MAHARASHTRA CRICKET ASSOCIATION vs. INCOME TAX OFFICER, WARD 11(1) AND ANR

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WP/10793/2013HC BombayHCBM01046585201308 April 2014Author: HON'BLE SHRI JUSTICE B.P. COLABAWALLA,HON'BLE SHRI JUSTICE S.J. VAZIFDAR5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court noted that the original assessment was under Section 143(1), which, following the Supreme Court's decision in Asst. CIT vs. Rajesh Jhaveri Stock Brokers P. Ltd., cannot be treated as an order of assessment, thus the question of change of opinion may not arise. The Court found it difficult in the writ petition to hold that there was no tangible material for reopening, but emphasized that all issues, including this aspect, must be considered by the authorities under the Act. The Court directed the authorities to consider the assessee's contention that the Revenue incorrectly recorded the nature of the Rs.1,58,69,279/- receipt and whether the assessee had represented it as voluntary. The Court also directed the authorities to decide the impact of the admitted changes in the society's objects on the tax liability. The Court clarified that all contentions of the petitioner regarding the validity of the notice and the order rejecting objections are kept open and shall be decided by the authorities uninfluenced by the High Court's order. The writ petition was disposed of subject to these clarifications.

What were the facts?

The petitioner, Maharashtra Cricket Association (MCA), a society registered under the Societies Registration Act and Bombay Public Trust Act, with registration under Section 12-A of the Income Tax Act, 1961, challenged a notice dated 15.03.2013 under Section 148 to reopen its assessment for AY 2006-2007, and an order dated 08.11.2013 rejecting its objections. The original return for AY 2006-2007 was processed under Section 143(1), not Section 143(3). The reasons for reopening included the receipt of Rs.1,58,69,279/- from an ODI match, which the Revenue believed was business income and not a voluntary receipt, and a change in the society's objects in 2004 without communication to the department. The Revenue relied on an ITAT Mumbai Bench decision in BCCI vs. ITO.

What were the issues?

1. Whether the notice under Section 148 and the subsequent order rejecting objections are valid, considering the original assessment was under Section 143(1) and the reasons provided by the Revenue. Assessee's Contentions: - The Revenue's reasons for reopening are based on an incorrect premise that the Rs.1,58,69,279/- was considered a voluntary receipt by the assessee. The assessee claims this is factually incorrect and the Revenue proceeded on a wrong basis. - While changes in the society's objects are admitted (e.g., restricting focus to cricket teams), the assessee contends these changes do not affect its tax liability. Revenue's Contentions: - The surplus from the India-Sri Lanka ODI of Rs.1,58,69,279/- appears to be in the nature of receipt from business/commercial activity, not a voluntary receipt. - There was a change in the objects of the society in 2004, which was not communicated to the department. The Revenue relies on the ITAT Mumbai Bench decision in BCCI vs. ITO, holding that benefits under Sections 11 and 13 for altered objects are not automatic unless vetted by revenue authorities. - The Revenue believes income has escaped assessment amounting to Rs. one lakh or more.

Which sections of the Income-tax Act were involved?

Section 148,Section 147,Section 11,Section 13,Section 143(1),Section 143(3)

AI-generated summary — verify with the full judgment below

wp10793-13 vai IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELALTE JURISDICTION WRIT PETITION NO.10793 OF 2013 Maharashtra Cricket Association, Pune ...Petitioner V/s. Income Tax Officer, Ward 11(1), Pune & Anr. ...Respondents Mr.Mihir C. Naniwadekar for the Petitioner. Mr.Vimal Gupta, Senior Counsel i/b Mr.Vipul Bajpayee for the Respondents. CORAM : S.J. VAZIFDAR & B.P. COLABAWALLA, JJ. DATE : 8TH APRIL, 2014. P.C. :-

1.

The petitioner has challenged a notice dated 15.03.2013 under section 148 of the Income Tax Act, 1961 seeking to reopen the petitioner's assessment for the assessment year (AY) 2006-2007 and an order dated 08.11.2013, rejecting their objections thereto.

2.

The petitioner is a society registered under the Societies Registration Act and the Bombay Public Trust Act. The petitioner was also granted registration on 09.12.1991 under section 12-A of the Income Tax Act (the said Act). In the earlier years after scrutiny assessment, the petitioner was held entitled to the benefits under sections 11 to 13 of the said Act. However, for the assessment year 1/5

wp10793-13 in question viz. 2006-2007, the petitioner filed its return of income and the same was processed under section 143(1) and not under section 143(3). It is in this context that the impugned notice and the impugned order must be tested. It is however, clarified that the same is only for the purpose of this writ petition and must be tested further by the authorities under the Act.

3.

On receipt of the impugned notice under section 148, the petitioner sought reasons in support thereof. By a letter dated 07.06.2013, respondent No.1 furnished the reasons. The same read as under :- “REASONS FOR REOPENING OF ASSESSMENT The original return of income declaring total income of Rs.(-) 46,62,359/- was filed on 22/01/2008. The Maharashtra Cricket Association is a trust registered u/s 12A vide registration dated 09-12-1991 and claims exemption u/s 11 in the return filed.

1.

During the year assessee has received Surplus from India Shrilanka ODI of Rs.1,58,69,279/- inter alia other receipt. However assessee has considered this amount as voluntary receipt. Apparently, the said amount appears to be in the nature of receipt from the business / commercial activity and not a voluntary receipt.

2.

Further, it has also come to the notice that assessee has been granted registration u/s 12A on 09-12-1991, however, during the assessment proceedings for A.Y. 2008-09 and 2009-10 has filed objects of the society constituted on 29.10.2004. Apparently, it is noticed that there is change in objects of the assessee. Assessee failed to communicate 2/5

wp10793-13 such change to the department. In view of the same reason I have reason to believe that income of the assessee has escaped assessment for AY 2006-07. This reason is further strengthened by recent decision of ITAT Mumbai Bench 'B' in the case of BCCI vs ITO Wd-5(1)(2), Mumbai wherein it is held that benefit under sections 11 and 13 for altered objects is not automatic unless changes in objects are vetted by revenue authorities. In view of the above, I have reasons to believe that assessee's income during the year has escaped assessment for AY 2006-07 and income chargeable to tax escaping assessment is likely to amount to Rs.one lakh rupees or more within the meaning of section 147 of the I.T. Act, 1961. Issue notice u/s 148.” 4. 3/5

wp10793-13

6.

Mr.Naniwadekar stated that the order dated 07.06.2013 incorrectly records that the assessee considered the amount of Rs.1,58,69,279/- to be a voluntary receipt. He submitted that respondent No.1 has therefore, proceeded on an incorrect basis.

7.

In the facts of this case, we deem it appropriate that the authorities under the Act should consider this aspect. From the record before us, it is difficult to hold whether or not the petitioner had represented the receipts to be voluntary receipts and whether or not the AO had considered this aspect of the matter.

8.

A communication dated 07.06.2013 also refers to changes in the objects of the petitioner's society. A comparative chart has been furnished at Exhibit “J” to the petition. That there are changes is admitted. For instance, prior to the amendments, the objects of the petitioner were “To arrange, supervise and regulate visits of teams”. The amendment of 2004 was not in respect of “teams” in general but was restricted to cricket teams. The amended clause read as under :- “To arrange, supervise and regulate visits of cricket teams of member, clubs, national and international teams or any other cricket teams”. It is contended however, that the changes would make no difference to the tax liability. This is also an aspect which must be left for the decision of the authorities under the Act. The amendments were brought about in the year 2004 and were therefore, relevant to 4/5

wp10793-13 the assessment proceedings for the assessment year in question viz. 2006-2007. 9. In the circumstances, the petitioner ought to challenge the notice by availing the machinery provided under the Act. It is clarified that all the petitioner's contentions, including those raised in this petition as to the validity of the impugned notice and the impugned order, rejecting the petitioner's objections, are kept open. The authorities shall decide the same uninfluenced by this order.

10.

Subject to the above clarifications, the writ petition is disposed of. There shall be no order as to costs. The interim order shall continue upto and and including 05.05.2014. (B.P. COLABAWALLA, J.) (S.J. VAZIFDAR, J.) 5/5

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