Sangeetha Sabha, Mumbai v. The Deputy Director Of Income

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (L) NO. 2700 OF 2011 Sri Shanmukhananda Fine Arts & Sangeetha Sabha, Mumbai. .. Petitioner. versus The Deputy Director of Income Tax (Exemptions) I-2, Mumbai & Anr. ..... .. Respondents. Mr. Percy J. Pardiwala, Sr. Adv., with Mr. Atul K. Jasani for the Petitioner. Mr. Vimal Gupta for the Respondents. ...... CORAM : DR.D.Y.CHANDRACHUD & A. A. SAYED, JJ. 20 DECEMBER 2011. P.C. : Rule, by consent returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal. 2.The Petitioner was granted Registration under Section 12A of the Income Tax Act, 1961 by the Commissioner of Income Tax on 28 January 1976. On 26 September 2004 the objects clause in the Memorandum of Association was amended to give the Petitioner the power to affiliate and/or take over or merge any other trust, society or institution with similar objects. On 31 October 2006 a return of income tax was filed by the Petitioner declaring a deficit of Rs.63.55 lakhs after claiming an exemption under Section 11. On 18 December 2007, a society by the name Bharatia Music & Arts Society was amalgamated with the Petitioner. On 2 February 2011 the Director passed an order under Section 12AA(3) cancelling the registration on the ground that since the Petitioner had changed its objects the earlier registration could not survive. The Petitioner filed an appeal before the Tribunal against the order under Section 12AA (3). A notice under Section 148 was issued on 11 March 2011. 3.The reasons which have been disclosed to the Petitioner for reopening the assessment rely on the fact that the registration which was granted to the Petitioner under Section 12A was withdrawn on 2 February 2011 under Section 12AA(3) from the date on which the amendment was made in the objects clause. Consequently the Respondents state that for Assessment Year 2006-07 the Petitioner is not registered under Section 12A and that registration was necessary for claiming the benefits of Sections 11 and 12 of the Income Tax Act, 1961. It is on this ground that the Assessing Officer formed the belief that the income of the assessee has escaped assessment. 4.Learned Counsel appearing on behalf of the Petitioner submits that the sole basis for reopening of the assessment is the withdrawal of the registration under Section 12AA. The order of withdrawal passed by the Commissioner has been set aside by the Income Tax Appellate Tribunal on 9 September 2011. Hence, it is urged, the basis for reopening has now been taken away by the subsequent order of the Tribunal. 5.The reasons for reopening are based solely and exclusively on the fact that registration which was granted to the Petitioner under Section 12A was withdrawn on 2 February 2011. From the record before the Court, it is evident that the order of the Director of Income Tax (Exemption) under Section 12AA(3) was set aside by the Tribunal which allowed the appeal of the Petitioner on 9 September 2011. Once that be the position, the very basis and foundation of the reopening of the assessment ceases to exist. Accordingly, we allow the Petition by quashing and setting aside notice dated 11 March 2011. In the circumstances of the case, there shall be no order as to costs. (Dr. D.Y. Chandrachud, J.) (A. A. Sayed, J.)