In a major relief to Framji Dinshaw Petit Parsee Sanatorium, the petitioner, Bombay High Court quashed an assessment order after holding that there was right claim of carry forward and set off of deficit made out by the petitioner.
The Petitioner is a Public Charitable Trust registered with the Director of Income Tax (Exemption), Mumbai since 1977 under section 12A of the Income Tax Act.
The notice under section 148 of the Income Tax Act proposing to reopen the assessment for assessment year (AY) A.Y. 2008-09 is challenged. The Petition also challenged the impugned order whereby the respondent rejected the objections of the Petitioner, challenging the validity of their reassessment proceedings for the A.Y. 2008-09 being ex-facie illegal and contrary to the provisions of the Income Tax Act.
The Petitioner addressed a letterto the Assistant Director of Income-tax (Exemptions) informing that they would not be able to utilise 85% of the accumulated income for the year towards the expenditure on the objects of the trust and therefore, may be allowed to exercise the option under section 11(1) of the Income Tax Act to spend the unspent surplus in the next twelve months.
J.D. Mistri, Senior Counsel for the Petitioner submitted that the petitioner is entitled to carry forward and set off the current year’s deficit with the subsequent year’s income tax and that the question of whether the petitioner is entitled to carry forward and set off the deficit is required to be considered in the year of set off, and cannot be considered in the relevant year and therefore, cannot be the reason to come to the conclusion that the income has escaped the assessment.
Suresh Kumar, Counsel for the Respondents submits that the notice under section 148 of the Income Tax Act was issued after following due procedure by AOhaving recorded reasons and that certain facts were discovered during the assessment proceedings for A.Y. 2012-13 where the Petitioner’s claim of deficit to be carried forwards for set off in the subsequent year was disallowed by A.O.
The Coram comprising Justice Kamal Khata and Justice Dhiraj Singh Thakur noted that the impugned notice is clearly a case of change of opinion and furthermore, AO’s the reason to believe must be based on some new tangible material which was not available at the time of passing the original Assessment Order.
The Bench concluded that “In our view, the petitioner had rightly claimed carry forward and set off of deficit. Consequently, the impugned order rejecting the objections deserve to be set aside.”
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