CHANDRAKANT GULABRAO BORDE,,PUNE vs. INCOME-TAX OFFICER, WARD - 13(1),, PUNE

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This appeal is filed by the Assessee against the order of CIT(A)-8, Pune, dated 23.10.2017 for the Assessment Year 2013-14.

“1. On the facts and circumstances of the case, the reassessment proceedings u/s.147 being initiated in absence of material showing escapement of income in the hands of the appellant is void and may kindly be cancelled. The reassessment proceedings initiated purely to verify the claim of exception in absence of tangible material and to make enquiries being invalid may kindly be cancelled. 2. The learned CIT(A) erred in law and on facts in confirming addition of Rs.75,00,000/- under head income from other sources under section 56 of the Income Tax Act, 1961. 3. The leaned CIT(A) erred in law and on facts in confirming addition of Rs.5,00,000/-received Baroda Cricket Association under the head income from Profession under section 28 of the Income Tax Act,1961.

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2.1 Assessee also raised Additional ground and the same reads as under:

“Whether on the facts and the circumstances of the case, the order of reassessment u/s.147 is valid in law when reasons recorded were not provided to the assessee and the opportunity to raise objections was not allowed to the assessee. The reassessment proceedings therefore become invalid in law for not complying with the mandatory procedure as laid down by Supreme Court in GKN Driveshaft (India) Ltd. Vs. ITO 259 ITR 19. It is respectfully submitted that the above ground of appeal is purely legal in nature and goes to the matter may kindly be admitted and decided on merits.”

a former cricketer, worked with M/s.Cooper Engineers Ltd., Chinchwad.

Assessee reported earning of income from Honorarium from BCCI, rental

income, income from other sources and capital gains etc. Assessee claims

that he was never a professional cricketer and he was only a sportsman.

During the year under consideration, assessee received (1) Rs.75 lakhs from

Board of Control for Cricket in India (BCCI) as One-Time Receipt (OTB)/award

and claimed the same as exempt in view of CBDT Circular No.447 of 1986

dated 22-01-1986; and also (2) Rs.5 lakhs from Baroda Cricket Association

(BCA) as OTB/award in recognition of his achievements in Indian

Cricket.OTB/awards are given to the Sport persons/former players/their

widows, as the case may be, as decided by the working committee of the

BCCI/BCB. It is a voluntary payment and is paid to facilitate the contribution

of players of the past. The same are not taxable receipts. Assessee received

the same, during the year, when the assessee is not a cricketer and leave

alone, the professional cricketer. He is merely an ex-cricketer of India.

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Assessee filed the return of income and the same was accepted

u./s.143(1A) of the Act on 27-10-2014. Subsequently, AO recorded the

reason for re-opening of the said assessment. The reasons indicate that the

issue of notice is needed “to verify the exempt income claimed by the assessee’.

Eventually, in the assessment, the AO made addition of Rs.75 lakhs as per

the discussion given in Para Nos. 4 and 5 of the re-assessment order. In

these paragraphs, the AO analysed the employment status of the assessee on

one side, the provisions of section 17 of the Act, the CBDT Circular and the

BCCI payment details, the provisions of section 10(17A)(ii) of the Act, status of

the assessee – sportsman Vs. professional cricketer etc., on the other.

Eventually, vide the discussion given in Para No.7.1 of the assessment order,

the AO denied the claim of exemption u/s.10(17A)(ii) of the I.T. Act. We

proceed to extract the said para here as under :

“7.1 After considering the above facts I am in opinion to that, this case is not fit for the claim of exemption under section 10(17A)(ii) of the Income Tax Act, 1961. Therefore the disallowance of the exemption of Rs.80,00,000/-.

The clause (ii) of section 10(17) of the Act, provides for exemption in

respect of the payments made by the Governments for the specified purposes

in public interest. Relevant provisions read as under :

“(17A) any payment made, whether in cash or in kind,-

(i) in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body. and approved by the Central Government in this behalf; or

(ii) as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest;]

CBDT issued Circular No.02/2014 (F.No.199/01/2014-ITA-I) u/s.10(17A) of

the Act and also CBDT Circular No.447 (F.No.199/1/86-IT (A-1)

dated 22-01-1986 and the same was clarified vide the Circular No.02/2014

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that “awards received by a sportsman, who is not a professional, will not be

liable to tax in his hands as the award will be in the nature of a gift and/or

personal testimonial”.

the merits. Aggrieved with the order of CIT(A), the assessee is in appeal before

the Tribunal with the grounds/additional grounds extracted above.

proceedings, Ld. Counsel for the assessee brought our attention to certain

case laws and submitted that assessee requested the AO to furnish the

reasons recorded by the AO before issue of notice u/s.148 of the Act. He

submitted that this is a case where the reasons were not furnished in writing

to the assessee thereby making the re-assessment proceedings invalid in view

of the binding judgment. In this regard, Ld. Counsel relied on the judgment of

Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO

reported in 259 ITR 19.

assessee, Ld. DR for the Revenue submitted a letter dated 27-06-2018

mentioned that the fact that the reasons were indeed communicated to the

assessee during the time of hearing and relied on the contents of the order

sheet noting. Ld. DR read out the relevant lines and the same are reproduced

here as under:

“Issue notice u/s.143(1) & 143(2) for A.Y. 2013-14. Hearing fixed on 25-8-2015 Sd/- ITO Shri D.Y. Pandit, Advocate, A.R. of the assessee attend ask for reason of reopening of the case. I explained to him reason of the case reopening, i.e. “To verify exempted income claimed by the ‘A’ in his return of income.” A.R. is noted this reason - no objection for the reason.

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Further the details are called in respect of the exempt income claimed which is received to him for BCCI & Baroda Cricket Association.

The case is fixed on 15/9/2015. Sd/- ITO”

Counsel for the assessee brought our attention the adequacy of the reasons

and mentioned that notice u/s.148 r.w.s. 147 cannot be issued merely “To

verify exempt income claimed by the assessee in the return of income”. In

this regard, Ld. Counsel relied on various binding judgments to support that

the re-assessment proceedings cannot be issued by the AO merely to conduct

roving enquiries for doing verifications etc. which becomes a cause of

surmises and the law does not permit to invoke such provisions.

and the CIT(A) and submitted the written submissions during the proceedings

before us. The same are reproduced here as under :

“2. During the course of hearing in this case on 20.06.2018 the assessee has raised an additional ground challenging the validity of the reassessment proceedings by taking a contention that the reasons recorded for the reopening were not provided to the assessee and the opportunity to raise the objections was not allowed to the assessee by the AO. 3. In this regard it is humbly submitted that the above stated claim of the assessee is patently wrong and is in contradiction to the information available in the assessment records. The assessee during the assessment proceedings made a request to the AO vide letter dated 19.08.2015 to make him aware of the reasons recorded for the reopening of his case. In response to this request of the assessee the AO during the course of hearing on 28.08.2015 duly made him aware of the reasons for reopening and the same were noted down in writing by Sh. D.Y. Pandit, Advocate, the AR of the assessee. Furthermore during the course of hearing on 28.08.2015, the AR after noting down the reason and understanding them submitted his no objection to the reason recorded to the AO. These facts are duly noted in the order sheet entry dated 28.08.2015, (duly signed by the AR and the AO).The relevant part of the order-sheet entry is reproduced in verbatim as under:-

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28.08.2015 Shri D.Y.Pandit Advocate, AR of the assessee attended asked for the reasons of the reopening of the case. I explained to him reasons of the reopening i.e. To verify the exempted income claimed by the 'A' in his return of income. AR has noted this reasons and no objection for the reasons. The photocopy of the relevant order sheet is also enclosed herewith for the kind perusal of your honours. 4. In view of the above submissions it is prayed that the additional ground taken by the assessee may kindly be dismissed.”

kind of receipts received by the assessee is exempt from tax and heavily relied

on the CBDT Circular No.447 of 1986 dated 22-01-1986 on one side and

various binding and other judgments on the other. In support of his case, Ld.

Counsel relied on the following case laws :

in nature, Ld. Counsel submitted that the additional ground raised by the

assessee should be admitted for adjudication as no fresh facts are required to

be investigated and all the material facts are available on record. For this

proposition, Ld. Counsel relied on various judgments including the decision of

Hon’ble Supreme Court in the case of NTPC Ltd. Vs. CIT reported in 229 ITR

383, the judgment in the case of Jute Corporation of India reported in 187 ITR

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688, the judgment of Hon’ble Bombay High court in the case of Ahmedabad

Electricity Company reported in 199 ITR 351.

opinion that the additional ground raised by the assessee is required to be

admitted for adjudication by virtue of binding decisions on the same.

reassessment proceedings and perused the orders of the Revenue. To start

with, regarding furnishing of reasons recorded by the AO, we find there is

evidence to demonstrate the fact of communicating the reasons to the

assessee and the Ld. AR for the assessee acknowledged the same. In this

regard, we find the Hon’ble Supreme Court in the case of GKN Driveshafts

(India) Ltd. Vs. ITO and others (2002) Supp(4) SCR 359 has observed as

under:

“We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the abovesaid five assessment years.

Insofar as the appeals filed against the order of assessment before the Commissioner (Appeals), we direct the appellate authority to dispose of the same, expeditiously.”

Further, it is a case that the aforesaid reasons were accepted by the Ld. AR of

the assessee and the assessee did not make use of it for filing further appeal

on this issue of furnishing of reasons to the assessee before reopening of the

completed assessment. Therefore, we are of the opinion that this part of the

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arguments of Ld. Counsel for the assessee is unsustainable and therefore, the

same are required to be dismissed.

assuming jurisdiction u/s.148 r.w.s.147 of the Act, we find the AO is on

record in stating that he assumed jurisdiction “To verify exempted income

claimed by the ‘A’ in his return of income.” The same was examined in the

light of the CBDT Circulars (supra) which infact orders for exemption of such

OTB-receipts in cases of sportsman. AO did not refute the assessee’s claim

that he is not a professional. He is merely a sportsman. At the relevant point

of time, Mr. Chandrakant Gulabrao Borde is an employee of Cooper Engineers

Ltd. Chinchwad and hence, he constitutes sportsman only. Further, we also

examined various decisions on similar cases receiving amounts from the BCCI

and found that the said amounts were considered exempt and not to be

included in the total income of the assessee. In this regard, we find in the

case of CIT Vs. Bigabass Maheshwari Sewa Samiti, the Hon’ble Rajasthan

High Court held as under :

“11. Coming to Question No.1, a look at the judgment of the Tribunal shows, that the learned Tribunal has proceeded on two judgments of Hon'ble the Supreme Court, being in ITO & Ors. Vs. Lakhmani Mewaldas, reported in 103 ITR 437, and Gangasharan & Sons Vs. ITO & Ors, reported in 130 ITR 1. In Lakhmani Mewaldas's case, it has been held, that the reasons, which led to the formation of the belief, contemplated by Sec.147(a), must have a material belief, on the question of escapement of income of the assessee, from assessment, and does not mean a purely subjective satisfaction on the part of the ITO. Where live link between the material before the ITO, and the belief he was to form regarding escapement of income, is missing, such material was stated to be not sufficient for forming belief, and same view was taken in Gangasharan's case.

Then, applying these judgments, it has been found, by the learned Tribunal, that one of the conditions necessary for issuance of notice under Sec.148, being under-statement of income of the assessee, is not fulfilled. It has been held, that in order to bring an item within the purview of Sec.147, it is of utmost importance, that the assessing officer should have reason to believe, based on relevant and cogent material, that such income has escaped assessment. It has been found, that there was no material direct or indirect, available with the assessing officer, which could show, that the receipt of donations, amounting to Rs.30,16,598, was without any specific direction of corpus fund. The assessee has shown the receipts, as having been received in the corpus fund, coupled with the report of the auditor. The assessing officer had not inquired into the

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nature of the receipts, before issuing notice under Sec.148, and in earlier years also, the amount was held to be received in the corpus fund.

The judgment is categorical in stating that the AO is barred from assuming

jurisdiction u/s.148 of the Act merely to verify the claim of the assessee.

Considering the above, we are of the opinion that the AO failed to satisfy the

test of adequacy of the reasons for assuming jurisdiction u/s.148 r.w.s.147 of

the Act. Accordingly, the additional ground raised by the assessee is partly

allowed on this aspect of adequacy of reasons.

Tribunal in the case of Abhinav Bindra Vs. DCIT (supra) has held as under :

“13. Thus, Section 14 provides the various heads under which income has to be computed and Item No.F which is 'income from other sources' is a residuary head i.e. the income which is not assessable under any of the other heads, viz., salary, income from house property and gains from business or profession and capital gains is to be assessed under the head 'income from other sources'. However, for applicability of Section 14 and thereafter Section 56, what is required is the receipt in the nature of income. In Circular No.447, it has been clearly stated "In view of this, it is clarified that such awards in the cases of a sportsman, who is not a professional, will not be liable to tax in his hands as it would not be in the nature of income.". Therefore, as per the Circular, the receipt by way of award by a sportsman who is not a professional sportsman will not be in the nature of income. In the order of learned CIT(A), he has distinguished between the words "reward" and "award", of course with reference to Section 10(17A). We have already stated that Section 10(17A) is not applicable where the above Circular is applicable. We further state that if we read the Circular as a whole, it is clear that the purpose of the Circular is to encourage the sportsmen, especially those who are not professional sportsmen.

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after 60 years of independence of the country and he has been given the awards/rewards/prizes mainly by various governments, local authorities, trusts and institutions and of course some corporate/individuals, a liberal construction of Circular No.447 is required. Considering the facts of the case and the nature and spirit of Circular No.447, we hold that in the case of the assessee, viz., Shri Abhinav Bindra, all the rewards/prizes/gifts received by him are covered by Circular No.447 dated 22nd January, 1986 and, therefore, should not be treated as income in his hands. Accordingly, the addition of Rs.63,10,601/- made by the Assessing Officer and the enhancement of Rs.2,34,00,000/- made by the learned CIT(A) is deleted.

From the above, it is evident that so long as the receipt of OTB/award is a

sportsman, the Circular No.447 (supra) provides exemption.

14.1 We find the Mumbai Bench of the Tribunal in the case of ACIT Vs. Shri

Sameer Sudhakar Dighe – ITA No.1327/Mum/2016 for the A.Y. 2011-12

dated 13-04-2018 decided the similar issue in favour of the assessee and

relevant extracts are reproduced as under :

“7. We have heard rival contentions and gone through facts and circumstances of the case. The facts available in public domain are that the assessee has played national as well as international cricket. The assessee has played international test matches numbering 6 and ODI's numbering 23.The assessee is full time employee of Air India. The benefit match was conducted by the BCCI, which is a regulatory body for cricket in India to appreciate the personal talent and skill in this sport because the assessee is a retire sportsman and the proceeds arising out of this benefit match is in the nature of award. There is no direct nexus between the payment and assessee's profession and these receipts being capital in nature cannot be brought to tax. This view of ours is supported by the decision of co-ordinate Bench in the case of G.R. Viswanath vs. ITO (1989) 29 ITD 0142 of Bangalore Bench, wherein exactly on similar facts the issue was decided vide Para 7 to 10 as under:

"7. It was argued for the revenue that the amounts are paid to the assessee because of his professional activity and that the same constitute taxable income. Records show that the receipts were not the result of any professional activity. He is a full-time employee with the State Bank of India holding the post of an officer. Cricket was not for his living. It was stated at the bar that there is no professional cricket in India. The assessee obviously plays for love of cricket and because of his great talents he had been in the team that represented India for playing in Pakistan. These facts are fairly certain from the records.

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"13. Thus, Section 14 provides the various heads under which income has to be computed and Item No. F which is 'income from other sources' is a residuary head i.e. the income which is not assessable under any of the other heads, viz., salary, income from house property and gains from business or profession and capital gains is to be assessed under the head 'income from other sources'. However, for applicability of Section 14 and thereafter Section 56, what is required is the receipt in the nature of income. In Circular No.447, it has been clearly stated "In view of this, it is clarified that such awards in the cases of a sportsman, who is not a professional, will not be liable to tax in his hands as it would not be in the nature of income."

Therefore, as per the Circular, the receipt by way of award by a sportsman who is not a professional sportsman will not be in the nature of income. In the order of learned CIT(A), he has distinguished between the words "reward" and "award", of course with reference to Section 10(17A). We have already stated that Section 10(17A) is not applicable where the above Circular is applicable. We further state that if we read the Circular as a whole, it is clear that the purpose of the Circular is to encourage the sportsmen, especially those who are not professional sportsmen.

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"(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 5[but before the 1st day of April, 2017],-- (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;"

Therefore, the principle is obvious that, so long as the recipient is not a

professional and the award/OTB is not the receipt for the professional

reasons, and it is received in the capacity of a “Sportsman”, the OTB/rewards

are exempt from tax in view of the CBDR Circular No.447 (supra). Similar

OTB/awards are exempted in the case of (1) Shri Abhinav Bindra; (2) Shri

Sameer Sudhakar Dighe; and (3) Shri Navab Mansur Ali Khan Pataudi

(supra) etc., On facts, the said OTB/rewards are received by the assessee who

is merely an ex-cricketer and not a professional cricketer. He was merely a

sportsman.

From the above finding of fact and law evolved in other cases, it is

evident that the facts of the above case are identical to the facts of the present

case on hand. AO did not make out a case that the assessee is a professional.

Considering the favourable decisions on merits of the case too, we are of the

opinion that the decision of CIT(A) upholding the addition made by the AO

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needs to be reversed. Accordingly, the grounds/additional ground raised by

the assessee are allowed.

Order pronounced on this 05th day of October, 2018.

Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य

पुणे Pune; �दनांक Dated : 05th October , 2018 सतीश

आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT (Appeals)-8, Pune. 3. आयकर आयु� / The Pr. CIT-4, Pune. 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “बी 5. बी बी” / DR ‘B’, बी ITAT, Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

// True Copy //

Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune.