ANANDA SOCIAL AND EDUCATIONAL TRUST,BANGALORE vs. DY.DIT, BANGALORE

PER BENCH :

These six appeals by the assessee are directed against the composite order dated 5/5/2014 of Commissioner of Income-tax (Appeals) – VI for the assessment year 1996-97 to 2001-02.

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I. Denial of opportunity/violation of principle of natural justice: 1. The CIT(A) erred in confirming that no adequate opportunity was granted by the AO even though there is no time limit to give effect to the Hon’ble High Court’s order. 2. The CIT(A) is not correct in confirming the action of the AO with respect to: a. Not providing the reason for reopening the assessment which is against the direction of the Hon’ble High Court of Karnataka, the same was not provided to the appellant during the original assessment. b. Not permitted the appellant the opportunity for inspection of records, though the appellant made request in writing. c. Not providing the copy of the report of alleged survey conducted on 6.3.2002 as stated by the AO and later on termed as survey/enquiry by the CIT(A).

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d. Not providing the proof of service of notice u/s 148 and u/s 143(2) to the appellant. II. Denial of exemption u/s 10(22) of the Act : 1. The CIT(A) failed to appreciate that when there is excess application as per return of income filed the appellant cannot claim exemption u/s 10(22) of the Act, when the applicant is only carrying on educational activities as per the findings of the AO herself. 2. The CIT(A) erred in concluding that appellant is not eligible for exemption u/s 10(22) of the Act in the absence of registration u/s 12AA as the exemption u/s 10(22) does not stipulate condition of registration u/s 12AA of the Act. 3. The CIT(A) is not correct in upholding the denial of exemption u/s 10(22) for this year based on the order passed u/s 12AA(1)(b)(ii) of the Act by the Director of Income Tax (Exemptions) order dt. 28.6.2002. 4. The CIT(A) erred in concluding that the appellant is not entitled exemption u/s 10(22) based on non-filing of appeal for the asst. year 1995-96. 5. The CIT(A) failed to appreciate that the appellant is in appeal before the Hon’ble Supreme Court against the order of the Hon’ble High Court order in ITA No.44/2006 dt. 9.11.2010 which has admitted and notice issued. 6. The CIT(A) erred in confirming the denial of exemption u/s 10(22) of the Act, based on the alleged

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statement of Sri PL Nanjundaswamy u/s 131 of the Act on 11.3.1998, though the said statement was subsequently retracted by him as per the CIT(A) order in ITA No.24, 25, 26/04-05 dt. 30.5.2005 at para 13(5)(b) and further confirmed by the Hon’ble Income-tax Appellate Tribunal. The said retracted statement of Sri PL Nanjundaswamy was accepted by the AO in the remand report dt. 28.2.2003, the contents of the said remand report was reproduced by the CIT(A) vide order No.24, 25, 26/04-05, dt. 30.5.2005 at para 13(5)(b). 7. The CIT(A) erred in not following the direction of the Hon’ble High Court stated that ‘all contentions of both parties are kept open” by denying the copy of reasons recorded, notices served, inspection of records etc. by stating that the reopening of assessment has reached finality. The CIT(A) confirming the assessment order selectively relying on certain portions in the assessment order without reference to the previous orders of the CIT(A) and Hon’ble Income-tax Appellate Tribunal is not correct. 8. The CIT(A) erred in suppressing the primary finding of the AO vide remand report dt. 28.2.2003 in denying the exemption u/s 10(22) of the Act. 9. The CIT(A) finding as pr para 18.2 that ‘it is clear that even as per the order’s of Hon’ble ITAT, the receipts in question are unaccounted receipts vide its

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order ITA No.1242 to 1244/Bang/2005 and ITA No.51 to 53/Bang/2006 are not correct and without appreciation of facts in the above orders. 10. For these and other reasons that may be adduced at the time of hearing the appeal may be allowed and justice rendered.”-

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DIT(Exemption) to grant registration u/s 12A to the assessee.

Accordingly, the CIT(A) allowed the appeals filed by the assessee.

appeals before this Tribunal all these assessment years which were

dismissed by this Tribunal vide respective orders. The Revenue

carried the matter to Hon’ble Jurisdictional High Court in respect of

the dispute arisen from the order of the DIT(Exemption) rejecting the

application for registration u/s 12A, which was allowed by this

Tribunal in the favour of the assessee. However, the Hon’ble High

Court vide order dated 9/11/2010 has set aside the order of this

Tribunal and restored the order passed by the DIT (Exemption)

rejecting the application for seeking registration u/s 12A. In the

appeals arisen from assessment order, the Hon’ble High Court

remanded the matter in respect of all these assessment years to the

record of the AO with the direction to look into the record and

examine the entitlement of the assessee to claim exemption u/s 11 of

the Act in the light of the fact that registration u/s 12A granted by the

Tribunal vide order dated 26/8/2005 was set aside by the Hon’ble

High Court. The case was remitted back to the AO for redoing the

whole exercise and the substantial question of law raised in the

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revenue’s appeal and contentions of both parties were kept open vide

order dated 7/12/2010.

pursuant to the directions of the Hon’ble High Court vide order dated

27/3/2012 and maintained the addition as made while passing the

assessment order u/s 144 r.w.s 147 dated 25/2/2004. The assessee

challenged the action of the AO before the CIT(A) but could not

succeed except partial relief for the assessment year 1996-97 and

1997-98 was granted.

has filed these appeals. The first ground of the assessee’s appeal is

regarding the denial of opportunity of proper hearing and violation of

principle of natural justice for not providing the record/material

sought by the assessee from the AO.

considered the relevant materials on record.

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was not provided the information sought for. The learned AR has referred the application filed by the assessee under Right to Information Act and the response by the authority whereby the majority of the information was not provided to the assessee. The learned AR has referred letter dated 30th Oct, 2013 written to the Dy. Director Income-tax (Exemption) wherein the information and documents sought by the assessee vide application under RTI dated 17/10/2013 but not furnished to the assessee were brought to the notice of the DIT(Exemption). Thus, the learned AR has submitted that the information sought by the assessee is basic requirement of the assessment and goes to the root of the matter. He has further submitted that the Hon’ble High Court while remitting the matter to the file of the AO directed the AO to redo the entire exercise and the contention of both the parties were kept open. The AO completed the assessment on 27/3/2013 without providing the assessee opportunity to inspect relevant record and to have the copies of the information and record sought by the assessee. The assessment was completed in haste without giving sufficient time/opportunity. The assessee raised this issue before the CIT(A) and contended that the AO was duty bound to supply the information. However, the CIT(A) having powers which co-extensive with the AO but the CIT(A) rejected the

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plea raised by the assessee instead of having acted on the reasonable

request. Thus, there is a violation of principle of natural justice by the

AO as well as by the CIT(A) in not providing the necessary

information to the assessee. The learned AR has thus pleaded that the

AO may not be directed to furnish the information sought by the

assessee which is necessary for the defense of the assessee and

completion of the assessment proceedings and accordingly, it is

prayed that the matter may be remitted to the record of the AO with

the direction to the AO to supply all the copies of the documents.

CIT(A) has recorded in the impugned order that all the necessary

information/document had already been made available to the

assessee who has taken the issue of registration u/s 12A up to the

Hon’ble Supreme Court. The relevant details are subject matter of

findings of the DIT(Exemption) in the order dated 28/6/2002 which is

relevant in this case. Further in the second round of litigation, the

assessee is not permitted to raise such a plea of seeking the

information which was not raised in the initial assessment proceedings

and appellate proceedings. The AO’s jurisdiction was limited to redo

the assessment as per the directions of the Hon’ble High Court and,

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therefore, the assessee cannot be allowed to raise these pleas of

violation of natural justice and not providing the alleged information

and documents at this stage. He has relied upon the orders of the

authorities below.

in the first round of litigation, the CIT(A) has recorded the fact that

the reasons recorded for reopening of the assessment u/s 147 was

were supplied to the assessee, therefore, the assessee cannot raise this

issue when the matter was already carried to the Hon’ble High Court

and remitted back to the AO.

relevant material on record.

the assessee on merits and on further appeal by the revenue, the

tribunal confirmed the order of the CIT(A) in granting relief to the

assessee. The Revenue further carried the matter to the Hon’ble

Jurisdictional High Court against the orders of this Tribunal and the

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Hon’ble High Court vide judgment dated 7th Dec, 2010 remitted the matter to the record of the AO in para 8 to 10 as under:

“The CIT(A) has also relied upon the order passed in ITA Nos.24, 23 and 26/Trust/CIT(A)-5/4/05 dated 30.5.2005 which was the subject matter of appeal before ITAT in 1242, 1244/Bang/2005 filed by the Revenue which came to be dismissed and said orders which had been carried in appeal to this court by the Revenue in ITA No.763, 755 and 751/2007 had been allowed by setting aside the order of the Tribunal remitting the matter back to the AO for redoing the whole exercise.

In that view of the matter, it would be just and proper for the AO to look into the records and examine the entitlement of the assessee to claim exemption u/s 11 of the Income-tax in these appeals also since the registration u/s 12A granted by the Tribunal by order dated 26.8.2005 has been set aside by us in ITA No.44/2006 by order dated 9.11.2010.

In that view of the matter, appeal deserves to be allowed in part by remitting the matter back to the AO for redoing he whole exercise. Since the appeals are being allowed on facts and appeals are being remitted back to the AO, substantial questions of law are not

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being answered for the present. All contentions of both the parties are kept open. No orders as to costs.”

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to complete proceedings before the limitation period expires on

31/3/2013. The assessee appeared before the AO on 26/2/2013 and

pleaded that the matter may be kept in abeyance till the disposal of

SLP. Though the AO could not accept to the request of the assessee

for keeping the proceedings in abeyance however, the request of the

assessee to furnish the information and documents which includes the

reasons recorded for reopening of assessment, the opportunity to

inspect the record to provide the copy of survey report, providing the

proof of service of notice u/s 148 copy of the order of the DIT denial

of the exemption u/s 10(22) for the assessment years 1996-97, 1998-

99 and all other record which were gathered during the survey

conducted on 6/2/2002 ought to have been provided to the assessee in

order to afford a reasonable opportunity of hearing and defending its

case. We note that the AO has denied the information sought by the

assessee and further it was recorded by the AO that it is not

mandatory to provide the reasons for reopening of the assessment u/s

148 in the present case. The AO further noted that the issue of

reopening has been dealt with by the appellate authority during the

course of appellate proceedings. Thus, in view of the AO the

assessee’s request was not tenable. We do not agree with the

contention of the AO on this point because the assessee raised this

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issue of validity of reopening and non supply of reasons recorded for

reopening of the assessment u/s 148 before the CIT(A) who decided

the appeal of the assessee on merits in favour of the assessee,

therefore, there was no occasion for the assessee to carry this issue

further once the relief was granted on merits by the CIT(A). The

Revenue challenged the order of the CIT(A) before the Tribunal and

the Tribunal confirmed the finding of the CIT(A). On further appeal

the Hon’ble High Court has remitted the matter to the record of the

AO with the directions to redo the whole exercise. Thus there is

significant change in the facts under which the assessment was to be

completed in pursuant to the directions of the Hon’ble High Court. In

the earlier round of litigation, the assessee got the relief because the

registration sought u/s 12A was granted by this Tribunal and

consequently the CIT(A) as well as this Tribunal decided the quantum

appeals in favour of the assessee.

the Hon’ble High Court, the matter was to be examined by

considering the new developments and facts that the assessee was not

having the benefit of registration u/s 12A. Therefore, in the changed

circumstances, the assessee got the right to contest its case on the

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basis of the facts and the material which is relied upon by the AO for framing the assessment. The assessee got legitimate right to have access to the record which has been used by the AO against the assessee. The denial of such record which has been used by the AO in framing the assessment would amount to depriving the assessee of its legal rights and therefore, will result in the violation of principle of natural justice. As regards the reasons for reopening the assessment, the assessee has raised this issue in the first round of litigation as well as before the AO in the reassessment proceedings in pursuant furnished to the directions of the Hon’ble High Court. Though the AO has given his reasons to reject the requests of supply of reasons recorded for reopening however, when this issue was raised before this Tribunal, the learned DR has contended that the reasons were supplied to the assessee as per the order of the CIT(A) in the earlier round of litigation. The Tribunal directed the learned DR to produce the relevant record whereby it can be shown that the reasons recorded for reopening of assessment were supplied/furnished to the assessee. This direction was given to the learned DR vide orders dated 22/1/2015 and the matter was finally heard on 17th Jul, 2015. The learned DR has expressed inability to produce relevant record due to shifting of jurisdiction and record. Therefore nothing has been

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produced before us to substantiate his argument that the reasons recorded for reopening were supplied to the assessee. Even otherwise,

the issue of non supply of reasons for reopening of the assessment goes to the root of the matter and in the absence of clear finding of the fact as well the record about the supply of reasons to the assessee, the issue requires a proper consideration of relevant record to show that the reasons were already supplied to the assessee. Accordingly, we are of the view that the AO is required to produce the record to show that the assessee was already supplied the reasons failing which the

assessee should be supplied the reasons for reopening. We further note that when the requests of the assessee to supply the various documents and other information which was gathered by the AO during the survey as well as the other relevant material which was relied upon by the AO was not acceded to the AO as well as the CIT(A) then the assessee restored to the remedy available under RTI

Act. Even in response to the application made by the RTI Act only a partial information was given to the assessee and substantial information and the documents sought by the assessee were not furnished. Thus, it is clear from the record that the assessment was completed in haste due to the constraint of time because of initiation of the proceedings by the AO at the fog end of limitation and

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consequently the assessee was deprived of the reasonable opportunity of hearing and defending its case

the AO on the issue of principle of natural justice, we do not propose to go into the other issue on the merits of the assessment. The same are kept open.

Order pronounced in the open court on 31 Jul, 2015. Sd/- Sd/- (JASON P BOAZ) (VIJAYPAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER

Vms. Bangalore Dated : 31/7/2015

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Copy to :

Asst. Registrar, ITAT, Bangalore.