EAST POINT EDUCATION SOCIETY Vs. ADIT (E)
LAWS(IT)-2014-6-2
INCOME TAX APPELLATE TRIBUNAL
Decided on June 02,2014

East Point Education Society Appellant
VERSUS
Adit (E) Respondents

JUDGEMENT

J.SUDHAKAR REDDY,AM. - (1.) THIS is an appeal filed by the assessee directed against the order of the Learned Commissioner of Income Tax (Appeals) -XXI, New Delhi dated 28.4.2011 pertaining to the Assessment Year 2007 -08 on the following grounds. "1. On the facts and circumstances of the case the CIT (A) has erred in upholding the assessment made by AO which was bad in law and void ab intio. 2. On the facts and in circumstances of the case and in law, the CIT (A) has erred in upholding Assessing officer's act in reopening appellants assessment for the year under consideration despite the fact that AO did not have any reason to believe that appellants income for the year under consideration had escaped assessment. 3. On the facts and circumstances of the case the CIT (A) has erred in upholding the AO's act of reopening the assessment u/s 147 when AO's reason to believe that appellant income has escaped assessment were extraneous to the facts on record and had no live link with the believe. 4. On the facts and circumstances of the case the CIT(A) erred in upholding additions made in assessment despite the fact that no addition of a single rupee was made on the basis of reasons recorded for reopening assessment. 5. On the facts and circumstances of the case the CIT(A) erred in upholding entire disallowance of Rs 10,06,8961 - out of appellants genuine expenditure on adhoc basis in reassessment proceedings. 6. On the facts and circumstances of the case the CIT(A) erred in giving a finding that the appellant did not attend proceeding before DGIT(E) u/s 10(23C) of the I.T. Act when that finding was not relevant for deicing the appeal before him neither his finding was based on any material. 7. On the facts and circumstances of the case the CIT(A) erred in upholding the reopening on the plea which was never raised by the appellant. 8. On the facts and circumstances of the case the CIT(A) erred in not admitting additional ground raised by the appellant. 9. On the facts and circumstances of the case the CIT(A) erred in rejecting additional evidence submitted by the appellant. 10. On the facts and circumstances of the case the CIT(A) has erred in upholding AO's act of denying benefit of section 11 and 12 of the I.T. Act to the appellant. 11. On the facts and circumstances of the case the CIT(A) has erred in upholding the AO's act of holding that appellant has violated provision of section 13(1)(c) of the Act when no actual payment of interest was made by the appellant to its member. 12. On the facts and circumstances of the case the CIT (A) has erred in upholding AO's act of disallowing depreciation claim of Rs 1,69,087/ - as appearing in society account on assets used for the purposes of running the school of the society. 13. On the facts and circumstances of the case the CIT (A) has erred in upholding AO's act of disallowing entire expenditure of society amounting to Rs 8,37,809/ - incurred in attaining its objectives. 14 On the facts and circumstances of the CIT (A) has erred in upholding the AO''s act of charging tax on appellants income at maximum marginal rate. 15. On the facts and circumstances of the case the CIT (A) has erred in punishing appellant for the misconduct of one of the member of the appellant society. 16. On the facts and circumstances of the case the CIT (A) has erred in upholding AO's act of levying interest u/s 2348 on the appellant. 17. On the facts and circumstances of the case CIT (A) has erred in upholding the order of the AO without considering evidence on record and merits of the case. 18. On the facts and circumstances of the case the order of learned CIT(A) was erroneous as he failed to consider any submission or case law cited by the appellant. 19. On the facts and circumstances of the case the entire appellant order was against the principles of natural justice. 20. Appellant craves for grant of permission to add, alter or withdraw any ground of appeal at or any time before the hearing."
(2.) WE have heard Mr.Piyush Kaushik, the Ld.Counsel for the assessee and Mr.Sameer Sharma, the Ld.Sr.D.R. on behalf of the Revenue.
(3.) WE first adjudicate the issue of reopening. The reasons for reopening are as follows. "East Point Education Society Assessment Year 2007 -08 A return has been filed declaring 'nil' income. Scrutiny of the return reveals that the auditor has prepared the audit report on the basis of the text check of vouchers. The auditor in his report has stated that one partner has taken construction loan and has also constructed a building. Loan as well as building has not been considered in the balance sheet, which clearly shows that the application of funds is not verifiable. The assessee has failed to produce the books of accounts and vouchers before DGIT(E) during the proceedings u/s 10(23C). In this case, the auditor has not certified in his audit report u/s 10BB that he had verified all the vouchers. I have reasons to believe that in the facts and circumstances of the case, the assessee has not declared true income, so far as the application of trust fund is not verifiable. Issue notice u/s 148. Sd/ - (VS Kapoor) DDIT(E), TC II, N.Delhi dt. 26.3.2009" 3.1. The Tribunal in the assessee's own case for the Assessment Year 2006 -07, while considering the issue of reopening, has held that the reopening is bad in law. At para 30 to 33 pages 14 and 15, it is held as follows. "30. We have heard the rival contention and perused the material available on record. It is undisputed that the original assessment was completed u/s 143(1) of the Act. The Revenue pleaded that in this case the Assessing Officer possessed wide powers of reopening powers and the auditors disclosure which is as under amounted to information "One member of the society, has taken loan for construction of building and building was partly constructed. The loan was taken without permission of society. The executive committee of the society has decided not to account for any books this loan , account and construction of building from this loan." 31. According to the Revenue, this information constituted sufficient reasons for the Assessing Officer to issue notice u/s 148. Assessee contends that the Assessing Officer's power to reopen the assessment, even in the case of section 143(1) is subject to conditions which have been enunciated' by the various High Courts including jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT (supra), wherein it has been held if the reasons for initiation of proceedings cease to survive, Assessing Officer reassessment is bad in law. The point for consideration before us is whether the Assessing Officer had sufficient reasons to reopen proceedings for assessment year 2006 -07. The reasons recorded for both the year~ i.e. assessment years 2006 -07 and 07 -08 are mechanically identical. The proceedings u/s 10(23C) were undisputedly taken up only in assessment year 2007 -08 and the factum of a loan disputed conversion of donation of one of the Governing Body members, Mohinder Singh was effected in the books of account in assessment year 2005 -06 and not in 2006 -07. In our view, the mere note about the audit being on the basis of test check voucher and auditor's audit does become the basis of reopening of assessment of 2006 -07 as the same is the standard auditing practice. 32. In case of section 143(1) assessment, the theory of change of opinion may not be applicable but the nexus of reasons and application of mind are still imperative for upholding the action to reopen the assessment. There is mention of 2nd reason in the assessment order about any member having taken any building loan. In the order only exemption u/s 11 is denied. Respectfully following Hon'ble Delhi High Court judgement in the case of Ranbaxy Laboratories Ltd., we are of the view that as far as the AY 2006 - 07 is concerned, the reopening of assessment is invalid. 33. In the impugned Assessment Year i.e. 2006 -07 both the reasons do not show any application of mind or making record of reasons on any material having any objective bearing." 3.2. The Ld. Counsel for the assessee has also brought to our notice the order of the 'B' Bench of the Tribunal in assessee's own case dr. 13.9.2013 in ITA 968/Del/2013 for the Assessment Year 2009 -10 wherein the order of the Tribunal for Assessment Year 2006 -07 was followed. Consistent with the view taken therein that the reopening in question is bad in law, we allow this ground of the assessee. Since it has been held that the reopening is bad in law, we do not go into the other aspects. In the result the appeal of the assessee is allowed.;


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