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

3. We first take up the appeal in We first take up the appeal in for AY 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 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 ::3 :: 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.

4. From the objects of the Trust, it is noted that, it primarily exists From the objects of the Trust, it is noted that, it primarily exists From the objects of the Trust, it is noted that, it primarily exists for the purpose of serving under privileged children in the area of education, purpose of serving under privileged children in the area of education, purpose of serving under privileged children in the area of education, physic, cognitive, economic and social through sponsorship. physic, cognitive, economic and social through sponsorship. physic, cognitive, economic and social through sponsorship. The assessee was involved in various charitable activities, more particularly Child was involved in various charitable activities, more particularly Child was involved in various charitable activities, more particularly Child Development Programs for the welfare of c Development Programs for the welfare of children as per the Objects of hildren as per the Objects of the Trust. The relevant o relevant objects for which the Trust was registered are bjects for which the Trust was registered are noted to be as follows -

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.

Subsequently, the case was re Subsequently, the case was re-opened by issuing notice u/s.148 of the opened by issuing notice u/s.148 of the Act dated 30.03.2017 on the strength of the following reasons recorded Act dated 30.03.2017 on the strength of the following reasons recorded Act dated 30.03.2017 on the strength of the following reasons recorded by the AO as under:

“As per the information r As per the information received from DCIT(Exemptions) Chennai nnai on 07.03.2017, it is seen that an amount of Rs.1,00,15,671/ 07.03.2017, it is seen that an amount of Rs.1,00,15,671/ 07.03.2017, it is seen that an amount of Rs.1,00,15,671/- was received by the assesse received by the assessee trust, M/s The Gate of Hope of Charita trust, M/s The Gate of Hope of Charitable Trust" from M/s. Caruna Bala Trust" from M/s. Caruna Bala Vikas, during the year, to carryout Vikas, during the year, to carryout religious activities. The fund was provided to M/s Gate of Hope of The fund was provided to M/s Gate of Hope of The fund was provided to M/s Gate of Hope of Charitable Trust, by Compassion International, Charitable Trust, by Compassion International, USA, also for religious USA, also for religious activities, and the same has been utilized for religious activities by M/s. es, and the same has been utilized for religious activities by M/s. es, and the same has been utilized for religious activities by M/s. The Gate of Hope of Charitable Trust" under the project names The Gate of Hope of Charitable Trust" under the project names The Gate of Hope of Charitable Trust" under the project names "Ayanavaram Child Development Centre", the place of project being Ayanavaram Child Development Centre", the place of project being Ayanavaram Child Development Centre", the place of project being Ayanavaram, Chennai and "Chengalpattu Child Development Centre", Ayanavaram, Chennai and "Chengalpattu Child Development Centre", Ayanavaram, Chennai and "Chengalpattu Child Development Centre", Chengalpet.

The assessee trust M/s. The Gate of Hope charitable trust is a trust The assessee trust M/s. The Gate of Hope charitable trust is a trust The assessee trust M/s. The Gate of Hope charitable trust is a trust registered for Charitable purposes u/s.12AA o registered for Charitable purposes u/s.12AA of the IT Act, 1961 vide f the IT Act, 1961 vide the the the order order order of of of the the the Commissioner Commissioner Commissioner of of of Income Income Income tax, tax, tax, TN TN TN-V in C.No:2039(58)/2000- -01/TN-V dated 02.01.2001. The assessee is also V dated 02.01.2001. The assessee is also granted approval u/s.80G vide order in DIT(E) No.2039(58)/00 granted approval u/s.80G vide order in DIT(E) No.2039(58)/00 granted approval u/s.80G vide order in DIT(E) No.2039(58)/00-01 dated 18.07.2011.

