ITO, CHITTORGARH v. Mahila Vidhiya Mandir, CHITTORGARH

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR BEFORE SHRI S.V. MEHROTRA ACCOUNTANT MEMBER AND SHRI V.D. RAO JUDICIAL MEMBER 1. ITA NO. 551/JU / 2008 (ASST. YEAR:2003-04) 2. ITA NO. 552/JU / 2008 (ASST. YEAR:2004-05) 3. ITA NO.553 /JU / 2008 (ASST. YEAR:2005-06) INCOME TAX OFFICER VS MAHILA VIDHIYA MANDIR WARD-2 PRATAPGARH. CHITTORGARH. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMIT NI GAM D.R. RESPONDENT BY : SHRI AMIT KOTH ARI A.R. ORDER PER V.D. RAO: JM THESE APPEALS HAS BEEN FILED BY THE ASSESSEE AGAI NST THE ORDER OF THE LD. CIT (A) UDAIPUR DATED 16 TH JULY 2008 RELATING TO THE ASSESSMENT YEARS 2003-04 2004-05 AND 2005-06. THE FACTS ARE SIMILAR IN ALL THESE THREE APPEALS EXCEPT QUANT UM. WE THEREFORE PROPOSE TO DECIDE ALL THE THREE APPEALS BY PASSING COMMON ORDER. 2 ITA NO: 551 / JU / 2008 (A.Y. 2003-04) 1. THE FACTS ARE IN BRIEF THAT THE ASSESSEE IS A RE GISTERED SOCIETY RUNNING EDUCATIONAL INSTITUTIONS VIZ. RUNNING SCHO OLS COLLEGES HOSTELS SINCE 1983. THE ASSESSEE FILED RETURN OF I NCOME ON 20 TH NOVEMBER 2003 DECLARING TOTAL INCOME AT NIL AFTER CLAIMING THE EXEMPTION U/S 10 (23C) (III AD) OF THE ACT. THE CA SE OF THE ASSESSEE WAS PROCESSED U/S 143 (1) AND SUBSEQUENTLY A NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE ON 20 TH NOVEMBER 2006. IN RESPONSE TO THAT THE ASSESSEE HAS SUBMITTED THAT TH E ORIGINAL RETURN ALREADY FILED MAY BE TREATED AS RETURN FILED IN RES PONSE TO THE NOTICE U/S 148 OF THE ACT. THE REASONS GIVEN BY ASSESSING OFFICER FOR RE- OPENING WAS THAT THE ASSESSEE EARNING PROFIT BY GIV ING DONATIONS TO THE OTHERS. 2. THE ASSESSEE HAS GIVEN DONATION TO THE OTHER SOC IETIES NAMELY SARASWTI VIDYA MANDIR SANSTHAN RS.2 69 470/- ADARS H BAL MANDIR SANSTHAN RS. 8 08 087/- SARASWTI COLLEGE RS . 9 733/-. THE ABOVE SOCIETIES ARE NOT REGISTERED U/S 12AA OF THE ACT AND THE 3 ASSESSEE IS ALSO GIVEN LOAN AND ADVANCES TO THE SAR SWATI COLLEGE OF RS. 25 00 000/- AND ONE MORE REASON GIVEN BY THE AS SESSEE IS THAT SECTION 10 (23C) WHICH APPLIES ONLY TO THOSE INSTIT UTIONS OR HOSPITALS WHICH ARE NOTIFIED OR APPROVED U/S 10 (23 C) (III AD) OF THE ACT. THE ASSESSEE HAS SUBMITTED BEFORE THE ASS ESSING OFFICER THAT VIDE LETTER DATED 7 TH JULY 2008 THE ASSESSEE IS A REGISTERED SOCIETY AND EXISTED SINCE 1983 RUNNING EDUCATIONAL INSTITUTIONS SUCH AS SCHOOLS COLLEGES AND HOSPITALS AND THE SOC IETY HAS BEEN GRANTED EXEMPTION YEAR BY YEAR U/S 10 (22) OF THE A CT TILL 1998-99 AND AFTER THAT SECTION 10 (23C) (III AD). HOWEVER THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASS ESSEE AND ASSESSED THE INCOME AT RS. 18 08 323/-. ON BEING A GGRIEVED ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE LD. CI T (A). 3. THE LD. CIT (A) FOR CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAS OBSERVED THAT THE ASSESSEE HAS RECEIVE D THE ADMISSION FEE ON BEHALF OF THE OTHER SOCIETIES AFTER ADMISSI ON PROCESS BEING COMPLETED THE SAME HAS BEEN TRANSFERRED TO THE THRE E SOCIETIES AND ACCORDING TO RESPECTIVE ADMISSIONS. THE ASSESSING OFFICER HAS 4 MISTAKEN THAT THE ASSESSEE RECEIVED THE DONATIONS A ND GAVE IT TO THEM. THE THREE SOCIETIES NAMELY SARASWATI VIDHYA MANDIR SANSTHAN ADARSH BAL MANDIR SANSTHAN AND SARSWATI C OLLEGE ARE NOT REQUIRED TO BE REGISTERED U/S 12AA OF THE ACT A S THEY WERE COVERED BY THE PROVISIONS OF SECTION 10 (23C) (III AD) OF THE ACT. BEING AN EDUCATIONAL INSTITUTION THE REGISTRATION U/S 12AA IS COMPULSORY FOR THE ORGANIZATIONS WHO HAVE AN INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSE A ND WHO CLAIMED THE EXEMPTION U/S 11 OF THE ACT NOT U/S 10 OF THE A CT. THE LOAN OF RS. 25 00 000/- GIVEN TO SARSWATI COLLEGE IS COVERE D UNDER THE OBJECTS AND PROGRAMME OF THE ASSESSEE SOCIETY AS SA RSWATI COLLEGE ITSELF IS RUNNING TEACHER TRAINING COLLEGE. THE LO AN WAS GIVEN FOR THE CONSTRUCTION OF COLLEGE BUILDING. IT WAS FURTH ER OBSERVED THAT THE ASSESSEE IS COVERED BY SECTION 10 (23C) (III AD ) OF THE ACT. THE LD. CIT (A) WITH REGARD TO RE-OPENING HAS HELD THAT THEAO WITHOUT UNDERSTANDING THE PROVISIONS OF LAW AND WIT HOUT ANY MATERIAL ON RECORD THAT THE ASSESSEE EARNING THE IN COME OTHER THAN 5 THE EDUCATIONAL ACTIVITIES AND ISSUED THE NOTICE U/ S 148 OF THE ACT AND THE SAME WAS QUASHED. 4. IN SO FAR AS THE MERITS OF THE CASE IS CONCERNED THE LD. CIT (A) HAS OBSERVED THAT THE ASSESSEE SOCIETY IS EXCLU SIVELY COVERED BY THE PROVISIONS U/S 10 (23C) (III AD) OF THE ACT. THE ASSESSEE HAS NOT CARRIED OUT ANY ACTIVITY OTHER THAN THE EDU CATIONAL ACTIVITIES DURING THE YEAR UNDER CONSIDERATION THE DONATION GI VEN TO THE OTHER SOCIETIES OUT DONATION RECEIVED FOR THE EDUCATIONAL PURPOSE AND ALSO GIVEN THEM FOR THE EDUCATIONAL ACTIVITIES. TH E LOAN OF RS. 25 00 000/- GIVEN TO THE SARSWATI COLLEGE IS ALSO M EANT FOR EDUCATIONAL ACTIVITY AND THE ABOVE THREE SOCIETIES I.E. SARASWATI VIDHYA MNDIR SANSTHAN ADARSH BAL MANDIR SANSTHAN A ND SARSWATI COLLEGE ARE ONLY REGISTERED WITH THE REGIS TRAR OF SOCIETIES ACT AS COVERED U/S 10 (23C) (III AD) AND THE ADDIT ION MADE BY THE ASSESSING OFFICER WAS DELETED. ON BEING AGGRIEVED THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. D.R. HAS SUBMITTED THAT THE LD. CIT (A) NOT CONSIDERING THE FACTS QUASHED THE NOTICE ISSUED BY THE ASSESSING 6 OFFICER U/S 148 OF THE ACT WITHOUT CONSIDERING THAT THE ASSESSMENT WAS REOPENED ON THE GROUND THAT THE ASSESSEE RUNNIN G EDUCATIONAL INSTITUTIONS AND THERE IS A PROFIT ELEMENT ALSO TH EREFORE REOPENING WAS MADE BY THE ASSESSING OFFICER. IN SO FAR AS MER ITS IS CONCERNED THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 6. (A) THE LEARNED COUNSEL FOR THE ASSESSEE HAS SU BMITTED THAT THE ASSESSEE IS A REGISTERED SOCIETY RUNNING EDUCA TIONAL INSTITUTIONS AND EXISTED SINCE 1983. ALL THE YEARS THE INCOM E OF THE ASSESSEE WAS EXEMPTED U/S 10 OF THE ACT ONLY THE YEAR UNDER CONSIDERATION REJECTED THE EXEMPTION U/S 10 (23C) (III AD) OF THE ACT. (B) THE ASSESSEE RUNNING AN EDUCATIONAL INSTITUTION ONCE AN EXEMPTION IS GRANTED FOR MANY YEARS WITHOUT ANY REA SON THE EXEMPTION CANNOT BE DENIED AND THE RULE OF CONSISTE NCY SHOULD BE FOLLOWED IN THE INTEREST OF JUSTICE. (C) THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SU BMITTED THAT THE ASSESSEE HAS GIVEN A LOAN TO THE OTHER EDU CATIONAL 7 INSTITUTION FOR THE PURPOSE OF IMPARTING EDUCATION AND IT WAS COVERED BY THE OBJECT OF THE ASSESSEE SOCIETY. (D) IT WAS FURTHER SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE OTHER INSTITUTIONS TO WHOM ASSESS EE HAS GIVEN LOANS ARE ALSO COVERED BY SECTION 10 (23C) (III AD) OF THE ACT THEREFORE THE ASSESSING OFFICER WAS NOT JUSTIFIED DENYING THE FAME OF THE ASSESSEE. 7. IN SO FAR AS REOPENING IS CONCERNED THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE REASONS RECORDE D BY THE ASSESSING OFFICER ON THE GROUND THAT VARIOUS TYPES OF THE INCOME AND EXPENSES UNDER THE HEAD OF DONATIONS HAS BEEN C LAIMED WHICH PRIMA FACIE DO NOT APPLY TO THE EDUCATIONAL ACTIVIT IES BUT APPEARS TO BE CLAIMED FOR PROFIT EARNING MOTIVATION. THE ABOV E REASON GIVEN BY THE ASSESSING OFFICER WITHOUT ANY MATERIAL AND I T IS NOT A CASE FOR RE-OPENING U/S 148 AND HE STRONGLY SUPPORTED TH E ORDER OF THE LD. CIT (A) IN THIS RESPECT. IN SO FAR AS MERITS O F THE CASE IS CONCERNED APART FROM THE SUBMISSIONS MADE BY THE LE ARNED COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING CASE LAWS. 8 1. COMMISSIONER OF INCOME-TAX WEST BENGAL-VII CULCUTTA VS DOON FOUNDATION 154 ITR 208 (CUL. HIGH COURT) 2. ADITANAR EDUCATIONAL INSTITUTION VS ADDITIONAL COMMISSIONER OF INCOME-TAX 224 ITR 310 (S C) 3. AGARWAL SIKSHA SAMITHI TRUST VS COMMISSIONER OF INCOME TAX (168 ITR 751) (RAJ) 8. WE HAVE HEARD BOTH THE SIDES PERUSE THE RECORDS AND GONE TO THE ORDERS OF THE AUTHORITIES BELOW. 9. THE ASSESSEE IS A SOCIETY RUNNING AN EDUCATIONAL INSTITUTION AND THE OTHER THREE EDUCATIONAL INSTITUTIONS NAMELY SARASWATI VIDHYA MANDIR SANSTHAN ADARSH BAL MANDIR SANSTHAN AND SARSWATI COLLEGE ALSO REGISTERED UNDER REGISTRATION S ACT AND RUNNING THEIR EDUCATIONAL INSTITUTIONS. THE ASSESS EE WAS EXISTED IN 1983 ALL THE YEARS UP TO ASSESSMENT YEAR UNDER CON SIDERATION EXEMPTION WAS GIVEN U/S 10 OF THE ACT. THE YEAR UN DER CONSIDERATION