2020 (5) TMI 336 - AT - Income Tax

Reopening of assessment u/s 147 - notice beyond the statutory period of four years - Tribunal is of the considered opinion that reopening of the assessment beyond the statutory limit of four years goes to the root of the matter, therefore it is not necessary either for the assessee or to the Department to raise the issue before this Tribunal - HELD THAT - There was no necessity for raising this issue of limitation, this Tribunal is expected to record a finding whether the assessment was reopened within the period of limitation. In this case, the assessee has taken a specific ground before this Tribunal as 2.1 saying that the assessment was reopened u/s. 147 beyond four years. As rightly submitted by the assessee there was not even a whisper in the assessment order that the assessee failed to disclose the entire details required for completion of the assessment. It is not in dispute that the assessment was reopened beyond four years period. Therefore, this assessment is barred by limitation under proviso to s.147 of the Act. Therefore, the orders of both the authorities below are set aside and the appeal of the assessee stands allowed. Exemption u/s. 11 - charitable activity u/s 2(15) - Establishing Kalyana Mandapam - HELD THAT - It is purely a commercial activity. Therefore, the assessee is not entitled for exemption u/s. 11 of the Act. The matter would stand different, in case establishing Kalyana Mandapam is an ancillary object for securing funds to carry out charitable activity. In the case on hand, establishing Kalyana Mandapam is one of the main object. Establishing Kalyana Mandapam being one of the main object may not be a charitable activity. Mere registration of u/s. 12A of the Act may not entitle the assessee to claim exemption. At the best, registration u/s. 12A of the Act is only to identify the entity. The assessee apart from registration u/s. 12A has to establish that it is engaged in the charitable activity. Since no charitable activity is carried on by the assessee, this Tribunal is of the considered opinion that the assessee is not eligible for exemption u/s. 11 of the Act. Accordingly, the orders of the lower authorities are confirmed and all the appeals of the assessee are dismissed.

Summary

Issues:
1. Reopening of assessment beyond the statutory period of four years for Assessment Year 2010-11.
2. Eligibility for exemption under section 11 of the Act based on the nature of activities for Assessment Years 2011-12 to 2014-15.

Issue 1: Reopening of assessment beyond the statutory period of four years for Assessment Year 2010-11:
The assessee contended that the Assessing Officer reopened the assessment beyond the statutory period of four years without any indication of negligence on the part of the assessee in disclosing necessary details. The Tribunal noted that the reopening of assessment beyond the four-year limit is a crucial aspect and ruled that it is unnecessary for either the assessee or the Department to raise the issue before the Tribunal. The Tribunal emphasized that despite no requirement to address the limitation issue, it must determine if the assessment was reopened within the statutory period. As the assessment was indeed reopened beyond the four-year period without any mention of the assessee's failure to disclose required details, the Tribunal held the assessment as time-barred under the proviso to section 147 of the Act. Consequently, the orders of the lower authorities were set aside, and the assessee's appeal was allowed for Assessment Year 2010-11.

Issue 2: Eligibility for exemption under section 11 of the Act based on the nature of activities for Assessment Years 2011-12 to 2014-15:
In the subsequent assessment years, the assessee's eligibility for exemption under section 11 of the Act was challenged based on the nature of its activities. The assessee argued that running a Kalyana Mandapam should be considered a charitable activity due to charging nominal amounts from the public. However, the Departmental Representative contended that operating a Kalyana Mandapam does not qualify as a charitable activity and, therefore, the assessee is not entitled to exemption under section 11 of the Act. The Tribunal agreed with the Department's stance, emphasizing that a Kalyana Mandapam is a commercial activity and not charitable in nature. The Tribunal highlighted that mere registration under section 12A does not automatically grant exemption; the entity must demonstrate engagement in charitable activities. Since the assessee failed to establish charitable activities and primarily focused on commercial ventures like the Kalyana Mandapam, the Tribunal upheld the lower authorities' decisions, dismissing all appeals for Assessment Years 2011-12 to 2014-15, except for the one related to Assessment Year 2010-11, which was allowed.

In conclusion, the judgment by the Appellate Tribunal ITAT Chennai addressed the issues of reopening assessments beyond the statutory period for one year and determining eligibility for exemption under section 11 of the Act for subsequent years. The Tribunal ruled in favor of the assessee for Assessment Year 2010-11 due to the time-barred assessment, while denying exemption for the following years based on the commercial nature of the activities conducted, particularly the operation of a Kalyana Mandapam.