TaxTMI 
TaxTMI 
2024 (12) TMI 1276
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....ing the petitioner's objection to the reopening of the assessment. The impugned reopening is within a period of four years. 2. The relevant facts need to be noted:- The petitioner is a Public Trust deemed to be constituted and governed under the State Legislation namely under the provisions of the "Shri Saibaba Sansthan Trust (Shirdi) Act, 2004" (for short, "2004 Act"). It is the petitioner's case that the petitioner manages and administers the "Sai Baba Temple", at Shirdi which is worshiped by millions of devotees from all over the world. Also, the petitioner is stated to be involved in religious and charitable activities. The petitioner has described the history in relation to Shirdi temple and the faith, which the people have in worshiping "Shri Sai Baba" who departed from the mortal world on 15 October 1918. 3. The formation of the petitioner trust and its aims, objectives were inter alia to spread the universal religion of Saibaba. It is the case of the petitioner that the devotees of Saibaba started worshiping the 'Samadhi' from 27 October 1918 being the "Bhandara Day". They also started a fund known as the "Samarth Sainath Kothi" for continuing the worship at the Sa....
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....ty Suit No. 3457 of 1969 whereby, vide an order dated 18 October 1982 (as confirmed by this Court in First Appeal No. 320 of 1982 decided on 23 July 1984), the management of the trust was vested in the Board of Management constituted by the Charity Commissioner of Maharashtra. It is stated that under such scheme, several Trustees of the Board of Management were appointed. The Board of Trustees were appointed for a period of five years i.e. from 1984-89, 1989-94, 1994-99 and 1999-2004. 6. The petitioner has contended that with a view to provide for better management, administration and control of the Saibaba Trust and to enable it to undertake wider welfare activities for the benefit of the public, the Maharashtra Legislature passed the 2004 Act (supra). It is stated that on account of the promulgation of the said Act, the existing public trust was reconstituted and the Shri Saibaba Sansthan Management Committee, under the Trust Act, was appointed under the provisions and control of the Government of Maharashtra, to enable the trust to carry out its activities more effectively and efficiently. It is stated that Sections 19 and 21 of the 2004 Act specify the manner of the utilizat....
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....ned the income of the petitioner trust and computed the same after taking into consideration all the accumulations under Section 11 (1) (a) and 11 (2) of the IT Act as 'Nil'. The total income of the petitioner as assessed under Section 143 (3) was shown as 'Nil' in the said original assessment order. In such order, the Assessing Officer also recorded that the petitioner had submitted all the details which were called for, which were examined and discussed during the course of the proceedings, when it was held that the exemption claimed by the petitioner under Section 11 of the IT Act was found to be correct and the same was allowed. 10. The petitioner thereafter had continued to file its return for the subsequent assessment years. The petitioner was continued to be assessed pursuant to scrutiny under Section 143 (3) of the IT Act on similar basis. However, for AY 2015-16, a notice under Section 142 (1) of the IT Act was issued to the petitioner. The same was duly replied. There were also further notices issued and information/documents with respect to the assessment provided by the petitioner. Despite past assessments, namely for the AY 2014-15, the petitioner was issued a show ....
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....h notice, respondent no. 4/Deputy Commissioner of Income Tax (Exemption) 2(1) sought to re-open assessment for the AY 2013-14. The petitioner replied to the said notice as also requested respondent no. 4 to furnish to the petitioner the reasons for reopening of the assessment. The request as made by the petitioner was complied by respondent no. 4. The only reason as furnished to the petitioner for reopening of the assessment was that the anonymous donations received by the petitioner had escaped assessment. 14. The petitioner filed its objections to the reasons as furnished to it to reopen the assessment. Such objections filed by the petitioner were dismissed by respondent no. 4. Hence, the petitioner again approached this Court in the proceedings of writ petition being Writ Petition (L.) No. 3278 of 2018 being aggrieved by the rejection of its objections. An order dated 24 October 2018 came to be passed on such writ petition disposing of the said writ petition, clarifying that the Court has kept open the challenge as raised by the petitioner to be raised in the appropriate legal proceedings. The petitioner being aggrieved by the order dated 24 October 2018 passed by this Court,....
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....- (anonymous donations) was taxable under Section 115BBC of the IT Act and that on such amount, tax payable was determined. 18. The petitioner being aggrieved by the assessment order dated 19 March 2019 passed by respondent no. 4 for the assessment year 2013-14, filed an appeal before the CIT (Appeals). It is contended by the petitioner that in the meantime, respondent no. 4 initiated recovery proceedings against the petitioner for the recovery of tax payable under order dated 19 March 2019. The petitioner responding to these proceedings, addressed a letter dated 18 January 2019 inter alia recording that under the orders passed by the Supreme Court, the recovery proceedings were stayed, till the appeal filed by the petitioner before the CIT (Appeals) for AY 2013-14 was decided. 19. The petitioner contends that both the appeals filed by the petitioner i.e. for the AY 2013-14 and AY 2015-16 were pending and no dates for hearing were granted. It is on such backdrop, although when the proceedings were pending, for the assessment year in question an assessment order dated 24 November 2016 was passed. On such backdrop, on 31 March 2019, the petitioner was issued the impugned notice....
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....tion keeping open all rights of the petitioner. The said order reads thus:- "1. Heard the counsel and also perused the reasons recorded for re-opening, objections filed by petitioner to reopening and order on objections dated 8th December 2019 rejecting petitioner's objections, which, alongwith the notice dated 31st March 2019 issued under Section 148 of the Income Tax Act 1961 (the said Act), is impugned in this petition. 2. Mr. Ganesh pointed out that the entire reopening is based on change of opinion and all the points have been scrutinized and discussed in detail during the assessment proceedings. Mr. Ganesh also submitted that the stand of petitioner in the order on objections have not been denied in toto but the Assessing Officer simply states what is submitted by petitioner is not discernible from return of income. 3. Having considered the order on objections, in our view, the concerned officer has not been able to really appreciate the submissions of petitioner and it would have helped, had a personal hearing been granted. The advantage of giving a personal hearing is, this doubt that the concerned officer had that he was unable to discern from re....
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....nts is placed on record opposing the petition inter alia contending that the petitioner's case has been reopened on two issues i.e. on the issue of the petitioner-trust being a charitable institution and hence the anonymous donations required to be taxed as per the provisions of Section 115BBC, and on the issue of donations being received of ornaments and jewellery in regard to which the petitioner not investing in the prescribed modes of investment as mandated by the provisions of Section 11 (5) of the IT Act. There are other grounds of opposition to the writ petition including to contend that the petition is premature. Submissions on behalf of the petitioner :- 26. On behalf of the petitioner, Mr. Ganesh, learned senior counsel would submit that the impugned notice issued to the petitioner under Section 148 as also the impugned order dated 28 June 2022 rejecting the objections of the petitioner against reopening of the assessment are issued/passed on the basis of material which was already available with the Assessing Officer at the time of the assessment and not on any new tangible material as derived by respondent no. 4. It is hence submitted that the impugned reopening o....
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....(5) of the IT Act that the petitioner had obtained donations in kind which were not converted into the investments, prescribed and required by Section 11 (5) i.e. donations of gold, silver, other valuables, it is submitted that the receipt of these donations in kind was expressly set out/revealed in the petitioner's balance-sheet, a copy of which is placed on record. It is submitted that after considering the audited balance sheets, the Assessing Officer did not apply Section 11 (5) read with Section 13 (1) (d) to these donations and no query was raised to the petitioner in this issue. Mr. Ganesh would submit that if such a query was to be raised by the Assessing Officer, then the petitioner would have certainly placed reliance on such material already available, as also to point out an injunction order dated 16 October 2012 passed by this Court in the proceedings of Civil Application No. 12056 of 2012 by which the petitioner was restrained from selling any valuables received by it in kind. It is submitted that therefore it was not possible for the petitioner to sell these valuables, and to convert the same into the investments required by Section 11 (5) of the IT Act as this would....
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....r ignored in the assessment order would be to stretch the interpretation of Section 147 to a point where the provision would cease to have meaning and content. Such an exercise of excision by judicial interpretation is impermissible. When an assessment is sought to be reopened within a period of four years of the end of the relevant assessment year, the test to be applied is whether there is tangible material to do so. What is tangible is something which is not illusory, hypothetical or a matter of conjecture. Something which is tangible need not be something which is new. An Assessing Officer who has plainly ignored relevant material in arriving at an assessment acts contrary to law. If there is an escapement of income in consequence, the jurisdictional requirement of Section 147 would be fulfilled on the formation of a reason to believe that income has escaped assessment. The reopening of the assessment within a period of four years is in these circumstances within jurisdiction." Reasons and Conclusion :- 30. As seen from the facts to which we have made a reference in some detail, it appears to be clearly not in dispute that the assessment order under Section 143 (3) of the....
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....t; unless it is excluded under sub-section (2) of the same Section. It is important to note that in the explanation dated 12/08/2016, it is clearly stated that the assessee trust is mainly incorporated for the charitable objects started by Shree Sai Baba in his lifetime, which prima facie shows that the assessee is a charitable trust on which exclusion u/s. 115BBC (2) does not apply. Importantly, even in the earlier reply dated 07/07/2016 also, it has been clearly stated that Shree Sai Baba Sansthan Trust is registered 'Charitable Trust' having the objects of charity to poor, to support, to education, to give free and concessional facility of medical to poor and needy people. As per these two letters, the assessee is admittedly a charitable Trust which is not covered by exclusion of sub-section (2) of Section 115BBC. Therefore, the above donation should have been disclosed by the assessee in its Return of Income, which it has failed to do, leading to escapement of income of assessee from assessment. The records also show that the AO did not apply mind to the issue. 4. In the Return of Income in Col. 8, the voluntary contribution forming part of corpus as per section 11(1) ....
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....nt and it is a fit case for re-opening of assessment u/s. 147 of the I. T. Act by issue of notice u/s.148 of the I. T. Act." 31. The petitioner had objected to the aforesaid reasons by its detailed letter dated 03 December 2019 addressed to respondent no. 4 inter alia contending that the basis on which such satisfaction was derived by respondent no. 4 as seen from the reasons as furnished to the petitioner was nothing more but from the records of the original assessment in the proceedings under Section 143 (3) which stood concluded vide an order dated 24 November 2016, which was passed by respondent no. 4. In regard to all such reasons as informed to the petitioner, forming part of the decision to reopen the assessment, it was pointed out that there was complete absence of any fresh material that was received/ obtained by the Assessing Officer on the completion of the impugned assessment under Section 143 (3). The petitioner stated that the assessment under Section 143 (3) was completed accepting the view consistently adopted for the previous undisputed assessments. It was also pointed out that the power for reopening was not akin to having a review and that the existence of tru....
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....s were ignored in finalizing the assessment. In our opinion, such proposition cannot be accepted in view of the settled position in law as seen from catena of judgments. We discuss the legal position hereafter. 35. At the outset we need to extract the provisions of Section 147 of the IT Act as applicable to the assessment year in question and as it stood on the date of notice i.e. 31 March 2019, which read thus: "Income escaping assessment. 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made fo....
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....income has been made the subject of excessive relief under this Act: or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; (ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3. For the purpose of assessment or reassessment" under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been include....
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....ent, were in fact wholly without basis. 38. In Bapalal & Co. Exports Vs. Joint Commissioner of Income Tax (OSD) (supra) the Division Bench of the Madras High Court was concerned with the case of reopening of the assessment after expiry of about three years and in such context it was observed that it was a settled legal proposition from the decision of the Supreme Court, that once an opinion is given in an assessment, it cannot be reopened by any other authority except on fresh material, and as the notice was issued in the "absence of any new material", the Assessing Officer was not empowered to reopen an assessment irrespective of the fact whether it is made under section 143 (1) or 143 (3) of the Act. 39. In the Commissioner of Income-tax-V vs. Orient Craft Ltd. (supra) a Division Bench of the Delhi High Court was dealing with the question whether reopening of the assessment made under Section 143 (1) is without jurisdiction in the absence of any tangible material available with the Assessing Officer so as to form the requisite belief regarding escapement of income. It was observed that in the absence of any new tangible material with the Assessing Officer, there was no grou....
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....sed." 41. In Income Tax Officer, Ward No.16(2) vs. Techspan India Pvt. Ltd. & Anr. (2018)6 SCC 685, the Supreme Court interpreting the provisions of Section 147 has held that the power to reopen assessment is conditional upon the fact that the Assessing Officer has reason to believe that the income has escaped assessment. It was observed that use of the words "reason to believe" in Section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequece of conferring arbitrary power on the Assessing Officer who may initiate such reassessment proceeding merely on the change of opinion on the basis of the same facts and circumstances which have already been considered by him during the original assessment proceedings. It was held that such could not be the intention of the legislature, as, the said provision was incorporated in the scheme of the IT Act so as to empower the assessing authorities to reassess any income on the ground which was not brought on record during the original proceedings and escaped his knowledge and the said fact would have material bearing on the outcome of the relevant assessment order. It was further held that S....
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....assessment order in the present case has obviously taken into account the aspect of depreciation. Perusal of the assessment order reveals that all relevant documents and details as called for were filed. It is further recorded in paragraph 3 of the assessment order that the details of the assessee-company along with the return of income and those which were called for assessment proceedings were scrutinized. There does not appear to be the tangible material/reason for the Assessing Officer to reopen the assessment proceedings in the facts of the present case. The reasons offered by the Assessing Officer while rejecting the objection that the issues involved in reassessment proceedings were never examined by the Assessing Officer are not tenable. No particulars whatsoever has been relied upon by the Assessing Officer while rejecting the objections. 19. The facts reveal and we are satisfied that in the present case, the order of reopening of the assessment will not be justified. The decision to reopen assessment is not based on proper reasons but obviously is a result of change of opinion. This is impermissible. In the case of ECGC, there was specific finding that there exis....
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....tal clear from the reading of the reasons for reopening that the same have been issued on the materials already available and on the record of the Assessing Officer in the course of the assessment proceedings and to his knowledge. It was not a fresh discovery to the Assessing Officer 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 Assessing Officer 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 ....
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....sessment proceedings was available with the Assessing Officer and the same was considered in passing the assessment order under Section 143 (3) of the IT Act, the Assessing Officer, in the absence of any fresh material, could not have proceeded to reopen the petitioner's assessment on similar materials. Such exercise would tantamount to a review of the assessment order on a mere change of opinion. This is certainly not permissible. If such interpretation of the provisions as canvassed on behalf of the respondents is accepted, an assessment order would become vulnerable to be arbitrarily reopened, merely on the ground that the Assessing Officer on the very material intends to take a different view/opinion on the assessment order passed by him. This would lead to a regime of total uncertainty. In our opinion, this is neither the object nor the intention of the provisions of Section 147. The provision is a special power, so as to check, discern and recall concluded assessments, hence, such power cannot be exercised when it is not a case, where the assessee had not withheld any information and/or the Assessing Officer did not have any fresh tangible material. A second bite at the cherr....