The assessee Trust filed the re The assessee Trust filed the return of income for A.Y.2010 turn of income for A.Y.2010-11 on 20.9.2010 admitting NIL income and the same was processed 20.9.2010 admitting NIL income and the same was processed 20.9.2010 admitting NIL income and the same was processed u/s.143(1) on 02.02.2012. The Gross Receipts of the assessee Trust u/s.143(1) on 02.02.2012. The Gross Receipts of the assessee Trust u/s.143(1) on 02.02.2012. The Gross Receipts of the assessee Trust (as per the Income and Expenditure Account) for the A.Y. 2010 (as per the Income and Expenditure Account) for the A.Y. 2010 (as per the Income and Expenditure Account) for the A.Y. 2010-11 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 ::5 ::

Rs.1,04,33,790/- The same con The same consists of "Foreign Contributions sists of "Foreign Contributions - Grant of Caruna Bala Vikas" of Rs.1,00,18,456/ Vikas" of Rs.1,00,18,456/-, and Local account and Bank , and Local account and Bank interest. The major claim of expenditure of the assessee trust was interest. The major claim of expenditure of the assessee trust was interest. The major claim of expenditure of the assessee trust was towards child development centres under 3 projects and child survival towards child development centres under 3 projects and child survival towards child development centres under 3 projects and child survival programme under 1 project. Out of the foreign contribution of Rs. under 1 project. Out of the foreign contribution of Rs. under 1 project. Out of the foreign contribution of Rs. 1,00,18,456/-, the assessee has applied a sum of Rs. 90,66,711/ , the assessee has applied a sum of Rs. 90,66,711/ , the assessee has applied a sum of Rs. 90,66,711/- towards the above said projects, which are claimed as charitable towards the above said projects, which are claimed as charitable towards the above said projects, which are claimed as charitable activity. The amount applied exceeds 90% of the foreign receipts. activity. The amount applied exceeds 90% of the foreign receipts. activity. The amount applied exceeds 90% of the foreign receipts.

But, as per the information received from the DCIT (Exemptions), , as per the information received from the DCIT (Exemptions), , as per the information received from the DCIT (Exemptions), contribution of Rs.1,00,15,671/ contribution of Rs.1,00,15,671/- has been received from M/s. Caruna has been received from M/s. Caruna Bala Vikas to carry out religious activities and also has been spent for Bala Vikas to carry out religious activities and also has been spent for Bala Vikas to carry out religious activities and also has been spent for religious activities.

Thus, the assessee trust, M/s. Thus, the assessee trust, M/s. The Gate of Hope of Charitable Trust, The Gate of Hope of Charitable Trust, being a Charitable trust, has carried out religious activities involving an being a Charitable trust, has carried out religious activities involving an being a Charitable trust, has carried out religious activities involving an expenditure of Rs.1,00,15,671/ expenditure of Rs.1,00,15,671/-, amounting to 99% of its Gross , amounting to 99% of its Gross Receipts. Hence, application to the tune of Rs.90,71,612/ Receipts. Hence, application to the tune of Rs.90,71,612/- excluding excluding the claim of depreciation should be disallowed and brought to tax. of depreciation should be disallowed and brought to tax. of depreciation should be disallowed and brought to tax.

The return of the income for AY 2010 The return of the income for AY 2010-11 was not selected for scrutiny 11 was not selected for scrutiny and therefore the occasion to examine the purpose of utilization of and therefore the occasion to examine the purpose of utilization of and therefore the occasion to examine the purpose of utilization of fund was not available. fund was not available.

In view of the above, I have reasons In view of the above, I have reasons to believe that income chargeable to believe that income chargeable to tax has escaped assessment for A.Y.2010 to tax has escaped assessment for A.Y.2010-11, within the meaning of 11, within the meaning of Sec.147 of the Income tax Act, 1961. Sec.147 of the Income tax Act, 1961.

Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who was pleased to dismiss it. Now the assessee is in appeal before us. was pleased to dismiss it. Now the assessee is in appeal before us. was pleased to dismiss it. Now the assessee is in appeal before us.

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 ::

(Amendment) Act 1987 w.e.f. 01.04.1989 had substitute (Amendment) Act 1987 w.e.f. 01.04.1989 had substituted d "for reason to believe escapement of income" believe escapement of income" to “for reasons to be recorded by him in for reasons to be recorded by him in writing, is of the opinion'' writing, is of the opinion'' which gave unbridled subjective satisfaction to which gave unbridled subjective satisfaction to the AO was later substituted back to the AO was later substituted back to “reason to believe escapement of reason to believe escapement of income'', by he Direct Tax Laws (Amendment) Act, 1989. The Hon'ble t Tax Laws (Amendment) Act, 1989. The Hon'ble t Tax Laws (Amendment) Act, 1989. The Hon'ble Apex Court as well as the Hon'ble jurisdictional High Court as well as Apex Court as well as the Hon'ble jurisdictional High Court as well as Apex Court as well as the Hon'ble jurisdictional High Court as well as other Hon'ble High Courts have already held in plethora of cases the test other Hon'ble High Courts have already held in plethora of cases the test other Hon'ble High Courts have already held in plethora of cases the test of a prudent person instructed in law in understanding jurisdicti of a prudent person instructed in law in understanding jurisdicti of a prudent person instructed in law in understanding jurisdictional fact and law (mixed question of fact and law) the reason to believe and law (mixed question of fact and law) the reason to believe and law (mixed question of fact and law) the reason to believe escapement of income (supra). escapement of income (supra).

It has to be kept in mind that the Hon'ble Supreme Court in It has to be kept in mind that the Hon'ble Supreme Court in It has to be kept in mind that the Hon'ble Supreme Court in Ganga Saran & Sons P. Ltd. Vs Saran & Sons P. Ltd. Vs. ITO (1981) 130 ITR 1 (SC) . ITO (1981) 130 ITR 1 (SC) held that the expression "reason to believe" "reason to believe" occurring in sec. 147 "is stronger" "is stronger" than the expression "if satisfied" and such requirement has to be met by the AO in and such requirement has to be met by the AO 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 before usurping the jurisdiction u/s. 147 o the reasons recorded before usurping the jurisdiction u/s. 147 o the reasons recorded before usurping the jurisdiction u/s. 147 of the Act.

It must be kept in mind that information adverse against the assessee It must be kept in mind that information adverse against the assessee It must be kept in mind that information adverse against the assessee may trigger "reason to suspect" "reason to suspect"then the AO is duty bound to make then the AO is duty bound to make reasonable enquiry to collect material which would make him belief that reasonable enquiry to collect material which would make him belief that reasonable enquiry to collect material which would make him belief that there is in fact an escapement of inco there is in fact an escapement of income.And on satisfaction of such an And on satisfaction of such an event, then proceed to reopen the assessment and not before that event, event, then proceed to reopen the assessment and not before that event, event, then proceed to reopen the assessment and not before that event, because reason to believe reason to believe is the jurisdiction requirement u/s 147 of the is the jurisdiction requirement u/s 147 of the Act, and not the reason to suspect reason to suspect escapement of income escapement of income. This subtle distinction should be borne in mind while adjudicating the legal issue ion should be borne in mind while adjudicating the legal issue ion should be borne in mind while adjudicating the legal issue raised by assessee.

Construction Co. (328 ITR 515) Construction Co. (328 ITR 515) wherein it was held that, the report wherein it was held that, the report given by the DVO is only his opinion and that given by the DVO is only his opinion and that per se cannot be a tangible cannot be a tangible material for the purposes of reopening assessment under section 147 of for the purposes of reopening assessment under section 147 of for the purposes of reopening assessment under section 147 of the Income-tax Act, 1961. The tax Act, 1961. The Hon’ble Supreme Court held that, the Hon’ble Supreme Court held that, the Assessing Officer has to apply his mind to Assessing Officer has to apply his mind to such information, if any, information, if any, collected and must form rm his own reasons to believe thereon that income his own reasons to believe thereon that income had escaped assessment. We may also gainfully refer to the decision of had escaped assessment. We may also gainfully refer to the decision of had escaped assessment. We may also gainfully refer to the decision of the Hon'ble Delhi High Court in the case of Hon'ble Delhi High Court in the case of CIT Vs Insecticides (India) CIT Vs Insecticides (India)

Ltd (357 ITR 330) which which upheld the order of the ITAT Delhi Benc upheld the order of the ITAT Delhi Bench by holding as under: -

