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THE GATE OF HOPE CHARITABLE TRUST,,CHENNAI vs ITO(E), WARD-2,, CHENNAI | BharatTax

THE GATE OF HOPE CHARITABLE TRUST,,CHENNAI vs. ITO(E), WARD-2,, CHENNAI

ITA 1372/CHNY/2024Status: DisposedITAT Chennai05 March 2025AY 2010-11Bench: SHRI ABY T. VARKEY (Judicial Member), SHRI JAGADISH (Accountant Member)1 pages

AI SummaryAllowed

Facts

The assessee, a charitable trust registered under Section 12AA, had its assessment for AY 2010-11 and 2011-12 reopened based on information that it received funds for religious activities and incurred expenses accordingly. The AO disallowed exemptions claimed under Section 11, which was upheld by the CIT(A).

Held

The Tribunal held that the Assessing Officer (AO) failed to establish valid reasons to believe that income had escaped assessment, as the reasons were based on borrowed satisfaction and lacked tangible material. The reopening of assessment was thus quashed.

Key Issues

Whether the reopening of assessment under Section 147 was valid without 'reason to believe' supported by tangible material, especially when the original assessment was processed under Section 143(1)?

Sections Cited

11, 147, 148, 143(1), 143(3), 13(1)(a), 12AA, 80G, 142(2A), 151, 2(40)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI JAGADISH

Hearing: 07.01.2025Pronounced: 05.03.2025

आदेश / O R D E R PER ABY T. VARKEY, JM: These appealshave been preferred by the assessee Trust against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as ‘Ld.CIT(A)‘), Delhi, dated 20.03.2024 & 20.06.2024 for the Assessment Years(hereinafter referred to as ‘AY‘)2010-11 &2011-12.

2. In both these appeals, the sole issue involved is the denial of exemption claimed by the assessee trust u/s 11 of the Act and taxing its & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust ::2 ::

1. income in status of AOP on the ground that, though the assessee was a income in status of AOP on the ground that, though the assessee was a income in status of AOP on the ground that, though the assessee was a registered charitable trust u/s 12AA of the Act, but it had carried out registered charitable trust u/s 12AA of the Act, but it had carried out registered charitable trust u/s 12AA of the Act, but it had carried out religious activities and therefore the expenses claimed to have been religious activities and therefore the expenses claimed to have been religious activities and therefore the expenses claimed to have been incurred towards its charitable objects was incurred towards its charitable objects was disallowed by the AO. The disallowed by the AO. The action of the AO was also confirmed by the Ld. CIT(A). The assessee has action of the AO was also confirmed by the Ld. CIT(A). The assessee has action of the AO was also confirmed by the Ld. CIT(A). The assessee has raised various grounds of appeal and has also filed additional grounds [1 raised various grounds of appeal and has also filed additional grounds [1 raised various grounds of appeal and has also filed additional grounds [1- 5] dated 06.10.2024, challenging the action both on merits and on legal 5] dated 06.10.2024, challenging the action both on merits and on legal 5] dated 06.10.2024, challenging the action both on merits and on legal grounds as well. At the outset itself, the Ld. AR of the assessee drew our At the outset itself, the Ld. AR of the assessee drew our At the outset itself, the Ld. AR of the assessee drew our attention to the legal issue that has been raised wherein the reopening attention to the legal issue that has been raised wherein the reopening attention to the legal issue that has been raised wherein the reopening u/s. 147/148 of the Income u/s. 147/148 of the Income-tax Act, 1961 (hereinafter referred to as the tax Act, 1961 (hereinafter referred to as the "Act") of the AO has been challenged by the ass "Act") of the AO has been challenged by the assessee, therefore, we are essee, therefore, we are inclined to adjudicate first the legal issue raised before us, because if inclined to adjudicate first the legal issue raised before us, because if inclined to adjudicate first the legal issue raised before us, because if there is merit on the legal issue then it goes to the root of the there is merit on the legal issue then it goes to the root of the there is merit on the legal issue then it goes to the root of the reassessment order framed pursuant to reopening itself. reassessment order framed pursuant to reopening itself.

2010-11. The brief facts are that, the assessee is a Charitable Trust and is 11. The brief facts are that, the assessee is a Charitable Trust and is 11. The brief facts are that, the assessee is a Charitable Trust and is registered u/s.12AA of the Income Tax Act, 1961 (hereinafter referred to registered u/s.12AA of the Income Tax Act, 1961 (hereinafter referred to registered u/s.12AA of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘) vide order dated 03.01.2001 and is also approved u/s.80G of as ‘the Act‘) vide order dated 03.01.2001 and is also approved u/s.80G of as ‘the Act‘) vide order dated 03.01.2001 and is also approved u/s.80G of the Act vide order dated 18.07.2011. Thereafter, under the new e Act vide order dated 18.07.2011. Thereafter, under the new e Act vide order dated 18.07.2011. Thereafter, under the new regime/amendment in law, the Trust again applied for renewal of regime/amendment in law, the Trust again applied for renewal of regime/amendment in law, the Trust again applied for renewal of registration u/s.12AB as well as u/s.80G of the Act, both of which were registration u/s.12AB as well as u/s.80G of the Act, both of which were registration u/s.12AB as well as u/s.80G of the Act, both of which were granted vide order dated 01.10.2021. Further, it is also no granted vide order dated 01.10.2021. Further, it is also no granted vide order dated 01.10.2021. Further, it is also noted that the & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust assessee is registered with the Ministry of Home Affairs under the Foreign assessee is registered with the Ministry of Home Affairs under the Foreign assessee is registered with the Ministry of Home Affairs under the Foreign Contributions Regulation Act, 2010 vide Registration No.075 820 253 Contributions Regulation Act, 2010 vide Registration No.075 820 253 Contributions Regulation Act, 2010 vide Registration No.075 820 253 dated 31.10.2002.

a) To promote the interest and overall welfare of socially, educationally a) To promote the interest and overall welfare of socially, educationally a) To promote the interest and overall welfare of socially, educationally and economically downtrodden people of India and economically downtrodden people of India b) To evolve and implement educational, cultural, economic and e and implement educational, cultural, economic and e and implement educational, cultural, economic and health-oriented programs for the underprivileged and weaker sections oriented programs for the underprivileged and weaker sections oriented programs for the underprivileged and weaker sections of the Society including women, youth, handicapped, working children of the Society including women, youth, handicapped, working children of the Society including women, youth, handicapped, working children drug addicts, urban and rural poor to enhance their social, cultur drug addicts, urban and rural poor to enhance their social, cultur drug addicts, urban and rural poor to enhance their social, cultural and economic wellbeing. c) To create environmental awareness and educate and motivate the c) To create environmental awareness and educate and motivate the c) To create environmental awareness and educate and motivate the general public to work for the environmental equilibrium such as social general public to work for the environmental equilibrium such as social general public to work for the environmental equilibrium such as social forestry, tree planting, waste land management etc. forestry, tree planting, waste land management etc. d) To promote the overall welfare or th d) To promote the overall welfare or the victims of leprosy. e) To establish institutional care for the children, youth, aged, orphans e) To establish institutional care for the children, youth, aged, orphans e) To establish institutional care for the children, youth, aged, orphans and all other needy. f) To help people to acquire skills and knowledge to safeguard the f) To help people to acquire skills and knowledge to safeguard the f) To help people to acquire skills and knowledge to safeguard the ecology and environment, to keep their locality clean and beautiful and ecology and environment, to keep their locality clean and beautiful and ecology and environment, to keep their locality clean and beautiful and to take up action programs in this field. to take up action programs in this field. g) To develop leadership qualities among the youth. g) To develop leadership qualities among the youth. h) To hold, organize and arrange meetings, lectures, discussions, h) To hold, organize and arrange meetings, lectures, discussions, h) To hold, organize and arrange meetings, lectures, discussions, seminars, symposia, conferences, competitions, debates, exhibitions seminars, symposia, conferences, competitions, debates, exhibitions seminars, symposia, conferences, competitions, debates, exhibitions & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust etc., in the fields of socio etc., in the fields of socio- economic problems, environment and economic problems, environment and education. i) To conduct and engage in research in the fields of rural i) To conduct and engage in research in the fields of rural i) To conduct and engage in research in the fields of rural development, environment and education. development, environment and education. j) To collect, organize and disseminate knowledge relating to ecology j) To collect, organize and disseminate knowledge relating to ecology j) To collect, organize and disseminate knowledge relating to ecology and environment.

AO should record "reason to believe "reason to believe" that the income chargeable to tax " that the income chargeable to tax for that assessment year has escaped assessment. If this condition is not for that assessment year has escaped assessment. If this condition is not for that assessment year has escaped assessment. If this condition is not satisfied at the first place, then it cannot be said the AO has validly satisfied at the first place, then it cannot be said the AO has validly satisfied at the first place, then it cannot be said the AO has validly assumed jurisdiction u/s. 147 of the Act. Therefore, the question for assumed jurisdiction u/s. 147 of the Act. Therefore, the question for assumed jurisdiction u/s. 147 of the Act. Therefore, the question for consideration is whether on the basis of the reasons recorded by the AO, ideration is whether on the basis of the reasons recorded by the AO, ideration is whether on the basis of the reasons recorded by the AO, he could have validly reopened the assessment. For that it has to be seen he could have validly reopened the assessment. For that it has to be seen he could have validly reopened the assessment. For that it has to be seen as to whether the AO on the basis of whatever material before him, as to whether the AO on the basis of whatever material before him, as to whether the AO on the basis of whatever material before him, [which he had indicated in his "reasons record [which he had indicated in his "reasons recorded"] had reasons warrant ed"] had reasons warrant holding a belief that income chargeable to tax has escaped assessment. It holding a belief that income chargeable to tax has escaped assessment. It holding a belief that income chargeable to tax has escaped assessment. It is important to remember that the reasons recorded by AO to reopen has is important to remember that the reasons recorded by AO to reopen has is important to remember that the reasons recorded by AO to reopen has to be evaluated on a stand to be evaluated on a stand-alone basis and no addition/extrapolation can alone basis and no addition/extrapolation can be made or assumed, while adjudicating the legal issue of AO's usurpation sumed, while adjudicating the legal issue of AO's usurpation sumed, while adjudicating the legal issue of AO's usurpation of jurisdiction u/s. 147 of the Act. of jurisdiction u/s. 147 of the Act. The Hon’ble Bombay High Court, in the The Hon’ble Bombay High Court, in the case of Hindustan Lever Ltd. vs. R.B. Wadkar [(2004) 268 ITR Hindustan Lever Ltd. vs. R.B. Wadkar [(2004) 268 ITR Hindustan Lever Ltd. vs. R.B. Wadkar [(2004) 268 ITR 332], has, inter alia, observed that "…… , observed that "………. It is needless t …. It is needless to mention that the reasons are required to be read as they were recorded by the AO. No the reasons are required to be read as they were recorded by the AO. No the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those substitution or deletion is permissible. No additions can be made to those substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons reasons. No inference can be allowed to be drawn on the basis of reasons reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the or the AO to disclose and open his mind through the or the AO to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons." reasons recorded by him. He has to speak through the reasons." reasons recorded by him. He has to speak through the reasons."Their Lordships added that " Lordships added that "The reasons recorded should be self The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons pro and should not keep the assessee guessing for reasons. Reasons pro and should not keep the assessee guessing for reasons. Reasons provide & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust link between conclusion and the evidence….". link between conclusion and the evidence….". Therefore, the reasons are Therefore, the reasons are to be examined only as they were recorded by the AO before the issue of to be examined only as they were recorded by the AO before the issue of to be examined only as they were recorded by the AO before the issue of the notice.

8. Moreover, the Parliament has given power to AO to reopen the Moreover, the Parliament has given power to AO to reopen the Moreover, the Parliament has given power to AO to reopen the assessment, if the condition pr assessment, if the condition precedent as discussed above are satisfied, ecedent as discussed above are satisfied, and not otherwise. It should be kept in mind that the concept of and not otherwise. It should be kept in mind that the concept of and not otherwise. It should be kept in mind that the concept of assessment is governed by the time assessment is governed by the time-barring rule and the assessee barring rule and the assessee acquires a right as to the finality of proceedings. Queitus of the completed acquires a right as to the finality of proceedings. Queitus of the completed acquires a right as to the finality of proceedings. Queitus of the completed assessment is the Fundamental Rule and exception to this rule is Re ent is the Fundamental Rule and exception to this rule is Re ent is the Fundamental Rule and exception to this rule is Re- opening of assessment by AO under section 147 or exercise of Revisional opening of assessment by AO under section 147 or exercise of Revisional opening of assessment by AO under section 147 or exercise of Revisional jurisdiction by CIT under section 263 of the Act. Therefore, the Parliament jurisdiction by CIT under section 263 of the Act. Therefore, the Parliament jurisdiction by CIT under section 263 of the Act. Therefore, the Parliament in its wisdom has provided safeguards for exerc in its wisdom has provided safeguards for exercise of the reopening of ise of the reopening of assessment jurisdiction to AO; and revisional jurisdiction of CIT by assessment jurisdiction to AO; and revisional jurisdiction of CIT by assessment jurisdiction to AO; and revisional jurisdiction of CIT by providing providing providing condition condition condition precedent precedent precedent which which which is is is sine sine sine qua qua qua non non non for for for assumption/usurpation of jurisdiction. In the case of reopening of assumption/usurpation of jurisdiction. In the case of reopening of assumption/usurpation of jurisdiction. In the case of reopening of assessment, the reason to believe escape assessment, the reason to believe escapement of income is the ment of income is the jurisdictional fact and law (mixed question of fact and law) and for jurisdictional fact and law (mixed question of fact and law) and for jurisdictional fact and law (mixed question of fact and law) and for revisional jurisdiction the order of the AO should be erroneous as well as revisional jurisdiction the order of the AO should be erroneous as well as revisional jurisdiction the order of the AO should be erroneous as well as prejudicial to the revenue. Unless the condition precedent is not satisfied, prejudicial to the revenue. Unless the condition precedent is not satisfied, prejudicial to the revenue. Unless the condition precedent is not satisfied, the AO or the CIT can exercise their reopening jurisdiction or revisional CIT can exercise their reopening jurisdiction or revisional CIT can exercise their reopening jurisdiction or revisional jurisdiction respectively. The legislative history is that in respect to the jurisdiction respectively. The legislative history is that in respect to the jurisdiction respectively. The legislative history is that in respect to the reopening u/s. 147 of the Act, the Parliament by Direct Tax Laws reopening u/s. 147 of the Act, the Parliament by Direct Tax Laws reopening u/s. 147 of the Act, the Parliament by Direct Tax Laws & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust ::8 ::

ITA No.1372 & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust mentioned as to who had given bogus entries/transactions to the mentioned as to who had given bogus entries/transactions to the mentioned as to who had given bogus entries/transactions to the assessee or to whom the assessee had given bogus entries or assessee or to whom the assessee had given bogus entries or assessee or to whom the assessee had given bogus entries or transactions. It is also n transactions. It is also nowhere mentioned as to on which dates and owhere mentioned as to on which dates and through which mode the bogus entries and transactions were made by through which mode the bogus entries and transactions were made by through which mode the bogus entries and transactions were made by the assessee. What was the information given by the Director of the assessee. What was the information given by the Director of the assessee. What was the information given by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 has also not tax (Inv.), New Delhi, vide letter dated 16.06.2006 has also not tax (Inv.), New Delhi, vide letter dated 16.06.2006 has also not been mentioned. In other words, the contents of the letter dated ned. In other words, the contents of the letter dated ned. In other words, the contents of the letter dated 16.06.2006 of the Director of Income 16.06.2006 of the Director of Income-tax (Inv.), New Delhi have not tax (Inv.), New Delhi have not been given. The AO has vaguely referred to certain communications that been given. The AO has vaguely referred to certain communications that been given. The AO has vaguely referred to certain communications that he had received from the DIT(Inv.), New Delhi; the AO did not m he had received from the DIT(Inv.), New Delhi; the AO did not m he had received from the DIT(Inv.), New Delhi; the AO did not mention the facts mentioned in the said communication except that from the the facts mentioned in the said communication except that from the the facts mentioned in the said communication except that from the informations gathered by the DIT (Inv.), New Delhi that the assessee informations gathered by the DIT (Inv.), New Delhi that the assessee informations gathered by the DIT (Inv.), New Delhi that the assessee was involved in giving and taking accommodation entries only and was involved in giving and taking accommodation entries only and was involved in giving and taking accommodation entries only and represented unsecured money of the assessee comp represented unsecured money of the assessee company is actually any is actually unexplained income of the assessee company or that it has been unexplained income of the assessee company or that it has been unexplained income of the assessee company or that it has been informed by the Director of Income informed by the Director of Income-tax (Inv.), New Delhi vide letter tax (Inv.), New Delhi vide letter dated 16.06.2006 that the assessee company was involved in giving and dated 16.06.2006 that the assessee company was involved in giving and dated 16.06.2006 that the assessee company was involved in giving and taking bogus entries/transactions duri taking bogus entries/transactions during the relevant financial year. The ng the relevant financial year. The AO did not mention the details of transactions that represented AO did not mention the details of transactions that represented AO did not mention the details of transactions that represented unexplained income of the assessee company. The information on the unexplained income of the assessee company. The information on the unexplained income of the assessee company. The information on the basis of which the AO has initiated proceedings u/s 147 of the Act are basis of which the AO has initiated proceedings u/s 147 of the Act are basis of which the AO has initiated proceedings u/s 147 of the Act are undoubtedly vague undoubtedly vague and uncertain and cannot be construed to be and uncertain and cannot be construed to be sufficient and relevant material on the basis of which a reasonable sufficient and relevant material on the basis of which a reasonable sufficient and relevant material on the basis of which a reasonable person could have formed a belief that income had escaped assessment. person could have formed a belief that income had escaped assessment. person could have formed a belief that income had escaped assessment. In other words, the reasons recorded by the AO are totally vague, In other words, the reasons recorded by the AO are totally vague, In other words, the reasons recorded by the AO are totally vague, scanty and ambiguous. They are not Shri Udit Kumar Dugar, AY 2012 nd ambiguous. They are not Shri Udit Kumar Dugar, AY 2012 nd ambiguous. They are not Shri Udit Kumar Dugar, AY 2012- 13 clear and unambiguous but suffer from vagueness. The reasons 13 clear and unambiguous but suffer from vagueness. The reasons 13 clear and unambiguous but suffer from vagueness. The reasons recorded by the AO do not disclose the AO's mind as to what was the recorded by the AO do not disclose the AO's mind as to what was the recorded by the AO do not disclose the AO's mind as to what was the nature and amount of transaction or entries, which had been given nature and amount of transaction or entries, which had been given nature and amount of transaction or entries, which had been given or taken by the assessee in the relevant year. The reasons recorded by the taken by the assessee in the relevant year. The reasons recorded by the taken by the assessee in the relevant year. The reasons recorded by the AO also do not disclose his mind as to when and in what mode or way AO also do not disclose his mind as to when and in what mode or way AO also do not disclose his mind as to when and in what mode or way the bogus entries or transactions were given or taken by the assessee. the bogus entries or transactions were given or taken by the assessee. the bogus entries or transactions were given or taken by the assessee. From the reasons recorded, nobody can know From the reasons recorded, nobody can know what was the amount and what was the amount and nature of bogus entries or transactions given and taken by the assessee nature of bogus entries or transactions given and taken by the assessee nature of bogus entries or transactions given and taken by the assessee in the relevant year and with whom the transaction had taken place. As in the relevant year and with whom the transaction had taken place. As in the relevant year and with whom the transaction had taken place. As already noted above, it is well settled that only the reasons recorded by already noted above, it is well settled that only the reasons recorded by already noted above, it is well settled that only the reasons recorded by the AO for initiating proceedings u/s 147 of the Act are to be looked at tiating proceedings u/s 147 of the Act are to be looked at tiating proceedings u/s 147 of the Act are to be looked at or examined for sustaining or setting aside a notice issued u/s 148 of or examined for sustaining or setting aside a notice issued u/s 148 of or examined for sustaining or setting aside a notice issued u/s 148 of the Act. The reasons are required to be read as they were recorded by the Act. The reasons are required to be read as they were recorded by the Act. The reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No a the AO. No substitution or deletion is permissible. No addition can be ddition can be made to those reasons. Therefore, the details of entries or amount made to those reasons. Therefore, the details of entries or amount made to those reasons. Therefore, the details of entries or amount mentioned in the assessment order and in respect of which ultimate mentioned in the assessment order and in respect of which ultimate mentioned in the assessment order and in respect of which ultimate addition has been made by the AO, cannot be made a basis to say that addition has been made by the AO, cannot be made a basis to say that addition has been made by the AO, cannot be made a basis to say that the reasons recorded by the AO were wi the reasons recorded by the AO were with reference to those amounts th reference to those amounts mentioned in the assessment order. The reasons recorded by the AO are mentioned in the assessment order. The reasons recorded by the AO are mentioned in the assessment order. The reasons recorded by the AO are & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust totally silent with regard to the amount and nature of bogus entries and totally silent with regard to the amount and nature of bogus entries and totally silent with regard to the amount and nature of bogus entries and transactions and the persons with whom the transactions had taken transactions and the persons with whom the transactions had taken transactions and the persons with whom the transactions had taken place. In this re place. In this respect, we may rely upon the decision of Hon'ble spect, we may rely upon the decision of Hon'ble jurisdictional Delhi High Court in the case of CIT v. Atul Jain [2000] 299 jurisdictional Delhi High Court in the case of CIT v. Atul Jain [2000] 299 jurisdictional Delhi High Court in the case of CIT v. Atul Jain [2000] 299 ITR 383, in which case the information relied upon by the AO for ITR 383, in which case the information relied upon by the AO for ITR 383, in which case the information relied upon by the AO for initiating proceedings u/s 147 of the Act did indicate the source of initiating proceedings u/s 147 of the Act did indicate the source of initiating proceedings u/s 147 of the Act did indicate the source of the capital gain and nobody knew which shares were transacted and with capital gain and nobody knew which shares were transacted and with capital gain and nobody knew which shares were transacted and with whom the transaction has taken place and in that case there were whom the transaction has taken place and in that case there were whom the transaction has taken place and in that case there were absolutely no details available and the information supplied was absolutely no details available and the information supplied was absolutely no details available and the information supplied was extremely scanty and vague and in that light of those extremely scanty and vague and in that light of those facts, the Hon'ble facts, the Hon'ble Jurisdictional Delhi High Court held that initiation of proceedings u/s 147 Jurisdictional Delhi High Court held that initiation of proceedings u/s 147 Jurisdictional Delhi High Court held that initiation of proceedings u/s 147 of the Act by the AO was not valid and justified in the eyes of law. The of the Act by the AO was not valid and justified in the eyes of law. The of the Act by the AO was not valid and justified in the eyes of law. The recent decision of Hon'ble jurisdictional High Court of Delhi in the case of recent decision of Hon'ble jurisdictional High Court of Delhi in the case of recent decision of Hon'ble jurisdictional High Court of Delhi in the case of Signature Hotels (P.) Ltd. (supra) also supports the view we have taken otels (P.) Ltd. (supra) also supports the view we have taken otels (P.) Ltd. (supra) also supports the view we have taken above."

12.

Before us the Ld. DR appearing for the Revenue had contended Before us the Ld. DR appearing for the Revenue had contended Before us the Ld. DR appearing for the Revenue had contended that, in the present case before us, there was no original assessment that, in the present case before us, there was no original assessment that, in the present case before us, there was no original assessment completed u/s 143(3) of the Act and therefore, accor completed u/s 143(3) of the Act and therefore, according to him, in case ding to him, in case of reopening of an intimation u/s 143(1) of the Act, the above discussed of reopening of an intimation u/s 143(1) of the Act, the above discussed of reopening of an intimation u/s 143(1) of the Act, the above discussed stringent condition was not applicable and that there is no requirement stringent condition was not applicable and that there is no requirement stringent condition was not applicable and that there is no requirement for the Revenue to demonstrate that the reasons recorded were based on for the Revenue to demonstrate that the reasons recorded were based on for the Revenue to demonstrate that the reasons recorded were based on some tangible material as there is no material available on record due to ial as there is no material available on record due to ial as there is no material available on record due to absence of original assessment. For this, absence of original assessment. For this, she relied upon the decision of he relied upon the decision of Hon’ble Supreme Court in the case of Hon’ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. (291 ITR 500) Brokers P. Ltd. (291 ITR 500). Against, such a contention of Against, such a contention of Ld DR, the assessee’s counsel drew our attention to the decision of Hon’ble the assessee’s counsel drew our attention to the decision of Hon’ble the assessee’s counsel drew our attention to the decision of Hon’ble jurisdictional High Court in the case of High Court in the case of TANMAC v. DCIT TANMAC v. DCIT (78 taxmann.com 155)and contented that and contented that formation of “reasons to believe” formation of “reasons to believe”

should be based on some tangible material which com should be based on some tangible material which com should be based on some tangible material which comes into the & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust possession or knowledge of the AO possession or knowledge of the AO for him to come to conclusion that to come to conclusion that there is escapement of income from assessment. there is escapement of income from assessment.According to her, o According to her, one cannot under any circumstance bypass the essential pre cannot under any circumstance bypass the essential pre cannot under any circumstance bypass the essential pre-requisite of forming “reasons to believe” before reo forming “reasons to believe” before reopening any assessment, even if pening any assessment, even if like in the present case only an intimation was issued u/s 143(1) of the like in the present case only an intimation was issued u/s 143(1) of the like in the present case only an intimation was issued u/s 143(1) of the Act.We observe that the Division Bench of the Hon’ble jurisdictional High he Division Bench of the Hon’ble jurisdictional High he Division Bench of the Hon’ble jurisdictional High Court in the case of TANMAC v. DCIT TANMAC v. DCIT (78 taxmann.com 155 78 taxmann.com 155) had an occasion to consider a case of re nsider a case of re-opening of an intimation passed opening of an intimation passed u/s.143(1)(a) of the Act wherein it was held that in the absence of any u/s.143(1)(a) of the Act wherein it was held that in the absence of any u/s.143(1)(a) of the Act wherein it was held that in the absence of any tangible material available with the AO to form the requisite belief tangible material available with the AO to form the requisite belief tangible material available with the AO to form the requisite belief regarding escapement of income, the re regarding escapement of income, the re-opening of assessment ma opening of assessment made u/s.143(1) of the Act is bad in law u/s.143(1) of the Act is bad in law. The Hon’ble High Court is noted to . The Hon’ble High Court is noted to have considered the decision of have considered the decision ofACIT v. Rajesh Jhaveri Stock Brokers ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. (supra), and rendered its view , and rendered its view by concurring with the Division by concurring with the Division Bench of the Hon’ble Delhi High Court in the case of Bench of the Hon’ble Delhi High Court in the case of CIT v. Orient Craft CIT v. Orient Craft Ltd (354 ITR 536). In this case also, t . In this case also, the Court held that he Court held that, it is true that no assessment order is passed when the return is merely processed under no assessment order is passed when the return is merely processed under no assessment order is passed when the return is merely processed under Section 143(1) and an intimation to that effect is sent to the assessee. tion 143(1) and an intimation to that effect is sent to the assessee. tion 143(1) and an intimation to that effect is sent to the assessee.

The ingredient is that there should exist The ingredient is that there should exist "reason to believe" "reason to believe" that income chargeable to tax has escaped assessment. The High Court chargeable to tax has escaped assessment. The High Court chargeable to tax has escaped assessment. The High Court thus held that the requirement of "reason to believe" "reason to believe" cannot be dispensed with even cannot be dispensed with even with reference to an intimation under Section 143(1). The High Court with reference to an intimation under Section 143(1). The High Court with reference to an intimation under Section 143(1). The High Court categorically observed that observed that, an assessment cannot be reopened on the essment cannot be reopened on the basis of a mere guess, suspicion, gossip or rumour. basis of a mere guess, suspicion, gossip or rumour. It was held that, It was held that, one needs to give a schematic interpretation to the words needs to give a schematic interpretation to the words "reason to believe" "reason to believe" failing which, section 147 would give arbitrary powers to the Assessing failing which, section 147 would give arbitrary powers to the Assessing failing which, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments, which otherwise are not valid reasons to ficer to reopen assessments, which otherwise are not valid reasons to ficer to reopen assessments, which otherwise are not valid reasons to reopen. The Court thus held that even where assessment is sought to be reopen. The Court thus held that even where assessment is sought to be reopen. The Court thus held that even where assessment is sought to be reopened when only an intimation u/s 143(1) was issued, it shall be open reopened when only an intimation u/s 143(1) was issued, it shall be open reopened when only an intimation u/s 143(1) was issued, it shall be open for the assessee to contend that notwithst for the assessee to contend that notwithstanding that the argument of anding that the argument of "change of opinion" is not available to him, he would challenge the is not available to him, he would challenge the is not available to him, he would challenge the reopening on the ground that there was either no reason to believe or reopening on the ground that there was either no reason to believe or reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the that the alleged reason to believe is not relevant for the formation of the that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. come chargeable to tax has escaped assessment. come chargeable to tax has escaped assessment. In the decided case, the Hon’ble High Hon’ble High Court noted that, there was no whisper in there was no whisper in & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust the reasons recorded, of any tangible material which came to the the reasons recorded, of any tangible material which came to the the reasons recorded, of any tangible material which came to the possession of the Assessing Officer subsequent to the issue of t possession of the Assessing Officer subsequent to the issue of t possession of the Assessing Officer subsequent to the issue of the intimation to exercise of the power conferred under section 147 intimation to exercise of the power conferred under section 147 intimation to exercise of the power conferred under section 147 of the Act, and therefore quashed the notice issued u/s 148 of the Act holding it Act, and therefore quashed the notice issued u/s 148 of the Act holding it Act, and therefore quashed the notice issued u/s 148 of the Act holding it to be bad in law.

13.

From the aforesaid understanding of law governing the issue at From the aforesaid understanding of law governing the issue at From the aforesaid understanding of law governing the issue at hand, we have to exam hand, we have to examine the reasons already set out above and test ine the reasons already set out above and test whether the condition precedent necessary to usurp the re whether the condition precedent necessary to usurp the re whether the condition precedent necessary to usurp the re-opening jurisdiction can be discerned from perusal of the reasons recorded by the jurisdiction can be discerned from perusal of the reasons recorded by the jurisdiction can be discerned from perusal of the reasons recorded by the AO in the instant case (supra). AO in the instant case (supra). For doing that we have to examine on For doing that we have to examine on a standalone basis the reasons recorded by the AO to reopen the standalone basis the reasons recorded by the AO to reopen the standalone basis the reasons recorded by the AO to reopen the assessment, which has already been extracted at , which has already been extracted at Para 5 Para 5 above. It is noted that, the AO at Para No.1 has taken note of information received noted that, the AO at Para No.1 has taken note of information received noted that, the AO at Para No.1 has taken note of information received from the DCIT (Exemptions), Chennai, on 07.03.2017 fr from the DCIT (Exemptions), Chennai, on 07.03.2017 fr from the DCIT (Exemptions), Chennai, on 07.03.2017 from which he observed that, an amount of Rs.1,00,15,671/ observed that, an amount of Rs.1,00,15,671/- was received by the was received by the assessee Trust from M/s.Caruna Bala Vikas (hereinafter referred to as assessee Trust from M/s.Caruna Bala Vikas (hereinafter referred to as assessee Trust from M/s.Caruna Bala Vikas (hereinafter referred to as ‘M/s.CBV‘) to carry out religious activities; and that the fund was provided ‘M/s.CBV‘) to carry out religious activities; and that the fund was provided ‘M/s.CBV‘) to carry out religious activities; and that the fund was provided to the assessee by the Compassio to the assessee by the Compassion International, USA [CI,USA] also for n International, USA [CI,USA] also for religious activities and that has been utilized by the assessee for the said religious activities and that has been utilized by the assessee for the said religious activities and that has been utilized by the assessee for the said purpose under the project name purpose under the project name “Ayanavaram Child Development Centre” “Ayanavaram Child Development Centre” at Chennai as well as at Chennai as well as “Chengalpattu Child Development Centre” “Chengalpattu Child Development Centre”, Chengalpattu. This is simply noted to be the sweeping information Chengalpattu. This is simply noted to be the sweeping information Chengalpattu. This is simply noted to be the sweeping information & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust received from the office of office of DCIT (Exemptions), Chennai giving DCIT (Exemptions), Chennai giving their/his opinion on the matter. The aforesaid observation does not contain any opinion on the matter. The aforesaid observation does not contain any opinion on the matter. The aforesaid observation does not contain any reference to the purported religious activitie reference to the purported religious activities carried out by the assessee s carried out by the assessee Trust basis which it was being alleged that the charitable funds were Trust basis which it was being alleged that the charitable funds were Trust basis which it was being alleged that the charitable funds were diverted for religious purposes. It is also not discernible as to which diverted for religious purposes. It is also not discernible as to which diverted for religious purposes. It is also not discernible as to which particular religion was being propagated and in which manner and why particular religion was being propagated and in which manner and why particular religion was being propagated and in which manner and why the utilization at the child development at the child development centers was being baldly inferred was being baldly inferred as religious activities.

15.

Thereafter, according to the AO, the major claim of the assessee hereafter, according to the AO, the major claim of the assessee hereafter, according to the AO, the major claim of the assessee Trust was under one project, but again no details of such project is given Trust was under one project, but again no details of such project is given Trust was under one project, but again no details of such project is given in the recorded reasons. The AO further observes that, out of the foreign in the recorded reasons. The AO further observes that, out of the foreign in the recorded reasons. The AO further observes that, out of the foreign & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust contributions of Rs.1,00,18,456/ contributions of Rs.1,00,18,456/-, the assessee has applied a sum of ssee has applied a sum of Rs.90,66,711/- towards the above said projects which are claimed as towards the above said projects which are claimed as towards the above said projects which are claimed as charitable activity and that the amount exceeds 90% of the foreign charitable activity and that the amount exceeds 90% of the foreign charitable activity and that the amount exceeds 90% of the foreign receipts. These observations are again noted to be the contemporaneous receipts. These observations are again noted to be the contemporaneous receipts. These observations are again noted to be the contemporaneous facts concerning the ass facts concerning the assessee, which are discernible from the income essee, which are discernible from the income-tax return and that they contain nothing adverse against the assessee nor are return and that they contain nothing adverse against the assessee nor are return and that they contain nothing adverse against the assessee nor are these observations referring to any material or information which these observations referring to any material or information which these observations referring to any material or information which suggests income escaping assessment. suggests income escaping assessment.

16.

In the next para 4, the AO In the next para 4, the AO again goes back to the information again goes back to the information received from the DCIT(E) which stated that the contribution of received from the DCIT(E) which stated that the contribution of received from the DCIT(E) which stated that the contribution of Rs.1,00,15,671/- has been received from M/s.CBV, to carry out religious has been received from M/s.CBV, to carry out religious has been received from M/s.CBV, to carry out religious activities and also has spent for religious activities. And in the next part activities and also has spent for religious activities. And in the next part activities and also has spent for religious activities. And in the next part i.e. Para No.5, the AO concludes that, the assessee Trust being a ara No.5, the AO concludes that, the assessee Trust being a ara No.5, the AO concludes that, the assessee Trust being a charitable Trust has carried out religious activities involving the charitable Trust has carried out religious activities involving the charitable Trust has carried out religious activities involving the expenditure of Rs.1,00,15,671/ expenditure of Rs.1,00,15,671/-, amounting to 99% of its gross receipts , amounting to 99% of its gross receipts and hence, he was of the opinion that application to the and hence, he was of the opinion that application to the and hence, he was of the opinion that application to the tune of Rs.90,71,612/- excluding the claim of depreciation should be disallowed excluding the claim of depreciation should be disallowed excluding the claim of depreciation should be disallowed and brought to tax. According to him therefore, there was a reason to and brought to tax. According to him therefore, there was a reason to and brought to tax. According to him therefore, there was a reason to belief that income chargeable to tax for AY 2010 belief that income chargeable to tax for AY 2010-11 and after approval 11 and after approval from the JCIT/CIT(E), he re from the JCIT/CIT(E), he re-opened the assessment. & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust ::18 ::

17.

From the aforesaid reasons recorded by AO it is evident that other From the aforesaid reasons recorded by AO it is evident that other From the aforesaid reasons recorded by AO it is evident that other than the general information given by than the general information given by DCIT(E),and there is no other there is no other material the AO collected himself after preliminary enquiry which could material the AO collected himself after preliminary enquiry which could material the AO collected himself after preliminary enquiry which could have enabled him at the t have enabled him at the time of recording reasons to come to a conscious ime of recording reasons to come to a conscious independent conclusion that independent conclusion that "income of the assessee has escaped "income of the assessee has escaped assessment". In fact, it appears that the AO never bothered to apply his In fact, it appears that the AO never bothered to apply his In fact, it appears that the AO never bothered to apply his own mind to the letter received from DCIT(E) but simply followed it as own mind to the letter received from DCIT(E) but simply followed it as own mind to the letter received from DCIT(E) but simply followed it as a gospel truth. According to us, the information given by According to us, the information given by DCIT(E) DCIT(E) can only be a basis to ignite/trigger and be the starting point to enquire; and at be a basis to ignite/trigger and be the starting point to enquire; and at be a basis to ignite/trigger and be the starting point to enquire; and at that stage, the information of the information of DCIT(E) can be termed as a foundation only can be termed as a foundation only to form "reason to suspect" "reason to suspect" and not “reason to believe” escapement of income which is the jurisdictional fact & law required to enable the AO to income which is the jurisdictional fact & law required to enable the AO to income which is the jurisdictional fact & law required to enable the AO to successfully assume jurisdiction to reopen as envisaged u/s. 147 of the successfully assume jurisdiction to reopen as envisaged u/s. 147 of the successfully assume jurisdiction to reopen as envisaged u/s. 147 of the Act. It has to be kept in mind that the Act. It has to be kept in mind that the 'reasons to believe' 'reasons to believe' is not synonymous to 'reason to suspect' 'reason to suspect'. 'Reason to suspect' 'Reason to suspect' based on an information can trigger an enquiry so that it can be found out whether information can trigger an enquiry so that it can be found out whether information can trigger an enquiry so that it can be found out whether there is any substance or material to substantiate that there is merit in there is any substance or material to substantiate that there is merit in there is any substance or material to substantiate that there is merit in the information adduced by the the information adduced by the DCIT(E) and after post enquiry the AO post enquiry the AO has to take an independent decision whether to re has to take an independent decision whether to re-open the assessment open the assessment or not. And at the cost of repetition or not. And at the cost of repetition, we say that the AO should not act on we say that the AO should not act on dictate of any other authority like in this case from dictate of any other authority like in this case from DCIT(E) DCIT(E) because then it would be borrowed satisfaction of the jurisdictional fact & law which is rrowed satisfaction of the jurisdictional fact & law which is rrowed satisfaction of the jurisdictional fact & law which is & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust ::19 ::

18.

In the present case, reading of the aforesaid reasons recorded In the present case, reading of the aforesaid reasons recorded In the present case, reading of the aforesaid reasons recorded reveals that, the core allegation is that, the assessee utilized the funds the core allegation is that, the assessee utilized the funds the core allegation is that, the assessee utilized the funds given to it by M/s.CBV& M/s. Compassion International for religious given to it by M/s.CBV& M/s. Compassion International for religious given to it by M/s.CBV& M/s. Compassion International for religious purposes rather than for charitable purposes. However, nowhere in the purposes rather than for charitable purposes. However, nowhere in the purposes rather than for charitable purposes. However, nowhere in the body of the reasons recorded, the AO has stated to have body of the reasons recorded, the AO has stated to have alleged whether alleged whether the funds given to assessee has been used for advancement, support or the funds given to assessee has been used for advancement, support or the funds given to assessee has been used for advancement, support or propagation of a particular religion and its tenets. It has also not been propagation of a particular religion and its tenets. It has also not been propagation of a particular religion and its tenets. It has also not been mentioned as to the manner in which the funds were diverted for religious mentioned as to the manner in which the funds were diverted for religious mentioned as to the manner in which the funds were diverted for religious purposes and as to how purposes and as to how the monies spent had child development centers the monies spent had child development centers was being inferred as religious activity. We find the reasons recorded to was being inferred as religious activity. We find the reasons recorded to was being inferred as religious activity. We find the reasons recorded to be lacking any tangible material or evidence in this regard whatsoever. be lacking any tangible material or evidence in this regard whatsoever. be lacking any tangible material or evidence in this regard whatsoever.

19.

The language used in the recorded reasons by the AO appears e used in the recorded reasons by the AO appears e used in the recorded reasons by the AO appears suggest that he is also not aware that, the benefit of exemption under suggest that he is also not aware that, the benefit of exemption under suggest that he is also not aware that, the benefit of exemption under Section 11 is also available to religious trusts. It is necessary to keep in Section 11 is also available to religious trusts. It is necessary to keep in Section 11 is also available to religious trusts. It is necessary to keep in & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust mind that, Section 11 exemptions can be claimed by both Pub mind that, Section 11 exemptions can be claimed by both Pub mind that, Section 11 exemptions can be claimed by both Public Charitable as well as Religious Trust; and as per the Constitution of India, Charitable as well as Religious Trust; and as per the Constitution of India, Charitable as well as Religious Trust; and as per the Constitution of India, all religions are equal in the eyes of law; and income donated/applied for all religions are equal in the eyes of law; and income donated/applied for all religions are equal in the eyes of law; and income donated/applied for public religious purposes enjoys exemption u/s.11 of the Act. But, only if public religious purposes enjoys exemption u/s.11 of the Act. But, only if public religious purposes enjoys exemption u/s.11 of the Act. But, only if a Trust was for “the pro the promotion and aiding” of the work of a particular ” of the work of a particular religion, then it may fall under the mischief of Section 13(1)(a) which religion, then it may fall under the mischief of Section 13(1)(a) which religion, then it may fall under the mischief of Section 13(1)(a) which provides that nothing contained in Section 11 shall operate to exempt provides that nothing contained in Section 11 shall operate to exempt provides that nothing contained in Section 11 shall operate to exempt “any part of income” from the property held under a Trust for private ” from the property held under a Trust for private ” from the property held under a Trust for private religious purpose which doesn’t endure for the benefit of the public. religious purpose which doesn’t endure for the benefit of the public. religious purpose which doesn’t endure for the benefit of the public.

20.

It is a common knowledge that in India there are different religious It is a common knowledge that in India there are different religious It is a common knowledge that in India there are different religious activities and right to freedom of religion to freedom of religion is granted as per Article 25 to 28 is granted as per Article 25 to 28 of the Constitution of India which comes under Part of the Constitution of India which comes under Part-III [Fundamental III [Fundamental Rights] of the Constitution of India. Rights] of the Constitution of India. As noted, the exemption granted he exemption granted u/s.11 of the Act for charitable or religious Trust would be denied only if u/s.11 of the Act for charitable or religious Trust would be denied only if u/s.11 of the Act for charitable or religious Trust would be denied only if activity falls in the mischief of section 13 of the Act is only when the vity falls in the mischief of section 13 of the Act is only when the vity falls in the mischief of section 13 of the Act is only when the income of a Trust or Institution is applied for the benefit of any particular income of a Trust or Institution is applied for the benefit of any particular income of a Trust or Institution is applied for the benefit of any particular religion, community or caste. Section 11 of the Act allows exemption for religion, community or caste. Section 11 of the Act allows exemption for religion, community or caste. Section 11 of the Act allows exemption for income derived from the property he income derived from the property held under Trust wholly for charitable ld under Trust wholly for charitable & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust or religious purposes. Unless, the AO had information that the assessee or religious purposes. Unless, the AO had information that the assessee or religious purposes. Unless, the AO had information that the assessee Trust has utilized/applied its income for the benefit of any particular Trust has utilized/applied its income for the benefit of any particular Trust has utilized/applied its income for the benefit of any particular religion, community or caste, the question of disallowing the exemption religion, community or caste, the question of disallowing the exemption religion, community or caste, the question of disallowing the exemption claimed u/s 11 for registered trust u/s.12A of the Act does not arise. In aimed u/s 11 for registered trust u/s.12A of the Act does not arise. In aimed u/s 11 for registered trust u/s.12A of the Act does not arise. In this case, there is no whisper in the recorded reasons about assessee this case, there is no whisper in the recorded reasons about assessee this case, there is no whisper in the recorded reasons about assessee applying its income for the benefit of any particular religious or caste in applying its income for the benefit of any particular religious or caste in applying its income for the benefit of any particular religious or caste in violation of Section 13(1)(a) of the A violation of Section 13(1)(a) of the Act. Even the reference to the ct. Even the reference to the information stated in Para No.1 and conclusion thereafter, has got no information stated in Para No.1 and conclusion thereafter, has got no information stated in Para No.1 and conclusion thereafter, has got no nexus whatsoever basis which any prudent person properly instructed in nexus whatsoever basis which any prudent person properly instructed in nexus whatsoever basis which any prudent person properly instructed in law could draw a linkage that the AO was in possession of tangible law could draw a linkage that the AO was in possession of tangible law could draw a linkage that the AO was in possession of tangible material that there is an escapement of income from assessment to the e is an escapement of income from assessment to the e is an escapement of income from assessment to the tune of Rs.90,71,612/-. . At the cost of repetitions, we note that AO simply At the cost of repetitions, we note that AO simply on the basis of the letter from DCIT(E) letter from DCIT(E) has jumped into conclusion that has jumped into conclusion that there is an escapement of income which is erroneous since there is an escapement of income which is erroneous since there is an escapement of income which is erroneous since it does not satisfy the jurisdictional fact and law for reopening as envisaged u/s. 147 satisfy the jurisdictional fact and law for reopening as envisaged u/s. 147 satisfy the jurisdictional fact and law for reopening as envisaged u/s. 147 of the Act. The AO simply taking note of the of the Act. The AO simply taking note of the DCIT(E) letter has borrowed letter has borrowed the satisfaction without independent application of mind to form reason the satisfaction without independent application of mind to form reason the satisfaction without independent application of mind to form reason warrant holding a beli warrant holding a belief that income chargeable to tax has escaped ef that income chargeable to tax has escaped assessment. Just because a letter has been received from the assessment. Just because a letter has been received from the assessment. Just because a letter has been received from the DCIT(E) the AO cannot reopen the assessment even if original assessment was u/s. AO cannot reopen the assessment even if original assessment was u/s. AO cannot reopen the assessment even if original assessment was u/s. 143(1) of the Act. & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust ::22 ::

21.

For the reasons discussed above, in our consi For the reasons discussed above, in our considered view, dered view, The reasons recorded by AO does not stand the test as laid by plethora of reasons recorded by AO does not stand the test as laid by plethora of reasons recorded by AO does not stand the test as laid by plethora of judicial precedence as discussed above which is sine qua non to assume judicial precedence as discussed above which is sine qua non to assume judicial precedence as discussed above which is sine qua non to assume jurisdiction u/s 147 of the Act, therefore, in the light of the aforesaid facts jurisdiction u/s 147 of the Act, therefore, in the light of the aforesaid facts jurisdiction u/s 147 of the Act, therefore, in the light of the aforesaid facts and circumstances of the case as discussed, we find that the reasons f the case as discussed, we find that the reasons f the case as discussed, we find that the reasons recorded by the AO to justify reopening the assessment u/s. 147 fails recorded by the AO to justify reopening the assessment u/s. 147 fails recorded by the AO to justify reopening the assessment u/s. 147 fails and, therefore, the very assumption of jurisdiction to reassess the and, therefore, the very assumption of jurisdiction to reassess the and, therefore, the very assumption of jurisdiction to reassess the assessee falls. Since the AO failed to validly assume jurisdiction u assessee falls. Since the AO failed to validly assume jurisdiction u assessee falls. Since the AO failed to validly assume jurisdiction u/s. 147 of the Act, the assumption of jurisdiction by him to re of the Act, the assumption of jurisdiction by him to re of the Act, the assumption of jurisdiction by him to re-open the assessment itself is coram non judice coram non judice and, therefore, all subsequent and, therefore, all subsequent action is null in the eyes of law and therefore, we quash the reopening action is null in the eyes of law and therefore, we quash the reopening action is null in the eyes of law and therefore, we quash the reopening and consequent reassessment order framed b and consequent reassessment order framed by him. y him.The assessee therefore, succeeds on this legal issue. The therefore, succeeds on this legal issue. The appeal of the assessee for AY the assessee for AY 2010-11, is thus allowed. , is thus allowed.

23.

Following the legal position of Following the legal position of law, as laid down in Paras Paras 7 to 12 above, we accordingly proceed to test the above recorded reasons for AY above, we accordingly proceed to test the above recorded reasons for AY above, we accordingly proceed to test the above recorded reasons for AY 2011-12 as to whether 12 as to whether the condition precedent necessary to usurp the re the condition precedent necessary to usurp the re- opening jurisdiction can be discerned from perusal of the opening jurisdiction can be discerned from perusal of the above reasons recorded by the AO. It is observed that, the Para 1 contains the general It is observed that, the Para 1 contains the general It is observed that, the Para 1 contains the general information & background facts concerning the assessee’s case for AY information & background facts concerning the assessee’s case for AY information & background facts concerning the assessee’s case for AY 2011-12. The relevant paras to be examined are Paras 2 & 3. It is 12. The relevant paras to be examined are Paras 2 & 3. It is 12. The relevant paras to be examined are Paras 2 & 3. It is observed that, in Para No.2, the AO takes note of th observed that, in Para No.2, the AO takes note of the information which e information which he received from the DCIT(E), Chennai dated 02.02.2017 wherein the he received from the DCIT(E), Chennai dated 02.02.2017 wherein the he received from the DCIT(E), Chennai dated 02.02.2017 wherein the said DCIT(E) observed that, the assessee Trust had received funds from said DCIT(E) observed that, the assessee Trust had received funds from said DCIT(E) observed that, the assessee Trust had received funds from M/s.Caruna Bal Vikas (hereinafter referred to as ‘M/s.CBV‘) to carry out M/s.Caruna Bal Vikas (hereinafter referred to as ‘M/s.CBV‘) to carry out M/s.Caruna Bal Vikas (hereinafter referred to as ‘M/s.CBV‘) to carry out projects at “Ayanavaram C “Ayanavaram Child Development Centre” at Chennai as well as at Chennai as well as “Chengalpattu Child Development Centre” “Chengalpattu Child Development Centre”, Chengalpattu. According to the , Chengalpattu. According to the DCIT(E) of the donor, the accounts of M/s CBV was referred for Special DCIT(E) of the donor, the accounts of M/s CBV was referred for Special DCIT(E) of the donor, the accounts of M/s CBV was referred for Special Audit and that it was gathered that Audit and that it was gathered that M/s. Compassion International M/s. Compassion International is transferring funds to M/s. transferring funds to M/s. CBV, which in turn is giving the funds to many the funds to many & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust channel partners to carry out religious activities channel partners to carry out religious activities. The DCIT(E) of the donor . The DCIT(E) of the donor M/s CBV thus is noted to have suspected that the funds received by the M/s CBV thus is noted to have suspected that the funds received by the M/s CBV thus is noted to have suspected that the funds received by the assessee Trust would have been assessee Trust would have been used to carry out religious activities out religious activities against its charitable objects. The AO in Para 3 is noted to have given his against its charitable objects. The AO in Para 3 is noted to have given his against its charitable objects. The AO in Para 3 is noted to have given his findings for forming purported findings for forming purported “reasons to believe” “reasons to believe” that income chargeable to tax had escaped assessment. The AO is noted to have chargeable to tax had escaped assessment. The AO is noted to have chargeable to tax had escaped assessment. The AO is noted to have simply accepted the aforesaid letter of DCIT(E) of M/s CBV as gospel truth simply accepted the aforesaid letter of DCIT(E) of M/s CBV as gospel truth simply accepted the aforesaid letter of DCIT(E) of M/s CBV as gospel truth and relying on same, the AO straightaway observed that, the and relying on same, the AO straightaway observed that, the and relying on same, the AO straightaway observed that, the assessee trust had incurred expenses tow trust had incurred expenses towards the Religious activities as per the ards the Religious activities as per the directions of M/s. CBV and therefore such expenses was to be disallowed. CBV and therefore such expenses was to be disallowed. CBV and therefore such expenses was to be disallowed.

24.

Thereafter, in Para No.4, the AO is noted to have observed that, Thereafter, in Para No.4, the AO is noted to have observed that, Thereafter, in Para No.4, the AO is noted to have observed that, there was no scrutiny assessment u/s.143(3) of the Act and therefore, there was no scrutiny assessment u/s.143(3) of the Act and therefore, there was no scrutiny assessment u/s.143(3) of the Act and therefore, the only requirement of law before re e only requirement of law before re-opening the assessment u/s.147 of opening the assessment u/s.147 of the Act was that the AO should have reason to believe escapement of the Act was that the AO should have reason to believe escapement of the Act was that the AO should have reason to believe escapement of income. And thereafter, in the last para, he states that he has reason to income. And thereafter, in the last para, he states that he has reason to income. And thereafter, in the last para, he states that he has reason to believe that income chargeable to tax for A believe that income chargeable to tax for AY 2011-12 has escaped 12 has escaped assessment for which he has to take necessary approvals since the re assessment for which he has to take necessary approvals since the re assessment for which he has to take necessary approvals since the re- opening of the case is beyond four years from the end of the relevant opening of the case is beyond four years from the end of the relevant opening of the case is beyond four years from the end of the relevant assessment year. However, the copy produced before us by the assessment year. However, the copy produced before us by the assessment year. However, the copy produced before us by the Department doesn’t show any endor Department doesn’t show any endorsement/approval of the competent sement/approval of the competent authority. Since, at present, we are not looking into the legality of the re authority. Since, at present, we are not looking into the legality of the re authority. Since, at present, we are not looking into the legality of the re- & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust opening for want of approval by the CIT(E) for which the records are opening for want of approval by the CIT(E) for which the records are opening for want of approval by the CIT(E) for which the records are required to be summoned, we leave this legal issue open. required to be summoned, we leave this legal issue open.

Only because, the special auditor of M/s CBV found that M/s CBV was Only because, the special auditor of M/s CBV found that M/s CBV was Only because, the special auditor of M/s CBV found that M/s CBV was receiving funds from M/s Compassion International, which was existing receiving funds from M/s Compassion International, which was existing receiving funds from M/s Compassion International, which was existing for religious purposes, it cannot be presumed that the further utilization , it cannot be presumed that the further utilization , it cannot be presumed that the further utilization of funds in India was also for religious purposes. If that be so, it was of funds in India was also for religious purposes. If that be so, it was of funds in India was also for religious purposes. If that be so, it was incumbent upon the AO incumbent upon the AO at least bring some material or evidence on bring some material or evidence on record through the recorded reasons basis which any prudent pers record through the recorded reasons basis which any prudent pers record through the recorded reasons basis which any prudent person could arrive at a reasonable belief that, the funds received from the donor could arrive at a reasonable belief that, the funds received from the donor could arrive at a reasonable belief that, the funds received from the donor by the assessee which were meant to be utilized for its charitable objects, by the assessee which were meant to be utilized for its charitable objects, by the assessee which were meant to be utilized for its charitable objects, had been diverted for had been diverted for propagation of any particular religio any particular religion/religious purposes. However, it is noted purposes. However, it is noted that, there is no such whisper or allegation that, there is no such whisper or allegation in the above extracted recorded reasons. Nowhere in the body of the in the above extracted recorded reasons. Nowhere in the body of the in the above extracted recorded reasons. Nowhere in the body of the reasons recorded, the AO or Special Auditor has stated to have alleged as reasons recorded, the AO or Special Auditor has stated to have alleged as reasons recorded, the AO or Special Auditor has stated to have alleged as to how or in which manner was the funds given to assessee has been to how or in which manner was the funds given to assessee has been to how or in which manner was the funds given to assessee has been used for advancement, support or propagation of a particular religion and sed for advancement, support or propagation of a particular religion and sed for advancement, support or propagation of a particular religion and its tenets. The reasons recorded on this aspect is noted to lack specifics its tenets. The reasons recorded on this aspect is noted to lack specifics its tenets. The reasons recorded on this aspect is noted to lack specifics but is vague and general in nature. but is vague and general in nature.

28.

We further note from perusal of Para No.3 of the reasons recorded We further note from perusal of Para No.3 of the reasons recorded We further note from perusal of Para No.3 of the reasons recorded that the AO has taken note of the contents of the RoI, filed by the that the AO has taken note of the contents of the RoI, filed by the that the AO has taken note of the contents of the RoI, filed by the assessee for AY 2011-12 and observes that assessee has shown gross 12 and observes that assessee has shown gross 12 and observes that assessee has shown gross- receipts of Rs.99,40,812/ receipts of Rs.99,40,812/- and then notes the observation of Statutory and then notes the observation of Statutory Audit [may be Special Auditin the case of M/s CBV may be Special Auditin the case of M/s CBV] that assessee had ] that assessee had incurred expenses for religious purpose, which has to be disall incurred expenses for religious purpose, which has to be disall incurred expenses for religious purpose, which has to be disallowed. It is ex-facie evident that, the AO has not carried out any such enquiry or facie evident that, the AO has not carried out any such enquiry or facie evident that, the AO has not carried out any such enquiry or collected any material to form a belief that assessee had incurred collected any material to form a belief that assessee had incurred collected any material to form a belief that assessee had incurred expenses for religious activities, rather, the AO has simply acted on expenses for religious activities, rather, the AO has simply acted on expenses for religious activities, rather, the AO has simply acted on receipt of the information from the D receipt of the information from the DCIT(E) pursuant to special CIT(E) pursuant to special-audit of M/s CBV for AY 2013-14, [not even the relevant year i.e. AY 2011 14, [not even the relevant year i.e. AY 2011 14, [not even the relevant year i.e. AY 2011-12] that assessee Trust had received funds from M/s.CBV and concluded that that assessee Trust had received funds from M/s.CBV and concluded that that assessee Trust had received funds from M/s.CBV and concluded that the expenses must have been incurred for religious activities, which is the expenses must have been incurred for religious activities, which is the expenses must have been incurred for religious activities, which is disallowable. Such a conclusion is noted to be based purely on suspicion able. Such a conclusion is noted to be based purely on suspicion able. Such a conclusion is noted to be based purely on suspicion and surmise, because, evidently the AO has not made any and surmise, because, evidently the AO has not made any and surmise, because, evidently the AO has not made any reasonable enquiry and collected relevant material to transform his suspicion to belief and collected relevant material to transform his suspicion to belief and collected relevant material to transform his suspicion to belief that there was in fact an escapement of income. that there was in fact an escapement of income. & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust ::29 ::