{"id":224374,"date":"2006-10-06T00:00:00","date_gmt":"2006-10-05T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/sardarni-uttam-kaur-educational-vs-ito-on-6-october-2006"},"modified":"2018-06-02T13:19:17","modified_gmt":"2018-06-02T07:49:17","slug":"sardarni-uttam-kaur-educational-vs-ito-on-6-october-2006","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/sardarni-uttam-kaur-educational-vs-ito-on-6-october-2006","title":{"rendered":"Sardarni Uttam Kaur Educational … vs Ito on 6 October, 2006"},"content":{"rendered":"
Income Tax Appellate Tribunal – Amritsar<\/div>\n
Sardarni Uttam Kaur Educational … vs Ito on 6 October, 2006<\/div>\n
Bench: J Pall, A.D.<\/div>\n<\/p>\n
<\/pre>\n
ORDER<\/p>\n
Joginder Pall, A.M.<\/p>\n
1. This is a bunch of six appeals out of which four have been filed by <\/p>\n
the assessee against the consolidated order dated 21-5-2002 of Commissioner (Appeals), <\/p>\n
Bhatinda, for the assessment years 1994-95, 1995-96, 1997-98 and 1998-99 and two appeals <\/p>\n
have been filed by the revenue against the same order of Commissioner (Appeals). for the <\/p>\n
assessment years 1995-96 and 1996-97. Since the issues involved in the appeals filed by the <\/p>\n
assessee and by the revenue are inter-related and arise from the same consolidated order of <\/p>\n
Commissioner (Appeals), all the appeals were heard together and are being disposed of by <\/p>\n
this consolidated order for the sake of convenience.\n<\/p>\n<\/p>\n
2. At the time of hearing of the appeals, the learned Counsel <\/p>\n
for the assessee submitted an application of the assessee dated 20-11-2005 requesting for <\/p>\n
admission of the following additional ground of appeals for the assessment years <\/p>\n
199495,1995-96,1997-98 and 1998-99:\n<\/p>\n
\nThat the order under appeal is void ab initio as legal <\/p>\n
requirements for supplying copy of reasons recorded have not been supplied and the reasons <\/p>\n
as mentioned by the learned Commissioner (Appeals) in his order does not show that any <\/p>\n
income has escaped assessment. It only talks of the inapplicability of the provisions of section <\/p>\n
10(22) of the Income Tax Act.\n<\/p>\n
\nNeither the status of the assessee can be changed in proceeding under <\/p>\n
section 148 nor any assessment can be framed without including income which is alleged to <\/p>\n
have escaped assessment or underassessed.”\n<\/p>\n
\nThe learned Counsel for the assessee submitted that the above <\/p>\n
additional ground is purely legal in nature for which relevant facts are already on record. He, <\/p>\n
therefore, submitted that the same deserves to be admitted in view of the judgment of <\/p>\n
Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd v. CIT .<\/p>\n
3. The learned departmental Representative, Sh. Achal <\/p>\n
Sharma, conceded that the additional ground raised by the assessee for all the assessment <\/p>\n
years was purely legal in nature and, therefore, there was no objection to the admission of <\/p>\n
additional ground.\n<\/p>\n<\/p>\n
4. We have heard both the parties and carefully considered <\/p>\n
the respective submissions, The additional ground raised by the assessee is purely legal in <\/p>\n
nature for which relevant facts are already on record. Relying on the judgment of Hon’ble <\/p>\n
Supreme Court in the case of National Thermal Power Co. Ltd. (supra), the additional <\/p>\n
ground raised by the assessee for all the abovementioned assessment years is admitted.<\/p>\n
5. In all the appeals filed by the assessee, the following <\/p>\n
identical issues with variation in amounts have been raised:\n<\/p>\n
\n“That the learned Commissioner (Appeals) has failed to appreciate the <\/p>\n
facts and circumstances of the case and has thereby erred in holding donations of Rs. 2,40,051 <\/p>\n
for the assessment year 1994-95 (Rs. 1,76,000 for the assessment year 1995-96, Rs.88,500 <\/p>\n
for the assessment year 1997-98 and Rs.2,89,000 for the assessment year 1998-99) received <\/p>\n
towards corpus fund from various donors duly reflected in the balance sheet as taxable.<\/p>\n
Donations towards corpus fund are exempt under Section 11(1)(d) of the <\/p>\n
Income Tax Act, 1961.\n<\/p>\n
\nIn view of the above stated facts and circumstances it is prayed that <\/p>\n
the addition upheld by the Commissioner (Appeals) may kindly be deleted or such other relief <\/p>\n
be granted as is deemed fit.”\n<\/p>\n<\/p>\n
6. In the appeals filed by the revenue for the assessment <\/p>\n
years 1995-96 and 1996-97, the following identical grounds have been raised:<\/p>\n
(i) The learned Commissioner (Appeals) has erred in allowing the status <\/p>\n
of ‘Trust’ as against ‘AOP’ assigned by the assessing officer.\n<\/p>\n<\/p>\n
(ii) That the learned Commissioner (Appeals) has erred in deleting the <\/p>\n
addition of Rs. 25 lakhs (Rs. 29 lakhs for the assessment year 1996-97) received by the <\/p>\n
assessee as donations from the Tilok Tirath Vidyawati Chuttani Charitable Trust holding that <\/p>\n
donations formed the corpus of the trust and the trust was not liable to tax.<\/p>\n
(iii) That the learned Commissioner (Appeals) has erred in relying upon <\/p>\n
the certificate which was not produced before any of the authorities during the assessment <\/p>\n
proceedings and the applicant was not entitled to produce fresh evidence before the appellate <\/p>\n
authority under Rule 46A of the IT Rules, 1962.\n<\/p>\n<\/p>\n
(iv) That the learned Commissioner (Appeals) has erred in not <\/p>\n
appreciating the fact that the representatives of the assessee invested the funds in <\/p>\n
companies in which they were substantially interested and the funds were not used for the <\/p>\n
purposes for which the trust was created. Further, the assessee was not running any <\/p>\n
educational institution for which it was eligible for exemption under Section 10(22) or under <\/p>\n
sections 11 and 13 of the Income Tax Act, 1961.\n<\/p>\n<\/p>\n
(v) That it is prayed that the order of the learned Commissioner <\/p>\n
(Appeals) be set aside and that of the assessing officer be restored.”<\/p>\n
7. The facts of the case common to all the assessment years <\/p>\n
are that the assessee filed the returns of income for the assessment years 1994-95, 1995-96, <\/p>\n
1996-97, 1997-98 and 1998-99 on 1-7-1994, 30-6-1995, 28-6-1996, 27-6-1997 and 17-8-1998 <\/p>\n
respectively declaring therein nil income as the assessee had claimed exemption in respect of <\/p>\n
its income under Section 10(22) of the IT, 1961 (in short the Act) on the plea that the <\/p>\n
assessee was an educational institution . These returns were processed under section <\/p>\n
143(1)(a)\/143(1) of the Income Tax Act, 1961. Subsequently, it appears that the assessing <\/p>\n
officer carried out enquiries with the prior permission of the CIT under Sub-section (6) of <\/p>\n
section 133. Such enquiries revealed that assessee was not running any educational <\/p>\n
institution\/school\/college\/ vocational institute at village Sarai Naga or its surrounding areas. <\/p>\n
There was only a sign board of its name, placed outside a room occupied by security guard of <\/p>\n
Brar family. The. Assessing Officer observed that in the absence of any educational <\/p>\n
institution\/school or building for educational purposes, the assessee was not entitled to <\/p>\n
exemption claimed under sub section (22) of Section 10 of the Act and the funds have not <\/p>\n
been utilized for this object. The assessing officer, therefore, initiated action under section <\/p>\n
147 by issue of notices under Section 148 on 2-3-2000. In response to said notices, the <\/p>\n
returns declaring nil income were filed for all the assessment years. Thereafter, the case was <\/p>\n
picked up for scrutiny. The assessing officer issued a detailed questionnaire and observed that <\/p>\n
the assessee failed to furnish replies in respect of Q. Nos. 1, 2 and 4. Question Nos. 4 and 6 <\/p>\n
were not fully answered. The assessing officer observed that in the returns of income filed, the <\/p>\n
assessee had mentioned Code No. 08 for AOP (trust). However, the assessee was a society <\/p>\n
registered with registrar of societies. The assessing officer observed that the assessee had <\/p>\n
claimed wrong status and it was repeatedly asked to clarify the, position by issue of several <\/p>\n
notices\/letters. But the same was not properly explained. The assessing officer, therefore, <\/p>\n
adopted the status as an AOP with Code No. 07 for all the assessment years.<\/p>\n
7.1 During the course of assessment proceedings, the <\/p>\n
assessee was asked to explain how it had claimed exemption in respect of its income under <\/p>\n
section. 10(22) of the Act whereas no expenditure was incurred and the income was utilised <\/p>\n
for educational purposes. The assessee stated that the institution has been formed with the <\/p>\n
sole object of setting up educational institute\/college. However, the same could not be set up <\/p>\n
due to non availability of sufficient funds. The assessee had claimed exemption under section <\/p>\n
10(22) because it had reimbursed the school tuition fee. It was also explained that funds <\/p>\n
collected had been invested in certain limited companies for the better returns and secured <\/p>\n
investments. Thus, it was contended that it had not violated the provisions of Section 11 and <\/p>\n
12 of the Act. The assessing officer examined such explanation and observed that the list of <\/p>\n
students to whom tuition fee had been reimbursed were studying in premier schools\/colleges <\/p>\n
of Chandigarh, Panchkula & Mohali and the students belonged to the elite class who <\/p>\n
could very well afford the study. Thus, the contention of the assessee that object was to help <\/p>\n
needy students in backward area was factually incorrect. He also observed that students to <\/p>\n
whom such fee was reimbursed belonged to the families who were closely connected with Brar <\/p>\n
family or the persons who made donations to the society. He specifically mentioned such <\/p>\n
names on p. 5 of the assessment order. He also observed that assessee reimbursed a meagre <\/p>\n
sum of Rs. 1,41,305 by way of tuition fee to some students out of funds available of Rs. <\/p>\n
79,41,734 collected by the assessee. He also observed though the society was registered with <\/p>\n
the Registrar of Societies in 1993, the only action taken by the assessee was to purchase the <\/p>\n
land for an amount of Rs. 15,41,250. The balance amount was invested in share application <\/p>\n
money and also deposits in various companies of Brar family who were members of the <\/p>\n
assessee society. He also observed that major chunk of donations amounting to Rs. 54,00,000 <\/p>\n
had been received from Tilok Tirath Vidyawati Chuttani Charitable Trust, of which Dr. Choutani <\/p>\n
was a founder member and he had very close relations with Brar family. He also observed that <\/p>\n
the assessee was not entitled to exemption under Section 10(22) of the Act because it was <\/p>\n
not running any educational inslilute\/school\/college\/vocationaI institute itself. He relied on the <\/p>\n
judgments of Hon’ble Madras High Court in the cases of CIT v. Devi Educational Institution <\/p>\n
 and in the case of Addl. CIT v.\n<\/p>\n
Aditanar Educational Institution  upheld by the Hon’ble Supreme <\/p>\n
Court in Aditanar Educational Institution Etc. v. Asstt. CIT  where it was held that if the assessee was not running a school or <\/p>\n
college itself, the assessee would not be entitled to exemption of its income under section <\/p>\n
10(22) of the Act. He further relied on the judgment of Hon’ble Gujarat High Court in the case <\/p>\n
of CIT v. Sorabji Nusserwanji Parekh, , <\/p>\n
where it was held that in the absence of any educational institution established for <\/p>\n
educational purposes, it could not be said that the trust was carrying on educational activities. <\/p>\n
He also relied on the decision of Tribunal, Pune Bench, in the case of Bhaskaracharya <\/p>\n
Pratishthan v. Asst. CIT (1995) 52 ITD 28 (Pune) and decision of Tribunal, Bombay Bench <\/p>\n
in the case of Shri Bhanbai Nenshi Mahila Vidyalaya v. ITO (1986) 26 TTJ (Bom) 79 : <\/p>\n
