Income Tax Appellate Tribunal - ChandigarhApeejay Education Society, Ludhiana vs Dcit (Exemptions), Chandigarh on 22 February, 2021I N T H E I NC OM E T A X A P PEL L A TE T RI B U N AL\n             D I VI SI O N B E NC H, " A" CH AN D I G A RH\n\n            BEFORE SHRI N.K. SAINI, VICE PRE SIDENT &\n                SHRIR.L NEGI, JUDICIAL MEMBER\n\n                   आयकरअपीलसं./ITA No.64/Chd/2017\n                         / Assessment Year :2009-10\n                   िनधा रणवष \n\n      The DCIT,                       बनाम Apeejay Education society,\n      Circle-1 (Exemptions),                             Jawahar Nagar,\n      Chandigarh                                         Jalandhar\n\n       थायीलेखासं./PAN NO: AAAPA3534F\n      अपीलाथ /Appellant                                       यथ /RespondentC.O. No. 12/Chd/2017(In ITA No. आयकरअपीलसं ./ITA No. 64/Chd/2017)\n                   िनधा रणवष    / Assessment Year : 2009-10\n      Apeejay Education society,      बनाम               The DCIT,\n      Jawahar Nagar,                                     Circle-1 (Exemptions),\n      Jalandhar                                          Chandigarh\n\n       थायीलेखासं./PAN NO: AAAPA3534F\n      अपीलाथ /Appellant                                       यथ /Respondent\n\n\n\n                           Hearing through video Conferencing\n\n     िनधा रतीक ओरसे/Assessee by : Smt. C. Chandrakanta, CIT\n     राज वक ओरसे/ Revenue by : Shri Salil Kapoor, Advocate and\n                                             Shri Sumit Lal Chandani Advocate\n\n     सुनवाईक तारीख/Date of Hearing                   :         17.12.2020\n     उदघोषणाक तारीख/Date of Pronouncement            :         22.02.2021\n\n                                        आदेश/Order\nPerR.L. Negi, Judicial Member:These are the appeal and cross objection filed by the Revenue and\n\nthe assessee respectively against the order dated 7.10.2016 passed by the2ITA No. 64/Chd/2017 & C.O. No. 12/Chd/2017 -Apeejay Education Soceity, Jalandhar\nLd. Commissioner of Income Tax (Appeals)-2 Jalandhar (for short\n\nCIT(A), whereby the Ld. CIT(A) has partly allowed the appeal filed by\n\nthe assessee against the assessment order dated 23.3.2015 passed by\n\nAsstt. Commissioner of Income Tax (Exemptions) [for short 'AO'] u/s\n\n143(3) read with section 148 of the Act.2.   The brief facts of the case are that the assessee is a society\n\nregistered u/s 12AA of the Act, engaged in educational activities and\n\nhas been running various educational institutions in different parts of\n\nthe country. The assessee society filed its return for the assessment year\n\nunder consideration declaring 'Nil' income. The return was accepted by\n\nthe Assessing Officer vide order dated 23.3.2015, however, treated the\n\nsoftware purchased by the assessee as accommodation entry. The\n\nassessee challenged the assessment order before the CIT(A). The Ld.\n\nCIT(A) vide order dated 07.10.2016 allowed the appeal of the assessee\n\nand held that the AO was not justified in holding that the purchase of\n\nsoftware was bogus. The Ld. CIT(A) accordingly directed the AO to\n\nallow the claim of expenses amounting to Rs. 2.35 crores on account of\n\nsoftware purchase during the year relevant to the assessment year under\n\nconsideration. Subsequently, on the basis of information received,\n\nregistration granted u/s 12AA of the Act was cancelled on 25.3.2013\n\nw.e.f. 2004-05.   In view of cancellation of registration, the assessee's\n\nclaim u/s 11 of the Act was withdrawn and the Assessing Officer\n\nreopened the case and passed the assessment order u/s 143(3) read with3ITA No. 64/Chd/2017 & C.O. No. 12/Chd/2017 -Apeejay Education Soceity, Jalandhar\nsection 148 of the Act and determined the total income of the assessee at\n\nRs. 3,76,00,000/-after making addition of Rs. 2,84,51,943/-on account\n\nof amount accumulated as per provisions of section 11(5) of the Act, Rs.\n\n2,35,00,000/- on account of bogus purchases and depreciation of Rs.\n\n1,41,00,000/-. The assessee challenged the assessment order before the\n\nLd. CIT(A). The Ld. CIT(A) afterhearing the assessee, partly allowed\n\nthe appeal and deleted the additions made by the Assessing Officer\n\nholding that the assessee is entitled to the claim of exemptionu/s 11of\n\nthe I.T. Act, however, upheld the reopening of the case by the AOu/s\n\n147r/wsection 148of the Act.3.   