPUTERISED BOOKS OF AC COUNT AND THE ASSESSING OFFICER HAS STATED IN THE ORDER THAT EXTRACTS OF THE SAME WERE PRODUCED AT THE TIME OF ASSESSMENT U/S 143(3) FOR THE ASSESSMENT Y EAR 2001-02; BUT THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNT DURI NG THE PROCEEDINGS OF REASSESSMENT. THE ASSESSING OFFICER ACCORDINGLY TO OK VIEW THAT NO SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY THE ASSESSEE. 14 INDIA ITME SOCIETY 21.6 IN ORDER TO ASCERTAIN THE ACTUAL NATURE OF AC TIVITIES AND REAL CHARACTER OF INCOME, THE ASSESSING OFFICER OBTAINED NECESSARY IN FORMATION IN RESPECT OF HOLDING OF EXHIBITION. THE ASSESSING OFFICER RECOR DED THAT THE EXHIBITION WAS ORGANISED VERY SYSTEMATIC ON THE BASIS OF BUSINESS ORIENTATION. THE ASSESSEE HAS ISSUED A GUIDE BOOK-INDIA ITME 2000 CONTAINING RULES & REGULATIONS. THE TARIFF FOR INDIAN EXHIBITION WAS FIXED AT RS. 4,500 /- PER SQ.MTR AND FOR FOREIGN EXHIBITION US $ 270 PER SQ.MTR. THE ASSESSING OFFIC ER WAS OF THE VIEW THAT WHEN THE EXHIBITION WAS CONDUCTED VERY SYSTEMATICALLY AN D IN COMMERCIAL MANNER CHARGING EXORBITANTLY FROM THE EXHIBITORS ON EACH A ND EVERY FACILITY PROVIDED TO THEM, THEN WHY THE INCOME FROM EXHIBITION SHOULD NO T BE TREATED AS BUSINESS INCOME. 21.7 AFTER CONSIDERING THE REPLY, THE ASSESSING OFF ICER HELD THAT THE EXHIBITION CONDUCTED BY THE ASSESSEE IS IN THE NATURE OF BUSIN ESS AS ALL ELEMENTS OF BUSINESS ARE PRESENT; THEREFORE, THE INCOME AROSE I S BUSINESS INCOME. THE ASSESSING OFFICER FURTHER HELD THAT THE ENTIRE SURP LUS GENERATED OVER THE YEARS HAS BEEN ACCUMULATED AND HAS NOT BEEN APPLIED TOWAR DS ANY CHARITABLE CAUSE AND KEPT IN BANK DEPOSITS. .. . THE ASSESSEE HAS ACCUMULATED SURPLUS OF MORE THAN RS 27 CRORES AND THE ENTIRE MONEY HAS BEEN KEPT IN THE FORM OF DEPOSITS IN THE BANKS. THE VIEWED THAT SINCE THE ASSESSEE HAS NOT PROVED WITH EVIDENCE THAT THE INCOME ARISING FROM BUSINESS IS BEING UTILIZED FOR ANY CHARITABLE CAUSE THEREFORE, HOLDING OF EXHIBITION IS A BUSINESS AS D EFINED U/S 2(13) AND IS NOT AN ACTIVITY INCIDENTAL TO THE OBJECT OF SOCIETY. FUR THER, THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT AND THE SURPLU S HAS NOT BEEN UTILIZED FOR CHARITABLE PURPOSES; HENCE, THE ASSESSEE IS NOT ELI GIBLE FOR DEDUCTION U/S 10(23C)(IV). ACCORDINGLY, THE ASSESSING OFFICER TR EATED THE INCOME FROM EXHIBITION AS BUSINESS INCOME. SIMILAR VIEW WAS TAK EN FOR THE AY 1997-98 AS WELL. 15 INDIA ITME SOCIETY 22 ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE A SSESSEE FOR BOTH THE ASSESSMENT YEARS. 23 BEFORE US, THE LD DR HAS REFERRED THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT B EFORE THE ASSESSING OFFICER. HE HAS FURTHER SUBMITTED THAT ADMITTEDLY NO SEPARAT E BOOKS OF ACCOUNT ARE MAINTAINED BY THE ASSESSEE. THE LD DR HAS POINTED O UT THAT THE ASSESSING OFFICER HAS RECORDED THE FACT THAT ONLY EXTRACTS OF COMPUTE RIZED BOOKS WERE FILED BY THE ASSESSEE; THEREFORE, THE ASSESSEE DID NOT FULFIL TH E CONDITIONS OF NOTIFICATION ISSUED BY THE CBDT U/S 10(23C)(IV)AS WELL AS SEC. 1 1 OF THE I T ACT. THE LD DR HAS FURTHER SUBMITTED THAT AS PER SEC. 11(4A) THE A CTIVITY OF THE ASSESSEE FALLS UNDER THE BUSINESS AND NOT CHARITY. HE HAS RELIED UPON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF ASSISTANT COMM ISSIONER OF INCOME-TAX V. THANTHI TRUST REPORTED IN 247 ITR 785 AS WELL AS T HE ORDER OF THE TRIBUNAL IN THE CASE OF INDIAN MACHINE TOOLS MFGR ASSOCIATION VS AD IT(EXEMPTIONS) REPORTED IN 70 ITD 304. THE LD DR HAS THEN SUBMITTED THAT THE PROFIT MARGIN OF THE ASSESSEE IS MORE THAN 50% FROM THE ACTIVITY OF PROVIDING FAC ILITIES TO THE PARTICIPANTS OF THE EXHIBITION, WHICH SHOW THE MOTIVE AS PROFIT MAK ING AND NOT CHARITY. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 23.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE H AS SUBMITTED THAT THE ASSESSING OFFICER HAS NO JURISDICTION TO WITHDRAW OR DISALLOW THE EXEMPTION ONCE GRANTED BY THE CBDT VIDE NOTIFICATION ISSUED U/S 10 (23C)(IV). HE HAS REFERRED THE NOTIFICATION ISSUED BY THE CBDT FOR GRANTING EXEMPT ION TO THE ASSESSEE AT PAGE 38 OF THE PAPER BOOK. THE LD AR HAS SUBMITTED THAT ONCE THE OBJECTS OF THE ASSESSEE HAS BEEN ACCEPTED AS CHARITABLE AND THE EX EMPTION U/S 10(23C)(IV) HAS BEEN GRANTED; THEN THE ASSESSING OFFICER HAS NO P OWER TO REVERSE THE EXEMPTION GRANTED BY THE APPROPRIATE AUTHORITY (GOV ERNMENT OF INDIA). HE HAS 16 INDIA ITME SOCIETY FURTHER CONTENDED THAT HOLDING THE EXHIBITION IS TH E ONLY ACTIVITY OF THE ASSESSEE; THEREFORE, THERE IS NO NEED TO MAINTAIN SEPARATE BO OKS OF ACCOUNT. THE BOOKS OF ACCOUNT MAINTAINED FOR EXHIBITION ARE SEPARATE AND EXCLUSIVELY AS NO OTHER ACTIVITY HAS BEEN CARRIED OUT BY THE ASSESSEE. THE LD AR THEN REFERRED THE MEMO EXPLAINING THE PROVISIONS IN THE FINANCIAL BILL 200 2 REGARDING THE POWER TO WITHDRAW APPROVAL OR RESCIND NOTIFICATION ISSUED IN THE CASE OF SCIENTIFIC RESEARCH ASSOCIATION, NEWS AGENCY, NOTIFIED TRUST OR INSTITU TION, EDUCATIONAL AND MEDICAL INSTITUTION ETC. 23.2 THE LD AR HAS SUBMITTED THAT ONLY AFTER THE AM ENDMENT WHEREBY A PROVISO HAS BEEN INSERTED SO AS TO PROVIDE EXPLICIT POWER T O CENTRAL GOVERNMENT AND THE PRESCRIBED AUTHORITY TO WITHDRAW THE APPROVAL OR RE SCINDING THE NOTIFICATION. BEFORE SUCH AMENDMENT, THERE WAS NO POWER TO WITHDR AW THE EXEMPTION ONCE GRANTED BY THE CBDT. THE CASE OF THE ASSESSEE SOCIE TY IS DISTINGUISHABLE FROM THOSE TRUST AND INSTITUTIONS WHICH ARE ASSESSED U/S 11 & 12 OF THE I T ACT; THEREFORE, THE CASE OF THE ASSESSEE CANNOT BE COMPA RED WITH THE CASES, WHICH FALLS U/S SE. 11 & 12 OF THE ACT. THE LD AR HAS THE N SUBMITTED THAT THE CASES RELIED UPON BY THE LD DR ARE DISTINGUISHABLE AND NO T APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSEE SOCIETY HAS REGULARLY AND FULLY COMPLIED WITH ALL THE TERMS AND CONDITIONS STIPULATED IN THE NOTIFICATION ISSUED U/S 10(23C)(IV) AND THEREFORE, THE EXEMPTION GRANTED BY THE CBDT CANNOT BE WITHDRAWN BY THE ASSESSING OFFICER. HE HAS FURTHER SUBMITTED THAT T HOUGH THE ASSESSEE SOCIETY IS ALSO REGISTERED U/S 12 OF THE ACT, HOWEVER, WHEN TH E ASSESSEE HAS BEEN GRANTED EXEMPTION U/S 10(23C)(IV) THEN, THE CASE HAS TO BE CONSIDERED AS PER THE NOTIFICATION ISSUED U/S 10(23C(IV). THE ASSESSING O FFICER CANNOT RE-EXAMINE THE OBJECTS OF THE ASSESSEE SOCIETY ONCE EXEMPTION WAS GRANTED BY THE CBDT AFTER SATISFACTIONS ABOUT THE OBJECTS. THE REGISTRATION A ND EXEMPTION ONCE GRANTED CANNOT BE DENIED BY THE ASSESSING OFFICER WHEN THE ACTIVITY CARRIED OUT BY THE 17 INDIA ITME SOCIETY ASSESSEE IS AS PER THE OBJECTS OF THE SOCIETY. HE H AS REITERATED THE CONTENTION AND SUBMITTED THAT THE AMENDMENT BY WHICH THE PROVI SO 13 TO CLAUSE 10 (23C) HAS BEEN INSERTED IS APPLICABLE W.E.F 1.4.2003 AND THEREFORE, PRIOR TO THE AMENDMENT THERE WAS NO PROVISION OF WITHDRAWAL OF T HE EXEMPTION GRANTED BY THE CENTRAL GOVERNMENT. IN SUPPORT OF THE ARGUMENT S AND CONTENTION, LD AR OF THE ASSESSEE HAS RELIED UPON THE FOLLOWING DECISION S: A) RAZA TEXTILES LTD. V. INCOME-TAX OFFICER - 87 I TR 539(SC) B) COCHIN DEVASWOM BOARD V. GOVERNMENT OF INDIA - 188 ITR 8(KEL) C) LAKSHMI NIWAS BIRLA V. WEALTH-TAX OFFICER - 25 2 ITR 598 (CAL) D) ASSISTANT COMMISSIONER OF INCOME-TAX V. SURAT CI TY GYMKHANA - 300 ITR 214 (SC) E) HIRALAL BHAGWATI V. COMMISSIONER OF INCOME-TAX - 246 ITR 188 (GUJ) D)MAHARASHTRA ACADEMY OF ENGINEERING AND EDUCATIONA L RESEARCH V. DIRECTOR GENERAL OF INCOME-TAX (INVESTIGATION) - -319 ITR 399 (BOM) E) CHATURVEDI HAR PRASAD EDUCATIONAL SOCIETY VS CI T - 46 DTR 121 (LKO) F) CIT VS MANIPAL ACADEMY OF HIGHER EDUCATION - 9 SOT 284(BANG) 24 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAR EFULLY PERUSED THE RELEVANT MATERIAL ON RECORD AS WELL AS THE PROVISIO NS OF THE ACT. THE FIRST QUESTION EMERGES FOR OUR CONSIDERATION AND ADJUDICA TION IS WHETHER AFTER THE NOTIFICATION U/S 10(23C)(IV) , THE ASSESSING OFFICE R HAS THE POWER TO WITHDRAW THE EXEMPTION. 24.1 AT THE THRESHOLD, WE MAY POINT OUT THE DENIAL OF THE CLAIM OF EXEMPTION AT THE TIME OF ASSESSMENT DOES NOT NECESSARILY AMOUNT TO WITHDRAWAL OF EXEMPTION GRANTED BY THE CBDT BY NOTIFICATION ISSUED U/S 10(2 3C)(IV). SECTION 10(23C)(IV) AS EXISTS AT THE RELEVANT TIME READS AS UNDER: ( 23C ) ANY INCOME RECEIVED BY ANY PERSON ON BEHALF OF (I) (II) .. (III) .. [( IV ) ANY OTHER FUND OR INSTITUTION ESTABLISHED FOR CHA RITABLE PURPOSES WHICH MAY BE NOTIFIED BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE, HAVING REGARD TO THE OBJECTS OF THE FUND O R INSTITUTION AND ITS IMPORTANCE THROUGHOUT INDIA OR THROUGHOUT ANY STATE OR STATES; 18 INDIA ITME SOCIETY IT IS CLEAR FROM THE CLAUSE (IV) OF SUB.SEC. 23C OF SEC. 10 THAT ANY FUND OR INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSES WHI CH IS NOTIFIED BY THE CENTRAL GOVT, THE INCOME RECEIVED BY SUCH FUND OR INSTITUTI ON IS EXEMPTED SUBJECT TO FULFILMENT OF THE CONDITIONS AS ENUMERATED UNDER VA RIOUS PROVISIONS TO CLAUSE (23C) AS WELL AS THE TERMS AND CONDITIONS STIPULATE D BY THE CENTRAL GOVERNMENT IN THE NOTIFICATION U/S 10(23C)(IV). 24.2 THE SECOND PROVISO TO CLAUSE 23C PRESCRIBES TH E PROCEDURE AND THE REQUIREMENT FOR GRANTING THE EXEMPTION BY THE CENTR AL GOVT BY NOTIFICATION, WHICH READS AS UNDER: PROVIDED FURTHER PROVIDED FURTHER PROVIDED FURTHER PROVIDED FURTHER THAT THE PRESCRIBED AUTHORITY, BEF ORE APPROVING ANY FUND OR TRUST OR INSTITUTION OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION, UNDER SU B-CLAUSE (IV) OR SUB- CLAUSE (V) OR SUB-CLAUSE (VI) OR SUB-CLAUSE (VIA), MAY CALL FOR SUCH DOCUMENTS (INCLUDING AUDITED ANNUAL ACCOUNTS) OR IN FORMATION FROM THE FUND OR TRUST OR INSTITUTION OR ANY UNIVERSITY OR O THER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION, AS TH E CASE MAY BE, AS IT THINKS NECESSARY IN ORDER TO SATISFY ITSELF ABOUT T HE GENUINENESS OF THE ACTIVITIES OF SUCH FUND OR TRUST OR INSTITUTION OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER ME DICAL INSTITUTION, AS THE CASE MAY BE, AND THE PRESCRIBED AUTHORITY MAY ALSO MAKE SUCH INQUIRIES AS IT DEEMS NECESSARY IN THIS BEHALF:] 24.3 THUS, IT IS CLEAR THAT BEFORE NOTIFYING ANY FU ND, TRUST OR INSTITUTION, THE CENTRAL GOVERNMENT OR THE PRESCRIBED AUTHORITY, AS THE CASE MAY BE, MAY CALL SUCH RECORD OR INFORMATION AS IT THINK NECESSARY IN ORDER TO SATISFY ITSELF ABOUT THE GENUINENESS OF THE ACTIVITY. THEREFORE, AT THE TIME OF GRANTING THE APPROVAL/EXEMPTION, THE CENTRAL GOVERNMENT OR THE P RESCRIBED AUTHORITY HAS TO SATISFY ABOUT THE GENUINENESS AND OBJECTS OF THE TR UST/INSTITUTION. THE ENQUIRY/INFORMATION AT THE TIME OF CONSIDERING THE APPLICATION FOR GRANTING OF EXEMPTION U/S 10(23C)(IV) IS RESTRICTED TO THE EXAM INATION/VERIFICATION AS TO WHETHER THE TRUST/INSTITUTION IS ACTUALLY IN THE AC TIVITY WHICH ARE GENUINE AND TO ACHIEVE THE OBJECT OF THE TRUST/INSTITUTION. ONCE THE EXEMPTION IS GRANTED BY 19 INDIA ITME SOCIETY ISSUING THE NOTIFICATION U/S 10(23C)(IV), THE ASSES SEE BECOMES ENTITLED TO CLAIM THE EXEMPTION AGAINST THE INCOME FROM THOSE ACTIVIT Y, WHICH ARE IN CONSONANCE OF THE OBJECT OF THE TRUST/INSTITUTION FOR WHICH TH E EXEMPTION IS GRANTED. THE NOTIFICATION ISSUED U/S 10(23C)(IV) ITSELF DOES NOT TANTAMOUNT TO HAVE ALLOWED THE CLAIM OF EXEMPTION. THE APPROVAL/EXEMPTION BY N OTIFICATION IS PRE-REQUISITE CONDITION FOR CLAIMING OF EXEMPTION WHETHER THE CLA IM IS ALLOWABLE OR NOT, HAS TO BE EXAMINED IN THE LIGHT OF VARIOUS CONDITIONS STIP ULATED UNDER THE STATUTE AS WELL AS BY THE CENTRAL GOVT SUBJECT TO WHICH THE AP PROVAL IS GRANTED. THE COMPLIANCE WITH THE TERMS AND CONDITIONS STIPULATED BY THE CENTRAL GOVERNMENT/PRESCRIBED AUTHORITY WOULD BE GAUGED AT THE ASSESSMENT STAGE. 25 AS PER THE PROVISIONS OF SEC 10(23C)(IV), THE OB JECT OF THE INSTITUTION SHOULD BE FOR CHARITABLE PURPOSE. THE EXEMPTION HA S BEEN GRANTED VIDE NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT U/S 1 0(23C)(IV), THE SAME WAS SUBJECT TO THE FOLLOWING CONDITIONS: IN EXERCISE OF THE POWERS CONFERRED BY SUB CLAUSE (IV) OF CLAUSE (23C) OF SEC. 10 OF THE INCOME TAX ACT, 1961 (13 OF 1961) TH E CENTRAL GOVERNMENT HEREBY NOTIFIES INDIA INTERNATIONAL TEXTILE MACHIN ERY EXHIBITION SOCIETY, MUMBAI FOR THE PURPOSE OF THE SAID SUB-CLAUSE FOR THE ASSESSMENT YEARS 1999-200 TO 2001-2002 SUBJECT TO THE FOLLOWING COND ITIONS NAMELY: I) THE ASSESSEE WILL APPLY ITS INCOME, OR ACCUMULATE F OR APPLICATION, WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR WHICH IT IS ESTABLISHED; II) THE ASSESSEE WILL NOT INVEST OR DEPOSIT ITS FUNDS ( OTHER THAN VOLUNTARY CONTRIBUTIONS RECEIVED AND MAINTAINED IN THE FORM OF JEWELLERY, FURNITURE ETC.) FOR ANY PERIOD DURING THE PREVIOUS YEARS RELEVANT TO THE ASSESSMENT YEARS MENTIONED AB OVE OTHERWISE THAN IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SUB SECTION (5) OF SECTION 11; III) THIS NOTIFICATION WILL NOT APPLY IN RELATION TO ANY INCOME BEING PROFITS AND GAINS OF BUSINESS, UNLESS THE BUSINESS IS 9INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE ASSESSEE AND SEPARATE BOOKS OF ACCOUNTS ARE MAINTAI NED IN RESPECT OF SUCH BUSINESS. 20 INDIA ITME SOCIETY 25.1 IT HAS BEEN MADE CLEAR THAT THIS NOTIFICATION WILL NOT APPLY IN RELATION TO ANY INCOME BEING PROFIT AND GAIN OF BUSINESS UNLESS THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE ASSESSEE AN D SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED IN RESPECT OF SUCH BUSINESS. THERE IS NO DISPUTE THAT THE ASSESSEE HAS NOT MAINTAINED ANY SEPARATE BOOKS OF A CCOUNT; BUT CLAIMED THAT THE ONLY ACTIVITY OF THE ASSESSEE IS TO CARRY OUT T HE EXHIBITION AND THEREFORE, THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE SEP ARATE BOOKS OF ACCOUNT FOR EXHIBITION ACTIVITY. THE ASSESSING OFFICER, FOR TH E AY 1997-98 HAS GIVEN DETAILS OF THE INCOME RELATING TO EXHIBITION AT PAGE 2 & 3 OF HIS ASSESSMENT ORDER AS UNDER: I) SPACE RENTAL RS. 15,37,23,281 II) POWER INSTALLATION CHARGES RS. 80,48,638 III) POWER SERVICE CHARGES RS. 59,63,429 IV) EXHIBITION TELEPHONE RECEIPTS RS. 6,45,402 V) COMPRESSED AIR HIRE CHARGES RS. 6,83,755 VI) INTEREST ON LATE PAYMENT OF EXHIBITION RECEIPTS RS. 6,87 ,621 VII) OTHER EXHIBITION INCOME RS. 48,7 3,600 TOTAL RS.17,46,25,726 25.2 THE ASSESSEE HAS NOT DISPUTED THIS FACT THAT T HE ASSESSEE HAS CHARGED MORE THAN 50% MARGIN IN PROVIDING THE FACILITIES TO THE PARTICIPANTS OF THE EXHIBITION. THUS, IT