M/s Patiala Urban Planning and Development Authority, Patiala V. ITO, Patiala

ITA 840/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90120 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-04-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 08-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Business expenditure; Charitable institution; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 12A; 12AA; 147; 148; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NOS. 674 & 675/CHD/2014 A.YS: 2007-08 & 2008-09 M/S PATIALA URBAN PLANNING & VS THE ITO, DEVELOPMENT AUTHORITY, WARD 2, URBAN ESTATE, PHASE II, PATIALA. PATIALA. PAN: AAALP0095J APPELLANT BY : SHRI ROHIT KAURA RESPONDENT BY : SMT. JYOTI KUMARI & ITA NOS. 839 & 840/CHD/2014 A.YS: 2010-11 & 2011-12 M/S PATIALA URBAN PLANNING & VS THE ITO, DEVELOPMENT AUTHORITY, WARD 2, URBAN ESTATE, PHASE II, PATIALA. PATIALA. PAN: AAALP0095J APPELLANT BY : SHRI ROHIT KAURA RESPONDENT BY : DR. AMARVEER SINGH (APPELLANT) (RESPONDENT) DATE OF HEARING : 30.04.2015 DATE OF PRONOUNCEMENT : 06.05.2015 O R D E R PER BHAVNESH SAINI,JM THIS ORDER SHALL DISPOSE OFF ALL THE ABOVE APPEALS FILED BY THE SAME ASSESSEE AGAINST DIFFERENT ORDERS OF LD. C IT(APPEALS), PATIALA FOR DIFFERENT ASSESSMENT YEARS. IT IS STAT ED THAT THE ISSUES ARE SAME IN ALL THE APPEALS, THEREFORE, ALL THE APPEALS ARE DECIDED THROUGH THIS COMMON CONSOLIDATED ORDER. 2 2. IT MAY BE NOTED HERE THAT DURING THE HEARING OF APPEALS, LD. COUNSEL FOR THE ASSESSEE DID NOT ARGUE ALL THE APPE ALS. THE RECORD REVEALED THAT TWO APPEALS FOR ASSESSMENT YEA RS 2007-08 AND 2008-09 WERE FILED IN JULY, 2014 AND THESE WERE TAKEN UP FOR HEARING ON 30.09.2014. ON 30.09.2014, LD. COUN SEL FOR THE ASSESSEE SOUGHT ADJOURNMENT ON THE GROUND THAT IN T HESE CASES, PAPER BOOK AND WRITTEN SUBMISSIONS ARE REQUIRED TO BE FILED, THEREFORE, ON HIS REQUEST, APPEALS WERE ADJOURNED T O 20.01.2015. ON 20.01.2015, AGAIN LD. COUNSEL FOR THE ASSESSEE M ADE A SIMILAR REQUEST FOR ADJOURNMENT ON THE SIMILAR GROU ND THAT PAPER BOOK AND WRITTEN SUBMISSIONS ARE REQUIRED TO BE FILED. THE APPEALS WERE ADJOURNED TO 09.04.2015. THE APPE ALS WERE TAKEN UP FOR HEARING ON 09.04.2015 AND AGAIN A REQU EST WAS MADE FOR ADJOURNMENT ON THE GROUND THAT ARGUING COU NSEL HAS GONE ABROAD FOR A SHORT VISIT. ON HIS REQUEST, THE APPEALS WERE ADJOURNED TO 30.04.2015 AND IT WAS DIRECTED THAT IT WOULD BE LAST OPPORTUNITY TO THE ASSESSEE. 3. THE REMAINING TWO APPEALS FOR ASSESSMENT YEARS 2 010-11 AND 2011-12 WERE ALSO LATER ON TAKEN UP TOGETHER FO R THE PURPOSE OF HEARING, BEING THE ISSUES COMMON. ON 30 .04.2014 THE LD. COUNSEL FOR THE ASSESSEE INSTEAD OF ARGUING THE APPEALS ON MERITS, AGAIN MADE A REQUEST FOR ADJOURNMENT ON THE GROUND THAT THE APPEAL UNDER SECTION 12AA OF THE ACT IS FI XED ON 25.05.2015, THEREFORE, THESE APPEALS MAY BE ADJOURN ED. THE REQUEST OF ASSESSEE WAS FOUND IMPROPER AS IT HAS NO CONNECTION WITH SUCH APPEAL. THE ASSESSEE, TILL DATE HAS NOT FILED ANY PAPER BOOK OR WRITTEN SUBMISSIONS ON WHICH EARLIER ADJOUR NMENTS WERE SOUGHT. THE REQUEST FOR ADJOURNMENT WAS ACCORDINGL Y REJECTED. 3 THE LD. COUNSEL FOR THE ASSESSEE WAS GIVEN OPPORTUN ITY TO ARGUE THE APPEALS, HOWEVER HE HAS NOT ARGUED ANY OF THE A PPEALS. THEREFORE, WE PROCEED TO DECIDE ALL THE APPEALS ON MERITS ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. 4. WE HAVE HEARD LD. DRS AND PERUSED THE FINDINGS O F AUTHORITIES BELOW. THE LD. DR STATED THAT THE ISSU ES ARE SAME IN ALL THE APPEALS. THEREFORE, WE PROCEED TO DECIDE T HE COMMON ISSUES RAISED IN ASSESSMENT YEAR 2007-08 FIRST. ITA 674/CHD/2014 (A.Y. 2007-08) 5. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS), DATED 27.06.2014 FOR ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS : 1. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AN D ON FACTS IN UPHOLDING THE ILLEGAL ASSESSMENT ORDER PASSE D BY THE ASSESSING OFFICER; 2. THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN UP HOLDING THE DISALLOWANCE MADE BY THE AO OF THE CLAIM MADE BY T HE APPELLANT U/S 11 IGNORING THE REGISTRATION GRANTED U/ S 12AA BY THE CIT STILL VALID AT THE TIME OF ASSESSMENT; 3. THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN UP HOLDING THE OPINION OF THE AO THAT THE ACTIVITIES OF THE APPE LLANT ARE FOR PROFIT AND NOT CHARITABLE DESPITE REGISTRATION U/S 12A A IN FORCE, IGNORING THAT REGISTRATION UNDER SECTION 12A IS A 'FAIT ACCOMPLI 'TO HOLD THE ASSESSING OFFICER BACK FROM FURTHER PR OBE INTO THE OBJECTS OF THE TRUST. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE STATUS OF ARTIFICIAL JURIDICAL PERSON A GAINST AOP (TRUST) JUST BY FOLLOWING THE ASSESSMENT ORDER FOR A.Y.2009-10 TO THE INSTANT A.Y. WHICH IS PRIOR TO 1.4.2009, THE DATE FROM WHICH THE AMENDMENT TO SECTION 2(15) IS EFFECTI VE; 5. THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN UP HOLDING THE REOPENING BY THE AO U/S 147 BY INVOKING RETROSP ECTIVELY, THE PROSPECTIVE AMENDMENT IN SECTION 2(15) BY INSERT ION OF A PROVISO THERETO HOLDING THAT THE APPELLANT IS ENGAG ED IN COMMERCIAL ACTIVITY AND NOT ANY ACTIVITY FOR AN ADVAN CEMENT OF GENERAL PUBLIC UTILITY; 6. THAT THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON F ACTS IN JUSTIFYING THE APPROVAL ACCORDED BY THE JCIT FOR IS SUANCE OF 4 NOTICE UNDER SECTION 147, WITHOUT THERE BEING APPLICA TION OF JUDICIOUS MIND BY THE JCIT. 6. BRIEFLY THE FACTS OF THE CASE ARE THAT THE CASE WAS INITIALLY PROCESSED UNDER SECTION 143(1)(A) OF THE ACT. LATE R ON, DURING THE COURSE OF SCRUTINY ASSESSMENT IN THIS CASE FOR ASSESSMENT YEAR 2009-10, IT WAS FOUND THAT ASSESSEE HAS NOT US ED THE INCOME FOR CHARITABLE PURPOSES. THEREFORE, CLAIM U NDER SECTION 11 WAS DISALLOWED. THE FACTS WERE SAME IN THE ASSE SSMENT YEAR UNDER APPEAL ALSO. THEREFORE, THE ASSESSING OFFICE R RE-OPENED THE CASE UNDER SECTION 148 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER SENT A DETAILED QUESTIONNAIRE. IN RESPONSE, THE ASSESSEE SUBMITTED ITS OBJECTIONS. ALL THESE FACTS ARE DULY DISCUSSED IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER, THEREAFTER DISALLOWE D THE CLAIM MADE BY ASSESSEE UNDER SECTION 11 OF THE ACT. FURT HER, IN THIS CASE THE ASSESSEE HAS CLAIMED THE STATUS OF AOP (TR UST) IN THE RETURN OF INCOME IN THIS ASSESSMENT YEAR. HOWEVER, THE SAME WAS CHANGED TO THE STATUS OF ARTIFICIAL JURISDICTIO NAL PERSON RELYING ON THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2009-10. 7. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER B EFORE LD. CIT(APPEALS) AND RAISED VARIOUS OBJECTIONS WHICH WE RE FORWARDED TO THE ASSESSING OFFICER FOR HIS COMMENTS. 8. THE ASSESSEE ON GROUND NOS. 5 & 6 CHALLENGED T HE RE- OPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT. THE LD. CIT(APPEALS) CONSIDERING THE RIVAL SU BMISSIONS AND MATERIAL ON RECORD CONFIRMED THE RE-OPENING OF THE ASSESSMENT. 5 THE FINDINGS OF THE LD. CIT(APPEALS) IN PARA 5 OF T HE APPELLATE ORDER ARE REPRODUCED AS UNDER : 5-O AS REGARDS, GROUND NO.2,1 HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE ISSUES ARE BEING DISCUSSED AS UND ER:- 5.1 IN THIS CONNECTION, THE APPELLANT FIRSTLY CONTENDED THAT SECTION 2(15) OF THE ITACT'6I IS APPLICABLE W.E.F. 01.04.20 09 I.E. FOR A.Y. 2009- 10 ONWARD AND THE SAME HAS NO APPLICATION FOR THE YE AR UNDER REFERENCE. IN THIS CONNECTION, IT IS NOTED THE CONDU CT OF THE ASSESSEE IN A.Y. 2009-10 WAS FOUND TO BE CARRYING ON AN ACTIVIT Y WHICH IS NOT IN THE NATURE OF FOR ADVANCEMENT OF ANY OTHER OBJECT OF GENER AL PUBLIC UTILITY. THE SAME FACTS WERE FOUND TO BE EXISTING IN THIS YEAR ALS O AS DISCUSSED IN LATER PART OF THIS ORDER. RETURN WAS ORIGINALLY PROC ESSED U/S 143(1)(A) OF THE IT ACT' 61. THEREAFTER, THE A.O. HAS ISSUED NO TICE U/S 148 TO RE-OPEN THE CASE ON THE BASIS OF FACTS AND INFORMATION IN H IS POSSESSION. IN MY OPINION, THEREFORE, THE OBJECTION OF THE APPELLANT I S NOT SUSTAINABLE. 5.2 THE PERUSAL OF THE REASONS RECORDED U/S 148 O F THE IT ACT AS REPRODUCED IN THE ASSESSMENT ORDER CLEARLY SHOWS TH AT ON THE BASIS OF INFORMATION AVAILABLE ON RECORD, IF WAS OBSERVED THA T THE ACTIVITY OF THE TRUST IS IN THE NATURE OF TRADE, COMMERCE AND BUSINE SS AND DOESN'T FALL WITHIN THE MEANING OF THE WORDS 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY'. THE APPELLANT HAS ALSO REL IED IN THIS CONNECTION ON THE DECISION IN THE CASE OF ASIAN SERC INFORMATION SERVICES PVT. LTD. VS. I TO 293 FTR 271 (BOM) AND PURITY TECH. TEXTILE PVT. LTD. VS. AC IT 325ITR 459 (BOM). THESE CASES ARE DISTINGUISHABLE AS THE A.O. HAS FORMED HIS OPINION ON THE BASIS OF INFORMATION ON RECORD AND EAR LIER THE CASE WAS PROCESSED U/S 143(1). FURTHER, IN THE CASE OF ACIT VS. RAJESH JHAWERI STOCK PROGRESS PVT. LTD. 291 ITR 500 (SC), IT IS HEL D THAT AT THE INITIATION STAGE WHAT IS REQUIRED IS REASON TO BELIEVE BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE ST AGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHERE THERE WAS RELEVANT MATERIA L ON WHICH A REASONABLE PERSON COULD HAVE FORMED REQUISITE BELIEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT O F INCOME IS NOT THE CONCERN AT THIS STAGE. THIS IS SO BECAUSE THE FORMA TION OF BELIEF BY THE A.O. IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION OF A.O . 5-3 THE APPELLANT HAS FURTHER SUBMITTED THAT THE HIGHER AUTHORITIES HAVE MECHANICALLY GRANTED AN APPROVAL FOR RE-OPENING OF ASSESSMENT WITHOUT APPLICATION OF MIND. WHILE GRANTING APPROVAL, IT IS WRITTEN AS 'YES, IT IS A FIT CASE FOR ISSUE OF NOTICE U/S 148.' THE APPELLANT RELIED ON CASE OF CENTRAL INDIA ELECTRICITY SUPPLY CO. LTD. VS. ITO 51 DTR 51 DHC, GERMAN REMEDIES LTD. VS. DCIT 287 ITR 494, CIT VS. SUMA N WAMAN CHAUDHARY 321 ITR 495 (BOM). I HAVE CONSIDERED THE S UBMISSIONS AS NOTED ABOVE. THE A.O. HAS RECORDED HIS REASONS IN DETAIL S BEFORE INITIATING ACTION U/S 147 OF THE IT ACT'61. THE REASON S ARE DULY REPRODUCED IN THE ASSESSMENT ORDER WHICH SHOWS THAT A DETAILED ANALYSIS OF THE CASE IS MADE. IT IS BUT APPARENT THAT THE HIGHER AUTHORITY HAS GONE THROUGH THE SAME BEFORE APPROVIN G THE CASE FOR RE- ASSESSMENT. FURTHER FROM THE SUBMISSION, IT IS NOTED T HAT THE A.O. HAS ENCLOSED THE DETAILS OF THE CASE AS PER ANNEXURE -A WITH THE PROPOSAL SENT TO THE ADDL. CIT. THE ADDL. CIT HAS THERE AFTER, DULY ENDORSED THE COMMENT THAT 'IT IS A FIT CASE FOR ISSUE OF N OTICE U/S 148.' I 6 AM, THEREFORE, OF THE OPINION THAT DUE APPLICATION O F MIND HAS BEEN MADE AT BOTH THE LEVELS AND THE APPELLANT'S CONTENT ION IS DISMISSED. THE CASE LAWS CITED BY THE APPELLANT ARE DISTINGUIS HABLE. 