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2022 (2) TMI 33 - AT - Income TaxValidity of reopening of assessment u/s 147 - assumption of jurisdiction by the ld. AO u/s.147 - exemption u/s.11 of the Act claimed by the assessee is denied in view of violation of provisions of Section 13 of the Act and claim of exemption u/s.10(38) and 10(34) of the Act was also rejected by the ld. AO - claim of exemption u/s.10(34) in respect of dividend on investments in shares / units derived by the assessee trust - HELD THAT - As at the time of recording the reasons, the ld. AO indeed had the benefit of the Tribunal order passed in the case of Jasubhai Foundation 2015 (4) TMI 305 - BOMBAY HIGH COURT . Despite this, the ld. AO sought to take a divergent stand in respect of claim of exemption u/s. 10(34) of the Act for the dividend income and sought to reopen the assessment. Since, this issue is squarely covered by the decision of the Hon ble Jurisdictional High Court on merits also, the reopening made by the ld. AO for the purpose of consideration of the taxability of the dividend income is bad in law and is hereby quashed. Hence, we hold that the ld. AO could not have had a reason to believe that income of the assessee had escaped assessment in respect of this issue. Hence, reopening made in this regard is quashed. Claim of deduction of the assessee trust u/s.11(1)(a) being 15% of gross income - We find that out of the gross receipts of ₹ 43,28,77,779/- during the year under consideration, assessee trust had duly applied for charitable purposes of ₹ 38,77,22,817/- as against the mandated application as per law at 85% of ₹ 36,79,46,112/-. This goes to prove that assessee was statutorily entitled to accumulate 15% of gross receipts year after year for future application of funds for charitable purposes. This 15% accumulation of funds works out to ₹ 6,49,31,667/- which has been accumulated or set apart for charitable purposes by the assessee. There is absolutely no error in this regard. All these facts were duly reflected in the computation of income which was also filed along with the return of income. All these facts were indeed available before the ld. AO in the course of original assessment proceedings itself. Hence, there cannot be any failure in any manner whatsoever for making full and true disclosure of these particulars before the ld. AO in the course of original assessment proceedings. In any case, on this issue in the reasons recorded by the ld. AO, we find that the ld. AO had neither placed reliance on any tangible material nor recorded the fact that there is any failure on the part of the assessee in accordance with first proviso to Section 147 of the Act. Hence, it could be safely concluded that the ld. AO had clearly resorted to only change of opinion in this regard. The law is very well settled that no re-assessment could be framed based on change of opinion. Hence, the re-assessment proceedings on this issue is quashed. Capital Gains on Transfer of Capital Asset and Re-investment in Unquoted Shares - main grievance of the ld. AO seems to be that assessee had not reflected the capital gains in the income and expenditure account and in the computation of income - Admittedly the assessee had reflected the movement in investments in its balance sheet directly and the said balance sheet has been filed along with return of income. Infact, the balance sheet is a mandatory enclosure along with return of income u/s.139(9) of the Act. Hence, it cannot be said that there is a failure on the part of the assessee to disclose the capital gains on sale of TCS shares and re-investment made in preference shares of Tata Sons Ltd. We find with regard to the issue of capital gains on sale of TCS Ltd shares and re-investment in preference shares of Tata Sons Ltd., the ld. AO did not have any tangible material which enable him to form belief that income of the assessee had escaped assessment. He had categorically stated in the reasons that from the records these transactions were found. That itself goes to prove that the ld. AO had gone into the assessment records again and had sought to entertain the change of opinion on the same set of facts available in the records.Hence, the reopening of assessment in respect of capital gain on sale of TCS Ltd. shares and re-investment in preference shares of Tata Sons Ltd., is declared as bad in law. Thus the issues for which reasons were recorded for reopening the assessment completely fails and hence, no re-assessment could have been validly framed by the ld. AO consequently. Hence, the entire re-assessment proceedings framed are hereby quashed and declared void ab initio and hence, quashed - Decided in favour of assessee.
Issues Involved:
1. Validity of re-assessment proceedings and assumption of jurisdiction by the Assessing Officer (AO) under Section 147 of the Income Tax Act, 1961. 2. Claim of exemption under Section 10(34) of the Act for dividend income. 3. Claim of deduction under Section 11(1)(a) of the Act. 4. Capital gains on the transfer of capital assets and re-investment in unquoted shares. Detailed Analysis: 1. Validity of Re-assessment Proceedings and Assumption of Jurisdiction by the AO under Section 147 of the Act: The assessee, a public charitable trust, challenged the re-assessment proceedings initiated by the AO under Section 147 of the Act, arguing that there was no failure on its part to make a full and true disclosure of all material facts necessary for the assessment. The re-assessment was initiated beyond four years from the end of the relevant assessment year. The Tribunal found that the AO had not brought out any tangible material to justify the re-assessment and had merely changed his opinion based on the same set of facts available during the original assessment. The Tribunal held that no re-assessment can be made based on a change of opinion and quashed the re-assessment proceedings as void ab initio. 2. Claim of Exemption under Section 10(34) of the Act for Dividend Income: The AO had denied the exemption claimed by the assessee under Section 10(34) for dividend income, arguing that such income should be subjected to the norms of application of income under Section 11. However, the Tribunal noted that the amendment to Section 11(7) preventing trusts from claiming exemptions under Section 10, other than 10(1), 10(23C), and 10(46), was applicable only from A.Y. 2015-16 onwards and not for A.Y. 2008-09. The Tribunal also referred to the decision of the Hon’ble Jurisdictional High Court in the case of DIT (Exemptions) Mumbai vs. Jasubhai Foundation, which supported the assessee's claim. Consequently, the Tribunal held that the AO's action was based on a change of opinion and quashed the re-assessment on this ground. 3. Claim of Deduction under Section 11(1)(a) of the Act: The AO had questioned the assessee's claim of deduction under Section 11(1)(a) for the accumulation of 15% of gross income, arguing that it was wrongly claimed. The Tribunal found that the assessee had duly applied the mandated 85% of gross receipts for charitable purposes and was statutorily entitled to accumulate the remaining 15%. The Tribunal concluded that there was no tangible material available with the AO to justify the re-assessment and that it was a clear case of change of opinion. Therefore, the re-assessment proceedings on this issue were also quashed. 4. Capital Gains on Transfer of Capital Assets and Re-investment in Unquoted Shares: The AO argued that the assessee had not reflected the capital gains from the sale of shares in the income and expenditure account, thus failing to make a full and true disclosure. The AO also contended that the re-investment in unquoted shares was in violation of Section 11(5) and should have led to the denial of exemption under Section 11. The Tribunal found that the assessee had disclosed the sale and re-investment details in the balance sheet filed with the return of income. The Tribunal held that the AO had not relied on any new tangible material but had merely revisited the same facts, constituting a change of opinion. The Tribunal also referred to the decision of the Hon’ble Jurisdictional High Court in the case of DIT vs. Sheth Mafatlal Gagalbhai Foundation Trust, which clarified that any violation of Section 13 would only lead to the forfeiture of exemption for the corresponding income and not the entire exemption. Consequently, the Tribunal quashed the re-assessment on this issue as well. Conclusion: The Tribunal quashed the entire re-assessment proceedings as void ab initio due to the lack of new tangible material and the AO's reliance on a change of opinion. Consequently, the other grounds raised by the assessee and the Revenue on the merits of the additions were not adjudicated, as they were deemed academic in nature. The appeal of the assessee was allowed, and the appeal of the Revenue was dismissed.
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