DNYANESHWAR MAHARAJ SANSTHAN ALANDI DEWACHI vs. THE INCOME TAX OFFICER EXEMPTION WARD 1(1) PUNE AND ORS

JUDGMENT: (Per Dr. Neela Gokhale, J.)

3/10 912-aswp-3310-2022-J.doc order dated 18th December 2018, Assessing Officer (“AO”) recorded his satisfaction with the explanation supplied to him by Petitioner and accepted the total returned income for AY 2016-17. 5. Petitioner received notice dated 25th March 2021 from the Department conveying that the AO had reasons to believe that Petitioner’s income chargeable to tax for AY 2016-17 had escaped assessment. Petitioner complied and filed its ROI on 30th May 2021. 6. Petitioner requested the AO by its letter dated 16th July 2021 to provide reasons for reopening of the assessment and also sought a copy of the sanction order by the appropriate Authority under Section 151 of the Act. Petitioner received reasons to believe escapement of income by letter dated 16th February 2022 along with a copy of the sanction. The only reason averred by the Department was in respect of alleged cash deposits of Rs.2,65,91,646/- during the year. Petitioner filed objections vide letter dated 22nd February 2022 raising several grounds to suggest that the reopening of the assessment was untenable. The Department, however, proceeded to pass the impugned order dated 3rd March 2022 rejecting the objections of Petitioner. It is this order and the notice dated 25th March 2021, which are challenged in the present Petition.

4/10 912-aswp-3310-2022-J.doc tax had escaped assessment for the relevant AY. He further submitted that the reopening has been initiated on a mere change of opinion as in the original scrutiny assessment, Respondent No. 1 had already scrutinized the issue of cash deposits and Petitioner had specifically submitted that the cash had been received as donations and offerings from the public at large through donation boxes. Having considered these submissions, Respondent No. 1 had accepted the ROI and passed Assessment Order dated 18th December 2018. 8. On merits, Mr. Naniwadekar contends that Petitioner/Trust is a religious institution and devotees make offerings to their deity of faith by way of cash or otherwise. He further asserted that the AO has sought to reopen the assessment solely on the basis of the information received from the Investigation Officer, Kolhapur that Petitioner had deposited cash amounting to Rs.2,65,91,646/-. He submitted that no independent enquiry was made by the AO and no live link or nexus was drawn between this information and the conclusion by the AO that income has escaped assessment. It was also submitted that the Investigation Officer, Kolhapur had already sought for relevant details under Section 133(6) of the Act which Petitioner had duly provided.

5/10 912-aswp-3310-2022-J.doc cash amounting to Rs.2,56,91,646/- with State Bank of India, Alandi Dewachi Branch in F.Y 2015-16 relevant to A.Y 2016-17 but had declared its Gross Receipts only at Rs.1,28,94,692/- and has claimed expenditure of Rs.2,39,80,608/- in its ROI whereas in the Audit Report, Petitioner has declared application to charitable or religious purpose at Rs.2,93,36,695/-. There is thus a difference of Rs.53,56,087/- on application of fund. He argued that as per instructions of Central Board of Director of Taxes (“CBDT”) received under F.No. 225/40/2021/ITA.II dated 4th March 2021, the AO has to consider categories of cases listed therein as ‘potential cases’ for taking action under Section 148 of the Act, which include reports made 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 the ITO(I&CI), Kolhapur that income chargeable to tax has escaped assessment. Thereupon requisite sanction was obtained and the notice was issued.

6/10 912-aswp-3310-2022-J.doc Petitioner had replied stating that the said issue was being examined in the scrutiny assessment. The reason recorded and the impugned order are based on issues which have already been examined and verified during the original scrutiny assessment and the same cannot, in law, be a valid ground to reopen Petitioner’s assessment for AY 2016-17 as the same would amount to a ‘review’. Once the AO accepted Petitioner’s explanation to the queries put forth in the scrutiny assessment and passed an assessment order, he is deemed to have applied his mind to the issues and queries put forth by him. The same facts and materials on record cannot be re-examined for change of opinion under the garb or reassessment proceedings. It has been held in a catena of judgments that reassessment proceedings cannot be initiated by the AO when he has accepted the matter in an original assessment and the same would amount to a mere change of opinion and would not give rise to ‘reasons to believe’.

“7. Therefore, the sine qua non to issue a notice for reopening of assessments even within a period of less than four years from the end of the assessment year, is reason to believe that income has escaped assessment and this reason to believe should be on the basis of tangible material, otherwise the exercise of power to reopen would be a review of the assessment order. As held by this court in the matter of Siemens Information Systems Ltd. v. Asst. CIT (2012) 343 ITR 188 (Bom) such tangible material could be even on the basis 1 349 ITR 482 (Bombay). Shivgan

7/10 912-aswp-3310-2022-J.doc of fresh material obtained during subsequent assessment proceedings. However, the test is that the reason to believe that income has escaped assessment should emanate from tangible material.

“6. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place.

8/10 912-aswp-3310-2022-J.doc link between the material coming to the notice of the AO and the formation of belief regarding escapement of income. The Apex Court in the matter Sheo Nath Singh v. AACIT3 has held as under: “….There can be no manner of doubt that the words ‘reasons to believe’ suggests that the belief must be that of an honest and reasonable person based upon reasonable grounds that the Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income Tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The Court can always examine this aspect though the declaration or sufficiency of reasons for the belief cannot be investigated by the Court.”

9/10 912-aswp-3310-2022-J.doc accounts of Petitioner are recorded, accounted and audited and hence, undoubtedly, there is no undisclosed cash over and above the deposits in its regular bank accounts which were offered for taxation. Thus, there is no material or fact which has been stated in the reasons for reopening assessment in the present case on which any belief can be founded of the nature contemplated by law.

10/10 912-aswp-3310-2022-J.doc The sanction under Section 151 of the Act granted by the prescribed authority as well as the notice dated 25th March 2021 is issued by the Department without any application of mind. In this view of the matter, the notice dated 25th March 2021 and the order dated 3rd March 2022 rejecting the objections of Petitioner are set aside. The Petition is thus, allowed.