Agricultural Produce Market Committee v. ITO

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The Tax Publishers2012 TaxPub(DT) 0583 (Guj-HC) : (2013) 355 ITR 0384 : (2011) 063 DTR 0007 INCOME TAX ACT, 1961 --Reassessment --Change of opinionObjections of revenue audit party--Assessee had been granted registration under section 12AA as an institution carrying out charitable activities. For relevant assessment year, it claimed exemption under section 11 in status of AOP which was allowed by AO. Later on AO issued notice under section 148 for reopening of assessment on objections raised by revenue audit party that even if assessee was registered under section 12AA, it was not entitled to status of 'Trust'. *Held:* Was not justified. Once the registration is granted under section 12AA, AO is not justified in refusing the benefit which would accrue under the registration. For reopening of assessment it is necessary that AO should have reason to believe that income had escaped assessment, but here it is based on a mere change of opinion, that too, of revenue audit party and not that of AO. Hence, reopening is not valid. Income Tax Act, 1961 Section 147 IN THE GUJARAT HIGH COURT HARSHA DEVANI & H.B. ANTANI, JJ. Agricultural Produce Market Committee v. ITO, Special Civil Application No. 16234 of 2010 24 January 2011 Petitioner by : J.P. Shah and Manish J. Shah, Respondent by : M.R. Bhatt and Mauna M. Bhatt, JUDGMENT *Ms. Harsha Devani, J.* By this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 29-3-2010 issued by the respondent under section 148 of the Income Tax Act, 1961 (the Act) reopening the assessment of the petitioner for the assessment year 2006-07. 2. The petitioner, an Agricultural Produce Market Committee, has been granted registration under section 12AA of the Income Tax Act, 1961 by the Commissioner of Income Tax as an institution carrying out charitable activities. The petitioner submitted a return of income for the assessment year 2006-07 in the status of 'Association of Persons' showing income of Rs. 74,57,427 and claiming deduction of Rs. 77,40,212 (Rs. 32,40,212 + Rs. 45,00,000) and thus, showing loss of Rs. 2,82,785. Pursuant to notice issued under section 142(1) of the Act, the petitioner by a reply filed in July 2008, stated that its activities were previously exempt under section 10(20) of the Act (before its amendment by Finance Act, 2002 with effect from 1-4-2003) as local authority because of its object of 'advancement of any other object of the general public utility'. It was also stated that the Commissioner of Income Tax had granted registration under section 12AA of the Act and that its activities are covered under section 2(15) of the Act defining 'charitable purpose' and that the registration granted under section 12AA was in order and as such there was no question of rejecting the petitioners claim of being assessed under sections 11 to 13 of the Act. The assessing officer framed assessment under section 143(3) of the Act vide order dated 31-7-2008 wherein he referred to the above referred letter and recorded in paragraph 2 thereof that, 'The assessee carries on charitable activities registered under 12A of the Income Tax Act, 1961', and computed the total income giving the specific deduction of Rs. 32,40,212 and Rs. 45,00,000, totalling to Rs. 77,40,212. Later on, after about more than a year, vide letter dated 15-9-2009, the assessing officer informed the petitioner that the revenue audit had raised various objections as regards the eligibility of the petitioner for exemption/deduction under section 11 of the Act. The petitioner gave a detailed reply dated 21-12-2009 in respect of the objections raised by the audit party. Thereafter, by the impugned notice dated 29-3-2010, the assessment of the petitioner is sought to be reopened for assessment year 2006-07. The petitioner, thereafter, addressed a letter dated 29-4-2010 to the respondent stating that it had filed return on 24-7-2010 in response to the notice under section 148 of the Act and asked for copy of the reasons. Upon the reasons being furnished, the petitioner filed its objection by a letter dated 12-10-2010. The respondent vide his order dated 6-12-2010, rejected the objections submitted by the petitioner. Being aggrieved, the petitioner has moved the present petition challenging the notice issued under section 148 of the Act. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0583 (Guj-HC) : (2013) 355 ITR 0384 : (2011) 063 DTR 0007

INCOME TAX ACT, 1961

--Reassessment --Change of opinionObjections of revenue audit party--Assessee had been granted registration under section 12AA as an institution carrying out charitable activities. For relevant assessment year, it claimed exemption under section 11 in status of AOP which was allowed by AO. Later on AO issued notice under section 148 for reopening of assessment on objections raised by revenue audit party that even if assessee was registered under section 12AA, it was not entitled to status of 'Trust'. Held: Was not justified. Once the registration is granted under section 12AA, AO is not justified in refusing the benefit which would accrue under the registration. For reopening of assessment it is necessary that AO should have reason to believe that income had escaped assessment, but here it is based on a mere change of opinion, that too, of revenue audit party and not that of AO. Hence, reopening is not valid.

Income Tax Act, 1961 Section 147

IN THE GUJARAT HIGH COURT

HARSHA DEVANI & H.B. ANTANI, JJ.

Agricultural Produce Market Committee v. ITO,

Special Civil Application No. 16234 of 2010

24 January 2011

Petitioner by : J.P. Shah and Manish J. Shah,

Respondent by : M.R. Bhatt and Mauna M. Bhatt,

JUDGMENT

Ms. Harsha Devani, J.

By this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 29-3-2010 issued by the respondent under section 148 of the Income Tax Act, 1961 (the Act) reopening the assessment of the petitioner for the assessment year 2006-07.

2. The petitioner, an Agricultural Produce Market Committee, has been granted registration under section 12AA of the Income Tax Act, 1961 by the Commissioner of Income Tax as an institution carrying out charitable activities. The petitioner submitted a return of income for the assessment year 2006-07 in the status of 'Association of Persons' showing income of Rs. 74,57,427 and claiming deduction of Rs. 77,40,212 (Rs. 32,40,212 + Rs. 45,00,000) and thus, showing loss of Rs. 2,82,785. Pursuant to notice issued under section 142(1) of the Act, the petitioner by a reply filed in July 2008, stated that its activities were previously exempt under section 10(20) of the Act (before its amendment by Finance Act, 2002 with effect from 1-4-2003) as local authority because of its object of 'advancement of any other object of the general public utility'. It was also stated that the Commissioner of Income Tax had granted registration under section 12AA of the Act and that its activities are covered under section 2(15) of the Act defining 'charitable purpose' and that the registration granted under section 12AA was in order and as such there was no question of rejecting the petitioners claim of being assessed under sections 11 to 13 of the Act. The assessing officer framed assessment under section 143(3) of the Act vide order dated 31-7-2008 wherein he referred to the above referred letter and recorded in paragraph 2 thereof that, 'The assessee carries on charitable activities registered under 12A of the Income Tax Act, 1961', and computed the total income giving the specific deduction of Rs. 32,40,212 and Rs. 45,00,000, totalling to Rs. 77,40,212. Later on, after about more than a year, vide letter dated 15-9-2009, the assessing officer informed the petitioner that the revenue audit had raised various objections as regards the eligibility of the petitioner for exemption/deduction under section 11 of the Act. The petitioner gave a detailed reply dated 21-12-2009 in respect of the objections raised by the audit party. Thereafter, by the impugned notice dated 29-3-2010, the assessment of the petitioner is sought to be reopened for assessment year 2006-07. The petitioner, thereafter, addressed a letter dated 29-4-2010 to the respondent stating that it had filed return on 24-7-2010 in response to the notice under section 148 of the Act and asked for copy of the reasons. Upon the reasons being furnished, the petitioner filed its objection by a letter dated 12-10-2010. The respondent vide his order dated 6-12-2010, rejected the objections submitted by the petitioner. Being aggrieved, the petitioner has moved the present petition challenging the notice issued under section 148 of the Act.