AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1510
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....ER] Α.Υ.12-13 1. Learned CIT (A) has erred in fact and in law in confirming the reassessment proceedings since the A.O. has assumed the jurisdiction for reopening to tax the sums u/s. 68 as per reason recorded and the approval was also given to tax the sums u/s. 68 only, however A.O. has charged to tax the sums u/s. 115BBC and thus the reassessment is not validly initiated and completed because the addition made in the reassessment is u/s. 115BBC which is all together different ground for which notice u/s. 148 was issued therefore the reassessment is un sustainable and bad in law and lacks legality. 2. Learned CIT(A) has erred in fact and in law in confirming the addition made by A.O. without considering the fact that, no addition is made on the basis of reason recorded for which approval was given and for which notice u/s. 148 was issued and therefore in view of settled legal position as per decision of Bombay High Court in the case of Lark Chemicals Pvt Ltd ITA No.1083 of 2015 dated 28/02/2018 and also decisions of various High courts and Pune ITAT the reassessment is patently illegal and bad in law and is unsustainable. 3. Learned CIT (A)....
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.... ergo the reassessment is made merely on the basis of change of opinion having similar set of facts and such an attempt is not sustainable and ergo the reassessment is bad in law being not validly initiated. 8. Learned CIT [A] has erred in fact and in law in following decision of Pune ITAT in the case of Ninaidevi Shikshan Prasarak Mandal, as well as in the case of Everest Education society because in both these cases trust did not file proper details and filed new set of details of donations in remand proceedings &the addresses were not found genuine whereas the facts of the case of the appellant are different and in the case of the appellant trust there is no issue/case of non genuine address. 9. Learned CIT [A] has erred in fact and in law in reopening the assessment u/s. 147 since there is no new/fresh tangible material other the one available before A.O. in original assessment and ergo the reopening is not validly done and in view of supreme Court decision in the case of Kelvinator India Ltd 320 ITR 561 and jurisdictional High Court decision in the case of Hindustan Lever Ltd (2004) 268 ITR 332 (Bombay), the reopening deserves to be quashed. 10. Appe....
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....ntained for any of the period starting from F.Y. 2011-12 to F.Y. 2018-19. It is further observed that some of the donors have denied to have given any donation to the assessee, therefore, the donations needs to be taxed u/s. 68 of the Act as the assessee has not been able to explain satisfactorily the nature and source of the sum credited in the books. Ld. AO recorded the reasons for reopening to which objections were filed by the assessee. Thereafter, ld. AO after disposing of the objections has concluded the re-assessment proceedings making addition u/s. 115BBC of the Act for Anonymous donations at Rs.1,36,50,000/- and assessed income at the same amount. 7. Subsequently, the assessee preferred appeal before ld.CIT(A) and even in the submissions made by the assessee before ld.CIT(A) it has been submitted that once the list of donors containing the names and addresses have been filed the assessee has discharged onus u/s. 115BBC and there is no requirement to prove the source of donation unlike section 68 of the Act. However, so far as the issue of assumption of jurisdiction u/s. 147 of the Act is concerned, there is no specific finding by ld.CIT(A). 8. Now the assessee is in ....
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....e-'Reasons' recorded before issuance of notice u/s 148 dated 30/3/2019 are reproduced by learned AO from Page-1 to Page-12 (in italics font). Page-1 to page-10 contain details and findings of the Survey 13/2/2019 on the various school locations of the Appellant Trust. The 'key' conclusions are stated on Page-11 and Page-12 of the 147 order in following manner. Page-11+12-Para 6(d) Since most of the donors have denied having made any donations to the assessee trust, the claim of donations made in the books of accounts from FY 2011-12 to FY 2016-17 are not genuine. Therefore the claimed donations need to be taxed u/s 68 of the I.T Act as the assessee has not been able to explain satisfactorily the nature and source of the sums credited in the books of account. Page-12-Para 6(g)... last 3 lines... ...substantiate any of the sources of the claimed donations during any of the above financial years... The assessee.................................................................................... ................................................................................................... ..............................................
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....ces Further, level of compliances u/s 68 is quite tough (i.e. substantiate source, AND, even source of source, in some cases). As against, compliance requirement u/s 115BBC is limited to possession of details of names and addresses of donors. c. Onus - In Section 68, entire onus to substantiate the genuineness of the sources behind credit entries and other required details is on the Appellant. In Section 115BBC, no onus to substantiate authenticity is casted on Assessee. d. Penalty Further, S. 68 additions are lead to penal proceedings which trigger penalty u/s 271(1)(c)/270A, etc. As against, no any Penalty per se, is applicable for taxation u/s 115BBC As such, forming 'reasons' for one phenomenon, and taxing the same for some different phenomenon, is completely conflicting. Learned AO is incorrect is starting the 147 proceedings for S. 68, continuing the same for S. 68; and concluding the matter for S. 115BBC. As a sequel, it follows, the taxation thrusted u/s 147 w.r.t. S. 115BBC is without any appropriate procedure and such taxation ought not to sustain. 13. Conention-2-S. 68 role v. S. 115BBC role-effect of Jet Airways ratio: ....
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....BC, mere rate of tax is differentiated from normal income. As stated earlier, entire charge of the learned AO at the stage of formation of belief of 'escapement of income' by resorting to Section 68 of the ITA, 1961. Had the learned AO proceeded on this analogy, the end-result would have been a NULLITY. Assuming that, the learned AO would have finally concluded that, there is 'escapement' of income by applying section 68, even then, for AY 2012-13, the 'Total Income' would have remained the same. As per facts, the said amt of Rs. 1.36 CR was anyway credited to P & L/1 & E account as 'income' only'. Categorising Appellant's 'donations' claim, as Section 68 specified 'income' would not have made any change in assessment. The Special Scheme of Taxation of Section 68 income u/s 115BBE at a Special Rate was introduced only from AY 2017-18 and onwards.. Even the negative condition of denial of setoff of any other LOSS was also introduced from AY 2017-18 only. As such, for all years till AY 2016-17, the 'reasons' formed for the belief of 'escapement of income' were specious and leading to a NULLITY. Appellant relies o....
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....he learned CIT(A) erred in confirming the reassessment proceedings, as the AO had assumed jurisdiction for reopening to tax the sum u/s. 68 of the Act as per the reasons recorded, whereas in the reassessment order, the addition was made u/s 115BBC of the Act. It is, therefore, contended that the reassessment is invalid. In this regard, it is submitted that the validity of reassessment proceedings is to be examined with reference to the existence of a reason to believe that income has escaped assessment and not with reference to the ultimate section under which such income is finally assessed. It is well settled in law that once the AO has validly assumed jurisdiction u/s. 147 of the Act on the basis of a bona fide belief that income has escaped assessment, any variation in the section or head of income under which the escaped income is ultimately taxed does not invalidate the reassessment proceedings. 1.2 In the present case, the AO recorded reasons showing a prima facie belief that certain income chargeable to tax had escaped assessment. The law does not require the AO, at the stage of recording reasons, to conclusively determine the exact section under which suc....
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....is factually incorrect. In the present case, the Assessing Officer has made the addition on the very same issue for which the assessment was reopened. The only variation is the section under which the addition has been made, and such a change in the section does not invalidate the reassessment proceedings. 2.2 In the case of Lark Chemicals Pvt. Ltd., the Hon'ble Bombay High Court held that where the reassessment order did not make any addition on the issue for which the Assessing Officer had recorded reasons to believe, the reassessment proceedings were invalid in law. The said decision was rendered following the ratio laid down by the Hon'ble Bombay High Court in CIT v. Jet Airways (1) Ltd. [2011] 331 ITR 236 (Bom), wherein it was held that if the income which formed the basis of the "reason to believe" is not ultimately assessed, then the Assessing Officer cannot make additions on other issues and the reassessment itself would be bad in law. However, the decision in Lark Chemicals Pvt. Ltd. is not applicable to the facts of the present case, since the Assessing Officer has made an addition on the very issue for which the assessment was reopened. Furtherm....
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.... in CIT v. MehakFinvest (P) Ltd. [2014] 367 ITR 769 (P&H), where the Hon'ble Court held that even if no addition is made on the issue forming the basis of reopening, the Assessing Officer is empowered to make additions on other issues that come to notice during the reassessment. 2.4 It is relevant to note that the Hon'ble Supreme Court dismissed the Special Leave Petition (SLP) against the judgment in Manjinder Singh Kang on 19.08.2011, thereby affirming the view of the Hon'ble Punjab & Haryana High Court. Accordingly, in light of the above judicial precedents and the legislative intent of Explanation 3 to Section 147, the contention of the appellant that the reassessment is invalid merely because no addition was made on the original reason is devoid of merit. Therefore, this ground of appeal may be rejected." 11. We have heard the rival contentions and perused the record placed before us and carefully gone through the decisions relied on by both the sides. Through Ground No.1, assessee has raised legal issue challenging the assumption of jurisdiction u/s. 147 of the Act and the main contention of the ld. Counsel for the assessee through this ground....
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....es given by 26 donors to whom notices U/s 133(6) were issued by the ITO (I & CI) Kolhapur. In these replied the claimed donors denied having made as donations to the assessee trust. The assessee could not provide any answer to the above query. No satisfactory explanation was given by the assessee. 06. The evidences collected during the course of survey action establish the following facts. a) The assessee has not maintained books of accounts for FY 2017-18 and F.Y. 2018-19. b) The assessee has not maintained any details or the list of donors in respect o donations of Rs. 1,94,03,000/- claimed to be received during FY 2012-13. c) No donation receipts books have been maintained for any of the period starting from FY 2011-12 to FY 2018-19. d) Since most of the donors have denied having made any donations to the assessee trust, the claim of donations made in the books of accounts from FY 2011-12 to FY 2016-17 are not genuine. Therefore, the claimed donations need to be taxed u/s 68 of the IT Act as the assessee has not been able to explain satisfactorily the nature and source of the sums credited to the books of account. e) The tota....
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.... order for different assessment years. The assessee could not explain the sources of the donations received during the year. Thus in view of the new facts discovered during the course of survey action it is evident that the assessee had not disclosed full and truly all material fact necessary for his assessment. 09. In this case a return of income was filed for the year under consideration and regular assessment u/s 143(3) was made on 25/03/2015. Since, 4 years from the end of the relevant year has expired in this case, the requirements to initiate proceeding u/s 147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration. It is pertinent to mention here that reasons to believe that income has escaped assessment for the year under consideration have been recorded above. In view of the above facts, the provisions of clause (C) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a c....
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....e serial nos in different years. 2. The provisions of section 68 are not applicable to the facts of the case. The trust has collected the donations from various persons through volunteers and this fact is proved and established on record even during the course of survey All the amounts of the donations are properly accounted and recorded in the books of accounts. Thus the donations are fully disclosed in the return of income. The donations received are credited to income and expenditure account of the trust and hence it is already shown as skin income of the trust. Your proposed action will result into double taxation of same amount. Hence all the donations are out of ambit of the provisions of section 68. Hence we object for reopening of assessment for your proposed action of addition u/s. 68 of the donation amount." 15. In the above objections raised by the assessee in para 2, assessee has stated that provisions of section 68 of the Act are not applicable to the facts of the instant case and that all the amounts of donations are properly accounted and recorded in the books of account credited as income in the Profit and Loss account and they are fully disclosed in the....
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.... the Act needs to be invoked and donations received during the year needs to be taxed as unexplained cash credit, however, the final outcome of the re-assessment proceedings is the addition u/s. 115BBC of the Act. Whether section 68 and section 115BBC of the Act has the same effect of taxing the assessee and whether provisions of section 68 of the Act and section 115BBC can be applied in place of each other needs to be examined. We will first go through the relevant provisions of section 68 and section 115BBC of the Act and they read as follows : "Section 68 : Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,- ....
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....referred to in sub-clause (A) or sub-clause (B) of clause (i), as the case may be. (2) The provisions of sub-section (1) shall not apply to any anonymous donation received by- (a) any trust or institution created or established wholly for religious purposes; (b) any trust or institution created or established wholly for religious and charitable purposes other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution. (3) For the purposes of this section, "anonymous donation" means any voluntary contribution referred to in sub-clause (iia) of clause (24) of section 2, where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed." 17. On going through the above sections 68 and 115BBC of the Act, we note that section 68 of the Act is invoked when there is unexplained cash credit in the books and the assessee is unable to explain the nature and source to t....
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....er capital receipts, share premium, sundry creditors etc. whereas in case of section 115BBC of the Act the donations are already recorded in the books as income. The above discussion indicates that section 68/115BBC of the Act are applicable under different set of facts and works on different path and they cannot be substituted for one another. 19. Ld. Counsel for the assessee has highlighted this very fact that the basis assumption by way of recording the reasons for reopening of the assessment of the assessee was for escapement of income and applicability of section 68 of the Act but thereafter even when the assessee has objected to such reasons, ld. AO has not recorded new reasons mentioning the applicability of section 115BBC of the Act and withdrawing the reasons recorded for invoking section 68 of the Act. Ld. AO has straight away concluded the proceedings making the addition u/s. 115BBC of the Act, i.e. under a particular provision which was never forming part of the reasons recorded for assuming jurisdiction u/s. 147 of the Act. Though we have reproduced the submission of ld. Counsel for the assessee, we would like to take note of the following portion of the submissions....
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....54E of the Act but thereafter Hon'ble Court has observed that section 54E of the Act is neither applicable nor sought to be applied by the assessee and also Hon'ble Court held against the Revenue and quashed the assessment order observing as follows : "2. The petitioner as an individual, for the assessment year 2008-09 filed his return of income on 3.3.2009 showing total income of Rs. 4,43,830/-. During the period relevant to the assessment year, the petitioner had sold a residential property and claimed exemption under section 54 of the Income-tax Act ("the Act" for short). Amount which remained unutilized was deposited by the petitioner with the State Bank of India as under:- (a) SBI Capital Gains Savings Bank Account Rs. 2,00,000/- (b) SBI Capital Gains Deposit Scheme Rs. 37,00,000/- 3. Assessing officer undertook scrutiny of the return. During the course of assessment, various queries were raised by the Assessing Officer and replied by the petitioner. Eventually, the Assessing Officer passed an order of assessment dated 20.8.2010 making no additions to the total income of the assessee. In the body of the assessment order, he noted that the as....
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....the surplus for a minimum period of 36 months. (4) Though through the affidavit-in-reply it is now pointed out that reference to section 54E is mere typographical error and the intention was to refer to section 54 of the Act, we are of the opinion that such stand is wholly incorrect. Had this been a case of mere typographical error, we would have ignored the mistake and referred to the correct statutory provision. The fact that reference under section 54E was however, not an error is manifest from the reasons recorded. It referred to the requirement of investing the surplus fund for a minimum period of 36 months. Such requirement flows from section 54E of the Act and not section 54. Section 54 in fact requires the assessee to acquire a new unit within a year or build himself within three years. In the later case he has to invest the surplus in specified investments. This was thus not a mere typographical error but a conscious decision on the part of the Assessing Officer to disallow the exemption claimed, for breach of the requirement of section 54E of the Act. 7. What thus emerges from the above discussion is that the reasons on which the notice for reopening is ....
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....;ble Rajasthan High Court in the case of "CIT vs. Shri Ram Singh", (2008) 217 CTR (Raj.) 345. We agree with the submissions made by learned AR to the effect that when the reopening of the assessment itself was not valid and even the reasons for which reopening was made have been proved to be wrong, then in that event, any decision/addition made on the basis of said reassessment is unsustainable and becomes void. Reliance can also be placed in this respect on another authority of Hon'ble Madras High Court styled as "Ace Investments Ltd. and Another Vs. Settlement Commission and Others", 264 ITR 571." 22. We further find that the above decision of the Coordinate Bench in the case of PCIT Vs. Lark Chemicals (P) Ltd. (2018) 99 taxmann.com 312 (SC) came up before Hon'ble Apex Court and the Hon'ble Court has dismissed the Revenue's Writ Petition affirming the order of the Hon'ble High Court where it has been held that in the order passed consequent to initiation of re-assessment proceedings, had not confirmed addition attributable to reasonable belief of Assessing Officer while issuing reopening notice. 23. We also take note of the judgment of Hon'ble Jurisdictional High Court ....