5.4 THE APPELLANT FURTHER CONTENDED THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2009-10, A REPORT WA S SENT BY ITO, WARD-2, PATIALA THAT REGISTRATION U/S 12A IN THIS CASE BE WITHDRAWN AND ON THE BASIS OF SAID REPORT THAT THE HONBLE CI T, PATIALA ISSUED A SHOW CAUSE NOTICE DATED 29.12.2011 AS TO WHY REGISTRA TION GRANTED U/S 12A OF THE ACT BE NOT WITHDRAWN. HOWEVER, THE SAID R EGISTRATION WAS NOT WITHDRAWN AND THE SAME IS IN OPERATION TILL DATE. THE APPELLANT, THEREFORE, RAISED TWO ISSUES:- (I). RELEVANT PROVISION OF THE ACT UNDER WHICH TAX EXEMPTION U/S 11 IS PROPOSED TO BE DENIED WITHOUT CANCELLATION OF REGIS TRATION U/S 12A AND (II).TANGIBLE MATERIAL WHICH CAME TO THE NOTICE TO T HE DEPARTMENT LEADING TO THE FORMATION OF BELIEF THAT INCOME CHARGEABLE' TO FAX HAS ESCAPED ASSESSMENT. THE APPELLANT ALSO RELIED ON VARIOUS CASE LAWS NAMELY SHEO NATH SINGH VS. APPELLATE ASST. COMMISSIONER OF INCO ME TAX 82 ITR 147 (SC), WHICH SAYS THAT THE REASON TO BELIEVE CAN'T B E BASED ON MERE SUSPICION, GOSSIP OR RUMOUR. THE APPELLANT FURTHER RELIED ON THE CASE OF CIT VS. KALVINATOR OF INDIA 320 ITR 561 (SC) AND CONT ENDED THAT THERE SHOULD BE TANGIBLE MATERIAL BEFORE COMING TO THE CO NCLUSION THAT INCOME HAS ESCAPED ASSESSMENT. RELYING ON THE CASE OF RAJE SH JHAWERI STOCK BROKERS PVT. LTD. (SUPRA), IT IS CONTENDED THAT THE RE SHOULD EXIST REASON TO BELIEVE. I HAVE CONSIDERED THE SUBMISSIONS MADE. IN THE CASE OF J YOTI PRABHA SOCIETY VS. CIT 81 TTJ (DEL) 942, IT IS HELD THAT 'AT THE TIME OF PROCESSING THE APPLICATION SEEKING REGISTRATION, THE CIT WAS NO T EXPECTED TO GO IN DETAIL AND PRIMA FACIE THE ASSESSEE WAS ABLE TO MAK E OUT A CASE FOR REGISTRATION. EVEN IF REGISTRATION IS GRANTED THAT WILL NOT BE PRECLUDING THE AO TO EXAMINE IN DETAIL THE VERY OBJECT OF THE ASSES SEE AND TO GIVE THE FINDING IN ASSESSMENT PROCEEDINGS AS TO ASSESSEE HA D COMPLIED WITH THE REQUIREMENT OF S. 11 OR NOT. AT THE MOST REGISTRATI ON CERTIFICATE, IF GRANTED, WILL MAKE OUT A PRIMAFACIE CASE IN FAVOUR OF ASSESSE E THAT ITS ACTIVITIES ARE OF CHARITABLE BUT THAT WILL NOT BE OBSTACLE IN THE WAY OF AO AT THE TIME WHEN ASSESSMENT PROCEEDINGS ARE TO BE TAKEN UP AND TO DECIDE AS TO WHETHER ASSESSEE IS ENTITLED FOR THE BENEFIT OF S. 11 O R 12, AS THE CASE MAY BE. THAT WILL BE THE SECOND STAGE. ' IN THIS CASE, A DE TAILED ANALYSIS OF THE FACTS OF THE CASE SHOWS THAT THE APPELLANT IS NOT EN GAGED IN CHARITABLE ACTIVITIES AND, THEREFORE, THE CLAIM OF EXEMPT ION U/S 11 IS DENIED. THEREFORE, RELYING ON THE DECISION AS ABOVE, IN MY OPINION, THERE IS NO IRREGULARITY IN THE ACTION OF THE A.O.' AS REGARDS THE ISSUE OF TANGIBLE MATERIAL IS CONCERNED , IT IS NOTED THAT THE A.O. HAS DISCUSSED THE REASONS IN DETAILS IN THE ASSESSMENT ORDER ITSELF. FURTHER, RELYING ON THE CASE OF RAJESH JHAWERI S TOCK BROKERS AND OTHERS (SUPRA), IN MY OPINION, THERE IS NO ERROR ON THE PART OF THE A.O. IN RE-OPENING THE CASE AND, THEREFORE, GROUND NO. 2 OF THE APPEAL IS DISMISSED. 7 9. ON CONSIDERATION OF THE SUBMISSIONS OF THE LD. D R FOR THE REVENUE AND PERUSAL OF RECORD, WE DO NOT FIND ANY M ERIT IN GROUND NOS. 5 & 6 OF THE APPEAL OF THE ASSESSEE. 10. THE AUTHORITIES BELOW NOTED THE CONDUCT OF THE ASSESSEE IN SUBSEQUENT ASSESSMENT YEAR 2009-10 AND IT WAS FOUND THAT ASSESSEE WAS CARRYING ON ACTIVITIES WHICH ARE NOT I N THE NATURE OF ADVANCEMENT FOR ANY OTHER OBJECT OF GENERAL PUB LIC UTILITY. THE SAME FACTS WERE FOUND TO BE EXISTING IN ASSESSM ENT YEAR IN APPEAL AS WELL. THE ORIGINAL RETURN WAS MERELY PRO CESSED UNDER SECTION 143(1)(A) OF THE INCOME TAX ACT. THE ASSES SING OFFICER REPRODUCED THE REASONS FOR RE-OPENING OF THE ASSESS MENT IN THE ASSESSMENT ORDER IN WHICH IT WAS SPECIFICALLY NOTED THAT DURING THE COURSE OF ASSESSMENT YEAR 2009-10 IT WAS FOUND THAT ASSESSEE WAS CARRYING ON BUSINESS AND HAS EARNED HU GE PROFITS IN CRORES. THE PROFIT EARNED, FDRS CREATED BY ASSE SSEE AND BANK BALANCES ARE ALSO NOTED IN THE REASONS WHICH CLEARL Y SHOWED THAT THE ACTIVITIES OF THE ASSESSEE TRUST DOES NOT FALL WITHIN THE MEANING OF THE WORDS ADVANCEMENT OF ANY OTHER OBJE CT OF GENERAL PUBLIC UTILITY UNDER SECTION 2(15) OF THE ACT. 11. THE HON'BLE SUPREME COURT IN THE CASE OF ACIT V S. RAJESH JHAWERI STOCK PROGRESS PVT. LTD. 291 ITR 500 (S.C.) HELD THAT THERE BEING NO ASSESSMENT UNDER SECTION 143(1)(A), THE QUESTION OF CHANGE OF OPINION DOES NOT ARISE. IT WAS FURTHER HELD AS UNDER : THE EXPRESSION REASON TO BELIEVE IN SECTION 147 WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFIC ER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCO ME HAD ESCAPED ASSESSMENT, HE CAN BE SAID TO HAVE REASON T O BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSIN G 8 OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACTS B Y LEGAL EVIDENCE OR CONCLUSION. WHAT IS REQUIRED IS REASO N TO BELIEVE BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY Q UESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REAS ONABLE PERSON COULD HAVE FORMED THE REQUISITE BELIEF. WHE THER MATERIAL WOULD CONCLUSIVELY PROVE ESCAPEMENT OF INC OME IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF THE BELIEF IS WITHIN THE REALM OF THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER. 12. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF AN USANDHAN INVESTMENT LTD. VS .R. SINGH, DCIT & ANOTHER 287 IT R 482 (BOM) HELD AS UNDER : HELD, DISMISSING THE WRIT PETITION, THAT IN THE ASS ESSMENT ORDER FOR THE ASSESSMENT YEAR 1993-94 THE ASSESSING OFFICER H AD HELD THAT THE SALE OF SHARES AS PER THE AGREEMENT DATED JANUARY 3 ,1992, TOOK PLACE ON JANUARY 3, 1992 ITSELF AND THE CAPITAL GAINS IN RESPECT THEREOF WAS TAXABLE IN THE ASSESSMENT YEAR 1992-93. ADMITTEDLY, TH E ISSUE REGARDING THE CAPITAL GAINS ARISING FROM THE SALE OF SHARES PUR SUANT TO THE AGREEMENT DATED JANUARY 3,1992, WAS NEITHER RAISED NO R DISCUSSED IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 1992-9 3 IT IS WELL ESTABLISHED IN LAW THAT THE ASSESSMENTS CAN BE REOPEN ED ON THE BASIS OF THE INFORMATION CONTAINED IN THE ASSESSMENT FOR SUBSEQUENT YEARS. THE FACT THAT THE APPEAL FROM THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 1993-94 WAS PENDING BEFORE THE APPELLATE AUTHO RITY WAS WHOLLY IRRELEVANT FOR THE PURPOSE OF REOPENING THE ASSESSM ENT. THE NOTICE OF REASSESSMENT WAS VALID. 