IS CLEAR THAT THE ASSESSEE IS CHARGING A DIFFERENT RATE OF TARIFF FROM THE PARTICIPANTS IN RESPECT OF POWER, TELEPHON E, COMPRESSOR HIRE CHARGES. THE NATURE OF THESE FACILITIES ITSELF SHOWS THAT TH E ASSESSEE IS CHARGING SEPARATELY FOR EACH AND EVERY FACILITIES MADE AVAIL ABLE TO THE PARTICIPANTS IN THE EXHIBITION BY ADDING ITS OWN MARGIN IN THE TARIFF R ATE CHARGED BY THE SERVICE PROVIDER. IT IS NOT THE CASE THAT FOR HOLDING THE EXHIBITION, THE ASSESSEE IS CHARGING FOR ITS SERVICE FOR ORGANIZING THE EXHIBIT ION; BUT APART FROM THE SPACE RENTALS, THE ASSESSEE IS CHARGING FOR ALL OTHER FAC ILITIES AND SERVICES LIKE 21 INDIA ITME SOCIETY ELECTRICITY, TELEPHONE IN A MANNER AS TO EARN THE P ROFIT. THUS, WHEN THE ASSESSEE IS NOT CHARGING LUMP SUM AMOUNT FROM THE PARTICIPA NTS FOR THE SERVICES FOR ORGANIZING; BUT ADDING THE MARGIN OF MORE THAN 50% ON EACH AND EVERY SERVICES, WHICH SHOWS THAT THE ASSESSEE IS NOT WORKING UNDER NO PROFIT NO LOSS BASIS BUT HAVING A DEFINITE TARGET OF EARNING THE PROFIT FROM THE ACTIVITY. NO DOUBT ABOUT THIS ACTIVITY OF PROVIDING OTHER FACILITIES/SERVICE S TO THE PARTICIPANTS OF THE EXHIBITION ARE CONNECTED WITH THE MAIN OBJECT OF OR GANISING THE EXHIBITION BUT SOME OF THESE ACTIVITIES ARE CLEARLY HAVING THE ELE MENT OF PROFIT MOTIVE AND NOT CHARITABLE IN NATURE. THEREFORE, THE CONDITION AS STIPULATED IN THE NOTIFICATION ISSUED U/S 10(23C)(IV) THE ASSESSEE IS REQUIRED TO MAINTAIN SEPARATE BOOKS OF ACCOUNT FOR THE ACTIVITIES WHICH ARE IN THE NATURE OF BUSINESS, THOUGH CONNECTED WITH THE MAIN OBJECT OF THE ASSESSEE. 25.3 SINCE THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR THESE ACTIVITIES OF PROVIDING OTHER SERVICES AND CH ARGING WITH A MARGIN, THE NOTIFICATION ISSUED U/S 10(23C)(IV) WILL NOT APPLIC ABLE IN RESPECT OF SUCH INCOME FROM OTHER ACTIVITIES AND THEREFORE, THE EXEMPTION U/S 10(23C)(IV) IS NOT AVAILABLE IN RESPECT OF THE INCOME EARNED BY THE AS SESSEE FROM THE ACTIVITY OF PROVIDING POWER INSTALLATION, ELECTRICITY, TELEPHON E FACILITIES, COMPRESSED AIR HIRE ETC. ETC. ACCORDINGLY, THE ASSESSING OFFICER IS D IRECTED TO ALLOW EXEMPTION WITH RESPECT TO THE RECEIPT AND ACCUMULATIONS FROM THE H OLDING AND ORGANIZING THE EXHIBITION AND HENCE, THE INCOME FROM OTHER ACTIVIT IES IN PROVIDING OTHER SERVICES BY CHARGING HUGE PROFIT HAS TO BE TAXED AS INCOME O F THE ASSESSEE. ACCORDINGLY, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. 22 INDIA ITME SOCIETY 26` IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE PARTLY ALLOWED WHEREAS THE CROSS OBJECTIONS BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THE 12 TH DAY OF DEC 2011. SD/ SD/ ( (( ( J SUDHAKAR REDDY J SUDHAKAR REDDY J SUDHAKAR REDDY J SUDHAKAR REDDY ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 12 DEC 2011 RAJ* RAJ* RAJ* RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI