9 445-Aswp-3309-2022-J.doc v. The Additional/Joint/Deputy/Assistant Commissioner Of Income Tax/Income-Tax Officer,Commissioner Of Income Tax/Income-Tax Officer

Digitallysigned bySHAMBHAVISHAMBHAVINILESHNILESHSHIVGANSHIVGANDate:2024.03.1918:53:01+0530 1/9 445-aswp-3309-2022-J.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAYCIVIL APPELLATE JURISDICTION WRIT PETITION NO. 3309 OF 2022 Shri Dnyaneshwar Maharaj Sansthan Alandi Dewachi,A public charitable trust having its address at: 1360, Bharat Bhawan, Shukrawar Peth,Pune 411 002PAN:AADTS4631E…Petitioner Versus 1.The Income Tax Officer Exemption Ward 1(1), Pune,Income Tax Office, PMT Building,Shankar Sheth Road, Pune 411 037Email: (1), Pune,Income Tax Office, PMT Building,Shankar Sheth Road, Pune 411 037Email: 2.The Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income-Tax Officer,Commissioner of Income Tax/Income-Tax Officer, National Faceless Assessment Centre,Through the Principal Chief Commissioner of Income Tax (National Faceless Assessment Centre), DelhiRoom No.401, 2[nd] Floor,E-Ramp, Jawaharlal Nehru Stadium,New Delhi-110 003Email: delhi.pccit.neac@ 3.The Union of India,Through the Principal Secretary,Department of Revenue, Ministry of Finance, Room No.128-B, North Block, New Delhi-110001Email: …Respondents Mr. Mihir Naniwadekar, with Mr. Rohan Deshpande, i/by Ms. Farzeen Khambatta, for Petitioner.Mr. Suresh Kumar, for Respondent-Revenue. CORAM:K. R. SHRIRAM &DR. NEELA GOKHALE, JJ.DATED :11[th] March 2024 JUDGMENT: (Per Dr. Neela Gokhale, J.) 1.Rule. Rule made returnable forthwith with consent of parties. 2. Petitioner challenges notice dated 25[th] March 2021 issued bythe Income Tax Officer, Exemption Ward 1(1), Pune under Section148 of the Income Tax Act, 1961 (“the Act”) and the order dated 3[rd]March 2022 rejecting the objections raised by Petitioner to the noticeof reopening the assessment proceedings. 3.Petitioner is a public charitable trust registered under theBombay Public Trusts Act, 1950. It is also registered under Section12A of the Act and is thus, eligible to claim exemption under Section11 of the Act. 4.Petitioner filed its return of income (“ROI”) on 22nd September2014 for Assessment Year (“AY”) 2014-15 disclosing ‘Nil’ incomeclaiming exemption under Section 11 of the Act. The ROI wasprocessed under Section 143(1) of the Act raising certain demandswhich were subsequently deleted by rectification proceedings.Petitioner received notice dated 25[th] March 2021 from theDepartment under Section 148 of the Act conveying that theAssessing Officer (“AO”) had reasons to believe that Petitioner’sincome chargeable to tax for AY 2014-15 had escaped assessment.Petitioner complied and filed its ROI on 30th May 2021. 5.The Department issued the notice dated 23rd June 2021 underSection 143(2) read with Section 147 of the Act seeking reply inrelation to the merits of the assessment proceedings. Petitionerrequested the AO by its letter dated 16[th] July 2021 to provide reasonsfor reopening of the assessment and also sought a copy of thesanction order given by the Appropriate Authority under Section 151of the Act. Petitioner received the reasons to believe escapement ofincome by letter dated 7th February 2022 along with a copy of the sanction. The reasons read as under: “1.The assessee is a public charitable trust registered with theCharity Commissioner under the BPT Act and it is also registeredu/s 12A of the IT Act. The assessee trust has e-filed return ofincome in ITR-7 for the A.Y. 2014-15 on 22/09/2014 declaringtotal income at Rs. Nil. 2. In this case, as per the information forwarded by theDDIT(I&CI)-2, Pune on the Insight Portal, the assessee trust hasmade cash deposits amounting to Rs. 2,76,49,804/- during F.Y.2013-14. The information disseminated has been rated as 'VeryHigh Priority' and the verification result has been described as'Undisclosed Income' by the DDCIT(I&CI)-2, Pune. sanction. The reasons read as under: “1.The assessee is a public charitable trust registered with theCharity Commissioner under the BPT Act and it is also registeredu/s 12A of the IT Act. The assessee trust has e-filed return ofincome in ITR-7 for the A.Y. 2014-15 on 22/09/2014 declaringtotal income at Rs. Nil. 2. In this case, as per the information forwarded by theDDIT(I&CI)-2, Pune on the Insight Portal, the assessee trust hasmade cash deposits amounting to Rs. 2,76,49,804/- during F.Y.2013-14. The information disseminated has been rated as 'VeryHigh Priority' and the verification result has been described as'Undisclosed Income' by the DDCIT(I&CI)-2, Pune. 3. I have, therefore, reason to believe that an income to the tuneof Rs. 2,76,49,804/- has escaped assessment within the meaningof the Explanation 2(b) to sec. 147 of the Income-tax Act, 1961.Therefore, this is a fit case for initiation of proceedings u/s 147 ofthe Income-tax Act, 1961. 