DEPUTY COMMISSIONER (EXEMPTIONS), CHENNAI, INCOME TAX vs. HINDUSTAN INSTITUTE OF TECHNOLOGY AND SCIENCE, CHENNAI

The brief facts of the case that the Respondent is a deemed to be a university having campus at Padur, near Chennai and was notified u/s.3(1) of the UGC Act 1961 and constituted as a society registered on 28.03.2007 under the TN Societies Registration Act 1975. Earlier to the UGC notification, the Padur campus was an Engineering college named Hindustan College of Engineering (HCE) which society was sponsoring the university. The assessee is approved and registered u/s 12AA of the IT Act, 1961. The assessee filed its return of income within the due date as stipulated u/s 139(1) of the IT Act, 1961 for the impugned year on 30/09/2009 claiming exemption u/s.11 of Income tax Act, 1961. The case was selected for scrutiny and the original assessment was completed u/s 143(3) of the IT Act 1961 on 24/11/2011 accepting the returned income and the claim of exemption u/s.11. This was after due enquiry and verification of records and books, the return of income and appreciation of the conditions for the claim of exemption u/s.11 of the IT Act, 1961. After considering the accumulation of income based upon the Form 10 filed along with annexure to the extent of Rs.2,24,00,000/- the Ld. AO clearly gives the findings in the Assessment Order in Paragraph 3 that the request of the Assessee is in order. Subsequently a notice u/s.148 dated 27/03/2014 was issued. In reply to which the Assessee filed a letter dated 15th April 2014, requesting to treat the return filed on 30/09/2009 as the return in compliance to the Notice u/s.148 while also stated therein that it had fully and truly furnished all the materials at the time of scrutiny proceedings and questioned the Jurisdiction for reopening the impugned assessment also seeking the reasons as recorded.

The Ld. AO replied to the above by his communication dated 23/09/2014 stating three reasons for issue of notice u/s.148 as under: I. Additions to fixed assets. II. Shortfall in application. III. Accumulation not specified in Form 10.

Aggrieved against the addition, the respondent filed the appeal against the order passed by the Ld. AO and in the appeal, proceedings filed the written submissions before the NFAC, Delhi in support of the grounds raised in the Appeal before the CIT(A) along with copies of Paper Book. The submissions made and adjudicated in first appeal are reproduced hereunder: It was submitted that the conclusion of the Ld. AO is erroneous and that the Assessee had correctly claimed the eligible exemption u/s.11. The Ld.AO also erred in law in reopening the assessment on issues already considered in the original assessment. It is submitted that first proviso to section 147 of the Act is relevant which is reproduced as follows: “Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the Assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:” From the aforesaid proviso to section 147 of the Act, it is clear that where an assessment under section 143(3) or under section 147 of the Act has been made for the relevant assessment year (AY), no action shall be taken under section 147 of the Act, after the expiry of four years from the end of the relevant AY, unless any income chargeable to tax has escaped assessment for such AY by reason of failure on the part of the Assessee to make a return under section 139 or in response to notice under section 142(1) or section 148 or to disclose fully and truly all material facts necessary for the assessment for that AY. It may be seen that the aforesaid first proviso places severe restriction on the power of the AO to reopen an assessment order passed under section 143 / 147, after the expiry of four years from the end of the relevant AY, except in cases where Assessee has failed to file a return of income under section 139, 142(1) or under section 148 and has failed to disclose fully and truly all material facts necessary for the assessment for that AY. It is submitted that from the letter dt. 23/09/2014 of the Ld. AO that it is clear that the reasons furnished in the above referred letter under section 148(2) of the Act, are based on the documents which the Assessee Society had already furnished and were looked into the original assessment. There was nothing new that had come to the AO. It was only a unilateral different analysis of the facts on record which was done and the conclusion was drawn from the revised analysis that income had escaped assessment. Therefore, as there was no failure on the part of the Assessee to make a true and full disclosure of the relevant facts, such reopening would not be permissible after the expiry of four years in view of the first proviso to section 147 of the Act. Hence the assessment lacks jurisdiction and is void ab initio. It is further submitted that as per the reasons recorded, it emerges that there is no allegation that the Assessee Society had failed to disclose material facts necessary for assessment, all that was alleged is reconsideration of the figures from the available facts and materials. Moreover, the return of income and the material placed on record by the Assessee together with the return would make it abundantly clear that the Assessee had set forth the basis of its claim with all materials and there was no suppression of material facts. The fundamental condition for reopening the assessment beyond a period of four years had thus not been fulfilled. Therefore, the notice is liable to be dropped and assessment annulled. It is also submitted that the impugned notice under section 148 was issued merely on account of change of opinion as no fresh tangible material unearthed based on which notice is issued. As there is no new material referred to in the reasons recorded as they are only pointing to Financial Statement filed and which were looked into and reviewed in the Regular Assessment proceedings earlier. The Full bench order of the Hon’ble ITAT, New Delhi , reported in 348 ITR 485 in the case of CIT v Usha International Ltd, has decided on the ratio wherein re assessment proceedings cannot be reopened u/s 147 even within four years if an Assessee had furnished full and true particulars at the time of original assessment, which in the instant case, the findings in the original assessment order dt. 24/11/2011 establishes. Thus, it is humbly prayed that the entire reassessment proceedings are invalid as the Assessee had filed the same details filed in original proceedings and Notice u/s.148 amounts to mere change of opinion. The Assessee relies on the ratio of the decision reported in CIT v. Kelvinator of India reported in 320 ITR 561 Board’s Circular No.549, dt.31.10.1989 [182 ITR (St) 1, 29], clarifies that a mere change of opinion cannot form the basis for reopening the completed assessment. The aforesaid views are further strengthened by the following legal precedents:

The Ld. DR assailing the action of the Ld.CIT (A), NFAC, Delhi, stated that the impugned order is erroneous for the reason that the Ld.CIT(A) failed in allowing the excess claim of capital expenditure even though it was not matching with audited books of accounts of the assessee. The Ld.DR further argued that the Ld.CIT(A) failed to give opportunity to Assessing Officer before admitting resolution as it was additional evidence not presented before the Assessing Officer during scrutiny proceedings dated 22/09/2009. The Ld.AR submitted that the ld.CIT(A) erred in concluding that all the records were already present with AO and that this is a case of change of opinion and failed to appreciate that asset received on division from HCE was never 143(3) proceeding and hence re- opening is valid based on new material evidence. Therefore, he stated that the order of the Ld.CIT(A) is erroneous and needs to be set aside and restore the AO’s order U/s.143(3) r.w.s. 147 of the Act.

Per contra, the Ld. AR of the assessee submitted his arguments to the grounds raised in the appeal by the department.

This ground of revenue is ill-conceived there is no excess claim of expenditure, incorrect to say it was not matching with the audited books of accounts of the assessee. In this connection, the Ld.AR submits that the audited annual accounts giving details of assets addition made during the year ( Paper Book Page Nos.1 to 22). These details were given in the original scrutiny proceedings and also given by letter dt 09/02/2015 along with the reference to the Audited Financial statement in the re-assessment proceedings. However, in the impugned reassessment the Ld.AO did not make any findings contrary to the facts & evidence brought out in Respondents representation in their letter dt 09/02/20215 (Enclosed in Pages 37-46 of PB) in making additions except repeating the reasons and on his unilateral conclusions. The findings of the then Ld.AO in the original assessment is clear.

Further the Ld.AR submitted that the Ld. DR has wrongly stated in the grounds of appeal that the resolution passed in Form 10 dt.22/09/2009 was not presented before the AO. In this connection, the Ld.AR submitted that these were part of assessment record from the day the Return of income was filed and clearly mentioned in the original Assessment Order u/s 143(3). It is evident that, in the impugned re-assessment the only ground taken by the Ld.AO is that the purpose of accumulation is not specified in Form No.10 and hence the accumulation u/s 11(2) was not allowed. The Ld.AR stated that there is no findings that Form No.10 along with the resolution was not filed or was not available on record.

The Ld. AR summirsed that it is clear from the facts on record and pointed out in the submissions before the Ld.AO dt 09/02/2015 that all the records were already available in the original assessment proceedings and the reasons recorded also indicate so and hence is evident that the impugned Assessment order is on account of change of opinion which is in conceived.

The details of additions to capital expenditure was already on record based on which the AO had allowed the application towards capital expenditure at Rs.6,16,57,081/-. This was explained with reference to the financial statements filed in the impugned re- assessment by submission dt. 09/02/2015 and from the reading of the findings of the Ld. AO in the impugned assessment order, it is evident that Ld. AO did not retract the factual submission noted supra and neither brought on record any mistake in the submission dtd.09/02/2015 of the assessee.

The Ld.AR argued that after seeking a remand report which was submitted by Ld.AO on 08/07/2019 brought out in para 4 page 10 of the Ld.CIT(A) order and on the appreciation of facts, evidences and submissions of the assessee, the Ld.CIT(A), NFAC decided the appeal by quashing the re-assessment. The impugned assessment order which was quashed by the CIT(A), NFAC, was thus on valid, reasonable and substantive grounds of merit and in law. Therefore, the assessee humbly and respectfully prays to uphold the impugned order in appeal and dismiss the appeal of the revenue.

We have heard the rival contentions, orders of lower authorities and the relevant materials on record. The assessee is a charitable institution registered U/s.12AA of the Act and enjoying the exemption U/s.11 of the Act. We note that the case was selected for scrutiny for the impugned A.Y. 2009-10 and the original assessment was 143(3) of the IT Act 1961 on 24/11/2011 accepting the returned income and the claim of exemption u/s 11. This was after due enquiry and verification of records and books, the return of income and appreciation of the conditions for the claim of exemption u/s 11 of the IT Act, 1961. After considering the accumulation of income based upon the Form 10 filed along with annexure to the extent of Rs.2,24,00,000/- the Ld. AO clearly gives the findings in the Assessment Order in Paragraph 3 that the request of the assessee is in order. Further, the AO has allowed the accumulation of income to the tune of Rs.2.24 Crores by allowing reduction in the computation confirmed that the form 10 has been filed by the assesee. The extract of computation of Income as per Section 143(3) is given below: Gross receipts Rs.22,47,53,179 85% thereof Rs.19,10,40,202 Application of Income 1. Capital Rs. 6,16,57,081 2. Revenue Rs.10,81,87,832 ----------------------- Rs.16,98,44,913 ------------------------ Rs. 2,11,95,289 Less: Form 10 filed Rs. 2,24,00,000 -------------------------- Total income Nil Tax there on Nil TDS Rs. 44,067 Refundable Rs. 44,067 Add: Int u/s. 244A Rs. 6,615 ---------------------- Total refund Rs. 50,682 ------------------------ 15. Subsequently, the AO has reopened the assessment by issuing notice U/s.148 for the reasons, which have already been dealt in the original assessment order U/s.143(3) dated 24/11/2011: I. Additions to fixed assets. II. Shortfall in application. III. Accumulation not specified in Form 10.

According the ld.AR, all these three reasons given by the AO for reopening of assessment and hence objected to the same by letter filed on 09/02/2015 pointing out with reference to the facts and materials on record that the three issues were supported with facts, enquired and looked into in the regular and original assessment and were accepted (Paper book Page Nos. 37 to 46). We note that the AO has passed an order U/s.143(3) r.w.s. 147 of the Act, without considering the reply filed by the Assessee furnishing the details sought for reassessment (PB page Nos.37 to 41) completed Assessment on 31/03/2015 by bringing to tax income of Rs 4,23,54,535/- on account of the following: a) Not allowing the accumulation of income claimed in Form no. 10 set apart U/s 11(2) of the Income Tax Act alleging accumulation not specified. Rs.2,24,00,000 b) Shortfall in application towards Capital Expenditure alleging as excess application Rs.1,99,54,535

On perusal of the orders of the AO in original assessment, Reassessment and appellate order Ld.CIT(A), it is observed that, all the three issues were subject matter of original assessment for the following reasons: “In the present case, it has been noticed that the appellant has submitted the entire material required for the assessment during the course of original assessment proceedings completed on 24.11.2011. Thereafter, the case was reopened on the same materials which was available before the AO. From the reasons recorded for reopening of the assessment, it is seen that the AO perused the material available on record which is evident from the notings that "On perusal of the Annexure to Return of Income i.e. "Statement of income showing the application of income and Donation" the assessee has furnished the sources of income, application of income, additions to fixed assets and short fall in application of income. The details of statement are furnished as under: ...... ". The AO also referred to Form No. 10 and has stated that "The purpose of accumulation is not mentioned neither in the resolution passed by the trust not in Form No. 10.° The Annexure to Form No. 10 is the Extract of the Resolution of the Governing Body / Members / Trustees in the Meeting held on 22nd September 2009 at the Registered Office of Society. It states as under "RESOLVED that in pursuance of the on going requirement to incur vast expenditure in the development of the infrastructure in the University Campus, Padur, an amount of Rs. Two crore and twenty four lakhs be earmarked from the Income of the Society in the Financial year ending 31st March 2009 relevant to Income tax Assessment year 2009-2010." "Further RESOLVED that the same amount is accumulated and set apart to be utilized on or before 31.03.2014, for the purposes of Construction buildings on going and in future for expansion and improvement of existing facilities at the University campus of the Society at Padur Form No. 10 and the resolution which is annexure to form no. 10 passed by the trust provided by the appellant during the course of original assessment proceedings.”

Therefore, in the present case it is relevant to consider the dictum given by the Hon’ble Apex court in the case of CIT Vs.Kelvinator India Ltd (320 ITR 561), wherein it has been held that “Assessing officer has power to re-assess but not review”.

In the result the appeal of the Revenue is dismissed. Order pronounced on 04th September, 2024.