THE BRITISH SCHOOL SOCIETY,DELHI V. CIT (EXEMPTION), DELHI, DELHI

ITA 2554/DEL/2024

AI Insights

The case involves The British School Society, which appealed against the orders of the Commissioner of Income Tax (Exemption) (CIT(E)) for the Assessment Years 2013-14 and 2014-15. The CIT(E) had set aside the reassessment orders passed by the Assessing Officer (AO) under section 147 r.w.s. 144B, which accepted the society's returned income, on the grounds that the donations received were capitation fees and required further investigation. The Tribunal examined whether the CIT(E) was justified in invoking section 263, considering the legal and factual matrix, including the nature of the donations and the procedures followed by the AO during reassessment. The Tribunal concluded that the CIT(E) had overstepped by revising the orders as they were not found to be erroneous or prejudicial to the revenue's interests.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 42228 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 26-09-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 20-05-2024
• Other Referred Cases: Malabar Industrial Co. Ltd vs. CIT, Kwality Steel Suppliers Complex vs. CIT, Sheo Nath Singh vs. CIT, Ganga Saran & Sons (P) Ltd vs. CIT, Keshav Social and Charitable Foundation vs. CIT, Uttaranchal Welfare Society vs. CIT, Gabriel India Ltd vs. CIT, Sir Ratan Tata Trust vs. CIT, GM Mittal Stainless Steel (P) Ltd vs. CIT, Garden Silk Mills Ltd vs. CIT, Russell Properties vs. CIT, Amitabh Bachchan vs. CIT, Max India Limited vs. CIT, BSES Rajdhani Power Ltd vs. CIT, Mehak Finvest P. Ltd vs. CIT, Surya Jyoti Software Pvt. Ltd vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIMISHA SINGH
• Assessee Lawyers: AJAY VOHRA
• Keywords: Set aside; Reassessment proceedings; Reason to believe; Application of stay; Tangible material
• Section: 147; 148; 143(3); 143(1); 263; 11; 133(6); 12A; 101

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’: NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER Stay Application Nos. 361 & 362/Del./2024 (Arising out of ITA Nos. 2554 & 2555/Del./2024) A.Y.2013-14 & 2014-15 AND ITA Nos.2554 & 2555/Del/2024, A.Y.2013-14 & 2014-15 The British School Society Dr. Jose P. Rizal Marg, San Martin Marg Chanakyapuri, New Delhi PAN: AAATT0271C Vs. Commissioner of Income Tax (Exemption), Delhi (Appellant) (Respondent) Appellant by Sh. Ajay Vohra, Sr. Advocate, Sh. Deepesh Jain, Advocate& Sh. Shourya Jain, CA Respondent by Ms. Nimisha Singh, CIT-DR Date of Hearing 26/09/2024 Date of Pronouncement 24th/10/2024 ORDER PER AVDHESH KUMAR MISHRA, AM Common grounds and facts arise in the above captioned appeals of the assessee; therefore, these appeals were heard together and are being disposed off by this common order. 2. Both appeals for the Assessment Years (hereinafter, the ‘AY’) 2013-14 and 2014-15 respectively filed by the assessee is directed ITA No.2554 & 2555 /Del/2024 British School Society 2 against the orders dated 28.03.2024, passed by the Commissioner of Income Tax (Exemption), New Delhi [hereinafter, the ‘CIT(E)’]. 3. Following grounds have been raised by the appellant/assessee in the AY 2013-14: - “1. That on the facts and circumstances of the case and in law, order dated 28.03.2024 passed by Commissioner of Income Tax (Exemption), Delhi, ['CIT(E)'\"] under section 263 of the Income Tax Act, 1961 ('the Act') is without jurisdiction, illegal, bad in law, and liable to be quashed. 1.1 That the CIT(E) erred on facts and in law in setting aside the assessment order dated 22.03.2022 passed under section 147 r.w.s. 144B of the Act holding the same to be erroneous and prejudicial to the interest of Revenue and directing the assessing officer to pass fresh assessment order qua issue of receipt of donation and other issues pertinent to the facts and circumstances. 1.2 That the CIT(E) erred on facts and in law in exercising revisionary powers under section 263 of the Act without appreciating that the twin jurisdictional condition of the assessment order being: (a) erroneous; and (b) prejudicial to the interest of the Revenue, are not satisfied and consequently, the impugned order is illegal and bad-in-law. 2. That on the facts and circumstances of the case and in law, the CIT(E) erred in not appreciating that since the reassessment order sought to be revised is non-est, invalid and beyond jurisdiction being passed in violation of sections 147-151, revision of the same under section 263 of the Act is beyond jurisdiction and impermissible. 3. That the CIT(E) erred on facts and in law in setting aside the reassessment order by exercising powers under section 263 of the Act without appreciating that: (a) reassessment order was passed by due enquiry and application of mind qua receipt of donation; (b) view taken by the assessing officer is not just plausible but the only correct view; and (c) revisionary powers cannot be exercised merely to substitute the view taken by the assessing officer. 