2020 (12) TMI 1148 - AT - Income Tax

Reopening of assessment u/s 147 - exemption under section 11 and 12 denied - AO has noticed that since 85% of the income for the year under consideration was not applied by the assessee for charitable purpose, therefore, the assessee was not entitled to exemption u/s. 11 - HELD THAT - We are not convinced with the arguments of the assessee that the assessee has fully and truly disclosed all material facts necessary for his assessment. It is apparent from the assessment order dated 13.2.2014 that the assessee did not disclose fully and truly the very material fact that the assessee had not applied 85% of the income/receipts of the year for charitable purposes which was a pre-condition for grant of exemption u/s. 11. Had the assessee disclosed this material fact to the AO, the Assessing Officer would not have accepted the return of the income of the assessee. In view of this, we do not find any merit in ground No. 1 of the appeal and the same is, therefore, dismissed. Deduction u/s. 11 - alternative claim u/s. 10(23C)(iiiad) was also made before the Assessing Officer and the Assessing Officer was supposed to consider the same - HELD THAT - We find force in the above contention of the assessee. If the assessee otherwise is eligible for deduction under the provisions of section 10(23C)(iiiad) of the Act, the said claim of the assessee, in our view, is required to be examined by the AO. The issue is, therefore, restored to the file of the AO with a direction to consider the alternative claim of the assessee of its eligibility to claim exemption from taxation under the provisions of section 10(23C)(iiiad) of the Act if the assessee otherwise qualify for the same irrespective of the fact whether or not the assessee had made a specific claim in the original return of income in this respect. This issue is accordingly restored to the file of the Assessing Officer. As contested the denial of claim of exemption under the provisions of section 11 of the Act. Admittedly, the assessee did not apply 85% of the income/receipt on charitable purposes as required under the provisions of section 11 of the Act. Therefore, there is no merit in this ground of appeal, and the same is accordingly dismissed.

Summary

Issues involved:
1. Reopening of assessment under section 147 read with section 148 of the Income Tax Act, 1961.
2. Eligibility of the assessee for exemption under section 10(23C)(iiiad) and sections 11 and 12 of the Income Tax Act, 1961.

Issue 1: Reopening of assessment
The assessee contested the reopening of the assessment, arguing that all material facts were disclosed, and therefore, the reopening was not justified. The contention was that the assessment was reopened based on the failure to apply 85% of income for charitable purposes, impacting eligibility for exemption under section 11 of the Act. The Tribunal noted that the assessee did not fully and truly disclose the fact about not applying 85% of income for charitable purposes, a crucial condition for exemption under section 11. The Tribunal held that if this material fact had been disclosed, the Assessing Officer would not have accepted the return. Consequently, the Tribunal dismissed the appeal against the reopening of the assessment.

Issue 2: Eligibility for exemption under various sections
Regarding the eligibility of the assessee for exemption under section 10(23C)(iiiad), the Tribunal found merit in the contention that the Assessing Officer should have considered the alternative claim under this section, even though the assessee was found ineligible for deduction under section 11. The Tribunal directed the Assessing Officer to examine the eligibility of the assessee for exemption under section 10(23C)(iiiad) if the assessee qualifies for it. The issue was restored to the Assessing Officer for further examination. As for the denial of claim under section 11 due to non-compliance with the requirement of applying 85% of income for charitable purposes, the Tribunal dismissed this ground of appeal. The Tribunal allowed the appeal for statistical purposes based on the findings related to the eligibility for exemption under section 10(23C)(iiiad).

In conclusion, the Tribunal upheld the reopening of the assessment due to non-disclosure of material facts by the assessee regarding the application of income for charitable purposes. Additionally, the Tribunal directed the Assessing Officer to consider the alternative claim under section 10(23C)(iiiad) and dismissed the claim under section 11 due to non-compliance.