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Income Tax Appellate Tribunal, ‘B’ (SMC
Before: SHRI MAHAVIR SINGH
आदेश /O R D E R These eight appeals by the assessee are arising out of two different orders of the Commissioner of Income Tax (Appeals)-19, Chennai in 517, 519, 525, 541, 546/21-22 and 522, 535/21-12, both dated 11.10.2022. The assessments were framed by the ITO, Exemptions Ward 2, Chennai for the assessment year 2012-13 vide order dated 20.12.2019 passed u/s.143(3) r.w.s. 147
- 2 - of the Income Tax Act, 1961 (hereinafter ‘the Act’) and by the DCIT, Central Circle -2(3), Chennai vide orders dated 23.09.2021 & 25.09.2021 passed u/s.143(3) r.w.s.147 of the Act for assessment years 2013-14 to 2016-17 & 2018-19 and u/s.147 r.w.s. 144 of the Act for assessment year 2017-18 and u/s.143(3) of the Act for the assessment year 2019-20. to 1083/CHNY/2022 2. The first common issue in these seven appeals of assessee is as regards to the order of CIT(A) not adjudicating the issue of reopening.
The assessee’s trust is registered u/s.12AA of the Act vide order in C.No.9165E(1440)/CIT/PDY/2011-12 dated 28.03.2012 as a public charitable trust. A survey u/s.133A of the Act was conducted on the business premises of the assessee’s trust on 28.01.2020. During the course of survey, it came to the notice of the Department that the assessee’s trust is running a coaching centre under the name of M/s. Synergic Academy for the students who are appearing for specified entrance examinations viz. IIT-JEE, NEET etc., in and around Cuddalore District. During the course of survey the trustee has also averred that the trustee is collecting fee from the students.
- 3 - On account of this information obtained during the course of survey the AO has considered that the income chargeable to tax has escaped from assessment and accordingly invoked the provision of section 147 and issued notice u/s.148 of the Act. The AO analyzing proviso to section 2(15) of the Act noted that the assessee is neither in the activity of education or the activity of ‘relief to poor’ for the reason that the assessee is charging heavy fee for the purpose of coaching classes from students of IIT-JEE, NEET, etc. The AO has reproduced portion of sworn statement recorded on 29.01.2020 from the trustee and the relevant structure of fee reported reads as under:- Q15 Please provide the details of the Coaching classes conducted by the Trust in M/s. Synergic Academy along with the fees received for each course A.15 IIT Coaching: Class VI – Rs.6000/- including study materials issued by the academy Class VII – Rs.7000/- do Class VIII – Rs.8000/- do Class IX – Rs.9000/- -d0- Class X – Rs.10000/- -do- IIT Coaching & NEET Coaching: Class XI and XII - Rs.22000/- per annum for IIT Coaching including study material Class XI and XII – Rs.17000/- per annum for NEET coaching including study material. The above fees are being charged presently. Previously lesser amount of fees were collected. As replied earlier, some concessions are given for the wards of farmers, contract labourers and society labourers.
- 4 - In term of the above, the AO disallowed the claim of exemption u/s.11 of the Act and assessed the income that is the profit element of the assessee. Aggrieved, assessee came in appeal before the Tribunal.
The assessee before CIT(A) challenged the reopening in all these seven assessment years i.e., from AYs 2012-13 to 2018-19 and the CIT(A) by a common order dismissed the ground by observing in para 6.1.1 as under:- 6.1.1 A survey u/s.133A of the Act was conducted at the business premises of the Appellant on 28.01.2020. During the course of survey it has been noticed that the Appellant’s trust is running a coaching center under the name of M/s. Synergic Academy for the students who are appearing for specified entrance examinations viz. IIT-JEE, NEET etc., in and around Cuddalore District. During the course of survey the trustee has also averred that the trustee is collecting fee from the students. On account of this information obtained during the course of survey the AO has considered that the income chargeable to tax has escaped from assessment and accordingly invoked the provision of section 147 and issued notice u/s.148 of the Act. In view of this, it is considered that the AO has rightly invoked the jurisdiction u/s 147 and the contention of the Appellant about the reopening of the assessment and the grounds raised upon this issue are dismissed.
Aggrieved, now assessee is in appeal before the Tribunal.
When these appeals were called for hearing, none is present from assessee’s side. On the other hand, the Department is represented by Shri AR.V. Sreenivasan, Addl.CIT. I noted from the - 5 - order of CIT(A) that CIT(A) has not at all discussed the issue of reopening whereas the assessee before CIT(A) has raised a specific ground which are common in all the years, which reads as under:- 1. That the order of the Assessing Officer dated 23.09.2021 passed u/s 143(3) r.w.s. 147 of the Act against the appellant is without jurisdiction and is opposed to the principles of law, weight of evidence, probabilities, equity, natural justice, fair play and the facts and circumstances of the case of the appellant.
That the re-opening of assessment is bad in law.
3. That the order of re-assessment passed by the Assessing Officer is illegal and void ab initio.
5.1 When this was confronted to ld. Senior DR that where is the adjudication of CIT(A) in regard to reopening of assessment, he could not controvert what the Bench said. Hence, he agreed that let this issue be remitted back to the file of the CIT(A) for fresh adjudication.
After hearing ld. Senior DR and going through the case records, I noticed that at this stage, facts are not available and adjudication in regard to reopening is not there by CIT(A), I’m unable to proceed with the issue of reopening on merits. Hence, I remand this issue in all the seven years back to the file of the CIT(A), who will pass a speaking order on this issue after allowing reasonable opportunity of - 6 - being heard to the assessee. Hence, this issue in all the seven years is remanded back to the file of the CIT(A).
to 1084/CHNY/2022 7. The next common issue in all these eight appeals of assessee is as regards to denial of exemption u/s.11 of the Act i.e., on merits.
After hearing ld. Senior DR and going through the facts of the case, I noted that the assessee was covered under survey u/s.133A of the Act at the business premises on 28.01.2020. During the course of survey, it has been noticed that the assessee’s trust is running a coaching center under the name of M/s. Synergic Academy for the students who are appearing for specified entrance examinations viz. IIT-JEE, NEET etc., in and around Cuddalore District. During the course of survey the trustee has also averred that the trustee is collecting fee from the students. The AO noted that the assessee is not falling under charitable activity i.e., education or ‘relief to poor’ but is indulging purely in commercial activity and hence, at the best it can be called GPU and income of the assessee has to be assessed as business income. For this, he observed in para 15 & 16 as under:-
In view of the above, as the activity carried on by the assessee trust of running Coaching Centre' is a business activity and is not the business incidental to attainment of the objects of the assessee trust, as per the provisions of the section 11(4A) of the Act. Therefore the assessee trust is not entitled for claiming exemption u/s 11 of the Act, as running of 'Coaching Centre' is not incidental to attainment of the main objective of the assessee.
From the above discussion, it is apparent that assessee's activities are in the nature of trade commerce and business. This activity, by any stretch of imagination cannot be called a charitable act, but is purely a commercial activity. Therefore, it does not fall under any of the limbs of the definition of charitable activity under section 2(15) of the Income Tax Act, 16. As the assessee trust is not eligible to claim exemption under Section 11 of the Act i.e. Section 11 will not operate in the assessee's case, the taxable income of the assessee is to be determined in a commercial sense. Therefore, surplus received by the assessee needs to be brought to tax. Also expenses which are not incurred towards income also need to be disallowed.
Aggrieved, assessee preferred appeal before CIT(A).
The CIT(A) also upheld the action of AO by observing in para 6.3.12 and 6.3.13 as under:- 6.3.12 The Appellant during the course of Appellate Proceedings has not produced any evidence to support the contention about the concession given for the wards of farmers, contract labourers and society labourers, which amounts to relief to poor. As per the income and expenditure statement furnished before the A.O. the assessee Trust had shown only the receipts from M/s Synergy Academy. The argument advanced by the Appellant upon this issue is colourable but when one looks into the background and activities of the Appellant Trust it
- 8 - can be said that the running of M/s Synergy Academy by the Trụst is nothing but a commercial activity run by the Appellant Trust. There is HO evidence to substantiate the claim that the activities are relating to relief to poor.
6.3.13 In this background., it is considered that the activities of the Appellant are in the nature of trade, commerce and business. In no way such activities cannot be considered to achieve the object of the Trust in providing relief to the poor as per the provisions of the section 2(15) of the Act. In this background, it is considered that the action of the A.O. in withdrawing the exemption claimed u/s 11 of the Act is factually correct and legally tenable. In view of this the ground raised by the Appellant upon this issue are dismissed.
Aggrieved, now assessee is in appeal before the Tribunal.
The ld. Senior DR supported the order of AO and that of the CIT(A).
After hearing ld. Senior DR and going through the case records and facts of the case available on record, I notice that the assessee has to be given one more opportunity as the legal issue in seven out of eight years is going back to the file of the CIT(A), let this issue on merits also be sent back to the file of CIT(A) to consider the judgment of Hon’ble Supreme Court on this very issue in the case of ACIT (Exemptions) vs. Ahmedabad Urban Development Authority,
- 9 - [2022] 449 ITR 1. Hence, the CIT(A) will consider the decision of Hon’ble Supreme Court and then decide the issue on merits also afresh. Therefore, all these eight appeals of the assessee are allowed for statistical purposes.
In the result, the appeals filed by the assessee in to 1084/CHNY/2022 are allowed for statistical purposes.
Order pronounced in the open court on 23rd February, 2023 at Chennai.