LITTLE ANGELS EDUCATIONAL SOCIETY Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) These writ Petitions are filed challenging the communication dated 06.9.2010 issued by the Respondent. By the said communication, the objections raised by the Petitioners to the notices dated 30.3.2010, under Section 148 of the Income Tax Act, 1961 (the Act), proposing to reassess the income for five assessment years i.e., 2004-05 to 2007-08 were rejected. As all the matters are interconnected, they are being disposed of by this common order.

(2.) We will notice the factual background from W.P. No. 24241 of 2010. The Petitioner is an educational institution registered under Section 12A of the Act with effect from 21.3.2003. They were granted exemption under Section 10(23-C)(vi) of the Act vide orders dated 28.10.2005 passed by the Chief Commissioner of Income Tax, Visakhapatnam for the years 2003-04 to 2005-06. They filed a return of income for the assessment year 2004-2005 showing the taxable income as 'nil'. The said return was taken up for scrutiny. The Respondent issued notice under Section 143(2) and 142(1) of the Act. In response the Petitioner produced relevant information and records. The scrutiny was completed accepting the taxable income as 'nil' as declared by the Assessee with the advent of claiming exemption under Section 10(23-C) of the Act on the excess of income over expenditure. It appears that, during the enquiry, the Respondent sought clarification with respect to certain transactions of the Petitioner with M/s. Margadarsi Chit Funds (P) Ltd., (hereafter, Chit Fund). Vide their letter dated 08.3.2006, the Petitioner submitted an explanation denying that it is "an investment". The Petitioner took up the plea that it is a long term liability, and not an investment or a deposit.

(3.) For the assessment year 2005-2006, the return of income, filed by the Petitioner declaring taxable income as 'nil', was accepted after scrutiny, and an assessment order was passed under Section 156 of the Act on 28.8.2006. For subsequent years 2006-07, 2007-08 as well as for the assessment year 2003-04 also the return of income filed by the Petitioner, showing taxable income as 'nil', was accepted and assessment orders were passed. Be it noted that, when the return of income for the assessment years 2003-04, 2005-06 and 2007-08 was scrutinized, the Respondent did not raise any queries with respect to investment/ deposit by the Petitioner in the Chit fund.