2000 (1) TMI 134 - AT - Income Tax

Reassessment Voided Due to Lack of Reasons; Charitable Trust Wins Exemption Appeal

The reassessments for assessment years 1988-89 to 1990-91 were cancelled as the Assessing Officer failed to record reasons before issuing notice u/s 148, ... Income Escaping Assessment, Notice, Charitable Purpose, Words And Phrases Issues Involved:1. Validity of reassessments for assessment years 1988-89 to 1990-91.2. Denial of exemption u/s 11 of the I.T. Act, 1961.Summary:Validity of Reassessments for Assessment Years 1988-89 to 1990-91:The reassessment proceedings initiated by the Assessing Officer (AO) u/s 147 for denying the claim of exemption u/s 11 and section 10(23) were strongly contested by the assessee. The assessee argued that the requisite conditions for action u/s 147 were not fulfilled, and the AO did not bring any fresh facts or material to justify the reopening. The Tribunal found that the AO failed to record reasons before issuing notice u/s 148, rendering the reassessments ab initio void and without jurisdiction. The Tribunal noted that the proposal u/s 263 could not substitute the mandatory requirement of recording reasons u/s 148(2). Consequently, the reassessments for assessment years 1988-89 to 1990-91 were cancelled.Exemption u/s 11 of the I.T. Act, 1961:The core issue in all five appeals was the denial of exemption u/s 11. The assessee argued that its primary object was the promotion of sports and games, which qualifies as an object of general public utility. The AO, however, denied the exemption, treating the assessee as a mutual concern and not a charitable organization. The Tribunal noted that the assessee trust was registered u/s 12A and recognized u/s 80G by the CIT, Surat, which implies a recognition of its charitable status. The Tribunal held that once registration u/s 12A is granted, the AO cannot deny exemption u/s 11 by questioning the charitable nature of the trust. The Tribunal also emphasized that the objects of the trust, being the promotion of sports and games, are charitable in nature as per section 2(15) of the Act. The Tribunal concluded that the assessee trust is entitled to exemption u/s 11, provided other conditions regarding application and utilization of income are satisfied. Consequently, the appeals for assessment years 1988-89 to 1990-91 were allowed, and the appeals for assessment years 1990-91 and 1991-92 were disposed of accordingly.