3.1 That the CIT(E) erred on facts and in law in relying on Explanation 2 to section 263 of the Act without appreciating that the same cannot be applied to exercise unfettered powers of revision, in violation of the main section. ITA No.2554 & 2555 /Del/2024 British School Society 3 4. That the CIT(E) erred on facts and in law in not appreciating that since the donations received were credited to the income and expenditure account and considered for application of section 11 of the Act, there cannot be a case of any prejudice to the interest of the Revenue and thus the impugned revision is bad in law. 5. That the CII(E) erred on facts and in law in not appreciating that reassessment order framed by National Faceless Assessment Centre in terms of procedure prescribed under section 144B of the Actis not amenable to revisionary jurisdiction under section 263 of the Act. 6. That on the facts and circumstances of the case and in law, the CIT(E) erred on facts and in law in relying on assessment order for assessment year 2015-16 (disputed in appeal) and observing that the donations (Rs.1,05,00,000) received by the appellant is 'capitation fees' and thereby ordering enquiry qua denial of exemption under section 11/12 of the Act. 6.1 That the CIT(E) erred on facts and in law in not appreciating that the donations received by the appellant society were purely voluntary having no nexus with admissions, and the charitable activity of imparting education by the appellant cannot be disputed to deny exemption under sections 11/12 of the Act. The appellant craves leave to add, to alter, amend or vary the above grounds of appeal at or before the time of hearing.” 3.1 Similar grounds have been taken in the AY 2014-15. 3.2 In nutshell, the appellant/assessee has challenged the validity impugned orders, in both the AYs, passed under section 263 of the Income Tax Act, 1961 (hereinafter ‘the Act’) by the CIT(E) directing the Assessing Officer (hereinafter ‘AO’), in both years, to pass assessment orders afresh qua issue of receipt of donation and other issues pertinent to the facts & circumstances of the case. 4. The brief facts of the case for deciding these appeals are that the appellant/assessee, society registered under section 12A of the Act, is ITA No.2554 & 2555 /Del/2024 British School Society 4 running a school named as British School since more than 50 years. The original Income Tax Return (hereinafter, the ‘ITR’) declaring NIL income and loss of Rs.9,91,91,758/- in AYs 2013-14 and 2014-15 respectively. The appellant/assessee has claimed exemptions under section 11 r.w.s. 12 of the Act in both years. The case of AY 2013-14 was completed accepting the returned income under section 143(1) of the Act; whereas the case of AY 2014-15 was picked up for scrutiny and consequential assessment was completed at returned loss of Rs.9,91,91,758/-, which was not allowed to be carried forward as per the law. Against the assessment order of AY 2014-15; the assessee preferred appeal before the Ld. CIT(A), who allowed the appeal. The said order (AY 2014-15) of the Ld. CIT(A) was challenged by the Revenue before the Tribunal who dismissed the said appeal in ITA No. 4579/Del/2017. 4.1 Later, the cases of both AYs were reopened on 31.03.2021 on the reasoning that the appellant/assessee had charged capitation fee of Rs.1,05,00,000/- and Rs.5,00,00,000/-, in AYs 2013-14 and 2014-15 respectively, from various donors whose dependent/children/family members, etc. got admissions into school, which had escaped assessment. The appellant/assessee challenged reopening of both years during the reopened assessment proceedings, which were rejected by ITA No.2554 & 2555 /Del/2024 British School Society 5 the AO. Thereafter, it filed writ petitions for both years before the Hon’ble Delhi High Court challenging the validity of the reopening of assessment proceedings under section 148 of the Act. During the writ proceedings before the Hon’ble High Court, the appellant/assessee filed additional affidavits narrating factual aspects of donations received in relevant years, which were also provided to the Revenue for filing counter affidavits/ comments/submission, etc. Meanwhile, the Revenue brought the fact that reassessments of both years had been completed accepting the income/loss shown in the original ITRs to the notice of the Hon’ble Delhi High Court; therefore, it dismissed the writ petitions as infructuous. 