THE GITA EDUCATION SOCIETY,DELHI vs. ITO, EXEMPTION WARD, GHAZIABAD

This is an appeal filed by the assessee against the order dated 28.09.2018 passed by the CIT(A, Ghaziabad.

In this appeal filed by the assessee, Ground No. 1 reads as under:- i. That order passed by Ld AO dated 13/11/2017 and further order passed by Id CIT (A) dated 28/09/2018 are bad in law in as much as impugned assessment is made in violation of jurisdictional conditions stipulated under the Act, ergo, orders of Ld AO and Ld CIT-A may please be quashed. a. That order passed by Ld AO dated 13/11/2017 and further order passed by Id CIT A dated 28/09/2018 are bad in law as reasons recorded are based on borrowed satisfaction and without independent application of mind as no where it is established that assessee is real beneficiary of stated amount of Rs 50,00,000 which is solely based on suspicion only and reasons recorded lack live nexus which is sine qua non for valid reopening action; b. That order passed by Ld AO dated 13/11/2017 and further order passed by Id CIT A dated 28/09/2018 are bad in law as reasons recorded in extant case are delightfully silent on lack of disclosure on stated bank a/c in earlier assessment proceedings (order u/s 143(3) dated 27.02.2013) vide first proviso in section 147 of the Act and same is the position in notice u/s 148 dated 28.03.2017 for AY 2010-2011 and objection disposal dated 29.09.2017. c. That order passed by Ld AO dated 13/11/2017 and further order passed by Id C1T A dated 28/09/2018 are bad in law as reasons recorded as supplied are sans approval if any taken from competent authority. d. That order passed by Ld AO dated 13/11/2017 and further order passed by Id CIT A dated 28/09/2018 are bad in law as reasons recorded stated Rs 50,00,000 is unexplained amount simply where as Ld AO changing basis of reopening in order passed states that assessee has utilized undisclosed funds being cash for clearing of cheque in the bank a/c and Ld CIT-A further changes it to held that assessee could not substantiate the genuineness of transaction of Rs 50,00,000 being amount reed from SOWHAP which amorphous and fleeting allegation breaks the entire belief formed in reasons recorded.

2. At the time of hearing before us, it is stated by the assessee’s counsel that the assessee is a society which has been granted registration under section 12AA of the Income Tax Act. For the year under consideration, the assessment was originally completed under section 143(3) vide order dated 27.2.2013 on nil income. The assessment was reopened vide notice under section 148 dated 28th March, 2017. Thus, admittedly the assessment was reopened beyond the period of four years when the original assessment was completed under section 143(3). Therefore, the proviso to section 147 is clearly applicable. That no finding is recorded by the Assessing Officer in the reasons recorded that the alleged escapement of income is on account of any failure on the part of the assessee to disclose any material fact and therefore, the reopening is not valid.

3. He further stated that in the reasons recorded it is alleged by the Assessing Officer that as per the information received from the CIT(E) Kolkata it was gathered by the Department that there was a society named as M/s Society for Welfare of Handicapped Persons, which was approved under section 35 (i)(ii) of the Income Tax Act and it is used to transfer the bogus donation to the society / trust in lieu of cash. The Assessing Officer alleged that the assessee had received the donation of Rs. 50,00,000/- on 17th March, 2010 by cheque for which the assessee made the payment in cash which was the undisclosed income of the assessee.

5. The learned DR on the other hand fiiled the written submissions which is reproduced below:-

“In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to reopening of cases beyond 4 years u/s 147 of I.T.Act: 1. PCIT Vs Paramount Communication (P.) Ltd.(2017-TIOL-253-SC-IT)(Copy enclosed) where Hon’ble Supreme Court dismissed SLP of assessee. Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was 'tangible material outside record' to initiate valid reassessment proceedings.

PCIT Vs Paramount Communication (P.) Ltd.[2017] 79 taxmann.com 409 (Delhi)/[2017] 392 ITR 444 (Delhi) where Hon’ble Delhi High Court held that Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was 'tangible material outside record' to initiate valid reassessment proceedings

6. Ankit Agrochem (P.) Ltd. Vs JCIT[2018] 89 taxmann.com 45 (Rajasthan)(Copy enclosed) where Hon’ble Rajasthan High Court held that where DIT informed that assessee-company had received share application money from several entities which were only engaged in business of providing bogus accommodation entries to beneficiary concerns, reassessment on basis of said information was justified.

