2022 (6) TMI 957 - HC - Income Tax

Reopening of assessment u/s 147 - Change of opinion - Deduction under section 35 (1)(ii) to an extent of 175% of the donation - HELD THAT - Indisputable fact that the assessment in the case of M/s. Jindal Aluminium Limited was completed even before the completion of the survey proceedings though the assessment proceedings in the other two writ petitions are completed after the aforesaid survey and the nature of the information shared by the petitioners' Account Officer, this Court must opine that the threshold bar for initiation of the reassessment proceedings is satisfied. This Court must conclude, at this stage, that the AO's subjective prima facie opinion, though is based on the records made available during the assessment proceedings, is because of further enquiry into the affairs of M/s. Herbicure, and this is not a case of 'change of opinion'. As regards the contention that the petitioners, whose only obligation in law once approval is granted under Section 35 1 ii of the I-T Act is to file a copy of the approval and the details of the donations made, and if the approval is later withdrawn because of certain allegations against the entity which has granted approval, even if such approval is withdrawn retrospectively, the concluded assessment proceedings cannot be reopened, it would suffice for this Court to opine that this will have to be examined as part of the reassessment proceedings based on the further material that would be available on record by the petitioner and would not be a reason for interference at this threshold.

Issues Involved:
1. Legality of the notices issued under Section 148 of the Income-tax Act (I-T Act) for Assessment Years (AY) 2013-14 and 2015-16.
2. Validity of the Central Board of Direct Taxes (CBDT) notification dated 06.09.2016.
3. Retrospective withdrawal of the approval granted to M/s. Herbicure Healthcare Herbal Research Foundation.
4. Reassessment proceedings based on alleged bogus donation transactions.
5. Jurisdiction of the Assessing Officer (AO) to issue notices under Section 148 of the I-T Act.

Detailed Analysis:

1. Legality of the Notices Issued Under Section 148 of the I-T Act:
The petitioner challenged the notices issued under Section 148 for AY 2013-14 and 2015-16, arguing that the reasons provided for reopening the assessments were not justified. The AO had issued these notices based on the belief that income chargeable to tax had escaped assessment due to alleged bogus donation transactions with M/s. Herbicure. The petitioner contended that the reopening was based on mere suspicion without concrete evidence of receiving back the donated amounts.

2. Validity of the CBDT Notification Dated 06.09.2016:
The petitioner argued that the notification dated 06.09.2016, which rescinded the earlier notification dated 14.03.2008, was invalid as it was issued by the CBDT instead of the Central Government. The petitioner relied on the decision of the High Court of Bombay in Indian Planetary Society v. CBDT to support this claim. However, the court noted that the petitioner lacked the locus to challenge this notification, as it should be challenged by M/s. Herbicure.

3. Retrospective Withdrawal of the Approval Granted to M/s. Herbicure:
The petitioner contended that the approval granted to M/s. Herbicure under Section 35(1)(ii) of the I-T Act could not be withdrawn retrospectively to their detriment. They argued that the benefit of the allowance under Section 35(1)(ii) could not be denied merely due to the subsequent withdrawal of approval. The court emphasized that this issue should be examined during the reassessment proceedings and not at this preliminary stage.

4. Reassessment Proceedings Based on Alleged Bogus Donation Transactions:
The AO initiated reassessment proceedings based on information obtained from a survey conducted on M/s. Herbicure, which indicated that the donations were not genuine and involved bogus transactions. The petitioner argued that the reassessment was based on statements recorded during the survey, which could not be considered evidence as they were not recorded under oath. The court held that the AO's subjective prima facie opinion, based on further enquiry into M/s. Herbicure's affairs, justified the initiation of reassessment proceedings.

5. Jurisdiction of the AO to Issue Notices Under Section 148 of the I-T Act:
The court examined whether the AO had jurisdiction to issue notices under Section 148. It referred to the decision in Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stockbrokers (P) Ltd., which established that the AO must have reason to believe that income chargeable to tax had escaped assessment. The court concluded that the AO's belief was based on relevant material obtained from the survey and investigation, satisfying the threshold for initiating reassessment proceedings.

Conclusion:
The court rejected the petitions, leaving open all contentions for examination during the reassessment proceedings. The initiation of reassessment proceedings was deemed justified based on the AO's prima facie opinion and the material obtained from the survey and investigation into M/s. Herbicure's activities. The court emphasized that the issues raised by the petitioner should be addressed during the reassessment process, not at this preliminary stage.

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