THE ASSESSMENT WAS RE-OPENED DENIED THE EXEMPTION OF THE ASSESSEE. THE REASON FOR REOPENING IT APPEA RS FROM THE 9 RECORD THAT THE ASSESSING OFFICER HAS REOPENED ON T HE GROUND THAT THE EXEMPTION U/S 10 (23C) IS AVAILABLE TO ONLY THO SE INSTITUTIONS WHICH DERIVE THEIR INCOME SOLELY FROM EDUCATIONAL A CTIVITIES BUT IN THE INSTANT CASE THE ASSESSEE IS ALSO INVOLVED IN OTHER THAN THE EDUCATIONAL ACTIVITIES. THE ASSESSING OFFICER HAS MENTIONED NOWHERE THAT WHAT IS BASIS FOR THE ASSESSING OFFICE R TO COME TO SUCH CONCLUSION THAT THE ASSESSEE INVOLVED IN OTHER ACTIVITIES APART FROM THE EDUCATIONAL ACTIVITIES. 10. IN THIS CONTEXT ASSISTANT COMMISSIONER OF INCOME-TAX VS RAJESH JHAVERI STOCK BROKERS P. LTD. (291 ITR 400) WHEREIN THE HONBLE SUPREME COURT HAS OBSERVED THAT THE EXPRESSION REASON TO BELIEVE IN SECTION 147 WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT HE CAN BE SAID TO HAVE REASON TO BELIEVE THAT INCOME HAD ESCA PED ASSESSMENT. THE EXPRESSION CANNOT BE RED TO MEAN H AT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED T HE FACT BY LEGAL EVIDENCE OR CONCLUSION. WHAT IS REQUIRED IS REASO N TO BELIEVE 10 BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOM E. AT THE STAGE OF ISSUE OF NOTICE THE ONLY QUESTION IS WHETHER TH ERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FO RMED THE REQUISITE BELIEF. WHETHER MATERIAL WOULD CONCLUSIV ELY PROVE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THE STAG E. THIS IS SO BECAUSE THE FORMATION OF THE BELIEF IS WITHIN THE R EALM OF THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER. 11. FROM THE ABOVE OBSERVATION OF THE HONBLE SUPRE ME COURT AT THE TIME OF THE ISSUE NOTICE THE ASSESSING OFFICER MUST HAVE SOMETHING ON THE RECORD THAT THE ASSESSEE IS DOING OTHER THAN THE EDUCATIONAL ACTIVITIES NO SUCH MATERIAL IS AVAILABL E ON RECORD THAT THE REASON TO BELIEVE THAT THERE WAS AN ESCAPEMENT OF INCOME. 12. IN VIEW OF THE ABOVE WE FIND THAT THE LD. CIT (A) RIGHTLY QUASHED THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 148 OF THE ACT. 13. IN SO FAR AS MERITS OF THE CASE IS CONCERNED T HE LD. CIT (A) BY CONSIDERING THE SEC.10 (23C) (III AD) ALLOWED TH E EXEMPTION BY DELETING THE ADDITION MADE BY THE ASSESSING OFFICER . IN SO FAR AS 11 VARIOUS CASE LAWS RELIED BY THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTS THE CLAIM OF EXEMPTION U/S 10 (23C) (III A D) OF THE ACT. (I) IN THE CASE OF CIT WEST BENGAL V/S DOON FOUND ATION (SUPRA) THE HONBLE CULCUTTA HIGH COURT HAS HELD T HAT A SOCIETY PRIMARILY ENGAGES ITSELF IN EDUCATIONAL ACT IVITIES OR RUNS A SCHOOL OR COLLEGE IT IS ENTITLED TO CLAIM E XEMPTION U/S 10 (22) OF THE ACT. (II) IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTIO N VS ACIT (SUPRA) THE HONBBLE SUPREME COURT HAS HELD THAT IN SUBSTANCE AND REALITY THE SOLE PURPOSE FOR WHICH T HE ASSESSEE HAD COME INTO EXISTENCE WAS TO IMPART EDUC ATION AT THE LEVELS OF COLLEGES AND SCHOOLS AND SO SUCH AN EDUCATIONAL SOCIETY SHOULD BE REGARDED AS AN EDUCA TIONAL INSTITUTION COMING WITHIN SECTION 10 (22) OF THE A CT . (III) IN THE CASE OF AGARWAL SIKSHA SAMITHI TRUST V S CIT (SUPRA) THE HONBLE RAJASTHAN HIGH COURT HAS HELD THAT A BARE READING OF SEC.10(22) OF THE INCOME TAX ACT 1 961 WILL SHOW THAT WHAT IS REQUIRED FOR EXEMPTION IS THAT TH E 12 EDUCATIONAL INSTITUTIONS SHOULD EXIST SOLELY FOR TH E PURPOSE OF EDUCATION NOT FOR THE PURPOSE OF ANY PROFIT. ALL THE ABOVE DECISIONS SUPPORTS THE EXEMPTION CLAI MED BY THE ASSESSEE. 14. APART FROM THE ABOVE WHEN THE ASSESSEE WAS CON TINUOUSLY GETTING EXEMPTION U/S 10 SINCE 1983 DENYING YEAR U NDER CONSIDERATION WITHOUT ANY MATERIAL OR PROPER REASON IS CONTRARY TO THE WELL SETTLED PRINCIPLE OF LAW AND THEREFORE TH E ASSESSING OFFICER WAS NOT JUSTIFIED ON THIS COUNT THE DENIAL OF EXEMPTION U/S 10 OF THE ACT TO THE ASSESSEE. IN THIS CONTEXT TH E HONBLE SUPREME COURT IN THE CASE OF BHARAT SANCHAR NIGAM LTD. AND ANOTHER VS UNION OF INDIA AND OTHERS (2006) 282 ITR 273 (S C) WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT WHEN FACTS AND LAW IN SUBSEQUENT ASSESSMENT YEAR ARE THE SAME NO AUTHORITY WHETHER QUASI-JUDICIAL OR JUDICIAL GENERALLY BE PER MITTED TO ATTRACT A DIFFERENT VIEW. IN THE PRESENT CASE NOTHING WAS BROUGHT ON RECORD TO SHOW THAT THE YEAR UNDER CONSIDERATION NE ITHER THE FACTS ARE DIFFERENT NOR ELIGIBILITY HAS BEEN CHANGED. WH EN THE ASSESSEE 13 IS GETTING EXEMPTION SINCE 1983 DENIAL THE YEAR UN DER CONSIDERATION HIGHLY UNJUSTIFIED CONTRARY TO THE AB OVE PRINCIPLE LAID DOWN BY THE HONBLE SUPRME COURT. 15. IN VIEW OF THE ABOVE BY TAKING INTO CONSIDERAT ION ALL FACTS CASE LAWS AND VARIOUS JUDICIAL PRONOUNCEMENTS WE F IND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A). WE ACCORDINGLY UPHELD THE ORDER OF THE LD. CIT (A) AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. 16. IN SO FAR AS ITA NOS. 552/JU/2008 & 553/JU/2008 RELATING TO ASSESSMENT YEARS 2004-05 AND 2005-06 THE FACTS ARE SIMILAR AND THEREFORE BY ADOPTING THE SAME REASONS GIVEN IN TH E APPEAL FOR A.Y. 2003-04 AND UPHOLDING THE ORDERS OF THE LD. CI T (A) AND THE APPEALS FILED BY THE REVENUE IS DISMISSED. 17. IN THE RESULT APPEALS FILED BY THE REVENUE ARE DISMISSED. O RDER WAS PASSED IN THE OPEN COURT DATED ON 11TH FEBRUA RY 2011. SD/- SD/- (S.V. MEHROTRA) (V.D. RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH FEBRUARY 2011 KAMAL KUMAR 14 COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. INCOME-TAX OFFICER 4. CIT 5. D/R 6. GUARD FILE