Digitallysigned Byshambhavishambhavinileshnileshshivganshivgandate:2024.03.2014:46:17+0530 v. The Additional/Joint/Deputy/Assistant Commissioner Of Income Tax/Income-Tax Officer,Commissioner Of Income Tax/Income-Tax Officer

Digitallysigned bySHAMBHAVISHAMBHAVINILESHNILESHSHIVGANSHIVGANDate:2024.03.2014:46:17+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYCIVIL APPELLATE JURISDICTION WRIT PETITION NO. 3310 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 :12[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 30[th] September2016 for Assessment Year (“AY”) 2016-17 disclosing ‘Nil’ incomeclaiming exemption under Section 11 of the Act. Petitioner’s casewas selected for scrutiny and notice under Section 143(2) of the Actdated 27[th] July 2017 was issued by Respondent No. 1. Scrutinyquestionnaires under Section 142(1) of the Act were issued on 5[th]February 2018 to furnish details in respect of the source ofFDs/deposits with the banks and cash deposited in various bankaccounts during AY 2015-2016. Petitioner, vide letters dated 27[th]November 2018 and 17[th] December 2018 furnished replies to thescrutiny questionnaires and provided explanations and documentswith respect to cash deposit of an amount of Rs.2,61,37,708/-. VideShivgan order dated 18[th] December 2018, Assessing Officer (“AO”) recordedhis satisfaction with the explanation supplied to him by Petitionerand accepted the total returned income for AY 2016-17. 5.Petitioner received notice dated 25[th] March 2021 from theDepartment conveying that the AO had reasons to believe thatPetitioner’s income chargeable to tax for AY 2016-17 had escapedassessment. Petitioner complied and filed its ROI on 30[th] May 2021. order dated 18[th] December 2018, Assessing Officer (“AO”) recordedhis satisfaction with the explanation supplied to him by Petitionerand accepted the total returned income for AY 2016-17. 5.Petitioner received notice dated 25[th] March 2021 from theDepartment conveying that the AO had reasons to believe thatPetitioner’s income chargeable to tax for AY 2016-17 had escapedassessment. Petitioner complied and filed its ROI on 30[th] May 2021. 6. Petitioner requested the AO by its letter dated 16[th] July 2021to provide reasons for reopening of the assessment and also sought acopy of the sanction order by the appropriate Authority under Section151 of the Act. Petitioner received reasons to believe escapement ofincome by letter dated 16[th] February 2022 along with a copy of thesanction. The only reason averred by the Department was in respectof alleged cash deposits of Rs.2,65,91,646/- during the year.Petitioner filed objections vide letter dated 22[nd] February 2022 raisingseveral grounds to suggest that the reopening of the assessment wasuntenable. The Department, however, proceeded to pass theimpugned order dated 3[rd] March 2022 rejecting the objections ofPetitioner. It is this order and the notice dated 25[th] March 2021,which are challenged in the present Petition. 7.Mr. Naniwadekar, learned counsel appearing for Petitionersubmitted that the reasons recorded for the reopening do not at allindicate any tangible reasons to believe that the income chargeable toShivgan tax had escaped assessment for the relevant AY. He further submittedthat the reopening has been initiated on a mere change of opinion asin the original scrutiny assessment, Respondent No. 1 had alreadyscrutinized the issue of cash deposits and Petitioner had specificallysubmitted that the cash had been received as donations and offeringsfrom the public at large through donation boxes. Having consideredthese submissions, Respondent No. 1 had accepted the ROI andpassed Assessment Order dated 18[th] December 2018. 8.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 asserted that the AOhas sought to reopen the assessment solely on the basis of theinformation received from the Investigation Officer, Kolhapur thatPetitioner had deposited cash amounting to Rs.2,65,91,646/-. Hesubmitted that no independent enquiry was made by the AO and nolive link or nexus was drawn between this information and theconclusion by the AO that income has escaped assessment. It wasalso submitted that the Investigation Officer, Kolhapur had alreadysought for relevant details under Section 133(6) of the Act whichPetitioner had duly provided. 9.Mr. Suresh Kumar for the Revenue counters the arguments ofPetitioner by stating that as per information received by the IncomeTax Authority viz., ITO(I&CI), Kolhapur, Petitioner had depositedShivgan 9.Mr. Suresh Kumar for the Revenue counters the arguments ofPetitioner by stating that as per information received by the IncomeTax Authority viz., ITO(I&CI), Kolhapur, Petitioner had depositedShivgan cash amounting to Rs.2,56,91,646/- with State Bank of India, AlandiDewachi Branch in F.Y 2015-16 relevant to A.Y 2016-17 but haddeclared its Gross Receipts only at Rs.1,28,94,692/- and has claimedexpenditure of Rs.2,39,80,608/- in its ROI whereas in the AuditReport, Petitioner has declared application to charitable or religiouspurpose at Rs.2,93,36,695/-. There is thus a difference ofRs.53,56,087/- on application of fund. He argued that as perinstructions of Central Board of Director of Taxes (“CBDT”) receivedunder F.No. 225/40/2021/ITA.II dated 4[th] March 2021, the AO has toconsider categories of cases listed therein as ‘potential cases’ fortaking action under Section 148 of the Act, which include reportsmade by the Directorate of Intelligence & Criminal Investigation(I&CI). As in Petitioner’s case, the Jurisdictional Assessing Officer(“JAO”) proceeded on the basis of information received from theITO(I&CI), Kolhapur that income chargeable to tax has escapedassessment. Thereupon requisite sanction was obtained and thenotice was issued. 