TMI Blog2016 (4) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... game of cricket. In the given facts of this case, one cannot visualise earning of this income, de-horse the assessee having been a cricketer and a sportsman and nor can it be visualised independent of the game of cricket. We have already held in earlier part of our order that assessee falls in the category of a 'sportsman'. Thus, in our considered opinion, the facts of this suggest that the impugned income has been derived by the assessee in the exercise of his profession as a 'sportsman'. Thus, the facts of this case suggest that the assessee is eligible to claim deduction u/s 80RR, and therefore no belief could have been formed for escapements of his income. The claim is allowable on merits also, as discussed above in detail. Thus, the benefit of deduction claimed u/s 80RR was in accordance with law, and therefore, disallowance made by the AO in this regard is directed to be deleted. - Decided in favour of assessee. - ITA Nos. 3970 & 3971/Mum./2010 - - - Dated:- 16-3-2016 - Saktijit Dey, JM And Ashwani Taneja, AM For the Petitioner : Shri D V Lakhani For the Respondent : Shri Nitin Waghmade ORDER Per Ashwani Taneja, AM These appeals have been filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reopening of the already concluded assessment. Accordingly, the Bench had directed the Ld. DR to produce the assessment records. In accordance with the same, learned DR produced before us assessment records containing, inter-alia, documentation work done by the Department for reopening of the case, which was examined by us. Ld. DR submitted copies of reasons recorded by the AO and other supporting material to the Bench with one copy to the counsel of the assessee. The case was adjourned to next date to enable both the parties to file their respective replies. Accordingly, on the date of hearing, parties made their respective submissions on the jurisdictional and other legal aspect of the reopening as well as on the merits of the case. 5. The learned Counsel for the assessee has made detailed arguments to assail the reopening done by the AO as well as merits of additions/disallowances. He relied upon various judgments to argue that reopening was illegal and the disallowance was also bad in law and factually incorrect. He took us through these judgments in support of his argument that assessee is very much eligible as per law to claim deduction under section 80RR and inconsist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts made, evidences shown and judgments relied upon before us, by both the parties. 9. We shall first deal with the arguments made by both the parties before us with regard to the reopening of the case. The foremost issue as was raised before us is with regard to existence of two sets of reasons . The assessment records were produced by the learned DR during the course of hearing before us. Surprisingly, there do exist two sets of reasons . The first set of reasons is undated which is approved by the Additional-DIT(IT), Range-3, Mumbai, on 24th May 2007 and was forwarded for further approval by the DIT. Accordingly, DIT(IT), Mumbai, granted sanction of the same on 25th May 2007, by making detailed reasoning in his own handwriting. It is noted that while giving reasoning, the DIT had raised few new aspects which were not raised by the AO in the reasons recorded viz, some difference in income shown in the return of income and amount shown in the remittance certificate and a change in method of accounting by the assessee. It is noted that subsequent to the sanction granted by the DIT, the AO recorded another set of reasons dated 6th June 2007. This set of reasons appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belief need not be conclusive, but it is equally expected that the position of law should be clear in the mind of the AO, at least prima-facie. The belief need not be conclusive but it should be firm and clear. No belief can be formed out of confusion and doubtful thoughts. If this kind of situation is allowed to be sustainable in law, then it is quite possible that there will be experiments by the revenue officials by reopening the case of any assessee at their whims and fancies and that too on the basis of doubts and suspicions and without complying with jurisdictional and other procedural requirements of law. The re- assessment proceedings are not meant to make fishing enquiries and to experiment with the legal issues. In this regard, the position of law is well settled by many judgments coming from various High Courts. We find support of our view from the judgment of Hon'ble Jurisdictional High Court in IL And FS Investments Managers Ltd. v/s ITO, 298 ITR 32 (Bom.) wherein it was held by the Hon'ble Jurisdictional High Court that where the AO himself disagreed with the audit objection, under such circumstances, there could not have been valid basis to reopen the already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uing a reopening notice. This for the reason he states that otherwise the revenue due to the State would be lost even in case the audit objection is upheld. 