2019 (2) TMI 1210 - HC - Income Tax

Reopening of assessment - benefit of Section 11 - Held that - We are prepared to accept the contention of the learned counsel for the petitioner that the sum of ₹ 76.59 lacs is not accurate and in fact, the petitioner trust had received a sum of ₹ 68.16 lacs from Hinduja Hospital. However, a mere minor inaccuracy in indicating the figure in the reasons recorded, would not shake the very foundation of the reasons so as to nullify the notice of reopening based on such reasons. We are also prepared to proceed on the basis as contended by the learned counsel for the petitioner that there may be some differences in the situation emerging out of the return for the assessment year 2014-15 and the present one. When we examined the situation in the present year, on the basis of reasons recorded by the Assessing Officer, we are unable to accept either of the two contentions. Once, we proceed on the basis that the petitioner Hinduja Foundation received sizable donation from Hinduja Hospital and the Assessing Officer asserts on the prima facie information available with him that such sum was spent on the officers / directors of Hinduja Hospital, the question of applicability or non-applicability of Section 13(3) (b) in the context of the provisions contained in Section 13(1) (c)(ii) would arise. When such an issue was never examined by the AO during the original scrutiny assessment, we would be well advised not to carry out an incisive inquiry into the question which would an inquiry, necessarily be factual as well as legal. An opinion of law can be rendered only once facts are conclusively established. It is a settled law that at the stage of examining the validity of notice of reopening of assessment in a Writ Petition, the Court would not, in exercise of the writ jurisdiction, go into the sufficiency of the reasons recorded by the AO. Reference in this respect can be made to the decisions of the Supreme Court in the case of Raymond Woollen Mills Ltd Vs. I.T.O. & Ors. 1997 (12) TMI 12 - SUPREME COURT and in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt Ltd 2007 (5) TMI 197 - SUPREME COURT . The petition is dismissed.

Summary

Issues:
Challenging a notice of reopening of assessment under Section 148 of the Income Tax Act, 1961.

Analysis:
The petitioner, a registered trust, filed a return of income for the assessment year 2013-14, declaring NIL income under Section 11 of the Act. The Assessing Officer issued a notice of reopening of assessment within four years from the end of the relevant assessment year. The reasons for reopening included the receipt of a substantial amount from a hospital, which was claimed as reimbursement of expenses, leading to denial of exemption under Section 11. The petitioner objected to the notice, contending erroneous factual basis and lack of validity in the reasons recorded.

The petitioner's main contentions were that the Assessing Officer proceeded on erroneous factual basis and that no income chargeable to tax had escaped assessment. The court did not examine the sufficiency of the reasons at this stage. The notice was issued within the prescribed period, and the petitioner did not argue change of opinion as a ground to challenge the notice.

The Assessing Officer's reasons stated that the trust received a donation from a hospital, spent it on the hospital's officers/directors, and claimed it as reimbursement, potentially violating Section 13(3)(b) of the Act. The court noted minor discrepancies in the amount mentioned but upheld the notice of reopening based on the reasons recorded. It emphasized that at this stage, the sufficiency of reasons is not within the court's purview, citing relevant Supreme Court decisions.

The court dismissed the petition, refusing to continue the interim relief against assessment. It highlighted the need for factual and legal clarity before rendering a legal opinion and reiterated that the sufficiency of reasons is not to be examined in a writ petition challenging a notice of reopening of assessment.

In conclusion, the court upheld the notice of reopening of assessment, emphasizing the importance of factual and legal clarity before determining the validity of the reasons recorded by the Assessing Officer. The decision was based on procedural aspects and the court's limited scope in examining the sufficiency of reasons at the initial stage of challenging a notice of reopening of assessment.