2020 (3) TMI 1027 - HC - Income Tax

Reopening of assessment us 147 - exemption u/s. 11 denied - receipt of corpus donations - HELD THAT - During the course of regular assessment, the petitioner-assessee has furnished requisite details sought for by the Assessing Officer in the form of details of the donation received by the petitioner as corpus credited to the Earmarked Funds being part of the balance-sheet. It is also not in dispute that during the course of the scrutiny assessment, the Assessing Officer has inquired about the donation received by the petitioner, which was forming part of the corpus and thereafter, the assessment order under Section 143(3) of the Act, 1961 was passed. In such circumstances, it cannot be said that there is any failure on the part of the petitioner to disclose truly and fully all material facts during the course of assessment. In view of above dictum of law the issue of reopening in the facts of the present case is no more res-integra. Therefore, the impugned notice is required to be quashed and set aside, as none of the reasons assigned by the Assessing Officer for re- opening the assessment was tenable in the eye of law, the conditions precedent to invoke the powers for re-opening assessment as provided in Section 147 of the Act is absent, therefore we find that the Assessing Officer acted illegally and issued Notice of re-assessment on the self same material forming second opinion without having any tangible material to exercise jurisdiction. - Decided in favour of assessee.

Issues Involved:
1. Validity of the notice for reopening the completed assessment under Section 147 of the Income Tax Act, 1961.
2. Legality of the reassessment proceedings initiated based on the said notice.
3. Examination of the failure to disclose fully and truly all material facts necessary for assessment.

Issue-wise Detailed Analysis:

1. Validity of the notice for reopening the completed assessment under Section 147 of the Income Tax Act, 1961:

The petitioner, a charitable institution, challenged the notice dated 27/09/2012 issued by the Respondent for reopening the assessment for A.Y. 2006-07. The notice was issued under Section 148 of the Income Tax Act, 1961, based on the observation that the petitioner had collected fees from students and credited the same directly to the Balance Sheet instead of the income and expenditure account. The petitioner argued that the reopening was based on a misinterpretation of facts, as the registration under Section 12AA was restored by the appellate tribunal before the reasons for reopening were recorded. The court examined whether the notice was issued based on a valid reason to believe that income had escaped assessment.

2. Legality of the reassessment proceedings initiated based on the said notice:

The petitioner contended that the reassessment proceedings were invalid as the Assessing Officer had already scrutinized the relevant details during the original assessment under Section 143(3) of the Act. The petitioner had provided all necessary details regarding donations received and credited to the "Earmarked Funds" in the balance sheet. The Assessing Officer had accepted these details in the original assessment. The court noted that the reassessment was initiated based on the same material facts that were already scrutinized during the original assessment, which indicated a mere change of opinion rather than new tangible material.

3. Examination of the failure to disclose fully and truly all material facts necessary for assessment:

The court examined whether there was any failure on the part of the petitioner to disclose fully and truly all material facts during the original assessment. The petitioner had provided detailed information regarding donations received and their treatment in the accounts. The court found that the Assessing Officer had inquired about these details during the original assessment and had accepted the petitioner's explanations. Therefore, it could not be said that there was any failure to disclose material facts.

Conclusion:

The court concluded that the notice for reopening the assessment was not based on any new tangible material but was a result of a mere change of opinion by the Assessing Officer. The court referred to the Supreme Court's decision in Commissioner Of Income Tax VS. Kelvinator Of India Ltd., which emphasized that reassessment should be based on tangible material and not on a change of opinion. The court held that the conditions precedent to invoke the powers for reopening assessment under Section 147 of the Act were absent. Consequently, the notice dated 27.09.2012 for reopening the assessment for A.Y. 2006-07 was quashed and set aside. The petition was allowed, and the rule was made absolute to the extent of quashing the impugned notice. No order as to costs was made.

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