2014 (9) TMI 829 - HC - Income Tax

Reopening of assessment u/s 148 Jurisdiction to issue notice Full and true disclosure made or not - Held that - There can be no reason to believe that income chargeable to tax has escaped assessment on the activity of pharmacy carried out at the hospital as decided in Baun Foundation Trust vs. Chief Commissioner of Income Tax and anr. 2012 (4) TMI 172 - BOMBAY HIGH COURT the entire issue would require factual determination - The grant of approval u/s 10(23C) (via) of the Act has to be examined /evaluated independently for each AY - All the issues requires factual determination which can be best done by the AO in reassessment proceedings - Thus, it cannot be said that the notices are without jurisdiction there is no reason to entertain the present petition and injunct the AO from proceeding further with the notices Decided against assessee.

Summary

Issues:
1. Jurisdiction of reopening assessment for Assessment Year 2006-07 and 2008-09 under Section 148 of the Income Tax Act, 1961.
2. Compliance with the provisions of Section 11(4A) regarding the pharmacy store activity.
3. Consideration of approval under Section 10(23C)(via) of the Act for Assessment Year 2006-07 and 2008-09.

Jurisdiction of Reopening Assessment:
The High Court addressed the challenge against two impugned notices dated 28 March 2013 issued under Section 148 of the Income Tax Act for Assessment Year 2006-07 and 2008-09. The notice for 2006-07 was found to be beyond the 4-year period, while the notice for 2008-09 fell within the timeframe. The petitioner contended that all material facts were disclosed during the original assessment. However, the Assessing Officer rejected the objections, leading to the petition. The court held that the impugned notices were not without jurisdiction as the activity of the pharmacy came to light during later assessment proceedings, and the approval under Section 10(23C)(via) for a subsequent year did not impact the current assessment years.

Compliance with Section 11(4A) - Pharmacy Store Activity:
The reasons provided for reopening the assessment highlighted the failure to maintain separate books of accounts for the pharmacy store activity, which was deemed necessary under Section 11(4A) of the Act. The petitioner argued that the pharmacy store served the dominant object of the Trust by supporting the hospital's operations. However, the court emphasized that even if the activity was incidental to charitable objects, compliance with Section 11(4A) was essential. The court noted that factual determinations regarding turnover and compliance needed to be made during reassessment proceedings, indicating that the impugned notices were valid.

Consideration of Approval under Section 10(23C)(via):
The petitioner's reliance on approval under Section 10(23C)(via) for a subsequent assessment year was deemed irrelevant to the current assessment years. The court clarified that each assessment year's approval needed separate evaluation. The court rejected the petitioner's plea to set aside the impugned notices, allowing the petitioner to raise contentions during reassessment. Additionally, the court advised expeditious disposal of pending approval applications under Section 10(23C)(via) while emphasizing that reassessment proceedings were not stayed.

In conclusion, the High Court rejected both petitions, emphasizing the need for compliance with statutory provisions and factual determinations during reassessment proceedings.