2023 (2) TMI 31 - HC - Income Tax

Reopening of assessment against trust - rejection of the objections to re-opening of assessment - alternative efficacious remedy available - undervaluation of land purchased by the Trustee - HELD THAT - Writ petitions filed by the Trustees cannot be entertained at this stage as case of the petitioners / Trustees is that the re-opening of assessment is based on change of opinion. There appears to be lack of clarity, if there was application of mind by the assessing officer while making the original assessment with regard to the above issues i.e., undervaluation of land and source of fund for construction of building. This Court has no doubt that reassessment on the basis of change of opinion is bad for want of jurisdiction. There is merit in the submission of the learned counsel for the Revenue, inasmuch as for challenging the initiation of reassessment or assumption of jurisdiction of reassessment on the ground of change of opinion, it may be necessary to show / demonstrate that while framing the original assessment the Assessing Officer had applied its mind and formed an opinion and the reassessment is with reference to the very same issue and on the basis of mere change of opinion, without any new tangible material which in the facts of the present case can be arrived at only on a deep/close scrutiny of the documents and books of accounts. Further, with regard to the assessment year 2012-13 as no assessment has been made, the only requirement for the Revenue is to show escapement of assessment to assume jurisdiction. The present case falls under the latter category and to decide the issue viz., whether the assessment is on the basis of change of opinion, a close scrutiny of documents and books of accounts is necessary. The above aspect viz., reassessment is bad as having been made on change of opinion, may require investigation into facts in the present case. Therefore, it is only appropriate for the appellant to participate in the proceedings before the statutory authorities. Similarly, whether there is escapement of turnover is again a question of fact which ought to be decided by the statutory authorities on appreciation of evidence. Reading of Explanation 1 to Section 147 of the Act appears to suggest that mere production of books of accounts or other evidence would not by itself tantamount to disclosure within the meaning of the foregoing proviso even if material evidence could with due diligence have been discovered by the assessing officer. Whether the above Explanation would apply to the facts of the case again requires examination of books of accounts and other documents by the Assessing Officer and not under Article 226 of the Constitution of India. The above exercise requiring a close look at/ examination of books of accounts and other documents is alien to the jurisdiction conferred on this Court under Article 226 of the Constitution of India. This Court prima facie finds that there is merit in the submissions of the Respondents that assuming that the survey was not legal when the same was conducted on 23.01.2013, the same would not bar the materials from being used. Finally, the cost of construction which is stated to be more than Rs.17 crores on the basis of a valuation report is sought to be explained by the Petitioner /Trust that the source is from corpus donation receipts and fees collected from the students. It is submitted by the learned Senior Standing Counsel for the Respondents that the construction of the building itself was over only in year 2013-14, thus the explanation offered by the Trust that the fees were collected from the students and utilised for construction is factually incorrect and false. The above aspect is a disputed question of fact and it may not be appropriate to examine such disputed questions of fact in a writ petition, as the same is beyond the realm of judicial review. The writ petitions filed by the Petitioner /Trust are dismissed. It is open to the Respondents to proceed with the assessment from the stage of disposal of the objections in accordance with law. The petitioners are at liberty to raise all/ any objections, including lack of jurisdiction on the ground of change of opinion or permissibility/legality of using evidence/material gathered during the course of the alleged illegal search. If any such objection is raised the same shall be dealt with by the Assessing Officer uninfluenced by any of the observation - finding on various questions of law recorded in this judgment are for the limited purpose of holding that the petitioners have an alternative efficacious remedy available under the Act Writ Petitions filed by the Petitioners /Trustees are dismissed for the reasons set-out above, it is open to the Petitioners/Trustees to pursue their statutory remedies by way of an appeal which is availed of by the petitioners/ Trustees and agitate all grounds that may be available, including lack of jurisdiction before the Appellate Authority.

Summary

Issues Involved:
1. Legality of the writ petitions filed by the Trustees.
2. Legality of the writ petitions filed by the Petitioner Trust challenging the rejection of objections to reopening assessments for the years 2012-13 and 2013-14.
3. Whether the reassessment proceedings were based on a change of opinion.
4. The impact of an allegedly illegal survey conducted on the Petitioner Trust.
5. The issue of substantive vs. protective assessments.

Detailed Analysis:

1. Legality of the writ petitions filed by the Trustees:
The Court noted that the Trustees had already filed an appeal before the Commissioner of Income Tax - Appeals challenging the orders of assessment. The principle that "parallel remedies cannot be pursued" was emphasized, citing several precedents, including Jai Singh v. Union of India and Deeksha Suri v. Income-tax Appellate Tribunal. The Court held that the writ petitions filed by the Trustees could not be entertained as they had already availed the statutory remedy of appeal.

2. Legality of the writ petitions filed by the Petitioner Trust challenging the rejection of objections to reopening assessments for the years 2012-13 and 2013-14:
The Petitioner Trust challenged the reopening of assessments under Section 148 of the Income Tax Act, arguing that the reassessment was based on vague and factually incorrect assumptions. The Trust contended that the reasons provided for reopening were not based on new tangible material and were merely a change of opinion. The Court found that whether the reassessment was based on a change of opinion required a close scrutiny of documents and books of accounts, which is beyond the scope of judicial review under Article 226 of the Constitution. The Court held that the Trust should participate in the assessment proceedings and raise any objections before the assessing authority.

3. Whether the reassessment proceedings were based on a change of opinion:
The Court observed that the original assessment order did not reference the issues of undervaluation of land or the sources of funds for the construction of the building. The Court held that for challenging the initiation of reassessment on the ground of change of opinion, it is necessary to demonstrate that the assessing officer had applied its mind and formed an opinion during the original assessment. The Court found merit in the Respondents' submission that there was no formation of any opinion on these issues in the original assessment, and thus the reassessment could not be challenged as a change of opinion without new tangible material.

4. The impact of an allegedly illegal survey conducted on the Petitioner Trust:
The Petitioner Trust argued that the survey conducted on 23.01.2013 was illegal as Section 133A was amended to enable surveys on charitable institutions only with effect from 01.04.2017. The Court held that even if the survey was illegal, it would not bar the authorities from using the materials gathered during the survey. The Court cited several judgments, including Pooran Mal vs. The Director of Inspection (Investigation), which held that materials seized during an illegal search could still be used by the authorities.

5. The issue of substantive vs. protective assessments:
The Petitioner Trust contended that the reassessment proceedings on the Trust and the Trustees could not be sustained without indicating which of the two was substantive or protective. The Respondents clarified that both assessments were substantive. The Court held that even if one was substantive and the other protective, failure to indicate which was which would not vitiate the proceedings.

Conclusion:
The Court dismissed the writ petitions filed by the Trustees on the ground that they had already availed an alternative statutory remedy. The writ petitions filed by the Petitioner Trust were also dismissed, with the Court directing the Respondents to proceed with the assessment from the stage of disposal of the objections, allowing the Petitioners to raise any objections they may have. The Court emphasized that the findings were for the limited purpose of holding that the Petitioners had an alternative efficacious remedy available under the Act. Consequently, the connected miscellaneous petitions were closed.