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TMI Blog2016 (4) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... He has also erred in holding that reopening the assessment was in order. The appellant prays that the notice issued u/s 148 is bad in law. The conditions stipulated u/s 147 are not satisfied. The reassessment order passed by the Learned AO may be treated as invalid. The appellant prays that reassessment order passed by the Learned AO may be cancelled. 2. Without prejudice to ground No.1 the Learned Commissioner of Income Tax (Appeals) has erred in rejecting the claim of the appellant u/s 80RR amounting to Rs. 97,71,079/-. On the facts & circumstances of the case the appellant submit that he is entitled to deduction u/s 8ORR at Rs. 97,7 1,079/- as all the conditions stipulated u/s 80RR are satisfied. 3. On the facts & circumstances of the case the appellant prays that deduction u/s 8ORR may be granted at Rs. 97,71,079/-. 4. On the facts & circumstances of the case the Learned Commissioner of Income tax (Appeals) has erred in confirming the levy of interest u/s 234B at Rs. 38,07,838/-. The appellant denies the liability for payment of interest u/s 234B and prays that the interest levy at Rs. 38,07,838/- may be deleted." 4. During the course of hearing, detailed arguments have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " were available in records. Undated "reasons" were approved/sanctioned by the Additional DIT and then also by the DIT on 25th May 2007. He fairly admitted that nothing was available in assessment record to show any approval/sanction of a competent authority with regard to the 'reasons' dated 6th June, 2007. It has been argued by him that variance in the "reasons" does not have any material effect. It was further submitted that the Additional DIT as well as the DIT have gone through the entire records before granting their approval and thus due procedure was followed before reopening of the assessment. It was further submitted that the AO did not form any specific opinion during the course of original assessment proceedings and, therefore, there arises no question of any change of opinion. On merits, it was submitted by the learned DR that in section 80RR, what has been envisaged is a sportsman, and assessee was not a sportsman during the year. It was further submitted that cricket commentary is not an art. In support of his arguments, he placed reliance upon the judgment of the Tribunal in Harsha Bhogle, 114 TTJ 266. 7. In reply to the argument of the learned DR, learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the validity of the reopening. 10. The second issue raised by the learned Counsel for the assessee is that there was some audit objection raised by the audit team in its draft review report on eligibility of the assessee to claim deduction under section 80RR. With the assistance of both the parties, it is noted that there is a letter dated 29th September 2006, returned by the Assessing Officer to the CIT, City-5, Mumbai, on the subject of "Review on assessment of selected companies in selected sectors in the case of Shri Sunil Gavaskar - A.Y. 2000-01 to 2002-03 - comments reg". One relevant para from the said letter is reproduced hereunder:- "At the outset it is submitted that when the returns for A.Y. 2000-01 & 2002-03 are processed under section 143(1) of I.T. Act, 1961 and the adjustment pointed by the audit are not permissible while processing the return u/s 143(1), hence, in principle the objections raised by the audit are not acceptable for these two years. However, since the issue involved in all the three assessment years is of debatable in nature, further necessary action in this case will be taken after carrying out necessary verification. A final reply will be sent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluded that none of the three conditions precedent have been satisfied. The reason to believe that income chargeable to tax has escaped assessment on the part of the AO is a sine qua non for issue of a reopening assessment under section 148 of the Act as nonsatisfaction of reason to believe would by itself make the notice fatal. In such a case, the satisfaction of other conditions would not even require examination. 6. Both the CIT(A) as well as the Tribunal, on the aforesaid basis came to the conclusion that in view of the fact that the AO himself has not accepted the audit objection, there could be no reason for him to believe that income chargeable to tax has escaped assessment. It is clear from Section 147 of the Act that the jurisdictional requirement to issue a notice for reopening the assessment is the satisfaction of the "AO." This satisfaction of the AO cannot be outsourced or arrived at on the basis of directions of his superiors. The Act requires his reason to believe that income chargeable to tax has escaped assessment. Thus, the impugned notice is not sustainable. In that view, the first condition precedent of reason to believe is that income chargeable to tax is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 143(3) dated 25th August 2003. Detailed verification was done during the course of assessment proceedings, before passing the order under section 143(3). Relevant para from the assessment order under section 143(3) dated 25th August, 2003 is reproduced hereunder for the sake of ready reference:- "Return declaring total income of Rs. 12065650 was filed on 30.10.2001 along with copies of balance sheet and P&L account and Tax Audit Report u/s. 44AB. The return was processed u/s. 143(1) at the returned income. Notice u/s. 143(2) was issued on 01.10.2002 in response to which Shri. Dilip V. Lakhani - C.A. attended from time to time and necessary details called for were filed and placed on record. 