2018 (12) TMI 1488 - AT - Income Tax

Reopening of assessment - adequacy of reasons - addition of sum received Baroda Cricket Association under the head income from Profession under section 28 - Assessee reported earning of income from Honorarium from BCCI, rental income, income from other sources and capital gains etc. - Held that - AO is on record in stating that he assumed jurisdiction To verify exempted income claimed by the A in his return of income. The same was examined in the light of the CBDT Circulars (supra) which infact orders for exemption of such OTB-receipts in cases of sportsman. AO did not refute the assessee s claim that he is not a professional. He is merely a sportsman. At the relevant point of time, Mr. Chandrakant Gulabrao Borde is an employee of Cooper Engineers Ltd. Chinchwad and hence, he constitutes sportsman only. Further, we also examined various decisions on similar cases receiving amounts from the BCCI and found that the said amounts were considered exempt and not to be included in the total income of the assessee. AO failed to satisfy the test of adequacy of the reasons for assuming jurisdiction u/s.148 r.w.s.147 of the Act. Accordingly, the additional ground raised by the assessee is partly allowed on this aspect of adequacy of reasons. On merits of case so long as the recipient is not a professional and the award/OTB is not the receipt for the professional reasons, and it is received in the capacity of a Sportsman , the OTB/rewards are exempt from tax in view of the CBDR Circular No.447 (supra). Similar OTB/awards are exempted in the case of (1) Shri Abhinav Bindra; (2) Shri Sameer Sudhakar Dighe; and (3) Shri Navab Mansur Ali Khan Pataudi (supra) etc., On facts, the said OTB/rewards are received by the assessee who is merely an ex-cricketer and not a professional cricketer. He was merely a sportsman. From the above finding of fact and law evolved in other cases, it is evident that the facts of the above case are identical to the facts of the present case on hand. AO did not make out a case that the assessee is a professional. Considering the favourable decisions on merits of the case too, we are of the opinion that the decision of CIT(A) upholding the addition made by the AO needs to be reversed. Accordingly, the grounds/additional ground raised by the assessee are allowed.

Summary

Issues Involved:

1. Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961.
2. Addition of ?75,00,000 under the head "income from other sources" under Section 56 of the Income Tax Act, 1961.
3. Addition of ?5,00,000 received from Baroda Cricket Association under the head "income from Profession" under Section 28 of the Income Tax Act, 1961.
4. Applicability of CBDT Circular No.447 dated January 22, 1986, regarding tax exemption on awards received by a sportsman.

Detailed Analysis:

1. Validity of Reassessment Proceedings:

The Assessee contended that the reassessment proceedings initiated under Section 147 were void due to the absence of material showing escapement of income and were initiated merely to verify the claim of exemption. The Assessee also raised an additional ground stating that the reasons recorded for reassessment were not provided, thus violating the mandatory procedure as laid down by the Supreme Court in GKN Driveshaft (India) Ltd. Vs. ITO 259 ITR 19. The Tribunal found evidence that the reasons for reopening were communicated to the Assessee's representative, who acknowledged and noted them without objection. However, the Tribunal held that the reasons provided by the AO, which were merely to verify exempted income, were inadequate for assuming jurisdiction under Section 148, citing the judgment in CIT Vs. Bigabass Maheshwari Sewa Samiti. Consequently, the Tribunal ruled that the AO failed to satisfy the adequacy of reasons for reassessment, making the proceedings invalid.

2. Addition of ?75,00,000 under "Income from Other Sources":

The AO added ?75,00,000 received by the Assessee from BCCI as a One-Time Benefit (OTB)/award under "income from other sources" and denied the exemption under Section 10(17A)(ii). The Tribunal referred to CBDT Circular No.447, which clarifies that awards received by a sportsman who is not a professional are not liable to tax as they are in the nature of gifts or personal testimonials. The Tribunal also cited the case of Abhinav Bindra Vs. DCIT, where similar receipts were held exempt from tax. The Tribunal concluded that the Assessee, being a non-professional sportsman, was entitled to exemption on the ?75,00,000 received from BCCI.

3. Addition of ?5,00,000 from Baroda Cricket Association:

The AO added ?5,00,000 received from Baroda Cricket Association under "income from Profession." The Tribunal, however, held that such receipts were in recognition of the Assessee's achievements and were not professional income. Referring to the CBDT Circular No.447 and various case laws, the Tribunal ruled that the amount received was exempt from tax as it was in the nature of a testimonial for the Assessee's contributions as a sportsman.

4. Applicability of CBDT Circular No.447:

The Assessee argued that Circular No.447 was effective when the return was filed, which provided that the impugned amounts were not liable to tax. The Tribunal upheld this argument, stating that the Circular clearly exempts awards received by non-professional sportsmen. The Tribunal cited multiple judgments, including those of Abhinav Bindra and Sameer Sudhakar Dighe, to support the exemption of such awards from tax. The Tribunal concluded that the Assessee's receipts from BCCI and Baroda Cricket Association were exempt under the said Circular.

Conclusion:

The Tribunal allowed the appeal of the Assessee, ruling that the reassessment proceedings were invalid due to inadequate reasons. It also held that the amounts received from BCCI and Baroda Cricket Association were exempt from tax under CBDT Circular No.447, thus reversing the additions made by the AO and upheld by the CIT(A). The Tribunal emphasized that the Assessee, being a non-professional sportsman, was entitled to the exemptions claimed.