Purti Parab v. Institute Of Banking Personnel [1

PURTI IN THE HIGH COURT OF JUDICATURE AT BOMBAYPRASADORDINARY ORIGINAL CIVIL JURISDICTIONPARABDigitally signed byPURTI PRASADPARABDate: 2024.01.2217:23:24 +0530WRIT PETITION NO. 2689 OF 2015 Shri Shanmukhananda Fine ArtsAnd Sangeetha Sabha V/s. The Deputy Director of Income Tax(Exemptions) 1(2) and Ors. ….Petitioner …Respondents ---- Mr. Madhur Agrawal i/b Mr. Balasaheb G. Yewale for Petitioner.Mr. Suresh Kumar for Respondents. ---- CORAM : K.R. SHRIRAM & DR. NEELA GOKHALE, JJ. DATED : 19[th] JANUARY 2024 P.C. : 1. Petitioner is a society registered under the Societies Registration Act, 1960 and is also a charitable institution under Bombay Public Trust,1950. Petitioner states, it is engaged in charitable activities comprising fieldof Education (Music, Fine Arts & Yoga), Medical relief (running of EyeCentre, Dialysis Center, Pathology Centre & holding Medical Camps) andpromotion of dance and drama and fine arts in all forms without derogationto the generality of Secular Education. 2.Petitioner has been granted registration under Section 12A ofthe Income Tax Act, 1961 (the Act) by the Commissioner of Income-tax,vide order dated 28[th] January 1976 which is still in force. 3.Petitioner filed the original return of income on 29[th] September2009 disclosing total deficit at Rs. 3,26,12,415/- after claiming exemptionunder section 11 of the Act. Petitioner also claimed depreciation on thecapital assets of Petitioner. The said return was accompanied by a copy ofthe Annual Report and Statement of Account for the year ended 31[st] March2009. In its accounts, Hall Charges income of Rs.2,88,87,001/- andcompensation for use of premises of Rs.45,69,771/- aggregating toRs.3,34,56,772/- are disclosed. Further, the computation of income filed bypetitioner also discloses Hall and Premises Rental Income atRs.3,34,56,772/-. 4.Petitioner was issued a notice dated 31[st] January 2011 underSection 142(1) of the Act asking for various information including on theobject of the Trust. Petitioner filed detailed note on the object of the Trustas also on the issue of claim of depreciation. 5.In the mean time, the Director of Income Tax (Exemption)passed an order dated 2[nd] February 2011 withdrawing the registrationgranted under section 12A of the Act for amendment to objects. Petitionerhad filed an appeal before Tribunal against the said order of Director ofIncome Tax (Exemption). The Tribunal, vide order in ITA No. 1849/Mum/2011, dated 9[th] September 2011, allowed Petitioner’s appeal and the 12Aregistration was restored. 6.The department preferred an appeal before Hon’ble BombayHigh Court against the said order dated 9[th] September 2011 of the IncomeTax Appellate Tribunal (ITAT). The Hon’ble Bombay High Court, vide OrderNo. 214 of 2012 dated 30[th] April 2014, dismissed the department’s Appeal. 7.The assessment order dated 23[rd] December 2011 was passedunder Section 143(3) of the Act by the Assessing Officer (A.O.) denying theexemption under Section 11 of the Act and computing the taxable income ofRs.35,90,477/-. Petitioner filed an appeal before CIT(A) against thequantum order. Grounds taken were regarding denial of exemption underSection 11 of the Act, addition of expenses, non-grant of set off/carriedforward of unabsorbed depreciation and excess of expenditure over income. 8.The CIT(A), vide order dated 9[th] July 2012, allowed Petitioner’sappeal and granted exemption under Section 11 of the Act, deleteddisallowed expenses and allowed claim of set off/carried forward ofunabsorbed depreciation and excess of expenditure over income based onCIT vs Institute of Banking Personnel [1]. 9.The department filed an appeal before the ITAT on 27[th]November 2011. The ITAT, vide order dated 30[th] May 2014, dismisseddepartmental appeal for denial of exemption under Section 11 of the Act, 8.The CIT(A), vide order dated 9[th] July 2012, allowed Petitioner’sappeal and granted exemption under Section 11 of the Act, deleteddisallowed expenses and allowed claim of set off/carried forward ofunabsorbed depreciation and excess of expenditure over income based onCIT vs Institute of Banking Personnel [1]. 9.The department filed an appeal before the ITAT on 27[th]November 2011. The ITAT, vide order dated 30[th] May 2014, dismisseddepartmental appeal for denial of exemption under Section 11 of the Act, disallowance of expenses, non- allowance of claim of set off/carried forwardof unabsorbed depreciation and excess of expenditure over income. 10.The department further appealed in Bombay High Court whichwas dismissed on 31[st] July 2017 by the High Court on account of low taxeffect. 