10.The reasons recorded clearly indicate that notice has beenissued and the reopening has been initiated on a mere change ofopinion. In the earlier scrutiny assessment, Respondent No. 1 hadthe opportunity to specifically scrutinize the cash deposits made byPetitioner. A specific query was also raised by the IO, Kolhapurregarding the cash deposits under Section 133(6) of the Act, to which Petitioner had replied stating that the said issue was being examinedin the scrutiny assessment. The reason recorded and the impugnedorder are based on issues which have already been examined andverified during the original scrutiny assessment and the same cannot,in law, be a valid ground to reopen Petitioner’s assessment for AY2016-17 as the same would amount to a ‘review’. Once the AOaccepted Petitioner’s explanation to the queries put forth in thescrutiny assessment and passed an assessment order, he is deemed tohave applied his mind to the issues and queries put forth by him. Thesame facts and materials on record cannot be re-examined for changeof opinion under the garb or reassessment proceedings. It has beenheld in a catena of judgments that reassessment proceedings cannotbe initiated by the AO when he has accepted the matter in an originalassessment and the same would amount to a mere change of opinionand would not give rise to ‘reasons to believe’. 11.Mr. Naniwadekar has placed reliance on the decision of thisCourt in the matter of Commissioner of Income Tax v. ICICI Bank Ltd.[1] The relevant portion of the decision reads as thus: “7.Therefore, the sine qua non to issue a notice forreopening of assessments even within a period of less thanfour years from the end of the assessment year, is reason tobelieve that income has escaped assessment and this reason tobelieve should be on the basis of tangible material, otherwisethe exercise of power to reopen would be a review of theassessment order. As held by this court in the matter ofSiemens Information Systems Ltd. v. Asst. CIT (2012) 343 ITR188 (Bom) such tangible material could be even on the basisreopening of assessments even within a period of less thanfour years from the end of the assessment year, is reason tobelieve that income has escaped assessment and this reason tobelieve should be on the basis of tangible material, otherwisethe exercise of power to reopen would be a review of theassessment order. As held by this court in the matter ofSiemens Information Systems Ltd. v. Asst. CIT (2012) 343 ITR188 (Bom) such tangible material could be even on the basis of fresh material obtained during subsequent assessmentproceedings. However, the test is that the reason to believethat income has escaped assessment should emanate fromtangible material. 12.The Hon’ble Apex Court in Commissioner of Income Tax v. Kelvinator[2] held as under: “6. We must also keep in mind the conceptual differencebetween power to review and power to reassess. The assessingofficer has no power to review; he has the power to reassess.But reassessment has to be based on fulfilment of certainprecondition and if the concept of "change of opinion" isremoved, as contended on behalf of the Department, then, inthe garb of reopening the assessment, review would takeplace. 7. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the assessing officer.Hence, after 1-4-1989, the assessing officer has power toreopen, provided there is "tangible material" to come to theconclusion that there is escapement of income fromassessment. Reasons must have a live link with the formationof the belief…..” 13.It is further noticed from the documents on record that there was no reason nor any justification given in the notice to even arriveat 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. 14.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[3] 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.” 15.This Court in Neetu M Chandaliya v. Income Tax Officer-14(2) (3)has also held that while the Court cannot investigate into theadequacy or sufficiency of reasons, the Court can certainly examinewhether the reasons are relevant and have a bearing on the matter inregard to which the AO is required to entertain the belief before hecan issue notice under Section 148 of the Act. The reasons cannot bebased on a suspicion subject to a case of fishing enquiry. 16.The reasons to believe in the present matter merely adverts toinformation 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 assessment year. Moreover, the accounts of Petitioner are recorded, accounted and audited andhence, 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. accounts of Petitioner are recorded, accounted and audited andhence, 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. 17. The Apex Court in the case of Income Tax Officer, I Ward,Distt.VI, Calcutta and Ors. v. Lakhmani Mewal Das[4] 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…....” 18.Thus, for the reasons discussed above and upon perusal of the letter providing the reasons to believe escapement of assessment aswell as the order rejecting Petitioner’s objections impugned herein,we have no hesitation in holding that there is no live link, which is asine qua non between the material before the AO in the present caseand the belief which he has to form regarding escapement of income. The sanction under Section 151 of the Act granted by the prescribedauthority as well as the notice dated 25[th] March 2021 is issued by theDepartment without any application of mind. In this view of thematter, the notice dated 25[th] March 2021 and the order dated 3[rd]March 2022 rejecting the objections of Petitioner are set aside. ThePetition is thus, allowed. 19.Rule is made absolute. There will be no order as to costs. (DR. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.)