Gujarat High Court
Friends Of Wwb. India vs Deputy Commissioner Of Income Tax ... on 1 April, 2014
Bench: Akil Kureshi, Sonia Gokani
C/SCA/2984/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION No. 2984 of 2014
================================================================
FRIENDS OF WWB. INDIA....Petitioner(s)
Versus
DEPUTY COMMISSIONER OF INCOME TAX EXEMPTION....Respondent(s)
================================================================
Appearance:
Mr. JP SHAH for Mr M.J SHAH, ADVOCATES for the Petitioner(s) No. 1
Mrs. MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 1
================================================================
CORAM: HONOURABLE Mr. JUSTICE AKIL KURESHI
and
HONOURABLE Ms. JUSTICE SONIA GOKANI
1st April 2014
ORAL ORDER (PER : HONOURABLE Ms. JUSTICE SONIA GOKANI)
Challenge is made by the petitioner to the notice of reopening issued by the Assessing Officer for the A.Y 200708. It is the case of the petitioner that after the return was filed by the petitionerTrust, the same was taken in scrutiny assessment. The petitioner being a registered trust, registered with the Charity Commissioner under the Bombay Public Trusts Act and under Section 12A, has got certain exemption under Section 80G (5) of the said Act.
A notice under Section 148 of the Incometax Act, 1961 {"the Act" for short} is issued by the Assessing Officer on 25 th March 2013, which is beyond Page 1 of 9 C/SCA/2984/2014 ORDER the period of four years from the end of relevant assessment year. The petitioner has submitted that the original return of its is to be considered as its return in response to the notice under Section 148. The reasons recorded and furnished to the petitioner on its request for reopening the assessment are as follows : "In this case, it was observed that during the year, the assessee had claimed accumulation of income u/s. 11 (1)(a) to the extent of Rs. 1,74,02,120/= and under Section 11 (2) for Rs. 93,20,000/=.
As per Form No. 10 submitted by the assessee it is seen that the amount of Rs. 93,20,000/= had been set apart without any specific purpose. For the same, the deduction claimed u/s. 11 (2) of the I.T Act by the assessee was seen to be irregular as per the provisions of the Act.
In view of the aforesaid facts of the case, I have reason to believe that the said amount of Rs. 93,20,000/= has escaped from being assessed to tax within the meaning of Section 147 of the I.T Act, 1961.
Issue notice u/s. 148 of the I.T Act, 1961."
The petitioner raised objections to such proceeding by filing a detailed reply on 11th September 2013. All objections raised have been disposed of by the Assessing Officer vide order dated 6th February 2013. The Assessing Officer by not accepting the objections, chose to dispose of the same and therefore, the Page 2 of 9 C/SCA/2984/2014 ORDER present petition.
Challenging such action of reopening, the petitioner seeks following prayers : {A} This Hon'ble Court be pleased to call for the records of the proceedings, look to them and be pleased to issue a writ of certiorari or any other appropriate writ, order or direction quashing the impugned 148 notice at Exh.E and the order disposing the objections at ExhH. {B} This Hon'ble Court be pleased to issue a writ of mandamus or any other appropriate writ, order or direction asking the respondent not to proceed further in pursuance of Section 148 notice at Exh. E and the order rejecting the objections at Exhibit H. {C} Pending the hearing and final disposal of this application, this Hon'ble Court be pleased to stay further proceedings in pursuance of Section 148 notice at Exhibit E. {D} This Hon'ble Court be pleased to grant any further or other relief, as this Hon'ble Court deems just and proper in the interest of justice, and {E} This Hon'ble Court be pleased to allow this application with costs against the respondent.
On issuance of notice, affidavitinreply has been filed by the Page 3 of 9 C/SCA/2984/2014 ORDER respondent inter alia contending that the assessee had not fully and truly disclosed all material facts relevant for the assessment, and therefore, proviso to Section 147 would entitle the Assessing Officer to issue the notice for reopening, and therefore, the Assessing Officer was within his competence to issue such a notice. The assumption of jurisdiction as contended since is with valid reason, the Court at this stage, is not to interfere. It is further contended that the escaped income, as stated in the reasons recorded, is estimated at Rs. 93.20 lakhs for the assessment year under consideration. It is the say of the respondent that proviso (2) of Section 11 of the Act allows accumulation of funds for a specific purpose only and as per proviso (a) to Section 11 (1) of the Act, if a charitable trust spends 85% of the gross receipts, the trust can set apart 15% of its receipt as accumulation and if application of funds is less than 85%, for claiming exemption of the remaining amount, the Trust has been earmarked during the year as per Section 11(2) of the Act, before filing return of income and such accumulated money needs to be invested in the manner provided under subSection (5) of Section 11 of the Act. Even though a sum of Rs. 93,20,000/= [as per Form 10] has been set apart; the said amount is setapart by way of expenditure of general objects of the trust, the claim of deduction by the assessee under Section 11 (2) being irregular, the same is required to be treated as income of the trust, and therefore, notice under Section 148 of the Act. Page 4 of 9 C/SCA/2984/2014 ORDER
We have heard learned counsel Shri J.P Shah for the petitioner who has strongly objected to such action of reopening the assessment beyond the period of four years from the end of relevant assessment year. It is urged by learned counsel that there is nothing to indicate that the assessee had not disclosed fully and truly anything which has resulted into income escaping the assessment. The reasons recorded also do not indicate that on account of any nondisclosure on the part of the Trust, the Assessing Officer had formed any belief. It is further submitted that this Court in case of this very assessee in Special Civil Application No. 2985 of 2014, where the notice of reopening was issued for Assessment Year 200809, has held in favour of the assessee by holding that the notice was based only on the change of opinion on the part of the Assessing Officer, and therefore also, this petition deserves to be allowed.
Learned counsel Ms. Mauna Bhatt for the Revenue has urged that as stated in the affidavitinreply, on merits, the Assessing Officer had genuinely formed a belief that the income has escaped assessment, and therefore, notice of reopening on the ground of Assessing Officer having rightly assumed the jurisdiction need no interference.
On thus having heard both the sides and on considering the material on record, it emerges that the notice issued under Section 148 of the Act on 25 th March 2013 is beyond the period of four years from the end of relevant Page 5 of 9 C/SCA/2984/2014 ORDER assessment year. The requirement under the law is that the Assessing Officer who is authorized to make reassessment must form a belief that the income chargeable to tax has escaped assessment for such assessment year on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment. All that is necessary therefore for the Assessing Officer to assume jurisdiction for initiating proceedings under Section 148 of the Act is to hold a belief that nondisclosure of material facts fully and truly led to escapement of the income.
The reasons recorded do not indicate anywhere that the income for the relevant assessment year has escaped assessment on account of petitioner assessee not having disclosed any material fully and truly. The reasons, as reflected hereinabove, even does speak of the Form No. 10 submitted by the assessee not having reflected the setting apart of a sum of Rs. 93.20 lakhs for any specific purpose, and therefore, deduction claimed under Section 11 (2) having been claimed on irregular basis. When the reasons themselves do not indicate anywhere that the assessee had not truly and fully disclosed all material facts now has any material brought to reveal such nondisclosure. Such being the case, we also need to be alive to the facts that for the subsequent year also, when the Assessing Officer had issued the notice of reopening for the A.Y 200809, on the very ground, this Court, while allowing the petition of the Page 6 of 9 C/SCA/2984/2014 ORDER very petitioner, has held thus "Having heard the learned counsel for the parties and having perused the material on record, it emerges that the entire issue on the basis of which the assessment is sought to be reopened was examined by the Assessing Officer in the original assessment. It is true that the present case pertains to notice of reopening issued within the period of four years from the end of the relevant assessment year. The additional requirement flowing from proviso to section of such income chargeable to tax having escaped assessment for the failure of the assessee to disclose truly and fully all material facts, therefore need not be satisfied. Nevertheless, if an issue had been examined by the Assessing Officer in the original assessment proceedings, any reopening on the basis of such issue without any additional material would be a mere change of opinion. As held by this Court in the case of Gujarat Power Corporation v. Asst. CIT, 350 ITR 166 (Guj.), even when the Assessing Officer in an order of assessment had accepted the assessee's stand and granted the claim as put forth, reopening on the same issue would not be permissible on the basis of selfsame material on record. Similar view is also taken by the Delhi High Court in the case of CIT v. Usha International Ltd, 348 ITR 485 (Delhi). In the present case, the Assessing Officer had raised a pointed query with respect to the amount accumulated or set apart for utilization in subsequent years. He called upon the petitioner to give details and to produce computation of income and statutory form for accumulation of amount under section 11(2) of the Act. It was in response to such query, the petitioner pointed out that an amount of Rs.93.20 lacs was accumulated or set apart for the Page 7 of 9 C/SCA/2984/2014 ORDER assessment year 200709 and in the year under consideration, i.e., 200809, a further sum of Rs.1.30 crores was set apart under section 11(2) of the Act. In the return filed itself, the petitioner had produced Form 10 as well as the resolution of the Trust setting apart such amount for a period of five years to be utilized for the purpose of the Trust. It was after scrutinizing the claim of deduction under section 11(2) of the Act that the Assessing Officer framed the assessment. He made no disallowance on such claim. He disallowed part of the depreciation claimed by the petitioner. Though there was no reason given by the Assessing Officer for making any disallowance on this score, nevertheless, in the facts of the case, it cannot be stated that he had not scrutinized the petitioner's claim for deduction under the said provision. Under the circumstances, the impugned notice can be said to be based on mere change of opinion on the part of the Assessing Officer. The same is, therefore, quashed. The petition is allowed and disposed of accordingly."
We notice that for the subsequent year, the notice for reopening was within the period of four years and yet on examination of the fact and yet on the very issue, this Court has found that it was a mere change of opinion on the part of the Assessing Officer, who previously framed assessment on scrutiny and accordingly, the impugned notice came to be quashed. The very issue has been raised in the reasons of reopening and this order where the additional requirement of law is to point out non disclosure on the part of the assessee. In Page 8 of 9 C/SCA/2984/2014 ORDER absence of any such averments, we are of the firm opinion that assumption of jurisdiction on the part of the Assessing Officer itself is not sustainable. Petition, therefore, deserves to be allowed.
Contention of alternative remedy being available to the assessee in light of foregoing discussion cannot be sustained, particularly keeping in mind the plethora of judicial pronouncements and in particular, as held by the Constitutional Bench in case of Calcutta Discount Company Limited v. Income Tax Officer, reported in 41 ITR 191.
The petition is accordingly allowed. Notice of reopening issued under Section 148 of the Act and all subsequent proceedings are hereby quashed.
Parties to bear their own costs.
{Akil Kureshi, J.} {Ms. Sonia Gokani, J.} Prakash* Page 9 of 9