"7. We may point out at this juncture itself that the Tribunal did not go "7. We may point out at this juncture itself that the Tribunal did not go "7. We may point out at this juncture itself that the Tribunal did not go into the question of merits. It only examined the question of the validity into the question of merits. It only examined the question of the validity into the question of merits. It only examined the question of the validity of the proceedings under Section 147 of the said Act. The Tribunal, in of the proceedings under Section 147 of the said Act. The Tribunal, in of the proceedings under Section 147 of the said Act. The Tribunal, in essence, held that the purported reasons for reopening the assessments ld that the purported reasons for reopening the assessments ld that the purported reasons for reopening the assessments were entirely vague and devoid of any material. As such, on the were entirely vague and devoid of any material. As such, on the were entirely vague and devoid of any material. As such, on the available material, no reasonable person could have any reason to available material, no reasonable person could have any reason to available material, no reasonable person could have any reason to believe that income had escaped assessment. Consequently, the believe that income had escaped assessment. Consequently, the believe that income had escaped assessment. Consequently, the Tribunal held that the proceedings under Section 147 of the said Act unal held that the proceedings under Section 147 of the said Act unal held that the proceedings under Section 147 of the said Act were invalid.

"In the case at hand, as is seen from the reasons recorded by the AO, "In the case at hand, as is seen from the reasons recorded by the AO, "In the case at hand, as is seen from the reasons recorded by the AO, we find that the AO has merely stated that it has been informed by the we find that the AO has merely stated that it has been informed by the we find that the AO has merely stated that it has been informed by the Director of Income Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 tax (Inv.), New Delhi, vide letter dated 16.06.2006 that the above named company was involved in that the above named company was involved in giving and taking bogus giving and taking bogus entries/transactions during the relevant year, which is actually entries/transactions during the relevant year, which is actually entries/transactions during the relevant year, which is actually unexplained income of the assessee company. The AO has further stated unexplained income of the assessee company. The AO has further stated unexplained income of the assessee company. The AO has further stated that the assessee company has failed to disclose fully and truly all that the assessee company has failed to disclose fully and truly all that the assessee company has failed to disclose fully and truly all material facts and source o material facts and source of these funds routed through bank account of f these funds routed through bank account of the assessee company. In the reasons recorded, it is nowhere the assessee company. In the reasons recorded, it is nowhere the assessee company. In the reasons recorded, it is nowhere

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."

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.

However,the Hon’ble High Court observed that, the Hon’ble High Court observed that, the Supreme Court itself the Supreme Court itself in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P). Ltd. (supra) Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P). Ltd. (supra) Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P). Ltd. (supra) had held that, even where proceedings under Section even where proceedings under Section 147 are sought to be 147 are sought to be taken with reference to an intimation framed earlier under Section taken with reference to an intimation framed earlier under Section taken with reference to an intimation framed earlier under Section & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust ::14 ::

143(1), the ingredients of Section 147 have to be fulfilled. The 143(1), the ingredients of Section 147 have to be fulfilled. The 143(1), the ingredients of Section 147 have to be fulfilled. The Hon’ble High Court observed that Court observed that, the language employed in Section 147 makes the language employed in Section 147 makes no distinction between an no distinction between an order passed under section 143(3) and the order passed under section 143(3) and the intimation issued under section 143(1) and hence it is not permissible to intimation issued under section 143(1) and hence it is not permissible to intimation issued under section 143(1) and hence it is not permissible to adopt different standards while interpreting the words adopt different standards while interpreting the words "reason to believe” "reason to believe”.

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.

These observations are noted to be general in nature giving the These observations are noted to be general in nature giving the These observations are noted to be general in nature giving the background facts of the assessee trust. background facts of the assessee trust.

not permitted by law and consequently vitiate the assumption of not permitted by law and consequently vitiate the assumption of not permitted by law and consequently vitiate the assumption of jurisdiction by AO to reopen u/s. 147 of the Act. jurisdiction by AO to reopen u/s. 147 of the Act.

Apart from relying on the letter received from DCIT(E) baldly Apart from relying on the letter received from DCIT(E) baldly Apart from relying on the letter received from DCIT(E) baldly alleging that the assessee had utilized charitable funds for religious purposes, the the assessee had utilized charitable funds for religious purposes, the the assessee had utilized charitable funds for religious purposes, the reasons so recorded does not speak out the relevant tangible material on reasons so recorded does not speak out the relevant tangible material on reasons so recorded does not speak out the relevant tangible material on which the belief was formed that income chargeable to tax had escaped which the belief was formed that income chargeable to tax had escaped which the belief was formed that income chargeable to tax had escaped assessment.

However, as noted from reading of the However, as noted from reading of the reasons recorded reasons recorded by AO, it is noted that there is no whisper/allegation neither in the informati noted that there is no whisper/allegation neither in the informati noted that there is no whisper/allegation neither in the information nor in the reasons recorded, to link assessee with any particular religious the reasons recorded, to link assessee with any particular religious the reasons recorded, to link assessee with any particular religious activities, which fell foul of Section 13(1)(a) of the Act. activities, which fell foul of Section 13(1)(a) of the Act.

02.01.2001. The assessee is also granted approval u/s.80G vide order in 02.01.2001. The assessee is also granted approval u/s.80G vide order in 02.01.2001. The assessee is also granted approval u/s.80G vide order in DIT(E) No.2039(58)/00 DIT(E) No.2039(58)/00-01 dated 18.07.2011. The assessee Trust filed the d 18.07.2011. The assessee Trust filed the return of income for A.Y.2011 return of income for A.Y.2011-12 on 06-07-2011 admitting NIL income and the 2011 admitting NIL income and the same was processed u/s.143(1) on 17 same was processed u/s.143(1) on 17-07-2012. During the year under 2012. During the year under consideration the assessee had admitted a gross receipts of Rs. 99,40, consideration the assessee had admitted a gross receipts of Rs. 99,40, consideration the assessee had admitted a gross receipts of Rs. 99,40,812/- and claimed an amount of Rs. 1,10,58,707/ and claimed an amount of Rs. 1,10,58,707/- under Section 11 of the Income under Section 11 of the Income Tax Act.

An information had been received from the DCIT(Exemptions), Chennai, vide An information had been received from the DCIT(Exemptions), Chennai, vide An information had been received from the DCIT(Exemptions), Chennai, vide letter in No.DCIT(E)/Information/2016 letter in No.DCIT(E)/Information/2016-17 dated 02-02-2017, that M/s. The 2017, that M/s. The Gate of Hope Charitable Trust, had received funds during the FY 2010 Gate of Hope Charitable Trust, had received funds during the FY 2010- -11 from M/s. Caruna Bala Vikas, a society registered u/s. 12AA of the Income Tax Act M/s. Caruna Bala Vikas, a society registered u/s. 12AA of the Income Tax Act M/s. Caruna Bala Vikas, a society registered u/s. 12AA of the Income Tax Act to carry out the projects viz., (a)Ayanavaram Child Development Centre, to carry out the projects viz., (a)Ayanavaram Child Development Centre, to carry out the projects viz., (a)Ayanavaram Child Development Centre, Ayanavaram, Chennai and (b) Chengalpatu Child Development Centre, avaram, Chennai and (b) Chengalpatu Child Development Centre, avaram, Chennai and (b) Chengalpatu Child Development Centre, Chengelpet. However, the assessee, M/s. The Gate of Hope Charitable Trust Chengelpet. However, the assessee, M/s. The Gate of Hope Charitable Trust Chengelpet. However, the assessee, M/s. The Gate of Hope Charitable Trust had carried out the religious activities as against its charitable objects. The had carried out the religious activities as against its charitable objects. The had carried out the religious activities as against its charitable objects. The relevant portion of the information is a of the information is as under:

