SH.SHREE GURU NANAK DEV QUIN-CENTENARY CELEBRATION COMMITTEE,LUDHIANA vs. INCOME TAX OFFICER (EXEMPTION), JALANDHAR

आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अमृतसर अिधकरण अमृतसर अमृतसर �यायपीठ अमृतसर �यायपीठ �यायपीठ, अमृतसर �यायपीठ अमृतसर अमृतसर अमृतसर IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH AMRITSAR BEFORE SHRI L.P. SAHU, AM & SHRI RAVISH SOOD, JM आयकर अपील सं./ITA No.238/ASR/2019 आयकर अपील सं आयकर अपील सं आयकर अपील सं (िनधा�रण िनधा�रण वष� वष� / Assessment Year :2010-2011) िनधा�रण िनधा�रण वष� वष� Shree Guru Nanak Dev Vs. ITO(Exemptions) Ward, Quin-Centenary Celebrations Jalandhar Committee, Guru Nanak Bhawan, Ludhiana �थायी लेखा सं./PANNo. : AAWFS 2431 F .. (अपीलाथ� /Appellant) (� यथ� / Respondent) : Shri S.K.Mukhi, Advocate िनधा�!रती क" क" क" ओर क" ओर ओर सेसेसेसे /Assessee by ओर ओर सेसेसेसे /Revenue by : Shri M.P.Singh, CIT-DR राज�व क" क" क" ओर क" ओर ओर सुनवाई क" तार'ख / Date of Hearing : 06/02/2020 घोषणा क" तार'ख/Date of Pronouncement : 30/06/2020 आदेश आदेश / O R D E R आदेश आदेश Per L.P.Sahu, AM: This is an appeal filed by the assessee against the order of CIT(A)-4, Ludhiana, dated 08.02.2019, on the following grounds of appeal :- 1. That the orders of Ld. CIT(A) is illegal, erroneous and perverse and thus needs to be quashed. 2. That the issuance of notice u/s 147/148 is bad in law as no new material was there with the AO to initiate action u/s 147 and the proceedings in furtherance of illegal notice are void ab-initio and deserve to be set aside. 3. That the addition made by AO and partially confirmed by CIT (A) is devoid of proper appreciation of facts on record and against express provisions of law and deserve to be set aside. 4. That the appellant craves leave to add, amend or delete any of the grounds of appeal on or before the disposal of the present appeal. 2. Brief facts of the case are that the assessee filed its return of income on 15.06.2010 declaring total income after claiming exemption

2 ITA No.238/ASR/2019

u/s.12AA r.w.s.11 of the Act, 1961. Thereafter the case was selected for

scrutiny and assessment was completed on 03.09.2012 therein the

returned income was accepted by the AO. Thereafter the case was

selected for scrutiny u/s.148 r.w.s. of the I.T.Act, 1961 after recording

reasons and obtaining approval from the competent authority and

statutory notices were issued u/s.148 of the Act on 27.03.2017.

Subsequently, other statutory notices were also issued to the assessee.

The reasons recorded by the AO as under :-

“2. Before going ahead, and extract of reasons of reopening the case u/s 147 is given hereunder:

"On perusal of record it, revealed that dosing balance of capital fund as on 31.03.2009 was Rs. 1,83,63,024/- but opening balance of capital fund as on 31.03.2010 was taken as Rs. 2,81,68,024. This has resulted into overstatement of capital fund to the tune of Rs.9805000/- (28168024-183630324)

Capital Fund Details :- 31.03.2009 Rs. 18363024/- 31.03.2010 Rs. 28168024/- Unexplained Addition Rs. 9805000/- It was ascertained from the assessment record that assessee has not filed explanation alongwith documents/evidence about source of his increase in the capital fund. Resultantly, assessee has taken overstatement of capital fund to the tune of Rs.9805000/-. Therefore, treated as escapement of Rs.9805000/-.

Secondly, it was noticed from the balance sheet that assessee has shown receipts of Rs.2,07,46,843/- under the head of shopping complex/library head but not credited in income & expenditure account. This receipts was capitalized directly. This has resulted into income escaped assessment to the tune of Rs.2,07,46,843/-.

The total escaped assessment comes to Rs.98,50,000+2,07,46,843=3,05,51,843/-.”

3 ITA No.238/ASR/2019 The assessee did not file his return of income in pursuance to notice

issued u/s.148 of the Act, but he filed a letter dated 19.07.2017, stating

as under :-

“3. The assessed-society has not filed any ITR for A.Y.2010-11 in response to notice u/s.148 of Income Tax Act. However, the assessee vide its letter dated 19.07.2017 furnished as under : i. As stated in the letter it is hereby clarified that no income has escaped tax. The detailed capital A/c is enclosed. In this year the society has received 99 year lease amount from the shops situated in the complex and is a capital receipt and accordingly capitalized. ii. Shopping complex/library receipt is a lease for 99 years since the year 1999-2000 and is a one time capital receipt. In no way it is a revenue receipt to be taken in Income & Expenditure account. This is balance of amount for that shops which are pending for execution of lease deeds. The entire lease deeds were executed in F.Y.2012-13 and nil balance of same is there in that year. The copy of balance sheet as on 31.03.2013 enclosed alongwith Notes to accounts stating the position.” Subsequently, the assessee also filed reply on 03.08.2017, which was

considered by the AO and the AO noticed that in the reassessment

proceedings, the assessee could not file details as required by the AO.

Accordingly, the reassessment was completed u/s.144/147 of the Act

and determined total income of the assessee at Rs.3,05,51,843/-.

before the CIT(A) and he also challenged the reopening of the case by

the AO and he also filed detailed written submissions before the CIT(A).

During the course of hearing, the CIT(A) called for the remand report

from the AO which was duly confronted before the assessee and

rejoinder was also filed by the assessee against the remand report. The

CIT(A) after considering the submissions of the assessee and relying

some case laws, dismissed the appeal of the assessee.

4 ITA No.238/ASR/2019 4. Feeling further aggrieved, the assessee is in appeal before the

Income Tax Appellate Tribunal.

vehemently argued that the reopening of the case which was

completed u/s.143(3) of the Act, cannot be reopened merely on the

change of opinion without any additional material. It was also

submitted by the ld. AR that all the financial documents were furnished

before the AO at the time of original assessment on which basis the AO

passed order and determined the total income at Nil after giving effect

of Section 12AA r.w.s.11 of the Act. From the reasons recorded by the

AO, there is no tangible material mentioned by the AO and full and true

disclosure was made by the assessee during the course of assessment

u/s.143(3) of the Act. Therefore, the case of the assessee cannot be

reopened. The details of capital funds received by the assessee were

disclosed through the reconciliation statement filed at the time of

original assessment. The AO has reopened the case on the basis of audit

objection which was duly replied by the assessee to the AO. This is

mere change of opinion which is not permitted as per the decisions of

many courts in respect of completed assessments. To support his contentions, ld. AR relied on the following case laws :-

i) CIT Vs. M/s Kelvinator of India Limited, Civil Appeal Nos.2009- 2011 of 2003, dated 18.01.2010(Supreme Court), and ii) Pr. CIT Vs. Baldev Singh, ITA No.286 of 2016(O&M) (Punjab and Haryana High Court).

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and the AO has rightly reopened the case which has rightly been

dismissed by the CIT(A) relying on may case laws. It was also

submitted by ld. DR that the case laws relied on by the ld. AR is

distinguishable on the facts.

available on record and the orders of authorities below, we noticed

from the documents submitted by the assessee that this issue was

already been questioned by the AO at the time of making original

assessment u/s.143(3) of the Act in the question No.12 dated

06.02.2012. In response to this, the assessee submitted his reply on

23.02.2012 at Serial No.12. The financial statement was also submitted

before the AO and the notes of account were also appended with the

financial statements. Further it is also clear from the documents

available before us that this case has been reopened by the AO on the

basis of audit objection in regard to capital funds. The assessee had

also duly replied of the audit objections as per his letter which is placed

on record. Details of capital funds were also submitted before the AO,

which means this issue was already been examined by the AO at the

time of framing original assessment. Thereafter the AO passed order

u/s.143(3) of the Act and accepted nil return of the assessee. The case

laws relied on by the ld. AR in the case of M/s Kelvinator of India

6 ITA No.238/ASR/2019

Limited (supra) also supports the case of the assessee, wherein the

Hon’ble Supreme Court has held as under :-

“Heard learned counsel on both sides. A short question which arises for determination in this batch of civil appeals is, whether the concept of "change of opinion" stands obliterated with effect from 1st April, 1989, i.e., after substitution of Section 147 of the Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1987? To answer the above question, we need to note the changes undergone by Section 147 of the Income Tax Act, 1961 [for short, "the Act"]. Prior to Direct Tax Laws (Amendment) Act, 1987, Section 147 reads as under: "Income escaping assessment. 147. If— [a] the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or [b] notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income- tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year)." After enactment of Direct Tax Laws (Amendment) Act, 1987, i.e., prior to 1st April, 1989, Section 147 of the Act, reads as under: "147. Income escaping assessment.-- If the Assessing Officer, for reasons to be recorded by him in writing, is of the opinion that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year)." After the Amending Act, 1989, Section 147 reads as under: "Income escaping assessment. 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or

7 ITA No.238/ASR/2019

the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)."

On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re- opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No.549 dated 31st October, 1989, which reads as follows:

"7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe' in Section 147.--A number of representations were received against the omission of the words `reason to believe' from Section 147 and their substitution by the `opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, `reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in

8 ITA No.238/ASR/2019 writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." For the afore-stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs.

of Baldev Singh(supra), has held as under :-

“6. As we noted earlier the details in respect of transactions were called for by the Assessing Officer and the assessee furnished the same. On the basis thereof the Assessing Officer accepted the return in this respect. The Tribunal on this basis and after following the judgments of Delhi High Court in Madhukar Khosla v. Assistant Commissioner of Income Tax (2014) 90CCH 0023 Delhi High Court and Orient Crafts Ltd. 354 ITR 536 (Delhi) rightly allowed the appeal on the ground that the Assessing Officer was not entitled to assume jurisdiction under section 147 of the Act in the absence of any new information or material. We are unable to state that the finding is perverse or irrational.” 9. Respectfully following the above judicial decisions, we are of the

opinion that in absence of any new material pointed out by the

assessee in the reasons recorded, the reassessment u/s.147 of the Act

is null and void and we quash the reassessment order passed by the AO

on legal ground. Since we have already quashed the reassessment

order passed by the AO on legal ground, other grounds on merits need

no adjudication. Thus, the appeal of the assessee is allowed on legal

ground.

of the captioned appeal was concluded on 06.02.2020, however, this

order is being pronounced much after the expiry of 90 days from the

date of conclusion of hearing. We find that Rule 34(5) of the Income

9 ITA No.238/ASR/2019 tax Appellate Tribunal Rules, 1962, which envisages the procedure for

pronouncement orders, provides as follows:

34(5) The pronouncement may be in any of the following manners: - (a) The Bench may pronounce the order immediately upon the conclusion of hearing. (b) in case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date of pronouncement. (c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board.

As such, “ordinarily”, the order on an appeal should be pronounced by

the Bench within no more than 90 days from the date of concluding the

hearing. It is, however, important to note that the expression

“ordinarily” has been used in the said rule itself. This rule was inserted

as a result of directions of Hon’ble High Court in the case of Shivsagar

Veg Restaurant vs ACIT (2009) 319 ITR 433 (Bom), wherein, it was,

inter alia, observed as under:

“We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now),all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment”.

In the rules so framed, as a result of these directions, the expression

“ordinarily” has been inserted in the requirement to pronounce the

10 ITA No.238/ASR/2019 order within a period of 90days. The question then arises whether the

passing of this order, beyond ninety days, was necessitated by any

“extraordinary” circumstances.

coordinate Bench of the Tribunal viz; ITAT, Mumbai ‘F’ Bench in DCIT,

Central Circle-3(2), Mumbai vs JSW Limited & ors (ITA

No.6264/Mum/18 dated 14.5.2020, wherein, it was observed as under:

“ 9. Let us in this light revert to the prevailing situation in the country. On 24th March,2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon’ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also afew more days prior to, and after, the lockdown by observing that “In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon’ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus “should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure...”. The term ‘force majeure’ has been defined in Black’s Law Dictionary, as ‘an event or effect that can be

11 ITA No.238/ASR/2019

neither anticipated nor controlled’ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary” period.

Bombay High Court and the Tribunal, we are of the considered view

that the period during which the lockdown was in force shall stand

excluded for the purpose of working out the time limit for

12 ITA No.238/ASR/2019 pronouncement of orders, as envisaged in Rule 34(5) of the Appellate

Tribunal Rules, 1963.”

(Senior Private Secretary) ITAT Amritsar Bench, Amritsar