2008 (7) TMI 843 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reassessment proceedings under section 147/143(3).
2. Disallowance of exemption for cricketing income and award money.
3. Addition of deemed dividend under section 2(22)(e).
4. Disallowance of depreciation on camera.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147/143(3):
The primary issue was whether the reassessment proceedings initiated by the Assessing Officer (AO) under section 147/143(3) were valid. The assessee argued that the reopening was based on a mere change of opinion, which is not permissible under the law. The Commissioner of Income-tax (Appeals) [CIT(A)] found that the reassessment was invalid because the AO did not allege any failure on the part of the assessee to disclose material facts fully and truly. The Tribunal upheld this view, citing that the reassessment was initiated beyond the four-year limit without fulfilling the conditions specified in the first proviso to section 147. The Tribunal referenced several judicial precedents, including Jindal Photo Films Ltd. v. Deputy CIT and ITO v. Lakhmani Mewal Das, to support its conclusion that the reassessment was invalid due to the absence of any new facts and the lack of failure on the part of the assessee to disclose material facts.

2. Disallowance of Exemption for Cricketing Income and Award Money:
The AO disallowed the exemptions claimed by the assessee for cricketing income and award money, arguing that the assessee, being a professional cricketer, was not eligible for the exemptions under Instruction No. 1432 and Circular No. 447. The CIT(A) cancelled the reassessment on the grounds of invalid initiation, thus not addressing the merits of the disallowance. For the assessment year 1998-99, the Tribunal held that the assessee was entitled to exemption for award money based on the precedent set by the Bangalore Bench of the ITAT in G. R. Viswanath v. Fifth ITO and the Delhi "I" Bench in Manoj Prabhakar's case. However, the Tribunal remanded the issue of cricketing income back to the AO for verification, as the relevant instruction had been withdrawn.

3. Addition of Deemed Dividend under Section 2(22)(e):
The AO added Rs. 5,78,190 to the assessee's income as deemed dividend under section 2(22)(e), arguing that the amount received from M/s. Jadeja Consultants Pvt. Ltd. was a loan. The assessee contended that the amount was a security deposit for a camera. The CIT(A) upheld the AO's decision. The Tribunal found no evidence to support the assessee's claim that the amount was a security deposit and upheld the addition as deemed dividend. However, the Tribunal directed the AO to restrict the addition to the extent of accumulated profits at the beginning of the year, as per the decision in CIT v. P. K. Badiani.

4. Disallowance of Depreciation on Camera:
The AO disallowed the depreciation claimed on a camera, stating that no rental income was declared by the assessee. The assessee argued that the professional receipts included the camera hire charges. The Tribunal found that the camera was owned by the assessee and had been rented out in the previous year, and there was no reason to disallow the depreciation merely due to the non-production of the agreement. The Tribunal directed the AO to allow the depreciation claim.

Conclusion:
1. The appeal of the Revenue for the assessment year 1996-97 was dismissed, and the corresponding cross-objection by the assessee was also dismissed.
2. The appeal of the Revenue for the assessment year 1997-98 was allowed, and the corresponding cross-objection by the assessee was remanded for statistical purposes.
3. The appeal of the assessee for the assessment year 1998-99 was partly allowed.

The decision was pronounced in the open court on July 25, 2008.