2024 (12) TMI 1276 - HC - Income Tax

Reopening of income tax assessment under section 148 overturned where no fresh material justified Assessing Officer's change of opinion

Reopening of an income tax assessment under notice u/s 148 was invalidated because the Assessing Officer relied solely on materials already on record and ... Reopening of assessment - validity of impugned notice u/s148 and to reject the objections as raised by the petitioner to the reasons for reopening of the assessment by the impugned order - anonymous donations received by the petitioner - HELD THAT:- Reading of the reasons for reopening that the same have been issued on the materials already available and on the record of the AO in the course of the assessment proceedings and to his knowledge. It was not a fresh discovery to the AO that the petitioner was receiving anonymous donations in a cash and in kind. He also could not have been oblivious to the provisions of Section 115BBC and Section 11 (5) or Section 13 of the IT Act, in finalizing the petitioner’s assessment for the assessment year in question. On such backdrop, on a plain reading of the reasons for reopening as furnished to the petitioner, it is clear that the AO has sought to reopen the assessment on a change of opinion in the application of the provisions of the IT Act or on interpretation of law differently, on facts which were abundantly within his knowledge at the time of original assessment. This is certainly not permissible. Hence, such reopening of the assessment, being not on any fresh tangible material, the Assessing Officer would not have jurisdiction to proceed with the re-assessment, as this would be purely in the realm of a review and / or on a mere change of opinion. As decided in Shree Saibaba Sansthan Trust-Shirdi [2024 (10) TMI 546 - BOMBAY HIGH COURT] held that the petitioner was a religious charitable trust and hence the assessee rightly and legitimately claimed an entitlement under sub-section 2 (b) of Section 115BBC of the Act that the anonymous donations as received in hundi are not liable to be taxed. Other ground to reopen the assessment by applying the provisions of Section 13 on the issue of accepting donations in the form of ornaments and not investing in the prescribed form as mandated by Section 11 (5) is of no consequence in view of the order passed in Rajendra Bhausaheb Gondkar & Anr. [2012 (10) TMI 1280 - BOMBAY HIGH COURT] wherein specifically directed that the auction in respect of such precious items / articles stands stayed and suspended forthwith. The Court also injuncted and restrained the petitioner from converting precious metals in any form or melt it in any form. If this be so, as to how the Assessing Officer can reopen the assessment on such ground cannot be understood. Thus once tangible material during the course of assessment proceedings was available with the AO and the same was considered in passing the assessment order u/s 143 (3) AO in the absence of any fresh material, could not have proceeded to reopen the petitioner’s assessment on similar materials. Decided in favour of assessee. Issues Involved:1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment for Assessment Year 2014-15.2. Legality of the order rejecting the petitioner's objections to the reopening of the assessment.3. Application of Section 115BBC regarding anonymous donations.4. Compliance with investment requirements under Section 11(5) of the Income Tax Act.Issue-wise Detailed Analysis:1. Validity of the Notice under Section 148:The petitioner challenged the validity of the notice dated 31 March 2019 issued under Section 148 of the Income Tax Act, 1961, arguing that the reopening of the assessment was based on materials already available during the original assessment proceedings. The court emphasized that for reopening an assessment within four years, there must be fresh tangible material that was not considered during the original assessment. The court found that the reasons for reopening were based on a change of opinion rather than new material, making the notice invalid.2. Legality of the Order Rejecting Objections:The petitioner contended that the order dated 28 June 2022, rejecting their objections to the reopening of the assessment, was issued without any new tangible material. The court agreed, noting that the reasons provided for reopening were based on the same materials that were available during the original assessment. The court held that the reopening amounted to a review of the original assessment, which is not permissible under the law.3. Application of Section 115BBC:The court examined whether the anonymous donations received by the petitioner in the hundi were taxable under Section 115BBC. It was noted that the petitioner, being a religious charitable trust, claimed exemption under sub-section 2(b) of Section 115BBC. The court referred to its previous decision in the petitioner's case for other assessment years, where it was held that such donations are not liable to be taxed under Section 115BBC(1), thus supporting the petitioner's position.4. Compliance with Investment Requirements under Section 11(5):The reopening was also based on the petitioner's alleged non-compliance with the investment requirements under Section 11(5) concerning donations received in kind (ornaments and jewellery). The petitioner argued that a court order had restrained them from selling these valuables, preventing compliance with Section 11(5). The court acknowledged this restraint and found that the petitioner could not be faulted for not converting the donations into prescribed investments, thereby invalidating this ground for reopening.Conclusion:The court concluded that the reopening of the assessment was not based on any fresh tangible material and was merely a change of opinion on the same set of facts considered during the original assessment. Consequently, the notice under Section 148 and the order rejecting the petitioner's objections were quashed. The court reiterated that Section 147 does not allow for reassessment based on a mere change of opinion and emphasized the need for fresh material to justify reopening an assessment. The petition was allowed, and the impugned notice and order were set aside.