Aggrieved by the impugned order passed by the Ld. CIT(A), the\n\nRevenue is in appeal before this Tribunal. The Revenue has challenged\n\nthe impugned order onthe followinggrounds: -(i) Whether the Id. CIT(A)-2, Jalandhar has erred in law while\n           allowing the benefit underSection 11of the Act without\n           appreciating that there was a clear violation ofSection 13of the\n           Income Tax Act.(ii) Whether the CIT(A)-2, Jalandhar has erred in law while not\n           consideringSection 13(1)(c)of the I.T. Act, 1961, according to\n           which, any income of the trust directly or indirectly applied for the\n           benefit of any person referred to inSection 13(3)of the Act shall\n           not be excluded from the total income and provisions ofSection 11shall not apply to the same.(iii) Whether the CIT(A)-2, Jalandhar is right in law as the findings\n           recorded       are    perverse     and       contrary      to     the\n           evidence/material/statements available on record and duly\n           considered by the AO.(iv) Whether on facts and in the circumstances of the case, the Ld.\n           CIT(A)-2, Jalandhar is right in deleting the addition when the4ITA No. 64/Chd/2017 & C.O. No. 12/Chd/2017 -Apeejay Education Soceity, Jalandhar\n           statement of Sh. Sanjay D. Sonawani was not reliable whereas he\n           had clearly confirmed that he had provided accommodation entries\n           to the assessee and had deposed that no software was sold to the\n           assessee and his company had no infrastructure, manpower and\n           expertise to even develop the softwares.(v) Whether on the facts and in the circumstances of the case, the\n           Ld. CIT(A) -2, Jalandhar is right in deleting the addition even when\n           A.O. has clearly brought out that the assessee could not produce the\n           software developed by M/s WSL Limited during the survey\n           operation and in fact did not follow the normal procedure and\n           procurement as in the cases of other purchase.(vi) The Appellant craves leave to add or amend the grounds of\n           appeal on or before is heard and disposed off.4.   Since the Ld. CIT(A) upheld the action of the AO in reopening of\n\nthe caseu/s 147r.w.s. 148 of the Act, the assessee has filed Cross\n\nobjection by raising the following grounds: -1. That the notice issuedu/s 148and the Assessment Order passed\n           u/s 147/143(3) on 23.03.2015 of theIncome Tax Act. 1961 are\n           illegal, bad in law, without jurisdiction.2. That the proceedings initiated undersection 147/148of the Act\n           are invalid for want of jurisdiction as the pre-conditions for\n           initiation of the said proceedings as stipulated insection 147of the\n           Act are not satisfied.3. That in view of the facts and circumstances of the case. CIT(A)\n           has erred in upholding the reopening of Assessment U/s 148 which\n           was framed under 143(3) as there was neither any fresh material/\n           tangible material in forming the belief for reopening of assessment\n           u/s 147 of the Act.4. That in view of the facts and circumstances of the case the\n           Notice U/s 148 is issued on the basis of change of opinion, which is\n           not permissible. Hence the noticeu/s 148is illegal and bad in law.5. That on the facts and circumstances of the case, there is no\n           allegation as to any failure on the part of Assessee to produce\n           material facts truly and as such notice issued after four years from5ITA No. 64/Chd/2017 & C.O. No. 12/Chd/2017 -Apeejay Education Soceity, Jalandhar\n            the end of relevant assessment year is illegal, bad in law and\n            without jurisdiction.5.    The Ld. Departmental Representative (DR) submitted before us\n\nthat the Ld. CIT(A) has erred in allowing benefit undersection 11of the\n\nAct to the assessee without considering that any income of the trust\n\ndirectly or indirectly utilized for the benefit of any person referred to insection 13(3)of the Act shall not be excluded from total income. The\n\nLd. DR further contended that the Ld. CIT(A) has wrongly deleted the\n\naddition made by the AO on account of accommodation entries obtained\n\nfrom bogus parties to show purchase of software by ignoring the\n\nstatement of Sh. Sanjay D. Sonawani, who has categorically stated that\n\nno software was sold by the company to the assessee society. The Ld.\n\nDR further contended that since the findings of the Ld. CIT(A) are\n\nperverse and contrary to the evidence on record, the impugned order\n\nmay be set aside and the additions made by the AO may be confirmed.6.    On the other hand, the Ld. Counsel for the assessee submitted that\n\nthere is no merit in the appeal of the Revenue as the Ld. CIT(A) has\n\nrightly deleted the additions made by the Assessing Officer. The Ld.\n\nCounsel further pointed out that the Amritsar Bench of the ITAT has\n\ndecided the issue regarding cancellation of registration granted undersection 12AA (1)of the Act in favour of the assessee in assessee's own\n\ncase ITA No. 228(Asr)/2013vide common order dated 08.05.2014. Ld.\n\nCounsel further pointed out that the Tribunal has also dealt with the\n\nissue regarding purchase of software and decided the same in favour of6ITA No. 64/Chd/2017 & C.O. No. 12/Chd/2017 -Apeejay Education Soceity, Jalandhar\nthe assessee. The revenue challenged the said order before the Hon'ble\n\nPunjab and Haryana High Court. The Hon'ble court dismissed the appeal\n\nof the revenue holding that the questions of law sought to be raised in\n\nthis case do not arise.Further the Ld. Counsel submitted that in the\n\nassessment years 2008-09,2010-11 & 2011-12, the AO denied the benefit\n\nu/s 11 of the Act to the assessee. The assessee challenged the\n\nassessment order before the Ld. CIT(A). However, the Ld. CIT(A)\n\naffirmed the action of the AO. The matter travelled to the Amritsar\n\nBench of the ITAT.The ITAT set aside the order passed by the Ld.\n\nCIT(A). In the present cases, again the AO denied the benefit ofsection\n\n11of the Act to the assessee and made addition on account of bogus\n\npurchase and disallowance of depreciation apart from additionu/s 11(5)of the Act, holding the software purchase from WSL as sham\n\ntransactions. In the first appeal, the Ld. CIT(A) set aside the assessment\n\norder holding that matter relating to purchase of software from WSL has\n\nalready been considered by the Amritsar Bench of the Tribunal in\n\nassessee's cases ITA No. 712 to 714(Asr)2014 for the assessment year\n\n2008-09, 2010-11 and 2011-12. The department has filed thepresent\n\nappeal against the said order7.   In view of the aforesaid facts and circumstances of the case and\n\nthe decisions of Amritsar Bench of the Tribunal, the Ld. Counsel\n\nsubmitted that there is no merit in the appeal of the assessee, therefore\n\nthe same is liable to be dismissed.7ITA No. 64/Chd/2017 & C.O. No. 12/Chd/2017 -Apeejay Education Soceity, Jalandhar\nDuring the course of arguments, the Ld. DR fairly admitted that the\n\nAmritsar Bench of the Tribunal has decided the identical issues in\n\nfavour of the assessee.However, the Ld. DR supported the plea of the\n\nDepartment that the Ld. CIT(A) has wrongly allowed the claim of the\n\nassessee and deleted the addition made by the Assessing Officer.8.    We have heard the rival submissions of the parties and perused the\n\nmaterial on record including the decisions of the Amritsar Bench of the\n\nTribunal rendered in assessee's own case in ITA No. 228(Asr)\n\n/2013(supra), ITA No 712 to 714 (Asr)/2014 for the Assessment Years\n\n2008-09, 2010-11 & 2011-12.            As pointed out by the Ld. Counsel, the\n\nassessee vide ITA No. 228(Asr) /2013(supra) challenged the order dated\n\n25.03.2013     passed     by    Ld.    CIT,     Jalandhar-11,         withdrawing           the\n\nregistration grantedu/s 12AA(1), before the Amritsar Bench of the\n\nTribunal. The Tribunal vide common order dated 08.05,2014 allowed the\n\nappeal of the assessee and set aside the action of the Ld. CIT. We\n\nfurther notice that the Tribunalalso dealt with the issue relating to\n\npurchase of software by the assessee and decided the same in favour of\n\nthe assessee. The findings of the Amritsar Bench of the Tribunal are as\n\nunder: -"20)   In the present case, the activities of the assessee-trust which are\n             mainly of imparting education to the students under various\n             institutions referred in the order of learned CIT, Jalandhar-II,\n             Jalandhar, have been found to be genuine and no allegation\n             regarding not imparting of education has been framed by learned\n             CIT, Jalandhar-II, Jalandhar, in its order passed underSection\n             12AA(3)of the Act or by the Assessing Officer in his order passed\n             for the assessment years 2004-05 & 2009-10, referred8ITA No. 64/Chd/2017 & C.O. No. 12/Chd/2017 -Apeejay Education Soceity, Jalandhar\n      hereinabove. The activities of the trust are found to be genuine and\n      according to us the activities of the trust are genuine and cannot\n      be said to be for non-charitable purposes, especially that there is\n      not even a whisper from learned CIT, Jalandhar-II, Jalandhar,\n      with regard to the non-genuineness of the activities of the trust\n      which are found to be in consonance with the objects of the trust\n      and therefore, the learned CIT, Jalandhar-II, Jalandhar, is not\n      justified in cancelling and withdrawing the registration granted\n      underSection 12AAof the Act i.e. w.e.f. the assessment year 2004-05. In the present case, learned CIT, Jalandhar-II, Jalandhar, has\n      not brought on record any materials that the activities of 39 I.T.A.\n      No. 228 & 227(Asr)/2013 the trust are not genuine or are not\n      being carried out in accordance with the objects of the trust. Thus,\n      the order of learned CIT, Jalandhar-II, Jalandhar, cancelling the\n      registration is bad in law and, therefore, is set aside.21)   Reliance has been placed by learned counsel for the assessee in\n      the cases of Chaturvedi Har Prasad Education Society (supra),\n      Maharashtra Academy of Engineering & Educational Research\n      (Maeer) (supra), Institute of Science and Management (supra) and\n      Ajit Education Trust, Bharuch (supra) and these case-laws support\n      our views and all the decisions are placed on record.22)   As regards the purchase of software, much has been relied upon\n      the statement of one Mr. Sanjay D. Sonawani Manager of M/s\n      Washington Software Ltd. who stated that he has provided\n      accommodation entries to the assessee society. From the\n      statements given to the Department from time to time dated\n      16.03.2011, 12.04.2011, 12.05.2011 and 30.12.2011, it was argued\n      that Mr. Sanjay D Sonawani has contradicted his statements every\n      time and as regards the arguments made by learned Sr. DR Mr.\n      Mahavir Singh that his stand has already been constant with\n      regard to providing accommodation entries to the 40 I.T.A. No.\n      228 & 227(Asr)/2013 assessee whereas while reading page 26 of\n      order of learned CIT, Jalandhar-II, Jalandhar, in which it has\n      been clearly mentioned by him that Mr. Sonawani was threatened\n      by the Department for the statement dated 16.03.2011 which is\n      reproduced as under:"I have not made any false statement in Pune on 16.03.2011. In fact, at\n      that time, I was told that I would have a heavy liability of roughly 100\n      crores, so I got frightened and took the name of Parag Mehta."9ITA No. 64/Chd/2017 & C.O. No. 12/Chd/2017 -Apeejay Education Soceity, Jalandhar23)   The aforesaid statement recorded by the Department was whether\n              under threat of tax liability of 100 crores is not evidenced by any\n              documentary evidence by learned A.R. In the present issue, the\n              assessee has submitted the explanation vide letter dated\n              14.09.2012 available at page 8 to 10 of the order of learned CIT,\n              Jalandhar-II, Jalandhar, in which it was stated that the software\n              purchased from Washington Software Limited though debited to\n              various institutions, is installed in the central server at the head\n              office of utmost importance and required secrecy. The software\n              includes various modules and various types of reports which\n              include data of students and also about the institutions. It\n              generates reports which are very big and contain large number of\n              pages. Some of the reports were produced before the learned CIT,\n              Jalandhar-II, Jalandhar, and are available on record. Such\n              reports 41 I.T.A. No. 228 & 227(Asr)/2013 have been stated to be\n              wrong by learned CIT, Jalandhar-II, Jalandhar. The assessee, for\n              supplementing his contention, has enclosed the report of Trident\n              Information System Pvt. Ltd. certifying that the software were duly\n              installed in the central server at the head office and the said report\n              is available on record as mentioned hereinabove. It was argued\n              that the said software system has generated the reports right from\n              2004 to 2011.24)   In this regard and keeping in view the facts and circumstances as\n              above, it cannot be a case for withdrawal/cancellation of\n              registration granted underSection 12AA(1)of the Act and\n              therefore, in these facts and circumstances of the present case, our\n              findings as hereinabove. Learned CIT, Jalandhar-II, Jalandhar, is\n              not justified in withdrawing or cancelling the registration underSection 12AA(3)of the Act. Accordingly, all the grounds of the\n              assessee are allowed.9.      Further the Amritsar Bench has set aside the orders passed by the\n\nCIT(A) upholding the findings of the AO denying the benefit ofsection\n\n11of the Act to the assessee by invoking provisionsu/s 13(1)(c)and\n\nassessing the assessee's income under the head income from business in\n\nassessee's appeals ITA Nos. 712 to 714 (Asr)/2014 for the Assessment\n\nYears     2008-09,      2010-11 and 2011-12.The Ld. CIT(A) allowed the10ITA No. 64/Chd/2017 & C.O. No. 12/Chd/2017 -Apeejay Education Soceity, Jalandhar\nappeal of the assessee on merits by following the decision of the Amritsar\n\nBench of the ITAT in assessee's own case ITA No 712 to 714\n\n(Asr)/2014(supra) .The operative part of the impugned order passed by the Ld.\n\nCIT(A) reads as under:"5.5 I have gone through the copy of order of the honourable ITAT\n            Amritsar bench, in the case of the appellant in ITA number 712 to\n            714/Asr/2014 dated 12.08.2016 and find that this issue of purchase\n            of software from M/s Washington Software Ltd., which is based at\n            Pune has been examined in detail by the Honourable Tribunal and\n            after going through the same it was held that exemption undersection 11of the IT Act was wrongly denied to the appellant. The\n            order passed by the AO and confirmed by the CIT-A was reversed.\n            5.6 In view of the above stated facts, respectfully following the\n            order of the honourable ITAT Amritsar bench, since there is no\n            change in the facts of the case in this year, I hold that AO was not\n            justified in making an addition of Rs. 2,35,00,000/- on account of\n            bogus purchase of software and disallowance of the depreciation\n            of Rs. 1,41,00,000/- on that account. Further, I hold that applicant\n            is entitled to the claim of exemptionu/s 11of the IT Act.\n            Accordingly, the additions made by the AO of Rs. 3,76,00,000 are\n            deleted."10.   We notice that the issues involved in the present case are covered\n\nby the decisions of the Amritsar Bench of the Tribunal in assessee's own\n\ncases discussed above. The Ld. CIT(A) has passed the impugned order\n\nby following the decisions of the Amritsar Bench of the Tribunal\n\nrendered in assessee's own cases particularly in ITA No 712 to 714\n\n(Asr)/   2014   (supra).     Further,     the   Ld.    CIT(A)        has     categorically\n\nmentioned in its order that there is no change in the facts of the present11ITA No. 64/Chd/2017 & C.O. No. 12/Chd/2017 -Apeejay Education Soceity, Jalandhar\ncase. Hence, in the light of the aforesaid decisions of the ITAT Amritsar\n\nBench, there is no infirmity in the order passed by the Ld. CIT(A). On\n\nthe other hand, we do not find merit in the contention of the Revenue\n\nthat the Ld. CIT(A) has wrongly allowed the benefitu/s 11of the Act to\n\nthe assessee society. We therefore, do not find any reason to interfere\n\nwith the findings of the Ld. CIT(A). Accordingly, we uphold the\n\ndecision of the Ld. CIT(A) and dismiss the appeal of the Revenue.\n\nC.O. No. 12/Chd/2017:-So far as the cross objection filed by the assessee is concerned, the\n\nLd. Counsel for the assessee submitted before us that since the initiation\n\nof the proceedingsu/s 147of the Act is contrary to law, the Ld. CIT(A)\n\nought to have quashed the proceedings as void ab initio. The Ld.\n\nCounsel further pointed out that there was no fresh material / tangible\n\nmaterialbefore the AO to form the belief that the income of the assessee\n\nhas escaped, the notice issuedu/s 148of the Act was bad in law. The\n\nLd. Counsel further submittedas per the settled law; the Assessing\n\nOfficer cannot issue noticeu/s 148on the basis of change of opinion.The Ld. Counsel relied on the following case laws to substantiate the\n\ncontention that the notice issuedu/s 148of the Act is bad in law. The\n\nLd. Counsel placing reliance on the judgment of the Hon'ble Gujarat\n\nHigh Court in the case ofAhmedabad Urban Development Authority vs.\n\nDeputy Director of Income Tax[2017] 82 taxmann.com 177 (Guj)\n\nsubmitted that as per theratiolaid down inthe said case, the AO cannot12ITA No. 64/Chd/2017 & C.O. No. 12/Chd/2017 -Apeejay Education Soceity, Jalandhar\nreopen assessment solely on the basis of order cancelling registration of\n\ndevelopment authority u/s 122AA(3) retrospectively.The Ld. Counsel\n\nfurther submitted that as per the Lawlaid down bythe Hon'ble Supreme\n\nCourt in the case ofCIT vs. Kelvinator Of India Ltd.310 ITR 661(SC),\n\nthe AO can reopen the assessment, provided there is tangible material to\n\ncome to the conclusion that there is escapement of income from\n\nassessment. Further the reason must have a live link with formation of\n\nbelief.The Ld. Counsel further relied on the decision ofCIT vs.\n\nKelvinator of India Ltd.[2002] 123 Taxman 433 (Delhi) to substantiate\n\nthe contention that the AO cannot reopen the assessment on the basis of\n\nchange of opinion. In view of the lawlaid down inthe aforesaid cases,\n\nthe Ld. Counsel contended that since the AO had initiated the\n\nproceedingsu/s 148r/wsection 147of the Act in violation of the lawlaid down bythe Hon'ble Supreme Court and the High Courts, the Ld.\n\nCIT(A) has wrongly upheld the reopening of assessment in this case.Accordingly, the Ld. Counsel submitted that the findings of the Ld.\n\nCIT(A) on this issue are liable to be set aside.2.    On the other hand, the Ld. DR supporting the view taken by the\n\nLd. CIT(A) submitted that since the Assessing Officer had reason to\n\nbelieve that the income of the assessee had escaped, the Ld. CIT(A) has\n\nrightly upheld the action of the Assessing Officer.3.    We have heard the rival submissions of the parties and perused the\n\nmaterial on record.     Since we have upheld the findings of the Ld.13ITA No. 64/Chd/2017 & C.O. No. 12/Chd/2017 -Apeejay Education Soceity, Jalandhar\nCIT(A) 0n merits, deleting the addition made by the Assessing Officer\n\nand also upheld the findings of the Ld. CIT(A) that the assessee is\n\nentitled for exemptionu/s 11of the Act, the Cross Objection filed by\n\nthe assessee has become academic. Hence, we are of the considered view\n\nthat the issue raised by the assessee in cross objection do not require\n\nadjunction.In the result, the appeal filed by the Revenue and Cross objection\n\nfiled by the assessee are dismissed.O r d er p r o n o u n c ed o n 2 2. 0 2. 2 0 2 1.S d /-                                                           S d /-\n( N.K. SAINI)                                                (R.L.NEGI)\nउपा य  /Vice President                                        याियकसद य/ Judicial Member\nDated :22.02.2021\nआर.के ."\n"आदेशक "ितिलिपअ#ेिषत/ Copy of the order forwarded to :1. अपीलाथ / The Appellant2. "$यथ / The Respondent3. आयकरआयु&/ CIT4. आयकरआयु& (अपील)/ The CIT(A)5. िवभागीय"ितिनिध, आयकरअपीलीयआिधकरण, च*डीगढ़/ DR, ITAT, CHANDIGARH6. गाडफाईल/ Guard File\n                                                                   आदेशानुसार/ By order,\n                                                             सहायकपंजीकार/ Assistant Registrar