The Bombay Presidency Golf Club Ltd v. The Income Tax Officer (Exemption)-1(1) Mumbai & Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION 2018/2010 The Bombay Presidency Golf Club Ltd. PetitionerVS. The Income Tax Officer(Exemption)-1(1) Mumbai & Ors. Respondents Mr.P.J.Pardiwala ,Sr.Counsel a/w Mr.A.K.Jasani for Pet.Mr.Suresh Kumar for Res. CORAM- J.P.DEVADHAR ,AND MRS.MRIDULA BHATKAR,JJ.DATE -31st JANUARY,2011. P.C. .Heard. 2Rule. Returnable forthwith. By consent of the parties the petition is taken up for final hearing. 3The petitioner has challenged the notice issued u/s 148 of the Income Tax Act, 1961 dated 24/3/2010 whereby the assessment for the year 2003-04 is sought to be reopened. 4The reasons recorded for reopening the assessment read thus. “ The Return of income accompanied with the balance-sheet, income-expenditure account,computation of income,TDS certificate, etc. declaring deficit of Rs.9,17,849/- was filed on 27/11/2003 . The return was processed u/s 143(1) of the Act. Subsequently the Assessment for the year under consideration was finalized u/s 143(3) of the I.T.Act, by the then Assessing Officer on 28/3/2006, determining loss at Rs.6,82,200/-. On perusal of the assessment records, it is observed that the Assessee has credited the entrance fee of Rs.2,96,56,000/- directly to the reserves in the balance Sheet without routing it through the income and expenditure account. As a result the income of the Assessee has been understated and which has been accepted in the assessment. The Assessee Trust has failed to disclose fully and truly material facts for the assessment as far as this issue is concerned which was entailed into escapement of income to that extent. I have therefore reason to believe that income has escaped assessment within the meaning of section 147 of Income Tax Act, 1961. The sanction u/s 151(1) of the Income Tax Act, 1961 ,is solicited for issuance of notice u/s 148 of the Act, from the DIT (Exemption) as the assessment for the year under consideration has been finalized u/s 143(3) of Income Tax Act , and a period of four years have lapsed from the end of the relevant assessment year.” On perusal of the aforesaid reasons it is evident that 3 the assessment is sought to be reopened on the basis of material which were on record at the time of original assessment. During the assessment proceedings the Assessing Officer had enquired into the question regarding the allowability of the entrance fee received from its members and on being satisfied allowed the claim. 6Although the Assessing Officer has recorded reasons to the effect that the assessee has failed to disclose fully and truly all material facts, nothing is brought to our notice which would suggest that there is any failure on the part of the assessee to disclose fully and truly all material facts. As per the proviso to Section 147 of the Income Tax Act, 1961 the assessments beyond four years from the end of the relevant assessment year can be reopened only if there is failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. 7In the present case, in the absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment , the notice issued u/s 148 of the Income Tax Act, 1961 cannot be sustained. 8Accordingly the rule is made absolute by quashing notice dated 24/3/2010 issued under section 148 of the Income Tax Act, 1961. No order as to costs. (Mrs.Mridula Bhatkar,J.) (J.P.Devadhar,J.)