(1986) 18 ITD 115 (Bom). He observed that in the present. case the assessee has not <\/p>\n
been able to establish its own institution though it had been in existence for the last 8 years. <\/p>\n
That apart it had not even undertaken any activity other than buying a land for setting up the <\/p>\n
institution or even related to educational field. He also observed that sole purpose of setting <\/p>\n
up the society was to act a conduit to route money received from other trusts and certain <\/p>\n
individuals to the companies run by Brar family on purely commercial consideration. He <\/p>\n
referred to the judgment of Honble Supreme Court in the case of McDowell & Co. Ltd. <\/p>\n
v. CTO  to come to conclusion that it <\/p>\n
was merely a collusive device to evade tax. The assessing officer also observed that the major <\/p>\n
portion of donations amounting to Rs. 54 lakhs had come from Tilok Tirath Vidyawati Chuttani <\/p>\n
Charitable Trust, whose founder member was Dr. P.N. Choutani. Dr. P.N. Choutani was a close <\/p>\n
family member of Brar family. The said trust namely, Tilok Tirath Vidyawati Chuttani Charitable <\/p>\n
Trust had claimed exemption in respect of donations given to the assessee on the ground that <\/p>\n
this institution was set up for educational purposes duly recognized and registered by CIT <\/p>\n
under sections 80G and 12A of the Act. However, by referring to the results of enquiries made <\/p>\n
in this case which revealed that assessee had not set up any educational institution, the <\/p>\n
assessing officer having jurisdiction over the case of Tflok Tirath Vidyawati Chuttani Charitable <\/p>\n
Trust, disallowed the exemption claimed in respect of donations given to the assessee. The <\/p>\n
assessee filed an appeal before the Commissioner (Appeals) against the said order. The <\/p>\n
assessing officer referred to the observations made by the Commissioner (Appeals) in the <\/p>\n
order passed in the case of Tilok Tirath Vidyawati Chuttani Charitable Trust, where she had <\/p>\n
observed that Sardarni Uttam Kaur Educational Society had not rendered any worthwhile <\/p>\n
services in the field of nursery education and the funds received have been misutilised by the <\/p>\n
trustees of the assessee trust. He also observed that if any trust to whom donations have <\/p>\n
been given does not deploy\/invest\/utilise its funds in accordance with the objects and the <\/p>\n
various modes and forms mentioned under section. 11(5) of the Act, such donations are liable <\/p>\n
to forfeiture of exemption by virtue of Section 13(1)(d) of the Act. After drawing the support <\/p>\n
from the said order of the Commissioner (Appeals), the assessing officer observed that the <\/p>\n
donations received from Tilok Tirath Vidyawati Chuttani Charitable Trust, were invested in <\/p>\n
share application money of the companies and also as deposits in the business concerns in <\/p>\n
which the members of the Brar family were in full control. Thus, he held that the assessee had <\/p>\n
violated the provisions of Section 13(1)(d) and was, therefore, not entitled to exemption of its <\/p>\n
income under sections 10(22) and 11 of the Act. The assessing officer, therefore, completed <\/p>\n
the assessments for the abovementioned years by disallowing exemptions both in respect of <\/p>\n
its income and donations received from the various persons in the respective assessment <\/p>\n
years.\n<\/p>\n<\/p>\n
8. Aggrieved with the order of the assessing officer, the <\/p>\n
assessee filed appeals before the Commissioner (Appeals), where the action of the assessing <\/p>\n
officer for initiating reassessment proceedings was inter alia challenged. It was <\/p>\n
submitted before the Commissioner (Appeals) that the trust was established with a view to <\/p>\n
open, run, continue an educational and vocational institution in healthy surroundings. The <\/p>\n
returns for all the assessment years were filed in the status of trust which was also registered <\/p>\n
by the CIT under Section 12A of the Act. The returns were processed under Section 143(1)(a). <\/p>\n
It was submitted that the assessing officer misdirected himself by considering the claim for <\/p>\n
exemption of its income under Section 10(22) of the Act instead of considering the same as <\/p>\n
per provisions of sections 11 and 12 of the Act. However, while denying the exemption, the <\/p>\n
assessing officer totally overlooked the nature of donations received i.e. whether the same <\/p>\n
were towards corpus or for its application. It was submitted that the donations received from <\/p>\n
Tilok Tirath Vidyawati Chuttani Charitable Trust, were towards the corpus of the trust. The <\/p>\n
assessee also filed a photocopy of the certificate in confirmation of the donations given for <\/p>\n
corpus by the said trust. It was also submitted that the assessee was not supplied a copy of <\/p>\n
reasons recorded by the assessing officer for issuing notices under Section 148. Therefore, the <\/p>\n
action of the assessing officer for reopening the assessments was void ab initio. This <\/p>\n
fact was strongly disputed by the Jt. CIT, who contended that such reasons were supplied to <\/p>\n
the Authorised Representative. The assessing officer also submitted before the Commissioner <\/p>\n
(Appeals) that enquiries made during the course of assessment proceedings revealed that the <\/p>\n
assessee had not established any educational institution\/school\/college\/ vocational institute <\/p>\n
and, therefore, the assessee was not entitled to exemption under Section 10(22) of the Act. <\/p>\n
Further, the donations received were also diverted to business concerns of Brar family and <\/p>\n
were not utilized for the objects for which the trust was set up. Members of Brar family were <\/p>\n
the members of the assessee society. It was, therefore, submitted that the assessments had <\/p>\n
been rightly reopened and claim for exemption in respect of its income under Section 10(22) of <\/p>\n
the Act has also been rightly denied by the assessing officer. The issue regarding completion <\/p>\n
of assessments in the status of an AOP with Code No.07 was contested and it was contended <\/p>\n
that assessee was a trust and, therefore, the assessment was to be made in the status of a <\/p>\n
trust with Code No. 8. The learned Commissioner (Appeals) considered these submissions and <\/p>\n
held that since the trust was set up for running an educational institution\/school\/college or <\/p>\n
vocational institute and the same was not found in existence when enquiries were made by <\/p>\n
the department, the assessee was not entitled to exemption under Section 10(22) of the Act. <\/p>\n
He, therefore, held that the assessing officer had rightly initiated reassessment proceedings <\/p>\n
and the same were valid.\n<\/p>\n
\n8.1 The learned Commissioner (Appeals) observed that the <\/p>\n
donations of Rs. 54 lakhs were given by Tilok Tirath Vidyawati Chuttani Charitable Trust of <\/p>\n
which Dr. P.N. Choutani was founder member. Dr. P.N. Choutani was very close with Brar <\/p>\n
family. However, he observed that this fact itself could neither go against the assessee nor in <\/p>\n
its favour more so when the learned Commissioner (Appeals), Chandigarh, has accepted the <\/p>\n
claim of Tilok Tirath Vidyawati Chuttani Charitable Trust for exemption in respect of donations <\/p>\n
given to the assessee trust on the ground that once the donations have been given to a trust <\/p>\n
recognized\/registered as charitable purpose, it had no power to withdraw the same even if the <\/p>\n
said trust i.e. Assessee trust had misused the said donations under the Act. As regards the <\/p>\n
claim of the assessee that it had filed returns in the status of a trust, the revenue had <\/p>\n
contended that the assessee was a society and the same has been registered with registrar of <\/p>\n
societies. Therefore, the status of the assessee was taken as an AOP with Code No.7. <\/p>\n
Revenue has also stated that even during the course of assessment proceedings, the <\/p>\n
assessee could not prove its status as that of a trust despite various opportunities allowed. <\/p>\n
Revenue       had also contended that during the course of assessment proceedings, the <\/p>\n
assessee failed to furnish any evidence or even certificate that donations of Rs. 54,00,000 <\/p>\n
received from Tilok Tirath Vidyawati Chuttani Charitable Trust, were towards corpus of the <\/p>\n
trust mentioned in clause (d) of Sub-section (1) of Section 11 of the Act. Relying on the <\/p>\n
decision of Tribunal, Bombay Bench in the case of Prabodban Prakashan v. Asst. DIT <\/p>\n
(1994) 50 ITD 135 (Bom), it was submitted that the certificate issued by the trustee of <\/p>\n
the donor trust dated 2-5-2002 was merely an afterthought and should not be accepted. Thus, <\/p>\n
it was submitted that the, assessee was not entitled to exemption under Section 11(1)(d) in <\/p>\n
respect of voluntary donations received from the said trust. The learned Commissioner <\/p>\n
(Appeals) considered these submissions and observed that apart from the fact that the <\/p>\n
assessee was registered with the Registrar of Societies, Punjab, on 21-7-1993, the trust was <\/p>\n
also registered under Section 12 by the CIT, Jalandhar vide order dated 21-9-1993. The <\/p>\n
assessee was also granted exemption under Section 80G of the Act. By referring to the <\/p>\n
certificate dated 2-5-2002 of Tilok Tirath Vidyawati Chuttani Charitable Trust that donations of <\/p>\n
Rs. 25 lakhs and Rs. 29 lakhs received from the said trust in the assessment years 1995-96 <\/p>\n
and 1996-97 respectively were towards the corpus and not towards its income, the learned <\/p>\n
Commissioner (Appeals) held that the same qualified for exemption under Section 11(1)(d) of <\/p>\n
the Act for these two assessment years. However, he observed that the income arising from <\/p>\n
the donations was not utilized for the objects for which it was set up and violated the <\/p>\n
provisions of Section 11 and 13 of the Act, such income was not exempt. He further observed <\/p>\n
that correct status of the assessee was a trust with Code No. 8 and not an AOP with Code No. <\/p>\n
7. While holding the view that the assessee had contravened the provisions of section <\/p>\n
13(1)(d) of the Act, the learned Commissioner (Appeals) took note of the fact that the funds <\/p>\n
received or invested in the firms, companies and other entities where the trustees and their <\/p>\n
family members had substantial interest were not eligible for exemption under Section 11 of <\/p>\n
the Act. While taking such view the learned Commissioner (Appeals) held that other receipts <\/p>\n
in the form of voluntary donations were not entitled to any exemption because the assessee <\/p>\n
failed to furnish any evidence that those were given at the specific direction that these shall <\/p>\n
form part of the corpus of the Trust Act. The assessee is aggrieved with the order of the <\/p>\n
Commissioner (Appeals) for the aforesaid four assessment years and the revenue is also <\/p>\n
aggrieved with the order of Commissioner (Appeals) for the assessment years 1995-96 and <\/p>\n
1996-97 for allowing exemption in respect of donations of Rs. 25 lakhs and Rs. 29 lakhs <\/p>\n
respectively. Hence, these appeals before us.\n<\/p>\n<\/p>\n
9. The learned Counsel for the assessee, Sh. B.M. Khanna filed <\/p>\n
written submissions vide his letter dated 7-9-2006 and also reiterated the submissions which <\/p>\n
were made before the authorities below. He submitted that all the returns filed for the <\/p>\n
assessment years under consideration were processed under Section 143(1)(a). Thereafter, <\/p>\n
reassessment proceedings were initiated under Section 147 by issue of notices under section <\/p>\n
148 on 2-3-2000 for all the assessment years. However, the reasons recorded for initiating the <\/p>\n
reassessment proceedings were not supplied to the assessee. Relying on the two judgments <\/p>\n
of Honble Allahabad High Court in the cases of Herbs (India) (P) Ltd. v. Dy. CIT  and Anand Kumar Sharma<\/a> v. Asst. CIT  and the decision of Tribunal, Bombay Bench in the case of Dy. CIT v. <\/p>\n