4.2 Subsequently, the Ld. CIT(E) issued notices under section 263 of the Act, in both years, on the reasoning that the donations as mentioned above were nothing but capitation fee which remained to be taxed due to improper enquiries/investigations carried out by the AO. The Ld. CIT(E) was not satisfied with the submissions of the appellant/assessee. Therefore, he invoked the provision of Section 263 of the Act and set aside the assessment orders and directed the AO to pass a fresh assessment order qua issue of receipt of donation and other issue pertaining to the facts and circumstances. ITA No.2554 & 2555 /Del/2024 British School Society 6 5. At the outset, the Ld. Counsel, placing reliance on the decisions of the Hon’ble Supreme Court in the cases of Malabar Industrial Co. Ltd. 243 ITR 83 and Kwality Steel Suppliers Complex 395 ITR 1, contended that the scope of jurisdiction of the CIT(E) under section 263 of the Act is limited and cannot be invoked unless the order sought to be revised is 'erroneous' and 'prejudicial to the interests of the Revenue. Further, he emphasized on Schedule-8 of the Income & Expenditure Account of both years to demonstrate that the alleged capitation fee had already been duly disclosed as donations/receipts in respective years; therefore, the same could not be taxed again and that was the reason why the AO completed the reassessments accepting the returned income/loss in the orders passed under section 147 r.w.s. 144B of the Act. 5.1 The Ld. Counsel further questioned the validity of the notice issued under section 148 of the Act. He, emphasizing on the fact that the alleged capitation fee had already been disclosed as donations in respective years, contended that there was no \"reason to believe\" based on any tangible material as there was no income which had escaped assessments. Thus, there was no application of mind by the AO [Sheo Nath Singh 82 ITR 148 (SC) and Ganga Saran & Sons (P) Ltd 130 ITR 1 (SC)] as there was no income which escaped assessment under section ITA No.2554 & 2555 /Del/2024 British School Society 7 147 r.w.s. 148 of the Act. Reliance was placed on the decision of Keshav Social and Charitable Foundation 278 ITR 152 (Del) and Uttaranchal Welfare Society: 222 Taxman 34 (All)) 5.2 It was further submitted that the perusal of list of donors in AY 2013-14 and 2014-15 (refer pages 314-315 of the PB) there are no common donor between these years and the said donations were not linked with the admission in the school. Thus, the allegation that the aforesaid donations were in the nature of 'capitation fee' was grossly/patently erroneous. 5.3 It was further submitted by the Ld. Counsel that none had ever levelled the allegation of receiving capitation fee in lieu of admission by the appellant/assesseesince its existence. It was demonstrated before us with the help of Paper Book that the major donors were corporate bodies and prominent individuals and there was no direct nexus with the students. Certain donors had made multiple donations over the year(s) (page 316 to P'B). It was contended that students were admitted after following requisite admission procedure for all students without exception as the appellant/assessee had a well-defined system/process for admission to the school, which had been scrupulously followed over the years. Further, our attention was drawn to the fact that the AO had ITA No.2554 & 2555 /Del/2024 British School Society 8 carried out enquiries during the assessment proceedings of AY 2015-16 by issuing notices under section 133(6) of the Act to the donors who confirmed that the donations made were voluntarily and no benefit in lieu of donation was availed, much less in form of any admission(s). However, the AO was not satisfied with the explanation of the appellant/assessee and drew adverse inference in the AY 2015-16. Based on his finding in the AY 2015-16, the AO reopened these cases. It was argued that the reassessment proceedings initiated under section 148 of the Act based solely on the conclusion reached by the AO in a subsequent AY in absence of any fresh tangible information/material was not sustainable [NYK Line (India) Ltd. 346 ITR 361 (Bom.)] 5.4 It was specifically submitted by the Ld. Counsel that all donations had been considered as income (credited to the Income & Expenditure Account). Our attention was also drawn to the assessment order dated 19.12.2018 passed u/s 143(3) of the Act in AY 2016-17, wherein the similar donations of Rs.1,70,00,000/- received by the appellant/assessee was accepted. 5.5 It was argued by the Ld. Counsel that the aforesaid reassessment orders sought to be revised were illegal and bad in law; therefore, the same could not be reviewed and revised under section 263 of the Act. ITA No.2554 & 2555 /Del/2024 British School Society 9 Reliance was placed on the decisions in the cases of Keshab Narayan Banerjee 101 Taxman 512 (Cal), Badal Prakash Jindal 457 ITR 345 (Orissa), Aishwarya Rai Bachchan 194 ITD 272 (Mum), Supersonic Technologies Pvt. Ltd. ITA.No.2269/Del./2017 (Del Trib.), WSP Consultants India (P.) Ltd. 161 taxmann.com 559 (Del Trib.) and Vision Promoters & Builders (P) Ltd. 190 TTJ 398 (Chd.). 