DDIT (E)-1(1), MUMBAI vs. MATUNGA GYMKHANA, MUMBAI

Briefly the facts are, the assessee, for the impugned assessment year, filed its return of income on 30th October 2004, declaring nil income. As it appears, assessment in the case of the assessee was completed under section 143(3) of the Act on 28th December 2006, determining the total income of ` 46,57,130, by disallowing assessee’s claim of exemption under section 11 of the Act. Subsequently, the assessment in the case of assessee was re–opened after expiry of a period of four years from the end of the relevant assessment year, on the reason that assessee has contravened the provisions of section 13(1)(c), 13(3) and section 11(4), as a result of which capital expenditure of ` 29,51,353, has to be disallowed. Re–assessment in the case of assessee was ultimately completed vide order dated 24th December 2010, by making addition of an amount of ` 11,48,170, being the surplus from the sport Department. Assessee challenged the assessment order so passed in an appeal preferred before the learned Commissioner (Appeals) both on the validity of re–opening as well as on the merits of the additions made.

Matunga Gymkhana 3 3. Before the first appellate authority, it was submitted, not only the assessee has furnished all material information in the return of income but in the course of the original assessment proceedings also therefore, the re–opening of assessment on the very same set of facts and materials which were considered at the time of original assessment and that too after expiry of four years from the end of relevant assessment year, when there is no failure on the part of the assessee to disclose fully or truly all material facts relating to his assessment, is bad–in–law. He further submitted, the original assessment order passed denying assessee’s claim of exemption under section 11 was subjected to appeal before the first appellate authority and learned Commissioner (Appeals) has allowed assessee’s claim of exemption under section 11 of the Act by deleting the addition made by the Assessing Officer. He submitted, the aforesaid fact was conveniently overlooked by the Assessing Officer while framing the re– assessment. The learned Commissioner (Appeals), after considering the submissions of the assessee in the context of facts and material on record, annulled the assessment by holding the initiation of proceedings under section 147 to be invalid observing as under:– “I have duly considered the submission of the appellant's AR and I find that the AO is not justified in reopening the assessment without considering the CIT(A)'s order dtd. 23.01.2008, wherein the CIT(A) has allowed exemption u/s.11 and deleted the additions made by the AO. The Matunga Gymkhana 4 department has not filed 2nd appeal before the I.T.A.T. as such the decision of CIT(A) has become final. The AO is not empowered to reopen the same assessment after expiry of four years without pointing out any failure on the part of the appellant to show that any information which is essential for computing the total income of the assessee has not been furnished. In fact, the AO has simply disallowed a sum of Rs.11,48,170/- which according to him is the surplus of the sports department of the appellant. Even if some surplus has arisen from any of the activities of the assessee, the same is not taxable as that surplus is utilized for the over all object of trust and not for the benefit of a particular individual. Hence, the AU is not ustilised in reopening the assessment and denying exemption u/s. 11, stating that the trust's activities are such that they contravene the provisions of section 13(1)(c), 13(3) and 11(4A). No such evidence has been mentioned in the reassessment order dated 24.12.2010. The case la' relied upon by the AU are misplaced as they are not on the issue involved. The facts remains that there is no failure on the part of the ass to disclose all the facts necessary for computing of income. The A.O. is not justified in reopening the assessment u/s 147 and reassessing the income at ` 58,05,300. \in the facts and circumstances of the case, I have no hesitation that reopening of assessment u/s 148 is bad in law. Reliance is placed on the decision of CIT v/s Kelvinator of India (256 ITR 1) (Del.) and Bombay High Court decision in the case of German Remedies Ltd. v/s DCIT, 287 ITR 494) (Bom.). Hence, the assessment order u/s 143(3) r.w.s. 147 dated 24.12.2010 is annulled. This ground of appeal is allowed.