CIT (Exemptions) Vs Tibetan Children’s Village Dal Lake (Himachal Pradesh High Court)
Himachal Pradesh High Court held that exemption u/s 11 of the Income Tax Act duly entitled even if ‘Funds Pending Utilization’ was more than the prescribed limit as proved that funds were utilized for the purpose of achieving its objective.
Facts- The return was filed by the respondent-assessee for A.Ys. 2004-05 and 2005-06 after claiming exemption u/s. 11 of the Act. The cases of the assessee were, however, re-opened u/s. 147 of the Act for the said assessment years on the ground that the assessee had earmarked funds amounting to Rs.20,66,74,263/- for A.Y. 2004-05 under the head ‘Fund Pending Utilization’ and had not included in receipts.
AO observed that if the said amount was routed through the Income & Expenditure account, the application of income would have fallen short of the statutorily required 85%, and hence income had escaped assessment within the meaning of Section 147 of the Act. He held that the deficiency in application of fund for charitable purposes during the year under assessment comes to Rs.5,55,50,896/- and the same is added back to the taxable income of the assessee-trust.
CIT(A) dismissed the appeal. Whereas, Tribunal deleted the additions.
Conclusion- The Tribunal held that having thus formed an opinion on the treatment of earmarked funds shown as “Funds Pending Utilization”, the Assessing Officer could not have resorted to re- opening the case of the assessee on the same issue, since it amounts to change of opinion which cannot be resorted to in re-assessment Proceedings.
The Tribunal held that proceedings for re-opening of assessment on the ground of income escaping assessment are an exception to the finality of proceedings arrived at u/s. 143(3) of the Act during the regular assessment proceedings of the assessment years; the Assessing Officer, having applied his mind to the issue of corpus funds, after the assessee explained the same with evidences in the regular assessment, impugned notice u/s. 148 of the Act (issued by the Assessing Officer stating that the earmarked funds shown in the Funds Pending Utilization are to be treated as income of the assessee on the same set of facts and material which were in the knowledge of the Assessing Officer), is invalid.
Held that it is established that the assessee utilized the fund for the purpose of achieving its objective, and that the utilization was more than the prescribed limit, consequent upon which there was no reason to make additions against the assessee.
We are satisfied that no question of law much less substantial question of law arises for consideration in these appeals and we hold that the findings recorded by the Tribunal cannot, in the facts and circumstances, be said to be perverse.
FULL TEXT OF THE JUDGMENT/ORDER OF HIMACHAL PRADESH HIGH COURT