Maharashtra State Corporation<\/a> (a copy not supplied to the Bench), the learned Counsel <\/p>\n
submitted that it was mandatory on the part of the assessing officer to communicate the <\/p>\n
reasons recorded under Section 148 so as to enable the assessee to make its submissions on <\/p>\n
the legal aspect of reopening the assessments. He further referred to the identical <\/p>\n
stereotyped reasons recorded by the assessing officer which were supplied to the assessee as <\/p>\n
per directions given by the Bench. The learned Counsel submitted that assessments had been <\/p>\n
reopened on the ground that the assessee was not entitled to exemption in respect of its <\/p>\n
income under Section 10(22) of the Act. However, the assessing officer had included all <\/p>\n
receipts in the form of donations, subscriptions and interest income as the income which had <\/p>\n
escaped assessment. The learned Counsel submitted that all the returns were accompanied by <\/p>\n
audited accounts and balance sheet and loss of Rs. 5,208, Rs. 13,674 and Rs. 16,500 was <\/p>\n
shown for the asst yrs. 1994-95, 1997-98 and 1998-99 respectively after adjusting the income <\/p>\n
applied against the receipts. Only for the assessment year 1995-96., the assessee had shown <\/p>\n
income of Rs. 12,097. The audited accounts indicated that donations were received towards <\/p>\n
corpus. Thus, the inference drawn by the assessing officer that income of the amounts <\/p>\n
mentioned in the reasons recorded were untenable in view of the fact that the assessee was a <\/p>\n
trust registered with the CIT under Section 12A in the year 1993 and, therefore, the income of <\/p>\n
the trust was to be considered only as per provisions of sections 11 and 12 of the Act <\/p>\n
irrespective of the fact that the assessee had claimed exemption in respect of its income <\/p>\n
under Section 10(22) of the Act. Thus, the learned Counsel submitted that reassessment <\/p>\n
proceedings have been initiated on the basis of irrelevant facts for making fishing and roving <\/p>\n
enquiry. He further submitted that the law casts a duty on the assessing authority to complete <\/p>\n
an assessment on the same person to whom a notice under Section 148 has been issued and <\/p>\n
change in status vitiates the order. However, he submitted that the learned Commissioner <\/p>\n
(Appeals) has restored the status to the assessee as a charitable institution for all the <\/p>\n
assessment years with Code No. 08. The department has challenged the findings for the <\/p>\n
assessment years 1995-96 and 1996-97, but has accepted the findings of the learned <\/p>\n
Commissioner (Appeals) for the assessment years 1994-95, 1997-98 and 1998-99. He relied on <\/p>\n
the decision of Tribunal, Visakhapatnam Bench, in the case of Jashua Gootam v. Asst. CIT <\/p>\n
(2003) 80 TTJ (Visakha) 658 : (2003) 85 ITD 727 (Visakha), where it was held that <\/p>\n
without mentioning the status in notice itself i.e. oral trust, the assessment completed in <\/p>\n
pursuance of such an illegal notice issued under Section 148 was invalid and, therefore, was to <\/p>\n
be quashed. He submitted that in proposal sent to the Jt. CIT for initiating the reassessment <\/p>\n
proceedings under Section 147, the status of AOP (society trust) has been written in hand <\/p>\n
which shows interpolation at a later date. Relying on the judgment of Honble Allahabad High <\/p>\n
Court in the case of CIT v. Ishwar Singh & Sons  (All), <\/p>\n
the learned Counsel submitted that issue of a valid notice under Section 148 is a <\/p>\n
condition precedent and the same must be issued to a specific assessee. Thus, he submitted <\/p>\n
that the assessment proceedings initiated for making roving and fishing enquiries were invalid <\/p>\n
and bad in law. He submitted that it is clear from the order of the Commissioner (Appeals) <\/p>\n
that the assessee had furnished a certificate from Tilok Tirath Vidyawati Chuttani Charitable <\/p>\n
Trust to show that donations of Rs. 54 lakhs given to the assessee were with a specific <\/p>\n
direction that they shall form part of the corpus of the trust. He submitted that the assertion <\/p>\n
of the revenue that this evidence was furnished only before the Commissioner (Appeals) was <\/p>\n
not correct. Thus it was submitted that the donations received towards corpus for setting up <\/p>\n
nursery schools were exempt and not subject to tax as per Section 11(1)(d) of the Act. He also <\/p>\n
relied on the judgment of Honble Punjab & Haryana High Court in the case of Vipan <\/p>\n
Khanna v. CIT  where it <\/p>\n
was held that reassessment proceedings could be initiated only in respect of income escaping <\/p>\n
assessment or in cases of underassessment and not for making roving and fishing enquiries. <\/p>\n
He also stated that audited accounts indicated that even the remaining donations were for the <\/p>\n
corpus of the trust and these were so included in the accounts of the assessee. He submitted <\/p>\n
that Commissioner (Appeals) was not justified in confirming the additions in respect of other <\/p>\n
donations. Thus, he submitted that the appeals of the assessee deserve to be allowed for the <\/p>\n
reason that initiation of proceedings by the assessing officer under Section 147 was illegal and <\/p>\n
bad in law and the assessee was entitled to exemption in respect of the income and voluntary <\/p>\n
donations.\n<\/p>\n<\/p>\n
10. The learned departmental Representative, Sh. Achal <\/p>\n
Sharma, filed written submissions vide his letter dated 21-4-2006. He submitted that the <\/p>\n
contention of the assessee that assessment orders passed by the assessing officer were void <\/p>\n
ab initio, was not correct because it was neither a case of absence of any reason nor <\/p>\n
there was any lack of jurisdiction or any basic flaw in the assumption of jurisdiction. He <\/p>\n
submitted that it is a fact that in all the returns filed for the assessment years under <\/p>\n
consideration that the assessee had claimed exemption in respect of its income under section <\/p>\n
10(22) of the Act. He also drew our attention to p. 2 of the assessment order and copy of <\/p>\n
reasons recorded for all the assessment years which indicated that enquiries made with the <\/p>\n
permission of CIT under Section 133(6) of the Act revealed that the assessee had not set up <\/p>\n
any educational institution\/school or college at village Sarai Naga and there was only sign <\/p>\n
board of its name outside the room occupied by the security guard of Brar family of Sh. H.S. <\/p>\n
Brar. Thus, he submitted that the claim of the assessee for exemption under Section 10(22) of <\/p>\n
its income was not found to be valid. The assessing officer was, therefore, justified in forming <\/p>\n
a reason to believe that income chargeable to tax had escaped assessment. He submitted <\/p>\n
that for this purpose, the income not only included earnings of the assessee on the funds by <\/p>\n
way of interest, but also included voluntary donations and subscriptions. These were duly <\/p>\n
taken into account by the assessing officer while recording the reasons for initiating <\/p>\n
reassessment proceedings. He further submitted that the contention of the assessee that the <\/p>\n
Jt. CIT. had accorded his approval without due application of mind was factually incorrect <\/p>\n
because such approval was granted only after due application of mind and on the basis of the <\/p>\n
reasons recorded by the assessing officer. He also submitted a copy of letter dated 28-2-2002 <\/p>\n
where proposal submitted by the assessing officer under Section 147 was duly approved and <\/p>\n
returned to the assessing officer. As regards the contention of the assessee that reasons <\/p>\n
recorded under Section 148 were not communicated to the assessee, the learned departmental <\/p>\n
Representative submitted that this was a non-issue. He submitted that records revealed that <\/p>\n
there were some correspondence of the assessing officer with the counsel of the assessee <\/p>\n
with Sh. Kapil Khanna. Vide his letter dated 9-1-2001, the assessing officer informed him since <\/p>\n
Sh. Khanna was not authorised person as there was a change in counsel, the copy of the <\/p>\n
reasons could not be given to him. He further submitted that assessing officer vide his letter <\/p>\n
dated 29-1-2001 had informed the assessee that for obtaining the copy of reasons recorded, <\/p>\n
the assessee was required to pay the prescribed copying fee which had not been paid. A copy <\/p>\n
of this letter is placed at p. 3 of the paper book. Thereafter, the proceedings were attended by <\/p>\n
Sh. Taran Chugh, accountant and Sh. R. K. Rathore, chartered accountant, who appeared <\/p>\n
before the assessing officer upto the conclusion of the assessment proceedings. He enclosed <\/p>\n
therewith copies of the notings in the order-sheets and submitted that no demand for supply <\/p>\n
of reasons was raised by the authorized representative of the assessee, which only showed <\/p>\n
that either reasons were supplied to the assessees representative or otherwise, this no longer <\/p>\n
remained the issue with the assessee. He further submitted that the object of the requirement <\/p>\n
of supply of reasons under Section 148 was only to ensure that there was no denial of <\/p>\n
opportunity to the assessee. He drew our attention to the notings made in the order-sheet <\/p>\n
during the period 8-2-2001 to 15-3-2002 which showed that ample opportunities were given to <\/p>\n
the assessee during the course of assessment proceedings. He also referred to annex. 1, 2, 3 <\/p>\n
and 4 of the assessment orders which are copies of questionnaires issued by the assessing <\/p>\n
officer under Section 142(1)\/143(2) on 25-4-2001, 16-7-2001, 3-9-2001 and 5-3-2001 where <\/p>\n
specific information was called for. He particularly drew our attention to question No.3 of <\/p>\n
questionnaire dated 25-4-2001 (Annex.-l) where the assessee was specifically asked to furnish <\/p>\n
details of expenses incurred and utilization of income as provided under sections 11 and 12 to <\/p>\n
show that 75 per cent of its income had been expended or utilized for the objects for which <\/p>\n
the society had been set up. The assessee was also asked to furnish details of the investment <\/p>\n
and the difference between the corpus fund and investment fund in view of the submissions <\/p>\n
that only corpus has been invested and no income was utilised. He then drew our attention to <\/p>\n
pp. 2 and 3 of the assessment order where the assessee failed to furnish reply in respect of <\/p>\n
question Nos.1, 2 and 4 and Q. No.3(iii) and 6 were either not specifically answered\/fully <\/p>\n
answered. He further referred to Q.No.5 of Annex.-H, where the assessee was asked to furnish <\/p>\n
relationship of the members of the society with the companies mentioned therein, directors <\/p>\n
and persons having substantial interest in respect of which the assessee had stated that <\/p>\n
members of the society were also directors. However, this information was not furnished and <\/p>\n
again vide letter dated 3-9-2001 (listed as Annexure A-III of the assessment order), the <\/p>\n
assessee was asked to furnish- details of relationship of the members of the society with <\/p>\n
those of directors\/persons interested in the companies\/firms\/ business concerns having <\/p>\n
substantial interest along with their names and addresses etc. Again such information was not <\/p>\n
furnished. Thus, he submitted that the assessee has been avoiding furnishing of such <\/p>\n
information even upto the date of the completion of the assessments. He further referred to p. <\/p>\n
27 of the paper book filed by the assessee for the assessment year 1996-97 which is a copy of <\/p>\n
letter dated 13-2-2001 of the assessee, which is unsigned and is not on the assessment <\/p>\n
record of the assessee. He submitted that in this letter a reference has been made in para 2 <\/p>\n
of non-supply of the reasons recorded under Section 148. He submitted that the letter which is <\/p>\n
on the file of the assessing officer does not contain any request for supply of the reasons <\/p>\n
recorded under Section 148. He submitted that the assessee was fully aware of the reasons <\/p>\n
recorded and had been given full opportunity during the course of assessment proceedings. As <\/p>\n
regards the status of the assessee, the learned departmental Representative relied on the <\/p>\n
judgment of Hon’ble Supreme Court in the case of Income Tax Officer v. Ch. Atchaiah<\/a> <\/p>\n
, where it was held that the assessing <\/p>\n
officer must tax the right person and right person alone. It was also held that merely because <\/p>\n
a wrong person is taxed with respect to particular income, the assessing officer is not <\/p>\n
precluded from taxing the right person with respect to that income. He submitted that the <\/p>\n
judgment of Hon’ble Supreme Court was also with reference to the assessment to be made in <\/p>\n
the correct status by way of issue of notice under Section 148. He submitted that in this case, <\/p>\n
the assessee was repeatedly asked to explain how the status was claimed in the return as <\/p>\n
AOP (trust). However, the assessee evaded explaining this matter during the course of <\/p>\n
assessment proceedings. Thus, he submitted that the assessment had been rightly made in <\/p>\n
the status of AOP with Code No. 7.\n<\/p>\n
\n10.1 The learned departmental Representative, further <\/p>\n
submitted that in this case enquiries made by the assessing officer has confirmed that the <\/p>\n
assessee had not at all set up any educational institution for which it was formed. Therefore, <\/p>\n
the assessee was not entitled to exemption in respect of its income under Section 10(22) of <\/p>\n
the Act as claimed in the returns of income filed for the various assessment years under <\/p>\n
consideration. He submitted that it is also a fact that the assessee had diverted voluntary <\/p>\n
donations received mainly from Tilok Tirath Vidyawati Chuttani Charitable Trust amounting to <\/p>\n
Rs. 54 lakhs to the companies and business concerns of Brar family, who were members of the <\/p>\n
society and thereby violated the provisions of Section 13(1)(c) of the Act. He submitted that <\/p>\n
during the course of assessment proceedings, the assessee only furnished the list of persons <\/p>\n
from whom donations have been received but evaded to indicate the relationship with <\/p>\n
members of the assessee’s society though specifically asked for by the assessing officer. He <\/p>\n
particularly referred to pp. 15 to 18 of the paper book filed for the assessment year 1995-96 <\/p>\n
which contains list of persons from whom donations were received. He further referred to the <\/p>\n
provisions of Section 13(3) which mentions the persons covered under clause (c) of sub-section <\/p>\n
(1) and Sub-section (2) of Section 13 of the Act and it is not disputed by the assessee that <\/p>\n
these persons were not (sic) covered under these sections. He further referred to the <\/p>\n
provisions of clause (h) of Sub-section (2) of Section 13 which provide that if any funds of the <\/p>\n
trust or institution are, or continue to remain, invested for any period during the previous year, <\/p>\n
in any concern, in which any person referred to in Sub-section (3) has a substantial interest, <\/p>\n
the assessee would not be entitled to exemption under Section 11 of the Act. He further relied <\/p>\n
on the judgment of Hon’ble Andhra Pradesh High Court in the case of T. Bapanaiah <\/p>\n
Vidyadharma Trust v. CIT  where the <\/p>\n
funds referred to in clause (h) Sub-section (2) of Section 13 of the Act have been held to <\/p>\n
include both corpus as well as the income derived from. Thus, he submitted that despite the <\/p>\n
fact the learned Commissioner (Appeals) has upheld the finding of the assessing officer that <\/p>\n
the assessee was not entitled to exemption in respect of its income under Section 10(22) and <\/p>\n
section 11 of the Act as it had invested funds in the business concerns and companies of the <\/p>\n
persons closely related to the members of the assessee society\/trust, he was not justified in <\/p>\n
holding that the amounts of voluntary donations amounting to Rs. 54 lakhs received by the <\/p>\n
assessee during the assessment years 1995-96 and 1996-97 would be entitled to exemption <\/p>\n
under Section 11(1)(d) of the Act. He further stated that while deciding the appeals for the <\/p>\n
assessment years 1995-96 and 1996-97, the learned Commissioner (Appeals) has relied on a <\/p>\n
certificate dated 2-5-2002 of Tilok Tirath Vidyawati Chuttani Charitable Trust that donations <\/p>\n
were given to the assessee with a specific direction that these shall form part of the corpus. <\/p>\n
He submitted that this certificate was not filed during the course of assessment proceedings. <\/p>\n
The same was also not given at the time of making the donations. This was only an <\/p>\n
afterthought and did not deserve to be accepted by the Commissioner (Appeals). However, the <\/p>\n
learned Commissioner (Appeals) accepted a fresh evidence in the form of such certificate and <\/p>\n
deleted the additions made for the assessment year 1995-96 and 1996-97 without complying <\/p>\n
with the provisions of Rule 46A which inter alia required that such evidence should <\/p>\n
not be accepted without recording reasons in writing and also without allowing sufficient <\/p>\n
opportunity to the assessing officer to examine and furnish any contrary evidence. No such <\/p>\n
opportunity was allowed to the assessing officer. He submitted that the order of the <\/p>\n
Commissioner (Appeals) so far it relates to assessment years 1995-96 and 1996-97 is contrary <\/p>\n
to the provisions of the Act and IT Rules.\n<\/p>\n
\n10.2 The learned Authorised Representative submitted byway <\/p>\n
of rejoinder that the certificate submitted before the Commissioner (Appeals) was not a fresh <\/p>\n
evidence. It was all along the claim of the assessee that donations have been received <\/p>\n
towards the corpus. He drew our attention to p. 12 of the paper book for the assessment year <\/p>\n
199697 which is a copy of assessing officer’s letter dated 27-1-1999 asking the assessee to <\/p>\n
furnish the details of corpus funds along with other information. He submitted that reply of <\/p>\n
assessee is at p. 13 of the paper book, where it was mentioned that details of the funds for <\/p>\n
the corpus of trust and mode of receipts were enclosed. He submitted a copy of letter dated <\/p>\n
19-4-1999 placed at p. 14 of the paper book addressed to assessee which mentions about the <\/p>\n
manner of utilization of the donations. The assessee’s letter dated 18-12-2000 is at p. 15 <\/p>\n
where it was mentioned that such information would be furnished only if the copy of reasons <\/p>\n
recorded were supplied. Thus, he submitted that the information in regard to the donations <\/p>\n
given to the corpus of the trust was supplied to the assessing officer during the course of <\/p>\n
enquiries made.\n<\/p>\n<\/p>\n
11. We have heard both the parties at some length and given <\/p>\n
our anxious consideration to the rival contentions, examined the facts, evidence and material <\/p>\n
placed on record. We have also gone through the orders of the authorities below and referred <\/p>\n
to the relevant pages of the paper book to which our attention has been drawn. We have also <\/p>\n
referred to the relevant judgments cited at the bar. Now the first issue that requires to be <\/p>\n
decided by this Bench is whether the assessing officer was justified in initiating the <\/p>\n
reassessment proceedings on the basis of evidence and material placed on record. Before <\/p>\n
recording our findings on this issue, we consider it appropriate to reproduce hereunder the <\/p>\n
provisions of Section 147 of the Income Tax Act, 1961 read with Expln. 2(c) of Section 147, <\/p>\n
which reads as under:\n<\/p>\n<\/p>\n
147. If the assessing officer has reason to believe that any <\/p>\n
income chargeable to tax has escaped assessment for any assessment year, he may, subject <\/p>\n
to the provisions of sections 148 to 153, assess or reassess such income and also any other <\/p>\n
income chargeable to tax which has escaped assessment and which comes to his notice <\/p>\n
subsequently in the course of proceedings under this section or recompute the loss or the <\/p>\n
depreciation allowance or any other allowance, as the case may be, for the assessment year <\/p>\n
concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant <\/p>\n
assessment year)<\/p>\n
Provided that where an assessment under Sub-section (3) of Section 143 <\/p>\n
or this section has been made for the relevant assessment year, no action shall be taken <\/p>\n
under this section after the expiry of four years from the end of the relevant assessment year, <\/p>\n
unless any income chargeable to tax has escaped assessment for such assessment year by <\/p>\n
reason of the failure on the part of the assessee to make a return under Section 139 or in <\/p>\n
response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose <\/p>\n
fully and truly all material facts necessary for his assessment, for that assessment year.<\/p>\n
Explanation 1 : ……………..\n<\/p>\n
\nExplanation 2 : For the purpose of this section, the following shall also <\/p>\n
be deemed to be cases where income chargeable to tax has, escaped assessment’, <\/p>\n
namely:\n<\/p>\n<\/p>\n
(a) …………..\n<\/p>\n<\/p>\n
(b) …………..\n<\/p>\n<\/p>\n
(c) where an assessment has been made, but;\n<\/p>\n<\/p>\n
(i) income chargeable to tax has been underassessed; or<\/p>\n
(ii) such income has been assessed at too low a rate; or<\/p>\n
(iii) such income has been made the subject of excessive relief under <\/p>\n
this Act; or<\/p>\n
(iv) excessive loss or depreciation allowance or any other allowance <\/p>\n
under this Act has been computed.”\n<\/p>\n
\nA bare reading of the above provisions of the Act shows that the <\/p>\n
assessing officer can initiate reassessment proceedings, if he has, “reason to believe’ that any <\/p>\n
income chargeable to tax has escaped assessment for any assessment year subject to the <\/p>\n
provisions of sections 148 to 153 of the Act. In such a case the assessing officer is <\/p>\n
empowered to assess or reassess such income. Such escapement of income could be due to <\/p>\n
omission or failure on the part of the assessee to disclose fully and truly all material facts <\/p>\n
necessary for the assessment. Such escapement of income could also be without any omission <\/p>\n
or failure on the part of the assessee to disclose fully and truly all material facts. The proviso <\/p>\n
to Section 147 provides that in case the assessment completed under Section 143(3) or <\/p>\n
section 147 is to be reopened after the expiry of four years from the end of the relevant <\/p>\n
assessment year, the assessing officer could take recourse to such action only if the <\/p>\n
escapement of income chargeable to tax was on account of assessee’s failure to disclose fully <\/p>\n
and truly all material facts necessary for assessment. In case such assessment completed <\/p>\n
under Section 143(3) or Section 147 is to be reopened within a period of four years from the <\/p>\n
end of the relevant, assessment year or the assessment was completed under section <\/p>\n
143(l)(a) or Section 143(1), it is not necessary to establish the escapement of income due to <\/p>\n
omission and failure on the part of the assessee to disclose fully and truly all material facts. <\/p>\n
But the conditions precedent for initiating the reassessment proceedings must exist before <\/p>\n
such action could be initiated by the assessing officer. Expln. 2(c) deals with deemed <\/p>\n
escapement of income where assessment has been made, but income chargeable to tax has <\/p>\n
been underassessed or such income has been assessed at too low a rate or such income has <\/p>\n
been made the subject matter of excessive relief under this Act or excessive loss or <\/p>\n
depreciation allowance or any other allowance under this Act has been allowed.11.1 The expression used in Section 147 is that if the <\/p>\n