8. We are unable to understand how the mandate of the Act requiring the AO to have reason to believe that income chargeable to tax has escaped assessment can be ignored on the altar of revenue collection. If such a submission is to be accepted, it would, be the beginning of the end of the Rule of Law. The aforesaid judgment is squarely applicable upon the facts of this case before us. Thus, we find that the reasons recorded by the AO were not in accordance with law. 10.2. It is further noted by us that Para-2 of the reasons dated 6th June 2007, was modified at the instance of the DIT and Para-3 was added subsequent to the approval from DIT, that too at the instance of the DIT. Allegations made in both these paragraphs were found to be factually incorrect as no effect was given in the assessment order with respect to these issues raised in these two paragraphs. It indicates that firstly there was no independent application of mind of the AO and secondly, the reasons were factually incorrect, at least to this e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income. A perusal of the assessment order shows that complete facts have been narrated in the assessment order that assessee is a well known erstwhile cricketer. It has also been mentioned that assessee has also received foreign exchange remittance from ESPN Star Sports Ltd. for giving commentary. Further, perusal of the computation sheet enclosed with the return shown that complete facts have been narrated in the computation sheet wherein income has been shown under the head income tax from business and deduction under section 80RR has been claimed @ 60% of factual income describing the same as professional income from foreign sources. It is further noted that assessee had filed replies to the AO wherein various relevant facts have been mentioned. Some of the relevant points mentioned in the reply dated 22nd August, 2003 are reproduced below:- Our client Mr. Sunil Gavaskar has filed the return of income declaring the total income at ₹ 1,20,65,654. Our client has earned the income from salary of ₹ 6,00,000. The salary certificate is enclosed along with the return of income. The salary is received from M/s. All Star Management Group Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration Ltd. v. DCIT 328 ITR 534 (Bom) and MAPS Enzyms Ltd. v. DCIT 41 taxmann.com 527 (Guj) wherein it was held that if the assessee had made disclosure of all material facts relating to its claim for the deductions in the return which were allowed by the AO, during the course of original assessment proceedings, then, reopening u/s 147 sought to be done beyond the period of 4 years from the end of the relevant assessment year, on the ground that the assessee had wrongly been allowed deduction was not permitted under the law and barred by limitation, in view of first proviso to section 147 of the Act. Thus, in view of the above discussion, we find impugned reopening to be barred by limitation in terms of first proviso to section 147. 11.4. The fourth argument of Ld. Counsel was that in this case impugned claim was allowed on the basis of information and documents provided in return as well as original assessment proceedings completed u/s 143(3), and thus AO's attempt of reopening this case on the same set of facts and factual material is based upon change of his opinion and has amounted to review of the original assessment order. On the other hand, Ld DR submitted that no o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO. This issue has been settled by Hon'ble Supreme Court in the case of Kelvinator of India Ltd. in 320 ITR 561 (SC) and has been followed regularly. Subsequently, in many judgments including various judgments from Hon'ble Bombay High Court also, e.g. in the case of Direct Information Pvt. Ltd. vs. ITO 349 ITR 150 (Bom), a similar view has been taken by the jurisdictional high court. We shall also like to rely upon a very recent judgment from Hon'ble Bombay High Court in the case of Nirmal Bang Securities Pvt. Ltd. v/s ACIT, W.P. No. 2665/2007, order dated 18th January, 2016, in support of our view, wherein it was held that when the assessment order was passed by the AO after due application of mind, after considering that dividend income earned from the mutual funds are exempt from tax u/s 10(33), subsequent initiation of reassessment proceedings would be considered merely on the basis of a change of opinion. 12. Before we conclude and wind up the issue of reopening, we find it appropriate to refer and discuss here that the Government of India had constituted Income-Tax Simplification Committee under the chairmanship of Justice R.V. Easwar, Former Judge, Delhi Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same principle in our opinion should hold good for Section 263. It is also noticed that often the income-tax authorities are not in a position to overlook the audit objection on a point of law though they have taken a view after due application of mind to the legal position, due to several reasons. This has led to avoidable litigation, even though the ruling of the Supreme Court is clear and categorical. Moreover, the Ministry of Law by its advice dated 24th June, 1982 to the Ministry of Finance (Department of Revenue) has opined, after referring to the ruling of the Supreme Court, that the '.......audit objection as well as the note of the Ministry of Law cannot be the basis for the re-opening of the assessments made under section 59 of the Estate Duty Act. Therefore, the instructions referred to by the Department in para (a) of their note based on the audit objection directing the reopening of the assessments already concluded runs counter to the decision of the Supreme Court referred to above' (Source: Page No. 9961 of Volume 6, 11th Edn. Law of Income Tax by Sampath Iyengar) In spite of several court judgments to this effect, the CBDT has issued a circular to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xth and last argument of the assessee was that disallowance was incorrect as per law and facts on merits also. We shall deal with both of these arguments together, as these are interconnected with each other. 