Reopening under s.147 invalid where s.11 exemption and related reliefs were appealed, depriving AO jurisdiction; charitable trust depreciation and carryforward protected

Bombay HC held the reopening under s.147 invalid because the grant of exemption under s.11 and related reliefs were earlier allowed by the first appellate authority and thus became the subject matter of appeal, depriving the Assessing Officer of jurisdiction under the third proviso to s.147 to reassess. The HC further confirmed that a charitable trust is eligible to claim depreciation and that carry forward/set off of unabsorbed depreciation and excess expenditure upheld by the appellate order cannot be reopened.

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Issues involved:
The issues involved in the judgment are the denial of exemption under Section 11 of the Income Tax Act, 1961, and the disallowance of claim of depreciation.

Exemption under Section 11:
The petitioner, a registered society engaged in charitable activities, had been granted registration under Section 12A of the Act. However, the Director of Income Tax had withdrawn this registration, leading to an appeal by the petitioner to the Tribunal, which restored the registration. The department's subsequent appeals to the Bombay High Court were dismissed due to low tax effect. The assessment order initially denied exemption under Section 11, but the CIT(A) allowed the appeal, granting the exemption and allowing other claims based on precedent.

Disallowance of claim of depreciation:
The department issued a notice under Section 148 of the Act to reopen the assessment, citing issues related to commercial activities and depreciation. The petitioner challenged this reopening, arguing that the AO's observations were incorrect and that the matter had already been considered and decided in the original assessment proceedings and subsequent appeal. The petitioner also relied on a Supreme Court judgment to support the claim that a charitable trust is eligible for claiming depreciation. The court held that since the grant of benefit under Section 11 was the subject of appeal and had been decided in favor of the assessee, the matter could not be reopened. Additionally, the court affirmed the eligibility of a charitable trust to claim depreciation, as per the Supreme Court ruling.

Separate Judgment by the Judges:
The judgment was delivered by the Bombay High Court, and the Rule issued on 27th March 2015 was made absolute, resulting in the disposal of the petition.

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