5.6 The reassessment orders sought to be revised by the CIT(E) were passed after examination and verification of all the relevant facts on record and returned income were accepted after thorough examination of issue of donation. The writ petitions (pages 85-133 of PB) and additional affidavits (pages 134-156 of PB) filed before the Hon’ble High Court explained the entire factual matrix of donations.It was submitted that the replies/documents filed during the course of reassessment proceedings and writs, the appellant/assessee had given detailed justifications to why the donations received by the appellant could not be considered as capitation fee. The returned income of the appellant was accepted by the AO in reassessments only after thorough examination of the factual and legal matrix. Our attention was drawn to the para 2 of the impugned reassessment orders wherein the AO had categorically mentioned that \"All the details submitted by the assessee have been examined and found satisfactory\" (page 166-168 of the PB). ITA No.2554 & 2555 /Del/2024 British School Society 10 The Ld. Counsel thus submitted that it was settled law that once the entire details were placed on record and issue stood examined by the AO, merely because the AO might not have specifically discussed the issue in the assessment order would not ipso facto mean that there was non-consideration and/or non-application of mind on the part of the AO on such issue. (Hari Iron Trading Co. 263 ITR 437 (P&H HC), Eicher Limited 294 ITR 310 (Del) and Vipul Modi 139 taxmann.com 89 (Mumbai – Trib). 5.7 The Ld. Counsel, in view of the above, submitted that the said donations could not be treated as capitation fee in lieu of admissions as there were no live nexus between donations and admissions. The view taken by the AO while completing reassessment drawing no adverse inference qua the donations received by the appellant/assessee could not be treated as erroneous [GM Mittal Stainless Steel (P) Lad 263 ITR 255 (SC), Garden Silk Mills Lad 221 ITR 861 (Guj) and Russell Properties 109 ITR 229 (Cal.)]. Thus, it was further submitted that the view taken by the AO was a very much a plausible view in law and therefore, where two views were possible and the AO took one view with which the CIT did not agree, it could not be treated as an erroneous and prejudicial to the interests of the Revenue unless the view taken by the AO was unsustainable in law [Malabar Industrial Co. Ltd: 243 ITR ITA No.2554 & 2555 /Del/2024 British School Society 11 83 (SC), Amitabh Bachchan: 384 ITR 200 (SC), Max India Limited: 268 ITR 128 (P&H) affirmed by SC in 295 ITR 282 (SC)]. It was further submitted that fishing and roving enquiries were not permissible for revision proceedings under section 263 of the Act [CIT vs. Gabriel India Lid. [1993] 71 taxman 585 (Bom. HC) and Sir Ratan Tata Trust 122 taxmann.com 273 (Mum Trib.)]. 5.8 The Ld. Counsel, in view of the aforesaid legal and factual matrix of the cases submitted that the impugned order was without jurisdiction, illegal and bad in law liable to be quashed. 6. The Ld. CIT-DR submitted that the orders passed under section 147 r.w.s. 144B of the Act were valid orders and had attained finality; therefore, the same could not be questioned now on merit as those orders were not the subject of the appeal here. Since orders passed under section 147 r.w.s. 144B of the Act were not ever challenged by the appellant/assessee; therefore, those order were valid orders and thus, the same could be revised under section 263 of the Act. However, on the merit, she placed reliance on the impugned order. 7. We have heard both the parties and have perused the material available on the record. We also perused the above referred case laws. The relevant part of the section 263 of the Act is extracted hereunder: - ITA No.2554 & 2555 /Del/2024 British School Society 12 “Explanation 2—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, — (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.” 8. The record shows that the impugned orders have set aside the reopened assessment orders passed under section 147 r.w.s. 144B of the Act. We have taken note of the fact that orders passed under section 147 r.w.s. 144B of the Act have never been challenged before any appellate authority and thus, the reassessment orders have attained the finality. From perusal of the orders passed under section 147 r.w.s. 144B of the Act, it is evident that the AO did not make any addition in respect of the issue for which these cases were re-opened. However, keeping in view the ratio laid in the decisions in the cases of Mehak Finvest P. Ltd. 367 ITR 769 (P & H) SLP dismissed, Govind Raju 60 taxmann.com 333 (Kar) and Majinder Singh Kang 25 Taxmann.com124 (P & H), we are of the considered opinion that the AO is legally competent to make addition on other issues even if no ITA No.2554 & 2555 /Del/2024 British School Society 13 addition is made in respect of those issues for which the assessment has been reopened under section 148 of the Act. 9. The present cases were reopened under section 147 of the Act and consequential assessments were completed accepting the returned income as such. As mentioned above, the appellant/assessee has categorically admitted that the AO had enquired/investigated the issues based on which these cases were reopened and thereafter, the AO accepted the returned income.The AO, after having reopened the case under section 147 of the Act, was required to carry out detailed enquiry and verification not only on the reasons for reopening the case but also about other issues emerged during the reopened assessment proceedings. In the orders passed under section 147 r.w.s. 144B of the Act, there is no whisper about any enquiry or verification done in respect of core issue of reopening and other issues emerged during the reopened assessment proceedings though in his order disposing of the assessee's objection on validity of proceedings under section 147 of the Act, it is seen that he has passed a detailed order justifying the assumption of jurisdiction under section 147 of the Act. However, there is no clear-cut finding on this score in the orders passed under section 147 r.w.s. 144B of the Act. ITA No.2554 & 2555 /Del/2024 British School Society 14 10. We are of the considered view that the orders passed under section 147 r.w.s. 144B of the Act have not become non-est or invalid order just because the AO has accepted the returned income. If the proposition of the Ld. Counsel is accepted on this score, then a very peculiar situation will arise against the intent of amendment brought into the section 263 of the Act. Take a case, where the AO has not carried out any investigation or improper investigation and has accepted the returned income in the scrutiny assessment; then the PCIT/CIT cannot invoke her/his revisionary power under section 263 of the Act. Thus, in such a situation, the AO by not carrying out the investigation will have upper hand on the revisionary power of the PCIT/CIT under section 263 of the Act. Definitely, this is not the intent of the Parliament amending the section 263 of the Act in 2015. Thus, the AO is under legal obligation to examine those issues which warranted such examination in light of the facts of the case, irrespective of the fact that whether any addition was going to be made on issues concerning reasons for reopening or not. 11. We are of the considered view that the orders passed under section 147 r.w.s. 144B of the Act are valid orders as per law even if no addition has been made in respect of any issue including issue relating to reasons for reopening. The decisions in the cases of BSES Rajdhani ITA No.2554 & 2555 /Del/2024 British School Society 15 Power Ltd.399 ITR 228 (Delhi), Mehak Finvest P. Ltd. (supra) and Surya Jyoti Software Pvt. Ltd. (I.T.A. No.2158/DEL/2017) ITAT Delhiare squarely applicable here. However, we find merit in the Ld. Counsel submission that the scope of jurisdiction of the CIT(E) under section 263 of the Act is limited and cannot be invoked unless the order sought to be revised is 'erroneous' and 'prejudicial to the interests of the Revenue. 12. In the present cases, we find that the entire donations including the so called ‘capitation fee’ for which the provisions of section 263 invoked have been shown as receipts in the Income & Expenditure Account (Schedule-8) in both years. Further, we also take note of the fact that the Registration of the appellant/assessee under section 12A/12AA of the Act for relevant years has not been withdrawn. Therefore, the appellant/assessee is entitled to claim exemption in accordance with the provisions of section 11 and 12 of the Act. Further, we find that the AO has accepted the similar donations of Rs.1,70,00,000/- in the scrutiny assessment order dated 19.12.2018 of the AY 2016-17. In view of the above, the CIT(E) has failed to demonstrate and establish in the impugned orders that how the orders passed under section 147 r.w.s. 144B of the Act, in both years, are erroneous and prejudicial to revenue particularly when the ITA No.2554 & 2555 /Del/2024 British School Society 16 appellant/assessee, a registered trust under section 12A/12AA of the Act, have disclosed theso called capitation fee of Rs.1,05,00,000/- and Rs.5,00,00,000/- as income in its Income & Expenditure Account (Schedule-8) of the AYs 2013-14 and 2014-15 respectively and failure to establish live nexus between donors with any admission into the school in the impugned orders. 13. In totality of facts and circumstances of the cases as discussed above, we are of the considered view that the orders passed under section 147 r.w.s. 144B of the Act, in both years, are not erroneous and prejudicial to the interest of revenue. We therefore, hold that the CIT(E) is not justified in exercising his revisionary power under section 263 of the Act and setting aside the orders passed under section 147 r.w.s. 144B of the Act. Accordingly, we quash both impugned orders passed by the Ld. CIT(E). 14. In the result, the assessee’s appeals for both years are allowed. 15. In view of the above findings both the Stay Applications have become infructuus, therefore stand dismissed. Order pronounced in open Court on 24th October, 2024. Sd/- Sd/- (VIKAS AWASTHY) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 24th/10/2024 ITA No.2554 & 2555 /Del/2024 British School Society 17 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT-DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "