KATIANI EDUCATION SOCIETY,KULLU vs. DCIT, MANDI

Per Bench:

The present bunch of appeals have been preferred by the

assessee against the common order dated 08.05.2014 of the

Commissioner of Income Tax (Appeals), [hereinafter referred to as

CIT(A)], Shimla.

nature, hence, the same have been heard together and are being

disposed of by this common order.

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 2 3. Identical grounds have been taken in all the appeals, hence, for the sake of convenience, ITA No. 664/Chd/2014 for assessment year 2006-07 is taken as a lead case, wherein following grounds

have been raised by the assessee:-

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 3 6. That the Ld. CIT(A) has further erred in upholding the addition of Rs. 6,09,784/- brushing aside the explanation rendered during the course of appellate proceedings which is arbitrary and unjustified.

the grounds of appeal. The assessee in this appeal has taken as

many as eight grounds of appeal. Ground Nos. 1 & 2 are regarding

the legal issue challenging the reopening of the assessee u/s 148 of

the Income-tax Act, 1961 (in short 'the Act'). Ground No.3 is

relating the claim of the assessee for exemption u/s 10(23C)(iiiad)

of the Act. Ground No.4 is relating to the claim of exemption u/s

10(23C)(vi) of the Act. Ground No. 5 is relating to the claim of

exemption as per the provisions of section 11 to 13 of the Act. Vide

ground No.6, the assessee has agitated the addition of Rs.

6,09,784/- on merits, in the facts and circumstances of the case.

Ground No.7 is relating to the charging of interest u/s 234A, B and

C of the Act. Ground No.8 is General in nature.

relating to the reopening of the assessment, the Ld. counsel has

reiterated the submission as were made before Ld. CIT(A) on this

issue. The brief facts relating to the issue is that the assessee had

applied for approval u/s 10(23C)(vi) of the Act for assessment year

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 4 2011-12 but the same was rejected by the competent authority on

the ground that the assessee society does not exist solely for

educational purposes but for the purpose of making profit also.

Since the identical condition for running the educational institution also finds mention under the provisions of section 10(23C)(iiiad)

also, hence, the Assessing officer noticed that for earlier

assessment years the assessee had been wrongly claiming

exemption u/s 10(23C) (iiiad) of the Act, he, therefore, reopened the assessments for assessment years 2006-07 to 2009-10 and

assessment year 2011-12.

fresh material had come to the Assessing officer to reopen the

assessments and that the Assessing officer had not applied his mind independently to form an opinion that income of the assessee had

escaped assessment.

this issue. Since the application for approval u/s 10(23C) (vi) of

the Act was rejected by the CCIT, hence, the reasonable conclusion was that the assessee was not running the institution solely for

educational purposes. In view of this, there was a reasonable belief

to the Assessing officer that income of the assessee had escaped assessment because of the wrong claim of the exemption u/s

10(23C)(iiiad) of the Act for the aforesaid assessment years. In

view of this, we do not find any merit in ground Nos. 1 & 2 of the

appeal and the same are accordingly dismissed.

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 5 8. Now coming to the ground No.3 of the appeal, which is

relating to the claim of exemption u/s 10(23C)(iiiad) of the Act, the

Ld. AR of the assessee has been fair enough to furnish a copy of

the decision of the Hon'ble Jurisdictional High Court of Himachal

Pradesh at Shimla passed in CWP No. 7235 of 2012 vide order

dated 4.3.2015 and submitted that, in fact, the assessee had

challenged the denial of approval u/s 10(23C)(vi) before the

Hon'ble High Court by way of writ petition, which has been

dismissed by the Hon'ble High Court holding that the assessee was

not running the institution solely for educational purposes but

profit element was involved. Since, the essential parameter of

running of institution solely for educational purposes and not for

profit is also there as a pre-condition under the provisions of

section 10(23C)(iiiad) of the Act, hence, the findings arrived at by

the Hon'ble High Court vide order dated 4.3.2015 (supra) would

squarely apply to the issue regarding the claim of exemption u/s

10(23C)(iiiad) of the Act also. There is no merit in the ground and

the same is accordingly dismissed.

Hon'ble High Court dated 4.3.2015 is squarely applicable, hence,

ground No. 4 of the appeal is accordingly dismissed.

assessee is not registered as a charitable institution under the

provisions of section 12A of the Act, hence, the assessee is not

entitled to the exemption as per the provisions of sections 11 to 13

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 6 of the Act. In view of this, ground No.5 of the appeal is also

dismissed.

invited our attention to the impugned order of the Assessing

officer to state that the Assessing officer has made the impugned

addition of Rs. 6,09,784/- into the income of the assessee on

account of corpus fund received as contribution from the members.

The Ld. Counsel has submitted that even though the assessee may

not be found eligible to claim exemption under the provisions of

section 10(23C) and / or sections 11 to 13 of the Act, however, it

was incumbent upon the Assessing officer to examine the nature of

the receipts. The Ld. Counsel has submitted that the assessee’s

claim is that the said receipts were capital in nature and further

that even if the same are to be treated as a Revenue receipts, the

assessee would be entitled to the deduction of eligible expenditure.

The Ld. Counsel has submitted that the Assessing officer has not

examined the nature of the receipts. He has further submitted that

the matter be restored to the file of the Assessing officer to

examine the nature of receipts. The Ld. counsel has further brought

our attention to the impugned order of the CIT(A) to state that even

the Ld. CIT(A) has not deliberated on this aspect of the nature of

the income.

the lower authorities.

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 7 13. After considering the rival submissions, we find merit in the

submissions of the assessee. Though the assessee may not be

entitled to the claim of exemption under the exemption provisions

as claimed by the assessee, however, still the nature of receipts /

income is required to be examined at the hands of the Assessing

officer. We, therefore, restore the issue raised vide ground No.6 of

the appeal to the file of the Assessing officer for adjudication

afresh.

of the Act, which is consequential is nature, does not require any

adjudication at this stage.

adjudication.

The appeal of the assessee stands partly allowed

ITA No. 665/Chd/2014 (A.Y. 2007-08)

submitted that so far as ground Nos. 1 to 5 are concerned, they are

identical as taken by the assessee in appeal for assessment year

2006-07. In view of our findings given above, grounds Nos. 1 to 5

of the appeal are accordingly dismissed.

for the assessee has pleaded that the same are required to be

restored to the file of the Assessing officer for adjudication afresh

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 8 in respect of the nature of receipts and taxability of income as

directed while adjudicating ground No.6 of the appeal of the

assessee for assessment year 2006-07.

In view of our findings given above while adjudicating the

ground No. 6 of the appeal for assessment year 2006-07, ground

Nos. 6 &7 of this appeal are restored to the file of the Assessing

officer for decision afresh.

234A, B & C of the Act, which is consequential in nature, whereas,

ground No.9 is general in nature and need not to be adjudicated.

In view of this, the appeal of the assessee for assessment year

2007-08 is also treated as partly allowed.

ITA No. 666/Chd/2014 (A.Y 2008-09)

of appeal, which are almost identical as taken by the assessee in its

appeal for assessment year 2006-07.

appeal is restored to the file of the Assessing officer for

adjudication afresh whereas other grounds of appeal are dismissed

in view of our findings given in the appeal of the assessee for

assessment year 2006-07.

The appeal of the assessee is partly allowed.

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 9 ITA No. 667/Chd/2014 (A.Y. 2009-10)

of appeal. The Ld. counsel for the assessee was fair enough to

admit that the ground Nos.1 to 5 of the appeal are identical to that

have been taken in assessee’s appeal for assessment year 2006-07.

In view of our findings given above for the earlier assessment year

i.e. assessment year 2006-07, ground Nos.1 to 5 of the appeal are

hereby dismissed.

the Assessing officer under the provisions of section 40A(3) of the

Act on account of payments made more than the prescribed limit by

cash on a single day.

was specifically raised through grounds of appeal before the Ld.

CIT(A). However, Ld. CIT(A) has failed to adjudicate on the same.

The Ld. counsel has further submitted that since the assessee was

under bonafide belief that the assessee was entitled to exemption

u/s 10(23C)(iiiad) of the Act, hence, the assessee could not furnish

the relevant evidences / explanation for making payments more

than prescribed limit in cash. The Ld. Counsel has further

submitted that the assessee be given an opportunity to present its

case before the Assessing officer in this respect.

the Assessing officer on this issue.

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 10 25. We have considered the rival submissions. The fact on the

file is that the Ld. CIT(A) has failed to adjudicate on this issue.

The other appeals of the assessee have already been restored to the

file of the Assessing officer though on different issue. The assessee

has submitted that to avoid multiplicity of the litigation, the issue

may be restored to the file of the Assessing officer so that he may

be able to furnish the necessary explanation / evidences on this

issue.

Considering the overall facts and circumstances of the case,

we are of the view, that no prejudice will be caused to the Revenue

if the issue is restored to the file of the Assessing officer for

adjudication afresh; we order accordingly.

has agitated the addition for Rs. 2.5 lacs made by the Assessing

officer on account of unsecured loans applying the provisions of

section 68 of the Act.

respect, the assessee may be given an opportunity to furnish

explanation / evidences regarding the unsecured loan of Rs. 2.5

lacs. The Ld. DR, on the other hand, has relied on the findings of

the authorities below and has submitted that the assessee has failed

to furnish the requisite explanation before the lower authorities on

this issue.

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 11 28. After considering the rival submissions and in view of the

submissions of the assessee that it could not furnish the requisite

information during assessment proceedings, because of the entire

stress of the assessee was on the claim of exemption provisions. In

our view, the assessee should be given an opportunity to furnish

the explanation / evidences on this issue also. This issue is also

accordingly restored to the file of the Assessing officer for fresh

adjudication.

234-A, B and C which is consequential in nature, whereas, ground

No.10 is general in nature and need not to be adjudicated.

In view of this, the appeal of the assessee is treated as partly

allowed.

ITA No. 668/Chd/2014 (A.Y. 2011-12)

30 Now coming to assessee’s appeal for assessment year 2011-12.

The assessee in this appeal has taken as many as 12 grounds of

appeal, which are reproduced below:-

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 12 resort to the provisions of Section 148 of the Act is illegal, arbitrary & unjustified. 3. Without prejudice to the above, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding that the assessee society is not eligible to claim exemption u/s 10(23C)(iiiad) as it was not existing solely for educational purpose which is contrary to the facts on record and as such the order of Commissioner of Income Tax(Appeals) is arbitrary and unjustified. 4. That all the reasons mentioned in the order to deny exemption are based only on suspicion, conjectures and surmises and have been picked up only from the order of the Chief Commissioner denying exemption u/s 10(23C)(vi) without any independent application of mind by both the Commissioner of Income Tax(Appeals) and Assessing Officer. 5. That the Ld. Commissioner of Income Tax(Appeals) has further erred in holding that the assessee Society does not fulfill the required conditions for claiming exemption u/s 11 to 13 of the Act which is arbitrary and unjustified.

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 13 explanations rendered during the course of appellate proceedings which is arbitrary and unjustified.

dismissed.

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 14 32. Vide ground Nos. 6 to 9 of the appeal, the assessee has

agitated various additions / disallowance made the Assessing

officer.

our attention to the impugned order of the Assessing officer and

stated that Assessing officer has discussed in detail regarding the

various additions / disallowances made by the Assessing officer

which have been agitated before us through ground Nos. 6 to 9 of

the appeal. She has also invited our attention to the impugned order

of the CIT(A) on this issue. We have gone through the impugned

order of the CIT(A). The Ld. CIT(A) after considering the

submissions of the assessee has given observation that the assessee

is not entitled to the depreciation of Rs. 92,997/- since the building

was not ready for use. We do not find any infirmity in the order of

the CIT(A) on this issue and, hence, ground No. 6 of the appeal is

dismissed.

relating to the certain expenses regarding which the assessee could

not furnish the justifiable explanation. The Ld. CIT(A )has

disallowed a part of the expenses claimed by the assessee, the

same being unverifiable and personal in nature.

think that the order of the CIT(A) on this issue is required any

ITA Nos 664 to 668/Chd/2014- Katiani Education Society, Kullu 15 interference at this stage. Hence, grounds Nos. 7 to 9 of the appeal

are accordingly dismissed.

require any specific adjudication.

C of the Act which is consequential in nature, does not require any

adjudication at this stage.

This appeal of the assessee for assessment year 2011-12

accordingly stands dismissed.

664/Chd/2014 to 667/Chd/2014 for assessment years 2006-07 to

2009-10 are party allowed whereas ITA No. 668/Chd/2014 for

assessment year 2011-12 is hereby dismissed.

Order pronounced in the Open Court.

Sd/- Sd/-

(ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 23.04.2018 Rkk Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR