Bombay H.C : If A.O enquired regarding the allowability of the entrance fee received from its members, reassessment u/s 147 not justified

High Court Of Bombay

Bombay Presidency Golf Club Ltd. Vs. ITO

Assessment Year : 2003-04

Section : 147, 4

Mrs. Mridula Bhatkar And J.P. Devadhar, JJ.

Writ Petition No. 2018 Of 2010

January  31, 2011

JUDGEMENT

1. Heard.

2. Rule. Returnable forthwith. By consent of the parties the petition is taken up for final hearing.

3. The petitioner has challenged the notice issued under section 148 of the Income-tax Act, 1961 dated 24-3-2010 whereby the assessment for the year 2003-04 is sought to be reopened.

4. The reasons recorded for reopening the assessment read thus :
“The return of income accompanied with the balance-sheet, income and expenditure account, computation of income, TDS certificate, etc., declaring deficit of Rs. 9,17,849 was filed on 27-11-2003. The return was processed under section 143(1) of the Act. Subsequently the assessment for the year under consideration was finalized under section 143(3) of the Income-tax Act, by the then Assessing Officer on 28-3-2006, determining loss at Rs. 6,82,200.

On a perusal of the assessment records, it is observed that the assessee has credited the entrance fee of Rs. 2,96,56,000 directly to the reserves in the balance-sheet without routing it through the income and expenditure account. As a result the income of the assessee has been understated and which has been accepted in the assessment. The assessee-trust has failed to disclose fully and truly material facts for the assessment as far as this issue is concerned which was entailed into escapement of income to that extent.

I have therefore reason to believe that income has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961.

The sanction under section 151(1) of the Income-tax Act, 1961, is solicited for issuance of notice under section 148 of the Act, from the Director of Income-tax (Exemption) as the assessment for the year under consideration has been finalized under section 143(3) of the Income-tax Act, and a period of four years have lapsed from the end of the relevant assessment year.”

5. On a perusal of the aforesaid reasons it is evident that the assessment is sought to be reopened on the basis of material which was on record at the time of original assessment. During the assessment proceedings the Assessing Officer had enquired into the question regarding the allowability of the entrance fee received from its members and on being satisfied allowed the claim.

6. Although the Assessing Officer has recorded reasons to the effect that the assessee has failed to disclose fully and truly all material facts, nothing is brought to our notice which would suggest that there is any failure on the part of the assessee to disclose fully and truly all material facts. As per the proviso to section 147 of the Income-tax Act, 1961 the assessments beyond four years from the end of the relevant assessment year can be reopened only if there is failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

7. In the present case, in the absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, the notice issued under section 148 of the Income-tax Act, 1961 cannot be sustained.

8. Accordingly the rule is made absolute by quashing the notice dated 24-3-2010 issued under section 148 of the Income-tax Act, 1961.

9. No order as to costs.

[Citation : 332 ITR 226]

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