Wp/3595/2018 Of Bhanumati Mulraji Kabali v. Income Tax Officer, Ward 19(1)(3) And Anr

Priya Soparkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3595 OF 2018 Bhanumati Malraj Kabali… Petitioner V/s. Income Tax Officer, Ward 19(1)(3) and anr. … Respondents --- Mr.K.Gopal with Ms.Neha Paranjpe i/by Mr.Satendra KumarPandey for the Petitioner.Mr.Sham Walve for the Respondents. --- CORAM : AKIL KURESHI AND M.S.SANKLECHA, JJ. DATE : JANUARY 24, 2019. P.C.:- 1.Petitioner has challenged a notice of reopening ofassessment dated 28[th] March, 2018 in following background. 2.Petitioner is an individual. For the assessment year 2011-12the petitioner had filed the return of income on 26[th] July, 2011declaring total income of Rs.27.96 lakhs (rounded off). Such areturn was processed under Section 143(1) of the Income TaxAct, 1961 (“the Act” for short) and accepted without scrutiny. Toreopen such assessment the respondent No.1-Assessing Officer issued the impugned notice. In order to do so, he had recorded following reasons:- “1.The assessee, has filed Return of income for A.Y. 2011-12on 26/07/2011 declaring total income at Rs.27,96,412/- . Returnof income was processed u/s 143(1) of the Act at Rs.27,96,412/-.The assessee has declared income from other sources. 2.Information was received in this office from DDIT (Inv)Unit 4(1), Kolkata vide their letter No.DDIT(Inv.)/Unit-4(1)/Kol/Trust/2015-16/2291 dated 02.12.2015 that a surveyaction watch conducted by the Kolkata investigation wing onthree institution in the matter of facilitating bogus donation u/s35(1)(ii) of the IT Act. It was found that the donors/beneficiariesin connivance with these institute with the active help of brokers,entry operator/billers were engaged in bogus donation syndicateand the donation were returned back to the donors in lieu ofcommission. 3.After investigation, the DDIT (Inv) Unit 4(1), Kolkata hasforwarded the list of beneficiaries who had made bogus donationduring the F.Y. 2010-11 (A.Y. 2011-12) from the trusts. The nameof the above assessee appears in the list of bogus donations-beneficiaries as mentioned below: 4.In view of the above facts narrated in aforesaid paragraph,the above profit is nothing but accommodation entry to introducethe unaccounted money of the assessee through above means.Thus, after applying my mind I have reason to believe that the Priya Soparkar income of the assessee chargeable to tax for the A.Y. 2011-12amounting to Rs.15,00,000/- has escaped assessment due tofailure on the part of the assessee to disclose fully and truly allmaterial facts in the return of income, in terms of provisions ofsection 147 of the Income Tax Act. 5.On verification of the ITS details on ITD system & ITBA/360 degree, it is found that the Transactions carried out by theassessee during the year are not commensurate with the assessee'sprofile and the source and nature of the transactions remainunverifiable and unexplained. 6.In this case, return of income was filed for the year underconsideration but no scrutiny assessment u/s 143(3) of the Actwas made. Accordingly, in this case, the only requirement toinitiate proceedings u/s 147 is reason to believe which has beenrecorded in above paras. It is pertinent to mention here that inthis case the assessee has filed return of income for the yearunder consideration but no assessment as stipulated u/s 2(40) ofthe Act was made and the return of income was only processedu/s 143(1) of the Act. In view of the above, provisions of clause(b) of explanation 2 to section 147 are applicable to facts of thiscase and the assessment year under consideration is deemed tobe a case where income chargeable to tax has escapedassessment.” 3.Upon being supplied the reasons, the petitioner raised objections to the notice of reopening of assessment on 17[th] 3.Upon being supplied the reasons, the petitioner raised objections to the notice of reopening of assessment on 17[th] August, 2018. Such objections were rejected by the AssessingOfficer by an order dated 8[th] October, 2018. Hence, the petition. 4.Having heard learned counsel for the parties for finaldisposal of the petition, we notice that in the reasons recorded Priya Soparkar 418 wp 3595-18-o by the Assessing Officer has cited one ground namely of havingprima facie information at his command supplied by theInvestigation Wing that the petitioner had made a donation ofRs.15 lakhs to one “School of Human Genetics and PopulationHealth”, a Trust (hereinafter to be referred to as “the said Trust”)which was not a case of genuine donation. The information goeson to state that bogus donation was made and the amountwould be reverted back to the donor after deduction ofcommission. The Assessing Officer added that the verification ofthe records of the assessee would show that his income duringthe year under consideration did not justify such sizabledonation being made. In short, the Assessing Officer doubts thegenuineness of so-called donation by the petitioner of a sum ofRs.15 lakhs to the said Trust. Being a case where the return hasbeen accepted without scrutiny, the Assessing Officer would havemuch wider latitude in reopening the assessment. Neverthelessas held by the Supreme Court in case of AssistantCommissioner of Income Tax vs. Rajesh Jhaveri Stock BrokersPvt. Ltd.[1], even in such a case the requirement that the 1(2007) 291 ITR 500 (SC) Priya Soparkar 518 wp 3595-18-o Assessing Officer must have reason to believe that incomechargeable to tax has escaped assessment, must be satisfied.Such a view is consistently followed by this Court. In case ofInductotherm (India)(P) Ltd. Vs. M. Gopalan, DeputyCommissioner of Income Tax[1]. Gujarat High Court has alsoexpressed the same view. Within this narrow scrutiny we haveexamined the reasons recorded by the Assessing Officer andother materials on record. The assessee points out that thereasons lack validity because during the period relevant to theassessment year in question, the assessee had not made anydonation of Rs.15 lakhs or for that matter of any amount at all tothe said Trust. This is a fact which can be easily verified from thereturn filed by the petitioner. The counsel for the department wasunable to dispute this aspect. We have also perused return ofthe assessee and find that in such return there was no claim ofdonation of Rs.15 lakhs to the said Trust. In plain terms,therefore, the information supplied to the Assessing Officer bythe Investigation Wing and on which he acted for issuing theimpugned notice, was a wrong information. We had also called 1(2013) 356 ITR 481(Guj) 618 wp 3595-18-o 1(2013) 356 ITR 481(Guj) 618 wp 3595-18-o for the original files of the department to guard against anypossible typographical or clerical error in recording reasons.Such files also would not reveal anything that could save theimpugned notice. The files contain the communication from theInvestigation Wing providing information to the Assessing Officerof beneficiaries of bogus donations, which also contain the Trustto which such donations were made and the amount of donationso given. This information in case of the petitioner, refers tosum of Rs.15 lakhs, allegedly donated by the petitioner to thesaid Trust. Thus, on the basis of such information supplied by theInvestigation Wing is falsified upon perusal of the return filed bythe assessee. We also notice that in the return the assessee hadclaimed to have paid the donation of Rs.20 lakhs to oneScientific Research of Rural Development. However, theinformation supplied to the Assessing Officer by the InvestigationWing does not even suggest that this Trust namely ScientificResearch of Rural Development was a dubious Trust and theInvestigation Wing had material to believe that the donors ofthis Trust were beneficiaries of the bogus entries. Priya Soparkar7 5.In the result, impugned notice is set aside. Petition is disposed of accordingly. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.)