2. The assessee is a well known erstwhile Cricketer and who has also been conferred the RASHTRIYA SANMAN by the C.B.D.T on 7th April, 2000, for being the highest taxpayers during the period AY 1994-95 to 1998-99. The assessee's is deriving his income by way of remuneration and interest from the partner firm M/s. PMG Exports in the capacity as a Partner. Salary and rent from M/s All Star Management Group. The assessee has also received foreign remittance from ESPN Star Sports Ltd. for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reply. It was also mentioned that assessee was prepared to give further details and evidences in support of income and expenditure claimed in the return of income. Perusal of the Income and Expenditure A/c again reveals that complete item- wise break-up of the income received by the assessee from various sources has been given. These avenues of income include column writing and commentary, foreign remittances and honorariums and royalty on books. We find that as far as disclosures are concerned, the assessee had provided requisite information and details in his return of income and also furnished further details and evidences during the course of original assessment proceedings. It is not at all a case of failure on the part of the assessee in disclosure of material facts. If at all there was any failure, it would be on the part of the AO in not appreciating the facts and applicable legal position, in the manner as the AO and his DIT want now at the reassessment stage. The law in this regard is very clear. The AO cannot be given benefit of its own wrong, and particularly in those cases which are covered by the first proviso to section 147. The position of law in this regard is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of original assessment proceedings, pertinent queries were raised by the AO and their replies were given by the assessee or if requisite facts and connected material is held on record of the AO which were relevant to decide an issue, then under these circumstances, a natural inference can be drawn that the AO had applied his mind before framing the assessment order while deciding that issue in favour of the assessee, and an opinion was formed by him in favour of the assessee. 11.6. With the assistance of both the parties, we have gone through the "reasons" recorded. We have already discussed in detail in earlier part of our order that complete facts with regard to work profile and status of the assessee, nature of receipt and particulars of deductions claimed in the return were provided along with return and further supported by further information and documents submitted during the course of original assessment proceedings. The AO had examined these documents and he was aware of complete facts, and thus, apparently, an opinion was formed by the AO while granting the benefit of deduction u/s 80RR. 11.7. Subsequently, at the stage of reopening, the AO has alleged in the "reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rective measures take the form of rectification or reassessment (by reopening the case under section 147 or revision by the Principal Commissioner or Commissioner under section 263). In the case of rectification, these are general in the nature of correction for arithmetical errors and other mistakes which are apparent from the record. The problem arises when the AO seeks to take corrective measures by invoking the provisions of section 147 or 263 of the Income tax Act. Since the audit object ions are based on material on record and there is no occasion for new material to be brought on record in the course of audit, any reopening of assessment or review by the Principal Commissioner constitutes "change of opinion" in the eyes of the law. This being so, the corrective measure under section 147 or section 263 of the Income tax Act is held to be invalid by Courts. In Indian & Eastern Newspaper Society vs CIT (1979) 119 ITR 996 the Supreme Court extensively considered the powers and duties of both the internal audit party of the Income-tax Department (prior to 1960) and those of the C & AG under the Comptroller & Auditor General's (Duties, Powers and Conditions of Service) Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng audit objections. In view of the above, it is recommended that to the extent the audit objections are mistakes apparent from record, it should be mandatory for the AO to take corrective steps. However, where the correction of the audit objections require re-opening or revision of completed assessments, the same should not be permitted since it amounts to change of opinion and creates uncertainty for the taxpayer. Such audit objections may be used as material for knowledge dissemination and system improvement. In other words, such audit objections may be given prospective effect by amending the law or issuing circular, as the case may be, to remove ambiguity and eliminate all scope for litigation." 