2011 (12) TMI 416 - AT - Income Tax

Validity of the reopening - Condonation of delay in filing of cross objection - Held that - it appears that the assessee took the provisions of condonation of delay in a casual manner and granted. It is well settled that the Court helps vigilant and not indolent. Hence we are of the view that the assessee has not disclosed a reasonable/good much less a sufficient cause for not filling the cross objections within the period of limitation and the delay of about 5 years. - Cross Objections filed by the assessee are dismissed as time barred. Right of the assessee (respondent) to raise issues under rule 27 of the ITAT Rules even without filing the cross objection or appeal against the order of the CIT(A). - held that - it is clear from the observation of the Hon ble jurisdictional High Court in the case of B R Bamasi (1970 -TMI - 8216 - BOMBAY High Court ) that the effect of the plea raised by the assessee against the validity of the reopening would be only to the extent of defence against the appeal and if assessee succeeds in the said ground then the appeal of the revenue would fail. Regarding reopening - Held that the information and the material gathered during the course of assessment proceedings and assessment of exhibition income for the AY 2001-01 u/s 143(3) constitute a tangible material for coming to the conclusion that the income assessable to tax has escaped assessment - Decided against the assessee. Regarding exemption u/s 10(23C)(iv) - held that - Since the assessee has not maintained separate books of account for these activities of providing other services and charging with a margin the notification issued u/s 10(23C)(iv) will not applicable in respect of such income from other activities and therefore the exemption u/s 10(23C)(iv) is not available in respect of the income earned by the assessee from the activity of providing power installation electricity telephone facilities compressed air hire etc. etc. Accordingly the Assessing Officer is directed to allow exemption with respect to the receipt and accumulations from the holding and organizing the exhibition and hence the income from other activities in providing other services by charging huge profit has to be taxed as income of the assessee. - Decided partly in favor of revenue.

Issues Involved:
1. Validity of the reopening of the assessment under Section 147 of the Income Tax Act.
2. Condonation of delay in filing cross objections by the assessee.
3. Allowability of exemption under Section 11 of the Income Tax Act.
4. Classification of income from exhibitions as business income or charitable income.
5. Compliance with the conditions stipulated for exemption under Section 10(23C)(iv) of the Income Tax Act.

Detailed Analysis:

1. Validity of the Reopening of the Assessment:
The assessee contested the validity of the reopening of the assessment under Section 147 of the Income Tax Act. The Tribunal noted that the reopening was based on tangible material gathered during the assessment proceedings for the AY 2001-02, where the income from exhibitions was assessed as business income. The Tribunal held that the reopening was valid as there was sufficient material to form a belief that income had escaped assessment. The Tribunal referenced the Hon'ble Supreme Court's decision in the case of Ess Ess Kay Engineering Co Pvt Ltd and the Hon'ble jurisdictional High Court's decision in Multiscreen Media Private Limited v. Union of India, which supported the reopening based on findings from subsequent years.

2. Condonation of Delay in Filing Cross Objections:
The assessee filed cross objections with a delay of 1747 days, explaining that the delay was due to a lack of understanding of the technicalities of the appeal process. The Tribunal found the explanation insufficient and noted that the assessee had legal representation since 2008 but did not act in a timely manner. The Tribunal emphasized that while a lenient view is often taken regarding delays, the explanation must be cogent and satisfactory. Since the assessee failed to provide a satisfactory explanation, the Tribunal declined to condone the delay, and the cross objections were dismissed as time-barred.

3. Allowability of Exemption under Section 11:
The CIT(A) had not adjudicated the alternative ground regarding the allowability of exemption under Section 11 of the Income Tax Act. The Tribunal did not provide a detailed analysis on this issue as it focused on the primary grounds related to the reopening of the assessment and the classification of income.

4. Classification of Income from Exhibitions:
The revenue argued that the income from exhibitions should be classified as business income, as the exhibitions were conducted systematically and commercially. The Tribunal noted that the assessee charged significant margins on various services provided during the exhibitions, indicating a profit motive. The Tribunal held that while the primary activity of organizing exhibitions aligned with the charitable objects, the additional services provided at a profit margin constituted business activities. Consequently, the income from these services was classified as business income and not eligible for exemption under Section 10(23C)(iv).

5. Compliance with Conditions for Exemption under Section 10(23C)(iv):
The Tribunal examined whether the assessee complied with the conditions stipulated in the notification granting exemption under Section 10(23C)(iv). The notification required the assessee to maintain separate books of account for business activities incidental to the charitable objects. The Tribunal found that the assessee did not maintain separate books of account for the additional services provided during the exhibitions. As a result, the exemption under Section 10(23C)(iv) was not applicable to the income from these activities. The Tribunal directed the Assessing Officer to allow exemption only for the income directly related to organizing the exhibitions and to tax the income from additional services as business income.

Conclusion:
The Tribunal upheld the validity of the reopening of the assessment under Section 147 and dismissed the cross objections due to an inordinate delay in filing. It classified the income from additional services provided during exhibitions as business income and not eligible for exemption under Section 10(23C)(iv) due to non-compliance with the condition of maintaining separate books of account. The appeals filed by the revenue were partly allowed, and the cross objections by the assessee were dismissed.

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