13. THE FACTS OF THE ABOVE CASE CLEARLY SHOW THAT T HE ASSESSING OFFICER ON THE BASIS OF FINDING OF FACT BROUGHT AGA INST ASSESSEE IN SUBSEQUENT ASSESSMENT YEAR 2009-10 HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMEN T. THE ASSESSING OFFICER, THEREFORE, HAS CAUSE OR JUSTIFIC ATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, HE C AN BE SAID TO HAVE REASON TO BELIEVE THAT THE INCOME HAD ESCAP ED ASSESSMENT. THE ASSESSING OFFICER WAS, THEREFORE, JUSTIFIED IN INITIATING THE PROCEEDINGS FOR RE-OPENING OF THE AS SESSMENT IN THE MATTER. 9 14. THE LD. CIT(APPEALS) ALSO NOTED IN THE IMPUGNED ORDER THAT DETAILED ANALYSIS OF THE CASE HAVE BEEN MADE BY THE ASSESSING OFFICER WHICH WERE PUT UP BEFORE HIGHER AUTHORITIES FOR APPROVAL OF THE RE-ASSESSMENT OF THE CASE. THE LD. CIT(APPE ALS) ALSO NOTED THAT THE ADDITIONAL CIT, AFTER EXAMINING THE RECORD HAS DULY APPROVED THE RE-OPENING OF THE ASSESSMENT BY N OTING IT IS A FIT CASE FOR ISSUE OF NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT. THEREFORE, PROPER MIND HAD BEEN APPLIED BY THE AUTHORITIES BELOW FOR GIVING SANCTION FOR RE-OPENIN G OF THE ASSESSMENT. 15. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DISCUSSION AND THE FACT THAT ASSESSEE HAS FAILED TO REBUT THE FINDING OF FACTS RECORDED BY THE AUTHORITIES BELOW, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF LD . CIT(APPEALS) ON THESE ISSUES. GROUND NOS. 5 & 6 OF THE APPEAL O F THE ASSESSEE ARE ACCORDINGLY, DISMISSED. 16. ON GROUND NOS. 2 & 3, ASSESSEE CHALLENGED THE DISALLOWANCE UNDER SECTION 11 OF THE ACT IGNORING T HE REGISTRATION GRANTED UNDER SECTION 12AA OF THE ACT. THE LD. CIT(APPEALS) RECORDED THE FACTS OF THE CASE ON THES E ISSUES AS EMANATING OUT OF THE RECORD AS UNDER : I) DURING THE YEAR THE APPELLANT HAS SHOWN GROSS REC EIPTS AT RS.51,94,02,0O4/-AND THE EXCESS OF INCOME OVER EXPE NDITURE IS RS.49,78,82,27O/-. IT IS, THEREFORE, OBSERVED THAT THE APPELLANT IS EARNING HUGE NET PROFIT BY CARRYING ON BUSINESS OF SAL E OF RESIDENTIAL PLOTS AS WELL AS SALE OF COMMERCIAL PLOT S BY AUCTION IN A SYSTEMATIC MANNER. THE COMPARATIVE FIGURES OF THE NE T PROFIT FDRS AND BANK BALANCE ARE AS UNDER:- ASSESS MENT YEAR GROSS RECEIPTS EXCESS OF INCOME OVER EXPENDITURE FDRS BANK BALANCES 10 2010-11 17,85,19,764 15,41,68,022 43,38,25,024 14,28,15,935 2009-10 52,46,06,811 50,49,77,952 1,05,60,13,324 17,99,47,679 2008-09 53,28,83,572 22,87,04,250 92,00,50,609 5,82,80,475 2007-08 51,94,02,004 49,78,82,720 57,82,68,124 1,39,46,665 II) IT WAS FURTHER NOTICED THAT THE APPELLANT IS CARR YING ON THE BUSINESS OF SALE OF PLOTS UNDER JOINT DEVELOPMENT AG REEMENT WITH OMAXE LTD. AND EARNS 15% PROFIT FROM THIS ACTIVITY A ND THE BALANCE PROFIT GOING TO M/S OMAXE LTD. THE FIGURES FOR LAST TWO YEARS ARE AS UNDER:- F.Y. TOTAL INCOME 15% SHARE OF ASSESSEE 2007-08 69,44,72,203/- 14,46,70,830/- 2008-09 76,01,27,620/- 1,40,19,430/- 2009-10 53,60,35,760/- 8,04,05,364/- III) LOOKING INTO THE ACTIVITY OF THE ASSESSEE TRUST I T WAS CLEAR THAT IT IS IN THE NATURE OF TRADE, COMMERCE AND DOESN'T FALL WITHIN THE MEANING OF THE WORDS 'THE ADVANCEMENT OF ANY OTHER OBJECT OF GENER AL PUBLIC UTILITY' U/S 2(15) OF THE ITACT'61. IV) THE NET PROFIT IN THIS YEAR IS 95-84% WHILE THE NET PROFIT IN THE CASE OF BUILDERS/DEVELOPERS IN THIS TRADE IS GENERALLY BETWEEN 5% 10% . V) THE A.O. HAS ALSO OBSERVED THAT THE NET SURPLUS GE NERATED BY THE TRUST REVEALS THAT THE TRUST HAS BEEN EARNING SYSTEMATIC PR OFITS AND, THEREFORE, THE RATIO OF THE DECISION IN THE CASE OF CIT VS. QUE ENS EDUCATIONAL SOCIETY HALDWANI & SANT PAUL SR. SEC. SCHOOL, KATHGODAM DELIVERE D BY HONBLE HIGH COURT IN ITA NO.W3 AND 104 IS APPLICABLE. THE A.O. A LSO HELD THAT IN A SIMILAR CASE OF CIT VS. NATIONAL INSTITUTE OF AER ONAUTICAL ENGINEERING EDUCATIONAL SOCIETY 26 DTK 193, THE HON'BLE UTTRAKHAN D HIGH COURT UPHELD THE REJECTION OF REGISTRATION U/S 12AA BY THE CI T. VI) IT IS ALSO OBSERVED THAT SIMILAR OTHER DEVELOPMENT AUTHORITIES LIKE HARYANA URBAN PLANNING AND DEVELOPMENT AUTHORITY, PU NJAB URBAN PLANNING DEVELOPMENT, GMADA ETC. ARE HELD TO BE LIABLE TO TAX. VII) SECTION 10(2OA) HAS BEEN OMITTED W.E.F. 01.04.2 003 AND, THEREFORE, THE INTENTION OF LEGISLATURE IS CLEAR FOR NOT GIVIN G EXEMPTION ON ANY INCOME OF AN AUTHORITY SITUATED IN INDIA FOR THE PURP OSE OF DEALING WITH OR SATISFYING THE NEED FOR HOUSING ACCOMMODATION. VIII) SECTION 10(20) HAS BEEN INCORPORATED W.E.F. 01.0 4.2003 AND BY DEFINITION THE ASSESSEE DOESN'T FALL WITHIN THE MEANING OF LOC AL AUTHORITY. THEREFORE, IT 11 IS CONTENDED THAT THE APPELLANT HAS WRONGLY SOUGHT R EGISTRATION U/S 12A OF THE IT ACT'6I. IX) IT IS NOTED THAT THE PLOTS HAVE BEEN SOLD AT EXO RBITANTLY HIGH RATES AND NO CONCESSION HAS BEEN GIVEN TO POOR FAMILIES. THE COMM ERCIAL PLOTS HAVE BEEN SOLD BY AUCTION AT THE MAXIMUM RATE. THEREFORE, THE AC TIVITY OF THE APPELLANT IS IN THE NATURE OF TRADE, COMMERCE OR BUSIN ESS WITH THE MOTIVE OF EARNING PROFIT. IT IS ALSO NOTED THAT THE PLOTS HAVE BEEN ACQUIRED AT A VERY LOW RATE AND THE AVERAGE PURCHASE RATE IS AROUND RS .175 PER SQUARE YARD WHILE THE SAME ARE SOLD @ OF 5,000/- TO 6,000/- PER SQUARE YARD. EVEN AFTER CONSIDERING THE DEVELOPMENTAL EXPENSES ETC, T HE SELLING PRICE IS EXORBITANTLY HIGH. X) THE APPELLANT IS CHARGING DIFFERENT KIND OF FEES FROM THE ALLOTTEES AS WELL AS PENAL INTEREST FOR DELAYED PAYMENT OF INSTALLMENTS. P ROCESSING FEE IS CHARGED FOR TRANSFER OF PLOT, ADDITION AND DELETION OF NAME, NO OBJECTION CERTIFICATE ETC. LICENCE FEES IS ALSO CHARGED. CHAR GING SUCH TYPE OF FEES CLEARLY SHOWS THAT THE AUTHORITY IS CARRYING ON ACT IVITY IN THE TRADE, COMMERCE OR BUSINESS AND. THEREFORE, IT IS NOT AN AC TIVITY FOR ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. XI) HUGE AMOUNTS HAVE BEEN INVESTED IN FDRS AND BAN KS WHICH ARE INCREASING YEAR AFTER YEAR. THIS ALSO SHOWS THAT THE ACTIVITIES ARE IN THE NATURE OF TRADE COMMERCE OR BUSINESS. THE ASSESSEE IS CHARGING DIFFERENT TYPE OF FEES, CESS, LATE FEES, INTEREST AND PENALTIE S ETC. IF THE CONTENTION OF THE APPELLANT IS ACCEPTED THEN OTHER SIMILAR TRADE, COMMERCE OR BUSINESS DONE BY EVERY PERSON IN INDIA WILL ALSO BE TERMED AS A N ACTIVITY OF GENERAL PUBLIC UTILITY. THE APPELLANT'S PLEA THAT SETTING UP OF INTEGRATED TOWNSHIP WHICH INCLUDES SALE OF PLOTS IS AN INCIDENTAL ACTIVITY TO THE MAIN ACTIVITY COVERED U/S 11(4)/11(4A) OF THE ACT IS NOT RELEVANT WH EN THE ACTIVITIES OF THE TRUST ITSELF IS HELD TO BE COMMERCIAL IN NATURE. XII)THE ASSESSEE'S PLEA IS THAT SECTION 2(15) IS AP PLICABLE W.E.F. 01.04.2009 IS ALSO NOT RELEVANT AS EVEN THEN THE ACTIVITY ITSELF IS NOT FOR THE PURPOSE OF ADVANCEMENT OF GENERAL PUBLIC UTILITY. 6.1 AT THIS POINT, IT IS WORTHWHILE TO NOTE THAT THE HON'BLE ITAT CHANDIGARH IN THE CASE OF PUDA VS. CIT 103 TTJ (CHD) 988 HAS HELD THAT 'IT IS A WELL KNOWN FACT THAT IN SOME OF THE SI TUATIONS THE PROVISIONS OF LAW ARE MISUSED IN THE NAMES OF CHARITIES. IF EXPA NDED/BROADER LATITUDE IS EXTENDED TO THE WORD CHARITY, THEN THERE ARE SO MANY INSTITUTIONS/DEPARTMENTS WHO WILL TRY TO COME UNDER THE UMBRELLA OF THIS PROVISION TO MISUSE THE PROVISION. THEREFORE, FOR THE BROAD DEVELOPMENT OF THE NATION/SOCIETY, A STRICT AND POSITIVE VIGIL IS RE QUIRED SO THAT THE PROVISION CAN BE SAVED FROM ITS MISUSE IN ANY MANNE R. NO ACTIVITY CAN BE CARRIED ON EFFICIENTLY, PROPERLY UNLESS AND UNTIL IT I S CARRIED OUT ON BUSINESS PRINCIPLE BUT IT DOES NOT MEAN THAT THE PROVISION IS MISUSED IN ANY MANNER UNDER THE GARB OF CHARITY AND ANY INSTITUTION BE ALLOWED TO BECOME RICHER AND RICHER UNDER THE GARB OF CHARITY BY MAKING IT A NON TAX PAYABLE ORGANIZATION. A CHARITABLE INSTITUTION PROV IDES SERVICES FOR CHARITABLE PURPOSES FREE OF COST AND NOT FOR A GAIN. IN THE PRESENT SCENARIO, SIMILAR ACTIVITIES ARE PERFORMED BY BIG COLONIZERS/ DEVELOPERS WHO ARE EARNING A HUGE PROFIT. IF THIS REGISTRATION IS GRANTE D, THEN ANYBODY WILL CLAIM THE EXEMPTION FROM TAX. IF THE ACCOUNTS OF TH E ASSESSEE ARE ANALYZED, IT HAS TURNED INTO A HUGE PROFIT-MAKING AGENCY FOR W HICH IT IS TAKING MONEY FROM THE GENERAL PUBLIC. IF ANY INSTITUTIONS OF PUB LIC IMPORTANCE LIKE SCHOOLS, COMMUNITY CENTERS ARE CREATED/DEVELOPED, THE ASSESS EE IS CHARGING THE 12 COST OF IT FROM THE PUBLIC AT LARGE AND THE MONEY IS COMING FROM THE COFFER OF THE GOVERNMENT. IT CAN BE SAID THAT OBJECTS/ACTI VITIES OF THE ASSESSEE ARE MORE OF COMMERCIALIZED NATURE AND NO CHARITY IS INVOLVED IN IT. AT THE SAME TIME, IF THESE FACILITIES ARE NOT PROVIDED, THEN NOBODY WILL PURCHASE A PLOT. IT CAN BE SAID THAT IT IS A MEANS OF ATTRACTI NG THE PEOPLE SO THAT MAXIMUM PEOPLE MAY APPLY FOR THE SAME AND THE HIDDE N COST IS ALREADY ADDED, SO NO CHARITY IS INVOLVED. AT BEST, THE ASSESSE E CAN BE SAID TO BE AN AUTHORITY CREATED TO HELP IT TO ACHIEVE CERTAIN OBJ ECTS. IT CAN BE SAID THAT IT IS THE DUTY OF THE GOVERNMENT TO CREATE/PROVIDE ALL THESE FACILITIES TO PUBLIC AT LARGE, WHICH IS BEING DONE THROUGH HIS AGENCY IN A PARTICULAR AREA. AT THE SAME TIME, THE FUNDS WHICH ARE PROVIDED TO THE AS SESSEE BY THE GOVERNMENT IS AGAIN A PUBLIC MONEY OR GENERATED FROM THE PUBLIC ITSELF. THE OBJECTS OF THE ASSESSEE, THOUGH CLAIMED TO BE CHA RITABLE, BUT ACTUALLY ARE OF PURELY COMMERCIAL NATURE WHERE PROFIT MOTIVE IS INVOLVED. IT IS A KNOWN FACT THAT THE ASSESSEE IS ACQUIRING THE LAND A T VERY LOW PRICES AND SELLING THE SAME LAND ON VERY HIGHER RATES AND IS EA RNING A PROFIT THERE FROM. A NEW TREND HAS ALSO EMERGED THAT THE ASSESSE E HAS STARTED AUCTIONING THE PLOTS BY WAY OF BIDDING AT THE MARKET RATE AND SOMETIMES MORE THAN THAT AND CHARGING INTEREST ON BELATED PAYM ENTS. IN SUCH A SITUATION, NO CHARITY IS INVOLVED. RATHER THE ASS ESSEE HAS CONVERTED ITSELF INTO A BIG BUSINESSMAN. SIMILAR DEVELOPMENT/INFRASTRUCTURE/FACILITIES ARE ALSO PROVIDED BY PRIVATE DEVELOPERS THESE DAYS, THEN THEY WILL ALSO CLAIM THE STATUS OF A CHARITABLE INSTITUTION. THE FACILITIES WHICH ARE PROVID ED TO THE PLOT HOLDERS ARE INCIDENTAL TO THE COMMERCIAL ACTIVITY CARRIED OUT BY THE ASSESSEE AND IF CERTAIN FACILITIES LIKE PARKS, COMMUNITY CENTER, SC HOOL ARE PROVIDED, IT IS NOT ONLY BASIC REQUIREMENT, RATHER A TOOL OF ATTRAC TING THE INVESTORS WHEREIN THE HIDDEN COST OF THESE FACILITIES IS ALREA DY INCLUDED. IN THE ABSENCE OF THESE FACILITIES, NORMALLY THE PURCHASER M AY NOT INVEST AND THE PRICES MAY BE LESS. IN VIEW OF THESE FACTS, THE A SSESSEE'S ACTIVITIES NOT BEING OF CHARITABLE NATURE, THE APPLICATION OF REG ISTRATION UNDER S. 12A HAS BEEN RIGHTLY REJECTED BY CIT' 17. THE LD. CIT(APPEALS) CONSIDERING THE MATERIAL O N RECORD DISMISSED THESE GROUNDS OF APPEAL OF THE ASSESSEE. THE FINDINGS OF LD. CIT(APPEALS) IN THE IMPUGNED ORDER ARE REPRO DUCED AS UNDER : THE FACTS OF THE PRESENT CASE IS SIMILAR TO THAT O F PUDA AS EMANATING FROM THE DISCUSSION IN PARA. 5 OF THE ORDE R IN CASE OF PUDA (SUPRA). IT IS WORTHWHILE TO NOTE THAT IN THE CASE OF' PUNJAB URBAN PLANNING & DEVELOPMENT AUTHORITY VS. CIT 103 TTJ (C HD) 988. IT HAS BEEN ARGUED BY THE APPELLANT THAT OBJECTS OF PUDA A RE IDENTICAL TO OBJECTS OF PATIALA URBAN PLANNING & DEVELOPMENT AUT HORITY IN WHICH CASE REGISTRATION U/S 12A OF THE IT ACT WAS ACCORDED BY THE CIT, PATIALA. THE HON'BLE ITAT HELD THAT THE APPELLANT I.E. PUDA IN T HAT CASE, A LOCAL AUTHORITY CONSTITUTED FOR PLANNED DEVELOPMENT OF TH E STATE, ACQUIRING LAND AT NOMINAL RATE AND SELLING THE SAME AFTER DEV ELOPMENT TO GENERAL PUBLIC AT HIGHER RATES IS ENGAGED IN COMMERCIAL ACTI VITIES OF PROFIT MOTIVE AND CAN'T BE SAID TO BE CARRYING ON CHARITABLE ACTI VITIES. ADMITTEDLY, THE FACT OF THIS CASE IS IDENTICAL TO THAT OF PUDA AS CO NTENDED BY THE 13 APPELLANT HIMSELF IN THE CASE OF PUDA AND, THEREFORE , ALSO IT CAN BE REASONABLY SAID THAT THE APPELLANT IS NOT ENGAGED IN CHAR ITABLE ACTIVITIES. 