378 October 20 To October 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 43 u^20
under section 12AA for which section
56(2)(vii) would not apply.(ii) The cancellation of registration granted
to YI on 26.10.2017 will not vitiate the
assessment and the Assessing Officer
should have made independent investiga-
tion to ascertain whether any obligation
to disclose value of underlying assets
of YI ought to have been undisclosed
by the assessee. The reassessment notice
was issued purely based on the infor-
mation obtained from the investigation
wing of the Department and, thus, it
was out of non-application of mind of
the Assessing Officer.
(iii) The Assessing Officer relied on the report
of DIT investigation and inspite of the
repeated requests of the assessee did
not give copies or allow inspection of
materials, which prompted the invoca-
tion of section 148 by him.
(iv) The disclosure of interest under section
299 of the Companies Act, 1956 is
exempted in respect of not for profit
companies. Hence, the directors are
exempted from disclosure of interest.
As regards interest in the non-profit
organization, the assessee relied on CWT
v. Arvind Narottam [1988] 39 Taxman
368 (SC) where it was observed “a
mere right to be considered for the
distribution of income or the corpus of
the trust fund cannot be regarded as
an ‘interest’ since it was not capable
of valuation”. When the assessee did
not earn any income or acquire any
interest in the asset on account of
becoming a shareholder or director of
YI, non-disclosure of such directorship
could not be the basis for reopening
the assessment with extended time
period. Reliance was placed on CIT v.
Kelvinator India Ltd. [2010] 187 Taxman
312/320 ITR 561 (SC).
(v) The Revenue received investigation report
during financial year 2015-16, whereas
the notice under section 148 was is-
sued on the last day of limitation, i.e.,
31.03.2018 and to record to the reason
to believe escapement of income and
obtain satisfaction of the PCIT on the
last date of time limitation exhibited
mala fide motives.
(vi) The Assessing Officer rejected the ob-
jections of the assessee for reopening
the assessment and the demand of the
assessee for copies of documents relied
upon by him, when rejected by the
Assessing Officer resulted in denial of
the principles of natural justice.
(vii) In the assessment of YI, the amount
of ` 90 crore was treated as bogus
or paper entry and the appeal in this
regard is pending. The Revenue held
that the entry is unreliable in that as-
sessment of YI but relied on the same
material for the purpose of reopening
the assessment of the petitioners. Thus,
there was a contradiction in the stand
of the Revenue.
(viii) Section 56(2)(vii) does not apply to any
sum of money or any property received
from any trust or institution registered
under section 12AA. Since YI is a section
25 company and it is eligible for tax
exemption at the time the shareholders
obtained shares from the company, the
cancellation of registration subsequently
is not retrospective and, hence, would
not burden the shareholders under
section 56(2)(vii).
(ix) The Assessing Officer, while applying
rule 11UA, must have adopted book
value by the total number of shares,
whereas he has adopted ` 407 crores
as against the 90 crores being the
value of assets obtained by YI. The
reassessment was made on the basis of
a wrong and bizarre calculation and,
hence, it is not tenable in law.CuriOus Case OF ‘naTiOnal Herald’