Commissioner Of Income Tax,Chennai v. M/S.pentafour Software Employees' Welfare Foundation,Sekar Towers

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal Nos.582 to 584 of 2009 Commissioner of Income Tax,Chennai...Appellant in all Appeals -vs- M/s.Pentafour Software Employees' Welfare Foundation,Sekar Towers, 25, I Main Road, India Colony, Kodambakkam, Chennai-600 024...Respondent in all Appeals Appeals under Section 260A of the Income-tax Act, 1961against the common order dated 08.07.2008 on the file of theIncome-tax Appellate Tribunal, Chennai Bench 'B', Chennai, inI.T.A.Nos.751 and 752(Mds)/2007 and I.T.A.No.1007(Mds)/2007 andC.O.No.34(Mds)/2008 for the assessment years 1998-99, 1999-2000and 2002-03 respectively, against the Order dated 19/01/2007 and22/01/2007 made in ITA Nos.351,352 and 155/05-06 on the file ofthe Commissioner of Income Tax (Appeals)-V, Chennai-34 for theAssessment year 1998-99, 1999-00 and 2002-03 respectively,against the Assessment Order dated 30/09/2005 and 24/03/2005made in PAN No. on the file of the AssistantCommissioner of Income Tax, Company Circle V(2), Chennai for theAssessment year 1998-99, 1999-00 and 2002-03 respectively. These appeals under Section 260A of the Income-tax Act, 1961(hereinafter referred to as “the Act”) have been filed by theRevenue challenging the common order dated 08.07.2008, passed by https://hcservices.ecourts.gov.in/hcservices/ the Income-tax Appellate Tribunal, Chennai Bench 'B', Chennai(for brevity, “the Tribunal”), in I.T.A.Nos.751 and 752(Mds)/2007 and I.T.A.No.1007(Mds)/2007 and C.O.No.34(Mds)/2008 for theassessment years 1998-99, 1999-2000 and 2002-03 respectively. 2.The above appeals have been admitted, on 14.07.2009, onthe following substantial questions of law:- T.C.A.Nos.582 and 583 of 2009 :- “(i) Whether on the facts and circumstances ofthe case, the Tribunal was right in holding thatthe amount received by the assessee towards corpusfrom the employer cannot be treated as income.(ii) Whether on the facts and circumstances ofthe case, the Tribunal was right in holding thatthe amount received by the assessee towards corpuscannot be treated as income and therefore there isno escapement of income to invoke jurisdiction toreopen u/s 147.” T.C.A.No.584 of 2009 :- “(i) Whether on the facts and circumstances ofthe case, the Tribunal was right in dismissing theappeal of revenue as infructuous.(ii) Whether on the facts and circumstances ofthe case, the Tribunal was right in dismissing theDepartment's appeal with respect to CIT(A)'sdirection to allow proportionate expenditureagainst corpus receipt of Rs.9.25 lakhs as revenueexpenditure, as infructuous on the ground that theamounts received by the assessee towards itscorpus was not treated as income.” 3.The decision to be rendered in T.C.A.Nos.582 and 583 wouldcover the entire proceedings, if we uphold the order of theTribunal. This is so because, if we uphold the order of theTribunal, the re-assessment proceedings under Section 147 of theAct would be held to be invalid for those two years. In such anevent, there may not be any necessity to answer the substantialquestions of law framed in T.C.A.No.584 of 2009. If, on theother hand, we take a decision in favour of the Revenue inT.C.A.Nos.582 and 583 of 2009, we may be required to answer thesubstantial questions of law framed in T.C.A.No.584 of 2009.With this preface, we set out the factual details which arenecessary for the disposal of these appeals. 4.The assessee filed their return of income for theassessment years 1998-99 and 1999-2000 wherein, it had beenmentioned that the assessee is incorporated under Section 25 ofthe Companies Act, 1956. The return for the assessment year1998-99 was processed and the Assessing Officer issued a notice https://hcservices.ecourts.gov.in/hcservices/ 4.The assessee filed their return of income for theassessment years 1998-99 and 1999-2000 wherein, it had beenmentioned that the assessee is incorporated under Section 25 ofthe Companies Act, 1956. The return for the assessment year1998-99 was processed and the Assessing Officer issued a notice https://hcservices.ecourts.gov.in/hcservices/ dated 09.08.2000 under Section 142(1) of the Act, and called fordetails, of which, what would be relevant for the purposes ofthis case is the ledger copy of the corpus. The assesseeproduces the relevant copy of the ledger and also letters givenby Pentafour Software and Exports Ltd., dated 01.04.1997,31.03.1998 and 31,03.1998; and copies of the ledger account.The letters given by Pentafour Software and Exports Ltd., statedthat the contribution made by them is towards a corpus fund ofthe assessee which is to be invested in shares and securitiesand only the income from such investments is to be spent forachieving the objects of the foundation. The assessment for theyear 1998-99 was completed under Section 143(3) of the Act, on09.03.2001 and for the assessment year 1999-2000, it wascompleted under Section 143(3) of the Act, on 21.08.2001. 5.On a reading of the assessment order for the year 1998-99,it is seen that after the notice was issued under Section 143(2)of the Act, the authorized representative of the assesseeappeared before the Assessing Officer, and the case wasdiscussed and the assessment was completed. 6.Further, on a reading of the said assessment order dated09.03.2001, it is seen that the Assessing Officer was fullyaware that the assessee was incorporated under Section 25 of theCompanies Act, 1956, and he has recorded the same in theassessment order. After four years, the Assessing Officerissued notice under Section 148 of the Act proposing to reopenthe assessments for the assessment years 1998-99 and 1999-2000.The reason for reopening being that it was not brought to thenotice of the Assessing Officer that the assessee had not beenregistered under Section 12A of the Act in order to claimexemption on income received as “corpus fund”. Therefore, theAssessing Officer drew a conclusion that the assessee failed todisclose fully and truly all material facts necessary for theassessment. 7.The assessee submitted their reply dated 12.09.2005,firstly pointing out that the proposal to reopen the assessmentis an outcome of a change of opinion and is impermissible.Further, the contribution received from time to time was with aspecific direction to be invested in shares of group companiesand only the income therefrom, viz., dividends, should beapplied for the objects of the assessee company. 8.It was further submitted that the corpus receipts have thecharacter of capital receipts and it is definitely not income.Reliance was placed on the decision in the case of CIT vs. Shaw,Wallace & Co. reported in (1932) 34 BOMLR 1033. Theseobjections were dated 12.09.2005 and 19.09.2005 for the twoassessment years respectively. Subsequently, another submission was made before the Assessing Officer on 16.12.2004 stating thatthe expenses incurred were exclusively for cricket matches,which is one of the recreational facilities provided by thecompany. 9.The Assessing Officer passed the re-assessment orders on30.09.2005 holding that any corpus fund is exempted from thecharge of tax only under Section 11(1)(d) of the Act, and inorder to claim exemption under the said provision, the assesseehas to comply with the provisions of Section 12A of the Act andshould have got itself registered under Section 12A of the Act.Thus, the Assessing Officer concluded that the assessee has notfulfilled the conditions required to claim exemption on thecorpus fund under Section 11(1)(d) of the Act. was made before the Assessing Officer on 16.12.2004 stating thatthe expenses incurred were exclusively for cricket matches,which is one of the recreational facilities provided by thecompany. 9.The Assessing Officer passed the re-assessment orders on30.09.2005 holding that any corpus fund is exempted from thecharge of tax only under Section 11(1)(d) of the Act, and inorder to claim exemption under the said provision, the assesseehas to comply with the provisions of Section 12A of the Act andshould have got itself registered under Section 12A of the Act.Thus, the Assessing Officer concluded that the assessee has notfulfilled the conditions required to claim exemption on thecorpus fund under Section 11(1)(d) of the Act. 10.It was further pointed out that merely because theassessee company was registered under Section 25 of theCompanies Act, 1956, the same will not automatically entitle theassessee for exemption from payment of income tax on the corpusfund received. Furthermore, it is pointed out that the onus ison the assessee to prove that the corpus fund is a capitalreceipt and the assessee has failed to establish the same andsuch contention raised by the assessee requires to be rejected. 11.The assessee preferred appeals before the Commissioner ofIncome-tax (Appeals)-V, Chennai (for brevity, “the CIT(A)”).The appeals were dismissed by orders dated 19.01.2007.Aggrieved by the same, the assessee preferred appeals before theTribunal in I.T.A.Nos.751 and 752(Mds)/2007. The appeals wereallowed by the impugned order. 12.The first issue to be considered is whether the Tribunalwas right in upholding that there is no escapement of income, toinvoke the jurisdiction under Section 147 of the Act. 13.Mr.T.Ravi Kumar, learned Senior Standing Counsel wouldvehemently contend that the assessee is a foundation, but doesnot have a registration under Section 12A of the Act and unlessand until they obtain a registration under Section 12A of theAct, their claim for exemption under Section 11(1)(d) of the Actis not sustainable. Furthermore, the assessee has not satisfiedthe mandatory conditions which are required to be fulfilled forbeing entitled to exemption under Section 11(1)(d) of the Act. 14.Further, it is submitted that the Tribunal ought to haveappreciated the fact that the proper test to be applied iswhether the receipt is income or not and it has to be seen fromthe stand point of the person who receives it, to whom, itaccrues by virtue of his office. 15.It is submitted that the factual position in the instantcase is that the employees of the Pentafour Group of Companiesare to be provided certain facilities for which, the assesseecompany was incorporated under Section 25 of the Companies Act,1956, but for the said objectives, the assessee would not havebeen provided with such corpus by Pentafour Group of Companies.Since the amount received by the assessee towards corpus isrequired to be treated as income, which is escaped to assessmentincome tax, the reopening of assessments is valid. 16.In support of his contention that the receipt income isrequired to be viewed from the stand point of the person whoreceives it, reliance was placed on the decision of the Hon'bleSupreme Court in P.Krishnan Menon vs. CIT (1959) 35 ITR 48 (SC);Dr.K.George Thomas vs. CIT (1985) 156 ITR 0421; and Boeing vs.CIT reported in (2001) 250 ITR 0667 (Madras). This decision waspressed into service to explain as to what is income and how theCourt has interpreted the definition of “income” as definedunder Section 2(24) of the Act. 16.In support of his contention that the receipt income isrequired to be viewed from the stand point of the person whoreceives it, reliance was placed on the decision of the Hon'bleSupreme Court in P.Krishnan Menon vs. CIT (1959) 35 ITR 48 (SC);Dr.K.George Thomas vs. CIT (1985) 156 ITR 0421; and Boeing vs.CIT reported in (2001) 250 ITR 0667 (Madras). This decision waspressed into service to explain as to what is income and how theCourt has interpreted the definition of “income” as definedunder Section 2(24) of the Act. 17.With regard to the validity of the reopening proceedings,reliance was placed on the decisions in Areva T & D India Ltd.,vs. Assistant Commissioner of Income-tax reported in (2007) 294ITR 233 (Madras); Consolidated Photo and Finvest Ltd., vs.Assistant Commissioner of Income-tax reported in (2006) 281 ITR394 (Delhi); and P.S.Govindasamy Naidu & Sons vs. ACIT reportedin (2010) 324 ITR 44 (Rajasthan). Therefore, it is thesubmission of the learned counsel that the order passed by theTribunal requires to be set aside, as the amount received by theassessee as corpus from the three companies has been receivedwithout rendering any services and merely because the assesseeis registered under Section 25 of the Companies Act, 1956, doesnot automatically exempt from levy of income tax and theexemption is available only if the conditions stipulated underSection 11(1)(d) are satisfied. This income having escaped frombeing taxed, the Assessing Officer was well justified inreopening the assessment. Furthermore, it is reiterated thatthe onus to prove that the corpus is not taxable is on theassessee, which burden was discharged by the assessee andconsequently, the order passed by the Tribunal calls forinterference. 18.Ms.Sree Lakshmi Valli, learned counsel for therespondent/assessee sought to sustain the order of the Tribunalby contending that it was never the case of the assessee thatthey are a charitable institution or a trust claiming benefitunder Section 11(1)(d) of the Act and consequently, there is norequirement for the assessee to obtain registration underSection 12A of the Act. It is submitted that even assuming thatthe respondent/assessee had obtained registration, the voluntary contributions received from the companies by the assessee waswith a specific direction to be invested in shares and theassessee company was permitted to use only the dividendsreceived and nothing more as pleaded by the Revenue. 19.Further, by referring to the typed set of documents filedby the assessee which contains the certificate of incorporation;memorandum of association of the assessee company; the return ofincome for the assessment years 1998-99, 1999-2000; noticeissued under Section 142(1) of the Act; letters given byPentafour Software and Exports Ltd., giving the voluntarycontributions with specified condition; copies of the ledgeraccount, etc., and the assessment orders passed under Section143(3) of the Act, submitted that all the documents were placedbefore the Assessing Officer and there is no failure on the partof the assessee to fully and truly disclose the materials andtherefore, the reopening of the assessments is a clear case ofchange of opinion. 20.Furthermore, it is submitted that though the assessee hadgiven elaborate objections for the reopening of the assessments,the objections were not disposed of as mandated by the Hon'bleSupreme Court in GKN Driveshafts (India) Ltd., vs. Income TaxOfficer reported in (2003) 259 ITR 19 (SC). 20.Furthermore, it is submitted that though the assessee hadgiven elaborate objections for the reopening of the assessments,the objections were not disposed of as mandated by the Hon'bleSupreme Court in GKN Driveshafts (India) Ltd., vs. Income TaxOfficer reported in (2003) 259 ITR 19 (SC). 21.The learned counsel placed reliance on the decisions ofthe Hon'ble Supreme Court in CIT vs. Kelvinator of India Ltd.,reported in (2010) 320 ITR 0561 (SC); CIT & Anr. vs. ForamerFrance reported in (2003) 264 ITR 0566 (SC); CIT vs. S.R.M.T.Staff Association reported in (1996) 221 ITR 0234 (AP); and thedecision of the Delhi Bench of the Tribunal in Income TaxOfficer (Exemption) vs. Smt.Basanti Devi & Shri Chakhan Lal GargEducation Trust, I.T.A.No.5082 (Del)2010, dated 19.01.2011,which was affirmed by the Hon'ble High Court of Delhi inI.T.A.No.927/2009, dated 23.09.2009 and the appeal filed by theRevenue against the said order in C.A.No.007036/2011, which wasdismissed by the Hon'ble Supreme Court on 17.09.2018. 22.We have heard the learned counsel for the parties andcarefully perused the materials placed on record. 23.At the very outset, we wish to point out that the case aspleaded by the Revenue, before us, was never the case of theassessee before the Assessing Officer, at the first instance,while the assessments were completed under Section 143(3) of theAct. During the re-assessment proceedings, the assessee neverclaimed that it is a trust or an institution established for acharitable purpose, nor it is the case of the assessee that theyhave applied for or obtained registration under Section 12A ofthe Act. That apart, the assessee never pleaded that the assessee is entitled to the exemption under Section 11(1)(d) ofthe Act. In such circumstances, the very premise based onwhich, notices for re-assessments were issued on 09.08.2000 and29.03.2005 is absolutely without any basis. Admittedly, thenotices were issued after four years, after the assessments werecompleted. Thus, unless and until there was a tangible materialavailable with the Assessing Officer to show that the assesseehas not made full and true disclosure and income assessable totax had escaped assessment, re-assessments could not have beenresorted to. 24.There can be no dispute on the above proposition, whichhas been laid down in several decisions and more particularly,in the decision in Kelvinator of India Ltd., (supra). Thiswould have been sufficient for us to hold that the reopening ofthe assessments was bad in law. Nevertheless, since the learnedSenior Standing Counsel for the Revenue made an elaboratesubmission before us, we are to examine as to how theassessments were completed. From the above, it is seen that one of the documents calledfor was the ledger copy of the corpus fund. 26.The assessee's case was that, it received voluntarycontribution from three companies towards the corpus fund of theassessee company with a condition that, it should be invested inshares and securities and only the income from such investmentis to be spent for achieving the objects of the assessee. Thecopies of the letters given by the companies, which extended thevoluntary contributions were enclosed. The copy of the ledgeraccount for the corpus fund was enclosed for the entire period https://hcservices.ecourts.gov.in/hcservices/ along with all the details. After the receipt of the documents,notice under Section 143(2) of the Act was issued to theassessee, the assessee's authorized representative attended thehearing before the Assessing Officer and the assessment wascompleted under Section 143(3) on 09.03.2001. https://hcservices.ecourts.gov.in/hcservices/ along with all the details. After the receipt of the documents,notice under Section 143(2) of the Act was issued to theassessee, the assessee's authorized representative attended thehearing before the Assessing Officer and the assessment wascompleted under Section 143(3) on 09.03.2001. 27.The Assessing Officer in the said order clearly recordsthe presence of the authorized representative of the assesseeand that the case was discussed. Apart from that, the AssessingOfficer was fully aware that the assessee company is registeredunder Section 25 of the Companies Act, 1956, and this is notedin the assessment order when the Assessing Officer consideredthe expenditure of a sum of Rs.87,350/- and held that it is alsoin the nature of capital expenditure and not mere repairs andmaintenance, as the assessee itself has been incorporated underSection 25 of the Companies Act, 1956, on 22.01.1997. In thisfactual background, we need to examine the reasons forreopening. 28.The Assessing Officer while issuing the notice dated29.03.2005, stated that the assessee had not been registeredunder Section 12A of the Act and therefore, cannot claimexemption on income received as corpus fund. As pointed outearlier, at no point of time, the assessee claimed to be a trustor an institution possessing a registration under Section 12A ofthe Act. Consequently, there was no claim for any exemptionunder Section 11(1)(d) of the Act. In such circumstances, theAssessing Officer misdirected himself in posing such a questionand stating the same to be a reason for reopening. This isamply clear that it is only a case of change of opinion, but nota case of re-assessment. What the Assessing Officer has done isto review the scrutiny assessments, which were completed underSection 143(3), which is wholly impermissible. In the reasonsfor reopening, there is no reference to any tangible materialwhich has come to the notice of the Assessing Officer after thescrutiny assessments under Section 143(3) of the Act warrantingthe reopening of the assessments. There is no finding as to howincome chargeable to tax has escaped assessment and this was onaccount of failure of the assessee to fully and truly discloseall particulars. In the absence of any of these, the reopeninghas to be held to be wholly unsustainable and a clear case ofchange of opinion. 29.Having held so, it may not be necessary for us to referto the decisions referred to by the Revenue, viz., P.KrishnanMenon (supra) and Dr.K.George Thomas (supra), nor go into theaspect as what would be the definition of “income”, as such asituation does not arise for consideration, as we have held thatthe reopening is bad in law. One more issue, which was pointedout by the assessee was that no order has been passed by the Assessing Officer after the assessee gave their objections tothe reopening proceedings, vide their objections dated12.09.2005, 19.09.2005 and 16.12.2004. 30.The learned Senior Standing Counsel for the Revenuepointed out that the objections given by the assessee were dealtwith by the Assessing Officer in the re-assessment orders andeven assuming that a separate speaking order was not passed bythe Assessing Officer after objections were received from theassessee, that would at best be a curable defect and on thatground, the assessments cannot be nullified. In this regard,the learned counsel referred to the decision in the case ofAreva T & D India Ltd. (supra). The Court while approving thedecisions of the Allahabad High Court in Sant Baba Mohan Singhvs. CIT reported in (1973) 90 ITR 197 and that of the RajasthanHigh Court in CIT vs. Gyan Prakash Gupta reported in (1987) 165ITR 501, held that failure to pass an order on the objectionsgiven by the assessee to the reopening proceedings is only aprocedural irregularity committed by the Assessing Officer andhence, the re-assessments cannot be annulled. 31.In Jayanthi Natarajan vs. Assistant Commissioner ofIncome Tax reported in (2018) 401 ITR 0215, one of us (TSSJ) wasconsidering the validity of a reopening proceedings in a writpetition filed by the assessee. One of the grounds urged wasthat, in spite of specific objection being raised to thereopening proceedings by the assessee, the Assessing Officerfailed to pass a speaking order disposing of the assessee'sobjections as per the principles laid down by the Hon'bleSupreme Court in GKN Driveshafts (India) Ltd. (supra) and theAssessing Officer passed an assessment order disposing of theobjections while completing the assessment. The assesseecontended that in the event of failure to dispose of theobjections raised by the assessee, reopening proceedings underSection 147 of the Act is liable to be set aside. 32.In this regard, reliance was placed on the decision inthe case of IOT Infrastructure and Energy Services vs. ACIT,reported in (2010) 329 ITR 547 (Bom) and Rabo India Finance Ltd.vs. DCIT reported in (2011) 346 ITR 81 (Bombay). Reliance wasalso placed on the decision of the High Court of Bombay in thecase of KSS Petron Private Ltd. vs. Assistant Commissioner ofIncome Tax, Appeal No.224 of 2014, dated 03.10.2016. 33.The Revenue resisted the plea by referring to thedecision in Areva T & D India Ltd. (supra) as done before us bythe Revenue stating that if at all it is true that no speakingorder is passed, it is a procedural error and that cannot annulin an assessment. The decision in Areva T & D India Ltd.(supra) was distinguishable on the ground that the Court had held that both on the failure to issue notice under Section 143(2) and failure to follow the procedure prescribed in GKNDriveshafts (India) Ltd. (supra) are procedural defects and canbe cured. 34.It was pointed out that the fundamental basis for thisconclusion has been overruled by the Hon'ble Supreme Court inACIT vs. Hotel Blue Moon reported in (2010) 321 ITR 362(SC),which has been followed by the Division Bench in N.Ahamed Alivs. Income Tax Officer in Tax Case (Appeal) No.766 of 2014,dated 19.11.2014. Apart from that, reliance was also placed onthe decision of the Division Bench of the High Court of AndhraPradesh in the case of B.F.Dittia vs. Appellate Authority,Income Tax Department and the Income Tax Officer (PublicRelations) reported in (2008) 307 ITR 158 (A.P) in which, thedecision of the Hon'ble Supreme Court in Sona Builders vs. Unionof India reported in (2001) 10 SCC 280 (SC) was followed holdingthat an order in violation of principles of natural justicedeserves to be quashed and not set aside and remanded. Further,it was pointed out that the decision in the case of SonaBuilders (supra) was not considered by the Division Bench ofthis Court in Areva T & D India Ltd. 35.Further, reliance was placed on the decision of theDivision Bench of this Court in the case of Sterlite Industries(India) Ltd. vs. Assistant Commissioner of Income Tax andanother reported in (2008) 304 ITR (Mad), wherein, it was heldthat when a notice under Section 148 of the Act, is withoutjurisdiction, especially in cases beyond four years, where thereis no failure on the part of the assessee, to fully and trulydisclose all material facts, the proceedings deserves to bequashed simplicitor. After noting the above legal position,which was placed before the Court, the Court took intoconsideration the factual position and allowed the writpetition. 35.Further, reliance was placed on the decision of theDivision Bench of this Court in the case of Sterlite Industries(India) Ltd. vs. Assistant Commissioner of Income Tax andanother reported in (2008) 304 ITR (Mad), wherein, it was heldthat when a notice under Section 148 of the Act, is withoutjurisdiction, especially in cases beyond four years, where thereis no failure on the part of the assessee, to fully and trulydisclose all material facts, the proceedings deserves to bequashed simplicitor. After noting the above legal position,which was placed before the Court, the Court took intoconsideration the factual position and allowed the writpetition. 36.In our considered view, the decision arrived at in thecase of Jayanthi Narayanan (supra) reflexes the correct positionof law because, the procedure carved out by the Hon'ble SupremeCourt in GKN Driveshafts (India) Ltd. (supra) not only binds theassessee, but also the Revenue. Filing of objections to thereasons for reopening is not an empty formality. If this is so,passing a speaking order on the objections cannot be treated asan empty formality and to be brushed aside as a proceduralerror. The purpose for passing a speaking order on theobjections is to afford an opportunity to the assessee toquestion the same, in the event the assessee is aggrieved bysuch an order. Therefore, to state that it would be sufficientfor the Assessing Officer to deal with the objections in theassessment order and thereafter, if the assessee is aggrieved, he can file a statutory appeal, is a proposition which would beagainst the principles of natural justice. Therefore, if anorder violates the law laid down by the Hon'ble Supreme Court,then it has to be necessarily held to be an order withoutjurisdiction. The law declared by the Hon'ble Apex Court is abinding character and is a source of law and to itself whichwill bind all authorities. 37.We are to bear in mind that the procedure carved out inGKN Driveshafts (India) Ltd. (supra) is with a view to providethe assessee an opportunity to put forth his submission. Thisis in the light of the fact that reopening of a concludedassessment after a period of assessment is a very seriousmatter. This would be evident from the observations of theHon'ble Apex Court in Kelvinator of India Ltd. (supra) wherein,it was held that post 1[st] April, 1989, power to reopen is muchwider. However, one needs to give a schematic interpretation tothe words “reason to believe” failing which, Section 147 wouldgive arbitrary powers to the Assessing Officer to reopenassessments on the basis of “mere change of opinion”, whichcannot be per se reason to reopen. 38.Further, it was pointed out that the conceptualdifference between the power to review and power to reopen is tobe kept in mind; the Assessing Officer has no power to review;he has the power to re-assess, but the re-assessment has to bebased on fulfilment of certain pre-condition and if the conceptof change of opinion is removed in the garb of reopening theassessment, review would take place. It was further held thatone must treat the concept of “change of opinion” as an in-builttest to check abuse of power by the Assessing Officer andtherefore, after 01.04.1989, the Assessing Officer has power toreopen, provided there is tangible material to come to theconclusion that there is escapement of income from assessmentand reasons must have live link with the formation of thebelief. 39.The Hon'ble Supreme Court in GKN Driveshafts (India) Ltd.(supra) had clarified that when a notice under Section 148 ofthe Act is issued, the proper course of action for the noticeeis to file a return and if he so desires, to seek for reasonsfor issuing such notice. Further, it was held that theAssessing Officer is bound to furnish reasons within areasonable time, on receipt of the reasons, the noticee isentitled to file objections and the Assessing Officer is boundto dispose of the same by passing a speaking order. 40.We do not agree with the interpretation canvassed beforeus that assuming objections were not disposed of by a speakingorder, it would be only a procedural error. https://hcservices.ecourts.gov.in/hcservices/ 41.We have referred to Kelvinator of India Ltd. (supra),which has pointed out as to how serious is reopening of aconcluded assessment, that too, after four years. The Hon'bleSupreme Court has laid down the law and it has been mademandatory for the Assessing Officer to pass a speaking order.The use of the word “bound” cannot be rendered meaningless.Therefore, we are of the clear view that if there has been aprocedural error, it goes to the root of the matter therebyaffecting the jurisdiction of the Assessing Officer to proceedfurther to give a fresh innings to the Assessing Officer on theground that it is a procedural error, will not only dilute thedecision of the Hon'ble Supreme Court in GKN Driveshafts (India)Ltd. (supra), but would lead to abuse of power conferred underSection 147 of the Act, which had been pointed out in Kelvinatorof India Ltd. (supra) Therefore, this would be the one morereason to hold that the reopening of assessments are bad. 42.It would be beneficial to refer to the decision in thecase of S.R.M.T. Staff Association (supra). The facts of thesaid case were more or less identical to the assessee's caseexcept the fact that the assessee was registered as a societywhereas, the assessee before us is a company registered underSection 25 of the Companies Act, 1956. The said societycollected certain amounts from various businessmen for bringingout a souvenir requesting them to send advertisements forpublication in the said souvenir. The Income-tax Officerassessed to tax the difference of the amount received and theexpenses, treating as “revenue receipts” in the hands of theassessee society negativing the claim of the society that it isa charitable institution and entitled to exemption and theamounts paid to the society by the businessmen were voluntarycontributions. 43.The assessee filed appeal before the Commissioner ofIncome-tax (Appeals), who held that the amounts paid by thebusinessmen towards advertisements could not be considered as“donations”. On appeal to the Tribunal, the Tribunal followingthe judgment of the Bombay High Court in CIT vs. Trustees ofVisha Nima Charity Trust reported in (1982) 138 ITR 564 (Bom),held that the amounts received by the society could not betreated as “trading receipts” and they were mere voluntarycontributions. Further, the Tribunal confirmed the findingrecorded by the authorities that the society was not acharitable institution. When the matter was carried on appealto the Bombay High Court, the question referred was whether theTribunal was correct in holding that the amount received by wayof advertising charges are voluntary contributions or donationsand are not trading receipts. After taking note of Section 2(24) of the Act, it was held that the assessee society has beenheld as not a charitable institution and it is not also one of the institutions which are satisfied under Section 2(24) of theAct which are treated as “income” within the meaning of Section2(24) of the Act and therefore, voluntary contributions receivedby the assessee society cannot be treated as “income” or“trading receipts”. This decision applies with full force insupport of the assessee herein and the Revenue is not able toput forth any submission to dislodge such conclusion. 44.It would be beneficial to refer to the decision of theHon'ble Supreme Court in Income Tax Officer vs. TechSpan India(P.) Ltd. reported in (2018) 404 ITR 0010 (SC). The Hon'bleSupreme Court was considering the validity of a reopeningproceedings under Section 148 of the Act on the ground thatdeduction under Section 10A of the Act had been allowed inexcess and the income had escaped assessment. While dismissingthe appeal filed by the Revenue, it was pointed out that thevery basis of issuing show cause notice for reopening was thatthe assessee was not maintaining any separate books of accountfor the two categories of expenses and held that the conclusionof the Assessing Officer that the deduction under Section 10A ofthe Act was allowed in excess was based on nothing, but a changeof opinion on the same facts and circumstances, which werealready in the knowledge of the Assessing Officer even duringthe original assessment proceedings. 45.In the preceding paragraphs, we have noted the factualposition in the assessee's case as well as the reasons forreopening mentioned in the notice dated 29.03.2005 and we findthat there is absolutely no other material available with theassessee except the records which formed part of the assessmentfile. Therefore, the reopening was a clear case of change ofopinion. 46.In the result, the appeals filed by the Revenue aredismissed and the substantial questions of law are answeredagainst the Revenue and in favour of the assessee. 47.So far as T.C.A.No.584 of 2009 is concerned, this ispertaining to the proportionate expenditure against the corpusreceipt of Rs.9.25 lakhs treated as revenue expenditure. 48.In T.C.A.Nos.582 and 583 of 2009, we have held that thereopening is bad. Consequently, the original assessments forthe assessment years 1998-99 and 1999-2000 have been sustained.In the said assessments, the Assessing Officer has treated thecorpus as not taxable. Consequently, the Tribunal has allowedthe proportionate expenditure incidentally as revenueexpenditure. We find no reason to interfere with the saidfinding. 49.Accordingly, the tax case appeal is dismissed and thesubstantial questions of law are answered against the Revenueand in favour of the assessee. 50.In the result, these tax case appeals are dismissed andthe substantial questions of law are answered against theRevenue and in favour of the assessee. No costs. Sd/- Assistant Registrar(CS III) //True Copy// Sub Assistant RegistrarabrTo1. The Assistant Commissioner of Income-tax, Company Circle V(2), Chennai.2. The Assistant Commissioner of Income-tax, Company Circle (2), Chennai.3. The Commissioner of Income-tax (Appeals)-V, Chennai-600 034.4. The Income-tax Appellate Tribunal, Chennai Bench 'B', Chennai.+1 cc to M/s.N.Muthukumar, Advocate, S.R.No.66843T.C.A.Nos.582 to 584 of 2009RSV(CO)SSM(17/09/2019)