"M/s. Caruna Bal Vikas, is a society registered under Section 12AA of "M/s. Caruna Bal Vikas, is a society registered under Section 12AA of "M/s. Caruna Bal Vikas, is a society registered under Section 12AA of the Income Tax Act and assessed in this office. The assessee society, the Income Tax Act and assessed in this office. The assessee society, the Income Tax Act and assessed in this office. The assessee society, M/s. Caruna Bal Vikas was referred to Special Audit u/s. 142(2A) of the M/s. Caruna Bal Vikas was referred to Special Audit u/s. 142(2A) of the M/s. Caruna Bal Vikas was referred to Special Audit u/s. 142(2A) of the Act for the AY 2013 Act for the AY 2013-14. During the course of Special Audit, it is seen course of Special Audit, it is seen that M/s. Compassion International is transferring funds to M/s. that M/s. Compassion International is transferring funds to M/s. that M/s. Compassion International is transferring funds to M/s. Caruna Bal Vikas, the funds are given to many channel partners to Caruna Bal Vikas, the funds are given to many channel partners to Caruna Bal Vikas, the funds are given to many channel partners to carry carry carry out out out religious religious religious activities. activities. activities. As As As directed directed directed by by by M/s.Compassion M/s.Compassion M/s.Compassion International and M/s. Caru International and M/s. Caruna Bal Vikas, the entire funds are to be na Bal Vikas, the entire funds are to be used by the chanel partners for the purpose of carrying out activities used by the chanel partners for the purpose of carrying out activities used by the chanel partners for the purpose of carrying out activities as per objectives of M/s. Compassion International which is religious. as per objectives of M/s. Compassion International which is religious. as per objectives of M/s. Compassion International which is religious.

It is noticed that M/s. The Gate of Hope Charitable Trust had received It is noticed that M/s. The Gate of Hope Charitable Trust had received It is noticed that M/s. The Gate of Hope Charitable Trust had received funds during the AYs. 2010 funds during the AYs. 2010-11 to 2014-15.

The said M/s. The Gate of Hope Charitable Trust, it appears thus The said M/s. The Gate of Hope Charitable Trust, it appears thus The said M/s. The Gate of Hope Charitable Trust, it appears thus carrying out religious activities as against its charitable objects...." carrying out religious activities as against its charitable objects...." carrying out religious activities as against its charitable objects...."

It is seen from the Return of Income filed for the AY 2011 It is seen from the Return of Income filed for the AY 2011-12, that the 12, that the assessee had admitted a gross receipts of Rs. 99,40,812/ assessee had admitted a gross receipts of Rs. 99,40,812/-, which includes the , which includes the fund received from M/s. Caruna Bal Vikas. The Statutory Audit had observed fund received from M/s. Caruna Bal Vikas. The Statutory Audit had observed fund received from M/s. Caruna Bal Vikas. The Statutory Audit had observed that the assessee trust had incurred expenses towards the Religious activities essee trust had incurred expenses towards the Religious activities essee trust had incurred expenses towards the Religious activities as per the directions of M/s.Caruna Bal Vikas. It is pertinent to mention here as per the directions of M/s.Caruna Bal Vikas. It is pertinent to mention here as per the directions of M/s.Caruna Bal Vikas. It is pertinent to mention here that though the trust is registered as a Charitable Trust under Section 12AA of that though the trust is registered as a Charitable Trust under Section 12AA of that though the trust is registered as a Charitable Trust under Section 12AA of the Act, it had carried out re the Act, it had carried out religious activity and incurred the expenditure ligious activity and incurred the expenditure towards the religious activity. Therefore, the expenses claimed as application towards the religious activity. Therefore, the expenses claimed as application towards the religious activity. Therefore, the expenses claimed as application of income towards charitable activity has to be disallowed and brought to tax. of income towards charitable activity has to be disallowed and brought to tax. of income towards charitable activity has to be disallowed and brought to tax.

In this case a return of income was filed for the year under consideration but In this case a return of income was filed for the year under consideration but In this case a return of income was filed for the year under consideration but no scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this no scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this no scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceeding u/s 147 is reason to b case, the only requirement to initiate proceeding u/s 147 is reason to b case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded above (refer paragraphs). which has been recorded above (refer paragraphs).

& 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust ::24 ::

It is pertinent to mention here that in this case the assessee has filed return of It is pertinent to mention here that in this case the assessee has filed return of It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration but no assessment as stipulated u/s income for the year under consideration but no assessment as stipulated u/s income for the year under consideration but no assessment as stipulated u/s 2(40) of the Act was made and the return 2(40) of the Act was made and the return of income was only processed u/s of income was only processed u/s 143(1) of the Act. In view of the above, provisions of clause (b) of explanation 143(1) of the Act. In view of the above, provisions of clause (b) of explanation 143(1) of the Act. In view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to facts of this case and the assessment year 2 to section 147 are applicable to facts of this case and the assessment year 2 to section 147 are applicable to facts of this case and the assessment year under consideration deemed to be a case where income chargeable under consideration deemed to be a case where income chargeable to tax has to tax has escaped assessment.

In view of the above, I have reasons to believe that income chargeable to tax In view of the above, I have reasons to believe that income chargeable to tax In view of the above, I have reasons to believe that income chargeable to tax has escaped assessment for A.Y.2011 has escaped assessment for A.Y.2011-12, within the meaning of Sec.147 of 12, within the meaning of Sec.147 of the Income tax Act, 1961. In this case, more than four years have lapsed the Income tax Act, 1961. In this case, more than four years have lapsed the Income tax Act, 1961. In this case, more than four years have lapsed from the end of assessment year under consideration. Therefore, necessary the end of assessment year under consideration. Therefore, necessary the end of assessment year under consideration. Therefore, necessary approval may please be accorded for reopening of the case for the AY 2011 approval may please be accorded for reopening of the case for the AY 2011 approval may please be accorded for reopening of the case for the AY 2011- 12 under Section 147 of the Act and to issue notice u/s 148 of the Act. 12 under Section 147 of the Act and to issue notice u/s 148 of the Act.

The AO is noted to have not made any preliminary enquiry himself or The AO is noted to have not made any preliminary enquiry himself or The AO is noted to have not made any preliminary enquiry himself or applied his own mind to the said report, before recording the reasons for applied his own mind to the said report, before recording the reasons for applied his own mind to the said report, before recording the reasons for reopening the assessment. The AO has himself observed that, the funds reopening the assessment. The AO has himself observed that, the funds reopening the assessment. The AO has himself observed that, the funds received from M/s CBV by received from M/s CBV by the assessee were utilized by the latter at child the assessee were utilized by the latter at child development centers and there is no allegation levelled in the recorded and there is no allegation levelled in the recorded and there is no allegation levelled in the recorded reasons that these child development reasons that these child development centers are only a façade or that, in are only a façade or that, in these child development these child development centers, the assessee is conducting , the assessee is conducting any activities & 2006/Chny/2024 & 2006/Chny/2024 (AYs 20 2010-11 & 2011-12) The Gate of Hope Charitable Trust The Gate of Hope Charitable Trust for a particular religion or caste in violation of Section 13(1)(a) of the Act. for a particular religion or caste in violation of Section 13(1)(a) of the Act. for a particular religion or caste in violation of Section 13(1)(a) of the Act.

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.

According to us, the information given by the DCIT(E) can at best trigger information given by the DCIT(E) can at best trigger information given by the DCIT(E) can at best trigger “reason to suspect” and not “reason to believe” escapement of income “reason to suspect” and not “reason to believe” escapement of income “reason to suspect” and not “reason to believe” escapement of income and that, in the absence of any tangible material or enquiry as discussed and that, in the absence of any tangible material or enquiry as discussed and that, in the absence of any tangible material or enquiry as discussed (supra), respectfully applying the propositions of law laid respectfully applying the propositions of law laid respectfully applying the propositions of law laid down (supra) while deciding the appeal of AY 2010 while deciding the appeal of AY 2010-11, we have no other alternative but , we have no other alternative but to hold that the reopening of the assessment to hold that the reopening of the assessment for AY 2011 for AY 2011-12 is also bad in law and we thus quash the impugned reopening proceedings and quash the impugned reopening proceedings and quash the impugned reopening proceedings and consequential reassessment. consequential reassessment. The appeal of the assessee for AY 20 the assessee for AY 2011-12, is thus allowed.

Order pronounced on the 05th day of March, 2025, in Chennai. Order pronounced on the , in Chennai.