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TMI Blog2022 (2) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - ITA No.1317/Mum/2018 And ITA No.1299/Mum/2018 - - - Dated:- 24-1-2022 - Shri M.Balaganesh, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Revenue : Ms. Jacinta Zimik Vashai For the Assessee : Shri Percy Pardiwala ORDER PER M. BALAGANESH (A.M): These Cross appeals in ITA Nos.1317/Mum/2017 1299/Mum/2018 for A.Y.2008-09 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-6, Mumbai in appeal No.CIT(A)-6/IT-07/156/2017-18 dated 16/12/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 10/02/2015 by the ld. Asst. Commissioner of Income Tax (E), 2(1), Mumbai (hereinafter referred to as ld. AO). Identical issues are involved in both these appeals hence, they are taken up together and disposed of by this common order for the sake of convenience. ITA No.1299/Mum/2018(A.Y.2008-09) Assessee Appeal 2. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empt u/s.11 if it holds for any period during a previous year any shares in a company (other than shares in a public sector company or shares as prescribed u/s.11(5)(xii). Further, proviso to Section 164(2) provides that the portion of income not exempt u/s.11 or 12 by virtue of the fact that any funds of the trust have not been invested or deposited for any part of the year in consonance with the provisions of Section 13(1)(d) read with section 11(5) shall be charged to tax at the maximum marginal rate of tax. During the year, from the records it is seen that the book value of quoted shares which was ₹ 43,75,000/- as on 31.03.2007 was reduced to ₹ 21,75,000/- as on 31.03.2008. Consequently, the investment in unquoted shares has increased to ₹ 1034 Crores in A.Y.2008-09. This implies that the assessee had earned capital gains on sale of quoted shares and invested in unquoted shares which is a prohibited mode of investment as per Section 13(1)(d) of the Act. Therefore, the investment in prohibited mode to the extent of ₹ 1034 Crores has escaped from being taxed. The profit on sale of shares of quoted shares was a capital gain on sale of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been wrongly claimed by the assessee. Therefore an income of ₹ 6,49,31,667/- has escaped income for the A.Y.2008-09. In view of the above facts, I have reason to believe that the income to the extent of ₹ 1034 Crores + ₹ 11,98,37,200 + ₹ 6,49,31,667 = ₹ 1052.47 Crores has escaped assessment for A.Y.2008-09. As such the assessment for A.Y.2008-09 is re-opened by way of issue of notice u/s.148 of the I.T. Act. 3.1. The reasons recorded by the ld. AO for reopening assessment were furnished by the ld. AO to the assessee on 16/10/2014. The assessee primarily made objection that from the perusal of the aforesaid reasons there could be no fault that could be attributed on the part of the assessee in making a full and true disclosure of the particulars of income by the assessee in the original assessment proceedings and accordingly, first proviso to Section 147 of the Act would come into operation, based on which the re-assessment proceedings initiated by the ld. AO are required to be dropped. The assessee submitted that full and true details were indeed furnished before the ld. AO in the course of original assessment proceedings. It was specifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of dividend on investments in shares / units derived by the assessee trust, we find that up to A.Y.2014-15, the assessee trust is indeed eligible for exemption u/s.10(34) of the Act. In fact, the provisions of Section 11(7) of the Act is inserted in the statute only by Finance No.2 of the Act 2014 w.e.f. 01/04/2015 wherein the assessee trust has been prevented from claiming exemption u/s.10 other than 10(1), 10(23C) and Section 10(46) of the Act. This amendment is obviously applicable only from A.Y.2015-16 onwards and cannot be applicable for earlier years. The year under consideration before us is A.Y.2008-09. Hence, this amendment in Section 11(7) cannot be made applicable for A.Y.2008-09. Accordingly, we hold that the claim of exemption made by the assessee in respect of dividend u/s.10(34) of the Act is very much in order. Hence, there cannot be any illegality in the claim of exemption made by the assessee. In either way, the ld. AO in the reasons recorded had not referred to any tangible material for taking a divergent stand in respect of this issue and make addition thereon. It only clearly reflects the change of opinion in the mind of the ld. AO. The law is very well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art in computing 15% of the income of such property, is dealt with. Therefore, it is a particular assessee and who is in receipt of such income as is falling under clause (a) of sub-section (1) of section 11 who would be claiming the exemption or benefit. That is a income derived by a person from property. It is that which is dealt with and if the property is held in trust for the specified purpose, the income derived therefrom is exempt and to the extent indicated in section 11(1)(a) of the Income Tax Act, 1961. There is nothing in the language of sections 10 or 11 which says that what is provided by section 10 or dealt with is not to be taken into consideration or omitted from the purview of section 11. If we accept the argument of Mr. Malhotra and the Revenue, the same would amount to reading into the provisions something which is expressly not there. In such circumstances, the Tribunal was right in its conclusion that the income which in this case SRP 11/13 ITXA1310.13.doc the assessee trust has not included by virtue of section 10, then, that cannot be considered under section 11. 9. In the circumstances and when the income from property held for charitable or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 enclosed in page 6 of the paper book 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -3 vide letter dated 21/10/2010 filed before the ld. AO in the original assessment proceedings. The said annexure is reproduced as under:- PARTICULARS AMOUNT Rs. Opening Balance as on 01.04.2007 467,02,25,000.00 Add ; - Investments made during the year 14,17,00,000.00 a) Fixed Deposits b) Cum. Preference 1034,00,00,000/00 Shares of Tata Sons Ltd. 1048,17,00,000.00 1515,19,25,000.00 Less : - Investments redeemed / matured during the year a) Capital Gains Bonds 455,55,00,000.00 b) Fixed Deposits 15,00,000.00 c) Equity Shares of TCS Ltd. 21,99,760.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t vs. DCIT reported in 122 Taxman.com 274; Sir Ratan Tata Trust vs. DCIT reported in 122 Taxmann.com 275. Hence, it could be safely concluded that the ld. AO could not have legally and validly entertained a belief that income of the assessee had escaped assessment in respect of investment of ₹ 1034 Crores made in preference shares of Tata Sons Ltd. Either way, there is absolutely no failure on the part of the assessee to make full and true disclosure of material facts relevant for the purpose of assessment before the ld. AO in the original assessment proceedings. 5.3. 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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