2011 (1) TMI 1450 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessment.
2. Taxability of donations given to Ramakrishna Mutt.

Summary:

Reopening of Assessment:
The first issue concerns the reopening of the assessment. The assessee, a public charitable trust registered u/s 12A of the Income Tax Act, 1961, filed its return for the assessment year 2006-07 on 31.10.2006. No notice u/s 143(1) and 143(2) was issued, but a notice for reopening u/s 148 was issued on 17.10.2007. The assessee argued that the assessment made u/s 143(3) read with s.147 is bad in law as the notice u/s 148 was issued before the expiry of the period for issuing notice u/s 143(2). The Tribunal, after considering various judgments, including CIT Vs. Ved & Co. (302 ITR 328) (Del.) and CIT Vs. TCP Ltd. (323 ITR 346) (Mds. HC), held that the reopening of assessment by issuing notice u/s 148 dated 17.10.2007 is bad in law. The Tribunal emphasized that proceedings u/s 147 can only be initiated after the earlier proceedings have terminated, which was not the case here. Hence, the first ground of the appeal was allowed in favor of the assessee.

Taxability of Donations to Ramakrishna Mutt:
The second issue pertains to the taxability of donations given to Ramakrishna Mutt. The assessee contended that the donations received were for a specific purpose (helping Tsunami victims) and thus should not be treated as income. The assessee argued that the donations were tied-up funds and relied on the Tribunal's order in Nirmala Agricultural Society Vs. ITO (71 ITD 152) (Hyd.). However, the Tribunal found no evidence of how the funds were used for the welfare of Tsunami victims and noted that the end utilization was not furnished. The Tribunal held that the donation given to Ramakrishna Mutt cannot be considered as utilization u/s 11(3A) due to the proviso which prohibits such application of income. Consequently, the second ground was decided against the assessee.

Conclusion:
The appeal was partly allowed, with the reopening of assessment being quashed, but the taxability of donations to Ramakrishna Mutt upheld.