7. Mona Mahesh Bhojani Vs ITO (2017-TIOL-345-SC-IT)(copy enclosed) SLP dismissed against appeal challenging the judgment, whereby the High Court had held that reopening initiated in case of an assessee who had not filed his return, could not be claimed by the assessee to be based on 'change of opinion'.

The Assessee had also challenged the action of High Court in holding that when the AO had tangible material at his command to form a bonafide belief that income chargeable to tax had escaped assessment, the writ court would not interfere with the formation of such belief unless it is shown to be wholly perverse.

8. Indu Lata Rangwala Vs DCIT [2017]80taxmann.com102(Delhi)/[2016] 384 ITR 337 (Delhi)/[2016] 286 CTR 474 (Delhi) (copy enclosed) where Hon’ble Delhi High Court held that where initial return of income is processed under section 143(1), it is not necessary in such a case for Assessing Officer to come across some fresh tangible material to form 'reasons to believe' that income has escaped assessment

10. Honda Siel Power Products Ltd. v. Dy. CIT [2011] 10 taxmann.com 2 (Delhi)/[2011] 197 Taxman 415 (Delhi)/[2012] 340 ITR 53 (Delhi)/[2012] 247 CTR 322 (Delhi) (Copy enclosed) where Hon’ble Delhi High Court held that assessee having not pointed out during assessment proceedings about expenses incurred relatable to tax free income u/s 14A there was omission and failure on its part to disclose fully and truly material facts and hence reopening of assessment was justified

where Hon’ble Madras High Court held that completed assessment could be reopened within period of six years where there were some information with department that share premium invested by foreign company was income of assessee-company which had not been disclosed

13. A Sridevi Vs ITO (2018-TIOL-2246-HC-MAD-IT)(Copy enclosed) where Hon’ble Madras High Court held that any fresh information filed before the AO during the process of re-assessment u/s 147, which gives force to the belief of the AO that certain income of the assessee had escaped assessment, can be construed as tangible material for reopening the assessment once again. Since alleged escapement of income exceeds One lakh rupees, reopening in such case can be done within the period of six years from the end of relevant AY as prescribed by section 149(1)(b), and thus, the same cannot be said to be barred by limitation

proceedings after four years to assess amount as deemed dividend was held to be valid. Sd/- (S S Rana) Commissioner of Income Tax(DR) G-Bench, ITAT, New Delhi.

Sub: Communication of Reasons for issue of notice U/s 148 of I.T. Act.- Reg: Please refer to your letter dated 25.04.2017 requesting reasons. As requested the reasons are communicated to you, as under:- In this case , an information is received from the Commissioner of Income Tax (Exemption), Kolkata vide letter dated 08.08.2016 that a large number of societies/trust, situated all over India have received huge donation from a Society named M/s Society for Welfare of Handicapped Persons located at 27, Tagore Avenue, Durgapur. This society has approval of section 35(l)(ii) of the income Tax Act. It transpires that one chartered Accountant based in Kolkata by fraudulent means opened a bank account in the name of this society in Axis Bank Limited. Prince Anwar Shah Road, Kolkata branch vide A/c No. 255010100128834 which carried the transfer of several crores of rupees. Contributions were received u/s 25(l)(ii) of the Income Tax Act, 1961from various corporate/non - corporate entities in this fraudulent account and these amount were either withdrawn in cash through two or more layers, which happed to be societies/trusts or bogus donations were paid in lieu of cash to the societies

/trusts, who are beneficiaries to these transactions of bogus donation, which are situated all over India. The mediators, who are generally Chartered Accountants, get commission of 15-20% in cash out of the contributions received u/s 35(l)(ii) of the I.T. Act and 2-5% out of the bogus donation paid. By way of this mediators get benefit from both parties. This facts relating to fraudulent bank account opened by the Chartered Account, are further confirmed from the letter filed by the President of the society before various enforcement agencies namely:-

The list of second/third layer Trust/Societies, through which money is either withdrawn in cash or transacted for bogus donations alongwith their respective bank account numbers are as follows:-

S. No. Name of the Name of Name of the Account society the Bank Bank branch Numbers 1. M/s Society for Axis Bank Prince Anwar 255010100128834 Welfare of the Ltd. Shah Road Handicapped branch, Person Kolkata 2. M/s Society for Axis Bank New Alipore 909010033440278 Rural & Ltd. branch, Development Kolkata 3. M/s Community Axis Bank One Town 911010041883071 Rural Orient Ltd. branch, Service Society Vijaywada

The list of the beneficiary trust / societies who received donation in lieu of cash is as per annexure-D, which speaks that the assessee society M/s Geeta Education Society, has received donation of Rs.50,00,000/- on 17.03.2010 and thereafter oil 19.03.2010 paid Rs.50,00,000/-. The name of the assessee finds place in the bank statement of Axis Bank Limited. The assessee has taken the amount of Rs.50,00,000/- from M/s Society for Welfare of the Handicapped Person, which is in lieu of cash because before the clearing entry of cheque No. 228925 of Rs.50,00,000/- on 17.03.2010, there are two cash deposit of Rs.25,00,000/- and 25,00,000/- in the bank account on 17.03.2010. Thus, this amount of Rs.50,00,000/-is unexplained amount. In this case, assessee filed return showing NIL income on 11.11.2010 and assessment was completed u/s 143(3) on 27.02.2013 on NIL income. The assessee furnished the list of donation during assessment proceedings, but no name of donor M/s Society for Welfare of Handicapped Persons located at 27 Tagore Avenue, Durgapur is mentioned.

Keeping in view the above facts, the above amount of Rs.50,00,000/- being amount of donation in lieu of cash is assessable in the hands of assessee. I have therefore reason to believe that the income of Rs.50,00,000/- has escaped the assessment within the meaning of section 147 of the Income Tax Act, 1961 and is chargeable to tax for the A.Y 2010-11.”

“16. The AO has not made the effort of disclosing, in the reasons, what according to him constituted the failure by the Assessee to make a full and true disclosure. A mere reproduction of the language of the provision will not suffice. Also, although making such an averment either in the order rejecting the objections of the Assessee or subsequently in the counter-affidavit in the answer to a writ petition will not satisfy the requirement of the law. The reasons will have to speak for themselves. For complying with the jurisdictional requirement under the first proviso to Section 14/ of the Act, the reasons would have to show in what manner the Assessee had failed to make a full and true disclosure of all the material facts necessary for the assessment. The failure to do so would not be a mere irregularity. It would render the reopening of the assessment after four years vulnerable to invalidation. “(emphasis supplied)

Thus wherever first proviso to section 147 is applicable the reasons recorded should show in what manner the assessee had failed to make a full and true disclosure of all material facts necessary for the assessment. The failure to do so would not be more irregularity but it would render the reopening of assessment after four year invalid.

9. We have already reproduced above the reasons recorded for reopening of assessment. In the reasons recorded, the Assessing Officer nowhere mentioned that which material facts assessee failed to disclose.

There is no finding by the Assessing Officer that there is any failure on the part of the assessee to make a full and true disclosure of any material fact and therefore on these fact, the Hon’ble Jurisdictional High Court in the case of HCL Technologies Limited (supra) as well as Unitech Limited (supra) would be squarely applicable.

11. After considering the above facts and also relying upon the decision of Hon’ble Jurisdictional High Court in the case of Unitech Limited and also in HCL Technologies Limited (supra), we quash the notice issued for reopening of assessment under section 148.

12. Once the notice for reopening of assessment u/s 148 is quashed, the assessment order passed in pursuance to such notice cannot survive the same is also quashed. Since the assessment order itself has been quashed, the other ground raised by the assessee which is against the addition of Rs. 50,00,000/- made by the Assessing Officer does not require any adjudication.

Order pronounced in the Open Court on 22nd May, 2019.