TMI Blog2011 (12) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is an inordinate delay in filing of these cross objections and the assessee cannot take an undue advantage of process of law. He has forcefully submitted that the assessee has not explained the sufficient cause for not filing the cross objections within the period of limitation. He has relied upon the decision of the Hon'ble Gujarat High Court in the case of Vareli Textile Industries v. Commissioner of Income-tax reported in 284 ITR 238. 5.2 On rebuttal, the ld AR of the assessee has submitted that the assessee can raise this issue even under Rule 27 of the ITAT rules as the assessee raised this issue before the CIT(A), though the same was not adjudicated. 6. We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material on record on condonation of delay in filing the cross objections. The main ground of delay as explained by the assessee in the affidavit is that the assessee was not conversant with technicalities of appeals and under bonafide impression that it would be able to take up the issues in the appeals of the department and only while discussing the case with the counsel, it was realized that the assessee should have filed cros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Though, a lenient view has to be taken while interpreting sufficient cause of delay; however, this does not mean that the litigant has a free license to approach the Court on its will. 8. In the absence of any satisfactory or cogent explanation, the plea of condonation of delay deserves dismissal. The assessee has not filed any material or evidence in support of its explanation, which otherwise appears to be vague and contrary to the facts and circumstances of the case. There is no particular date given on which the assessee discussed the matter with the counsel. 9. The provisions of limitation have to be given effect with all its vigour. Nevertheless, may harshly affect the particular party. 9.1 The Hon'ble Supreme Court in the case of Lachhman Das Arora V Ganeshi Lal (1999) 8 SCC 532 has observed as under: "There is no gain saying that the law of limitation may harshly effect a particular party but it has to be applied with all its vigour when the statute so prescribed. The courts cannot extent the period of limitation on equitable grounds." 9.2 Under sub sec. 5 of sec 253, the Tribunal may permit filing of cross objection after the expiry of prescribed peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO reported in 324 ITR 154 and submitted that even if there is no assessment u/s 143(3), the reopening u/s 147 is bad, if there are no proper reason to believe recorded by the Assessing Officer. The notices issued u/s 148 is bad in the absence of any material or information on the basis of which the Assessing Officer could believe that the income assessable to tax has escaped assessment. In support of the contention, the ld AR has relied upon the decision of the Hon'ble Madras High Court in the case of Bapalal and Co vs JCIT reported in 289 ITR 37 (Mad) and the decision of Hon'ble Rajasthan High Court in the case of CIT vs Manoharlal Gupta reported in 213 CTR 193. He has also referred various decisions of this Tribunal on this point. 12.1 The ld DR, on the other hand has submitted that there was no assessment for the AY 2001-02 because the assessment framed u/s 143 (3) was annulled by the CIT(A) on the ground that notices issued u/s 143(2) and 142(1) are beyond the limitation period. Thus, the return becomes only processed u/s 143(1)(a). He has further submitted that the Assessing Officer relied upon the decision of the Hon'ble jurisdictional High Court in the case of Ratna Bh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notices issued u/s 143(2) and 142(1). Consequently, there was no assessment and the return becomes only processed u/s 143(1)(a). 14.1 It is pertinent to note that the notice issued u/s 148 was issued within four years from end of the relevant assessment year; therefore, the case does not fall under the first proviso to sec. 147 of the I T Act. 15. Similarly, for the AY 1997-98, the return was processed u/s 143(1) and there was no assessment. The Assessing Officer exercised the power u/s 147 on the reason that in the course of assessment proceedings for theAY2001-02, the income arising out of exhibition brought to tax as business income. 16. It is relevant to note here that the notice of reopening for the AY 1997-98 was after the framing of the assessment u/s 143(3) for the AY 2001-01 and before the same was annulled by the CIT(A) on the ground of limitation. Therefore, at the time of issuing the notice u/s 148 for the AY 1997-98, the assessment framed u/s 143(3) for the AY 2001-02 was very much in existence. The case for the AY 1997-98 also does not fall under the first proviso to sec. 147 because there was no assessment; but only the return was processed u/s 143(1). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer was justified in the decision which he took for the assessment year 2005-06 is again not a matter to be considered at this stage of the proceedings. The point is that on the basis of the additional material which was available on record, the Assessing Officer issued a notice for reopening the assessment for the assessment year 2004-05. In our considered view, the Assessing officer did have tangible material to reopen the assessment under section 147 of the Act and to form a reason to believe that income had escaped assessment. Clause (c)(iv) of Explanation 2 to section 147 creates a deeming fiction where though the assessment has been made, income chargeable to tax is under assessed. In such a case, law deems that income chargeable to tax has escaped assessment. For these reasons, we are of the view that recourse to the provisions of section 147 cannot be faulted." 16.3 The Hon'ble High Court has given the above findings after considering various decisions of the Hon'ble Supreme Court and earlier decisions of the Hon'ble jurisdictional High Court itself. It is observed by the High Court that the Assessing Officer while seeking to reopen an assessment u/s 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mum/2006 (Asst Year 2001-02) 19. The grounds raised in the appeal for Assessment Year 2001-02 are common to the grounds in the appeal for Assessment Year 1997-98; therefore, for the sake of convenience, both these appeals are disposed off by this Composite order. 20. The revenue has raised the following grounds in the appeal for Assessment Year 1997-98: 1.On the facts and in the circumstances of the case, and in law, the CIT(A), Mumbai has erred in allowing exemption to the assessee even though the activity of carrying on the exhibition was a dominant activity and not an incidental one and carried on in a systematic way so as to constitute business income. 2. On the facts and in the circumstances of the case, and in law, the CIT(A), Mumbai has erred 'in directing the assessing officer to allow exemption to the assessee even though perusal of income and expenditure account reveal that income generated through holding of exhibitions were not utilized for charitable purposes. 3. On the facts and in the circumstances of the case, 1 i1. law, the CIT(A), Mumbai has erred in directing the Assessing officer to allow exemption to the assessee even though the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also reopened u/s 147 by issuing notice u/s 148 dt 10.3.2004. 21.5 The assessee maintain computerised books of account and the Assessing Officer has stated in the order that extracts of the same were produced at the time of assessment u/s 143(3) for the Assessment Year 2001-02; but the assessee has not produced the books of account during the proceedings of reassessment. The Assessing Officer accordingly took view that no separate books of account are maintained by the assessee. 21.6 In order to ascertain the actual nature of activities and real character of income, the Assessing Officer obtained necessary information in respect of holding of exhibition. The Assessing Officer recorded that the exhibition was organised very systematic on the basis of business orientation. The assessee has issued a Guide Book-India ITME 2000 containing rules and regulations. The tariff for Indian Exhibition was fixed at Rs.4,500/- per sq.mtr and for Foreign Exhibition US $ 270 per sq.mtr. The Assessing Officer was of the view that when the Exhibition was conducted very systematically and in commercial manner charging exorbitantly from the Exhibitors on each and every facility provided to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity of providing facilities to the participants of the Exhibition, which show the motive as profit making and not charity. He has relied upon the order of the Assessing Officer. 23.1 On the other hand, the ld AR of the assessee has submitted that the Assessing Officer has no jurisdiction to withdraw or disallow the exemption once granted by the CBDT vide notification issued u/s 10(23C)(iv). He has referred the notification issued by the CBDT for granting exemption to the assessee at page 38 of the paper book. The ld AR has submitted that once the objects of the assessee has been accepted as charitable and the exemption u/s 10(23C)(iv) has been granted; then the Assessing Officer has no power to reverse the exemption granted by the appropriate authority (government of India). He has further contended that holding the exhibition is the only activity of the assessee; therefore, there is no need to maintain separate books of account. The books of account maintained for exhibition are separate and exclusively as no other activity has been carried out by the assessee. The ld AR then referred the memo explaining the provisions in the financial bill 2002 regarding the power to withdra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gwati v. Commissioner of Income-tax - 246 ITR 188 (Guj) d) Maharashtra Academy of Engineering and Educational Research v. Director General of Income-tax (Investigation) - 319 ITR 399 (Bom) e) Chaturvedi Har Prasad Educational Society vs CIT - 46 DTR 121 (Lko) f) CIT vs Manipal Academy of Higher Education - 9 SOT 284(Bang) 24. We have considered the rival contentions and carefully perused the relevant material on record as well as the provisions of the Act. The first question emerges for our consideration and adjudication is whether after the notification u/s 10(23C)(iv), the Assessing Officer has the power to withdraw the exemption. 24.1 At the threshold, we may point out the denial of the claim of exemption at the time of assessment does not necessarily amount to withdrawal of exemption granted by the CBDT by notification issued u/s 10(23C)(iv). Section 10(23C)(iv) as exists at the relevant time reads as under: (23C) any income received by any person on behalf of- (i) ...... (ii) ..... (iii) ..... [(iv) any other fund or institution established for charitable purposes which may be notified by the Central Government in the Official Gazette, havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (23C)(iv), the assessee becomes entitled to claim the exemption against the income from those activity, which are in consonance of the object of the trust/institution for which the exemption is granted. The notification issued u/s 10(23C)(iv) itself does not tantamount to have allowed the claim of exemption. The approval/exemption by notification is pre-requisite condition for claiming of exemption whether the claim is allowable or not, has to be examined in the light of various conditions stipulated under the statute as well as by the Central Govt subject to which the approval is granted. The compliance with the terms and conditions stipulated by the Central government/prescribed authority would be gauged at the assessment stage. 25. As per the provisions of sec 10(23C)(iv), the object of the institution should be for charitable purpose. The exemption has been granted vide notification issued by the Central Government u/s 10(23C)(iv), the same was subject to the following conditions: "In exercise of the powers conferred by sub clause (iv) of clause (23C) of sec. 10 of the Income tax Act, 1961 (13 of 1961) the Central Government hereby notifies "India International Textile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of tariff from the participants in respect of power, telephone, compressor hire charges. The nature of these facilities itself shows that the assessee is charging separately for each and every facilities made available to the participants in the exhibition by adding its own margin in the tariff rate charged by the service provider. It is not the case that for holding the exhibition, the assessee is charging for its service for organizing the exhibition; but apart from the space rentals, the assessee is charging for all other facilities and services like electricity, telephone in a manner as to earn the profit. Thus, when the assessee is not charging lump sum amount from the participants for the services for organizing; but adding the margin of more than 50% on each and every services, which shows that the assessee is not working under 'no profit no loss basis' but having a definite target of earning the profit from the activity. No doubt about this activity of providing other facilities/services to the participants of the exhibition are connected with the main object of organising the exhibition but some of these activities are clearly having the element of profit motive and not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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