assessing officer has ‘reason to believe’ that any income chargeable to tax has escaped <\/p>\n
assessment. The expression “reason to believe” used in Section 147 has special significance. <\/p>\n
It does not mean ‘reason to suspect’. It is reasonable belief of a honest and reasonable <\/p>\n
person based upon reasonable grounds. The expression used is not ‘satisfied’. The ‘reason to <\/p>\n
believe’ requires higher level of evidence and material than the requirement of satisfaction’ of <\/p>\n
the assessing officer which essentially means the material which comes to the notice of <\/p>\n
assessing officer must be definite, specific and direct and not unspecific or vague. This issue <\/p>\n
was considered by the Hon’ble Supreme Court in the case of Income Tax Officer v. <\/p>\n
Lakhmani Mewal Das<\/a>  where the apex court <\/p>\n
observed that “reason to believe” does not mean “reason to suspect”. The reasons for the <\/p>\n
formation of the belief contemplated under s, 147 necessary for reopening of an assessment <\/p>\n
must have a rational connection or relevant bearing on the formation of the belief. Rational <\/p>\n
connection postulates that there must be a direct nexus or live link between the material <\/p>\n
coming to the notice of the Income Tax Officer and the formation of his belief that there has <\/p>\n
been escapement of income of the assessee. The apex court further observed that it was not <\/p>\n
every material, howsoever vague and indefinite or distant, remote and far-fetched, which <\/p>\n
would warrant the formation of the belief relating to the escapement of the income of the <\/p>\n
assessee from assessment. Again this issue was considered by the Hon’ble Supreme Court in <\/p>\n
the case of Ganga Saran & Sons (P) Ltd v. ITO (1981) 22 CTR (SC) 112 : (1981) 130 <\/p>\n
ITR (SC), where the apex court observed that expression “reason to believe” was stronger <\/p>\n
than the words ‘satisfied’. The belief entertained by the assessing officer must not be arbitrary <\/p>\n
or irrational. It must be reasonable or in other words, it must be based on reasons which are <\/p>\n
relevant and material. If there is no rational and intelligible nexus between the reasons and <\/p>\n
belief, the reopening of the assessment would be without jurisdiction and bad in law. <\/p>\n
11.2 The basis for initiating the reassessment proceedings is <\/p>\n
to be judged solely on the basis of reasons recorded by the assessing officer and the material <\/p>\n
and information referred to by the assessing officer in the reasons for initiating such action. It <\/p>\n
is settled law that assessing officer cannot initiate the reassessment proceedings merely on <\/p>\n
the basis of suspicion or for the purpose of making roving and fishing enquiries. The assessing <\/p>\n
officer cannot support the reopening of the assessment by collecting the material or by making <\/p>\n
enquiry subsequently after the date of initiation of the proceedings. Thus, the reopening of <\/p>\n
the assessment is to be seen on the date when the assessing officer initiated action under <\/p>\n
section 147. But at the same time the formation of the belief of the assessing officer is a <\/p>\n
prima facie belief on the date when he initiated the reassessment proceedings. It is <\/p>\n
not necessary that assessing officer must establish the factum of concealment\/escapement of <\/p>\n
income on the date of initiation of the reassessment proceedings itself. The assessment <\/p>\n
reopened by the assessing officer is subject to normal procedure of assessment where the <\/p>\n
assessing officer is required to examine the case by issue of notices under section <\/p>\n
143(2)\/142(l) and allow an opportunity to the assessee. Later, if it turns out that there is no <\/p>\n
escapement of income, assessing officer can drop the proceedings initiated under Section 147 <\/p>\n
of the Act.\n<\/p>\n
\n11.3 In the present case also, whether the assessing officer <\/p>\n
was justified in initiating reassessment proceedings or not has to be decided on the basis of <\/p>\n
material and evidence placed on record and the legal position discussed above. The <\/p>\n
undisputed facts of the case are that the assessee had filed returns for the various <\/p>\n
assessment years declaring therein nil income. All these returns were processed only under <\/p>\n
section 143(l)(a). Thus, there was no requirement on the part of the assessing officer to <\/p>\n
establish that the income had escaped assessments by reason of failure on the part of the <\/p>\n
assessee to disclose fully and truly all material facts necessary for assessment. It is also a <\/p>\n
fact that in all the returns, the assessee had claimed exemption in respect of its income under <\/p>\n
section 10(22) of the Act Which is admissible in a case of an educational institution. The facts <\/p>\n
brought on record further confirm that this is not a case where the assessing officer directly <\/p>\n
initiated reassessment proceedings merely on the basis of returns filed by the assessee. It <\/p>\n
appears that substantial portion of donations amounting to Rs. 54 lakhs had been received <\/p>\n
from Tilok Tirath Vidyawati Chuttani Charitable Trust. Dr. P.N. Choutani was founder member <\/p>\n
of the said trust. Enquiries were initiated to find out as to how the donations given to the <\/p>\n
assessee-trust had been utilized by the assessee. Such enquiries were made after obtaining <\/p>\n
approval of the CIT under Section 133(6) of the Act before initiating the reassessment <\/p>\n
proceedings. The letter dated 27-1-1999 issued by the assessing officer to the assessee is at <\/p>\n
p. 12 of the paper book filed for the assessment year 1996-97. A perusal of the same shows <\/p>\n
that the assessee was asked to furnish information with regard to loans and advances given <\/p>\n
to various parties, details of bank deposits, the details of advances taken by the assessee, <\/p>\n
the details of creation of corpus fund etc. It was also mentioned by the assessing officer, <\/p>\n
failure to furnish information will result in action under Section 147 of the Act. The assessee’s <\/p>\n
reply dated 15-4-1999 is placed at p. 13 of the same paper book, where the assessee has <\/p>\n
again reiterated its claim under Section 10(22) of the Act. The assessing officer issued another <\/p>\n
letter dated 19-4-1999 (copy placed at p. 14 of the paper book) stating that requisite <\/p>\n
information has not been furnished. The question of receipt of donations amounting to Rs. 25 <\/p>\n
lakhs and Rs. 29 lakhs from Tilok Tirath Vidyawati Chuttani Charitable Trust had been <\/p>\n
specifically asked from the assessee and the details of utilization of the same were also called <\/p>\n
for.\n<\/p>\n
\n11.4 Thereafter, the proceedings under. Section 147 were <\/p>\n
initiated for all the assessment years on 2-3-2000. The assessees letter dated 18-12-2000 to <\/p>\n
the assessing officer stating therein that the reply\/information as per questionnaire can be <\/p>\n
furnished only after receipt of reasons recorded by the assessing officer clearly show that the <\/p>\n
assessing officer tried to ascertain the position before initiating the reassessment proceedings <\/p>\n
under Section 147 and somehow the assessee has not fully complied with such information. On <\/p>\n
the contrary, the claim for exemption under Section 10(22) was reiterated. We have referred to <\/p>\n
the reasons recorded by the assessing officer which are similar in nature for all the <\/p>\n
assessment years. The same read as under for the assessment year 1994-95.<\/p>\n
“Reasons for the belief that income has escaped assessment:\n<\/p>\n
\nThe assessee filed its return of income for the assessment year <\/p>\n
1994-95 on 1-7-1994 declaring therein nil income processed under Section 143(1)(a) on <\/p>\n
19-9-1994. The assessee in its return of income claimed the status of educational society by <\/p>\n
mentioning the code as ’08’. The said return of income was accompanied by an audit report, <\/p>\n
income and application account, balance sheet which is reproduced hereunder:<\/p>\n
Income and Application Account for the period ending 31-3-1994 <\/p>\n
:\n<\/p>\n
Application<\/p>\n
Amount<\/p>\n
Income<\/p>\n
Amount<\/p>\n
To reimbursement of  school fee<\/p>\n
4,090<\/p>\n
By interest<\/p>\n
446<\/span><\/p>\n
To bank charges<\/p>\n
234<\/span><\/p>\n
By excess of application over income<\/p>\n
5,208<\/p>\n
To misc. exp.\n<\/p>\n
80<\/span>
\n \u00a0
\n \u00a0<\/p>\n
To preliminary exp.\n<\/p>\n
750<\/span>
\n \u00a0
\n \u00a0<\/p>\n
To audit fees<\/p>\n
500<\/span>
\n \u00a0
\n \u00a0<\/p>\n
  \u00a0<\/p>\n
5,654
\n \u00a0<\/p>\n
5,654<\/p>\n
  \u00a0
\n \u00a0
\n \u00a0
\n \u00a0<\/p>\n
Balance sheet as on 31-3-1994<\/p>\n
Liabilities<\/p>\n
Assets<\/p>\n
Donations<\/p>\n
2,34,551
\n \u00a0<\/p>\n
Fixed deposit<\/p>\n
75,000
\n \u00a0<\/p>\n
Subscription<\/p>\n
5,550<\/p>\n
2,40,051<\/p>\n
Add: intt. accr.\n<\/p>\n
446<\/span><\/p>\n
75,446<\/p>\n
Sundry creditors
\n \u00a0<\/p>\n
1,250<\/p>\n
bank bal.\n<\/p>\n
 \u00a0<\/p>\n
1,420<\/p>\n
  \u00a0
\n \u00a0
\n \u00a0<\/p>\n
Cash in hand
\n \u00a0
\n \u00a0<\/p>\n
  \u00a0
\n \u00a0
\n \u00a0<\/p>\n
Excess in application over income
\n \u00a0<\/p>\n
5,208<\/p>\n
  \u00a0
\n \u00a0<\/p>\n
2,41,301
\n \u00a0
\n \u00a0<\/p>\n
2,41,301<\/p>\n
In the return of income the assessee claimed the income of the society <\/p>\n
is exempt from income as per Section 10(22) of the Income Tax Act.\n<\/p>\n
\nThe assessee did not furnish the detail of donations received as well as <\/p>\n
subscription received totalling Rs. 2,41,301. The assessee did not furnish the copy of <\/p>\n
memorandum of rules and regulations as well as the objects of the society. From the copy of <\/p>\n
memorandum of rules and regulations, obtained from other sources, it is seen that one of the <\/p>\n
objects of the society is to open, run, continue an educational and vocational institution in <\/p>\n
healthy surrounding. On enquiries, it has been found that the assessee is not running any <\/p>\n
such educational institution\/school\/college or vocational institute etc. at village Sarai Naga or <\/p>\n
its surrounding areas whereas only a sign board of this name has been placed outside a room <\/p>\n
occupied by the security guard of Brar family of S. H.S. Brar, Ex. C.M. Punjab at village Sarai <\/p>\n
Naga. Thus, in the absence of any educational institution\/school or building for educational <\/p>\n
purposes, the assessee is not entitled for exemption under Section 10(22) as the funds have <\/p>\n
not been utilized for this object. Therefore, I have reasons to believe that income chargeable <\/p>\n
to tax has escaped assessment within the meaning of Section 147 to the extent of Rs. <\/p>\n
2,45,701 i.e. donations, subscription and interest (Rs. 2,34,551 + 5,550 + 5,654). To assess <\/p>\n
the same approval to issue notice under Section 148 for the assessment year 1994-95 is <\/p>\n
sought.”\n<\/p>\n
\nA perusal of the reasons recorded show that the basis of the initiation <\/p>\n
of such action was exemption claimed under Section 10(22) of the Act. The assessing officer <\/p>\n
has referred to the results of enquiries made in this case which revealed that the assessee <\/p>\n
was not running any such educational institution\/school\/college or vocational institute at the <\/p>\n
given place and there was only a sign board of its name outside the room occupied by the <\/p>\n
security guard of family of Sh. H.S. Brar. The assessing officer has mentioned that in the <\/p>\n
absence of such educational institution, the assessee was not entitled to exemption under <\/p>\n
section 10(22) of the Income Tax Act and, therefore, he had reason to believe that income <\/p>\n
chargeable to tax in the form of donations, subscription and interest had escaped assessment. <\/p>\n
The same are the reasons for the subsequent assessment years with variation in the amounts. <\/p>\n
The results of enquiries incorporated by the assessing officer in the reasons recorded that <\/p>\n
assessee was not running any institution\/school\/college at the given place have not been <\/p>\n
