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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R Per Dr. A.L. Saini, AM:
The captioned appeal filed by the assessee, pertaining to assessment year 2009-10 is directed against the order passed by the Commissioner of Income Tax (Appeal)-25, Kolkata, in appeal No. 16/CIT(A)-25/Kol/2016-17, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) /147 of the Income Tax Act, 1961 (in short the ‘Act’) dated 28/12/2016.
The grounds of appeal raised by the assessee are as follows:
1. That, the Ld.A.O. erred and the C.I.T.(A) wrongly held with material irregularity the initiation of proceeding u/s.148 for reopening the assessment u/s 147 of the Act as valid without considering that the very basis of issuing notice u/s.148 vis-a-vis reasons recorded was on wrong assumption of the fact that the appellant-trust deposited/ invested money of Rs.59,42,709/- with its specified person M/s.NDPPL, whereas as per audited books of account and ledger copy of account of NDPPL the said sum was repayment of interest-free advance taken from NDPPL.
B.P. Poddar Foundation for Education Assessment Year:2009-10 2. That, the Ld. C.I.T.(A) further erred in having upheld the re-opening of the completed assessment made u/s. 143(3) on his alleged satisfaction that money was reflecting in the opening of Poddar Institute of Management & Technology (sister unit) without reflecting the same by name in the books of the appellant in spite of the admitted fact that the sister unit is assessed jointly with the appellant-trust and as per his admission the same is reflected in the consolidated account of the appellant.
3. That, the Ld. C.I.T.(A) further erred in justifying the reopening of the assessment by assuming the refund of advance of Rs.59,42,709/-by the appellant to NDPPL as interest for the purpose of application of provisions of sec. 13(1 )(d) in spite of the fact that as per ledger copy of account of NDPPL, out of opening credit balance of Rs.77,42,709/- in the books of sister unit, repayment of Rs.59,42,709/- was made by the appellant itself and the balance outstanding was also returned by the sister unit towards squaring up the account.
That, the ld. CIT(A) further erred in having upheld the reopening of the assessment made by the successor A.O. on a mere change of opinion on the alleged ground that fresh information about M/s NDPPL having existed at the same address of the appellant was found during survey u/s 133A in spite of the fact that past assessments had been completed on the same set of facts and the predecessor A.O. for the year under appeal passed order u/s 143(3) following the accepted consistency in the matter.
That, the Ld. C.I.T.(A) erred in having upheld the reopeneing of concluded assessment on the ground that as per survey U/S.133A Mr. Aum Kr. Poddar, trustee, was a shareholder of M/s. NDPPL when he himself in his appellate order has held that the total shareholding of the said trustee and his family members was 16.5% as against 20% decided by the Hon’ble ITAT, Kolkata in the case of Hooghly Engg. & Technology College Society (ITA No.l579/Kol/2016 dated 04/.07.2018) and further the trustees and directors are not common and hence confirmation of reopening of assessment is against the settled facts and bad in law.
That, without any prejudice to the above grounds, the Ld. C.I.T.(A) on mere surmise and conjecture has upheld the addition of Rs.37,50,000/- u/s.69A r.w.s. 115BBE of the Act solely on the basis of statements of some guaredians obtained at the back of the appellant about their giving capitation fees in cash to some persons in the management when they could not even mention or recall the name of the concerned person to whom the money was claimed to have paid or any receipt thereof was produced.
That, therefore, when the allegation of taking cash from students in the guise of capitation fees has not been substantiated by the statements taken u/s.131 by any tangible evidence in that regard, the denial of claim of exemption u/s 11 on the allegation of charging extra money outside the books on conjecture, suspicion and surmises is liable to be quashed.
8. That, therefore, as the order of the Ld. C.I.T.(A) upholding the reopening of assessment u/s.148 r.w.s. 147 of the Act suffers from illegality and devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for.
9. That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds.” Page | 2
B.P. Poddar Foundation for Education Assessment Year:2009-10
The ld. Counsel for the assessee informs the Bench that the assessee does not want to press ground nos. 1 and 2 therefore, we dismiss them as not pressed.
4. Ground nos. 3 to 8 relate to reopening of assessment u/s 147/148 of the Act wherein the solitary grievance of the assessee is that addition of Rs.59,42,709/-, made in the assessment order u/s. 143(3)/l47 of the Act, dated 28.12.2016 on the basis of the reasons recorded was deleted by Ld. CIT(A)-25, Kolkata dated 30.07.2019, therefore, the other additions made in the said reassessment order which were not part of the reasons recorded for reopening the assessment are not sustainable in the eye of law.
5.The facts of the case which can be stated quite shortly are as follows: The assessee filed its return of income for the A.Y. 2009-10 on 30-09-2009 declaring total income to the tune of Rs. NIL. The return of income was processed u/s 143(1) of the Income Tax Act 1961 (hereinafter referred to as ‘Act’). A survey u/s 133A of the Act was conducted by the Department and it was found that the assessee had deposited money with Nissan Developers & Properties Pvt. Ltd.(NDPPL) for an amount of Rs. 59,42,709/-. The AO treated this NDPPL company as a specified person of the assessee. Therefore, the AO was of the view that the assessee is hit by both sections 13(1)(c)(ii) and 13(l)(d) of the Income Tax Act, 1961. On the above ground case was re-opened for re-assessment u/s 147 of the Act.
6. On appeal by the assessee, the ld CIT(A) deleted the addition of Rs. 59,42,709/-. However, the ld CIT(A) has confirmed the following other additions made by AO, which were not part of the reasons recorded by the assessing officer:
(i). An amount of Rs.3,64,97,000/- invested with Poddar Projects Ltd. (ii).Fee amounting to Rs.37,50,000/- received from students in cash.
(iii). Corpus Fund Rs.9,95,000/- (iv).Development Fund Rs.1,07,74,500/-.
B.P. Poddar Foundation for Education Assessment Year:2009-10 7. During the appellate stage, the assessee has also challenged the validity of reopening of assessment under section 147 of the Act stating that reassessment proceedings are bad in law. However, the ld CIT(A) held that reassessment proceedings initiated by the assessing officer was valid. In this regard, the main observations of the ld CIT(A) (to the extent applicable for our discussions) is reproduced below:
5.1.9….At the appellate stage the appellant was challenging as the substantiality of reasons recorded by the AO. The substantiality of reasons can not be challenged at reopening stage, what was required for reopening the case was the bonafide belief regarding violation of 11(5) read with section 13(1)(d) and 13(1)(c) and new information. These two conditions were present before the AO due to result of survey u/s 133A conducted at the premises of the appellant. Therefore, I hold that the action of the AO for reopening the case is valid, and the ground of appeal on this issue is dismissed.
This way, ld CIT(A) deleted the addition of Rs.59,42,709/-, (this is the amount the assessee had deposited with Nissan Developers & Properties Pvt. Ltd.(NDPPL) for which the AO has reopened the assessment under section 147 of the Act). However, the AO made other additions, which were not part of the reasons recorded by the assessing officer, as noted by us above in para No.6 of this order.
Aggrieved by the order of ld CIT(A), the assessee is in appeal before us.
Shri S.K. Tulsiyan, ld Counsel for the assesse vehemently argued before the Bench that in assessee`s case, the assessment for A.Y. 2009-10 was completed u/s. 143(3)/11 of the Act on 01/03.2011 and after a gap of five years, notice u/s 148 of the Act was issued on 22.03.2016 to reopen the assessment u/s 147 of the Act. The only reason for issuing the notice under section 148 of the Act as per reasons recorded on dated 17.08.2016 was that income of Rs.59,42,709/- had escaped assessment for having deposited money with the specified person M/s. Nissan Developers &Properties Pvt. Ltd. The said addition made in the assessment order u/s. 143(3)/l47 of the Act dated 28.12.2016,on the basis of the above reasons recorded was deleted by the Ld. C.I.T.(A)-25, Kolkata vide order dated 30.07.2019. In that view of the matter, the other additions made in the said reassessment order which were not part of the reasons recorded for reopening the assessment are not sustainable in the eyes of law and therefore, the reassessment order made by AO under section 147/148 of the Act is liable to be cancelled.
B.P. Poddar Foundation for Education Assessment Year:2009-10 10. On the other hand, the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity.
11.We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. First of all, let us examine the reasons recorded by the assessing officer, which reads as follows:
“A survey u/s 133A of the Income TaxAct,1961 was conducted on in the premises of the assessee and copies of the accounts were impounded. From there the following are seen: The assessee has deposited money with Nissan Developers &Properties Pvt. Ltd. for an amount of Rs.59,42,709/-. This company is a specified person of the assessee. Therefore the assessee is hit by both section 13(l)(c)(ii) and 13(l)(d). This amount is to be taxed separately at Maximum Marginal Rate vide proviso to section 164(2) of the Income Tax Act, 1961. A copy of the ledger folio is attached herewith. In view of all above, the income of Rs.59,42,709/- has escaped assessment. This is the prima facie reason to re-opening the assessment. ”
We note that solitary reason to reopen the assessment is that the assessee had deposited money with Nissan Developers &Properties Pvt. Ltd. for an amount of Rs.59,42,709/- and this company is a specified person of the assessee, therefore AO was of the view that the assessee has violated the provisions of sections 13(l)(c)(ii) and 13(l)(d) of the Act and hence the said amount is to be taxed separately at Maximum Marginal Rate.
On appeal by the assessee, the ld CIT(A) deleted the said amount of Rs.59,42,709/-, observing the following:
“5.2.6. I have perused the share holding pattern of M/s Nissan Developers & Properties Pvt. Ltd. and it is seen that total equity shares of M/s Nissan Developers & Properties Pvt Ltd. is 2,48,760/-. The share holding in this concern pertaining to Shri Arun Kr. Poddar one of the trustee and its family members are as under:
B.P. Poddar Foundation for Education B.P. Poddar Foundation for Education Assessment Year:2009-10
(Note M/s. Dheeraj Promoters Ltd is not shareholder in case of M/s. Nissan Developers & (Note M/s. Dheeraj Promoters Ltd is not shareholder in case of M/s. Nissan Developers & (Note M/s. Dheeraj Promoters Ltd is not shareholder in case of M/s. Nissan Developers & Properties Pvt Ltd). Properties Pvt Ltd).
5.2.7 Perusal of share holding pattern of the aforesaid persons whose names were found Perusal of share holding pattern of the aforesaid persons whose names were found Perusal of share holding pattern of the aforesaid persons whose names were found as running from same premises as running from same premises during the course of survey who are at a different capacity during the course of survey who are at a different capacity and they are also not trustee but relatives, is totaling at 41260. If 20% of share holding and they are also not trustee but relatives, is totaling at 41260. If 20% of share holding and they are also not trustee but relatives, is totaling at 41260. If 20% of share holding pattern in M/s. Nissan Developers & Properties Pvt Ltd is worked out, it comes to pattern in M/s. Nissan Developers & Properties Pvt Ltd is worked out, it comes to pattern in M/s. Nissan Developers & Properties Pvt Ltd is worked out, it comes to (248760*20%)=49752 No. (248760*20%)=49752 No. of equity shares. The trustees and their family members total of equity shares. The trustees and their family members total share holding as charted above is almost 16.5%. Even after adding entire family members share holding as charted above is almost 16.5%. Even after adding entire family members share holding as charted above is almost 16.5%. Even after adding entire family members mentioned above share holding mentioned above share holding and also known concern of the trustees like Poddar and also known concern of the trustees like Poddar Project Ltd found during Project Ltd found during the course of survey the share holding is only 16.58% in M/s. the course of survey the share holding is only 16.58% in M/s. Nissan Developers & Properties Pvt Ltd, cannot be stated to be having substantial interest Nissan Developers & Properties Pvt Ltd, cannot be stated to be having substantial interest Nissan Developers & Properties Pvt Ltd, cannot be stated to be having substantial interest as per the provision of section 13(3). The issue of as per the provision of section 13(3). The issue of substantial interest has been decided by substantial interest has been decided by the Hon'ble ITAT Kolkata in case of ACIT Vs. Hooghly Engineering & Technology e ITAT Kolkata in case of ACIT Vs. Hooghly Engineering & Technology e ITAT Kolkata in case of ACIT Vs. Hooghly Engineering & Technology College Society, dated 04.07.2018 College Society, ITA No. 1579/Kol/2016, dated 04.07.2018 College Society, ITA No. 1579/Kol/2016, dated 04.07.2018- A.Y. 2010-11 wherein Hon'ble ITAT has observed that if the concerned person is entitled far 20 Hon'ble ITAT has observed that if the concerned person is entitled far 20 Hon'ble ITAT has observed that if the concerned person is entitled far 20% of profits only then it can be held to be having substantial interest and only then the provision of section then it can be held to be having substantial interest and only then the provision of section then it can be held to be having substantial interest and only then the provision of section 13(3) would be applicable.. Thus it is seen that the trustees either individually or through 13(3) would be applicable.. Thus it is seen that the trustees either individually or through 13(3) would be applicable.. Thus it is seen that the trustees either individually or through its relatives, or the concern found during the course its relatives, or the concern found during the course of survey does not held substantial of survey does not held substantial interest in M/s. Nissan Developers & Properties Pvt Ltd as on 31.03.2009. There are total Nissan Developers & Properties Pvt Ltd as on 31.03.2009. There are total Nissan Developers & Properties Pvt Ltd as on 31.03.2009. There are total 38 persons (individual and companies) who are having share holding in the concern and 38 persons (individual and companies) who are having share holding in the concern and 38 persons (individual and companies) who are having share holding in the concern and more over the directors during the financia more over the directors during the financial year 2008-09 are none of the trustee. 09 are none of the trustee. Therefore the concern M/s. Nissan Developers & Properties Pvt Ltd was covered by the the concern M/s. Nissan Developers & Properties Pvt Ltd was covered by the the concern M/s. Nissan Developers & Properties Pvt Ltd was covered by the provision of section 13(3) provision of section 13(3)(c ) .
5.2.8 In this case the assessment folder and survey folder is are perused. It is seen that in 5.2.8 In this case the assessment folder and survey folder is are perused. It is seen that in 5.2.8 In this case the assessment folder and survey folder is are perused. It is seen that in the ledger account of Poddar Foundations for education, the transaction of ledger account e ledger account of Poddar Foundations for education, the transaction of ledger account e ledger account of Poddar Foundations for education, the transaction of ledger account Page | 6
B.P. Poddar Foundation for Education Assessment Year:2009-10 shows that M/s. Nissan Developers & Properties Pvt Ltd has been paid on 29.07.2008, Rs. 5442708.72 through cheque No. 00007 of Yes Bank Ltd current account, against credit balance of M/s. Nissan Developers & Properties Pvt Ltd. This outstanding balance was taken through journal entry from BP Poddar Unit of Management & Technology. The appellant also submitted before AO vide letter dated 20.09.2016 that M/s. BP Poddar Management & Technology a unit of trust has taken interest free advance in earlier years for short term requirement. The opening balance was of Rs. 7742708.72 of M/s. Nissan Developers & Properties Pvt Ltd in the books of institute. Thus it is seen that the payment of Rs.5442708.72 is made for repayment of interest free loan. Therefore the amount advanced to NDPPL cannot be held to be in violation of Sec.l3(l)(d) of the Act, inasmuch as in all the subclauses of clause (d) of sec.13(1), the words are "any funds of the trust or institution invested or deposited". In the case of the appellant, as explained above, the money given to NDPPL was repayment of credit balance not investment with that company for earning any income. That being so, Sec.11(5) can also not be applied for the above reason. Thus the entire facts and circumstances narrated above shows that in case of M/s. Nissan Developers & Properties Pvt Ltd , the trustees and directors are not common. Substantial interest referred in 13(3)(e ) has not been qualified. The payment was made for repayment of outstanding loan of M/s NDPPL taken by the trust and it was not invested with the company for earning any income. Therefore M/s. NDPPL was neither covered in section 13(l)(d) nor it was covered in section 11(5). Therefore provision of section 13 was not applicable in terms of advances given to NDPPL. Hence section 164(2) was not applicable. Therefore the action of the AO on this account is not sustainable. The ground on this issue is allowed.”
We note that it is abundantly clear that the addition of Rs.59,42,709/- made in the assessment order u/s. 143(3)/l47 of the Act dated 28.12.2016,on the basis of the above reasons recorded was deleted by the Ld. C.I.T.(A), vide order dated 30.07.2019. In that view of the matter, the other additions made in the said reassessment order which were not part of the reasons recorded for reopening the assessment are not sustainable in the eyes of law even after insertion of Explanation 3 to section 147 of the Act by Finance Act, 2009.
We note that AO may assess or reassess the income in respect of any issue which comes to his notice subsequently in the course of the proceedings though the reasons for such issue were not included in the notice; however, if after issuing a notice under section 148 of the Act, the AO accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income, for that we rely on the judgment of Hon`ble Bombay High Court in the case of Jet Airways (I) limited 331 ITR 236 (Bom), wherein it was held as follows:
B.P. Poddar Foundation for Education Assessment Year:2009-10 “21. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under s. 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the AO could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Expln. 3 by the Finance Act (No. 2) of 2009. However, Expln. 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of s.
147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Sec. 147 has this effect that the AO has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under s. 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.”
This view has also been ventilated by the Hon`ble Delhi High Court in the case of Ranbaxy Laboratories Ltd,336 ITR 136 (Del), wherein it was held as follows:
18. We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of Jaganmohan Rao (supra) [sic—Jet Airways (I) Ltd. (supra)]. We may also note that the heading of s. 147 is Income escaping assessment" and that of s. 148 "Issue of notice where income escaped assessment". Sec. 148 is supplementary and complimentary to s.
Sub- s. (2) of s. 148 mandates reasons for issuance of notice by the AO and sub-s. (1) thereof mandates service of notice to the assessee before the AO proceeds to assess, reassess or recompute escaped income. Sec. 147 mandates recording of reasons to believe by the AO that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Expln. 3 if during the course of these proceedings the AO comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the AO that on assuming jurisdiction under s. 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before AO during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under s. 148.”
B.P. Poddar Foundation for Education Assessment Year:2009-10 We note that in the assessee`s case under consideration, the assessment for A.Y. 2009-10 was completed u/s. 143(3)/11 of the Act on 01/03/2011. A notice under section 148 of the Act was issued on 22.03.2016 to reopen the assessment u/s. 147 of the Act. The only reason for issuing the said 148 notice as per Reasons Recorded dated 17.08.2016 was that income of Rs.59,42,709/- has escaped assessment for having deposited money with the specified person M/s. Nissan Developers &Properties Pvt. Ltd. We note that addition of Rs. 59,42,709/- was deleted by ld CIT(A) and since AO has not issued a fresh notice under section 148 of the Act to reassess the other income therefore, the reassessment proceedings initiated by the assessing officer to reassess other income ( as noted by us above) is null and void in the eye of law, hence we quash the reassessment proceedings under section 147/148 of the Act.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 13.11.2019