14.1. It has been submitted that even, if more comprehensive reasons i.e. reasons dated 06.06.2007 are taken into consideration, it can be seen that all the three allegations made in the reasons are factually incorrect and legally invalid. We have gone through the reasons recorded. The first allegation of the AO is with regard to wrong claim of deduction u/s 80RR, which we shall deal and discuss in detail, little later. 14.2. The second allegation is that there was difference to the tune of ₹ 1,94,362/- in the income shown as per remittance certificate for ₹ 1,60,90,500/- whereas, as per computation of income the assessee has show income of ₹ 1,62,85,132/-. Thus, according to AO there was difference of ₹ 1,94,632/-. We have gone through the requisite facts of this case. It is noted that allegations made in the 'reasons' are found to be not only factually incorrect but of no implication also. It has been alleged in the reasons tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Remittances (received from M/s. ESPN Star Sports Ltd., Singapore. 15.2. The assessee had received income in the form of foreign remittances, on which deduction was claimed u/s 80RR, in pursuance to an agreement, dated 10th May, 1999 with M/s ESPN Star Sports for rendering services on an exclusive basis as a presenter, reporter and commentator and various other allied services described in the said agreement. Ld. CIT(A) examined and discussed about clause 2(a) of the agreement, but after discussing about the same, claim of the assessee was rejected on the ground that this deduction is available to a person who is sportsman or a person belonging to any one of the categories as mentioned in the said section and the income must be derived as a result of carrying out that very activity only. But in the case of assessee, since assessee was no more a sportsman or a cricketer and in any case since the impugned income was not earned as a result of playing cricket, and therefore, in view of requirement of section 80RR, the assessee was not eligible to claim the deduction u/s 80RR. We have carefully considered the contention of the revenue, but do not agree with the contentions raised befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons in the field of sports, author, artists, and other categories as mentioned therein. It is well settled law that beneficial provisions of the law must be construed liberally. While interpreting a beneficial legislation, rule of liberal construction should be preferred over the rule of strict interpretation, and therefore an effort must be made to see how the benefit can be provided to the persons who are claiming it sincerely and genuinely. The interpretation that enables us to achieve its object should be preferred over the one that tend to frustrate it, and the one which takes us in a direction to find out how the benefit can be denied. Thus, for appreciating the true meaning of the terms used in the section, an expression of wider amplitude may be preferred in comparison to a narrower one while defining scope and boundaries of the benefits intended to be provided by the legislature. Any type of narrow minded approach or myopic view while examining the eligibility of deduction may cause undue hardship to eligible persons and may frustrate the object of legislation. Purposive Construction is a well accepted rule of interpretation which says that the courts must look upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Allahabad High Court observed that it is said that a statute is best understood if we know the reason for it. The reason for a statute is the safest guide to its interpretation. The words of a statute take their colour from the reason for it. No provision in the statute and no word of the statute may be construed in isolation. Every provision and every word must be looked at generally before any provision or word is attempted to be construed. The setting and pattern are important. 15.9. Hon'ble Supreme Court in the decision reported in CIT vs. J.H. Gotla 156 ITR 323 (SC), has observed that if a strict and literal construction of the statute leads to an absurd result, i.e., a result not intended to be sub-served by the object of the legislation ascertained from the scheme of the legislation then if another construction is possible apart from the strict literal construction, then that construction should be preferred to the strict literal construction. Where the plain literal interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the legislature, the Court might modify the language used by the legislature so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60% of such income so received or brought into India during the year under consideration by the assessee in convertible foreign exchange within a period of six months from the end of the previous year or within such further period as the competent authority may allow, is deductible from such gross total income. 16.2. According to the lower authorities conditions mentioned in clause a) and d) are duly complied with, as the assessee is resident individual in India and received income from a person not resident in India. The revenue has disputed compliance of the conditions mentioned only in clauses (b) and (c) above. According to the AO, the assessee was neither a sportsman nor an artist nor an author, and thus not eligible to claim benefit of this deduction. It was further held by the revenue that the impugned income was not derived from exercise of his profession by the assessee as sportsman. Therefore, we need to analyse whether the assessee has fulfilled both of these conditions in the given facts or not. 16.3. Since, the term sportsman has not been defined in the Act and the impugned provisions are beneficial provisions intending to provide the benefits to the public at l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e- Playing' at its meeting in June, 2000. This committee was subsequently renamed as ICC Cricket Committee. The assessee remained its chairman until his resignation in May, 2008. We shall further like to state the broad intention of section 80RR, as was discussed in detail in earlier part of this order also, is to promote the sports and persons associated with it for the sake of building up greater understanding of the country and augmenting foreign resources. Thus, if we adopt a broader definition of the term sportsman, as we should, in view of the legal discussion made in earlier paragraphs, then, we can certainly consider to include therein not only a persons who actively played in the field in the impugned year but also a person who had been actively playing in the field in earlier years and thereafter, he continued to remain associated with the related sport and promoted the same sport, but from outside the field. Our view gets further strengthened from this fact that in section 80RR, it has been no where mentioned that the sportsman should be the person who is currently playing in the field or the person earning income directly from playing in the field only. Thus, we fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions i.e. ' income derived by him in the exercise of his profession '. Thus, in our view, clear intention of the legislature is to include the incomes of the eligible persons earned from all the closely connected allied activities in addition to the core activity. 17.3. In the case of Milind C. Shrivastava v. JCIT, (96 ITD 284 (Mum.), Hon'ble Bombay Bench of the Tribunal held that under sections 80HH, 80I, 80IA, and other similar sections, the mandatory requirements of the law is that income should be derived from an industrial undertaking, whereas, on the other hand, u/s 80RR, income has to be derived in the exercise of profession. Thus, language used by the legislature in section 80RR is to be liberally interpreted. If any income is derived by the assessee in the exercise of his carrying on his profession, the assessee would be eligible for deduction u/s 80RR. Thus, it was held that assessee, being a music director fall in the category of an 'artist' and would be eligible to claim deduction u/s 80RR. In the said case the amount was received as an advance by the said assessee for performing music shows abroad. But his music shows got cancelled due to cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppearances and off-the-air personal appearances for promotional purposes as ESPN STAR Sports may require (the Project Services ) (b) For the purposes of this Agreement, sports programming shall consist of commentating, presenting or being an expert guest on any cricket tournaments being broadcast by ESPN STAR Sports, contributing to any magazine or news' shows broadcast including Inside Cricket by ESPN STAR Sports and any specific ancillary programming for a Cricket World Cup, mini World Cup or test championships. Any studio show of thirty (30) minutes or more in duration, such as stumped, shall not be included in this Agreement and You shall be reimbursed separately, the terms of which shall he mutually agreed upon.......................... 17.5. In the facts of the case before us, it is noted that the assessee has derived its income as a result of his agreement with M/s ESPN Star Sports for the services provided by the assessee as a presenter and commentator and other allied activities which have been discussed in the relevant clauses of the agreement. Thus, assignment has been given to the assessee and this role has been performed by him effectively, because of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28 ITR 629 (Bom), Amitabh Bachchan v. DCIT (12 SOT 95 ITAT-Mum.), Prem Prakash v. ITO, (ITAT-Delhi in ITA 60/Del/1989), Sachin Tendulkar v. ACIT (ITAT-Mumbai in ITA no.428 to 430/Mum/2008) and DCIT v. M/s. Preeti Vyas, (314 ITR (AT) 69 (Mum). He had also referred to various clauses of agreement between assessee and ESPN Star to support his claim. But, since we held that assessee's case falls in the category of a 'sportsman', therefore we are not going into this aspect, and leaving it open at this stage. 19. Thus, the facts of this case suggest that the assessee is eligible to claim deduction u/s 80RR, and therefore no belief could have been formed for escapements of his income. The claim is allowable on merits also, as discussed above in detail. Thus, the benefit of deduction claimed u/s 80RR was in accordance with law, and therefore, disallowance made by the AO in this regard is directed to be deleted. 20. As a result Ground nos. 1, 2 3 are allowed and Ground no.4 is consequential, therefore, dismissed and Ground no.5 is general and does not need any specific adjudication. Now we shall take up assessee's appeal for AY 2002-03 in ITA No.3971/Mum/2010: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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