ORDER
Per Miss Moksh Mahajan, Accountant Member – The assessee has challenged the order of the learned Commissioner of Income-tax (Appeals) for assessment year 1983-84 raising the following ground :
“That in the facts and circumstances of the case and in law the learned CIT (Appeals) was wrong to confirm the addition of Rs. 10,00,000 shown by the assessee in the revised return as income contrary to the provisions of the I. T. Act and specially u/s 35CCA. The inclusion being contrary to the provisions of the I. T. Act the same be excluded from the total income.”
2. The facts in brief are that the assessment for assessment year 1983-84 was finalised at an income of Rs. 39,83,870 vide order dated 17-3-1986. The income was reduced in appeal to Rs. 16,93,726. In a return filed on 30-9-1986 the assessee declared an additional income of Rs. 1,20,000 relating to the purchase made from unregistered dealers who were not traceable. The return was stated to have been field under Amnesty Scheme. As per the Assessing Officer the return filed was as a result of the investigations carried out on the purchases which were found to be bogus. Accordingly it was held that the same could not be covered under the Amnesty Scheme. In order, however, to regularise the return so filed on 30-9-1986 notice under section 148 was issued on 3-3-1988. In the mean-while the assessee filed another return on 9th Feb., 1989 withdrawing its claim in respect of deduction already allowed at Rs. 10 lakhs under section 35CCA. Taking this too into consideration the total income was adopted at Rs. 28,30,736. Before the learned CIT(A) the assessee contended that the revised return declaring an amount of Rs. 10,00,000 was filed under a mistaken impression. As per provisions of section 35CCA, there was no requirement that the amount so donated should be spent by the association or institution to whom the donation made before the donor is entitled to deduction under the aforesaid provisions. The assessee had paid the amount by cheque and the same was accepted. Therefore, the addition so made should be deleted. The learned CIT(A) after taking cognisance of the assessees letter filed before the Assistant Director of Investigations, Bombay and finding no force in the assessees plea rejected the same. Against this, the assessee is aggrieved.
3. Shri B. B. Gupta, the learned AR, submitted that the assessees head office is located in Delhi and branch office in Bombay. In its return filed it claimed deduction in respect of two donations of Rs. 10 lakhs each, one made to Bhandari Balweerchand Pratapchand Memorial Research Foundation and the other to Seva Charitable Trust. While in respect of the former the certificate in the form of approval by the Secretary of the Department of Science and Technology was furnished, in respect of latter the approval of the Commissioner of Income-tax, Karnataka-I, Banglore was filed. In respect of the latter, the approval had been allowed for a period of two years from the date of the issue of the letter. The deduction as claimed was thus allowed. Subsequently it so happened that searches were carried out in the premises of Seva Charitable Trust. It came to the notice of the Revenue that the trust had not carried out the activities as per the terms and conditions of approval granted by the Central Government. The assessee was confronted with this fact by the Assistant Director of Investigation Unit II(5), Bombay. In order to co-operate with the department and to avoid further litigation and penal proceedings, the assessee voluntarily offered to withdraw the claim allowed under section 35CCA by filing a revised return under the Act. This is evident from the letter dated 7th March, 1988 filed before the Assistant Director of Investigation Unit II(5), Bombay. As per the contents of the letter it was made clear that the return so filed would not affect the amount surrendered under the voluntary disclosure scheme and that no penalty and interest would be imposed. The surrender so made was conditional. The Assessing Officer not only imposed the penalty under section 271(1)(c) of the Act in respect of the aforesaid amount but also file an appeal against the relief allowed by the CIT(A) in respect of interest charge under section 215 of the Act. This was in breach of agreement entered into with the department. In any case after having once allowed the deduction, the same could not have been withdrawn under section 148 of the Act which would amount to change of opinion on the part of the Assessing Officer. The revised return could be considered in the proceedings under section 139 of the Act only and not under section 148 of the Act. Even on technical grounds the addition could not be sustained as would be apparent from the reasons recorded under section 148 of the Act. The proceedings under section 147 were initiated for a limited purpose to bring in its fold the income of Rs. 1,20,000 and no other income. It could not be extended to Rs. 10 lakhs as done by the Assessing Officer. The revised return filed surrendering a deduction of Rs. 10 lakhs was therefore a nullity in law and as such should have been ignored. A brave injustice has been done to the assessee in withdrawing its claim specifically when not only the assessee had parted with substantial sum of money but had not recovered the same back. Till dated it has not been shown that the approval under section 35CCA to Seva Charitable Trust stands withdrawn. On the other hand, the assessee is not barred from withdrawing the surrender at any stage. Support was derived from the decision of the Honble Supreme Court in the case of Pullangode Rubber Porduce Co. Ltd. v. State of Kerala [1973] 91 ITR 18. In the circumstances argued the AR, the addition made at Rs. 10 lakhs should be deleted.
4. The learned DR on the other hand relying heavily on the orders of the revenue authorities submitted that as per the order the Assessing Officer the assessment was reopened in view of certain investigation carried out in Bombay in respect of purchases made from unregistered dealers. In his order the Assessing Officer clearly held that the return could not be covered under the Amnesty Scheme. Similar was the case in regard to the withdrawal of deduction of Rs. 10 lakhs which was a voluntary act on the part of the assessee. It was only when confronted with certain facts regarding the activities of Seva Charitable Trust, that the assessee came forward and withdraw the deduction already enjoyed by it. The conditions laid down in the cited letter are unilateral and there is no material on record to show that the department was a party to it. It is a simple case of surrender but the assessee and the acceptance by the department. Having done so the assessee cannot turn around and plead that the surrender was wrong and the income should not have been brought to tax. It is a clear case where as a result of searches on the premises of the association/institution it was found that the party had not implemented any programme as required under section 35CCA for which it could have been granted an approval as done by the CIT (Admn.). There is no force in the argument that the second return could not have been entertained under section 148 of the Act. Once the proceedings have been validly initiated under section 148 of the Act, the entire assessment is open before the Assessing Officer and the Assessing Officer is well within his rights to bring to charge items of income which had escaped the assessment other than or in addition to the item or items which led to issuance of notice under section 148 of the Act. This is as held by their Lordships of Supreme Court in the case of CIT v. Sun Engg. Works P. Ltd. [1992] 198 ITR 297. Accordingly the addition has been rightly sustained by the learned CIT(A).
5. We have carefully considered the submissions made on both sides. At the outset we would like to made it clear that either side did not support their stand whether the surrender of Rs. 1,20,000 was made under the Amnesty Scheme as contended by the assessee or it was as a result of an investigation in respect of amount of purchases surrendered as is the case of the department. The reasons recorded under section 148 merely make a mention of the revised return filed by the assessee reflecting an income of Rs. 1,20,000 towards the purchases made from unregistered dealers. The fact however remains that the proceedings under section 147 of the Act were initiated to regular the revised return filed by the assessee declaring an income of Rs. 1,20,000. Thus what is material for determination of the issue is whether proceedings under section 147 were validly initiated or not. The assessee itself came forward to disclose an income Rs. 1,20,000. In order to bring the aforesaid income to tax, proceedings under section 147 were initiated which are valid. Having once done so the service of notice under section 148 of the Act results in the commencement of assessment proceedings which are governed in turn by all the other provisions of the Act. Notice under section 148 of the Act is therefore deemed to be one under section 139 of the Act. It may so happen that in some cases it may lead to supplementary assessment while in other case the assessment for the first time. These are neither separate nor distinct from the original assessment proceedings. All the other provisions apply while framing reassessment. Therefore, the objection of the assessee that the income declared in the second revised return was a nullity is devoid of force. “Once such assessment proceedings are open, the Assessing Officer is well within his rights to bring to charge items of income which had escaped assessment other than or in addition to the item or items which led to the issuance of a notice under section 148.” This is so held by their Lordships of Supreme Court in the case of Sun Engg. Works (P.) Ltd. (supra). The assessee itself surrendered an amount of Rs. 10 lakhs subsequent to the searches conducted in the premises of Seva Charitable Trust. There is no material to show that the surrender so made was under coercion. Rather, the letter dated 7th March, 1988 filed before the A.D. showed that the surrender was made in view of the facts disclosed that the institution had not implemented the programme for which donations were received. In the circumstances, the cognisance had to be taken of the income so returned. As the proceedings under section 148 had already been initiated the act of the Assessing Officer in withdrawing the exemption already granted on the basis of the assessees own statement, did not tantamount to change of opinion as argued by the counsel. If the notice issued under section 148 was solely for withdrawing the exemption expressed provided, it would have amounted to change of opinion but not otherwise. We may not examine the issue raised regarding the acceptance of the surrender with examining it. The circumstances as detailed in the order show that the surrender made was in pursuance of search operations carried out in the case of Seva Charitable Trust. While the nature of exact information found was not available, the mention has been made regarding the amount not spent for the purpose so collected. In the facts of these face the institution was not entitled to approval under section 35CCA. For this we would turn to the aforesaid provisions. As per provisions of section 35CCA as were prevailing at the time of the relevant period though for eligibility of deduction in respect of donation the requirement is that the payment has been made to the approved institution or association, yet embedded in the same is the requirement that the institution or association must carry out programmes of rural development approved by the prescribed authority. The prescribed authority as mentioned under Rule 6AAA is the Chief Commissioner or Commissioner of Income-tax. As per sub-section (2) of section 35CCA of the Income-tax Act, the expenditure by way of payment of any sum to any association or any institution is to be in respect of the programme of rural development to be approved by the prescribed authority. This clearly shows that there has to be a programme of rural development to be specified by the association or institution which is to be approved by the prescribed authority in respect of which a certificate is to be issued to enable the donor to get deduction. Thus from the wordings in which the section is couched, it is clear that not only the association or institution must have an object of carrying out a programme of rural development but the latter has to be implemented. The prescribed authority is duty bound to give authorisation only to those institutions or associations which have undertaken and are implementing the approved programmes. In our view we are supported by the decision of Gujarat High Court in the case of Kaka Ba and Kala Budh Public Charitable Trust v. CIT [1984] 146 ITR 9. While interpreting the provisions of section 35CCA of the Act, their Lordships held as under (Head Note) :
“Under the new section 35CCA of the I.T. Act, 1961, as amended by the Finance Act, 1983, an assessee will be entitled to deduction of expenses incurred on account of donation made to any institution or association for the purposes of approved rural development programme or for the training of persons for implementing programmes of rural development or to a rural development fund set up and notified by the Central Government. For claiming the deduction the assessee has to produce a certificate from such institution or association which has as its objects the undertaking of any programme of rural development. The institution or association concerned can issue the certificate only if it is authorised in that behalf by the prescribed authority. Under the old section 35CCA as enacted w.e.f. June 1, 1978, before its amendment by the Finance Act, 1983, an assessee was entitled to claim deduction of expenses incurred on account of donations to any institution or association which has as its objects the undertaking of any programme of rural development, provided both the programme and the association or institution was approved by the prescribed authority. The requirement of the approval of the institution or programme as envisaged in old section 35CCA and the authorisation which is now to be accorded to the institution for the purpose of issuing a certificate under the new section 35CCA operate in different fields altogether. The approval which was envisaged to the programme as well as to the institution under old section 35CCA was for the purpose of enabling the assessee to claim deduction on account of any expenses incurred by way of donation to such an institution or association. The authorisation which has now been envisaged under new section 35CCA is to empower the institution or association to issue certificate as to enable the assessee concerned to claim deduction on account of such expenses. It cannot be said that every and any institution which has as its object the rural development programme is entitled to the authorisation under sub-section (2B) of section 35CCA. The Commissioner is bound to give authorisation only to those institutions or associations which are approved and which have undertaken and are implementing approved rural development programmes after March 1, 1983. This view is fortified by sub-sections (2) and (2A) of section 35CCA. The said sub-section provide that the deduction under sub-section (1)(a) or (1) (b) shall not be allowed for payment to institutions or associations referred to in the said clause unless certificate is produced from such institution or association. The word “such” gives an indication that the institution or association must be such which must be carrying on, in furtherance of its objects, the approved rural development programme. If any such institution or association approached the prescribed authority it cannot be refused the authorisation on the ground that new section 35CCA does not envisage renewal of the approval to the institution and/or the programme.”
Thus the scope of section 35CCA as originally inserted by the Finance Act, 1978 and effect of amendment made by Finance Act, 1983 has been explained by their Lordships of Gujarat
High Court as stated above. The proposition that underlying object is the carrying out of rural developments has been more than elaborated in various Circulars issued by CBDT including Nos. 240 dated 17th May, 1978, 258 dated 14th June, 1979 and others. The view is fortified by the rules framed in this respect. Guide lines have been issued to for the benefit of the prescribed authorities for approval of both institutions as well the specific programmes. Performa of applications in Annexure IV(A) and IV(B) contain a column whereby yearly expenditure on rural development/welfare activities has to be specified. Thus the essential condition for grant for approval is that not only the association should have an object of rural development but the same is also implemented. In the case of assessee as per statement no such programme was implemented because of which the certificate has been apparently wrongly granted to the assessee. From the language of the certificate as placed before us, we find that the approval was also conditional. One of the conditions being that the funds would be utilised for the programmes approved and that the same were not to be diverted for any other purpose. It was also subject to the condition that the Director of the Health Services, Goa gives his concurrence for the setting up of the hospital at Carascowaddo Tivim Bardez Taluka, Goa District. There were other conditions of similar nature. It was in the light of this conditional approval that the Assessing Officer while granting deduction clearly mentioned that the “deduction as claimed by the assessee is allowed subject to the facts and circumstances narrated earlier without prejudice to the reassessment in the event of any finding prejudicial to the claim”. As the assessee itself offered to withdraw the deduction which was as a result of the material confronted to him its case cannot be covered under mistaken impression as alleged. We are unable to appreciate the argument that in all cases of surrender the Assessing Officer must examine the issue whether to accept the same or not. In the circumstances, we see no reason to interfere with the order of the learned CIT(A) which we uphold. In the result, assessees appeal stands dismissed.
