1985 (8) TMI 120 - AT - Income Tax

Summary

Issues:
- Validity of reopening assessment under section 147
- Exemption under section 11 for public charitable trust
- Application of provisions of section 13(2)(h) for loans
- Assessment as Association of Persons (AOP) or public charitable trust

Analysis:

Validity of Reopening Assessment under Section 147:
The appeals involved the issue of the validity of reopening assessments for the assessment years 1973-74, 1977-78, and 1978-79 under section 147. The CIT (A) found that there was no omission or failure on the part of the assessee to disclose all material facts necessary for assessment. The CIT (A) held that the initiation of proceedings under section 147(a) lacked a basis and, therefore, was invalid. The appellate tribunal endorsed this finding, stating that all necessary particulars were already before the assessing officer during the original assessment under section 143(3).

Exemption under Section 11 for Public Charitable Trust:
Regarding the exemption under section 11 for a public charitable trust, it was found that the trust, known as "Shree Gauhati Gaushala," fulfilled the requirements laid down by the Income Tax Act. The CIT (A) determined that the income of the trust was not taxable during the relevant years as the trust spent a significant amount on its primary objects, leaving a surplus within the prescribed limits under section 11(1)(a).

Application of Provisions of Section 13(2)(h) for Loans:
The Departmental Representative contended that a significant sum remained invested in loans, potentially attracting the provisions of section 13(2)(h). However, the appellate tribunal found no merit in this argument and confirmed the CIT (A)'s decision that the income of the trust was exempt under section 11.

Assessment as Association of Persons (AOP) or Public Charitable Trust:
In the assessment for the year 1978-79, the IAC treated the trust as an Association of Persons (AOP) instead of a public charitable trust. The CIT (A) directed the modification of the assessment, emphasizing that the trust met the requirements of being a public charitable trust under the law. The appellate tribunal confirmed this decision, stating that the assessment should be made on the trust as a public charitable trust.

In conclusion, all three Departmental appeals challenging the assessments for the respective years failed, and the appellate tribunal dismissed the appeals, upholding the decisions made by the CIT (A) regarding the validity of reopening assessments, exemption under section 11, and the assessment status of the trust as a public charitable trust.