M. NATESAN,KARUR vs. ITO, WARD-1,, KARUR

Simultaneously, the buil Simultaneously, the builder [M/s Selvaraj & Co.] was also surveyed from was also surveyed from whose premises loose documents relating to construction undertaken was whose premises loose documents relating to construction undertaken was whose premises loose documents relating to construction undertaken was also seized. The statements of the Managing Trustee, Site Engineer and also seized. The statements of the Managing Trustee, Site Engineer and also seized. The statements of the Managing Trustee, Site Engineer and the Partner of the builder firm was also recorded. It is the Partner of the builder firm was also recorded. It is inter ali inter alia observed that, the builder had admitted to have received Rs.2.40 crores in cash that, the builder had admitted to have received Rs.2.40 crores in cash that, the builder had admitted to have received Rs.2.40 crores in cash towards the said construction. To this, all the trustees are noted to have towards the said construction. To this, all the trustees are noted to have towards the said construction. To this, all the trustees are noted to have admitted that they had collectively paid Rs.2.25 crores out of their admitted that they had collectively paid Rs.2.25 crores out of their admitted that they had collectively paid Rs.2.25 crores out of their unaccounted sources and agreed unaccounted sources and agreed to proportionately pay tax on the same to proportionately pay tax on the same in the FY 2012-13 relevant to AY 2013 13 relevant to AY 2013-14 and that the balance sum was 14 and that the balance sum was explained to have been paid out of the regular sources of the Trust. explained to have been paid out of the regular sources of the Trust. explained to have been paid out of the regular sources of the Trust.

Pursuant to this admission, the trustees are noted to have proportionately Pursuant to this admission, the trustees are noted to have proportionately Pursuant to this admission, the trustees are noted to have proportionately offered the admitted sums in their returns of income filed for AY 2013 fered the admitted sums in their returns of income filed for AY 2013 fered the admitted sums in their returns of income filed for AY 2013-14.

& 22 others 2587/CHNY/2024

4. Post the survey, the case of the trustees for AY 2013 Post the survey, the case of the trustees for AY 2013 Post the survey, the case of the trustees for AY 2013-14 are noted to have been taken up for scrutiny by the AO by issue of notice u/s to have been taken up for scrutiny by the AO by issue of notice u/s to have been taken up for scrutiny by the AO by issue of notice u/s 143(2) of the Act dated 29.05.2014. Thereaf 143(2) of the Act dated 29.05.2014. Thereafter, the AO is noted to have ter, the AO is noted to have issued notices u/s 142(1) of the Act calling for books of accounts, issued notices u/s 142(1) of the Act calling for books of accounts, issued notices u/s 142(1) of the Act calling for books of accounts, explanation and other details. The AO is noted to have taken cognizance explanation and other details. The AO is noted to have taken cognizance explanation and other details. The AO is noted to have taken cognizance of the admission made by the trustees in the course of survey and that of the admission made by the trustees in the course of survey and that of the admission made by the trustees in the course of survey and that they had paid taxes thereon. The AO is also noted to have observed that, xes thereon. The AO is also noted to have observed that, xes thereon. The AO is also noted to have observed that, the assesses had produced their books of accounts along with supporting had produced their books of accounts along with supporting had produced their books of accounts along with supporting evidences and that in light of the same, the documents and material evidences and that in light of the same, the documents and material evidences and that in light of the same, the documents and material found in the course of survey were examined and thereafter, found in the course of survey were examined and thereafter, found in the course of survey were examined and thereafter, the assessments were completed u/s 143(3) of the Act in which no further assessments were completed u/s 143(3) of the Act in which no further assessments were completed u/s 143(3) of the Act in which no further addition was made by the AO. addition was made by the AO.

5. Later on, it is noted that, the case Later on, it is noted that, the cases of these assesses assesses were re- opened after the expiry of four years from the end of the relevant opened after the expiry of four years from the end of the relevant opened after the expiry of four years from the end of the relevant assessment years 2012 2012-13 & 2013-14 by issue of notices u/s 148 of the 14 by issue of notices u/s 148 of the Act both dated 26.03.2019. The Act both dated 26.03.2019. The assesses are noted to have requested the noted to have requested the AO to treat the original return filed u/s 139 of the Act as the return of AO to treat the original return filed u/s 139 of the Act as the return of AO to treat the original return filed u/s 139 of the Act as the return of income in response to notice u/s 148 of the Act. Upon req income in response to notice u/s 148 of the Act. Upon req income in response to notice u/s 148 of the Act. Upon request of the assesses, the AO is noted to have supplied the , the AO is noted to have supplied the reasons reasons recorded for reopening the assessments. Drawing our attention to the recorded reopening the assessments. Drawing our attention to the recorded reopening the assessments. Drawing our attention to the recorded ‘reasons’ for both these AYs, the Ld. AR for the for both these AYs, the Ld. AR for the assesses showed us that, showed us that, the AO after re-appraisal of the impo appraisal of the impounded survey material, which unded survey material, which according to him, was already examined in the course of original according to him, was already examined in the course of original according to him, was already examined in the course of original assessment for AY 2013 assessment for AY 2013-14, changed his opinion and formed a belief that and formed a belief that the assesses had failed to disclose fully and truly the investments made had failed to disclose fully and truly the investments made had failed to disclose fully and truly the investments made on the construction of the polytechnic college. It is observed from the on of the polytechnic college. It is observed from the on of the polytechnic college. It is observed from the impugned reassessment orders that, according to AO, both the cost of impugned reassessment orders that, according to AO, both the cost of impugned reassessment orders that, according to AO, both the cost of land & cost of construction of the building were construction of the building were not correctly disclosed/offered by the trustees. Based on the loose sheets impounde offered by the trustees. Based on the loose sheets impounde offered by the trustees. Based on the loose sheets impounded at the time of survey, the AO is noted to have held that, the cost of land at the time of survey, the AO is noted to have held that, the cost of land at the time of survey, the AO is noted to have held that, the cost of land acquired by the trustees was actually Rs.2,91,20,000/ acquired by the trustees was actually Rs.2,91,20,000/ acquired by the trustees was actually Rs.2,91,20,000/- and thus computed sum of Rs.66,20,000/ computed sum of Rs.66,20,000/- which in his view was incurred outside which in his view was incurred outside the books of accounts had escaped assessment. the books of accounts had escaped assessment. Further, the AO also Further, the AO also examined the purported trial balance seized in the course of survey and examined the purported trial balance seized in the course of survey and examined the purported trial balance seized in the course of survey and inferred that contributions stated to have been received from the Trustees inferred that contributions stated to have been received from the Trustees inferred that contributions stated to have been received from the Trustees for construction was Rs.12.78 crores whereas the cost which ought to for construction was Rs.12.78 crores whereas the cost which ought to for construction was Rs.12.78 crores whereas the cost which ought to have been incurred, as per completion certificate, as obtained by the , as per completion certificate, as obtained by the , as per completion certificate, as obtained by the Department, was Rs.17.02 crores. The differential sum of Rs.4.24 crores Department, was Rs.17.02 crores. The differential sum of Rs.4.24 crores Department, was Rs.17.02 crores. The differential sum of Rs.4.24 crores was held to be further cost incurred by the trustees and the same was was held to be further cost incurred by the trustees and the same was was held to be further cost incurred by the trustees and the same was apportioned between AYs 2012 apportioned between AYs 2012-13 & 2013-14 at Rs.1,28,98,946/ 14 at Rs.1,28,98,946/- and Rs.2,94,97,054/- respectively. The AO is accordingly noted to have respectively. The AO is accordingly noted to have respectively. The AO is accordingly noted to have proportionately assessed the aforesaid computed further cost of land and proportionately assessed the aforesaid computed further cost of land and proportionately assessed the aforesaid computed further cost of land and construction in the hands of all the trustees. Aggrieved by the action of construction in the hands of all the trustees. Aggrieved by the action of construction in the hands of all the trustees. Aggrieved by the action of the AO, all the trustees are noted to the AO, all the trustees are noted to have preferred appeal before the Ld. have preferred appeal before the Ld.

CIT(A) who is noted to have confirmed the action of the AO. Being CIT(A) who is noted to have confirmed the action of the AO. Being CIT(A) who is noted to have confirmed the action of the AO. Being aggrieved by the said order, the trustees are now in appeal before us. aggrieved by the said order, the trustees are now in appeal before us. aggrieved by the said order, the trustees are now in appeal before us.

According to him, since the AO was of the view that the seized material According to him, since the AO was of the view that the seized material According to him, since the AO was of the view that the seized material did not contain anything which incriminated the assessee qua AY 2012 did not contain anything which incriminated the assessee qua AY 2012 did not contain anything which incriminated the assessee qua AY 2012- 13, the AO chose not to take up the case for scrutiny assessment. hose not to take up the case for scrutiny assessment. hose not to take up the case for scrutiny assessment.

According to him therefore, According to him therefore, when the AO chose not to issue notice u/s the AO chose not to issue notice u/s 143(2) of the Act when the time was available 143(2) of the Act when the time was available, and he he was already in possession of the impounded material, possession of the impounded material, then the subsequent issue subsequent issue of notice u/s.148 of the Act of the Act based on the same seized material material was not a valid action and hence, reopening action and hence, reopening notice is bad in law. For this, the Ld. AR . For this, the Ld. AR relied on the decision of relied on the decision of Hon’ble Madras High Court in the case of Hon’ble Madras High Court in the case of Tanmac India v DCIT [2016] 97 CCH 0189 and the Hon’ble Delhi High the Hon’ble Delhi High Tanmac India v DCIT [2016] 97 CCH 0189 Court decision in the case of Court decision in the case of CIT v. Orient Craft Ltd. 354 ITR 0536 354 ITR 0536 (Del) and the decision of the decision of the coordinate Bench of this Tribunal in the case coordinate Bench of this Tribunal in the case of Cheyur Ramakrishnan Rajkumar v Cheyur Ramakrishnan Rajkumar v. ITO (ITA No.334/Chny ITO (ITA No.334/Chny /2024).

being relied upon by the assessee was distinguishable. The Ld. CIT, DR being relied upon by the assessee was distinguishable. The Ld. CIT, DR being relied upon by the assessee was distinguishable. The Ld. CIT, DR further argued that, the AO also did not have the occasion at the material further argued that, the AO also did not have the occasion at the material further argued that, the AO also did not have the occasion at the material time to examine the seized ma time to examine the seized material and ascertain whether the case for terial and ascertain whether the case for AY 2012-13 could be taken up for scrutiny until the assessment for the 13 could be taken up for scrutiny until the assessment for the 13 could be taken up for scrutiny until the assessment for the surveyed year i.e. AY 2013 surveyed year i.e. AY 2013-14 was completed u/s 143(3) of the Act. The 14 was completed u/s 143(3) of the Act. The Ld. DR further relied on the decision of Hon’ble Supreme Court in the Ld. DR further relied on the decision of Hon’ble Supreme Court in the Ld. DR further relied on the decision of Hon’ble Supreme Court in the cases of ACIT v Rajesh Jhaveri Stock Brokers (P) Ltd. (291 ITR ACIT v Rajesh Jhaveri Stock Brokers (P) Ltd. (291 ITR ACIT v Rajesh Jhaveri Stock Brokers (P) Ltd. (291 ITR 500) & EssEss Kay Engg. Co. (P) Ltd. v CIT EssEss Kay Engg. Co. (P) Ltd. v CIT (247 (247 ITR 818) to support the AO’s action of reopening the assessment for AY 2012 support the AO’s action of reopening the assessment for AY 2012 support the AO’s action of reopening the assessment for AY 2012-13 which was completed u/s 143(1) of the Act. According to her, since t which was completed u/s 143(1) of the Act. According to her, since t which was completed u/s 143(1) of the Act. According to her, since the assessment was not completed u/s 143(3), the AO never had the assessment was not completed u/s 143(3), the AO never had the assessment was not completed u/s 143(3), the AO never had the occasion to form any opinion on the seized material for the relevant AY occasion to form any opinion on the seized material for the relevant AY occasion to form any opinion on the seized material for the relevant AY 2012-13 and hence she contended that the impugned reopening was 13 and hence she contended that the impugned reopening was 13 and hence she contended that the impugned reopening was justified.

We have heard the rival submissions of both the parties. heard the rival submissions of both the parties. heard the rival submissions of both the parties. The facts 10. as noted are that, survey action u/s 133A of the Act was conducted on noted are that, survey action u/s 133A of the Act was conducted on noted are that, survey action u/s 133A of the Act was conducted on 23.01.2013 in the course of which several material including loose 23.01.2013 in the course of which several material including loose 23.01.2013 in the course of which several material including loose documents, trial balance, completion certificate, estimated cost of documents, trial balance, completion certificate, estimated cost of documents, trial balance, completion certificate, estimated cost of construction etc. were seized by the AO. Also, statem construction etc. were seized by the AO. Also, statements of several ents of several persons were recorded by the AO at the time of survey. Thereafter, persons were recorded by the AO at the time of survey. Thereafter, persons were recorded by the AO at the time of survey. Thereafter, pursuant to post survey enquiries, the AO is noted to have recorded the pursuant to post survey enquiries, the AO is noted to have recorded the pursuant to post survey enquiries, the AO is noted to have recorded the last of the statement of the trustees in the month of August 2013. It is last of the statement of the trustees in the month of August 2013. It is last of the statement of the trustees in the month of August 2013. It is accordingly noted that the A accordingly noted that the AO was indeed aware about the contents of the O was indeed aware about the contents of the seized material, as he had examined the same in the post survey seized material, as he had examined the same in the post survey seized material, as he had examined the same in the post survey enquiries and thereafter examined the trustees on oath u/s 131 of the enquiries and thereafter examined the trustees on oath u/s 131 of the enquiries and thereafter examined the trustees on oath u/s 131 of the Act.

of the Act, even if the assessee [ even if the assessee [Arvind] had filed return on 16.10.2013, had filed return on 16.10.2013, if in his view, it was necessa in his view, it was necessary to do so, since he had time till 30.09.2014 to , since he had time till 30.09.2014 to issue notice u/s 143(2). The AO is however noted to have refrained from . The AO is however noted to have refrained from . The AO is however noted to have refrained from doing so. We therefore find force in the Ld. AR’s submission that, the AO doing so. We therefore find force in the Ld. AR’s submission that, the AO doing so. We therefore find force in the Ld. AR’s submission that, the AO, who had conducted the survey, after examining the impounded who had conducted the survey, after examining the impounded who had conducted the survey, after examining the impounded material, was not of the view that the income of the was not of the view that the income of the assessee for AY 2012 assessee for AY 2012-13 was required to be scrutinized. Later on however, the AO’s successor is required to be scrutinized. Later on however, the AO’s successor is required to be scrutinized. Later on however, the AO’s successor is noted to have changed his opinion changed his opinion and issued notice u/s 148 of the Act on and issued notice u/s 148 of the Act on 26.03.2019 beyond four years from the end of the relevant assessment 26.03.2019 beyond four years from the end of the relevant assessment 26.03.2019 beyond four years from the end of the relevant assessment year, on the basis of the same impounded material, which was already in , on the basis of the same impounded material, which was already in , on the basis of the same impounded material, which was already in his possession, when the assessment for AY 2012 his possession, when the assessment for AY 2012-13 was not taken up for not taken up for scrutiny u/s 143(2) of the Act, and basis the same stale material, the AO rutiny u/s 143(2) of the Act, and basis the same stale material, the AO rutiny u/s 143(2) of the Act, and basis the same stale material, the AO is noted to have formed his belief that income of the assessee chargeable is noted to have formed his belief that income of the assessee chargeable is noted to have formed his belief that income of the assessee chargeable to tax had escaped assessment. According to us, such action of the AO to tax had escaped assessment. According to us, such action of the AO to tax had escaped assessment. According to us, such action of the AO cannot be countenanced. The relevant cannot be countenanced. The relevant recorded reasons orded reasons, by the AO before reopening the assessment for AY 2012 before reopening the assessment for AY 2012-13 as taken note of by us, as taken note of by us, is as follows:-

“The assessee is one of the trustee in "The Karur Kongu Charitable The assessee is one of the trustee in "The Karur Kongu Charitable The assessee is one of the trustee in "The Karur Kongu Charitable Trust", Trust", Trust", located located located at at at No.464, No.464, No.464, Vaiyapuri Vaiyapuri Vaiyapuri Nagar, Nagar, Nagar, 2nd 2nd 2nd Cross, Cross, Cross, Sengunthapuram, Sengunthapuram, Karur. The trust was established on 04.02.2011. Karur. The trust was established on 04.02.2011. The trustees (32 in Nos) bought 17.99 acres of land at Pungambadi The trustees (32 in Nos) bought 17.99 acres of land at Pungambadi The trustees (32 in Nos) bought 17.99 acres of land at Pungambadi village, near Karur on 09.03.2011. The guide line value of the land village, near Karur on 09.03.2011. The guide line value of the land village, near Karur on 09.03.2011. The guide line value of the land was Rs. 14,40,000/ was Rs. 14,40,000/- and the market value was Rs.2,60,50,000/ and the market value was Rs.2,60,50,000/-. Out of this, the trust bought 5.02 acres of land at a cost of Rs.4.49 , the trust bought 5.02 acres of land at a cost of Rs.4.49 , the trust bought 5.02 acres of land at a cost of Rs.4.49 lakhs for constructing a Polytechnic College. During the Financial lakhs for constructing a Polytechnic College. During the Financial lakhs for constructing a Polytechnic College. During the Financial Year 2011-12 relevant to the assessment year 2012 12 relevant to the assessment year 2012-13, the trust 13, the trust started constructing a Polytechnic College on the land. The started constructing a Polytechnic College on the land. The started constructing a Polytechnic College on the land. The construction work was continued till the financial year 2012 uction work was continued till the financial year 2012- -13.

Meanwhile a survey u/s 133A was conducted at the premises of the Meanwhile a survey u/s 133A was conducted at the premises of the Meanwhile a survey u/s 133A was conducted at the premises of the above trust on 23.02.2013. During the survey proceedings, sworn above trust on 23.02.2013. During the survey proceedings, sworn above trust on 23.02.2013. During the survey proceedings, sworn statements were recorded from R. Palanisamy, the Managing trustee, statements were recorded from R. Palanisamy, the Managing trustee, statements were recorded from R. Palanisamy, the Managing trustee, Shri B. Sathyamoorthy, partner of Erode based builder firm (M/s Shri B. Sathyamoorthy, partner of Erode based builder firm (M/s Shri B. Sathyamoorthy, partner of Erode based builder firm (M/s S.Selvaraj& Co) and Shri S. Sethurajan site Engineer of the firm. S.Selvaraj& Co) and Shri S. Sethurajan site Engineer of the firm. S.Selvaraj& Co) and Shri S. Sethurajan site Engineer of the firm.

Shri R. Palanisamy, the managing trustee of the trust had admitted Shri R. Palanisamy, the managing trustee of the trust had admitted Shri R. Palanisamy, the managing trustee of the trust had admitted in his statement that a сonstruction contract was executed in his statement that a сonstruction contract was executed in his statement that a сonstruction contract was executed between the trust and with a builder firm called M/s S. Selvaraj & Co of Erode the trust and with a builder firm called M/s S. Selvaraj & Co of Erode the trust and with a builder firm called M/s S. Selvaraj & Co of Erode on 05.09.2011. The total value of the contract was Rs. 12 crores. on 05.09.2011. The total value of the contract was Rs. 12 crores. on 05.09.2011. The total value of the contract was Rs. 12 crores. Also, according to him, the trust had paid Rs.8 lakhs as on Also, according to him, the trust had paid Rs.8 lakhs as on Also, according to him, the trust had paid Rs.8 lakhs as on 23.01.2013 Further, he had admitted, each trustee 23.01.2013 Further, he had admitted, each trustee had contributed had contributed Rs. 40 lakhs towards the construction cost. Rs. 40 lakhs towards the construction cost.

In In In his his his statement, statement, statement, the the the partner partner partner of of of the the the builder builder builder firm firm firm Shei Shei Shei R.R.Sathyamoorthy also acknowledged the contract agreement R.R.Sathyamoorthy also acknowledged the contract agreement R.R.Sathyamoorthy also acknowledged the contract agreement executed on 05.09.2011 towards the construction of the Polytechnic executed on 05.09.2011 towards the construction of the Polytechnic executed on 05.09.2011 towards the construction of the Polytechnic College. Further, he had admitted that the firm had received er, he had admitted that the firm had received er, he had admitted that the firm had received Rs.3,80,00,000/- - and the total value of the contract was Rs.7 crores and the total value of the contract was Rs.7 crores (except cement and steel). Further, the statement given by the ate (except cement and steel). Further, the statement given by the ate (except cement and steel). Further, the statement given by the ate engineer Shri S. Sethurajan on the loose sheets impounded also engineer Shri S. Sethurajan on the loose sheets impounded also engineer Shri S. Sethurajan on the loose sheets impounded also strengthened the building construction commenced during the ed the building construction commenced during the ed the building construction commenced during the Financial Year 2011 Financial Year 2011-12

Consequent to the survey, the assessments of the 32 trustees for the Consequent to the survey, the assessments of the 32 trustees for the Consequent to the survey, the assessments of the 32 trustees for the Asst. Year 2013 Asst. Year 2013-14 were completed on 28.03.2016 During the 14 were completed on 28.03.2016 During the scrutiny proceedings, the trustee Shri S.Aravind admit scrutiny proceedings, the trustee Shri S.Aravind admitted Rs.8 lakhs ted Rs.8 lakhs towards the purchase of land (17.99 acres) from his unaccounted towards the purchase of land (17.99 acres) from his unaccounted towards the purchase of land (17.99 acres) from his unaccounted income However, he failed to disclose the investments made on the income However, he failed to disclose the investments made on the income However, he failed to disclose the investments made on the construction of the College building Further, the trustee had failed to construction of the College building Further, the trustee had failed to construction of the College building Further, the trustee had failed to admit the investments even in the retur admit the investments even in the return of income filed for the n of income filed for the assessment year 2012 assessment year 2012-13. In this juncture, it is pertinent to note 13. In this juncture, it is pertinent to note that the trust came into existence only in the year 2011 and the trust that the trust came into existence only in the year 2011 and the trust that the trust came into existence only in the year 2011 and the trust had not generated any income during the year of construction. The had not generated any income during the year of construction. The had not generated any income during the year of construction. The only source for the constr only source for the construction was from the trustees as there was uction was from the trustees as there was no external borrowings by the trust no external borrowings by the trust

Therefore, the above trustee had failed to disclose truly and fully on Therefore, the above trustee had failed to disclose truly and fully on Therefore, the above trustee had failed to disclose truly and fully on the investments made during the Financial Year 2011 the investments made during the Financial Year 2011-12 on the 12 on the construction of the Polytechnic College. Hen construction of the Polytechnic College. Hence, I have reason to ce, I have reason to believe that the income chargeable to tax has escaped assessment believe that the income chargeable to tax has escaped assessment believe that the income chargeable to tax has escaped assessment and I request the Pr.CIT Trichy and I request the Pr.CIT Trichy-1, Trichy to accord approval to 1, Trichy to accord approval to initiate proceedings u/s 147 for the assessment year 2012 initiate proceedings u/s 147 for the assessment year 2012-13. 13.”

13. Our above view is Our above view is found to be squarely supported by decision of the found to be squarely supported by decision of the Hon’ble jurisdictional Madras High Court in the case of Hon’ble jurisdictional Madras High Court in the case of Tanmac India v Tanmac India v DCIT (supra). While answering to the question as to While answering to the question as to whethe whether on the facts and in the circumstances facts and in the circumstances of the case, the Appellate Tribunal was of the case, the Appellate Tribunal was right in law in holding that the Assessing Officer is justified in reopening right in law in holding that the Assessing Officer is justified in reopening right in law in holding that the Assessing Officer is justified in reopening the assessment by issuance of notice under section 148 of the Act when the assessment by issuance of notice under section 148 of the Act when the assessment by issuance of notice under section 148 of the Act when no new material was unearthe no new material was unearthed justifying the re-opening of the opening of the assessment, the Hon’ble High Court is noted to have the Hon’ble High Court is noted to have held as follows: held as follows:

“12. If the assessing officer, after issuing intimation If the assessing officer, after issuing intimation u/s. section u/s. section 143(1) does not 143(1) does not issue a notice u/s. 143(2) of the Act to initiate issue a notice u/s. 143(2) of the Act to initiate proceedings for scrutiny of the return of income, the obvious proceedings for scrutiny of the return of income, the obvious proceedings for scrutiny of the return of income, the obvious conclusion is that he does not consider it necessary or expedient conclusion is that he does not consider it necessary or expedient conclusion is that he does not consider it necessary or expedient to do so, the inference being that the Return of Income filed to do so, the inference being that the Return of Income filed to do so, the inference being that the Return of Income filed was in order. It is this opinion that cannot be arbitrarily changed by is this opinion that cannot be arbitrarily changed by is this opinion that cannot be arbitrarily changed by the assessing officer, to re the assessing officer, to re-assess income on the basis of stale assess income on the basis of stale material, already on record. If we thus keep in the mind the material, already on record. If we thus keep in the mind the material, already on record. If we thus keep in the mind the above fundamental requirement of section 147, it would be above fundamental requirement of section 147, it would be above fundamental requirement of section 147, it would be apparent that the apparent that the exercise undertaken by the Revenue in this exercise undertaken by the Revenue in this case is not one of re case is not one of re-assessment, but of review. The reasons assessment, but of review. The reasons make it abundantly clear that the re make it abundantly clear that the re-assessment is sought to be assessment is sought to be initiated on the basis of the return of income and the enclosures initiated on the basis of the return of income and the enclosures initiated on the basis of the return of income and the enclosures which were available which were available with the assessing officer since 2.11.1998 with the assessing officer since 2.11.1998 and which ought to have prompted him to issue a notice under and which ought to have prompted him to issue a notice under and which ought to have prompted him to issue a notice under section 143(2) of the Act to conduct the proceedings under section 143(2) of the Act to conduct the proceedings under section 143(2) of the Act to conduct the proceedings under scrutiny. What is sought to be done by the re scrutiny. What is sought to be done by the re-assessment ought assessment ought to have been achieved by scrut to have been achieved by scrutiny assessment proceedings. iny assessment proceedings. Having missed the bus earlier, the Department cannot be Having missed the bus earlier, the Department cannot be Having missed the bus earlier, the Department cannot be permitted to avail of the extended time limit in the absence of permitted to avail of the extended time limit in the absence of permitted to avail of the extended time limit in the absence of any new or tangible material, when the time for scrutiny any new or tangible material, when the time for scrutiny any new or tangible material, when the time for scrutiny assessment has elapsed on 31.3.2001, prior to issue assessment has elapsed on 31.3.2001, prior to issue assessment has elapsed on 31.3.2001, prior to issue of notice u/s.

148. The notice under section 148 dated 9.12.2002 is thus u/s.

148. The notice under section 148 dated 9.12.2002 is thus u/s.

'Was the Tribunal right in law in holding that 'Was the Tribunal right in law in holding that in the absence of any in the absence of any tangible material available with the Assessing Officer to form the tangible material available with the Assessing Officer to form the tangible material available with the Assessing Officer to form the requisite belief regarding escapement of income, the reopening of the requisite belief regarding escapement of income, the reopening of the requisite belief regarding escapement of income, the reopening of the assessment made under section 143(1) is bad in law?' assessment made under section 143(1) is bad in law?

14. The Division Bench notes that The Division Bench notes that the Supreme Court in the case of Rajesh Jhaveri stock Brokers P. Ltd. Rajesh Jhaveri stock Brokers P. Ltd. (supra) only deals with the (supra) only deals with the formation of an opinion at the time of issuance of prima facie intimation formation of an opinion at the time of issuance of prima facie intimation formation of an opinion at the time of issuance of prima facie intimation and does not indicate anywhere that a re and does not indicate anywhere that a re-assessment can be initiated in assessment can be initiated in the absence of a reason to believe. the absence of a reason to believe.

To conclude, the Division Bench holds thus: To conclude, the Division Bench holds thus:

'This judgment, contrary to what the Revenue would have us believe, 'This judgment, contrary to what the Revenue would have us believe, 'This judgment, contrary to what the Revenue would have us believe, does not give a carte blanche a carte blanche to the Assessing Officer to disturb the to the Assessing Officer to disturb the finality of the intimation under section 143(1) at his whims and caprice; finality of the intimation under section 143(1) at his whims and caprice; finality of the intimation under section 143(1) at his whims and caprice; he must have reason to believe within the m he must have reason to believe within the meaning of the section. eaning of the section.’” [emphasis given by us emphasis given by us]

“16. The facts as well as the law remain identical in all three The facts as well as the law remain identical in all three The facts as well as the law remain identical in all three cases. Thus, merely by virtue of the non cases. Thus, merely by virtue of the non-action on the part of the action on the part of the assessing officer in the case of the present assessee, er in the case of the present assessee, er in the case of the present assessee, i.e. by his failure to issue a notice under section 143 (2) of the Act, the failure to issue a notice under section 143 (2) of the Act, the failure to issue a notice under section 143 (2) of the Act, the Department gets the advantage of another four years from Department gets the advantage of another four years from Department gets the advantage of another four years from 31.3.2002 to initiate proceedings for re 31.3.2002 to initiate proceedings for re-assessment. assessment. This obviously can neither be obviously can neither be the proper interpretation of section 147 the proper interpretation of section 147 nor the intention of Legislature. …………………………….. nor the intention of Legislature. …………………………….. nor the intention of Legislature. …………………………….. ……………………………………. …………………………………….

It is incorrect to state that the Assessing Officer had no It is incorrect to state that the Assessing Officer had no It is incorrect to state that the Assessing Officer had no opportunity as the statute grants him full opportunity to opportunity as the statute grants him full opportunity to opportunity as the statute grants him full opportunity to scrutinize the assessment if he f scrutinize the assessment if he felt it was necessary and elt it was necessary and expedient for him to do so. Having chosen not to, he cannot expedient for him to do so. Having chosen not to, he cannot expedient for him to do so. Having chosen not to, he cannot resort to the provisions of S.147 in the absence of any new or resort to the provisions of S.147 in the absence of any new or resort to the provisions of S.147 in the absence of any new or fresh material indicating escapement of income. fresh material indicating escapement of income.

17. A decision of the Delhi High Court in the case of A decision of the Delhi High Court in the case of A decision of the Delhi High Court in the case of Orient Craft Ltd. (supra) had occasion to consider a similar question and the Division (supra) had occasion to consider a similar question and the Division (supra) had occasion to consider a similar question and the Division Bench, at Page 546, holds as follows; Bench, at Page 546, holds as follows;

'Having regard to the judicial interpretation placed upon the expression 'Having regard to the judicial interpretation placed upon the expression 'Having regard to the judicial interpretation placed upon the expression reason to believe", and the continued use of that expression r reason to believe", and the continued use of that expression r reason to believe", and the continued use of that expression right from 1948 till date, we have to understand the meaning of the expression in 1948 till date, we have to understand the meaning of the expression in 1948 till date, we have to understand the meaning of the expression in exactly the same manner in which it has been understood by the courts. exactly the same manner in which it has been understood by the courts. exactly the same manner in which it has been understood by the courts. The assumption of the Revenue that somehow the words "reason to The assumption of the Revenue that somehow the words "reason to The assumption of the Revenue that somehow the words "reason to believe" have to be understood in a libe believe" have to be understood in a liberal manner where the finality of ral manner where the finality of an intimation under section 143(1) is sought to be disturbed is an intimation under section 143(1) is sought to be disturbed is an intimation under section 143(1) is sought to be disturbed is erroneous and misconceived. As pointed out earlier, there is no warrant erroneous and misconceived. As pointed out earlier, there is no warrant erroneous and misconceived. As pointed out earlier, there is no warrant for such an assumption because of the language employed in section for such an assumption because of the language employed in section for such an assumption because of the language employed in section 147; it makes no dis 147; it makes no distinction between an order passed under section tinction between an order passed under section 143(3) and the intimation issued under section 143(1). Therefore, it is 143(3) and the intimation issued under section 143(1). Therefore, it is 143(3) and the intimation issued under section 143(1). Therefore, it is not permissible to adopt different standards while interpreting the words not permissible to adopt different standards while interpreting the words not permissible to adopt different standards while interpreting the words "reason to believe" vis "reason to believe" vis-à-vis section 143(1) and section 143(3) vis section 143(1) and section 143(3). We are unable to appreciate what permits the Revenue to assume that unable to appreciate what permits the Revenue to assume that unable to appreciate what permits the Revenue to assume that somehow the same rigorous standards which are applicable in the somehow the same rigorous standards which are applicable in the somehow the same rigorous standards which are applicable in the interpretation of the expression when it is applied to the reopening of an interpretation of the expression when it is applied to the reopening of an interpretation of the expression when it is applied to the reopening of an assessment earlier made under section 143(3) ca assessment earlier made under section 143(3) cannot apply where only nnot apply where only an intimation was issued earlier under section 143(1). It would in effect an intimation was issued earlier under section 143(1). It would in effect an intimation was issued earlier under section 143(1). It would in effect place an assessee in whose case the return was processed under section place an assessee in whose case the return was processed under section place an assessee in whose case the return was processed under section 143(1) in a more vulnerable position than an assessee in whose case 143(1) in a more vulnerable position than an assessee in whose case 143(1) in a more vulnerable position than an assessee in whose case there was a full-fled fledged scrutiny or is accepted without demur is not a ged scrutiny or is accepted without demur is not a matter which is within the control of the assessee; he has no choice in matter which is within the control of the assessee; he has no choice in matter which is within the control of the assessee; he has no choice in the matter. The other consequence, which is somewhat graver, The other consequence, which is somewhat graver, The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in would be that the entire rigorous procedure involved in would be that the entire rigorous procedure involved in reopening an ass reopening an assessment and the burden of proving valid essment and the burden of proving valid reasons to believe could be circumvented by first accepting the reasons to believe could be circumvented by first accepting the reasons to believe could be circumvented by first accepting the return under section 143(1) and, thereafter, issue notices to return under section 143(1) and, thereafter, issue notices to return under section 143(1) and, thereafter, issue notices to reopen the assessment. An interpretation which makes a reopen the assessment. An interpretation which makes a reopen the assessment. An interpretation which makes a distinction between the meaning and distinction between the meaning and content of the expression content of the expression "reason to believe" in cases where assessments were framed "reason to believe" in cases where assessments were framed "reason to believe" in cases where assessments were framed earlier under section 143(3) and cases where mere intimations earlier under section 143(3) and cases where mere intimations earlier under section 143(3) and cases where mere intimations were issued earlier under section 143(1) may well lead to such were issued earlier under section 143(1) may well lead to such were issued earlier under section 143(1) may well lead to such an unintended mischief. It would be discrimin an unintended mischief. It would be discriminatory too. An atory too. An interpretation that leads to absurd results or mischief is to be interpretation that leads to absurd results or mischief is to be interpretation that leads to absurd results or mischief is to be eschewed." . . . . . . . . . . . The reasons recorded by the Assessing Officer reached the belief that The reasons recorded by the Assessing Officer reached the belief that The reasons recorded by the Assessing Officer reached the belief that there was escapement of income "on going through the return of there was escapement of income "on going through the return of there was escapement of income "on going through the return of income" filed by the assessee after he accepted the return under section filed by the assessee after he accepted the return under section filed by the assessee after he accepted the return under section 143(1) without scrutiny, and nothing more. This is nothing but a review 143(1) without scrutiny, and nothing more. This is nothing but a review 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing of the earlier proceedings and an abuse of power by the Assessing of the earlier proceedings and an abuse of power by the Assessing Officer, Officer, Officer, both both both strongly strongly strongly deprecated deprecated deprecated by by by the the the Supreme Supreme Supreme Cour Cour Court in CIT v. Kelvinator Kelvinator (supra).'”[Emphasis supplied]

According to the Ld. AR, in the present case, all the relevant information According to the Ld. AR, in the present case, all the relevant information According to the Ld. AR, in the present case, all the relevant information and details were made available at the time of original assessment available at the time of original assessment which was examined by the AO in the light of impounded material and was examined by the AO in the light of impounded material and was examined by the AO in the light of impounded material and therefore it was not only a case of change of opinion by the AO but also only a case of change of opinion by the AO but also only a case of change of opinion by the AO but also the assessee cannot be said to have cannot be said to have failed to disclose truly and full failed to disclose truly and fully all material facts necessary for assessment for that year and in that view of material facts necessary for assessment for that year and in that view of material facts necessary for assessment for that year and in that view of the matter, the Ld. AR has contended that Ld. AR has contended that AO could not have validly AO could not have validly reopened the assessment for AY reopened the assessment for AY 2013-14 after the expiry of four years. after the expiry of four years.

Drawing our attention to the books of accounts of the Trust, he showed us Drawing our attention to the books of accounts of the Trust, he showed us Drawing our attention to the books of accounts of the Trust, he showed us that, the Trust had incurred cost of Rs.14.19 crores towards the that, the Trust had incurred cost of Rs.14.19 crores towards the that, the Trust had incurred cost of Rs.14.19 crores towards the construction of building and therefore for this reason the AO’s construction of building and therefore for this reason the AO’s construction of building and therefore for this reason the AO’s predecessor didn’t find any reason to infer that any additional cost of t find any reason to infer that any additional cost of t find any reason to infer that any additional cost of construction, apart from what was already admitted by the trustees, had construction, apart from what was already admitted by the trustees, had construction, apart from what was already admitted by the trustees, had been incurred. According to the Ld. AR therefore, not only were the been incurred. According to the Ld. AR therefore, not only were the been incurred. According to the Ld. AR therefore, not only were the reasons recorded by the AO on incorrect premise but the same reasons recorded by the AO on incorrect premise but the same reasons recorded by the AO on incorrect premise but the same constituted change of opinion change of opinion on the basis of material already available on on the basis of material already available on record. He thus urged that the impugned reopening of assessment ought record. He thus urged that the impugned reopening of assessment ought record. He thus urged that the impugned reopening of assessment ought to be held as invalid.

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"147. If the Assessing Officer has reason to believe that any income "147. If the Assessing Officer has reason to believe that any income "147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he chargeable to tax has escaped assessment for any assessment year, he chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or may, subject to the provisions of sections 148 to 153, assess or may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax ncome and also any other income chargeable to tax ncome and also any other income chargeable to tax which has escaped assessment and which comes to his notice which has escaped assessment and which comes to his notice which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re subsequently in the course of the proceedings under this section, or re subsequently in the course of the proceedings under this section, or re- compute the loss or the depreciation allowance or any other allowance, compute the loss or the depreciation allowance or any other allowance, compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in he case may be, for the assessment year concerned (hereafter in he case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant this section and in sections 148 to 153 referred to as the relevant this section and in sections 148 to 153 referred to as the relevant assessment year) : assessment year) :

Provided that where an assessment under sub Provided that where an assessment under sub-section (3) of section (3) of section 143 or this section has been made section 143 or this section has been made for the relevant for the relevant assessment year, assessment year, no action shall be taken under this section after no action shall be taken under this section after the expiry of four years the expiry of four years from the end of the relevant assessment from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for year, unless any income chargeable to tax has escaped assessment for year, unless any income chargeable to tax has escaped assessment for such assessment year such assessment year by reason of the failure on the part of the failure on the part of the assessee to make a return under section 139 or in response to a notice to make a return under section 139 or in response to a notice to make a return under section 139 or in response to a notice issued under sub issued under sub-section (1) of section 142 or section 148 or section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his disclose fully and truly all material facts necessary for his disclose fully and truly all material facts necessary for his assessment, for that assessmen assessment, for that assessment year:[Emphasis given by us]" :[Emphasis given by us]"

The Hon'ble Supreme Court in the case of The Hon'ble Supreme Court in the case of Ganga Saran & Sons (P.) Ganga Saran & Sons (P.)