12.1. Thus, from the above, it is clear that the Committee, after considering entire gamut of circumstances faced by the revenue as well as assessees, suggested that reopening, merely on the basis of audit objections and in absence of any new material indicating escapement of income, amounts to change of opinion and creates uncertainties for taxpayers. Thus, our view is in line with ideal position of law as envisaged by a competent body. 13. The fifth argument of the Ld. Counsel is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 'reasons' about alleged wrong claim of the assessee for claiming deduction u/s 80RR of Rs. 97,71,079/- being 60% of the professional income from foreign sources amounting to Rs. 1,62,85,132/-. It has been stated in the 'reasons' that deduction u/s 80RR is allowable in respect of professional income from foreign sources where the total income of an individual being inter-alia sportsman, includes an income derived by him in the exercise of his profession from any person not resident in India, but, in this case the assessee was neither a sportsman nor an athlete. According to AO, the assessee did not exercise any of the professions covered in definition of section 80RR, and thus the assessee had wrongly claim deduction u/s 80RR. 15.1. We have examined entire gamut of facts of this case and judgments placed before us on this issue by both the sides. Admitted facts on record, which are in public domain also, are that the assessee has been a cricketer of international stature and has been always playing for the country in domestic as well as international cricket tournaments. The perusal of the Income Tax Expenditure account of the assessee for the year under consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise of his profession from foreign sources and receives such income in India or beings it into India in foreign exchange, it entitled to deduct 25 per cent of the income so received or brought into India in computing his total income. This provision is designed to encourage authors, playwrights, artists, musicians and actors in our country to project their activities outside India with a view to contributing to greater understanding of our country and its culture abroad and also for augmenting our foreign exchange resources. With a view to encouraging our sportsmen and athletes to compete in international events, the Finance Act has amended section 80RR to include them in the category of persons entitled to the benefit of that section." 15.4. The perusal of the above said circular clearly shows that section 80RR is a beneficial provision intended to provide benefits of tax concessions to those persons who can contribute to greater understanding of our country and its culture abroad and also for augmenting our foreign exchange resources. The circular clearly lays down that aim of section 80RR is to encourage our sportsman, and athletes and persons of other categories as mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered. Courts should, whenever possible, unless prevented by the express language of any section or compelling circumstances of any particular case, make a benevolent and justice-oriented inference. Facts must be viewed in the social milieu of a country. 15.7. Further, the apex Court in the case of CIT vs. Gwalior Rayon Silk Manufacturing Co. Ltd. 196 ITR 149 (SC) has held with regard to the interpretation of statute granting deduction, exemption, or relief to the taxpayer that it is settled law that the expression used in the taxing statute would ordinarily be understood in the sense in which it is harmonious with the object of statute to effectuate the legislative intention. It is equally settled law that, if the language is plain and unambiguous, one can only look fairly at the language used and interpret it to give effect to the legislative intention. Nevertheless, tax laws have to be interpreted reasonably and in consonance with justice adopting purposive approach. The contextual meaning has to be ascertained and given effect to. A provision for deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia, there shall be allowed in computing the total income of the individual, a deduction from such income of an amount equal to (i) Sixty per cent of such income or an assessment year beginning on 1st day of April, 2001; ...................................................................................... As is brought into India by, or on behalf of, the assessee in convertible foreign exchange within a period of six months from the end of the previous year or within such further period as the competent authority may allow in this behalf and no deduction shall he allowed unless the assessee furnishes a certificate in the prescribed form, along with the return of income, certifying that the deduction has been correctly claimed in accordance with the provisions of this section. .................................................................................... 