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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRAMOD KUMAR, VP & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the above mentioned appeals against the order dated 09.01.2017 passed by the Commissioner of Income Tax (Appeals) -54, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Ys. 2005- 06 & 2006-07.
2. The assessee has filed the present appeal against the order dated 09.01.2017 passed by the Commissioner of Income Tax (Appeals) -54, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2005- 06. & 2852/M/2017 A.Ys.2005-06 & 2006-07 3. The assessee has raised the following grounds: - “1. The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the assessing officer in reopening the assessment under section 147 read with section 148 despite the fact that there was no reason to believe that income had escaped assessment.
The learned Commissioner of Income Tax (Appeals) erred in not appreciating that the original assessment had been framed under section 143(3), and there was no failure on part of the appellant to disclose fully and truly all material facts necessary for the assessment and therefore the reopening suffered from the limitation prescribed by the proviso to section 147.
B. Denial of exemption under section 11:
The learned Commissioner of Income Tax (Appeals) erred in confirming the denial of the Appellant‟s claim for exemption under section 11 of the Act and in confirming the assessment of BCCI in the status of an AOP computing the income under the head „profits and gains of business‟.
The learned Commissioner of Income Tax (Appeals) erred in confirming the denial of the exemption under section 11 of the Act, despite the fact that as per the department's own admission the registration u/s 12A subsisted for the year under consideration i.e. A.Y. 2005-06, and there was no change in the activities of the appellant from earlier years in which the exemption under section 11 had been allowed to the appellant. & 2852/M/2017 A.Ys.2005-06 & 2006-07 5. The learned Commissioner of Income Tax (Appeals) failed to appreciate the legal position that once the registration (under Section 12A) exists, it is not open for the assessing officer to examine the objects of the trust and come to the conclusion that they are not charitable in nature. The reliance on the decision of Hon‟ble Supreme Court in case of ACIT V/s Surat City Gymkhana 170 taxman 612 (SC) has not been appreciated.
The learned Commissioner of Income Tax (Appeals) erred in confirming the AO‟s action of holding that the appellant is engaged in the activities which are commercial in the nature,‟ not engaged in charitable activities and therefore not entitled for exemption u/s 11 of the Act.
The learned Commissioner of Income Tax (Appeals) failed to appreciate that earn ng surpluses can never be the decisive factor to determine the nature of income or whether the activities are commercial or not and further the exemption u/s 11 cannot be rejected merely on the ground that the appellant‟s activities are akin to any commercial activity and the receipts / surplus have increased over the period.
The learned Commissioner of Income Tax (Appeals) failed to appreciate that none of the activities of the appellant were in the nature of business and were clearly in pursuance of the objects of the appellant.
Further the learned Commissioner of Income Tax (Appeals) erred in confirming the denial of the exemption under section 11 on the ground that the Appellant‟s activities were in the nature of business. Further the Commissioner of Income Tax (Appeals) erred in observing that and there was no internal control of the appellant on its expenditure expenses. & 2852/M/2017 A.Ys.2005-06 & 2006-07 C. Treatment of Contribution to benevolent funds and interest thereon:
The learned commissioner of Income Tax (Appeals) erred in confirming the disallowance of interest on earmarked funds to the extent of Rs.3,27,03,450/without appreciating that the said interest pertained to funds which did not belong to the appellant by virtue of an overriding obligation.
Without prejudice to the above the learned commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs.66,36,336/on account of interest on earmarked funds without appreciating that the said sum was already included in the disallowance of Rs.3,27,03,450/-
In the alternative and without prejudice to the above the learned Commissioner of Income Tax (appeals) erred in not appreciating that when the gross interest had been taxed any disallowance on account of interest on earmarked funds was not warranted.
The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance an amount of Rs. 18,88,06,672/- and Rs. 12,24,99,331/- being contribution to domestic and international benevolent fund, aggregating to Rs. 31,13,06,003/-
The learned Commissioner of Income Tax (Appeals) failed to follow the decision of Income Tax Appellate Tribunal (Mumbai) in its order 27" March 2012, where the ITAT had recorded a finding that both the contributions to the fund and interest on benevolent fund domestic and international are to be allowed as application of income u/s 11.
In the alternative and without prejudice to the above the learned Commissioner of income Tax (Appeals) erred in reject ng the claim of & 2852/M/2017 A.Ys.2005-06 & 2006-07 the appellant that if the income of the appellant was taxed as business income then the contribution to t @ funds was expenditure u/s 37 of the Act, incurred wholly end exclusively for the purposes of business.
C. Disallowance of TV Subventions share of media rights and payments to State Associations.
The Learned Commissioner of income Tax (Appeals) erred in confirming the disallowance of the expenditure of Rs.100,57,13,347/paid by the appellant to Mate Cricket Associations consisting of the sum of Rs.100,44,13,347/- on account of share in media rights and Rs.13,00,000/on account of coaching subsidy.
The learned Commissioner of Income Tax (Appeals) erred in disallowing the said expenditure “as application of income for the object of the appellant without appreciating that the same is entirely in pursuance of the objects of the appellant.
Strictly in the alternative and without prejudice to the contention that the payments of Rs.100,57,13,347/-constitute application of income under section 11, #@ the sad exemption is denied and the appellant is taxed as an AOP, carrying on business, the payments constitute expenditure, expenditure expended wholly and exclusively for the purposes of business and deserves to be allowed under section 37.
The learned Commissioner of Income Tax (Appeals) erred in confirming that the amount of Rs.100,57,13,347/represents distribution of profits to members, without appreciating the factual matrix in regard to the said payments. & 2852/M/2017 A.Ys.2005-06 & 2006-07 20. The learned Commissioner of Income Tax (Appeals) erred in observing that the infrastructure subsidy off Rs.11,08,56,866/- paid to the state associations is not an allowable expenditure.
E. Depreciation:
The learned Commissioner of Income Tax (Appeals) failed to appreciate that depreciation of Rs. 7,61,687/-should be allowed in computing the total income of the appellant. The allowance for depreciation should have been made irrespective of the manner in which the income of the appellant is to be computed, in view of the judicial decisions in this regard, which have held that a claim of depreciation is allowable to a trust even if the capital expenditure has been allowed as application.
Strictly in the alternative and without prejudice to the above if the income of the appellant is computed under the head profits and gains of business, depreciation as admissible under section 32 of the Act may be allowed to the appellant.
F. Claim of expenditure of Rs.15,47,94,938/-
Strictly in the alternative and without prejudice, if for any reason the claim of exemption under section 11 for the years prior to the year under appeal is denied, then the sum of Rs.15,47,94 838/- be treated as application of income for the year under appeal and i the income is computed under the head profits and gains of business, then the said expenditure be allowed under section 37 of the Act.
The Appellant craves leave to add alter or amend any of the g time before or at the time of hearing.” & 2852/M/2017 A.Ys.2005-06 & 2006-07 4. The assessee has raised the following additional grounds: - “The re-assessment proceedings have been completed without issuing notice under section 143(2) of the Act which is a necessary precondition. The said proceedings and the resultant reassessment order is therefore bad in law and deserves to be quashed.” 5. The brief facts of the case are that the assessee filed its return of income in Form No. 3A on 26.10.2005 declaring total income to the tune of Rs. Nil along with the income and expenditure statement, balance-sheet with schedules. Thereafter, the case of the assessee was reopened by issuance of notice u/s 148 of the Act. The assessment was completed in view of the provisions u/s 143(3) r.w.s. 147 of I. T. Act, 1961 by assessing the total income to the tune of Rs.1,685,957,430/-. Feeling aggrieved, the assessee has filed an appeal before the CIT(A) who partly allowed the claim of the assessee but the assessee was not satisfied, therefore, the assessee has filed the present appeal before us.
ISSUE NOs.1 to 24 5. We have heard the arguments advanced by the Ld. Representative of the parties and perused the record. The Ld. Representative of the assessee did not argue the case on merits. At the very outset, the Ld. Representative of the assessee has argued that the AO completed the assessment without issuance of notice u/s 143(2) of the Act, therefore, the re-assessment order is bad in law and is liable to be quashed. It is specifically argued that the issue has squarely been covered by the decision of Hon‟ble ITAT in the assessee‟s own case for the A.Ys. 2007-08 & 2008-09 bearing & ITA. No.2914/Mum/2017 decided on 02.08.2021 respectively, therefore, the re- & 2852/M/2017 A.Ys.2005-06 & 2006-07 assessment order is liable to be quashed. However, on the other hand, the Ld. Representative of the Department has refuted the said contention. The copy of the order dated 02.08.2021 is on the file in which the Hon‟ble ITAT has decided the issue as under: - “7. We have noted that the learned Departmental Representative‟s basic plea before us is that there is a distinction between the notices under section 143(2) not having been issued, and the evidence of service of such notices on record. He submits that in the present case the notices have been issued, as evident from the material on record, but admittedly there is no evidence about such a notice being served in this case. That is a lapse which can take place because of the records not being kept well but that lapse, according to the learned Departmental Representative, would not vitiate the reassessment proceedings. In support of this claim, learned Departmental Representative has submitted certain material, including a copy of the note sheet recording proceedings before the Assessing Officer, and copies of questionnaires issued to the assessee. There are issues also raised with respect to inappropriateness of the admission of additional ground by the learned CIT(A) as the grievance regarding non-service of notice under section 143(2) was not a pure question of law but also a question requiring investigation of facts. Howsoever attractive these arguments may seem at the first sight, these arguments lack legally sustainable merits. A plain look at the proceeding sheet before the Assessing Officer shows that, according to the said proceeding sheet, the notice under section 143(2) and 142(1) is issued immediately upon issuance of notice under section 147 (sic- 148) on 29th March 2012, and the entry immediately following the entry of issuance notices is the entry dated 27th April 2012 which records filing of letter & 2852/M/2017 A.Ys.2005-06 & 2006-07 by the assessee to the effect that the income tax return filed by the assessee may be treated as return in response to notice- a fact corroborated by the facts set out in the assessment order as well. Quite clearly, therefore, there was no return, filed in response to notice under section 148, before the Assessing Officer at the point of time when notice under section 143(2) was issued. Such a notice thus can not be relevant for the reassessment proceedings in question. There is no other reference to issuance of the notice under section 143(2) on the proceedings sheet. There is a reference to issuance of a questionnaire, which is rectified as a „letter‟ by striking off the word questionnaire, on 28th August 2012. As for the learned Departmental Representative‟s contention that the notice under section 143(2), as stated in the questionnaire in question- a copy of which was placed before us, accompanied the said questionnaire, that is a claim contested by the assessee. There is no evidence to the service of the notice purportedly attached to the said questionnaire. In any event, it is not clear whether this notice was the one issued on 29th March 2012 or it was some other notices. If this notice was the one issued on 29th March 2012, it had no legal sanctity because there was not even an income tax return before the Assessing Officer on that date. If it was some other notice, there is no mention of the same on the proceedings sheet, a copy of which is served by the learned Departmental Representative itself, but then where is the question of reissuance of the same notice if the proceeding sheet evidences issuance of notice, though not served, on 29th March 2012. Whichever way one looks at it, as evident from the proceedings recorded by the Assessing Officer, there was not even a valid issuance of notice. Issuance and service of a valid notice assuming jurisdiction under section 147 is not a matter of inference or assumption, it is to be established by the evidence & 2852/M/2017 A.Ys.2005-06 & 2006-07 on record. Clearly, that evidence is missing. Quite to the contrary, the contradictions in the proceedings sheet show that no such valid notice was even issued. Even in the assessment order, there is a mention of notice under section 142(1), but there is not even a mention of issuance of notice under section 143(2). In view of these factual findings, it is not really necessary to deal with the judicial precedents cited by the learned Departmental Representative which admittedly are on the basis of certain foundational facts which are missing in this case, i.e. evidence substantiating issuance of a lawful notice under section 143(2). We are, therefore, of the view that the issues raised by the learned Departmental Representative lack legally sustainable merits. We reject the plea of the revenue.
8. As regards the admission of additional ground of appeal before the learned CIT(A), we have noted that the issue raised was an important question of law and merely because a reference to some facts was required, admission of this ground by the CIT(A) could not have been declined. The proceedings before the CIT(A) are a mere continuation of the assessment proceedings and there is no bar is raising any issue, requiring further examination of facts, before the CIT(A). We, therefore find no substance in this plea of the learned Departmental Representative either. As regards participation in the reassessment proceedings by the assessee, nothing really turns on the same. When assumption of jurisdiction is illegal, as no valid notice under section 143(2) was issued and served on the assessee, mere participation by the assessee in the resultant proceedings cannot clothe it with legality.
9. We find that, as the learned CIT(A) rightly notes in his impugned order, issuance and service of notice under section 143(2) is a ITA Nos. 2851 & 2852/M/2017 A.Ys.2005-06 & 2006-07 foundational requirement for assessment under section 143(3) r.w.s. 147, and, in the absence of the same and notwithstanding the fact that the assessee may have participated in the related assessment proceedings, the reassessment order cannot have legal sanctity. As rightly analyzed by the learned CIT(A), Section 292 BB cannot come to the rescue of the Assessing Officer in such cases. We approve learned CIT(A)‟s reasoning and conclusions.
10. In view of the above discussions, as also bearing in mind entirety of the case, we approve the well-reasoned conclusions arrived at by the learned CIT(A) and decline to interfere in the matter.”
6. The copy of assessment order dated 30.05.2012 is also on the file which nowhere speaks about the issuance of notice u/s 143(2) of the Act. The decision of the Hon‟ble ITAT bearing & ITA. No.2914/Mum/2017 decided on 02.08.2021 is squarely applicable to the facts of the present case. Respectfully following the finding in the mentioned cases, we quashed the re-assessment order in question and decide these grounds in favour of the assessee against the revenue.
7. Since the re-assessment proceeding has been quashed while deciding the additional ground, therefore, the decision on the other issues would only be academic in nature, therefore, the same are not liable to be adjudicated.
ITA. NO.2852/Mum/2017 7. The facts of the present case are quite similar to the facts of the case as narrated above while deciding in , therefore, there is no need to repeat the same. However, the figure is different. The finding given above while deciding the is quite applicable to the facts of the present case also as mutatis and mutandis. Accordingly, we