IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on 28.01.2014 W.P.(C) 7660/2012
MOHAN GUPTA (HUF)
The petitioner/assessee is a Hindu Undivided Family, represented by its kartaMohan Gupta. The assessee filed its return of income for the A.Y. 2005-06 declaring net income of `16,98,732/-. This return was processed under Section 143(1) of the Act.
Subsequently, on 26.03.2012, the Revenue issued a notice under
Section 148 of the Act for reopening the assessment for A.Y. 2005-06.
Briefly, the return filed and processed for the A.Y. 2005-06
indicated `6,55,016/- as Short Term Capital Gain (“STCG”). The
reason for reopening the assessment of that year relates to the office
note of the Assessing Officer for the subsequent A.Y. 2007-08,
whereby the need to assess the income on purchase and sale of shares
as business income, rather than STCG, was expressed. Specifically,
the reasons provided to the assessee for reopening the assessment state
as follows:
“The case of the assessee for the A.Y. 2007-08 was
assessed u/s 143(3) at an Income of Rs.33,03,791/-, The
STCG of Rs.33,00,053/- declared by the assessee was
treated as Business income from purchase and sale of
shares, As per the office note of the assessing officer for
the A.Y. 2007-08, the issue of treating of STCG income
on sale of share is needed to be assessed again. The total
STCG for the A.Y. 2005-06 is Rs. 6,55,016/- taxed @
10% The tax effect, if income is treated as business
income, would be more than Rs. 1 lakh. I have therefore, reason to believe that by reason of
omission or failure on the part of the assessee to disclose
truly and fully all material facts necessary for assessment
and by wrong treatment of income, income chargeable to
tax amounting to Rs. 6,55,016/- taxed as STCG needed to
be taxed as business income, has escaped assessment for
which notice u/s 148 is required to be issued within the
meaning of sec 147 ofthe ITAct, 1961.”
In response, it is argued by revenue that since the return was processed
under Section 143(1) for the A.Y. 2005-06, which involves a mere
intimation, rather than an application of mind or true assessment of the return, a less stringent threshold must be taken in terms of ‘reasons to
believe’ that income has escaped assessment or not. This precise
argument, however, has been considered and rejected by this Court in
CIT v. Orient Craft, [2013] 354 ITR 536 (Delhi), in the following
terms, and thus is of no avail in the present case either. For the above reasons, the writ petition is allowed and the
impugned notices dated 26.03.2012 and 09.08.2012 are hereby set
aside.
Refer:
M/s. Phool Chand Bajrang Lal and Anr. v.
Income Tax Officer and Anr., [1993] 203 ITR 456 (SC), ITO, Calcutta and Ors. v. Lakhmani Mewal Das 1976 (103) ITR 437 (SC); Central Provinces Manganese Ore. Co. Ltd.
v. Income Tax Officer, Nagpur, [1991] 191 ITR 662 (SC), Sri Krishna
Pvt. Ltd. Etc. v. Income Tax Officer, Calcutta and Ors., (1996) 9 SCC
534. Supreme Court noted in
CIT v. Kelvinator, (2010) 2 SCC 723 = 320 ITR 561 (SC)
M/S. AKSHAY PORTFOLIO PVT. LTD. ..... Respondent
IN THE HIGH COURT OF DELHI AT NEW DELHI 12.02.2014
ITA 652/2012, C.M. APPL.19009/2013
The assessee in this case was apparently issued with notice under
Section 148 on 31.03.2006 proposing to reopen the assessment on the basis
of information received in regard to two entries of `10 lakhs each. The
findings of the Commissioner (Appeals) and the Tribunal are that such
notice was not received by the assessee. Consequently, he did not respond
to the notice and did not file the return as required under Section 148.
Being aggrieved by the order of the AO, the assessee approached in
appeal, complaining that the additions made were without the authority of
law. The CIT (Appeals) considered the matter and also called for a report
after which he found that the notice dated 31.03.2006 could not be served
since the assessee was not found at the address. These findings were
confirmed by the Tribunal.
Learned counsel for the Revenue urges that the assessee attended
the proceedings subsequently in November 2006. He also relies upon the
decision of the Court in Commissioner of Income Tax v. Vins Overseas
India Ltd. 2008 (305) ITR 320 (Del) to urge that in such circumstances,
the presumption of service should be resorted to especially since the
assessee attended the proceedings in November 2006. The appeal being
bereft of merit is accordingly dismissed along with pending application.
IN THE HIGH COURT OF DELHI AT NEW DELHI
ITA 171/2013 LUMINOUS HOLDINGS PVT. LTD 17.02.2014
The Revenue urges in support of the appeal that the Tribunal as well as
the appellate Commissioner fell into error in not making further enquiry
as to the source of the amounts which found their way into the Director?s
bank accounts. It was argued that the burden cast upon the assessee under
68 is not only to show/disclose the identity of the person making the
payment but also the creditworthiness of the individual concerned.
Commenting adversely on the ITAT?s order, learned counsel underlined that
the elements of the requirements spelt-out by Section 68 remained
unfulfilled and that this Court should interfere with the impugned order.
This Court has considered the submissions. Evidently, the AO and
the CIT (Appeals) had the benefit of accessing the bank accounts of the
two Directors who advanced the amounts to the assessee company. In this
instance, the CIT (Appeals) also noted that part of the amount could not
have been added since it had been advanced during the earlier year. As
far as the remaining amount of `51 lakhs is concerned, the CIT(A) conveys
that the bank statements of Directors reveal these amounts were issued
from the bank accounts during the relevant year. There is no finding by
the AO or any other fact finding authority reflecting cash deposits into
these accounts on any earlier proximate dates. Having considering the
material on record, this Court is of the opinion that the CIT(A) and ITAT
did not commit any error of law in directing deletion of amounts added on
account of Section 68.
IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision: 14.02.2014+ W.P.(C) 1608/2013 & CM Appl.3024/2013
RASALIKA TRADING AND INVESTMENT CO. PVT. LTD
In other words “the reasons to believe” do not state that even in one sentence that the investigation report of 13.3.2006 was not with the AO when he completed the assessment. The material on record in fact suggests otherwise; the nature of the queries put to assessee and the replies and confirmation furnished to the AO in the course of the regular assessment clarify that what excited the suspicion was indeed gone into by the AO himself while framing the assessment under section 143(3). This Court is fortified in its conclusions by the decision of the Supreme Court in Commissioner of Police v. Goverdhan Das Bhanji AIR 1952 SC 16 where it was held that public orders made by public authorities intended to have effect on the public should be construed objectively with reference to the language used rather than explanations subsequently offered. This principle was reiterated in a somewhat different vein in MS Gill V. Chief Election Commissioner, AIR 1978 SC 851 by the Supreme Court.
Karnataka high court in CIT vs ITC hotels in ITA 529/2007 31/1/2014: Held amount paid by assessee to trust for right to use COURT YARD under an MOU for indefinite future : is revenue expense SC 124 ITR Page 1 applied (Empire Jute)
Karnataka high court in Visvesvaraya educational university in ITA5007-12/2013 (20/12/2013)
HELD reviewing entire law on taxation and exemption of educational institution that:
i) Section 10(23c) dealing with exemption to educational institution under clauses (iiiab); (iiiad) and (iv) uses common phrase being “existing solely for educational purposes and not for purposes of profit”;
ii) As long as surplus is reasonable surplus there should be no difficulty in giving exemption subject to fulfillment of other conditions;
iii) However, if an educational institution/university starts making huge profit in guise of Surplus, exemption u/s 10(23c) shall stand forfeited;
iv) In high court opinion surplus cannot be more than 10-15% to meet contingencies and unforeseen expense; (sc order in Islamic academy referred)
v) Systematically making incremental profit would not come under umbrella of reasonable surplus;
vi) It is not sufficient u/s 10(23c) if an institution is established for educational purposes excluding profit motive , but it is also important that such institution continues to exist and operates for “not for profit” purposes, as where the unreasonable surplus is generated, said institution would cease to
Decided on 28.01.2014 W.P.(C) 7660/2012
MOHAN GUPTA (HUF)
The petitioner/assessee is a Hindu Undivided Family, represented by its kartaMohan Gupta. The assessee filed its return of income for the A.Y. 2005-06 declaring net income of `16,98,732/-. This return was processed under Section 143(1) of the Act.
Subsequently, on 26.03.2012, the Revenue issued a notice under
Section 148 of the Act for reopening the assessment for A.Y. 2005-06.
Briefly, the return filed and processed for the A.Y. 2005-06
indicated `6,55,016/- as Short Term Capital Gain (“STCG”). The
reason for reopening the assessment of that year relates to the office
note of the Assessing Officer for the subsequent A.Y. 2007-08,
whereby the need to assess the income on purchase and sale of shares
as business income, rather than STCG, was expressed. Specifically,
the reasons provided to the assessee for reopening the assessment state
as follows:
“The case of the assessee for the A.Y. 2007-08 was
assessed u/s 143(3) at an Income of Rs.33,03,791/-, The
STCG of Rs.33,00,053/- declared by the assessee was
treated as Business income from purchase and sale of
shares, As per the office note of the assessing officer for
the A.Y. 2007-08, the issue of treating of STCG income
on sale of share is needed to be assessed again. The total
STCG for the A.Y. 2005-06 is Rs. 6,55,016/- taxed @
10% The tax effect, if income is treated as business
income, would be more than Rs. 1 lakh. I have therefore, reason to believe that by reason of
omission or failure on the part of the assessee to disclose
truly and fully all material facts necessary for assessment
and by wrong treatment of income, income chargeable to
tax amounting to Rs. 6,55,016/- taxed as STCG needed to
be taxed as business income, has escaped assessment for
which notice u/s 148 is required to be issued within the
meaning of sec 147 ofthe ITAct, 1961.”
In response, it is argued by revenue that since the return was processed
under Section 143(1) for the A.Y. 2005-06, which involves a mere
intimation, rather than an application of mind or true assessment of the return, a less stringent threshold must be taken in terms of ‘reasons to
believe’ that income has escaped assessment or not. This precise
argument, however, has been considered and rejected by this Court in
CIT v. Orient Craft, [2013] 354 ITR 536 (Delhi), in the following
terms, and thus is of no avail in the present case either. For the above reasons, the writ petition is allowed and the
impugned notices dated 26.03.2012 and 09.08.2012 are hereby set
aside.
Refer:
M/s. Phool Chand Bajrang Lal and Anr. v.
Income Tax Officer and Anr., [1993] 203 ITR 456 (SC), ITO, Calcutta and Ors. v. Lakhmani Mewal Das 1976 (103) ITR 437 (SC); Central Provinces Manganese Ore. Co. Ltd.
v. Income Tax Officer, Nagpur, [1991] 191 ITR 662 (SC), Sri Krishna
Pvt. Ltd. Etc. v. Income Tax Officer, Calcutta and Ors., (1996) 9 SCC
534. Supreme Court noted in
CIT v. Kelvinator, (2010) 2 SCC 723 = 320 ITR 561 (SC)
M/S. AKSHAY PORTFOLIO PVT. LTD. ..... Respondent
IN THE HIGH COURT OF DELHI AT NEW DELHI 12.02.2014
ITA 652/2012, C.M. APPL.19009/2013
The assessee in this case was apparently issued with notice under
Section 148 on 31.03.2006 proposing to reopen the assessment on the basis
of information received in regard to two entries of `10 lakhs each. The
findings of the Commissioner (Appeals) and the Tribunal are that such
notice was not received by the assessee. Consequently, he did not respond
to the notice and did not file the return as required under Section 148.
Being aggrieved by the order of the AO, the assessee approached in
appeal, complaining that the additions made were without the authority of
law. The CIT (Appeals) considered the matter and also called for a report
after which he found that the notice dated 31.03.2006 could not be served
since the assessee was not found at the address. These findings were
confirmed by the Tribunal.
Learned counsel for the Revenue urges that the assessee attended
the proceedings subsequently in November 2006. He also relies upon the
decision of the Court in Commissioner of Income Tax v. Vins Overseas
India Ltd. 2008 (305) ITR 320 (Del) to urge that in such circumstances,
the presumption of service should be resorted to especially since the
assessee attended the proceedings in November 2006. The appeal being
bereft of merit is accordingly dismissed along with pending application.
IN THE HIGH COURT OF DELHI AT NEW DELHI
ITA 171/2013 LUMINOUS HOLDINGS PVT. LTD 17.02.2014
The Revenue urges in support of the appeal that the Tribunal as well as
the appellate Commissioner fell into error in not making further enquiry
as to the source of the amounts which found their way into the Director?s
bank accounts. It was argued that the burden cast upon the assessee under
68 is not only to show/disclose the identity of the person making the
payment but also the creditworthiness of the individual concerned.
Commenting adversely on the ITAT?s order, learned counsel underlined that
the elements of the requirements spelt-out by Section 68 remained
unfulfilled and that this Court should interfere with the impugned order.
This Court has considered the submissions. Evidently, the AO and
the CIT (Appeals) had the benefit of accessing the bank accounts of the
two Directors who advanced the amounts to the assessee company. In this
instance, the CIT (Appeals) also noted that part of the amount could not
have been added since it had been advanced during the earlier year. As
far as the remaining amount of `51 lakhs is concerned, the CIT(A) conveys
that the bank statements of Directors reveal these amounts were issued
from the bank accounts during the relevant year. There is no finding by
the AO or any other fact finding authority reflecting cash deposits into
these accounts on any earlier proximate dates. Having considering the
material on record, this Court is of the opinion that the CIT(A) and ITAT
did not commit any error of law in directing deletion of amounts added on
account of Section 68.
IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision: 14.02.2014+ W.P.(C) 1608/2013 & CM Appl.3024/2013
RASALIKA TRADING AND INVESTMENT CO. PVT. LTD
In other words “the reasons to believe” do not state that even in one sentence that the investigation report of 13.3.2006 was not with the AO when he completed the assessment. The material on record in fact suggests otherwise; the nature of the queries put to assessee and the replies and confirmation furnished to the AO in the course of the regular assessment clarify that what excited the suspicion was indeed gone into by the AO himself while framing the assessment under section 143(3). This Court is fortified in its conclusions by the decision of the Supreme Court in Commissioner of Police v. Goverdhan Das Bhanji AIR 1952 SC 16 where it was held that public orders made by public authorities intended to have effect on the public should be construed objectively with reference to the language used rather than explanations subsequently offered. This principle was reiterated in a somewhat different vein in MS Gill V. Chief Election Commissioner, AIR 1978 SC 851 by the Supreme Court.
Karnataka high court in CIT vs ITC hotels in ITA 529/2007 31/1/2014: Held amount paid by assessee to trust for right to use COURT YARD under an MOU for indefinite future : is revenue expense SC 124 ITR Page 1 applied (Empire Jute)
Karnataka high court in Visvesvaraya educational university in ITA5007-12/2013 (20/12/2013)
HELD reviewing entire law on taxation and exemption of educational institution that:
i) Section 10(23c) dealing with exemption to educational institution under clauses (iiiab); (iiiad) and (iv) uses common phrase being “existing solely for educational purposes and not for purposes of profit”;
ii) As long as surplus is reasonable surplus there should be no difficulty in giving exemption subject to fulfillment of other conditions;
iii) However, if an educational institution/university starts making huge profit in guise of Surplus, exemption u/s 10(23c) shall stand forfeited;
iv) In high court opinion surplus cannot be more than 10-15% to meet contingencies and unforeseen expense; (sc order in Islamic academy referred)
v) Systematically making incremental profit would not come under umbrella of reasonable surplus;
vi) It is not sufficient u/s 10(23c) if an institution is established for educational purposes excluding profit motive , but it is also important that such institution continues to exist and operates for “not for profit” purposes, as where the unreasonable surplus is generated, said institution would cease to