16.1. The plain reading of above provisions shows that the following conditions needs to be satisfied for the purpose of the above section :- (a) The individual must be a resident in India; (b) He should be an author, playwright, artist, musician and actor or sportsman (including an athlete); (c) The income should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Takeda is a sportsman who competed in two Summer Olympic Games and who was the International Olympic Committee (IOC) in 2012." From the above definition, it is noted that the term sportsman may also be used to describe a former player who continues to remain associated and engaged, for the promotion of the related sport activities. The facts of the case are that the assessee has been undoubtedly a cricketer of international stature. He was honoured with 'Arjun Award' by the Government of India and 'Maharashtra Bhushan' by the Government of Maharashtra as life time achievement award for his sporting excellence. It has been shown to us that the assessee has been playing cricket matches in India and abroad, even after he had stopped playing tournaments of international and national levels. The evidences of such district level and other smaller level matches participated and played by the assessee were brushed aside by the AO on the ground that such kind of tournaments and matches are of no relevance. In our view action of the AO is not justified. 16.4. It is further noted by us from the certificate dated 21st May, 2009 issued by ICC Cricket Committee that assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which that person belongs. If the legislature would have stated so, in that case the intention of the legislature would have been narrower in terms of nature of income to be considered as eligible for deduction under this section. Thus, what we understand from the reading of the section is that any income derived by the sportsman during the course of his profession which arise out of core activity (i.e. activity of playing in the field), and also other subsidiary & allied activities which are linked to and have nexus with the core activity of the sports, should also be included in the scope of the income eligible for deduction u/s 80RR. We do not mean to say that any type of income which has remote connection or no connection with or which are independent of the core activity would also be covered in this section. Further, those activities which go beyond the parameters of profession and take the shape of business activities shall also not fall in the scope of income derived during the course of profession in the context of section 80RR. 17.2. The legislature has clearly abstained from using the expressions like income derived from playing cricket (or sports), or participating in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned income received by the assessee from M/s. ESPN Star Sports. For properly appreciating the facts, we have referred to some of the relevant clauses of the agreement of the assessee with M/s. ESPN Star Sports, reproduced hereunder: "2(a) ESPN STAR Sports hereby engages you to render services on an exclusive basis as a presenter, reporter and commentator for its sports programming service (the "Programming") and such other services as described herein and you agree to render such services. You shall perform the services, under ESPN STAR Sports direction and control, as a presenter and commentator, including but not limited to on the air appearances, voice over announcements, commentary, interviews, ESPN STAR Sports commercials and promotions, radio appearances, audio recordings, narration, hosting rehearsals, vocal recordings (looping, post-synching and the like), costume fitting and other pre- and postproduction activities, and related services as well as such programs as ESPN STAR Sports may from time to time elect to produce for or exhibit on ESPN STAR Sports. In addition, You shall also be available for sales functions, cross-channel promotions, photography sessions, public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in the exercise of his profession as a 'sportsman'. 17.6. During the course of hearing, ld. DR had relied upon the decision of tribunal in the case of Harsha Bhogle vs ITO 114 TTJ 266, and submitted that Mr. Bhogle was also commentator and claimed deduction u/s 80RR, which was denied by the AO and his action was confirmed by the tribunal. We have gone through this decision and find that Mr. Bhogle had claimed deduction u/s 80RR as an actor/artist. He never made a claim as a 'sportsman'. Thus issue before the bench was different and the facts of the said case and ratio decided therein are not applicable on the facts of the case before us. 18. The assessee had made another alternative argument, on without prejudice basis that if assessee is not treated as a 'sportsman', then he shall fall in another category namely 'artist'. It has been contended that while performing the role of commentator and presenter, there was an element of art involved in the performance of the assessee, and Assessee's performance was like that of an artist, and therefore, viewed from this angle also the impugned income derived by the assessee in the exercise o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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