2019 (1) TMI 1482 - HC - Income Tax

Reopening of assessment - dubious Trust - whether Investigation Wing had material to believe that the donors of this Trust were beneficiaries of the bogus entries - Held that - We called for the original files of the department to guard against any possible typographical or clerical error in recording reasons. Such files also would not reveal anything that could save the impugned notice. The files contain the communication from the Investigation Wing providing information to the Assessing Officer of beneficiaries of bogus donations, which also contain the Trust to which such donations were made and the amount of donation so given. This information in case of the petitioner, refers to sum of ₹ 15 lakhs, allegedly donated by the petitioner to the said Trust. Thus, on the basis of such information supplied by the Investigation Wing is falsified upon perusal of the return filed by the assessee. We also notice that in the return the assessee had claimed to have paid the donation of ₹ 20 lakhs to one Scientific Research of Rural Development. However, the information supplied to the AO by the Investigation Wing does not even suggest that this Trust namely Scientific Research of Rural Development was a dubious Trust and the Investigation Wing had material to believe that the donors of this Trust were beneficiaries of the bogus entries. In the result, impugned notice is set aside - Decided in favour of assessee

Summary

Issues:
Challenge to notice of reopening of assessment for assessment year 2011-12 based on alleged bogus donation made to a trust.

Analysis:
The petitioner, an individual, filed an income tax return for the assessment year 2011-12, declaring a total income. The return was processed under Section 143(1) of the Income Tax Act and accepted without scrutiny. The Assessing Officer issued a notice of reopening the assessment based on information received regarding alleged bogus donations made to trusts. The reasons for reopening included the petitioner's name appearing in the list of beneficiaries who had made such donations. The Assessing Officer believed that the income chargeable to tax had escaped assessment due to the petitioner's failure to disclose material facts. The petitioner objected to the notice, which was rejected, leading to the petition challenging the reopening of assessment.

Upon hearing the parties, the High Court noted that the Assessing Officer's reasons for reopening the assessment were primarily based on the petitioner allegedly making a donation to a trust, which was suspected to be bogus. The Court emphasized the requirement that the Assessing Officer must have a reason to believe that income chargeable to tax has escaped assessment, even in cases where the return has been accepted without scrutiny. The Court referred to previous judgments to support this principle.

The Court examined the reasons recorded by the Assessing Officer and found that the petitioner had not made any donation to the trust as alleged. The information provided to the Assessing Officer by the Investigation Wing was found to be incorrect upon verification of the petitioner's return. The Court also noted discrepancies in the information provided regarding donations to different trusts. As a result, the Court set aside the impugned notice of reopening the assessment, ruling in favor of the petitioner.

In conclusion, the High Court held that the notice of reopening the assessment for the assessment year 2011-12 was based on incorrect information regarding alleged donations made by the petitioner to a trust. The Court emphasized the importance of the Assessing Officer having a valid reason to believe that income has escaped assessment, even in cases where the return has been accepted without scrutiny. The Court found that the information provided to the Assessing Officer was inaccurate, leading to the notice being set aside and the petition being disposed of accordingly.