2020 (1) TMI 1356 - HC - Income Tax

Reopening of assessment u/s 147 - charitable activity u/s 2(15) - HELD THAT - The activity of the petitioners cannot be said to be carrying on any activity in the nature of trade, commerce or business, so as to apply proviso to Section 2(15) which defines 'charitable purpose'. Therefore, the impugned notice as well as the assessment order passed by the respondent are required to be quashed and set aside. The petitions, therefore, succeed and are accordingly allowed. The impugned notice issued by the respondent under Section 148 of the Act is therefore quashed and set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment.
2. Validity of the assessment order passed under Section 143 read with Section 147 of the Income Tax Act, 1961.
3. Applicability of the amended provision of Section 2(15) of the Income Tax Act, 1961 regarding the definition of 'charitable purpose'.

Issue-wise Detailed Analysis:

1. Legality of the Notice Issued Under Section 148:
The petitioner challenged the notice dated 08.01.2013 under Section 148 of the Income Tax Act, 1961, which sought to reopen the assessment for the A.Y. 2010-11. The petitioner argued that the original assessment was framed under Section 143(3) of the Act, and any attempt to reopen it without tangible new material would amount to a change of opinion, which is not permissible. The court referred to the decision in SIDDHI VINAYAK TRANSPORT ASST. COMMISSIONER OF INCOME TAX, [2013] 35 taxmann.com 84 (Gujarat), where it was held that reopening an assessment based on a mere change of opinion is not valid. The court emphasized that once an assessment is thoroughly scrutinized and concluded, it cannot be reopened simply because a subsequent Assessing Officer believes the previous officer made an error.

2. Validity of the Assessment Order Passed Under Section 143 Read with Section 147:
The petitioner also challenged the assessment order dated 30.01.2013 passed under Section 143 read with Section 147 during the pendency of the petition. The court noted that the Assessing Officer issued the notice under Section 148 by recording reasons that the petitioner trust was engaged in activities in the nature of trade, commerce, or business, thus not qualifying as a 'charitable purpose' under the amended Section 2(15). The court observed that such reopening and reassessment were based on the premise that the petitioner trust's activities were commercial in nature, which was a matter already examined in the original assessment.

3. Applicability of the Amended Provision of Section 2(15):
The court examined whether the activities of the petitioner trust fell under the amended definition of 'charitable purpose' in Section 2(15). The court referred to its earlier decision in Tax Appeal No. 268 of 2012, where it was held that earning a surplus in carrying out charitable activities does not imply that the entity exists for profit. The court concluded that the trust did not distribute profits outside the organization and reinvested any surplus into promoting and developing the sport of cricket, thus maintaining its charitable status. The court also noted that the activities of the petitioner trust were distinct from those of the BCCI and should be evaluated independently.

Conclusion:
The court held that the activities of the petitioner trust could not be considered as carrying out trade, commerce, or business. Therefore, the proviso to Section 2(15) did not apply. Consequently, the notice under Section 148 and the subsequent assessment order were quashed and set aside. The petitions were allowed, and the rule was made absolute with no order as to costs.