Ltd. v. ITO [1981] 6 Taxman 14/131 ITR 1 Ltd. v. ITO [1981] 6 Taxman 14/131 ITR 1 further held that, the further held that, the expression “reason to believe" reason to believe" occurring in Section 147 is stronger than ring in Section 147 is stronger than the expression "is satisfied" "is satisfied" and this legal requirement has to be met in and this legal requirement has to be met in the reasons recorded before re the reasons recorded before re-opening. The Hon'ble Court held that it opening. The Hon'ble Court held that it has to be kept in mind that if an assessment (original assessment) has has to be kept in mind that if an assessment (original assessment) has has to be kept in mind that if an assessment (original assessment) has been made u/s. 143(3), the proviso to Sec. 147 further mandates that no n made u/s. 143(3), the proviso to Sec. 147 further mandates that no n made u/s. 143(3), the proviso to Sec. 147 further mandates that no action shall be taken under section 147 after the expiry of 4 years from action shall be taken under section 147 after the expiry of 4 years from action shall be taken under section 147 after the expiry of 4 years from the end of the relevant assessment year the end of the relevant assessment year, unless there is failure on the unless there is failure on the part of the assessee to disclose fully and part of the assessee to disclose fully and truly all facts necessary for his truly all facts necessary for his assessment for that assessment year. assessment for that assessment year.

Kelvinator of India Ltd (320 ITR 561) reported in CIT v. Kelvinator (320 ITR 561) wherein the Apex Court held as follows: Apex Court held as follows:

“... '2.A short question which arises for determination in this batch of civil '2.A short question which arises for determination in this batch of civil '2.A short question which arises for determination in this batch of civil appeals appeals is, is, whether whether the the concept concept of of "change "change of opinion" opinion" stands stands obliterated with effect from 1 obliterated with effect from 1-4-1989, i.e., after substitution of section substitution of section 147 of the Income 147 of the Income-tax Act, 1961 by Direct Tax Laws (Amendment) Act, tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1987 ?

…

"7.2 Amendment made by the Amending Act, 1989, to reintroduce "7.2 Amendment made by the Amending Act, 1989, to reintroduce "7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in section 147. the expression 'reason to believe' in section 147. —A number A number of representations were received against the omission of the words representations were received against the omission of the words representations were received against the omission of the words 'reason to believe' from section 147 and their substitution by the 'reason to believe' from section 147 and their substitution by the 'reason to believe' from section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning 'opinion' of the Assessing Officer. It was pointed out that the meaning 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been ex of the expression, 'reason to believe' had been explained in a number plained in a number of court rulings in the past and was well settled and its omission from of court rulings in the past and was well settled and its omission from of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to section 147 would give arbitrary powers to the Assessing Officer to section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere reopen past assessments on mere change of opinion. To allay these opinion. To allay these fears, the Amending Act, 1989, fears, the Amending Act, 1989, has again amended section 147 to has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the reintroduce the expression 'has reason to believe' in place of the reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the words 'for reasons to be recorded by him in writing, is of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." Other provisions of the new section 147, however, remain the same." Other provisions of the new section 147, however, remain the same."

“30. Having held so, we need to consider as to whether the “30. Having held so, we need to consider as to whether the “30. Having held so, we need to consider as to whether the reassessment was validly done. The Tribunal held in favour of the reassessment was validly done. The Tribunal held in favour of the reassessment was validly done. The Tribunal held in favour of the assessee stating that the reassessment was bad in law. To decide this assessee stating that the reassessment was bad in law. To decide this assessee stating that the reassessment was bad in law. To decide this issue, we may straightaway refer to the issue, we may straightaway refer to the decision in the case decision in the case of Kelvinator of India Ltd. of India Ltd. (supra), wherein the Hon'ble Supreme Court ), wherein the Hon'ble Supreme Court pointed out that post 1 pointed out that post 1-4-1999, the power to reopen was much wider 1999, the power to reopen was much wider and that however, one needs to give a schematic interpretation to the and that however, one needs to give a schematic interpretation to the and that however, one needs to give a schematic interpretation to the words "reason to believe", words "reason to believe", failing which, Section 147 of the Act would failing which, Section 147 of the Act would give arbitrary powers to the Assessing Officer to reopen the assessment give arbitrary powers to the Assessing Officer to reopen the assessment give arbitrary powers to the Assessing Officer to reopen the assessment on the basis of "mere on the basis of "mere change of opinion", which cannot be, opinion", which cannot be, per se, reason to reopen. It was pointed out that there is a conceptual reason to reopen. It was pointed out that there is a conceptual reason to reopen. It was pointed out that there is a conceptual difference between the power to review and power to reassess, that the e between the power to review and power to reassess, that the e between the power to review and power to reassess, that the Assessing Officer has no power to review, that he has the power to Assessing Officer has no power to review, that he has the power to Assessing Officer has no power to review, that he has the power to reassess and that reassessment has to be based on fulfilment of certain reassess and that reassessment has to be based on fulfilment of certain reassess and that reassessment has to be based on fulfilment of certain pre-conditions and if the concept "change conditions and if the concept "change of opinion" is removed, then s removed, then in the garb of reopening the assessment, review would take place. It in the garb of reopening the assessment, review would take place. It in the garb of reopening the assessment, review would take place. It was held that the concept of "change was held that the concept of "change of opinion" should be treated as opinion" should be treated as in-built test to check the abuse of power by the Assessing Officer. Thus, built test to check the abuse of power by the Assessing Officer. Thus, built test to check the abuse of power by the Assessing Officer. Thus, it was held that after 1 it was held that after 1-4-1999, the Assessing Officer has power to 1999, the Assessing Officer has power to reopen provided there is "tangible material" to come to the conclusion reopen provided there is "tangible material" to come to the conclusion reopen provided there is "tangible material" to come to the conclusion that there is an escapement of income from assessment and reasons that there is an escapement of income from assessment and reasons that there is an escapement of income from assessment and reasons must have a live link with the formation of the belief. must have a live link with the formation of the belief.

31. Bearing the aforementioned legal principles in mind, if we examine aforementioned legal principles in mind, if we examine aforementioned legal principles in mind, if we examine the facts of the present case, as rightly pointed out by the Tribunal, all the facts of the present case, as rightly pointed out by the Tribunal, all the facts of the present case, as rightly pointed out by the Tribunal, all particulars relating to dividends and short term capital gains and other particulars relating to dividends and short term capital gains and other particulars relating to dividends and short term capital gains and other particulars were available with the Assessing Officer particulars were available with the Assessing Officer during the assessment proceedings, which was concluded on 15 assessment proceedings, which was concluded on 15-2 2-1999 under section 143(3) of the Act. Furthermore, the Tribunal, on facts, recorded section 143(3) of the Act. Furthermore, the Tribunal, on facts, recorded section 143(3) of the Act. Furthermore, the Tribunal, on facts, recorded that the Department did not bring any material fact before it, which was that the Department did not bring any material fact before it, which was that the Department did not bring any material fact before it, which was not disclosed in the original retur not disclosed in the original return of income.

32. Even in this appeal, no such fact has been brought to our notice nor 32. Even in this appeal, no such fact has been brought to our notice nor 32. Even in this appeal, no such fact has been brought to our notice nor pleaded in the memorandum of grounds of appeal and presumably that pleaded in the memorandum of grounds of appeal and presumably that pleaded in the memorandum of grounds of appeal and presumably that is the reason why the Revenue had raised the substantial questions is the reason why the Revenue had raised the substantial questions is the reason why the Revenue had raised the substantial questions involving the interpretation of Rul involving the interpretation of Rule 27 of the Rules and conveniently was e 27 of the Rules and conveniently was not focussing on the issue as to whether the reopening of assessment not focussing on the issue as to whether the reopening of assessment not focussing on the issue as to whether the reopening of assessment was on account of was on account of change of opinion. A reading of the reassessment opinion. A reading of the reassessment order dated 31-3 3-2004 will clearly reveal that all facts and figures were 2004 will clearly reveal that all facts and figures were gathered by the Assessing Officer only from the original return of d by the Assessing Officer only from the original return of d by the Assessing Officer only from the original return of income filed by the assessee. There was no fresh or tangible material income filed by the assessee. There was no fresh or tangible material income filed by the assessee. There was no fresh or tangible material available with the Assessing Officer to reopen the proceedings. available with the Assessing Officer to reopen the proceedings. available with the Assessing Officer to reopen the proceedings. Therefore, we have no hesitation to conclude that the reopenin Therefore, we have no hesitation to conclude that the reopenin Therefore, we have no hesitation to conclude that the reopening of the assessment beyond four years was clearly a case of assessment beyond four years was clearly a case of change change of opinion. For all the above reasons, substantial questions of law Nos. 1 to 3 are For all the above reasons, substantial questions of law Nos. 1 to 3 are For all the above reasons, substantial questions of law Nos. 1 to 3 are liable to be answered against the Revenue and consequently, it is held liable to be answered against the Revenue and consequently, it is held liable to be answered against the Revenue and consequently, it is held that the reopening of the reassess that the reopening of the reassessment is bad in law and is liable to ment is bad in law and is liable to be set aside.

33. Accordingly, the appeal filed by the Revenue is dismissed. The re 33. Accordingly, the appeal filed by the Revenue is dismissed. The re 33. Accordingly, the appeal filed by the Revenue is dismissed. The re- assessment order dated 31 assessment order dated 31-3-2004 is set aside. Substantial questions of . Substantial questions of law Nos. 1 to 3 are answered against the Revenue. As we have law Nos. 1 to 3 are answered against the Revenue. As we have law Nos. 1 to 3 are answered against the Revenue. As we have answered substantial questions of law Nos.1 to 3 against the revenue, swered substantial questions of law Nos.1 to 3 against the revenue, swered substantial questions of law Nos.1 to 3 against the revenue, there would be no necessity for us to answer the substantial question of there would be no necessity for us to answer the substantial question of there would be no necessity for us to answer the substantial question of law No. 4 and the said question is left open. No costs.” law No. 4 and the said question is left open. No costs.

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“The assessee is one of the trustee in "The Karur Kongu Charitable ssessee is one of the trustee in "The Karur Kongu Charitable ssessee is one of the trustee in "The Karur Kongu Charitable Trust", Trust", Trust", located located located at at at No.464, No.464, No.464, Vaiyapuri Vaiyapuri Vaiyapuri Nagar, Nagar, Nagar, 2nd 2nd 2nd Cross, Cross, Cross, Sengunthapuram, Karur. The trust was established on 04.02.2011. The Sengunthapuram, Karur. The trust was established on 04.02.2011. The Sengunthapuram, Karur. The trust was established on 04.02.2011. The trustees (32 in Nos) bought 17.99 acres of land at Pungambadi village, trustees (32 in Nos) bought 17.99 acres of land at Pungambadi village, trustees (32 in Nos) bought 17.99 acres of land at Pungambadi village, near Karur on 09.03.2011. The guide line value of the land was ear Karur on 09.03.2011. The guide line value of the land was ear Karur on 09.03.2011. The guide line value of the land was Rs.14,40,000/- and the market value was Rs.2,60,50,000/ and the market value was Rs.2,60,50,000/- -. Out of this, the trust bought 5.02 acres of land at a cost of Rs.4.49 lakhs for the trust bought 5.02 acres of land at a cost of Rs.4.49 lakhs for the trust bought 5.02 acres of land at a cost of Rs.4.49 lakhs for constructing a Polytechnic College. During the Financial constructing a Polytechnic College. During the Financial Year 2011 Year 2011-12 relevant to the assessment year 2012 relevant to the assessment year 2012-13, the trust started constructing 13, the trust started constructing a Polytechnic College on the land. The construction work was continued a Polytechnic College on the land. The construction work was continued a Polytechnic College on the land. The construction work was continued till the financial year 2012 till the financial year 2012-13.

Meanwhile, a survey u/s 133A was conducted at the premises of the Meanwhile, a survey u/s 133A was conducted at the premises of the Meanwhile, a survey u/s 133A was conducted at the premises of the above trust on 23.01.2013 During the survey proceedings, sworn above trust on 23.01.2013 During the survey proceedings, sworn above trust on 23.01.2013 During the survey proceedings, sworn statements were recorded from Shri R. Palanisamy, the Managing statements were recorded from Shri R. Palanisamy, the Managing statements were recorded from Shri R. Palanisamy, the Managing trustee, Shri R.R.Sathyamoorthy, partner of Erode based builder firm trustee, Shri R.R.Sathyamoorthy, partner of Erode based builder firm trustee, Shri R.R.Sathyamoorthy, partner of Erode based builder firm (M/s S.Selvaraj& Co) and Shri S.Sethurajan, site Engineer of (M/s S.Selvaraj& Co) and Shri S.Sethurajan, site Engineer of (M/s S.Selvaraj& Co) and Shri S.Sethurajan, site Engineer of the firm. Shri R. Palanisamy, the managing trustee of the trust had admitted in Shri R. Palanisamy, the managing trustee of the trust had admitted in Shri R. Palanisamy, the managing trustee of the trust had admitted in his statement that a construction contract was executed between the his statement that a construction contract was executed between the his statement that a construction contract was executed between the trust and with a builder firm called M/s S.Selvaraj& Co of Erode on trust and with a builder firm called M/s S.Selvaraj& Co of Erode on trust and with a builder firm called M/s S.Selvaraj& Co of Erode on 05.09.2011. The total value of the cont 05.09.2011. The total value of the contract was Rs. 12 crores. Also, ract was Rs. 12 crores. Also, according to him, the trust had paid Ra. 5 lakhs as on 23.01.2013. according to him, the trust had paid Ra. 5 lakhs as on 23.01.2013. according to him, the trust had paid Ra. 5 lakhs as on 23.01.2013. Further, he had admitted, each trustee had contributed Rs. 40 lakhs Further, he had admitted, each trustee had contributed Rs. 40 lakhs Further, he had admitted, each trustee had contributed Rs. 40 lakhs towards the construction cost. towards the construction cost.

In his statement, the partner of the builder firm Shri R.R. In his statement, the partner of the builder firm Shri R.R.Sathyamoorthy Sathyamoorthy also acknowledged the contract agreement executed on 05.09.2011 also acknowledged the contract agreement executed on 05.09.2011 also acknowledged the contract agreement executed on 05.09.2011 towards the construction of the Polytechnic College. Further, he had towards the construction of the Polytechnic College. Further, he had towards the construction of the Polytechnic College. Further, he had admitted that the firm had received Rs.3,80,00,000/ admitted that the firm had received Rs.3,80,00,000/- and the total value and the total value of the contract was Rs.7 crores (exc of the contract was Rs.7 crores (except cement and steel). Further, the ept cement and steel). Further, the statement given by the site engineer Shri S.Sethurajan on the loose statement given by the site engineer Shri S.Sethurajan on the loose statement given by the site engineer Shri S.Sethurajan on the loose sheets sheets sheets impounded impounded impounded also also also strengthened strengthened strengthened the the the building building building construction construction construction commenced during the Financial Year 2011 commenced during the Financial Year 2011-12.

Consequent to the survey, the assessments of Consequent to the survey, the assessments of the 32 trustees for the the 32 trustees for the Asst. Year 2013-14 were completed on 28.03.2016. During the scrutiny 14 were completed on 28.03.2016. During the scrutiny 14 were completed on 28.03.2016. During the scrutiny proceedings, the trustee Shri S.Aravind admitted Rs.8 lakhs towards the proceedings, the trustee Shri S.Aravind admitted Rs.8 lakhs towards the proceedings, the trustee Shri S.Aravind admitted Rs.8 lakhs towards the purchase of land (17.99 acres) from his unaccounted income. However, purchase of land (17.99 acres) from his unaccounted income. However, purchase of land (17.99 acres) from his unaccounted income. However, he failed to disclose he failed to disclose the investments made on the construction of the the investments made on the construction of the College building. In this juncture, it is pertinent to note that the trust College building. In this juncture, it is pertinent to note that the trust College building. In this juncture, it is pertinent to note that the trust came into existence only in the year 2011 and the trust had not came into existence only in the year 2011 and the trust had not came into existence only in the year 2011 and the trust had not generated any income during the year of construction. The only source generated any income during the year of construction. The only source generated any income during the year of construction. The only source for the construction was from the trustees as there was no external for the construction was from the trustees as there was no external for the construction was from the trustees as there was no external borrowings by the trust. borrowings by the trust.

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Therefore, the above trustee had failed to disclose truly and fully on the Therefore, the above trustee had failed to disclose truly and fully on the Therefore, the above trustee had failed to disclose truly and fully on the investments made during the Financial Year 2012 investments made during the Financial Year 2012-13 on the construction 13 on the construction of the Polytechnic College. Hence, I have reason to believe that the nic College. Hence, I have reason to believe that the nic College. Hence, I have reason to believe that the income chargeable to tax has escaped assessment and I request the income chargeable to tax has escaped assessment and I request the income chargeable to tax has escaped assessment and I request the Pr.CIT, Trichy-1, Trichy to accord approval to initiate proceedings u/s 1, Trichy to accord approval to initiate proceedings u/s 1, Trichy to accord approval to initiate proceedings u/s 147 for the assessment year 2013 147 for the assessment year 2013-14.”

“A survey u/s 133A was conducted in the premises of M/s The Karur A survey u/s 133A was conducted in the premises of M/s The Karur A survey u/s 133A was conducted in the premises of M/s The Karur Kongu Charitable Trust, N. 111/B, Vaiyapuri Nagar, II Cross, Kongu Charitable Trust, N. 111/B, Vaiyapuri Nagar, II Cross, Kongu Charitable Trust, N. 111/B, Vaiyapuri Nagar, II Cross, Sengunthapuram Post, Karur Sengunthapuram Post, Karur – 639002 on 23.01.2013. The trust is 639002 on 23.01.2013. The trust is running a college in the name and style of M/s Kongu Hi college in the name and style of M/s Kongu Hi college in the name and style of M/s Kongu Hi-Tech Polytechnic College. Polytechnic College. In the trust, there are 32 trustees. During the In the trust, there are 32 trustees. During the course of survey proceedings, it was found that he trustees of course of survey proceedings, it was found that he trustees of course of survey proceedings, it was found that he trustees of the trust have contributed towards corpus donation and the trust have contributed towards corpus donation and the trust have contributed towards corpus donation and admitted Rs.2.25 C admitted Rs.2.25 Crores as additional income in the name of the rores as additional income in the name of the trustees. trustees. trustees. Books Books Books of of of accounts accounts accounts and and and documents documents documents have have have been been been impounded. The assessee Shri ARAVIND S, individual filed his return of . The assessee Shri ARAVIND S, individual filed his return of . The assessee Shri ARAVIND S, individual filed his return of income for the assessment year 2013 income for the assessment year 2013-14 admitting total income of 14 admitting total income of Rs.14,40,720/-.

Since this is a survey case and books of accounts and documents this is a survey case and books of accounts and documents this is a survey case and books of accounts and documents have been impounded, this case has been selected for scrutiny have been impounded, this case has been selected for scrutiny have been impounded, this case has been selected for scrutiny and Notice under section 143(2) was issued to the assessee on and Notice under section 143(2) was issued to the assessee on and Notice under section 143(2) was issued to the assessee on 29.05.2014 served on 12.06.2014. 29.05.2014 served on 12.06.2014.

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In response to notice issued the author In response to notice issued the authorised representative of the ised representative of the assessee Shri R. Subramanian, Chartered Accountant, appeared and assessee Shri R. Subramanian, Chartered Accountant, appeared and assessee Shri R. Subramanian, Chartered Accountant, appeared and filed the Power of Attorney in his favour. filed the Power of Attorney in his favour. During the course of During the course of assessment proceedings, the representative of the assessee assessment proceedings, the representative of the assessee assessment proceedings, the representative of the assessee provided the Books of accounts, bills & v provided the Books of accounts, bills & vouchers and other ouchers and other supporting evidences in support of Return of Income filed. The supporting evidences in support of Return of Income filed. The supporting evidences in support of Return of Income filed. The Books Books Books of of of accounts accounts accounts and and and other other other documents documents documents produced produced produced were were were examined.

The trustees of the trust have offered Rs. 2.25 Crores as The trustees of the trust have offered Rs. 2.25 Crores as The trustees of the trust have offered Rs. 2.25 Crores as additional income in their individual capacity and additional income in their individual capacity and the assessee’s the assessee’s contribution was Rs.8,00,000/ contribution was Rs.8,00,000/-. In the Return of Income filed, . In the Return of Income filed, the assessee has admitted the same in addition to the regular the assessee has admitted the same in addition to the regular the assessee has admitted the same in addition to the regular income and paid the taxes. income and paid the taxes.

Also, the books of accounts and documents impounded at the Also, the books of accounts and documents impounded at the Also, the books of accounts and documents impounded at the time of survey were thoroughl time of survey were thoroughly examined. Since, the assessee y examined. Since, the assessee has offered the entire amount admitted at the time of Survey in has offered the entire amount admitted at the time of Survey in has offered the entire amount admitted at the time of Survey in the Return of Income fled the assessment of the assessee is the Return of Income fled the assessment of the assessee is the Return of Income fled the assessment of the assessee is completed accepting the income returned. In addition to the completed accepting the income returned. In addition to the completed accepting the income returned. In addition to the above, all the details furnished were th above, all the details furnished were thoroughly verified for its oroughly verified for its genuineness.

Assessed u/s 143(3) of the Income tax Act, 1961. Demand Notice u/s Assessed u/s 143(3) of the Income tax Act, 1961. Demand Notice u/s Assessed u/s 143(3) of the Income tax Act, 1961. Demand Notice u/s 156 is attached to this order as Annexure. Penalty proceedings u/s 156 is attached to this order as Annexure. Penalty proceedings u/s 156 is attached to this order as Annexure. Penalty proceedings u/s 271(1)(c) is initiated separately. 271(1)(c) is initiated separately.”[Emphasis given by us]

“In the light of the above, we hold that when the Assessing Officer had “In the light of the above, we hold that when the Assessing Officer had “In the light of the above, we hold that when the Assessing Officer had failed to record anywhere failed to record anywhere his satisfaction or belief that the income his satisfaction or belief that the income chargeable to tax had escaped assessment on account of the failure of chargeable to tax had escaped assessment on account of the failure of chargeable to tax had escaped assessment on account of the failure of the assessee to disclose truly and fully all material facts necessary for the assessee to disclose truly and fully all material facts necessary for the assessee to disclose truly and fully all material facts necessary for assessment. On the contrary, it was the Assessing Officer, who faile assessment. On the contrary, it was the Assessing Officer, who faile assessment. On the contrary, it was the Assessing Officer, who failed to consider the material placed before him at the time of regular consider the material placed before him at the time of regular consider the material placed before him at the time of regular assessment for which the assessee cannot be found fault with. assessment for which the assessee cannot be found fault with. assessment for which the assessee cannot be found fault with. Therefore, the notice issued under section 147 of the Income tax Act Therefore, the notice issued under section 147 of the Income tax Act Therefore, the notice issued under section 147 of the Income tax Act beyond the period of four years was wholly without jurisd beyond the period of four years was wholly without jurisd beyond the period of four years was wholly without jurisdiction and cannot be sustained.” cannot be sustained.”

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