Ita/1255/2006 Of The Commissioner Of Income Tax v. Vishwa Bharathi Vidya Mandir

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATEHKD THIS THE 13 DAY OF AUGUST 2012 PRESENT THR HON BLE MR.JUSTICE K.SREKEDHAR RA ANT THR HON'BLE MR. JUSTICK B.MANOHAR ITA.NO.1255/2006 C/W ITA.NO.1256/2006 ITA.NO.1255/2006 BBRITIWE 1.THE COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE,C.R.BUILDING,QUEENS ROAD,BANGALORE.CENTRAL CIRCLE,C.R.BUILDING,QUEENS ROAD,BANGALORE. ooTHE DEPUTY DIRECTOR OF INCOME TAX,EXEMPTIONS,C.R.BUILDING,QUEENS ROAD,BANGALORE... APPBLLANEXEMPTIONS,C.R.BUILDING,QUEENS ROAD,BANGALORE... APPBLLAN (BY SRI.M.THIRUMALESH, ADV) AND: VISHWA BHARATHI VIDYA MANDIR,NO.17, ‘A’ MAIN,5 BLOCK, RAJAJINAGAR,BANGALORE — 560 O10. .. RESPONDE (BY SRIL.A.SHANKAR, ADV ITA FILED U/S. 260-A OF LT.ACT, 1961 ARISING OUTOF ORDER DATED 04-05-2006 PASSED IN IT (SS)A.164/BANG/2002 FOR THE ASSESSMENT YEARS 1990-91TO 2000-01, PRAYING TO FORMULATE THE SUBSTANTIALQUESTIONS OF LAW STATED THEREIN AND TO ALLOWTHR APPBAL AND SET ASIDE THR ORDER PASSBD BY THEITAT, BANGALORE IN IT (SS) A.164/BANG/2002 DATED04-05-2006 AND CONFIRM THE ORDER PASSED BY THEAPPEBELLATK COMMISSIONER CONFIRMING THR ORDPASSED BY THE DEPUTY DIRECTOR OF INCOME TAX,EXEMPTIONS, BANGALORE,IN-THE.INTERESTOFJUSTICE AND EQUITY. ITA.NO.1256/2006 BETWEEN: 1.THE COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE,C.R.BUILDING,QUEENS ROAD,BANGALORE.CENTRAL CIRCLE,C.R.BUILDING,QUEENS ROAD,BANGALORE. 2.THE DEPUTY DIRECTOR OF INCOME TAX,EXEMPTIONS,C.R.BUILDING,QUEENS ROAD,BANGALORE... APPBLLANEXEMPTIONS,C.R.BUILDING,QUEENS ROAD,BANGALORE... APPBLLAN (BY SRI.M.THIRUMALESH, ADV) ANT) VISHWA BHARATHI VIDYA MANDIR,NO.17, ‘A’ MAIN,5 BLOCK, RAJAJINAGAR,BANGALORE — 560 010._ RESPONDEN (BY SRILA.SHANKAR & SRI.M.LAVA, ADVS) ITA FILED U/S. 260-A OF LT.ACT, 1961 ARISING OUTOF ORDER DATED 04-05-2006 PASSED IN IT (SS)A.167/BANG/2002 FOR THE ASSESSMENT YEAR 1990-91TO 2000-01, PRAYING TO FORMULATE THE SUBSTANTIALQUESTIONS OF LAW STATED THEREIN AND TO ALLOWTHR APPBAL AND SET ASIDE THR ORDER PASSBD BY THEITAT, BANGALORE IN IT (SS) A.167/BANG/2002 DATED04-05-2006 AND CONFIRM THR ORDER PASSBD BY THEAPPEBELLATK COMMISSIONER CONFIRMING THR ORDPASSED BY THE DEPUTY DIRECTOR OF INCOME TAX,EXEMPTIONS, BANGALORE,IN|THE.INTERESTOFJUSTICE AND EQUITY. THRBSK [TA’S ARB HAVING BREN HRBRARD RESKBRVED AND COMING ON FOR PRONOUNCKMENT OJUDGEMENT THIS DAY,B.MANOHAR J.MADR THRRKFOLLOWIN JUDGMENT These appeals are filed by the Revenue challenging theorder dated 04-05-2006 made in IT(SS)A No.164/Bang/2002and|IT(SS)ANo.167/Bang/2002passedIncome|TaxAppellate Tribunal, Bangalore dismissing the appeal filed bythe Revenue and partly allowing the appeal filed by theass€sse€eforthe|blockperiodfrom O1.04.1990|=C13.07.1999| 2.since common question of law and fact involved in thisappeals, and common order passed by the appellatetribunal, both the appeals clubbed together and disposed oftby this order. 3,The respondent-assessee is a Society registered underthe Mysore Society’s Registration Act. It is running aneducational institution in the name and style as ‘VenkatInternationa]PublicSchool’aT|Rajajinagar.ori.T.Balakrishna is the President of the Society andPrincipal of the School. The assessee had not filed anyreturn though he is running the educational institution. Thesearch warrant was issued under Section 132 of the IncomeTax Act (hereinafter referred to as ‘the Act’) to search thepremises of Venkat International Public School and theresidential premises of T.Balakrishna, President and thePrincipal of the School. search was concluded on03-08-1999. The books of accounts relating to the Schoolwere seized along with other materials. A notice underSection 158BD ot the Act was issued in the name of theassessee-Society on 26-10-1999 directing the assessee to file its return for the block period. Further notice was alsoissued under Section 158BC of the Act to T.Balakrishna whois the President of the Society and Principal of the School on10-12-1999. The respondent-assessee filed the return forthe block period from 1-1-1990 to 13-77-1999 on 29-12-200declaring “NIL” income. The respondent-assessee alsoclaimed exemption under Section 10(22) of the Act. 4 The Assessing Officer passed the assessment orderdated 31-10-2001 and determined the income in the blockassessment period at Rs.1,81,45,710/-. Further denied theclaim of the assessee for exemption under Section 10(22) ofthe Act and also the deficit cash balance in each financialyear as unexplained investment and also held that notqualified for voluntary contribution fund and added theexcess income over expenditure deleting the unaccountedloans. Being aggrieved by the assessment order dated31-10-2001, the respondent-assessee preferred an appealbefore the Commissioner of Income Tax (Appeals)-V,Bangalore (hereinafter referred to as “CIT (Appeals)”)regarding denial of exemption under Section 10(22) of the Act and also voluntary contributions/donations. The CIT(Appeals) granted partial relief and denied the exemptionunder Section 10(22) of the Act and other additions. Beingagerieved by the partial relief and denying the exemptionunder Section 10(22) of the Act, the assessee preferred anappeal before the Income Tax Appellate Tribunal in IT(SS)ANo.16/7/Bang/2002 mainly contending that the assessmenorder is barred by limitation and the Assessing Authorityought to have passed the assessment order within a periodof two years i.e. on or before 31-08-2001 whereas theassessment order has been passed on 31-10-2001. Thesame is barred by the limitation. 5.The Revenue being aggrieved by the order passed bythe CIT (Appeals) insofar as deletion of the additions onaccount of deficit cash balance; deletion of additionalunaccountedDOrrowsand|deletionot >C6@?=47<contributions has filed an appeal before the Tribunal inIT(SS)A No.164/Bang/2002 mainly contending that inspiteof receiving donations, the receipts were not accounted andthe books of accounts are not properly maintained. Hence the assessee is not entitled for exemption under Section10(22) of the Act and voluntary contributions and cashcredits. 6.The Appellate Tribunal after considering the matter indetail partly allowed the appeal filed by the assessee anddismissed the appeal filed by the Revenue holding that theassessment order has not been passed within the period oilimitation and the same is barred by limitation. Beingagerieved by the order passed by the Income Tax AppellateTribunal, the Revenue has preferred these two appeals. T.The above appeals were admitted for consideration of the following substantial questions of law: (1)Whether the Tribunal was correct in holdingthat the search conducted based on thewarrant issued in the names of VenkatInternational Public School, Srt.Balakrishnaand Smt.Sulochana would be proceedingsinttiated on behalf of the assessee societyunder Sec.158BC of the Act and not undersec.158BD as held by the Assessing Officerand therefore barred by limitation?that the search conducted based on thewarrant issued in the names of VenkatInternational Public School, Srt.Balakrishnaand Smt.Sulochana would be proceedingsinttiated on behalf of the assessee societyunder Sec.158BC of the Act and not undersec.158BD as held by the Assessing Officerand therefore barred by limitation? (2)Whether the Tribunal was correct in holdingthat the assessee would be entitled to claimexemption under Sec.10(22) of the Act whenthe donations received by the society was notthat the assessee would be entitled to claimexemption under Sec.10(22) of the Act whenthe donations received by the society was not correctly accounted in the books and part of itwas declared as the assets of the promotersunder VDIS Scheme and for purchase ofShares and unaccounted expenditure7 (2)Whether the Tribunal was correct in holdingthat the assessee would be entitled to claimexemption under Sec.10(22) of the Act whenthe donations received by the society was notthat the assessee would be entitled to claimexemption under Sec.10(22) of the Act whenthe donations received by the society was not correctly accounted in the books and part of itwas declared as the assets of the promotersunder VDIS Scheme and for purchase ofShares and unaccounted expenditure7 (3)Whether the Tribunal was correct in holdingthat a sum of Rs.4,50,000/- undisclosedincome Rs.74,22,796/- deficit cash balanceand Rs.21,00,000/- cannot be treated as theincome of the assessee.7that a sum of Rs.4,50,000/- undisclosedincome Rs.74,22,796/- deficit cash balanceand Rs.21,00,000/- cannot be treated as theincome of the assessee.7 8.ori.M.Thirumalesh, learned counsel appearing for theRevenue contended that the order passed by the AppellateTribunal is contrary to law. Pursuant to the search warrantissued under Section 132 of the Act, after seizing the booksof accounts and other materials notice under Section 158BDwas issued to the assessee-Society on 26-10-1999 and alsonotice under Section 158BC of the Act was issued toori.T.Balakrishna who is the President of the Society andPrincipal of the School on 10-12-1999, calling upon them tofile the return for the block period. They have filed NILassessment on 29-12-2000. Since the notice is issued undersection 158BD, no limitation is applicable. Further, theassessee is not entitled for exemption under Section 10(22)of the Act since they have not maintained the accounts forthe donations received and also in respect of the undisclosed income from voluntary contributions. The difference ofincome.OVETthe expenditurecannotbe|treated|43undisclosed income for the block period. Further theAppellate Authority erred in holding that the deficit cashbalance cannot be treated as income of the assessee andsought for setting aside the order passed by the AppellateTribunal. QOOn the other hand, Sri.A.Shankar, learned counselappearing for the assessee contended that there is noinfirmity or irregularity in the order passed by the AppellateTribunal. Notice was issued under Section 158BD of the Act,for which assessment has to be completed within a period of2 years. In the instant case, admittedly, the assessmentorder has been passed on 31-10-2001 and the same isbarred by limitation. He also relied upon the order made inITA NO.1254/2006 disposed off on 28[=1]september 2011 inrespect of the sister institute of the assessee. On the verysame day, search warrant was issued and concluded thesearch and assessment was also made on the same day. Thesaid assessment order was set aside by the Income Tax Appellate Tribunal on the ground that the order is barred bylimitation. The order passed by the Appellate Tribunal isquestioned before this court. This court dismissed theappeal filed by the Revenue holding that the assessmentorder passed by the Tribunal is barred by limitation. Ordermade in ITA 1254/2007 covers the issue raised by theRevenue and sought for dismissal of the appeals. 10.We have carefully considered the arguments addressedby the learned counsel for the parties and perused the ordersimpugned passed by the authorities below, 11.The issue raised in these appeals is no more res-integra. The Division Bench of this Court in ITANO.1254/2006 disposed off on 28[=1]september 2011 (THECOMMISSIONER OF INCOME TAX, CENTRAL CIRCLE v/soT.ANN’S EDUCATIONAL SOCIEITY) has held that search ofthe school premises was finally concluded on 02.08.1999,the search of residential premises was concluded on26.08.1999, books and other documents were seized.Thereafter notice under Sec.158BD was issued and assessee has filed return. However, the assessment order came to bepassed on 31.10.2001 which is clearly barred by thelimitation. The Division Bench of this Court in para 2 and 3has held as follows: 11.The issue raised in these appeals is no more res-integra. The Division Bench of this Court in ITANO.1254/2006 disposed off on 28[=1]september 2011 (THECOMMISSIONER OF INCOME TAX, CENTRAL CIRCLE v/soT.ANN’S EDUCATIONAL SOCIEITY) has held that search ofthe school premises was finally concluded on 02.08.1999,the search of residential premises was concluded on26.08.1999, books and other documents were seized.Thereafter notice under Sec.158BD was issued and assessee has filed return. However, the assessment order came to bepassed on 31.10.2001 which is clearly barred by thelimitation. The Division Bench of this Court in para 2 and 3has held as follows: 0&A search warrant came to beissued in the case of Sri.T.Balakrishna andsmt.Sulochana Balakrishna. However, thewarrant showed that the premises to besearched is that of the assessee St.Ann’sHigh School at No.742 and 747, 6[th]Block,Rajajinagar, Bangalore. The search wasfinally concluded on 02.08.1999 at _ tpremises of St.Ann’s School, Rajajinagar,Bangalore. The search at the residence ofSri.T.Balakrishna|Wasconcluded.Of26.08. 1999.Thebooks|ofaccountsmaintained by the assessee were seized.Therefore, it is not in dispute that thepremises of the assessee was searched andthe books and other documents pertaining tothe assessee were seized. It is thereafter anotice was issued under Section 158BD,calling upon the assessee to file a return andblock assessment proceedings were initiatedand the assessment order came to be passedon 31.10.2001 where as the notice forassessment was issued on 26.10.1999. 3. Even thought the Tribunal has setaside the order, the case of the revenue wasit is a proceedings under Section 158BD andnot 158BC and therefore, the period of 2years for passing the assessment orderwould not arise. The Tribunal has held thatthe premises of the assessee was searchedon 13.07.1999. Again it was searched for the second time on 02.08.1999. 2 years is thetime prescribed for passing the assessmentorder from the date of last panchanama.Even though 02.08.1999 is taken as the dateof last panchanama, the assessment orderought to have been passed on or before31.08.2001. The assessment order 1Spassed on 31.10.2001. Therefore, it was ofthe view, it is clearly barred by time. Thesedates are not disputed. If that is so, the orderof the Tribunal is legal and valid and do notcallfor interference. 12.)since the facts and circumstance of these appeals are similar to that of ITA.NO.1254/2006 and in view of the order passed in the above said appeal, the appeals filed by theRevenue are liable to be dismissed and substantial questionsof law framed in these appeals are held against the Revenue.Accordingly, we pass the following: ORDER Both the appeals are dismissed. sd/- JUDGE _*| mp od/- JUDGE