DCIT, NEW DELHI vs. M/S. ESCORT HEART INSTITUTE & RESEARCH CENTRE LTD., CHANDIGARH

PER K. NARASIMHA CHARY, J.M. Challenging the orders passed by the Learned Commissioner of Income Tax (Appeals)-3, Delhi (“Ld. CIT(A)”) in the case of Escort Heart Institute and Research Centre Ltd (“the assessee”) for the assessment years 2004-05 to 2007-08, Revenue preferred these appeals. Since the facts and grounds involved in all these appeals are identical for all these years, we deem it just and convenient to dispose of these appeals by way

of this common order, with reference to the facts involved for the assessment year 2004-05. 2. Brief facts of the case are that a society in the name of Escorts Heart Institute and Research Centre (EHIRC), with the charitable objects was formed at Delhi on 21/10/1981. It’s income was exempt under section 10 (21) of the Income Tax Act, 1961 (for short “the Act”). Another society with the same name was formed at Chandigarh on 11/11/1999, which is not a charitable institution. Both the societies merged on 01/04/2000. The assessee came into existence, as a registered company, on 30/5/2000 when the Chandigarh society converted itself into a company. On such conversion, the assets of both the erstwhile Chandigarh and Delhi societies have become the assets of the assessee and the assessee has been claiming depreciation on the assets acquired from the daily society also. 3. Assessee is in the business of providing healthcare services. For the assessment year 2004-05, they have filed their return of income on 29/10/2004 declaring an income of Rs. 23,65,10,551/-.Assessment under section 143(3) of the Act was complete at an income of Rs. 32,22,03,200/-vide order dated 29/12/2006. During this year, assessee claimed a total depreciation of Rs. 20,02,32,167/-and according to the learned Assessing Officer the assessee is not entitled to claim such depreciation inasmuch as such assets were purchased by Escorts Heart Institute and Research Centre (EHIRC), Delhi a charitable society and a full deduction was allowed as application of income under section 11 of the Act in the hands of EHIRC, Delhi and since the assessee acquired such assets on the merger of EHIRC Delhi with the assessee, in whose hands

the value of the was only a notional book value. Learned Assessing Officer, therefore, reopened the assessment proceedings by issuing a notice under section 148 of the Act on the ground that some of the assets on which depreciation was being reclaimed were virtually purchased by EHIRC, Delhi by application of income under section 11 of the Act and the cost of such assets in the hands of the assessee was nil and consequently such depreciation allowed thereon had to be withdrawn. Reassessment proceedings were complete by order dated 26/12/2011 with an addition of Rs. 3,63,15,143/-which includes Rs.3,49,30,124/-the depreciation withdrawal on certain assets. 4. Aggrieved by the said addition, assessee preferred appeal before the Ld. CIT(A), Chandigarh and the Ld. CIT(A), Chandigarh passed an order confirming the additions/disallowances made by the learned Assessing Officer. Assessee filed an appeal before the Tribunal, and the Tribunal by order dated 23/08/2013, observed that the order passed by the Ld. CIT(A) was an ex parte order and in view of the decision of the Hon’ble Apex Court in the case of AK Kraipak vs. union of India (1969) to SCC 262 allowed the appeal of the assessee and restored to the file of Ld. CIT(A). The Tribunal also required the CBDT to direct the CCIT, Chandigarh to transfer the appeal of the assessee to the jurisdiction of Delhi. 5. Subsequent to the transfer of the appeal to Delhi jurisdiction, Ld. CIT(A) considered the contentions raised by the assessee and by way of impugned order held that the assessee disclosed the full and true particulars relating to the conversion of the association of persons (AOP) into a limited company at the time of original assessment itself, wherein all the material facts regarding the transfer of assets of the erstwhile

non-charitable society were disclosed in the notes appended to the Balance Sheet for the year ending on 31/3/2014, basing on which the order dated 29/12/2006 was passed by the assessing officer under section 143(3) of the Act. Ld. CIT(A), therefore, observing that the notice issued under section 148 of the Act beyond the period of 4 years from the end of the relevant assessment year, was bad in law. On this premise, Ld. CIT(A) allowed the appeal of the assessee and annulled the assessment order dated 26/12/2011. 6. Challenging the said order, Revenue is this appeal. It is contended by the Ld. DR that the learned Assessing Officer did not consider the issue of the cost of the assets becoming nil due to deduction/exemption already allowed under section 11 of the Act in respect of such assets, in the original assessment order and therefore, the learned Assessing Officer rightly invoked the jurisdiction under section 147 of the Act. According to the Ld. DR mere submission of a fact does not ipso facto mean that there was full and true disclosure. 7. Per contra, it is the submission of the Ld. AR that the fact of the merger of the EHIRC, Delhi with the EHIRC, Chandigarh was informed to the learned Assessing Officer vide letter dated 09/06/2000 itself and that is the reason why the assessments for the assessment years 2001-02 to 2003-04 were complet without resorting to any disallowance on account of depreciation. It is further submitted by the Ld. AR that no new information came to the notice of the learned Assessing Officer after the completion of the initial assessments inasmuch as the event in question, namely, the survey took place as far back as in August, 2003 whereas the learned Assessing Officer issued the notice under section 148 of the

Acton 03/03/2011, after almost 8 years and such an action of the learned Assessing Officer cannot be sustained under. 8. We have gone through the record in the light of the submissions made on either side. It could be seen from the Balance Sheet and P&L Account of the assessee vide schedules, there is sufficient revelation of the transfer of assets from EHIRC, Delhi to the assessee. Letter dated 9/6/2000 clearly shows that the learned Assessing Officer was informed of the fact of the EHIRC registered under the Societies Registration Act, XXI of 1860 was converted into a company under part IX of the Companies Act, 1956 w.e.f. 30/5/2000 and ceases to continue its activities as a society affect 29/5/2000. Further, schedules “C” appended to the Balance Sheet shows the properties that are vested in the assessee and vide schedule J (notes to the accounts ) at serial No. 4 it was stated that pursuant to registration of escorts heart Institute and research Centre (EHIRC-a society registered under the Societies Registration Act, 1860) as a company under part IX of the Companies Act, 1956 as on 30/5/2000, all property, movable, immovable, rights or liabilities in respect of any debt or obligation incurred, or any contract entered into, by, to, with or on behalf of society including all suits and other legal proceedings are passed to and vested the company. It is further stated therein that the figures of assets, liabilities and results of EHIRC have been incorporated in the books of the assessee on the basis of those appearing in the financial statements of EHIRC as the close of business on 29/5/2000 audited by another form of chartered accountants, the statutory auditors of EHIRC.

and also furnished all the relevant information by way of schedules to the Balance Sheet and P&L Account at the time of filing the versatility of income itself. 13. In the circumstances, we do not find anything wrong in the Ld. CIT(A) applying the law laid down by the Hon’ble jurisdictional High Court in the case of Orient Craft Ltd (2013) 354 ITR 536 (Delhi) to the facts of the case on hand and reaching a conclusion that the assessee had disclosed the full and true particulars relating to the conversion of the society into limited company at the time of the original assessment, all the material facts regarding the transfer of assets of the erstwhile noncharitable society were disclosed in the notes and relevant to the Balance Sheet for the year ending as on 31/3/2004 basing on which the assessing officer made the original assessment under section 143(3) of the Act on 29/12/2006 and that, therefore, the notice issued by the learned Assessing Officer beyond the period of 4 years from the end of the relevant assessment year was without jurisdiction. We uphold such a finding of the Ld. CIT(A) and consequently find the grounds of appeals of Revenue as devoid of merits. 14. As stated above, the facts involved for the assessment years 2005- 06 to 2007-08 are identical to the facts involved for the assessment year 2004-05 and therefore while following our finding for the assessment year 2004-05 we find that the grounds of appeal for the assessment years 2005-06 to 2007-08 are also devoid of merits and are liable to be dismissed.

SdSd/- sd/-- (G.S. PANNU) (K. NARSIMHA CHARY) VICE PRESIDENT JUDICIAL MEMBER Dated: 25/11/2019 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Draft dictated 20.11.2019 Draft placed before author 20.11.2019 Approved Draft comes to the Sr.PS/PS Order signed and pronounced on File sent to the Bench Clerk Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order. Date of uploading on the website