Mr. Dharan v. Gauri Gaekwad

Digitally signedby GAURIGAURIAMITAMITGAEKWADGAEKWADDate:2022.04.1914:47:43 +0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1224 OF 2022 Chandrakant Narayan Patkar Charitable Trust ….Petitioner V/s. Income Tax Officer (Exemption) 1(2) and Ors. ….Respondents ---- Mr. Dharan V. Gandhi for petitioner.Mr. Suresh Kumar for respondents. ---- CORAM : K.R. SHRIRAM &N.R. BORKAR, JJ. DATED : 12[th] APRIL 2022 P.C.: 1Petitioner is a charitable Trust registered under the BombayPublic Trust Act, 1950. Petitioner is also a registered Trust under Section12A of the Income Tax Act, 1961 (the Act). Petitioner filed its return ofincome for Assessment Year 2016-2017 under Section 139(1) of the Act on13[th] October 2016 declaring total income of Rs.37,25,830/- under Section11(1B) of the Act. Petitioner’s audited accounts also was uploadedalongwith the audit report in Form 10B. For the year under consideration,petitioner had claimed an accumulation of Rs.70,00,000/- for using forcharitable and religious purposes in India over a period of five years underSection 11(2) of the Act. The same was duly claimed by filing Form No.10in this regard. According to petitioner, in the audit report and in the returnof income, inadvertently it was mentioned that such accumulation is againstSection 11(1) of the Act. This was duly explained during the course of assessment proceedings which explanation was accepted. 2Thereafter, an assessment order came to be passed on5[th] December 2018. Petitioner received a notice dated 30[th] March 2021under Section 148 of the Act. Petitioner also received the reasons forreopening vide a communication dated 30[th] June 2021. Petitioner filed itsobjections to the reopening which came to be rejected by an order dated28[th] December 2021. It is this notice and the order which are impugned inthe petition. 3We have considered the petition, the documents annexedthereto and the affidavit in reply and we are satisfied that the proposedreopening is based on change of opinion which the law does not permit. 4We say this because the reasons for reopening pertains to a sumof Rs.70,00,000/- accumulated in the relevant year. In the reasons, theAssessing Officer states that it is not ascertainable whether the amount ofRs.70,00,000/- is accumulation of income under Section 11(2) or deemedapplication of income as per clause (2) of Explanation to Section 11(1) ofthe Act. It is also alleged that petitioner has not disclosed the true andcorrect information during the scrutiny proceedings of Assessment Year2016-2017 before the Assessing Officer and thereby suppressed its incomeby unlawful claim of accumulation/deemed application of income andhence, there has been an escapement of income to the extent ofRs.70,00,000/-. Infact this has been a subject matter in consideration duringGauri Gaekwad 4We say this because the reasons for reopening pertains to a sumof Rs.70,00,000/- accumulated in the relevant year. In the reasons, theAssessing Officer states that it is not ascertainable whether the amount ofRs.70,00,000/- is accumulation of income under Section 11(2) or deemedapplication of income as per clause (2) of Explanation to Section 11(1) ofthe Act. It is also alleged that petitioner has not disclosed the true andcorrect information during the scrutiny proceedings of Assessment Year2016-2017 before the Assessing Officer and thereby suppressed its incomeby unlawful claim of accumulation/deemed application of income andhence, there has been an escapement of income to the extent ofRs.70,00,000/-. Infact this has been a subject matter in consideration duringGauri Gaekwad the assessment proceedings. Petitioner had received a notice dated 19[th] July2018 under Section 142(1) of the Act calling upon petitioner to furnishdetails of accumulation made under Section 11(2), if any, in last 10 yearsand the details of utilization as per the format provided. Petitioner was alsocalled upon to furnish copies of application in Form 10 and Resolution ofTrustees in this regard. Petitioner, by its letter dated 7[th] August 2018,provided details of accumulation made under Section 11(2) in the last10 years. Thereafter, petitioner received another notice dated 30[th] August2018 under Section 142(1) of the Act once again calling upon petitioner tofurnish copy of Form 10 alongwith acknowledgment and Resolution ofTrustees with regard to accumulation under Section 11(2) of the Act. By aletter dated 5[th] September 2018, petitioner provided the details, i.e., theResolution as well as Form 10. Thereafter, petitioner received a show causenotice dated 9[th] November 2018 specifically calling upon petitioner as towhy petitioner’s explanation should not be rejected. In the show causenotice, it is mentioned that the details on record show that the Trust hasbeen accumulating continuously as per provisions of Section 11(2) of theAct and it is also noticed that the accumulated amount is not utilised for thepurposes specified of accumulation. It is also stated in the show cause noticethat from the audit report filed in Form 10B it is seen that an amount ofRs.70,00,000/- has been accumulated as per Explanation 2 to Section 11(1)of the Act and there is no accumulation under Section 11(2) of the Act. Instead of filing Form 9A, the Trust had filed Form 10 with no specificpurposes as required mandatorily. Petitioner was called upon to show causewhy the application be not denied since necessary requirements have notbeen fulfilled. Petitioner replied to the show cause notice vide its CharteredAccountants’ letter dated 14[th] November 2018 and showed cause as to whypetitioner’s claim to accumulation should be allowed. Petitioner explainedthat while mentioning in Form 10B, it was inadvertently mentioned against11(1) and also in the return as the same software generates all three form,viz., 10B, 10 and ITR-7. This explanation was accepted and no further querywas raised and the accumulation under Section 11 of the Act ofRs.70,00,000/- was factored in while computing the income. Therefore, it isquite clear that this issue was under active consideration during theassessment proceedings. Infact in the affidavit in reply at paragraph 6.13respondents admit the fact that the amount of Rs.70,00,000/- wasinadvertently shown as deemed application of income and after a showcause notice was issued and an explanation was received, the Income TaxOfficer accepted the claim of accumulation of Rs.70,00,000/- under Section11(2) of the Act and finalised the assessment under Section 143(3) of theAct on 5[th] December 2018. 5As regards the allegation in the reasons recorded that it is notascertainable whether the amount of Rs.70,00,000/- is accumulation ofincome under Section 11(2) or deemed application of income as per clause 5As regards the allegation in the reasons recorded that it is notascertainable whether the amount of Rs.70,00,000/- is accumulation ofincome under Section 11(2) or deemed application of income as per clause (2) of Explanation to Section 11(1) of the Act, at paragraph 6.17 of theaffidavit in reply, respondents have accepted that there is an error in thereasons recorded. Respondents have stated in the affidavit in reply that“therefore, the question in reason recorded that it is not ascertainablewhether the amount of Rs.70,00,000/- is accumulation of income u/s 11(2)or deemed application of income as per clause (2) of Explanation to section11(1) of the Act as shown in return of income does not arise”. 6 In the circumstances, it is quite clear that the entire reopeningis based on change of opinion. 7Mr. Gandhi relies on a judgment of this Court in Commissionerof Income Tax – 15 V/s. Srusti Diam[1] to submit that though there is no barto form an opinion based on tangible material obtained from the assessmentof subsequent years, if the material obtained during the assessmentproceedings for another year is based on same material which has alreadybeen considered, then it would amount to change of opinion. The Court inSrusti Diam (Supra) held that the reopening of an assessment cannot be onthe basis of a material which has already been considered during the regularassessment proceedings by the Assessing Officer. We also find that allmaterial which was relevant to the determination was available when theassessment was completed for the assessment year in question.Consequently, the mere formation of another view in the course 1. 2015 (57) taxmann.com 392 (Bombay) Gauri Gaekwad of assessment proceedings for subsequent years would not justify theRevenue in reopening the assessment for Assessment Year 2016-2017.Therefore, in the present case, there was no tangible material, no newinformation and no fresh material which came before the Revenue in thecourse of assessment of subsequent years which can justify the reopening of the Assessment Year 2016-2017. 8In the circumstances, petition is allowed in terms of prayer clause – (a), which reads as under : (a) that this Hon’ble Court may be pleased to issue aWrit of Certiorari or a Writ in the nature ofCertiorari or any other appropriate Writ, Order ordirection, calling for the records of the Petitioner’scase and after going into the legality and proprietythereof, to quash and set aside the said notice dated30 March 2021 (Exhibit “E”) and the subsequentOrder dated 28 December 2021 (Exhibit “I”). 9Petition accordingly disposed. (N.R. BORKAR, J.) (K.R. SHRIRAM, J.)