6.2 FURTHER, IN THIS PARTICULAR CASE FROM THE FACT S DISCUSSED AS ABOVE, IT IS AMPLY CLEAR THAT AN ACTIVITY IN THE NATUR E OF TRADE, COMMERCE OR BUSINESS HAS BEEN CARRIED OUT BY THE APPELLANT. IT HAS ENTERED INTO A JOINT DEVELOPMENT AGREEMENT WITH PRIVATE DEVELOPER A ND THIS DEVELOPER IS USING BRAND NAME OF PDA FOR ALL ITS ACTIVITIES WHI LE CORNERING 85% OF THE PROFIT GENERATED. THERE IS A HUGE DIFFERENCE BET WEEN PURCHASE AND THE SALE RATE OF PLOTS GIVING ABNORMALLY HIGH PROFIT AND A MAJOR PART OF THE PROFIT IS CORNERED BY THE PRIVATE DEVELOPER. IT IS ALSO NOTED FROM PERUSAL OF THE ASSESSMENT ORDER FOR A.Y. 2009-10 WH EREIN THE FACTS ARE SIMILAR AS CONTENDED BY THE A.O. THAT THE DOMINANT PA RTNER OF THIS JOINT DEVELOPMENT AGREEMENT I.E. M/S OMEX LTD. IS NOT CLAIMI NG ANY EXEMPTION IN RESPECT OF 85% SHARE OF PROFIT RECEIVE D THROUGH THE JOINT DEVELOPMENT AGREEMENT. IT IS, THEREFORE, NOT UNDERSTOO D AS TO HOW THE APPELLANT IS CLAIMING EXEMPTION U/S 11 WHILE THE ACTI VITIES REMAIN SAME. 6.3 THE APPELLANT HAS ALSO SUBMITTED THAT PDA IS STATUTORY BODY FUNCTIONING UNDER STATUTORY PROVISIONS AND ITS OBJE CTIVES ARE OF GENERAL PUBLIC UTILITY AND FURTHER THAT IN THE EVENT OF DISSOLUTION OF PDA ALL THE ASSETS VESTS WITH STATE GOVT. IT HAS ALSO B EEN ARGUED BY THE APPELLANT THAT PDA IS SET UP WITH THE OBJECT OF DEVELOPMENT OF PATIALA AND SALE OF PLOTS IN THE PROCESS OF SETTING U P OF INTEGRATED TOWNSHIP IS TO SUBSERVE THE MAIN OBJECT. THE APPELLAN T RELIED ON CASE OF JODHPUR DEVELOPMENT AUTHORITY VS. CIT145 TTJ 221 AND JAIPUR DEVELOPMENT AUTHORITY VS. CIT IN ITA NO. 27/JB/2OO7 ETC. THESE CASES APPARENTLY PERTAINS TO REGISTRATION U/S 12A/12 AA OF THE IT ACT'61. THE APPELLANT ALSO CONTENDED THAT THE MAIN ACTIVITY IN THE CASE OF THE ASSESSEE IS NOT BUSINESS. THE CONNECTED INCIDENTALLY OR ANCILLARY ACTIVITIES OF SALES CARRIED OUT IN FURTHERAN CE AND TO ACCOMPLISH THEIR MAIN OBJECTS WOULD NOT NORMALLY AMO UNT TO BUSINESS UNLESS AN INDEPENDENT INTENTION TO CONDUCT BUSINESS IN THESE CONNECTED, INCIDENTAL OR ANCILLARY ACTIVITY IS ESTABLISHED BY THE REVENUE. HOWEVER, IN THIS CASE, IT IS SEEN THAT THE APPELLANT WAS ACQUIRING HUGE CHUNKS OF LAND AT NOMINAL PRICE AND, THEREAFTER , THE SAME WERE SOLD AT EXORBITANTLY HIGH PRICES. THE COMMERCIAL PL OTS WERE SOLD THROUGH AUCTION EVIDENTLY TO THE HIGHEST BIDDER. LEVY OF FINES AND PENALTIES IMPLIES AND ELEMENT OF FORCE TO AVAIL MONETA RY BENEFIT. IT IS ALSO NOTED FROM THE ASSESSMENT ORDER THAT ONE OF THE PARTY TO THE JDA I.E. M/S OMEX LTD. HAS NOT FULFILLED THE CONDITIONS NO. (II) & (IN), I.E. PROVIDING EMPLOYMENT TO AROUND 5,000 PERSONS IN THE C ORE SECTOR AND TO PROVIDE BUILT UP AREA OF ATLEAST 2.5 LAKH SQ.FT. FOR THE IT & BIO-TECH SECTOR. THUS, THE TERMS OF THE AGREEMENT ARE ALSO N OT FULFILLED. FURTHER, THE CLAIM OF CHARITY AND EXEMPTION SOLELY BASED ON B EING STATUTORY AUTHORITY IMPLEMENTING GOVT. POLICY IS NOT ACCEPTABL E. THE DECISION IN THE CASE OF ENTERTAINMENT SOCIETY OF GOA VS. CIT, IT A NO.GO/PNJ/2OI2 A.Y. 2009-10 HAS SUPPORTED THIS FINDING. LOOKING INT O THE TOTALITY OF THE CASE, IT IS AMPLY CLEAR THAT THE APPELLANT IS ENGA GED IN AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS THEREFO RE, THE ACTION OF THE A.O. IS CONFIRMED AND GROUND NO. 3&4 IS DISMISSED . 18. ON CONSIDERATION OF THE FACTS OF THE CASE, IN T HE LIGHT OF THE FINDINGS ABOVE, WE DO NOT FIND ANY MERIT IN THESE G ROUNDS OF 14 APPEAL OF THE ASSESSEE. THE FACTS AS NOTED ABOVE H AVE NOT BEEN DISPUTED THROUGH ANY MATERIAL ON RECORD. THE FACTS CLEARLY SHOWED THAT THERE WAS EXCESS OF INCOME OVER EXPENDI TURE IN A SUM OF RS. 49.78 CRORES IN ASSESSMENT YEAR UNDER AP PEAL. APART FROM THAT, ASSESSEE HAS HUGE FDRS AND BANK BALANCES BY CARRYING ON BUSINESS OF SALE OF RESIDENTIAL PLOTS A S WELL AS SALE OF COMMERCIAL PLOTS BY AUCTION IN A SYSTEMATIC MANNER. IT WAS ALSO FOUND THAT ASSESSEE WAS CARRYING ON BUSINESS OF SAL E OF PLOTS UNDER JOINT DEVELOPMENT AGREEMENT WITH M/S OMAXE LT D. AND EARNED 15% OF THE PROFIT FROM THIS ACTIVITY AND BAL ANCE PROFIT HAD GONE TO M/S OMAXE LTD. THE FIGURES ARE REPRODU CED ABOVE, WHICH ARE IN CRORES. THE AUTHORITIES BELOW WERE TH EREFORE, OF THE VIEW THAT THE NATURE OF THE BUSINESS OF THE ASSESSE E WOULD NOT FALL WITHIN THE MEANING OF THE WORD THE ADVANCEMEN T OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY UNDER SECTIO N 2(15) OF THE ACT. IT WAS FURTHER FOUND THAT HUGE PROFIT IS PAR TED WITH THE BUILDER/DEVELOPER AND IN SIMILAR CASES, THE DIFFERE NT AUTHORITIES OF HARYANA AND PUNJAB WERE FOUND LIABLE TO TAX. TH E LD. DR RELIED UPON DECISION OF ITAT CHANDIGARH BENCH IN TH E CASE OF PUDA VS CIT 103 TTJ 988 (SUPRA) IN WHICH IT WAS HEL D AS UNDER: ASSESSEE, A LOCAL AUTHORITY CONSTITUTED FOR PLANNE D DEVELOPMENT OF THE STATE, ACQUIRING LAND AT NOMINAL RATES AND SELLING THE SAME AFTER DEVELOPMENT TO GENERAL P UBLIC AT HIGHER RATES IS ENGAGED IN COMMERCIAL ACTIVITIES OF PROFIT MOTIVE AND CANNOT BE SAID TO BE CARRYING ON CHARITABLE ACTIVITIES AND THEREFORE, REGISTRATION U NDER S. 12A COULD NOT BE GRANTED. 19. THE LD. DR ALSO RELIED UPON DECISION OF HON'BLE HIGH COURT OF JAMMU & KASHMIR IN THE CASE OF JAMMU DEVELOPMENT AUTHORITY VS UNION OF INDIA IN ITA NO. 164/2012 IN WHICH THE ORDER OF THE TRIBUNAL HAS BEEN UPHELD WITHDRAWING T HE STATUS OF 15 CHARITABLE INSTITUTION GIVEN TO THE ASSESSEE AND CO PY OF THE ORDER OF HON'BLE SUPREME COURT IS ALSO FILED IN WHICH THE SLP OF JAMMU DEVELOPMENT AUTHORITY HAS BEEN DISMISSED. 2 O . THE LD. DR ALSO RELIED UPON DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS RED ROSE SCHOOL 21 2 CTR 394 (ALL) ON THE PROPOSITION THAT EVEN IF REGISTRATION IS GRANTED UNDER SECTION 12AA OF THE ACT, SUFFICIENT SAFEGUARDS HAVE BEEN GIVEN UNDER SECTION 11, 12 AND 13 OF THE ACT FOR ASSESSIN G INCOME WHICH HAS NOT BEEN APPLIED TO THE PURPOSE OF THE TR UST OR INSTITUTION. THE LD. DR, THEREFORE, CONTENDED THAT EVEN IF ASSESSEE HAS PLEADED THAT THERE WAS REGISTRATION UN DER SECTION 12AA WHICH WAS LATER ON CANCELLED BY THE LD. COMMIS SIONER OF INCOME TAX, STILL ASSESSING OFFICER IS EMPOWERED TO EXAMINE THE APPLICABILITY OF PROVISIONS OF SECTION 11 TO 13 AT THE ASSESSMENT STAGE OF ASSESSEE WHETHER THE ASSESSEE IS ENTITLED FOR EXEMPTION OF INCOME UNDER THESE PROVISIONS. 21. WE DO NOT FIND ANY QUARREL WITH THE LEGAL PROPO SITION ARGUED BY THE LD. DR BECAUSE EVEN IF REGISTRATION I S EXISTING UNDER SECTION 12AA IN FAVOUR OF THE ASSESSEE, STILL ASSESSING OFFICER IS EMPOWERED TO EXAMINE THE APPLICABILITY O F PROVISIONS OF SECTION 11 TO 13 AT THE ASSESSMENT STAGE TO SEE WHETHER INCOME IS APPLIED BY THE ASSESSEE FOR CHARITABLE PU RPOSE TO ACHIEVE ITS AIMS AND OBJECTS. IN THE PRESENT CASE, THE ASSESSING OFFICER ON THE BASIS OF THE FINDING GIVEN IN SUBSEQ UENT ASSESSMENT YEAR 2009-10 AND EXAMINING THE RECORD OF THIS ASSESSMENT YEAR FOUND THAT ASSESSEE HAS BEEN CARRYI NG ON BUSINESS OF SALE OF PLOTS AND EARNED HUGE PROFITS A S WELL AS ENTERED INTO AGREEMENT WITH M/S OMAXE LTD. AND EARN ED 15% OF 16 THE PROFIT FROM SUCH ACTIVITY. NO AMOUNT IS SPENT ON CHARITABLE PURPOSES. THEREFORE, ASSESSING OFFICER RIGHTLY FOUN D THAT ASSESSEE'S ACTIVITY DOES NOT FALL WITHIN THE MEANIN G OF THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY UNDER SECTION 2(15) OF THE INCOME TAX ACT. THE LD. CIT( APPEALS) ALSO NOTED IN THE IMPUGNED ORDER THAT FACTS OF THE CASE OF THE ASSESSEE ARE IDENTICAL TO THAT OF PUDA AS WAS CONTE NDED BY THE ASSESSEE BEFORE HIM. THE LD. CIT(APPEALS) WAS THER EFORE, JUSTIFIED IN FOLLOWING THE DECISION OF ITAT CHANDIG ARH BENCH IN THE CASE OF PUDA (SUPRA). IT WAS ALSO FOUND THAT W HEN INCOME OF M/S OMAXE LTD. WAS TAXABLE WHICH EARNED 85% OF THE INCOME, THEN HOW THE INCOME OF THE ASSESSEE AT 15% FROM THE SAME JOINT AGREEMENT WITH M/S OMAXE LTD. WOULD BE EXEMPT AND H OW THE ASSESSEE COULD CLAIM EXEMPTION OF INCOME UNDER SECT ION 11 OF THE ACT. THE AUTHORITIES BELOW HAVE CORRECTLY ANAL YZED THE FACTS AND MATERIAL ON RECORD BEFORE GIVING ADVERSE FINDIN G AGAINST THE ASSESSEE DENYING EXEMPTION U/S 11 OF IT ACT. THE A SSESSEE HAS NOT BEEN ABLE TO REBUT THE FINDING OF FACTS RECORDE D BY THE AUTHORITIES BELOW AND IN THE ABSENCE OF ANY MATERIA L ON RECORD IN FAVOUR OF THE ASSESSEE, WE DO NOT FIND ANY JUSTI FICATION TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW. GROUND OF APPEAL NOS. 2 & 3 OF THE APPEAL OF THE ASSESSEE ARE , ACCORDINGLY DISMISSED. 21-A. ON GROUND NO. 4 ASSESSEE CHALLENGED ORDER OF LD. CIT(APPEALS) IN UPHOLDING THE STATUS OF ARTIFICIAL JURISDICTIONAL PERSON AGAINST STATUS OF AOP (TRUST). THE LD. CIT( APPEALS) NOTED THAT FACTS ARE SIMILAR AS WERE CONSIDERED IN ASSESS MENT YEAR 2009-10 IN WHICH STATUS OF ASSESSEE HAS BEEN TAKEN AS ARTIFICIAL 17 JURISDICTIONAL PERSON. IT WAS ALSO NOTED THAT IN T HE SIMILAR CASE OF PATIALA IMPROVEMENT TRUST FOR ASSESSMENT YEAR 20 03-04 AND 2004-05, ITAT HELD THAT THE STATUS OF ASSESSEE SHOU LD BE OF ARTIFICIAL JURISDICTIONAL PERSON. THEREFORE, FINDI NG THE ISSUE TO BE SAME, LD. CIT(APPEALS) CONFIRMED THE ORDER OF AS SESSING OFFICER AND DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. NOTHING IS ARGUED FROM THE SIDE OF THE ASSESSEE. T HEREFORE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF LD. CIT(APPEALS) IN CONFIRMING THE ORDER OF THE ASSESSI NG OFFICER TAKING THE STATUS OF ARTIFICIAL JURISDICTIONAL PERS ON BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF PATIALA IM PROVEMENT TRUST. GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY, DISMISSED. 22. GROUND NO. 1 IS GENERAL AND NEEDS NO FINDING. 23. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ITA 675/CHD/2014 (A.Y. 2008-09) 24. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS), PATIALA DATED 27.06.2010 FOR ASSESSME NT YEAR 2008-09. THE ASSESSEE HAS RAISED SIMILAR SIX GROUN DS OF APPEAL AS HAVE BEEN NOTED IN ASSESSMENT YEAR 2007-08. THE LD. DR CONTENDED THAT THE GROUNDS OF APPEAL AND ISSUES ARE SAME AS HAVE BEEN CONSIDERATION IN ASSESSMENT YEAR 2007-08. THEREFORE, FOLLOWING THE ORDER FOR ASSESSMENT YEAR 2007-08 (SU PRA), WE DISMISS ALL THE IDENTICAL SIX GROUNDS OF APPEAL IN THIS ASSESSMENT YEAR AS WELL. 25. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED. 18 ITA 839/CHD/2014 (A.Y. 2010-11) 26. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS), PATIALA DATED 30.07.2014 FOR ASSESSM ENT YEAR 2010-11. THE ASSESSEE HAS RAISED THE FOLLOWIN G FIVE EFFECTIVE GROUNDS OF APPEAL : 1. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN UPHOLDING THE ILLEGAL ASSESSMENT ORDER PAS SED BY THE ASSESSING OFFICER. 2. THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE MADE BY THE AO OF THE CLAIM MADE B Y THE APPELLANT U/S 11 IGNORING THE REGISTRATION GRANTED U/S 12AA BY THE CIT VALID AT THE TIME OF ASSESSMENT. 3. THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE OPINION OR THE AO THAT THE ACTIVITIES OF THE AP PELLANT ARE FOR PROFIT AND NOT CHARITABLE DESPITE REGISTRATION U/S 12AA IN FORCE, IGNORING THAT REGISTRATION UNDER SECTIO N 12A IS A 'FAIT ACCOMPLI' TO HOLD THE ASSESSING OFFICER BACK FROM FURTHER PRO BE INTO THE OBJECTS OF THE TRUST. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE STATUS OF ARTIFICIAL JURIDICAL PERSON AGAINST AOP (TRUST) WHEN THE APPELLANT IS A STATUTORY BODY DOIN G SOVEREIGN FUNCTIONS UNLIKE PRIVATE BUILDERS AND ITS OBJECTIVE S ARE OF GENERAL PUBLIC UTILITY AND IN EVENT OF DISSOLUTION OF APPELLANT ALL THE ASSETS VESTS WITH THE STATE GOVERNMENT. 5. THAT THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THAT THE APPELLANT IS NOT ENGAGED IN CHARITABLE ACTIVITIES A ND IS INVOLVED IN THE ACTIVITY IN THE NATURE OF TRADE, COMMERCE AN D BUSINESS, IGNORING THAT THE APPELLANT IS CARRYING OUT ITS ACT IVITIES ON NON- COMMERCIAL LINES WITH NO MOTIVE TO EARN PROFITS, FO R FULFILLMENT OF ITS AIMS AND OBJECTIVES WHICH ARE ADMITTEDLY CHARIT ABLE IN NATURE. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DI SPOSED OF. 27. THE LD. DR CONTENDED THAT ALL THESE GROUNDS ARE SAME AS HAVE BEEN CONSIDERED IN PRECEDING ASSESSMENT YEARS ABOVE. FOLLOWING THE REASONS FOR DECISION IN ASSESSMENT YE AR 2007-08, 19 WE DISMISS THESE SIX GROUNDS OF APPEAL OF ASSESSEE BEING IDENTICAL IN NATURE. 28. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ITA 840/CHD/2014 (A.Y. 2011-12) 29. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS), PATIALA DATED 20.08.2014 FOR ASSE SSMENT YEAR 2011-12 ON THE FOLLOWING GROUNDS : 1. THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN L AW AND ON FACTS IN UPHOLDING THE ILLEGAL ASSESSMENT ORDER PAS SED BY THE ASSESSING OFFICER. 2. THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS I N UPHOLDING THE DISALLOWANCE MADE BY THE AO OF THE CLAIM MADE B Y THE APPELLANT UNDER SECTION 11 IGNORING THE REGISTRATIO N GRANTED U/S 12AA BY THE CIT VALID AT THE TIME OF ASSESSMENT ; 3. THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE OPINION OF THE AO THAT THE ACTIVITIES OF THE APPELLANT ARE FOR PROFIT AND NOT CHARITABLE DESPIT E REGISTRATION U/S 12AA IN FORCE, IGNORING T HAT REGISTRATION UNDER SECTION 12A IS A FAIT ACCOMPLI' TO HOLD THE ASSESSING OFFICER BACK FROM FURTHER PROBE INTO THE OBJECTS OF THE TRUST. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE STATUS OF ARTIFICIAL JURIDICAL PERSON AGAINST AOP (TRUST) WHEN THE APPELLANT IS A STATUTORY BODY DOIN G SOVEREIGN FUNCTIONS UNLIKE PRIVATE BUILDERS AND ITS OBJECTIVES ARE OF GENERAL PUBLIC UTILITY AND IN EVENT OF DISSO LUTION OF APPELLANT ALL THE ASSETS VESTS WITH THE STATE GOVER NMENT. 5. THAT THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THAT THE APPELLANT IS NOT ENGAGED IN CHARITABLE ACTIVITIES A ND IS INVOLVED IN THE ACTIVITY IN THE NATURE OF TRADE, COMMERCE AND BUSINESS, IGNORING THAT THE APPELLANT IS CARRYING O UT ITS ACTIVITIES ON NON-COMMERCIAL LINES WITH NO MOTIVE T O EARN PROFITS, FOR FULFILLMENT OF ITS AIMS AND OBJECTIVES WHICH ARE ADMITTEDLY CHARITABLE IN NATURE. 6. WITHOUT PREJUDICE TO THE ABOVE GROUNDS AND STR ICTLY IN THE ALTERNATIVE, THE LD. CIT(A), HAS GROSSLY ERRED IN U PHOLDING THE DISALLOWANCE OF THE EXPENDITURE TO THE TUNE OF RS. 22.27 CRORES WHICH EVEN IF DIRECTLY RELATED TO THE ALLEGE D BUSINESS OF THE APPELLANT, SHOULD HAVE BEEN ALLOWED TO THE APP ELLANT BEING AN BUSINESS EXPENDITURE. 30. THE LD. DR CONTENDED THAT GROUND NOS. 1 TO 5 AR E SAME WHICH HAVE ALREADY BEEN CONSIDERED IN ASSESSMENT YE AR 2007-08 20 AND ARE ALSO IDENTICAL AS HAVE BEEN RAISED IN ASSES SMENT YEAR 2010-11. FOLLOWING THE ORDER FOR ASSESSMENT YEAR 2 007-08, THESE GROUNDS BEING IDENTICAL, ARE ACCORDINGLY DISM ISSED. 31. THE LD. DR, HOWEVER, CONTENDED THAT GROUND NO. 6 IS NEW AND HAS ARGUED THAT NO INTERFERENCE IS CALLED FOR I N THE ORDER OF THE LD. CIT(APPEALS). REGARDING DISALLOWANCE OF EXP ENDITURE TO THE TUNE OF RS. 22.27 CRORES, THE LD. CIT(APPEALS) NOTED THAT BECAUSE OF THE NATURE OF ACTIVITY OF THE ASSESSEE, IT IS ALREADY HELD THAT CLAIM OF EXEMPTION UNDER SECTION 11 IS NO T ALLOWABLE. THEREFORE, THE DONATION OF RS. 11.80 CRORE WAS ALSO NOT ALLOWABLE. THE LD. CIT(APPEALS) FURTHER NOTED THAT ASSESSEE IS CLEARLY ENGAGED INTO THE BUSINESS ACTIVITY, THEREFO RE ALSO SUCH EXPENDITURE NOT RELATED TO THE BUSINESS IS NOT ALLO WABLE 31(I) AS REGARDS EXPENDITURE OF RS. 10.47 CRORES, THE ASSESSEE DURING THE ASSESSMENT AND APPELLATE PROCEEDINGS HAS SIMPLY MENTIONED THAT THIS EXPENDITURE IS INCURRED BY THE ASSESSEE ON DEVELOPMENT WORK IN PURSUANCE OF OBJECTS AS PER DIRECTION/APPROVAL OF THE AUTHORITY. HOWEVER, THE NATURE OF SUCH EXPENSES AND ITS RELATION TO THE BUSINESS OF T HE ASSESSEE WAS NOT EXPLAINED, THEREFORE, FINDINGS OF THE ASSES SING OFFICER DISALLOWING EXPENDITURE WAS CONFIRMED BY THE LD. CI T(APPEALS) AND DISMISSED THIS GROUND. 32. ON CONSIDERATION OF SUBMISSIONS OF LD. DR, WE D O NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF LD . CIT(APPEALS). WE HAVE ALREADY CONFIRMED ORDERS OF THE AUTHORITIES BELOW DENYING EXEMPTION UNDER SECTION 11 OF THE ACT, THER EFORE, DONATION IS NOT ALLOWABLE DEDUCTION BECAUSE IT IS N OT CONNECTED 21 WITH BUSINESS ACTIVITY OF THE ASSESSEE. FURTHER EX PENDITURE OF RS.10.47 CRORES CANNOT BE ALLOWED BECAUSE ASSESSEE HAS FAILED TO EXPLAIN NATURE OF THE BUSINESS EXPENDITURE BEFOR E THE AUTHORITIES BELOW. EVEN BEFORE US NO DETAILS HAVE B EEN FURNISHED. THEREFORE, IN THE ABSENCE OF ANY DETAILS OR EVIDENCES, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW. THIS GROUND OF APPEAL OF TH E ASSESSEE IS ACCORDINGLY, DISMISSED. 33. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS D ISMISSED. 34. IN THE RESULT, ALL APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH MAY,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 6 TH MAY,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH