Ita/36/2009 Of The Commissioner Of Income Tax v. M/S International Society For Krishna Consciousness

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 9 DAY OF JUNE 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE HEMANT CHANDANGOUDAR| ILT.A. NO.36 OF 2ZOO BETWEEN 1.THE COMMISSIONER OF INCOME TAX. C R BUILDING, QUEENS ROAD, BANGALORE. 2THE DEPUTY COMMISSIONER OFINCOME TAX, CIRCLE-17(1),C.R.BUILDING,QUEENS ROAD,BANGALORE.INCOME TAX, CIRCLE-17(1),C.R.BUILDING,QUEENS ROAD,BANGALORE. . APPELLANTS| (BY SRI K V ARAVIND, ADV.) AND M/S. INTERNATIONAL SOCIETY FOR |KRISHNA CONSCIOUSNESS,HARE KRISHNA HILL,RAJAJINAGAR,| BANGALORE. (BY SRI ASHOK A.KULKARNI, ADV. FORSRI K R PRASAD, ADV.) . RESPONDENT THIS ITA IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961ARISING OUT OF ORDER DATED OQO5-09-2008 PASSED IN ITNO.113/BNG/2008,FORTHE|ASSESSMENTYEAR|1997-98, PRAYINT TO | I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED THEREIN, II]. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSEDBY THE ITAT BANGALORE IN ITA NO. 113/BNG/2008,DATED05-09-2008 CONFIRM THE ORDERS OF THE DEPUTY DIRECTOR OF|INCOME TAX , CIRCLE-17(1),BANGALORE IN THE INTEREST OF|JUSTICE AND EQUITY. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260-A of the Income) Tax Act, 1961 (nereinafter referred to as the Act, forshort) has been filed by the revenue.The subject matterof the appeal pertains to Assessment year 1997-98. Theappeal was admitted by a Bench of this Court vide orderdated 29.06.2009 on the following substantial questions|of law: a)Whetner tne Tribunal was correct In|noiding|tnat|tneASS@SSINQ|Officer.WaSjustifying|Indroppingthereopened|assessmentsunder.an|order|dated 15.03.2005 without recording any reasons byrecording its own reasons for the first time in-its order presuming the reasons on which theAssessing Officer would have passed aneorder?| 2. Facts giving rise to filing of this appeal briefly|stated are that the assessee is a society registeredunder Section 12A of the Act. During the course of theproceedings for grant of registration under Section 80Gof the Act, the assessee had filed copies of statement ofaccounts for year ending 31.03.1997. As per the|aforesaidaccounts,theincome.beforegrantingexemption|Under|Section11.and|1)|WaSRs.12,60,9195/-. The assessee was therefore requiredto file the return of income under Section 139(4A) of theAct. The assessee stated to have submitted its accountto the ISKON, Mumbai for consolidation of theiraccounts. The assessee did not file the return asrequired under Section 139(4A) of the Act. Therefore,|the proceeding under Section 14/7 of the Act were initiated by the assessing officer. In response to theaforesaid proceeding, the assessee filed return ofincome on 28.04.2004. Therefore, the proceeding wasdropped vide order dated 15.03.2005. 3. The Director of Income Tax (Exemptions)|initiated proceeding under Section 263 of the Act and anotice was issued to the assessee as to why order dated15.03.2005 be not cancelled and assessing officer bedirectedTO.frameafresh|assessmentfor.theAssessment year 1997-98. The Director of Income Tax.(Exemptions) by an order dated 30.03.2007 inter alianeid that the order dated 15.03.2005, by whichproceeding under Section 147 were dropped for theAssessment.Year199 /-98tO.De|erroneausand.prejudicial to the interest of the revenue. Tne orderdated 15.03.2005 was cancelled and matter wasremitted to the assessing officer by treating the incomeshown as opening balance for the Assessment year1997-98. Being aggrieved, the assessee filed an appeal 3. The Director of Income Tax (Exemptions)|initiated proceeding under Section 263 of the Act and anotice was issued to the assessee as to why order dated15.03.2005 be not cancelled and assessing officer bedirectedTO.frameafresh|assessmentfor.theAssessment year 1997-98. The Director of Income Tax.(Exemptions) by an order dated 30.03.2007 inter alianeid that the order dated 15.03.2005, by whichproceeding under Section 147 were dropped for theAssessment.Year199 /-98tO.De|erroneausand.prejudicial to the interest of the revenue. Tne orderdated 15.03.2005 was cancelled and matter wasremitted to the assessing officer by treating the incomeshown as opening balance for the Assessment year1997-98. Being aggrieved, the assessee filed an appeal before the Income Tax Appellate Tribunal. The tribunalby an order dated 05.09.2008 inter alia held thatcontention of the assessee that they were sendingaccounts to Mumbai for the purpose of consolidation iscorrect and the aforesaid fact finds place in the orderpassed by the Director of Income Tax (Exemptions)Under Section 263 of the Act. It was further held thatassessee was registered under Section 12A of the Actand accounts were being submitted along with ISKON,Mumbai. It was further held that Director of Income Tax(Exemptions) has not found anything wrong with theaccounts for the financial year 1996-97. 4. It was further held that the assessing officer|applied his mind on the basis of the facts and found thatno income has escaped assessment for the Assessmentyear 1997-98. It was further held that the view taken bythe assessing officer is one of the possible views andtherefore, in view of law laid by the Supreme Court inthe case of“MALABAR INDUSTRIES CO. LTD., VS.| CIT’, 243 ITR 83, It cannot be held that the order ofthe assessing officer was erroneous and required anaction under Section 263 of the Act. The. tribunalaccordingly quashed the order under Section 263 of theAct and partly allowed the appeal. In the aforesaidfactual background, this appeal has been filed. 5. Learned counsel for the revenue submitted that|the assessee was admittedly registered under Section12A of the Act and did not file the return. Therefore, theproceeding under Section 148 of the Act initiated. It isfurther submitted that scope of proceeding underSection 148 and 263 of the Act ts different and theproceeding under Section 263 could not have beenbrought on the ground that the income was alreadyassessed to tax in Mumbai. In support of aforesaidSubmission on a decision of the Supreme Court in>COMMISSIONER OF INCOME-TAX, MUMBAI VS.|AMITABH BACHAN., (2016) 69 TAXMANN.COM 170(SC).It is also urged that the assessing officer was under a duty to proceed with the assessment and to findout whether amount in question was assessed to tax inMumbeal. 6. On the other hand, learned counsel for theassessee has submitted that the proceedings underSection 263 of the Act were brought after taking intoaccount factual aspect. A decision of division bench ofthis Court in W.A.No.595/2007 has also been referred toand our attention has been invited to paragraph 6 of theaforesaid decision and it has been pointed out that thereturn of income was filed for the first time in the year2000-01 showing opening corpus fund of Rs.39.59Crores in the balance sheet. It is also urged that corpusfund is not taxable. In this connection, our attention hasbeen invited to the order passed by the Commissioner ofIncome Tax (Appeals) as well as Section 11(1)(d) of theAct where tne finding nas been recorded that amount inquestion is part of corpus fund. It is also submitted thatproceeding under Section 263 of the Act were ab initio void and the tribunal has passed a reasoned order,which does not call for any interference. void and the tribunal has passed a reasoned order,which does not call for any interference. 7. By way of rejoinder reply, learned counsel for|the revenue has invited our attention to paragraphs 7 &8 of the order passed by the division bench inW.A.No.595/2007 and has submitted that assessee is aseparate legal entity and was required to file the return.8. We have considered the submissions made on.both the sides and have perused the record. Admittedlyin response to the notice under Section 148, theassessee filed the return on 28.04.2004. From perusalof the proceeding, it is evident that the assessee wascalled upon to furnish certain details as well asdocuments on 28.10.2004 and 06.01.2005, which wereSupplied by the assessee on 18.02.2005. The DeputyDirector, Income Tax (Exemptions) on 23.02.2005confirmed that the assessee’s consolidation of accountswas done at Mumbai and assessment was completed. —After examining the submissions, made by the assessee, the proceeding under Section 14/7 of the Act weredropped. The Director of Income Tax (Exemptions) inits order has found that the assessee for the Assessmentyear 1997-98 had disclosed an opening Dalance ofRs.15,88,02,860/- as corpus fund. The finding recordedby the Director of Income Tax (Exemptions) that theproceedings were dropped without proper enquiry andappreciation, cannot be sustained as from perusal of therecord, it is evident that an enquiry was conducted andconfirmation was sought from Deputy Director, IncomeTax(Exemptions),Mumbal.whoconfirmed.that|consolidation was done at Mumbai and assessment wascompleted and exemption under Section 11 of the Actwas granted. The fact that assessee was sendingaccounts to Mumbal is recorded in the order underSection 263 passed by the Director of Income Tax(Exemptions), Mumbai. The relevant extract has beenreproduced by the tribunal in para 4.5 of the order,which is reproduced below for facility of reference: “Up to the asst. year 2000-01, theassessee Nave included complete accountsof its Bangalore Branch functioning fromHare Krishna Hill in Rajajinagar, Bangalorein its final audited accounts. ” 9. Thus, the accounts were being submitted along|with ISKON, Mumbai. The Director of Income Tax(Exemptions) has not found anything wrong in theaccounts for the Assessment year 1997-98. It ispertinent to mention here that view taken by theassessing officer is one of the two plausible views andtherefore, in view of law laid down by the SupremeCourt in the case ofMALABAR INDUSTRIAL CO. LTDa A Supra, the proceeding under Section 263 of the Actcannot be upheld. The tribunal has therefore, rightly setaside the proceeding under Section 263 of the Actinitiated against the assessee. In view of preceding analysis, the substantial|question of law is answered against the revenue. In | 9-2�72/439��C2�6:�5:9�;.56�05@�<27.9�.5�9-./�011203��9-2� /0<2�;0.3/�056�./�-272?@�6./<.//26�� //� ������������������������������������������������������������������