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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
PER BENCH
The aforesaid appeals of the Department are directed against separate orders of the learned Commissioner (Appeals)–1, Mumbai, pertaining to the assessment years 2004–05, 2005–06 and 2006–07.
2 M/s. Shri Vile Parle Kelavani Mandal
The common issue raised by the Department in all these appeals is against the decision of the learned Commissioner (Appeals) in holding the re–opening of assessment under section 147 of the Income Tax Act, 1961 (for short "the Act") as invalid.
Briefly stated the facts are, assessee a charitable trust is engaged in running more than 30 schools and colleges. It is also registered under section 12A of the Act. For the impugned assessment years, assessee filed its return of income voluntarily claiming exemption under section 11 of the Act. Assessments in case of assessee for all the aforesaid years were originally completed under section 143(3) of the Act accepting the income returned by the assessee. Subsequently, in course of assessment proceedings for the assessment year 2008–09, the Assessing Officer was of the view that income received by the assessee from Management Development Program (MDP) fees, consultancy charges, technical fees and income received from hiring of various halls owned by the assessee were in the nature of organized activity, hence, the income derived has to be considered as business income. Though the assessee objected to the aforesaid view of the Assessing Officer but the Assessing Officer rejecting the submissions of the assessee ultimately completed the 3 M/s. Shri Vile Parle Kelavani Mandal assessment for assessment year 2008–09 disallowing assessee’s claim of exemption under section 11 and treated the income derived by the assessee as business income. On the basis of the assessment completed for assessment year 2008–09, Assessing Officer re–opened the assessment for impugned assessment years alleging escapement of income as according to the Assessing Officer income derived from MDP fees, consultancy charges, technical fees and income received from hiring of various halls in the nature of business income. Though, the assessee objected to re–opening of assessment but he Assessing Officer following the reasoning on the basis of which assessment was completed for assessment year 2008–09, also completed the assessment for the impugned assessment years disallowing the assessee’s claim of exemption under section 11 by treating the income received from MDP fees, consultancy charges, technical fees and income received from hiring of various halls as business income of the assessee. The Assessing Officer also disallowed assessee’s claim of depreciation. Being aggrieved of the assessment order so passed, assessee preferred appeal before the learned Commissioner (Appeals) raising grounds on the validity of re–opening under section 147 as well as on the merits of the additions made.
4 M/s. Shri Vile Parle Kelavani Mandal 4. In course of hearing of appeal before the first appellate authority, it was submitted by the assessee that as far as assessment years 2004–05 and 2005–06 are concerned, there being no failure on the part of the assessee to disclose all material facts truly and fully re– opening of assessment beyond four years from the end of the relevant assessment year that too without any tangible material and on a mere change of opinion is not permissible under the Act. Further, it was submitted by the assessee additions made by Assessing Officer in assessment year 2008–09 rejecting assessee’s claim of exemption under section 11, was challenged by the assessee before the first appellate authority and the learned Commissioner (Appeals) deleted all the additions made by the Assessing Officer by allowing assessee’s claim of exemption under section 11. It was submitted, appeal preferred by the Department against the said order of the first appellate authority was also dismissed by the Tribunal. Thus, it was submitted that the re–opening of assessment is legally invalid. The learned Commissioner (Appeals) found that the Assessing Officer has re–opened the assessment primarily on the basis of assessment completed for assessment year 2008–09 holding that MDP fees, consultancy charges, technical fees and income received from hiring of various halls is organised business activity not linked to the objects,
5 M/s. Shri Vile Parle Kelavani Mandal hence, exemption under section 11 was not available. However, appeal preferred by the assessee on such reasoning of the Assessing Officer was challenged before the learned Commissioner (Appeals) and the learned Commissioner (Appeals) allowed assessee’s claim of exemption under section 11 which was confirmed by the Tribunal. Upon considering these facts, learned Commissioner (Appeals) that the Assessing Officer had not demonstrated that there was failure on the part of the assessee to make true and full disclosure of material fact relating to its assessments as required under section 147 as far as the assessment year 2004–05 are concerned. As far as assessment year 2005–06 and 2006–07 are concerned, the learned Commissioner (Appeals) expressing similar view held that as the Tribunal has confirmed the learned Commissioner (Appeals)’s order allowing assessee’s claim of exemption under section 11, in respect of income received from MDP fees, consultancy charges, technical fees and income received from hiring of various halls for assessment year 2008–09, the re–opening of assessment without any tangible material on the very same fact on a mere change of opinion is not sustainable. Being aggrieved, Revenue is in appeal before us.
6 M/s. Shri Vile Parle Kelavani Mandal 5. Learned Departmental Representative though agreed that the issues relating to the additions made by the Assessing Officer in the impugned assessment years are covered in favour of the assessee by the order of the Tribunal in assessee’s own case for the assessment year 2008–09 but nevertheless he supported the reasoning of the Assessing Officer.
Learned Counsel for the assessee, on the other hand, strongly supporting the order of the learned Commissioner (Appeals) submitted originally assessment for all the assessment years were completed under section 143(3) and at the time of completion of assessment, the Assessing Officer, after making necessary enquiry and examining the material brought on record accepted assessee’s claim of exemption under section 11. He submitted, merely because the Assessing Officer while completing the assessment for the assessment year 2008–09 formed an opinion that the income derived from MDP fees, consultancy charges, technical fees and income received from hiring of various halls being in the nature of organized activity are to be treated as business income, it cannot be a valid reason for re–opening of the assessment in the absence of any tangible material on record or in the absence of failure on the part of the assessee to truly and fully disclose
7 M/s. Shri Vile Parle Kelavani Mandal all material facts necessary for its assessments. He submitted for this very reason re–opening of assessment for assessment years 2004–05 and 2005–06 are invalid in law as the assessments were afer expiry of four years. As far as assessment year 2006–07 is concerned, learned counsel submitted, no fresh tangible material has come to the possession of the Assessing Officer to form the believe that income has escaped assessment. Merely relying upon the opinion formed in the assessment order passed for assessment year 2008–09, the Assessing Officer could not have re–opened the assessment under section 147. He submitted, as the Assessing Officer while completing the original assessment has examined all aspects relating to assessee’s claim of exemption under section 11 and allowed it, without any fresh tangible material re–opening of assessment on the very same facts would amount to change of opinion, hence, not permissible in law. He submitted, in any case of the matter, the assessment order passed for assessment year 2008–09 was subject matter of appeal before the first appellate authority and the learned Commissioner (Appeals) after examining the issue had allowed assessee’s claim of exemption by holding that income derived from MDP fees, consultancy charges, technical fees and income received from hiring of various halls will not constitute business income of the assessee. He,
8 M/s. Shri Vile Parle Kelavani Mandal therefore, submitted, as the issue relating to additions made are squarely covered by the decision of the Tribunal in assessee’s own case the order passed by the learned Commissioner (Appeals) deserves to be sustained.
We have considered the submissions of the parties and perused the orders of the authorities below as well as the material available on record. Undisputedly, assessee a charitable trust is registered under section 12A of the Act. It is also a fact on record that assessment in case of assessee for the aforesaid assessment years was original completed under section 143(3) of the Act. However, as could be seen while completing assessment for assessment year 2008–09, the Assessing Officer held that income derived by the assessee from MDP fees, consultancy charges, technical fees and income received from hiring of various halls being in the nature of organized activity, will constitute business income of the assessee. Accordingly, he denied assessee’s claim of exemption under section 11 by assessing the income under the head “Business”. It is further evident from the material on record that the Assessing Officer did not have in his possession any tangible material while re–opening the assessment for the impugned assessment years. Solely on the basis of reasoning of 9 M/s. Shri Vile Parle Kelavani Mandal Assessing Officer in assessment order for the assessment year 2008– 09, assessments for the impugned assessment years were re–opened. As far as assessment years 2004–05 and 2005–06 are concerned, the Assessing Officer had issued notices under section 148 of the Act on 25th March 2011. This fact has not been disputed by the learned Departmental Representative. Therefore, in terms of proviso to section 147, in a case where assessment has earlier been completed under section 143(3), re–opening of assessment cannot be made beyond a period of four years unless there is failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. There is not even a whisper or allegation either in the reasons recorded or in the assessment order of any such failure on the part of the assessee. It is further evident that merely following the reasoning of the Assessing Officer for assessment year 2008–09, assessments for the A.Y. 2004–05 and 2005–06 were re–opened. Thus, it is proved on record that there was no failure on the part of the assessee to declare fully and truly all material facts necessary for its assessment. That being the case, the Assessing Officer could not have re–opened the assessment for the A.Y. 2004–05 and 2005–06 beyond period of four years, admittedly, when neither there is any fresh tangible material in the possession of the Assessing Officer indicating
10 M/s. Shri Vile Parle Kelavani Mandal escapement of income nor there is failure on the part of the assessee to fully and truly disclose all material facts. Therefore, re–opening of assessment for assessment years 2004–05 and 2005–06 having not satisfied the conditions imposed under the proviso to section 147, have to be declared as invalid.
Even, as far as assessment year 2006–07 is concerned, though, re–opening of assessment is within the period of four years but one cannot ignore the fact that at the time of completion of original assessment, the Assessing Officer, after verifying assessee’s claim of exemption under section 11 had completed the assessment allowing the same. The Assessing Officer has re–opened the assessment for assessment year 2006–07, merely for the reason that in assessment year 2008–09, income derived from MDP fees, consultancy charges, technical fees and income received from hiring of various halls owned by the assessee were treated as business income, No fresh tangible material has come to the possession of the Assessing Officer to form the believe that income has escaped assessment. There is no live link between the material available on record and formation of belief. That being the case, applying the ratio laid down by the Hon'ble Supreme Court in CIT v/s Kalvinator of India Ltd., [2010] 320 ITR 561 (SC), re–
11 M/s. Shri Vile Parle Kelavani Mandal opening of assessment has to be declared as illegal. Even otherwise also, as has been brought to our notice by the learned A.R. additions made by the Assessing Officer by treating the receipts from MDP fees, consultancy charges, technical fees and income received from hiring of various halls as business income and denying assessee’s claim of exemption under section 11 was not approved by the learned Commissioner (Appeals) while deciding assessee’s appeal for assessment year 2008–09. Learned Commissioner (Appeals), while deleting the additions made by the Assessing Officer and allowing assessee’s claim of exemption held that income derived cannot be treated as business income of the assessee as all such income were applied for achieving the objects of the trust. The appeal preferred by the Revenue against the order of the learned Commissioner (Appeals) was dismissed by the Tribunal vide order dated 5th October 2012, in Mum./2006. Thus, the issue relating to additions made by the Assessing Officer in all the aforesaid assessment years being squarely covered by the decision of the Tribunal as referred to above, we do not find any infirmity in the order of the learned Commissioner (Appeals) in allowing assessee’s claim by holding re–opening of assessment to be invalid. Grounds raised by the Department in all these appeals are dismissed.
12 M/s. Shri Vile Parle Kelavani Mandal
In the result, Departmental appeals are dismissed. Order pronounced in the open Court on 29.02.2016