4. In this case more than four years have been lapsed from theend of the A.Y. under consideration. Hence, necessary sanction toissue notice u/s 148 has been obtained separately from theCommissioner of Income-tax (Exemptions), Pune as required u/s151 of the Income-tax Act, 1961.” The only reason to justify reopening proceeding, therefore, was in respect of alleged cash deposits of Rs.2,76,49,804/- during the year. Petitioner filed detailed objections vide letter dated 22nd February assessment was untenable. The Department, however, proceeded topass the impugned order dated 3rd March 2022 rejecting theobjections of Petitioner. It is this order and the notice dated 25thMarch 2021, which are challenged in the present Petition. 6.Mr. Naniwadekar, learned counsel appearing for Petitioner,submitted that there was nothing to indicate satisfaction of the AOthat income had escaped assessment since there was noenquiry/verification of information purported to have been providedby the Income Tax Officer (Investigation) Unit II. He furthersubmitted that issuance of notice under Section 147 of the Act is notfor the purpose of indulging in a fishing enquiry and such notice istenable only pursuant to existence of material facts thrown up by anindependent enquiry. 7.On merits, Mr. Naniwadekar contends that Petitioner/Trust is areligious institution and devotees make offerings to their deity offaith by way of cash or otherwise. He further asserts that the AO hasissued the notice on the basis of sole information received from theDDCIT (I & CI)-2, Pune that certain cash deposits are being treated as‘Undisclosed Income’. He says that every cash deposit in the bankaccount is not an income and can be transferred from one account toanother. During the year, receipts in cash were deposited in bankaccounts, recorded, accounted and audited and hence, there was nobank account which is undisclosed and all amounts were offered forShivgan taxation. The AO was seized with all this information which wasprovided by Petitioner but yet, proceeded to invoke the power toissue notice as a tool to undertake a roving enquiry. 8.Mr. Suresh Kumar for the Revenue counters the arguments ofPetitioner by stating that Petitioner had made cash deposits with theState Bank of India, Alandi Branch, which information was uploadedin the system by the DDIT/ADIT(I&CI)-2, Pune. The information wasflagged under the category of ‘High Risk CRIU/VRU’. The Departmentobserved that gross receipts disclosed by Petitioner were only9,85,181/- and Petitioner claimed an amount of Rs.3,77,57,818/- asamount applied for charitable purposes during the previous year.Since the receipts/income disclosed was not sufficient to carry outthe expenses and the ROI did not show anything about the differenceof Rs.2,76,46,804/-. Hence, the AO formed belief sufficient to reopenassessment. Thereupon requisite sanction was obtained and thenotice was issued. 9.Paragraph 4.12 of the affidavit in reply of the Departmentreads as thus: 9.Paragraph 4.12 of the affidavit in reply of the Departmentreads as thus: “4.12.…….Similarly, from the return of income filed, it wasnot possible for the JAO to ascertain whether the cash depositsof Rs.2,76,49,804/- as flagged by DIT(Systems) were disclosedin the return filed or not. I submit that for the purpose of issueof notice u/s.148 of the Act, what is required is sufficient reasonto form a belief that there is escapement of income…..”not possible for the JAO to ascertain whether the cash depositsof Rs.2,76,49,804/- as flagged by DIT(Systems) were disclosedin the return filed or not. I submit that for the purpose of issueof notice u/s.148 of the Act, what is required is sufficient reasonto form a belief that there is escapement of income…..” The aforesaid averment clearly indicates that the notice hasbeen issued only to gather information and that the AO had nosufficient reasons to believe that there was escapement of income.This is nothing but fishing expedition, which is not permissible in law.This Court in Neetu M Chandaliya v. Income Tax Officer-14(2)(3)[1]has held that while the Court cannot investigate into the adequacy orsufficiency of reasons, the Court can certainly examine whether thereasons are relevant and have a bearing on the matter in regard towhich the Assessing Officer is required to entertain the belief beforehe can issue notice under Section 148 of the Act. The reasons cannotbe based on a suspicion subject to a case of fishing enquiry. 10.It is further noticed from the documents on record that therewas no reason nor any justification given in the notice to even arriveat a prima facie finding that the cash deposits led to escapement ofincome. There was no response to Petitioner’s requests forinformation regarding alleged undisclosed income pertaining to cashdeposits over and above the deposits in the bank account. Theimpugned order does not even controvert the objection raised byPetitioner that the cash collected was not only deposited in its bankaccount but was also duly offered to tax. 11.It is settled law that a reason to suspect is not the same asreason to believe. There has to be a rational connection and the live link between the material coming to the notice of the AO and the formation of belief regarding escapement of income. The Apex Courtin the matter Sheo Nath Singh v. AACIT[2] has held as under: “….There can be no manner of doubt that the words ‘reasons tobelieve’ suggests that the belief must be that of an honest andreasonable person based upon reasonable grounds that theIncome Tax Officer may act on direct or circumstantial evidencebut not on mere suspicion, gossip or rumour. The Income TaxOfficer would be acting without jurisdiction if the reason for hisbelief that the conditions are satisfied does not exist or is notmaterial or relevant to the belief required by the section. TheCourt can always examine this aspect though the declaration orsufficiency of reasons for the belief cannot be investigated by theCourt.” 12.The reasons to believe in the present matter merely adverts to information from the Investigation Officer, Kolhapur that Petitionermade some cash deposits. But it is an admitted fact that Petitioner, acharitable trust registered under Section 12A of the Act, eligible toavail exemption under Section 11 of the Act has deposited thedonations received in cash in its bank account and thereby disclosed‘Nil’ total income for the relevant AY. Moreover, the accounts ofPetitioner are recorded, accounted and audited and hence,undoubtedly, there is no undisclosed cash over and above thedeposits in its regular bank accounts which were offered for taxation.Thus, there is no material or fact which has been stated in thereasons for reopening assessment in the present case on which anybelief can be founded of the nature contemplated by law. 13. The Apex Court in the case of Income Tax Officer, I Ward,Distt.VI, Calcutta and Ors. v. Lakhmani Mewal Das[3] has held asfollows: 13. The Apex Court in the case of Income Tax Officer, I Ward,Distt.VI, Calcutta and Ors. v. Lakhmani Mewal Das[3] has held asfollows: “…….the reasons for the formation of the belief must have arational connection with or relevant bearing on the formation ofthe belief. Rational connection postulates that there must be adirect nexus or live link between the material coming to thenotice of the Income-tax Officer and the formation of his beliefthat there has been escapement of the income of the assesseefrom assessment in the particular year because of his failure todisclose fully and truly all material facts. It is not doubt true thatthe court cannot go into the sufficiency or adequacy of thematerial and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiatedfor reopening assessment. At the same time we have to bear inmind that it is not any and every material, howsoever vague andindefinite or distant, remote and far-fetched, which wouldwarrant the formation of the belief relating to escapement of theincome of the assessee from assessment…....” 14.Thus, upon perusal of the letter providing the reasons tobelieve escapement of assessment as well as the order rejectingPetitioner’s objections impugned herein, we have no hesitation inholding that there is no live link, which is a sine qua non between thematerial before the AO in the present case and the belief which hehas to form regarding escapement of income. The sanction underSection 151 of the Act granted by the prescribed authority as well asthe notice dated 25th March 2021 is issued by the Departmentwithout any application of mind. In this view of the matter, the noticeof 25th March 2021 and the order dated 3rd March 2022 rejectingthe objections of Petitioner are set aside. The Petition is thus,allowed. 15.Rule is made absolute. There will be no order as to costs. (DR. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.)