The reopening of assessment u/s 147 cannot be sustained as the ...

Assessment Reopening Invalidated Due to Incorrect Exemption Denial; Trust's Charitable Purpose Misunderstood by Authorities.

August 2, 2024

Case Laws     Income Tax     HC

The reopening of assessment u/s 147 cannot be sustained as the exemption u/s 11 was wrongly denied. The notice claimed the petitioner engaged in commercial activities, rendering it ineligible for exemption. However, the Supreme Court's ruling in Yogiraj Charity Trust case clarified that if the primary purpose of a trust is charitable, an ancillary non-charitable object would not invalidate its charitable nature. The trust deed did not confer uncontrolled discretion to the trustees to engage in commercial activities. Mere receipts from charitable activities do not constitute income from commercial activities. There must be tangible material to conclude income escaped assessment to reopen the case. The reasons for reopening lacked application of mind, erroneously citing a non-existent assessment order and misattributing a Supreme Court judgment. The case was decided in favor of the assessee.

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