The Bombay High Court has quashed the re-opening of assessment under section 147 of the Income Tax Act, 1961 as the income was already declared in the Income Tax Return filed by the assessee and there is no failure in disclosing fact.
Sri Shanmukhananda Fine Arts and Sangeetha Sabha, the petitioner is a Society engaged in the promotion of arts and culture. Petitioner is a charitable institution registered under the Bombay Public Trust Act, 1950. The petitioner is also registered under Section 12AA of the Income Tax Act, 1961 (“Act”) and enjoys exemptions under Section 11 of the Act.
The petitioner filed its return of income. The assessment under Section 143(3) of the Act was completed on 11th December 2009 assessing Petitioner’s income at Rs.63,51,467/-. The Petitioner thereafter received a notice issued under Section 148 of the Act stating that the Assessing Officer (“AO”) has reason to believe that Petitioner’s income for AY 2007-08 has escaped assessment within the meaning of Section 147 of the Act.
Petitioner submitted that re-opening notice having been issued four years after the expiry of the relevant Assessment Year, proviso to Section 147 of the Act shall be applicable particularly since assessment under Section 143(3) of the Act has been completed. Mr Agrawal submitted that there is a bar to reopen after the expiry of four years unless there has been a failure on the part of the Assessee to truly and fully disclose material facts for completion of the assessment.
Mr. Suresh Kumar submitted that from the hall charges, other charges and compensation indicated in the return of income, it was obvious that the assessee was engaged in commercial activities since he was earning income regularly and without any break and these were not brought to the notice during the assessment proceedings. The fact that the assessee was carrying on commercial activity came to light later and hence, the AO was justified in invoking provisions of Section 147 of the Act.
A division bench comprising Justice K R Shriram & Justice Dr Neela Gokhale observed that re-opening the assessment is permissible only if there was a failure to disclose fully and truly material facts. Reason to believe itself indicates that the amount of Rs.2,84,19,039/- which the AO claims to have escaped assessment has been obtained from the return of income filed by Petitioner.
“Return of income, copy whereof is annexed to the Petition, itself indicates that income from hall charges is Rs.2,29,49,250/-, other charges recovered from auditorium users is Rs.8,17,216/- and compensation received for use of premises Rs.46,52,573/-. Therefore, by no stretch of imagination, it is a failure to truly and fully disclose. When Petitioner’s case is they are not carrying out any commercial activity, Petitioner cannot be accused of not disclosing that they were carrying out commercial activity.”, the court Concluded.
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