11.Petitioner was issued the impugned notice dated 28[th] March2014 under Section 148 of the Act which was received on 1[st] April 2014. Reasons recordedfor reopening are on two issues : a. Allegation of applicability of the proviso to Section 2(15)of the Act and for withdrawing claim of exemption underSection 11 of the Act on the ground that the main activityof giving Hall on rental basis is a commercial activity. of the Act and for withdrawing claim of exemption underSection 11 of the Act on the ground that the main activityof giving Hall on rental basis is a commercial activity. b. disallowance of claim of depreciation. 12.Petitioner filed objection to challenge the reopening on 22[nd]January 2015. Respondent No.1 passed the impugned order rejecting theobjection of Petitioner by holding that Petitioner’s indulgence in thecommercial activity was not disclosed by Petitioner. 13.Mr. Agrawal submitted that there can be no grievance to believeescapement of income because the observations of the A.O. that petitioner’sobject include commercial activity is incorrect, there are no allegations as to which and how much income has escaped assessment and the issue ofwithdrawal of exemption under Section 11 of the Act was considered by theA.O. in the original assessment proceedings, the exemption was withdrawnwhich were restored in appeal by the Commissioner of Income Tax(Appeals) [CIT(A)]. Mr. Agrawal submitted that as per the third proviso toSection 147 of the Act the A.O. will have no jurisdiction to reopen theassessment on an issue which was the subject matter of appeal and theAppellate Authority has allowed the benefit of Section 11 of the Act. Ineffect the A.O. cannot sit in appeal over the decision of CIT(A). 14.In the second part of disallowance of claim of depreciation,Mr.Agrawal relied on Commissioner of Income Tax III, Pune vs. Rajasthanand Gujarati Charitable Foundation, Poona[2] and submitted that a charitabletrust is also eligible for claiming depreciation. 15.Mr. Suresh Kumar opposed the petition and submitted thatpetitioner did not disclose to the A.O. during the assessment proceedings thatit was indulging in commercial activities. In fact petitioner is also guilty ofnon-disclosure. 16.Mr. Suresh Kumar also submitted that there has to be only areason to believe and it need not be conclusively demonstrated at the stage of issuance of notice that income had escaped assessment. He also 2 (2018) 89 taxmann.com 127 (SC) submitted that the assessment order was silent on the issue of commercialnature of receipts which falls under the amendment to first proviso ofSection 2(15) of the Act. 17.The third proviso to Section 147 of the Act provides “……….provided also that the Assessing Officer may assess or re-assess such income,other than the income involving matters which are the subject matters ofany appeal, reference or revision, which is chargeable to tax and hasescaped assessment”. 16.Mr. Suresh Kumar also submitted that there has to be only areason to believe and it need not be conclusively demonstrated at the stage of issuance of notice that income had escaped assessment. He also 2 (2018) 89 taxmann.com 127 (SC) submitted that the assessment order was silent on the issue of commercialnature of receipts which falls under the amendment to first proviso ofSection 2(15) of the Act. 17.The third proviso to Section 147 of the Act provides “……….provided also that the Assessing Officer may assess or re-assess such income,other than the income involving matters which are the subject matters ofany appeal, reference or revision, which is chargeable to tax and hasescaped assessment”. 18.It is not disputed that the benefit of Section 11 of the Act wasnot granted in the original assessment order dated 23[rd] December 2011which was carried in appeal before the CIT(A). The CIT(A) vide an orderdated 9[th] July 2012 allowed the appeal and granted exemption underSection 11 of the Act, deleted disallowed expenses and allowed claim of setoff/carry forward of unabsorbed depreciation and excess of expenditureover income. The CIT(A) had also relied upon a judgment of this court inthe case of CIT vs. Institute of Banking Personnel (supra). 19.Therefore, as stated in the third proviso to Section 147 of theAct, the A.O. has no jurisdiction to assess or reassess any income which wasthe subject matter of an appeal. Since the grant of benefit of Section 11 ofthe Act was the subject matter of appeal and has been held in favour of assessee, the matter cannot be reopened. As regards the issue of disallowanceof depreciation claim, the Hon’ble Apex Court in Rajasthan and GujaratiCharitable Foundation, Poona (supra) has held that a Charitable Trust iseligible for claiming depreciation. 20.In fact, this was also a subject matter of the appeal that waspreferred by petitioner against the assessment order. 21.In the circumstances, Rule issued on 27[th] March 2015 is madeabsolute. 22.Petition disposed. (DR. NEELA GOKHALE, J.) (K.R. SHRIRAM, J.)