controverted by the-assessee. Therefore, on the basis of.. such, information, the assessing <\/p>\n
officer was justified in forming a reason to believe that income chargeable to tax had escaped <\/p>\n
assessment more so when the assessee did not furnish the desired information before the <\/p>\n
assessing officer during the course of enquiries made before initiation of reassessment <\/p>\n
proceedings. We do not agree with the learned Authorised Representative that the <\/p>\n
assessments have been reopened only for making roving and fishing enquiries. The claim of <\/p>\n
the learned Counsel that the assessing officer should have seen the case in the light of <\/p>\n
exemption under sections 11 and 12 of the Act because the trust was registered with the CIT <\/p>\n
is without any merit. The assessing officer was required to confine himself to the claim made <\/p>\n
in the returns which was again reiterated in subsequent letter submitted by the assessee <\/p>\n
during the course of enquiries. Even the reliance of the learned Counsel on the judgment of <\/p>\n
Hon’ble Punjab & Haryana High Court in the case of Vipan Kbanna v. CIT (supra) <\/p>\n
is misplaced because in that case, the Hon’ble, High Court had upheld the reopening of the <\/p>\n
assessment on the point of allowing excess deduction of depreciation. The Honble High Court <\/p>\n
has clearly mentioned that what was required to be seen is whether the income chargeable to <\/p>\n
tax had escaped assessment or not. In case, the income has escaped assessment, the <\/p>\n
reopening of the assessment would be justified irrespective of the fact that the return was <\/p>\n
processed under Section 143(1)(a). We also rely on the subsequent judgment of Hon’ble <\/p>\n
Punjab & Haryana court in the case of Aditya & Company v. CIT , where the Honble High Court upheld the <\/p>\n
initiation of the reassessment proceedings in a case where the original return was processed <\/p>\n
under Section 143(1)(a). The Honble High Court held that processing of return is not a bar for <\/p>\n
initiating reassessment proceedings provided the income chargeable to tax had escaped <\/p>\n
assessment or under assessed. The plea of the assessee that as per returns filed, the net <\/p>\n
result for most of the years was a loss and, therefore, there cannot be escapement of income <\/p>\n
is again without any merit. This is a case of trust. While considering the case of a trust for <\/p>\n
exemption of its income, the meaning is different . It does not mean income computed as per <\/p>\n
provisions of the Act. It includes receipts in the form of voluntary donations also. If the <\/p>\n
income\/receipts are utilized for investment in capital assets like construction of school <\/p>\n
building for the objects of the trust, the same would be considered application of income even <\/p>\n
though the expenditure incurred relates to capital field. In case, the assessee has not utilized <\/p>\n
the income or even the voluntary donations for objects of the trust and there are violations of <\/p>\n
the provisions of sections 13(1)(c) and 13(1)(d) of the Act, even the voluntary donations would <\/p>\n
not be entitled to exemption under Section 11 of the Act. In any case, at the time of recording <\/p>\n
the reasons, the assessing officer is required to prima facie form a reason to believe <\/p>\n
whether on the basis of evidence and material placed on record, there is escapement of <\/p>\n
income chargeable to tax. He is not required to conclusively establish this fact at the time of <\/p>\n
initiation of reassessment proceedings itself. Thus, the objection raised by the assessee on <\/p>\n
this ground is untenable and hence rejected.\n<\/p>\n
\n11.5. The next objection of the assessee relates to <\/p>\n
non-communication of the reasons recorded under Section 148 to the assessee. We find that <\/p>\n
initially when Sh. Kapil Khanna was representing this case before the assessing officer, such <\/p>\n
request was made to the assessing officer. The correspondence placed on record further shows <\/p>\n
that the assessing officer asked the assessee to pay the requisite copying charges so that <\/p>\n
reasons recorded could be supplied. The assessee did not comply with the same. Later, there <\/p>\n
was a change in the counsel. The assessing officer wrote to the earlier counsel that since he <\/p>\n
was not an authorized person, the reasons recorded could not be supplied to him. We have <\/p>\n
gone through the entries in the order-sheet supplied by the revenue. We find that later the <\/p>\n
case was represented by another counsel, namely Sh. R.K. Rathore along with Sh. Taran <\/p>\n
Chugh, accountant. No request for supply of reasons appears to have been made. It is also <\/p>\n
significant to mention that unsigned letter of the earlier counsel dated 13-2-2001 placed at p. <\/p>\n
No. 27 of the paper book does include a para for supply of reasons. However, a copy of the <\/p>\n
same letter filed with the assessing officer does not contain such request for supply of <\/p>\n
reasons. Be that as it may, it appears that the assessee was fully aware of the reasons <\/p>\n
recorded by the assessing officer for initiating the reassessment proceedings. This is clear <\/p>\n
from the enquiry letters sent to the assessee before initiating reassessment proceedings and <\/p>\n
also subsequent enquiries made by the assessing officer during the course of reassessment <\/p>\n
proceedings. In fact, the letters dated 19-4-2001, 16-7-2001 and 30-9-2001 of the assessing <\/p>\n
officer to the assessee forming part of the assessment order and assessees reply dated <\/p>\n
30-9-2001 at Annex.-I show that assessee was aware of the basis of action for initiating the <\/p>\n
reassessment proceedings. Therefore, there does not appear to be any merit in the submission <\/p>\n
of the assessee that reasons were not communicated to the assessee. However, we must add <\/p>\n
it is mandatory on the part of the assessing officer to furnish the reasons recorded under <\/p>\n
section 148 for initiating the reassessment proceedings so as to enable the assessee to put <\/p>\n
across its objection on the legality of such action. In the case of GKIV Driveshafts (India) <\/p>\n
Ltd v. Income Tax Officer & Anr.<\/a> (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC), <\/p>\n
the Hon’ble Supreme Court has held that the assessing officer is bound to furnish reasons <\/p>\n
recorded under Section 148 within a reasonable time. Since the matter arose in a writ petition, <\/p>\n
the Hon’ble Supreme Court directed the assessing officer to consider this aspect while <\/p>\n
completing the reassessment. The learned Counsel has also relied on two judgments of <\/p>\n
Hon’ble Aliahabad High Court in the cases of Anand Kumar Sharma (supra) and <\/p>\n
Herbs (India) (P). Ltd. (supra) where the grievance of the assessee was that <\/p>\n
reassessments have been completed without furnishing reasons recorded under Section 148. In <\/p>\n
both the cases, the matter was restored to the assessing officer for supply of reasons <\/p>\n
recorded under Section 148. The assessments were not quashed for this reason. Now in this <\/p>\n
case also, the matter can be restored to the file of the assessing officer for supply of reasons. <\/p>\n
But the same would only prolong the litigation. Since the assessee has already been supplied <\/p>\n
copies of reasons recorded and its objections have been considered while deciding these <\/p>\n
appeals, this grievance no longer survives. As regards decision of Tribunal, Bombay Bench in <\/p>\n
the case of Dy. ClT v. Maharashtra State Corporation (sic-Gay Silk Mills v. Income Tax <\/p>\n
Officer) (2006) 101 TTJ (Mumbai) 1108 relied upon by the learned Authorised <\/p>\n
Representative, a copy of the same has not been supplied. Therefore, we are unable to refer <\/p>\n
to this decision. Thus, taking into account the fact that the assessee has already been <\/p>\n
supplied copies of reasons and objections have been taken into account and the <\/p>\n
reassessments have been completed after allowing opportunity to the assessee, we are of the <\/p>\n
opinion that plea is also devoid of any merit. Hence, rejected.\n<\/p>\n
\n11.6. The next aspect of the case relating to legality of <\/p>\n
initiation of reassessment proceedings is that the assessing officer cannot change the status <\/p>\n
while completing the reassessment. We find from the assessment orders that the assessing <\/p>\n
officer completed the assessments in the status of AOP (society trust) with Code No. 07. The <\/p>\n
assessee had filed the returns in the status of trust with Code No. 8. The assessee has <\/p>\n
contended that law casts a duty on the assessing authority to complete an assessment on the <\/p>\n
same person to whom notice under Section 148 has been issued. We have referred to the <\/p>\n
proposal submitted by the assessing officer for initiating the reassessment proceedings, where <\/p>\n
the status is mentioned as an AOP (society trust). The assessing officer has also completed <\/p>\n
the assessments in the same status with Code No.07. It is only the Commissioner (Appeals) <\/p>\n
who has held that correct status of the assessee was a trust with Code No.08. Therefore, <\/p>\n
there is no illegality in the orders of the assessing officer because the notices under section <\/p>\n
148 have also been issued to AOP (society trust) and the assessments have also been <\/p>\n
completed in the same status. This issue was subject-matter of appeal before the <\/p>\n
Commissioner (Appeals) who has held that the assessment should be completed in the status <\/p>\n
of trust because the same was registered with the CIT, Jalandhar, under Section 12 of the Act <\/p>\n
and was also granted exemption under Section 80G of the Act. The facts placed on record <\/p>\n
further show that the assessee was allowed repeated opportunities to justify the status <\/p>\n
claimed in the returns as trust. However, the assessee has given evasive reply and did not <\/p>\n
furnish complete information. The fact that the learned Commissioner (Appeals) has treated <\/p>\n
the status as a trust would not vitiate the reassessments completed by the assessing officer <\/p>\n
because the assessing officer has examined the case both from point of view of Section 10(22) <\/p>\n
of the Act and also under sections 11 to 13 of the Act relating to exemption of income of <\/p>\n
charitable institution. In the reassessments completed, the assessing officer has applied his <\/p>\n
mind to all the claims made by the assessee and has held that income is not exempt under <\/p>\n
section 10(22) and 11(l)(d) of the Act. Therefore, this plea of the assessee is also <\/p>\n
rejected.\n<\/p>\n
\n11.7. Thus, in the light of detailed discussions in the <\/p>\n
preceding paras and having regard to the facts and circumstances of the case, we are of the <\/p>\n
considered opinion that additional ground raised by the assessee for an the assessment years <\/p>\n
is devoid of any merit. The assessments completed are legal and valid more so when the <\/p>\n
assessee has not even disputed the order of Commissioner (Appeals) for the assessment year <\/p>\n
1996-97. Hence the same is rejected for all the assessment years.\n<\/p>\n<\/p>\n
12. The next grievance of the assessee projected through the <\/p>\n
grounds of appeals relate to sustaining of the additions made by the assessing officer for the <\/p>\n
above- mentioned assessment years. Briefly stated, the facts of the case are that while <\/p>\n
completing assessments under Section 147 read with Section 143(3), the assessing officer held <\/p>\n
that the assessee was not entitled to exemption in respect of its income under Section 10(22) <\/p>\n
of the Act. The assessing officer further considered the case for exemption of its income under <\/p>\n
sections 11 and 12 of the Act because the assessee was granted registration under section <\/p>\n
12A of the Act. The assessing officer observed that enquiries made in the case revealed that <\/p>\n
donations collected by the assessee trust were invested\/deposited with the various <\/p>\n
companies\/business concerns of Brar family in the shape of share application money <\/p>\n
amounting to Rs. 25 lakhs with M\/s Dashmesh Haegens Agro Tech. Ltd, Rs. 25 lakhs in M\/s <\/p>\n
Dashmesh Feb. Yarns Ltd. as share application money, Rs. 25 lakhs as a deposit with M\/s <\/p>\n
Dashmesh Falcon T & M Enterprises (P). Ltd. Even the income was invested in the said <\/p>\n
concerns. He also noted the relevant dates on which the amounts were invested with these <\/p>\n
concerns. The assessing officer observed that assessee society came into being only with an <\/p>\n
object of routing money received from other trusts and certain individuals to the companies <\/p>\n
run by Brar family purely on commercial considerations. He observed that family members of <\/p>\n
Brars were members of the assessee society. The assessing officer observed that by investing <\/p>\n
these amounts in the business concerns of the Brar family of which the trustees\/members of <\/p>\n
the assessee trust had substantial interest, the assessee contravened the provisions of <\/p>\n
section 13(1)(d) of the Act. He also observed that provisions of Section 13(l)(c) were also <\/p>\n
attracted to this case because the property of the trust and the income of the institution had <\/p>\n
been utilized for the benefit of persons mentioned in Sub-section (3) of Section 13 of the Act. <\/p>\n
The assessee has not disputed the findings of the assessing officer for directing the funds of <\/p>\n
assessee in the form of investments\/deposits in the business concerns of Brar family covered <\/p>\n
under, Sub-section (3) of Section 13 of the Act. However, assessee’s claim is that the <\/p>\n
contributions made towards corpus are exempt under Section 11(l)(d) of the Act. The revenue’s <\/p>\n
stand is that assessee has failed to furnish any evidence during the course of assessment <\/p>\n
proceedings that the voluntary contributions made by the donors were with specific directions <\/p>\n
that these were towards corpus. The learned CIT(A) accepted the contention of the assessee <\/p>\n
that once the trust was registered under Section 12 and the income of the trust has not been <\/p>\n
utilized for the objects of the trust the income accrued from the property of the trust could <\/p>\n
alone be denied exemption and the amounts received by way of donations for the corpus <\/p>\n
qualify for exemption under Section 11(1)(d) of the Act. During the course of appeal <\/p>\n
proceedings, the assessee furnished a certificate dated 2-5-2002 from Tilok Tirath Vidyawati <\/p>\n
Chuttani Charitable Trust, stating that the donations of Rs. 54 lakhs given by the said trust to <\/p>\n
the assessee in the accounting years re evant to assessment years 1995-96 and 1996-97 were <\/p>\n
for its corpus. Relying on the certificate, the learned Commissioner (Appeals) allowed <\/p>\n
exemption in respect of amount of Rs. 25 lakhS and Rs. 29 lakhs received in the accounting <\/p>\n
years relevant to assessment years 1995-96 and 1996-97 respectively, despite the fact that <\/p>\n
he has accepted the findings of the assessing officer that funds have not been utilized for the <\/p>\n
objects for which trust was set-up.\n<\/p>\n
\nHowever, in regard to the remaining amounts received by way of <\/p>\n
donations, the learned Commissioner (Appeals) observed that these were invested in the <\/p>\n
business concerns of Brar family where trustees\/members of the society had substantial <\/p>\n
interest and, therefore, this contravened the provisions of Section 13(l)(d) of the Act. He also <\/p>\n
rejected the submissions of the assessee that these donations were received towards corpus <\/p>\n
on the ground that no evidence was furnished by the assessee. No evidence whatsoever has <\/p>\n
also been produced before the Bench that these donations were given for the corpus. Further, <\/p>\n
as per clause (h) of Sub-section (2) of Section 13, if any funds of the trust or the institution <\/p>\n
continue to remain invested for any period during the previous year in any concern in which <\/p>\n
any person referred to in sub-section(3) of the said section has substantial interest, the <\/p>\n
assessee would not be entitled to exemption under Section 11(l)(d) in respect of such <\/p>\n
voluntary donations. The judgment of Honble Andhra Pradesh High Court in the case of T. <\/p>\n
Bapanaiah Vidyadbarma Trust (supra) relied upon by the learned departmental <\/p>\n
Representative supports the case of the revenue that if any income or any property of trust or <\/p>\n
institution is used or applied directly or indirectly for the benefit of any person referred to in <\/p>\n
sub-section (3) of Section 13, the assessee shall not be entitled to exemption in respect of <\/p>\n
voluntary contributions or income under Section 11(l)(d). Thus, we do not find any justification <\/p>\n
to interfere with the findings of the Commissioner (Appeals) so far these relate to the appeals <\/p>\n
filed by the assessee for all the above mentioned assessment years. Therefore, the orders of <\/p>\n
the Commissioner (Appeals) are upheld and respective grounds of appeals of the assessee are <\/p>\n
dismissed.\n<\/p>\n<\/p>\n
13. We now turn to grounds of appeals of the revenue for the <\/p>\n
assessment year 1995-96 and 1996-97. The first grievance of the revenue is that the learned <\/p>\n
Commissioner (Appeals) was not justified in allowing status of the ‘trust’ as against AOP <\/p>\n
taken by the assessing officer. The facts relating to this ground and the respective <\/p>\n
submissions of both the parties have already been discussed while dealing with the appeals <\/p>\n
filed by the assessee.\n<\/p>\n<\/p>\n
14.  Briefly  stated the facts are that assessing <\/p>\n
officer completed the assessments in the status of AOP because of assessees failure to <\/p>\n
furnish information in support of its claim. However, the learned Commissioner (Appeals) <\/p>\n
observed that the assessee was a society registered with registrar of societies, Punjab on <\/p>\n
21-7-1993. But the trust was also registered under Section 12 of the Act by the CIT, Jalandhar, <\/p>\n
vide order dated 21-9-1993 and the assessee was also granted exemption under Section 80G <\/p>\n
of the Act. He, therefore, held that the status of the assessee was a trust. The grouse of the <\/p>\n
revenue is that the assessee was repeatedly asked to furnish information in support of its <\/p>\n
claim for filing the return in the status of trust.\n<\/p>\n<\/p>\n
15. We have considered the rival submissions of both the <\/p>\n
parties and gone through the evidence and material placed on record. The fact that assessee <\/p>\n
was registered with CIT under Section 12A is not in dispute. The assessee was also allowed <\/p>\n
exemption under Section 80G of the Act. The very fact that registration has been allowed by <\/p>\n
the CIT does not by itself entitle the assessee to claim exemption in respect of its income. <\/p>\n
The registration with the CIT under Section 12A is only a first step for claiming exemption of <\/p>\n
its income. But the exemption of its income under Section 11 is subject to assessee fulfilling <\/p>\n
the other conditions. The assessee is required to fulfil the remaining conditions regarding <\/p>\n
utilization of 75 per cent of its income for the objects for which it has been set up and <\/p>\n
nondiverting of funds to the business concerns of the members\/trustees etc. Even the <\/p>\n
accumulation of 25 per cent of the remaining income is again subject to the conditions <\/p>\n
mentioned therein. Moreover, the revenue has also accepted the decision of Commissioner <\/p>\n
(Appeals) for the assessment years 1994-95, 1997-98 and 1998-99 for treating the status of <\/p>\n
the assessee as a trust. Thus, keeping in view these facts of the case, we are of the <\/p>\n
considered opinion that the learned Commissioner (Appeals) was justified in treating status as <\/p>\n
trust with Code No. 08. We confirm his order and reject the respective grounds of appeal for <\/p>\n
both the assessment years.\n<\/p>\n<\/p>\n
16. The next grievance of the revenue common to both the <\/p>\n
assessment years is that the learned Commissioner (Appeals) was not justified in allowing <\/p>\n
exemption in respect of donations of Rs. 25 lakhs and Rs. 29 lakhs received from Tilok Tirath <\/p>\n
Vidyawati Chuttani Charitable Trust, during the accounting years relevant to assessment years <\/p>\n
1995-96 and 1996-97 respectively which were liable to tax. Further grievance of the revenue is <\/p>\n
that the assessee was not entitled to exemption in respect of such donations under,ss. <\/p>\n
10(22), 11 and 13 of the Act. Connected with this is the ground of appeal of the revenue that <\/p>\n
while taking such view, the learned Commissioner (Appeals) has admitted and relied on <\/p>\n
additional evidence in violation of provisions of Rule 46A of IT Rules, 1962. The facts relating <\/p>\n
to these grounds have also been discussed while dealing with the appeals filed by the <\/p>\n
assessee. Briefly stated, the facts are that during the course of enquiries made before <\/p>\n
initiation of reassessment proceedings and also during the course of reassessment <\/p>\n
proceedings, the assessing officer repeatedly asked the assessee to furnish information in <\/p>\n
respect of persons from whom it had received donations. The assessee furnished the <\/p>\n
information which revealed that assessee had inter alia received donations of Rs. 25 <\/p>\n
lakhs and Rs. 29 lakhs from Tilok Tirath Vidyawati Chuttani Charitable Trust in the accounting <\/p>\n
years relevant to assessment years 1995-96 and 1996-97 respectively. In, the accounts, these <\/p>\n
amounts along with other donations were shown as forming part of corpus. However, no <\/p>\n
evidence in support of the fact that these donations were given by Tilok Tirath Vidyawati <\/p>\n
Chuttani Charitable Trust were with specific directions that they shall form part of the corpus <\/p>\n
of the trust was produced before the assessing officer. Taking into account the fact that the <\/p>\n
assessee had invested the amount of voluntary contributions received from various persons <\/p>\n
including Tilok Tirath Vidyawati Chuttani Charitable Trust in the companies, business <\/p>\n
concerns\/firms of Brar family for commercial consideration where members of the assessee <\/p>\n
society\/trustees had substantial interest, the assessing officer observed that the assessee <\/p>\n
had violated the provisions of sections 13(l)(c) and 13(l)(d) and, therefore, the assessee was <\/p>\n
not entitled to exemption in respect of such donations. Accordingly, he disallowed the <\/p>\n
exemption in respect of such voluntary donations.\n<\/p>\n<\/p>\n
17. When the assessee carried the matters in appeals before <\/p>\n
the Commissioner (Appeals), the assessee filed a certificate dated 2-5-2002 from Tilok Tirath <\/p>\n
Vidyawati Chuttani Charitable Trust stating that donations aggregating to Rs. 54 lakhs given <\/p>\n
to the assessee were for its corpus. The certificate read as under<\/p>\n
To whom it may concern<\/p>\n
It is hereby confirmed that the donations of Rs. 54 lakhs: given by the <\/p>\n
Tilok Tirath Vidyawati Chuttani Charitable Trust during the assessment years 1995-96 and <\/p>\n
1996-97 were made to Sardarni Uttarn Kaur Education Society for its corpus.”<\/p>\n
Relying on this certificate, the learned Commissioner (Appeals) held <\/p>\n
that the donations given by the said trust towards corpus were exempt under Section 11(1)(d) <\/p>\n
of the Act. The revenue is aggrieved with the order of the Commissioner (Appeals). Hence, <\/p>\n
these appeals before us.\n<\/p>\n<\/p>\n
18. The submissions made by the learned departmental <\/p>\n
Representative and learned Counsel have already been summarized while dealing with the <\/p>\n
respective submissions of the assessee. Briefly stated, the contention of the learned <\/p>\n
departmental Representative is that no such evidence was furnished before the assessing <\/p>\n
officer during the course of reassessment proceedings. He further submitted that admission of <\/p>\n
such evidence was subject to provisions of Rule 46A. However, the learned Commissioner <\/p>\n
(Appeals) has neither recorded any reason for admission of such evidence nor has forwarded <\/p>\n
this certificate to the assessing officer for enquiries and comments. Thus, he submitted that <\/p>\n
the learned Commissioner (Appeals) has violated the provisions of Rule 46A for admitting the <\/p>\n
fresh evidence. He further submitted that since the funds were diverted to business concerns <\/p>\n
of the members of the society\/trustees in violation of provisions of sections 13(l)(c) and <\/p>\n
13(l)(d), the assessee was not entitled to exemption under Section 11(l)(d) of the Act. The <\/p>\n
learned Authorised Representative, on the other hand, submitted that during the course of <\/p>\n
assessment proceedings copies of receipts were furnished in respect of donations. Thus, it <\/p>\n
was not a fresh evidence. He also stated that even the auditors had shown such receipts as <\/p>\n
forming part of corpus. He further submitted that since donations were given towards corpus of <\/p>\n
the trust, the same were eligible for exemption under Section 11(l)(d) of the Act.<\/p>\n
19. We have heard both the parties and carefully considered <\/p>\n
the rival submissions, examined the facts, evidence and material placed on record. Clause (d) <\/p>\n
of Sub-section (1) of Section 11 of the Act provides exemption in respect of income in the form <\/p>\n
of voluntary contributions made with a specific direction that they shall form a part of the <\/p>\n
corpus of the trust or institution. A bare reading of the aforesaid section reveals that all <\/p>\n
voluntary contributions other than given with specific direction that they shall form part of the <\/p>\n
corpus of the trust be considered as income of the trust. But for the purpose of claiming <\/p>\n
exemption under Section 11(l)(d) it is necessary that such voluntary contributions must have <\/p>\n
been made with specific direction that these shall form part of the corpus. However, the onus <\/p>\n
is entirely on the assessee that donations received were given with a direction that these <\/p>\n
shall form part of corpus of the trust. We have referred to the relevant pages of the paper <\/p>\n
book placed on record to which our attention has been drawn. We find that during the course <\/p>\n
of assessment proceedings, the assessee has not furnished any evidence that these donations <\/p>\n
were given with a direction that these shall form part of the corpus of the trust. The mere fact <\/p>\n
in the audited accounts these were shown as part of the corpus does not mean that the <\/p>\n
assessee had furnished requisite evidence during the course of assessment proceedings. The <\/p>\n
intention of the donor is to be seen on the date when he made the donations and not <\/p>\n
subsequently. The certificate dated 2nd May, 2002 was furnished before the Commissioner <\/p>\n
(Appeals). The reassessment orders in all the cases were passed on 22-3-2002. This clearly <\/p>\n
shows that the certificate is obtained after the completion of the assessments and constituted <\/p>\n
a fresh evidence furnished before the Commissioner (Appeals). The admission of fresh <\/p>\n
evidence is governed by provisions of Rule 46A of the IT Rules which read as under:<\/p>\n
“46A(l) The appellant shall not be entitled to produce before the Dy. <\/p>\n
Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), any evidence, <\/p>\n
whether oral or documentary, other than the evidence produced by him during the course of <\/p>\n
proceedings before the assessing officer except in the following circumstances, namely:<\/p>\n
(a) where the assessing officer has refused to admit evidence which <\/p>\n
ought to have been admitted; or<\/p>\n
(b) where the appellant was prevented by sufficient cause from <\/p>\n
producing the evidence which he was called upon to produce by the assessing officer; or<\/p>\n
(c) where the appellant was prevented by sufficient cause from <\/p>\n
producing before the assessing officer any evidence which is relevant to any ground of appeal; <\/p>\n
or<\/p>\n
(d) where the assessing officer has made the order appealed against <\/p>\n
without giving sufficient opportunity to the appellant to adduce evidence relevant to any <\/p>\n
ground of appeal.\n<\/p>\n
\n(2) No evidence shall be admitted under sub-rule (1) unless the Dy. <\/p>\n
Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing <\/p>\n
the reasons for its admission.\n<\/p>\n
\n(3) The Dy. Commissioner (Appeals) or, as the case may be, the CIT(A) <\/p>\n
shall not take into account any evidence produced under sub-rule (1) unless the assessing <\/p>\n
officer has been allowed a reasonable opportunity-\n<\/p>\n<\/p>\n
(a) to examine the evidence or document or to cross-examine the <\/p>\n
witness produced by the appellant, or<\/p>\n
(b) to produce any evidence or document or any witness in rebuttal of <\/p>\n
the additional evidence produced by the appellant.\n<\/p>\n
\n(4) Nothing contained in this rule shall affect the power of the Dy. <\/p>\n
Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the <\/p>\n
production of any document, or the examination of any witness, to enable him to dispose of <\/p>\n
the appeal, or for any other substantial cause including the enhancement of the assessment or <\/p>\n
penalty whether on his own motion or on the request of the assessing officer under clause (a) <\/p>\n
of Sub-section (1) of Section 251 or the imposition of penalty under Section 271.” (Emphasis, <\/p>\n
italicised in print, supplied is ours)<\/p>\n
A bare reading of the aforesaid rule shows that the assessee is not <\/p>\n
entitled to produce additional evidence until one of the conditions spelt out in clauses (a) to <\/p>\n
(d) of sub-rule (1) of Rule 46A is satisfied. In case, such condition is satisfied, the learned <\/p>\n
Commissioner (Appeals) is required to record reasons in writing for admission of such <\/p>\n
additional evidence. We have gone through the order of the Commissioner (Appeals). <\/p>\n
Nowhere, he has recorded the reasons as to why he considered it to be a fit case for admitting <\/p>\n
additional evidence. Thus, the provisions of sub-Rules (1) and (2) of Rule 46A have not been <\/p>\n
kept in view while admitting fresh evidence. Sub-Rule (3) of Rule 46A further mandates that <\/p>\n
the learned Commissioner (Appeals) shall not take into account the additional evidence unless <\/p>\n
the assessing officer had been allowed reasonable opportunity to examine the evidence or to <\/p>\n
produce any evidence in rebuttal of the evidence produced by the assessee. Again this part of <\/p>\n
rule has not been complied with by the learned Commissioner (Appeals) while admitting and <\/p>\n
relying upon fresh evidence. The learned Commissioner (Appeals) not only admitted fresh <\/p>\n
evidence but also deleted the additions without referring the same to the assessing officer <\/p>\n
under sub-rule (3) of Rule 46A by relying on such evidence. Thus, the action of the learned <\/p>\n
Commissioner (Appeals) is not in conformity with the provisions of the Act and also the Rules. <\/p>\n
Moreover, there is no doubt about the fact that assessee had invested\/deposited the amounts <\/p>\n
of voluntary contributions received from various persons including Tilok Tirath Vidyawati <\/p>\n
Chuttani Charitable Trust, in the companies, business concerns, firms by way of share <\/p>\n
application money, deposits etc. In these business concerns, the members of Brar <\/p>\n
family\/trustees had substantial interest. Thus, the assessee contravened the provisions of <\/p>\n
sections 13(l)(c), 13(l)(d) and 13(2)(h) of the Act. The learned Commissioner (Appeals) has <\/p>\n
already accepted the findings of the assessing officer about violations of the provisions while <\/p>\n
confirming other additions made by the assessing officer in the appeals filed by the assessee. <\/p>\n
In the case of Chairman, Andhra Pradesh Welfare Fund v. CIT , <\/p>\n
the Hon’ble Andhra Pradesh High Court has held that even if small portion of the <\/p>\n
voluntary contributions is used for noncharitable purposes, the entire contributions will lose <\/p>\n
the benefit of being exempt from tax. In the case of T. Bapanaiah Vidyadharma Trust v. <\/p>\n
CIT (supra), the Hon’ble Andhra Pradesh High Court has held that the term ‘fund’ <\/p>\n
mentioned in Section 13(2)(h) includes both the corpus as well as income derived therefrom. <\/p>\n
In the case of Action for Welfare and Awakening in Rural Environment (AWARE) v. <\/p>\n
Dy. CIT , the facts of the case were <\/p>\n
that the funds in the form of fixed deposits the name of assessee-trust worth Rs. 16 lakhs <\/p>\n
were pledged as security in the bank enabling one of the members of the assessee to avail <\/p>\n
loan without adequate security and consideration and certain transaction of purchase of land <\/p>\n
was routed through an AOP in which all members were directors and employees of assessee. <\/p>\n
The Hon’ble Andhra Pradesh High Court observed that misutilisation was glaring and it could <\/p>\n
not escape the clutches of law as it had violated the provisions of Section 13(1)(c)(ii) read <\/p>\n
with Section 13(2)(b), It was held that it was not entitled for exemption. In this case also <\/p>\n
there is a gross and blatant misutilisation of funds of the trust. The only charitable activity <\/p>\n
the assessee has done is to finance the business concerns of Brar family where <\/p>\n
members\/trustees have substantial interest in utter disregard of the provisions of the Act. <\/p>\n
Thus, the sum and substance of these judgments is that assessee shall not be entitled to <\/p>\n
exemption of its income and voluntary contributions if the funds have been misutilised by the <\/p>\n
assessee for non-charitable purpose and invested in the business concerns of members for <\/p>\n
commercial considerations. The mere fact that these were given with the direction that these <\/p>\n
shall form part of corpus was not enough in order to entitle the assessee to claim exemption <\/p>\n
under Section 11(1)(d) of the Act.\n<\/p>\n<\/p>\n
20. Having regard to these facts and circumstances of the <\/p>\n
case and the legal position discussed above, we are of the considered opinion that the learned <\/p>\n
Commissioner (Appeals) was not justified in deleting the additions of Rs. 25 lakhs and Rs. 29 <\/p>\n
lakhs for the assessment years 1995-96 and 1996-97 by relying on fresh evidence without <\/p>\n
complying with the provisions of Rule 46A and also without taking into account the <\/p>\n
contravention of provisions of sections 13(1)(c) and 13(1)(d) of the Act. We, therefore, set <\/p>\n
aside the orders of the Commissioner (Appeals) and restore the appeals to his file to be <\/p>\n
decided de novo as per law and after complying with the provisions of Rule 46A and <\/p>\n
also by taking into account the observations made hereinabove. Needless to say that while <\/p>\n
redeciding the appeals, the learned Commissioner (Appeals) shall allow adequate opportunity <\/p>\n
to both the parties. We order accordingly. These grounds of appeals of the revenue are treated <\/p>\n
as allowed for the assessment years 1995-96 and 1996-97.\n<\/p>\n<\/p>\n
21. In the result, while the appeals of the assessee are <\/p>\n
dismissed, the appeals filed by the revenue are allowed for statistical purposes. <\/p>\n","protected":false},"excerpt":{"rendered":"
Income Tax Appellate Tribunal – Amritsar Sardarni Uttam Kaur Educational … vs Ito on 6 October, 2006 Bench: J Pall, A.D. ORDER Joginder Pall, A.M. 1. This is a bunch of six appeals out of which four have been filed by the assessee against the consolidated order dated 21-5-2002 of Commissioner (Appeals), Bhatinda, for the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-224374","post","type-post","status-publish","format-standard","hentry","category-judgements"],"yoast_head":"\nSardarni Uttam Kaur Educational ... vs Ito on 6 October, 2006 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/sardarni-uttam-kaur-educational-vs-ito-on-6-october-2006\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Sardarni Uttam Kaur Educational ... vs Ito on 6 October, 2006 - 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