M/S BANDANTHAMMA MATHU KALAMMA TRUST,MYSORE vs. INCOME TAX OFFICER WARD-1(4), MYSORE

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “A”, BANGALORE Before Shri Chandra Poojari, AM & Smt.Beena Pillai, JM ITA No.1761/Bang/2018 : Asst.Year 2008-2009 ITA No.1762/Bang/2018 : Asst.Year 2009-2010 ITA No.1763/Bang/2018 : Asst.Year 2010-2011 ITA No.1764/Bang/2018 : Asst.Year 2011-2012 ITA No.1765/Bang/2018 : Asst.Year 2012-2013 ITA No.1766/Bang/2018 : Asst.Year 2013-2014 M/s.Bandanthamma Mathu The Income Tax Officer Kalamma Trust, K.G.Koppal Vs. Ward 1(4) New Kantharaj Urs Road Mysuru. Mysuru – 570 023 PAN : AABTB9845M. (Appellant) (Respondent) Appellant by : Sri. Narendra Sharma, Advocate Respondent by : Sri.Manjeet Singh, Addl.CIT-DR Date of Date of Hearing : 19.02.2020 Pronouncement : 26.02.2020 O R D E R Per Chandra Poojari, AM : These appeals by the assessee are directed against different orders of the CIT(A) for the assessment years 2008- 2009 to 2013-2014. Since common issue is involved in these appeals, they were heard together and are being disposed of by this consolidated order.

“1. The order of the learned Commissioner of Income-tax [Appeals], Mysuru, dated 29/12/2017 and the order of assessment passed by the learned assessing officer under section 143(3) r.w.s. 147 of the Act dated 28/03/2016, in so

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far as it is against the : Appellant is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant's case. 2 The, learned Commissioner of Income-tax [Appeals] failed to appreciate that the re-opening of assessment is bad in law since the said re-opening is not permissible as per the first and second proviso to section 12A [2] of the Act, on the facts and circumstances of the case. 3. The learned Commissioner of Income-tax [Appeals], failed to appreciate that the order of re-assessment passed under section 147 of the Act is bad in law and void-ab-intio as the mandatory conditions to invoke the provision of section 147 did not exist and thereby issuing the notice under section 148 was not present or complied with, on the facts and circumstances of the case. 4. The learned Commissioner of Income-tax [Appeals], failed to appreciate that the order of assessment passed by the learned assessing officer is bad in law for the reason that notice under section 148 of the Act is issued in the name of "M/s. Adi Shakthi Bandanthamma Kalamma Charitable Trust" and the reasons recorded for re-opening of assessment, other statutory notices and the assessment is concluded and framed in the name of "M/s. Bhandanthamma Mathu Kalamma Trust" consequently the entire proceedings become void ab into, on the facts and circumstances of the case. 5. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the reasons recorded by the learned assessing officer may utmost be considered as reason to suspect and under no stretch of imagination the same cannot be construed as reason to believe which is a basic ingredient for a valid assumption of re-assessment, on the facts and circumstances of the case. 6. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the procedure contemplated as per the statute has not been properly followed by the learned assessing officer for issuance of notice under section 148 of the Act, and consequently the order of assessment passed on an invalid procedure is void-ab-into, on the facts and circumstances of the case. 7. The learned Commissioner of Income-tax [Appeals], is not justified in upholding the action of the learned assessing officer in changing the status of the appellant from Trust to Association

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of Persons [AOP] which is not permissible under the provisions. of the Act. Consequently the impugned order of assessment passed under section 143[3] r.w.s. 147 of the Act upon changing of status requires to be cancelled, on the facts and circumstances of the case. 8. Without prejudice the appellant denies itself liable to be assessed on total income of Rs.8,54,651/- as determined by the learned assessing officer and confirmed by the learned Commissioner of Income-tax [Appeals], as against the returned loss by the appellant of Rs. 1,33,001/-, on the facts and circumstances of the case. 9. The learned Commissioner of income-tax [Appeals] erred in confirming the addition made by the learned Assessing Officer amounting to Rs. 9,87,652/- being the corpus donations received by the appellant Trust as income as per the provisions of section 2 [24] [ii] [a] of the Act, in the facts and circumstances of the case. 10. The learned authorities below failed to appreciate that the monies received by the appellant are all for a specific purpose received from the devotees of the appellant Trust towards the construction of a samudhaya bhavan belonging to the appellant Trust and the said receipts are to the corpus of the Trust and capital receipts which is not taxable as per the scheme of the Act as the appellant could not have utilised but for the purpose of construction of Samudhaya Bhavan, and consequently the same do not constitute income in the hands of the appellant Trust, on the facts and circumstances of the case. 11. Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies itself liable to be charged to interest under section 234 B of the Income Tax Act on the facts and circumstances of the case. The appellant contends that the levy of interest under section 234A and 234B of the Act is also bad in law as the period, rate, quantum and method of calculation adopted by the learned assessing officer on which interest is levied are not discernible and are wrong on the facts of the case. 12. The appellant craves leave to add, alter, amend, substitute or delete any or all of the grounds of appeal urged above. 13. For the above and other grounds to be urged during the course of hearing of the appeal the Appellant prays that the

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appeal be allowed in the interest of equity and justice.”

Sl. Asst.Year Income returned in No. response to 148 notice (Amount in Rs.) 1. 2008-2009 Loss of Rs.1,33,001 2. 2009-2010 Loss of Rs.2,73,197 3. 2010-2011 Loss of Rs.2,85,671 4. 2011-2012 Loss of Rs.3,44,792 5. 2012-2013 Loss of Rs.6,81,670 6. 2013-2014 Loss of Rs.28,51,789

3.1 The assessee sought the reason recorded for reopening of assessment and the same was provided by the A.O. Thereafter, the assessee filed objections as regards to the reasons recorded and the same were disposed of by the AO and the assessee filed another submission as regards to the disposal of objections by

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the A.O., which are all part of the assessment records. The A.O. issued statutory notices and called for certain details and documents which were provided by the assessee. Subsequently, the A.O. concluded the assessments by passing order of assessment u/s 143(3) r.w.s. 147 of the Act for all the assessment years under consideration, by determining the total income of the assessee, as under:-

Sl. Asst.Year Total income No. determined (Amount in Rs.) 1. 2008-2009 8,54,651 2. 2009-2010 11,26,071 3. 2010-2011 13,66,626 4. 2011-2012 14,28,996 5. 2012-2013 17,56,560 6. 2013-2014 10,65,430

3.2 The assessee being aggrieved by the impugned orders of the A.O. u/s 143(3) r.w.s. 147 of the Act, preferred appeals before the CIT(A). The CIT(A) disposed of the appeals by confirming the additions made by the A.O.

3.3 Aggrieved by the orders of the Income Tax Authorities, the assessee is in appeal before us.

3.4 The learned AR submitted that the issue involved in these appeals is with regard to non-consideration of first and second proviso to section 12A(2) of the Act and thereby reopening the assessment u/s 147 of the Act.

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3.5 The contentions of the assessee as regard to the legal issue on re-opening of assessment are as under:

The re-opening of assessment is bad in law since the i. said re-opening is not permissible as per the first and second proviso to section 12A [2] of the Act, on the facts and circumstances of the case.

The learned assessing officer is not justified in law in ii. changing the status from AOP [Trust] as per the return to Association of Persons, which is not permissible in law. In fact that the learned assessing officer ought to have issued fresh notice on the alleged AOP and proceeded with the assessment.

The order of assessment passed by the learned iii. assessing officer is bad in law for the reason that notice under section 148 of the Act is issued in the name of "M/s. Adi Shakthi Bandanthamma Kalamma Charitable Trust and the reasons recorded for re-opening of assessment, other statutory notices and the assessment is concluded in the case of the appellant is framed in the name of "M/s. Bhandanthamma Mathu Kalamma Trust" consequently the entire proceedings become void ab into.

The reasons recorded for re-opening of assessment iv. amount to reason to suspect and do not amount to reason to believe and the said reason do not constitute belief;

The procedure contemplated by the statute for re- v. opening of assessment has not been properly followed, adhered or complied to Et hence there is no proper assumption of valid jurisdiction, more so

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when the reasons are recorded by a different officer and notice under section 148 of the Act is issued by different officer. Consequently, the entire re- assessment proceedings get vitiated as void-ab- initio. 3.6 The re-opening of assessment is bad in law since the said re-opening is not permissible as per the first and second proviso to section 12AA of the Act, on the facts and circumstances of the case.

(i) It is submitted that it is an undisputed fact that the appellant has been granted registration under section 12A of the Act by the Certificate of Registration issued under section 12A r.w.s. 12AA of the Act and recognition under section 80G of the Act, on 05/08/2016 with effect from the A.Y. 2015-16 onwards. [ii]. It is submitted that as per the first proviso and also the second proviso to section 12A of the Act if the activities and objects of the appellant is one and the same for such preceding year the year in which the registration is granted to the assessee then provisions of section 11 and 12 shall apply and further as per the second proviso re- opening of assessment under section 147 of the Act is not permissible for such preceding years for which the assessee do not have registration under section 12A of the Act. For the sake of appreciation the appellant reproduces the provisions of section 12A[2] of the Act for the sake of ready reference: “12A. Conditions for applicability of sections 11 and 12. (1). ...................................

(2) Where an application has been made on or after the 1st day of June,

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2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made:] [Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.]".

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(iii) Thus, as could be seen from the above first and second proviso to section 12A [2] of the Act it is clear that no reopening under section 147 of the Act is permissible for any assessment year preceding the assessment years only for non-registration of Trust under section 12A of the Act and further as per the first proviso if the activities and objects of the Trust remain the same in the preceding years as well the re- opening for the preceding years wherein the registration under section 12A of the Act is not available cannot be brought to tax by re-opening the assessment by issuance of a notice under section 148 of the Act. (iv) Without prejudice the learned assessing officer ought to have computed the income of the appellant as per the provisions of section 11 of the Act for the above mentioned assessment years as per the first proviso to section 12A of the Act, in the interest of justice and equity. [v]. Wherefore, in view of the above submissions the appellant humbly pray before this Hon'ble Tribunal to kindly cancel the reassessment proceedings concluded by the learned assessing officer and without application of mind confirmed by the learned Commissioner of Income-tax [Appeals], for the advancement of substantial cause of justice. 3.7 The assessing officer is not justified in law in changing the status from AOP [Trust] as per the return to Association of Persons, which is not permissible in law and which was erroneously confirmed by the learned Commissioner of Income-tax [Appeals]. In fact that the learned authorities ought to have issued fresh notice on the alleged AOP and proceeded with the assessment.

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(i) The assessing officer has erred in making an assessment under the status of "Trust treated as AOP" as against the status of Trust which is contrary to the well settled principles of law that the Trust cannot be assessed in the status of Association of Persons, which was erroneously and without any application of mind . Reliance is placed on the decision of the Hon'ble Apex Court in the case of CWT Vs. H.E.H. Nizam's Family Trust, reported in 108 ITR 555 and reliance is also placed on the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. K. Shyamaraju [Trustees] Et Others, reported in 189 ITR 392. [ii]. The appellant wishes to submit that the learned Assessing Officer has issued the statutory notices and conducted the assessment proceedings on the Appellant under the status of AOP [Trust], which is the status under which the Appellant has filed its return of income. Further, the Notice issued under section 148 of the Act specifies the Permanent Account Number which was allotted to the appellant in the status of Trust, which demonstrates that the notice under section 148 of the Act is issued in the status of Trust. However, the learned Assessing Officer has passed the impugned order of assessment for the above mentioned assessment year by holding the Appellant Trust to be Trust treated as AOP. Nothing is discernable from the order of assessment as to who are the members of the AOP, what is the basis of arriving the said position. [iii]. It is a settled position of law that where the Assessee files the return of income under a particular status and the Assessing Officer wishes to assess the Assessee under a different status, then the Assessee is required to be put on notice about the proposal of the Assessing Officer and invite for objections, if any. [iv]. The Hon'ble Apex Court in CIT v. K. Adinarayana Murthy [1967] 65 ITR 607 [SC] has held that if a notice has been issued to a person having been of a particular status as described in the notice, the reassessment

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proceedings assessing escaped income of a different status of the assessee is illegal and without jurisdiction. [v]. Reliance is also placed on the following decisions in this regard: CIT v. Ram Das Deokinandan Prasad reported in [a]. 277 ITR 197 (All); CIT v. Sobhaglal Mishrilal Semlavada reported in [b]. 223 ITR 554 (MP); CIT v. Suresh Chandra Gupta reported in 173 ITR [c]. 407 (Raj); [d]. CIT v. Rohtas reported in 311 ITR 460 (P &H); Sri Nath Suresh Chand Ram Naresh v. CIT reported [e]. in 280 ITR 396 [All] CIT vs. Associated Cement & Steel Agencies [1984] [f]. 147 ITR 776 [Bom.], In all the above cited cases it has been held that where statutory notices initiating assessment were issued by treating assessee in a particular status the same cannot be changed while framing the assessment. [vi]. The Appellant also places reliance on the parity of reasoning in the following decisions in this regard: Abdul Sattar M. Mokashi v. CIT reported in 174 ITR [a]. 368 [Kar]; CIT v. Ramesh Mahesh Sanjay Trust Ex Others [b]. reported in 231 ITR 752 [Mad]; Gutta Anjaneyulu & Co. v. CIT reported in 249 CTR [c]. 106 [AP]; Pannabai v. CIT reported in 153 ITR 608 [AP][FB]; [d]. [e] P.N.Sasikumar & Ors. v. CIT reported in 170 ITR 80 [Ker]; [vii] Reliance is also placed on the decision of the Hon'ble Jurisdictional High Court in the case of CIT Et Another Vs. Children's Education Society, 358 ITR 373 wherein

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the Hon'ble Court has held that when the return is filed as an artificial juridical person the question of treating the assessee as an association of persons would not arise. [viii] On similar analogy the question of treating the Trust as an AOP would not arise and hence the entire order is without jurisdiction and liable to be set aside. [ix] In view of the above it is humbly submitted that the learned Assessing Officer erred in law in proceeding to conclude the Assessment under the status of Trust treated as AOP which was erroneously confirmed by the learned Commissioner of Income-tax [Appeals]. Thus the proceedings before and consequent order of assessment framed in the name of the Appellant are thus rendered void-ab-initio and bad in law and are required to be quashed in-toto 3.8 The order of assessment passed by the assessing officer is bad in law for the reason that notice under section 148 of the Act is issued in the name of "M/s. Adi Shakthi Bandanthamma Kalamma Charitable Trust" and the reasons recorded for re-opening of assessment, other statutory notices and the assessment is concluded in the case of the appellant is framed in the name of "M/s. Bhandanthamma Mathu Kalamma Trust" consequently the entire proceedings become void ab into.

[i] The entire proceedings initiated under the provisions of section 147 r.w.s. 148 of the Act is void ab inito for the reason that the learned assessing officer has recorded the satisfaction in the name of "M/s. Bhandanthamma Mathu Kalamma Trust". Whereas, the notice under section 148 of the Act is issued in the name of "M/s. Adi Shakthi Bandanthamma Kalamma Charitable Trust".

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[ii] It is submitted that the notice issued under section 148 of the Act being defective, the subsequent proceedings would not result in a valid assessment even if the assessee had filed the return. Reliance is placed on the parity of reasoning of the decision of the Hon'ble Calcutta High Court in the case of CIT Vs. Bibhuti Bhusan Mallick [1987] 165 ITR 107.

[iii] It is further submitted that a valid notice is sine qua non for assumption of a valid jurisdiction and subsequent proceedings. Reliance is placed on the parity of reasoning of the decision of the Hon'ble Allahabad High Court in the case of Sri Nath Suresh Chand Ram Naresh Vs. CIT, reported in [206] 280 ITR 396.

[iv] In view of the above submissions the appellant humbly submits that the foundation for re-opening and the subsequent proceedings is bad in law and void ab- into and consequently the impugned order of assessment passed under section 143[3] r.w.s. 147 of the Act do not have any legs to stand. 3.9 The reasons recorded for re-opening of assessment amount to reason to suspect and do not amount to reason to believe and the said reason do not constitute belief;

[i] It is submitted that the reasons recorded for re- opening of assessment is bad in law since the reasons recorded which provided to the appellant will at most amount to reason to suspect and do not constitute reason to believe which is a per-requisite condition for re-opening of assessment. Consequently the entire foundation for re- opening fails and subsequent proceedings become void ab initio.

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[ii]. Thus, the reasons recorded for re-opening based on suspicion and surmises is bad in law. The reasoning as recorded for reopening of assessment at most may amount to only "reasons to suspect" and not "reasons to believe". The Hon'ble Supreme Court in Calcutta Discount Company Limited vs. ITO and Another reported in 41 ITR page 191 has held that: "The expression "reason to believe" postulates belief and the existence of reasons for that belief. The belief must be held in good faith : it cannot be merely a pretence. The expression does not mean a purely subjective satisfaction of the Income-tax Officer : the forum of decision as to the existence of reasons and the belief is not in the mind of the Income-tax Officer. If it be asserted that the Income-tax Officer had reason to believe that income had been under- assessed by reason of failure to disclose fully and truly the facts material for assessment, the existence of the belief and the reasons for the belief, but not the sufficiency of the reasons, will be justifiable. The expression therefore predicates that the Income-tax Officer holds the belief induced by the existence of reasons for holding such belief, It contemplates existence of reasons on which the belief is founded, and not merely a belief in the existence of reasons inducing the belief; in other words, the Income-tax Officer must on information at his disposal believe that income has been under- assessed by reason of failure fully and truly to disclose all material facts necessary for assessment. Such a belief, be it said, may not be based on mere suspicion; it must be founded upon information".

[iii] Reliance is also placed on the decision of Hon'ble Apex Court in the case of Indian Oil Corporation Vs. Income Tax Officer, reported in 159 ITR 956 has held as under:

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"reason to believe is not the same thing as reason to suspect. The Apex court reiterated its view expressed in the case of Sheo Nath Singh v AAC, 82 ITR 147". [iv] The Hon'ble Supreme Court in Ganga Saran and Sons Pvt Ltd vs ITO and Others [130 ITR 1] has reiterated that :

"It is well settled as a result of several decisions of this court that two distinct conditions must be satisfied before. the Income-tax Officer can assume jurisdiction to issue notice under s. 147(a). First, he must have reason to believe that the income of the assessee has escaped assessment and, secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income-tax Officer would be without jurisdiction. The important words under s. 147(a) are " has reason to believe " and these words are stronger than the words " is satisfied ". The belief entertained by the Income-tax Officer must not be arbitrary or irrational.

If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and

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such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid".

[v]. The Hon'ble High court of Karnataka in H. Noronha V. Income Tax Officer [133 ITR 199] has held that mere suspicion would not be sufficient for re-opening of the case unless there existed some other prima facie evidence to warrant reopening. [vi] The Hon'ble Supreme Court in Chhugamal Rajpal V. S. P. Chaliha And Others [79 ITR 603 ] has held that :

"Before issuing a notice under section 148, the Income-tax Officer must have either reasons to believe that by reason of the omission or failure on the part of the 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 alternatively notwithstanding that there has been no omission or failure as mentioned above 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. Unless the requirements of clause (a) or clause (b) of section 147 are satisfied, the Income-tax Officer has no jurisdiction to issue a notice under section 148".

[vii] The Hon'ble Supreme Court in ITO V. Lakshmani Mewal Das [103 ITR 437] wherein it was a case arising

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under section 147[a]. The Hon'ble Supreme Court reiterated that the reasons for the formation of the belief by the ITO, must have a rational connection or relevant bearing on the formation of the belief. It was further explained that this aspect is justicable issue to be examined by the Court.

[viii] The Hon'ble High Court of Calcutta in Equitable Investment Co. (P.) Ltd. vs ITO G-Ward And Others [174 ITR 714] has held that :

"The powers of the Income-tax Officer to reopen assessments though wide, are not plenary. The words of the statute are 'reason to believe' and not 'reason to suspect'. The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements of law should be satisfied".

[ix] Confronted with identical situation on facts, the Hon'ble Bombay High Court in Hindustan Lever Limited V. R.B. Wadkar, Assistant Commissioner of Income Tax, [268 ITR 332] has held :

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"It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Assessing Officer. The reasons recorded should be self explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the Assessee fully and truly necessary for assessment of that assessment year, so as to establish the vita! link between the reasons and evidence. That vital link is the safeguard against arbitrary re-opening of the concluded assessment".

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[x] The single bench judgment of the Hon'ble Karnataka High Court in the matter of A. Nagappa V. ACIT, wherein the reasons of the Assessing Officer, were elaborate, were reproduced. Yet the Hon'ble High Court proceeded to quash the notice issued to the Assessee under section 148 of the Act. This Order was the subject matter of challenge at the instance of Revenue in W.A. No.928/1991 (unreported) before the Division Bench of the Hon'ble Karnataka High Court which held as under :

"More than the ADI's report which the learned judge characterized as evasive and speculative, it is the statement of reasons for the reopening which is evasive and speculative. We find no basis therein which could have led the appellant to entertain reasons to believe that income chargeable to tax had escaped assessment for the relevant assessment year. It is imperative that the reasons should have a rational and relevant nexus to the formation of such belief. We do not find such nexus".

[xi]. In the light of the aforesaid judgments of various High Courts and Supreme Court, it is clear that to re- open an assessment under section 147 of the Act, there should be reason to believe that there is escapement of income and should not be based on suspicion as in the instant case. Hence, the entire reassessment proceedings fails on this count also, it is humbly prayed before this Hon'ble Tribunal to kindly cancel the assessment passed under section 143[3] r.w.s. 147 of the Act for the advancement of substantial cause of justice.

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3.10 The procedure contemplated by the statute for re- opening of assessment has not been properly followed, adhered or complied to & hence there is no proper assumption of valid jurisdiction, more so when the reasons are recorded by a different officer and notice under section 148 of the Act is issued by different officer. Consequently the entire re- assessment proceedings get vitiated as void-ab-initio.

[i] It is submitted that the reasons for re-opening under section 147 of the Act is recorded on 16/03/2015 as provided by the learned assessing officer [Ref. Annexure - 4] and the name of the officer who has recorded the reasons are not discernible only a signature is made by the assessing officer who has recorded the reasons recorded i.e. on 16/03/2015.

[ii]. It is submitted that the notice for re-opening of assessment under section 148 of the Act was issued on 25/03/2016 [Ref. Annexure - 2]. The said notice of re- assessment dated 25/03/2016 is issued by the Income-tax Officer [Exemptions], Ward -1, Mysore one by Officer Indiramma.M. wherein, the notice of re- assessment under section 148 of the Act is very discernible.

[iii] Thus, the contention of the appellant is that the reasons for re-opening has been recorded by a different officer and the notice under section 148 of the Act has been issued by another officer, thus, the satisfaction for re-opening of assessment has to be necessarily by the officer who issues notice under section 148 of the Act. No other officer other than the officer who arrives at satisfaction and records his reasons for re-opening of assessment alone has to issue notice under section 148

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of the Act, which is absent in the instant case as it is seen by the signatures that reasons have been recorded by a different officer and notice under section 148 of the Act is issued by another officer as could be seen from the signatures on the reasons recorded and also the signature on the notice issued under section 148 of the Act, which fact may kindly be appreciated by this Hon'ble Tribunal.

[iv] Thus, the entire re-assessment based on an invalid procedure is void-ab-intio and the same requires to be cancelled. The appellant places reliance on the decision of the Hon'ble Gujarat High Court in the case of M/s. Hyoup Food and Oil Industries Limited Vs. ACIT, [2008] 307 ITR 115.

[v] It is further contended that the reasons recorded by the learned assessing officer and the notice issued under section 148 of the Act assessing officer are without assumption of proper jurisdiction. It is submitted that the assessing officer who has recorded the reasons for re-opening on 16/03/2015 and the officer issuing notice under section 148 of the Act dated 23/03/2015 did not possess requisite jurisdiction as is evident from the Transfer Memorandum for transfer of case as submitted by the learned assessing officer to the another assessing officer at Ward - 1[4], Mysuru, which was given to the appellant alongwith the notice of change in incumbent issued by the officer at Ward - 1[4] Mysuru dated 04/02/2016.

[vi] Thus, even on this count as well the entire procedure as adopted by the learned assessing officer under section 148 and 147 of the Act have been without assumption of proper jurisdiction and consequently the entire reassessment which was framed by the learned assessing officer on an invalid assumption of

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jurisdiction and improper procedure followed requires to be canceled for the advancement of substantial cause of justice.

[vii]: It is also contended that for the assessment years 2008-09 & 2009-10 in the reasons recorded it is stated that permission from the additional commissioner has been sought for approval as per the provisions of section 151 of the Act, whether the same has been obtained or not is not discernible from the order sheet noting of the learned assessing officer. [viii]. Wherefore, the appellant humbly state and submit that the entire procedure as contemplated in the statute has not been followed and without assumption of proper jurisdiction and consequently the re- assessment orders passed by the learned assessing officer for the above mentioned A.Y's 2008-09 to 2013- 14 requires to be cancelled for the advancement of substantial cause of justice. 3.11 In view of the overall legal submissions as submitted above and also submitted before the learned Commissioner of Income-tax [Appeals], the appellant humbly prays that the impugned order of assessments passed under section 143 [3] r.w.s. 147 of the Act as void-ab-into and also the appellate order passed by the learned Commissioner of Income-tax [Appeals] is not in accordance with law, for the advancement of substantial cause of justice.

3.12 As regard to the issue on merits of the matter is concerned the assessing officer in the impugned order of reassessment has made an addition of Rs. 9,87,652/ - as

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income since the Trust is not registered under section 12A of the Act, therefore the benefit available under section 11 of the Act is not available to the Trust. The learned assessing officer has further held that the above receipts i.e. hundi collections are towards corpus fund of the Trust. In the absence of any proof assessee is not entailed for any benefits as per the provisions of section 11 of the Act and the same is brought to tax as per the provisions of clause [ii] [a] of subsection 24 of section 2 of the Act. Further, the learned Commissioner of Income-tax [Appeals] without appreciating the contentions raised by the appellant during the appellate proceedings and without verifying the facts of the case in a cryptic manner confirmed by the findings of the learned assessing officer without any proper basis.

[i]. In this regard the appellant wishes to state and submit that the appellant is a religious Trust and the appellant has many followers and devotes. The appellant was in the process of constructing a samudhaya bhavan and was collecting contributions for the same. The appellant during the impugned assessment years had collected the monies from various donors for a specific purpose of construction of Samudhaya Bhavan for the benefits of its devotees.

[ii] It is submitted that the receipts which has been treated by the learned assessing officer as income and brought to tax are receipts which is capital receipts and for a specific purpose for construction of Samudaya Bhavan and the said receipts are towards the corpus of the appellant Trust. Consequently the additions made by the learned assessing officer and confirmed by the

24 ITA Nos.1761-1766/Bang/2018 M/s.Bandanthamma Mathu Kalamma Trust.

learned Commissioner of Income-tax [Appeals], treating the corpus as income is not correct and the same requires to be deleted in toto.

[iii] It is submitted that during the course of assessment proceedings and also in the appellate proceedings, it was clearly stated that the said receipts were received by the appellant for a particular purpose and cause and specific direction on the Hundi Box that the said amount are utilized for the construction of temple and Samudaya Bhavan, which the devotes were aware of the construction work-in-progress of the temple and Samudaya Bahavan and thus, they contributed toward s the specific cause. Thus, the said contributions from various devotes would constitute capital receipt in the hands of the appellant which was not appreciated by the learned authorities below.

[iv] In this regard the appellant wishes to humbly submit that as facts narrated above which is not disputed by the authorities below, which clearly establish that the amounts received by the appellant from its devotees for a specific purpose of construction of temple and Samudaya Bhavan, which is treated as corpus fund do not constitute income as per the definition of clause [iia] of sub-section [24] of section [2] of the Act.

[v] It is submitted that the contributions received by the appellant from the devotees for the specific purpose do not constitute the income of the appellant. It is submitted further that the said contributions made by the devotees are to be used and utilized for the purpose of construction of temple and Samudaya Bhavan, and not for any other purposes, as the same has been utilized by the appellant for the purpose which was contributed by the devotees. The intention of the

25 ITA Nos.1761-1766/Bang/2018 M/s.Bandanthamma Mathu Kalamma Trust.

devotees and the appellant was to treat the donations as capital to be spent only on the construction of temple and Samudaya Bhavan.

[vi] It is submitted that the donations or contributions or grants received for a specific purpose are not assessable as income and the fact that the amounts were not spent relevant. Reliance is placed on the parity of reasoning of the decision of the Hon'ble Rajasthan High Court in the case of Sukhdeo Charity Estate Vs. CIT, reported in 149 ITR 470.

[vii] It is submitted that the provisions of section 2[24][iia] of the Act defines income o include voluntary contributions received by the assessee wholly or partly for charitable purposes or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes. Section 2[24][iia] of the Act, however has to be read with section 12 of the Act. Further, section 11[1][d] also has to be taken into account in this regard to decide whether every donation received by a trust is income in its hands. Section 12 of the Act contains an exclusionary provision which exempts from treatment as income any donation made with a specific direction what is shall form part of the corpus of the trust. The words "not being contributions made with specific direction that they shall form part of the corpus of the trust or institution" appearing in the parenthesis in section 12 of the Act clearly exempt corpus donations made to a trust or institution.

[viii] It is further submitted that the provisions of section 11[1][d] of the Act also exempts corpus donations. Thu, the combined reading of sections 2[24][iia], 11[1][d] and 12 of the Act makes it clear that donations or contributions received by a trust or institution is though income in the hands of the trust

26 ITA Nos.1761-1766/Bang/2018 M/s.Bandanthamma Mathu Kalamma Trust.

or institution, yet by virtue of the exclusionary provisions contained in section 12 of the Act and also in view of the provisions of section 11[1][d] of the Act, corpus donations made with a specific direction or purpose that it shall form part of the corpus of the trust or institution is kept out of the purview of "income". Thus the legal position is that the donations or contributions received by a trust or institution constitutes income but corpus donations made with specific directions will not be treated as income of the Trust or institution. The appellant places its reliance on the Hon'ble Co-Ordinate Bench of Bangalore Tribunal decision in the case of St. Ann's Home for Aged Vs. ITO, reported in 10 TTJ 144.

[ix] It is submitted that the voluntary contributions received for a specific purpose cannot be regarded as income, as they do not fall within the ambit of the provisions of section 2[24][iia] of the Act. It is submitted that the principles relating to capital versus revenue have to be considered and the capital receipts cannot be treated as income, irrespective of the fact that whether the assessee is a Trust registered under the provisions of section 12AA of the Act. It is submitted further that the amount received from the devotees of the appellant towards "construction of temple and Samudaya Bhavan" and the said amounts received by the appellant was a tied up grant or an amount received for a specific purpose as being capital in nature.

[x] The Hon'ble Jurisdictional Co-Ordinate Bench of Tribunal in the case of ITO Vs. M/s. Vokkaligara Sangha, in ITA No's 281 to 285/Bang/2014, order dated 14/08/2015, wherein, in that case the assessee did not had registration under section 12AA of the Act for the Assessment Years 2005-06 to 2009-10, and the assessee in that case had received certain donations

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specifically for the purpose of construction of Kalyana Mantapa, which were credited to the Building Fund in the Balance Sheet, treating the said amounts as capital receipts and not as income by crediting the profit arid loss account and claimed exempt from taxation, even though the income of the assessee was not eligible for exemption as it did not had the benefit of registration under section 12A of the Act for the said assessment years. In that view of the matter the learned assessing officer initiated proceedings under section 147 of the Act to bring to tax income of the assessee that had escaped assessment for the assessment years 2005-06 to 2009-10. The assessing officer completed the assessment for the said assessment years by passing an order of assessment under section 143[3] r.w.s. 147 of the act, wherein the assessing officer rejected the assessee's contentions that the voluntary contributions received was not income and held the same as liable to be treated as income and bought the same to tax accordingly. The learned CIT[A] allowed the appeals preferred by the assessee and held that the voluntary contributions received for the specific purposes does not fall within the definition of income under section 2[24][iia] of the Act. That being aggrieved by the order of the learned CIT[A] the department preferred appeal before this Hon'ble Tribunal and the Hon'ble Tribunal vide its order dated 14/08/2015, held as under at para 5.3.4 & 5.3.5 at page 13 of the said order. "5.3.4.1n coming to the aforesaid conclusion the Hyderabad Bench of the ITAT has also relied upon the decisions of the ITAT, Delhi Bench in the case of Smt. Basanthi Devi (supra) and Sri Charon Lal Garg Education Trust (sura) and in the case of Gaudiya Granth Anved Trust (supra) wherein similar issue raised has been considered by both the Delhi and Agra

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Benches of the 1TAT, We also find that the Hon'ble Delhi High Court in the case of Basanti Devi Et Sri Chakhan Lal Garg Education Trust vide its order in ITA no.927/09 dt. 23.9.2009 has also affirmed the view taken by the Hon'ble ITAT in holding that corpus donation cannot be regarded as income under section 2(24)(iia) of the Act. 5.3.5. Following the above decisions of the Tribunal (supra), relied upon by the assessee, we hold that voluntary contributions received for a specific purpose cannot be regarded as income under section 2(24)(iia) of the Act since they are capital receipts and tied up grants for specific purposes".

[xi] It is submitted that the above order of the Hon'ble Co-Ordinate Bench decision of this Hon'ble tribunal is squarely applicable even to the facts of the present case of the appellant. In the instant case also the amounts contributed by the devotees to the "construction of temple and Samudaya Bhavan" is towards specific purpose. Hence, the appellant treated the said tied up grants or voluntary contributions received by its devotees for a specific purpose amounts to capital receipts and consequently the assessee treated the same as Corpus in its balance sheet without crediting the same to its income and expenditure account. In the humble opinion of the appellant the facts are identical to that of the case of ITO Vs. Ws. Vokkaligara Sangha, in ITA No's 281 to 285/Bang/2014, order dated 14/08/2015, and in view of the same the appellant humbly pray that your Honour be pleased to hold that the voluntary contributions received by the assessee from its devotees towards a specific purpose is capital

29 ITA Nos.1761-1766/Bang/2018 M/s.Bandanthamma Mathu Kalamma Trust.

receipts and do not constitute income and consequently the additions made by the learned assessing officer be deleted, for the advancement of substantial cause of justice.

[xii] The appellant also places reliance on the parity of reasoning of the decision of the Hon'ble Jurisdictional Tribunal decision in the case of Vishwabharti Education Society, in ITA No. 624/Bang/2014 and C.O. No. 16/Bang/2016, order dated 18/11/2016. The relevant portion of the said order is at para 10 at pages 21 to 22, which may kindly be considered by this Hon'ble Tribunal.

[xiii]. The appellant placed reliance on the following decisions in support of its case, which were considered by this Hon'ble Tribunal in the case of ITO Vs. M/s. Vokkaligara Sangha, in ITA No's 281 to 285/Bang/ 2014, order dated 14/08/2015: J.B. Educational Society Vs. ACIT, 159 TTJ 234 [a]. [Hyd. Tribunal]; Society for Integrated Development in Urban & [b]. Rural Areas, 90 ITD 493 [Hyd. Tribunal]; Nirmal Agricultural Society, 71 ITD 152 [Hyd. [c]. Tribunal];

[xiv]. In view of the above submissions the appellant humbly pray and submit that the corpus collections received by the appellant which has been treated as income by the learned assessing officer for the assessment years 2008-09 to 2013-14 and erroneously confirmed by the learned Commissioner of Income-tax [Appeals], requires to be deleted for the advancement of substantial cause of justice.

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3.13 Levy of Interest Under Section-234 A and 234 B of the Act:

[i], The levy of interest under section 234 A & 234 B are not in accordance with law as the rate, period and quantum on which interest has been levied is not discernible. The levy is not in accordance with law and further the appellant was not given the basis and method of calculation of interest under section 234 A and 234 B of the Act for the purpose of verification of the correctness of the charge of interest.

[ii]. It is submitted that it seems that the learned assessing officer has levied interest under section 234 B of the Act to the entire amounts determined by the learned assessing officer in the order of assessment. The learned assessing officer ought to have levied interest if at all any interest is to be levied under section 234 B of the Act as per the provisions of section 234 B [3] of the Act on such increased amount on the basis of reassessment.

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"[(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made:] [Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.]" 5.1 It is also relevant to reproduce the explanatory notes to the provisions of Finance (No.2) Act, 2014 as given in CBDT Circular No.01/2015 dated 21.01.2015 in reference F.No. 142/13/2014-TPL, which read as follows:-

"Para 8.2 Non-application of registration for the period prior to the year of registration caused genuine hardship to charitable organizations. Due to absence of

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registration, tax liability is fastened even though they may otherwise be eligible for exemption and fulfill other substantive conditions. However, the power of condonation of delay in seeking registration was not available." 5.2 This clearly goes to prove that the first proviso to section 12A(2) was brought in the statute only as a retrospective effect with a view not to affect genuine charitable trusts and societies carrying on genuine charitable objects in the earlier years and substantive conditions stipulated in section 11 to 13 have been duly fulfilled by the said trust. The benefit of retrospective application alone could be the intention of the legislature and this point is further strengthened by the Explanatory Notes to Finance (No.2) Act, 2014 issued by the Central Board of Direct Taxes vide its Circular No. 01/2015 dated 21.1.2015. Apparently, the statute provides that registration once granted in subsequent year, the benefit of the same has to be applied in the earlier assessment years for which assessment proceedings are pending before the Id. A.O., unless the registration granted earlier is cancelled or refused for specific reasons. The statute also goes on to provide that no action u/s147 could be taken by the AO merely for non- registration of trust for earlier years.

5.3 The explanatory Memorandum to Finance (No.2) Bill, 2014, which sought to amend section 12A explains the objects and reasons for making such amendments. The explanation makes it clear that it was in order to provide relief to such trusts in respect of which, due to absence of registration u/s

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12AA tax liability got attached though otherwise they were eligible for exemption by fulfilling other substantive conditions that the amendment was brought in. That being so, denying such benefit to a trust like the assessee who had obtained registration u/s 12AA during the pendency of the appeals filed against the orders of the assessing authority, by narrowly interpreting the term, 'pending before the assessing officer' so as to exclude its pendency before the appellate authority, will be doing violence to the provisions of the Statute and, as such, liable to be interfered with.

5.4 Moreover, under the Scheme of the Act, sections 11 and 12 are substantive provisions which provide for exemptions to a religious or charitable trust. Sections 12A and 12AA detail the procedural requirements for making an application to claim exemptions under sections 11 and 12 by the assessee and the grant or rejection of such application by the commissioner. Thus, in my view, sections 12A and 12AA are only procedural in nature. Hence, it is not the registration u/s 12AA by itself that offers immunity from taxation. A receipt whether it is revenue or capital in nature is to be decided at the assessment stage. Being procedural in nature, in our view, liberal interpretation will give effect to the intention of the amendment, thereby removing the hardship in genuine cases like the present assessee under consideration.

5.5 We are also supported by the order of Kolkata Bench of ITAT in case of Sree Sree Ramkrishna Samity vs. DCIT (ITA No. 1680/2012, order dated 09.10.2015) where it was held that

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amendment to Section 12A w.e.f. 01.10.2014 is retrospective. The relevant funding of the Hon'ble Kolkata Bench in case of Sree Sree Ramkrishna Samity vs. DCIT (supra) read as follows:

"6.10. We hold that it is an established position in law that a proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole and accordingly the said insertion of first proviso to section 12A(2) of the Act with effect from 1.10.2014 should be read as retrospective in operation with effect from the date when the condition of eligibility for exemption under section 11 & 12 as mentioned in section 12A provided for registration u/s.12AA as a pre-condition for applicability of section 12A." 5.6 Further, the Kolkata Tribunal observed as under:

"6.11. We also hold that though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quam pereat, i.e to make it workable rather than redundant. Applying this legal maxim, it would be just and fair to hold that the amendment in section 12A is brought in the statute to confer benefit of exemption u/s 11 of the Act on the genuine trusts which had not changed its objectives and had carried on the same charitable objects in the past as well as in the current year based on which the registration u/s 12AA is granted by the DIT (Exemptions).”

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5.7. In view of the above discussion, as per second proviso to section 12A(2), no action u/s 147 shall be taken by the Assessing Officer in case of a trust for any assessment year preceding the aforesaid assessment year only for non- registration of such trust for the said assessment year. In the present case, since the assessee has been granted registration u/s 12A of the Act on 05.08.2014 for the assessment year 2015-2016, it is not possible to reopen the assessment earlier to that on non-registration of such trust and bringing the corpus donation into tax, which was received for specific purposes. Since we have allowed the legal issue in favour of the assessee, we are refrained from going into any other grounds raised by the assessee before us in these appeals.

Order pronounced on this 26th day of February, 2020. Sd/- Sd/- (Smt.Beena Pillai) (Chandra Poojari) JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore ; Dated : 26th February, 2020. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)-Mysuru. 4. The Pr.CIT-Mysuru. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore