2017 (7) TMI 72 - AT - Income Tax

Reopening of assessment - cancellation of registration u/s 12A - as per the assessee registration for the impugned year was not cancelled and thus the reasons recorded to reopen assessee s case for the impugned year were incorrect - Held that - Admittedly, the reasons for reopening was the order cancelling registration granted to the assessee, dated 25.2.2013. A perusal of the same reveals that the Ld. Commissioner of Income Tax has cancelled registration which was granted vide order dated 9.3.1992. The arguments of the Ld. counsel for the assessee that the cancellation of registration could have been effective only from assessment year 2011-12 and thus cannot form the basis the basis for reopening of assessment of the impugned year i.e. assessment year 2009-10, we find, are relevant for challenging the order passed u/s 12AA(3) and not for challenging the jurisdiction assumed by the AO for reopening the case of the assessee. Even otherwise we do not find any merit in the contention of the assessee. We reject the contention of the Ld. counsel for the assessee that the cancellation of registration did not affect the assessment year prior to 2011-12. In view of the above, we hold that the reason recorded by the Assessing Officer of reopening of assessment on the basis of cancellation of registration by the Commissioner of Income Tax was in order. - Decided against assessee Claim of exemption under sections 11 and 12 - Held that - We have already dealt with this issue in ground No.2 raised by the assessee wherein we have held that the cancellation can be of period prior to 2011-12 also as held by the Hon ble Bombay High Court in the case of Sinhagad Technical Education Society (2012 (3) TMI 262 - BOMBAY HIGH COURT ). Even otherwise, the learned Commissioner of Income Tax vide his order dated 25.2.2013 has cancelled the registration granted to the assessee society w.e.f. 1992. In the absence of registration the assessee had, therefore, no basis for claiming exemption under sections 11 and 12 of the Act at all as rightly held by the Commissioner of Income Tax. - Decided against assessee Disallowance of expenses incurred on account of repair and maintenance - revenue v/s capital - Held that - We consider it fit to restore the issue back to the file of the Assessing Officer to verify the nature of expenses incurred and thereafter pass a speaking order in accordance with law. We may add that the assessee be granted due opportunity of hearing in this regard and is free to adduce all evidences on which he wishes to place reliance. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Validity of the reopening of the assessment under section 147 of the Income Tax Act.
2. Denial of exemption under sections 11 and 12 of the Income Tax Act.
3. Classification of repair and maintenance expenses as capital expenditure.

Detailed Analysis:

1. Validity of the Reopening of the Assessment under Section 147:
The assessee challenged the reopening of the assessment under section 147 on the grounds that it was in contravention of Circular No.1/2011 issued by CBDT, which stated that cancellation of registration under section 12A could only be effective from assessment year 2011-12. The assessee argued that the reopening was based on the cancellation of registration, which was not applicable for the impugned year 2009-10.

The Tribunal found no merit in the assessee's contention, stating that the cancellation of registration was effective for all years for which the registration had been granted, including the assessment year 2009-10. The Tribunal referenced the Hon'ble Bombay High Court's decision in Sinhagad Technical Education Society vs. CIT, which upheld the constitutional validity of the amendment to section 12AA(3), allowing the cancellation of registration obtained under section 12A prior to June 1, 2010. Thus, the reopening of the assessment was deemed valid.

2. Denial of Exemption under Sections 11 and 12:
The assessee contended that the denial of exemption under sections 11 and 12 was unjust as the cancellation of registration should only apply from assessment year 2011-12 onwards. However, the Tribunal reiterated its earlier finding that the cancellation of registration was effective from the date of the original registration in 1992. Consequently, without valid registration, the assessee was not entitled to claim exemptions under sections 11 and 12 for the assessment year 2009-10. This ground of appeal was dismissed.

3. Classification of Repair and Maintenance Expenses as Capital Expenditure:
The assessee argued that the expenses incurred under the head 'Repair and Maintenance' were revenue in nature and not capital. The Assessing Officer had disallowed ?9,93,327/- of these expenses, treating them as capital expenditure, and allowed depreciation on the same, resulting in a disallowance of ?8,84,305/-.

The Tribunal found that both the Assessing Officer and the CIT (Appeals) had not provided a detailed basis for classifying these expenses as capital in nature. The Tribunal noted that necessary details of the expenses were filed by the assessee, but the authorities had not adequately examined these details. Therefore, the issue was remanded back to the Assessing Officer for a fresh examination of the nature of the expenses incurred, with instructions to pass a speaking order after granting the assessee an opportunity to present evidence. This ground of appeal was partly allowed.

Conclusion:
The appeal was partly allowed. The Tribunal upheld the validity of the reopening of the assessment and the denial of exemptions under sections 11 and 12. However, it remanded the issue of classification of repair and maintenance expenses back to the Assessing Officer for a fresh decision.

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