2023 (11) TMI 507 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - expiry of limitation in relation to the issuance of the Impugned Notice - sufficiency of reasons or correctness of reason - Mandation of AO having requisite material / information to arrive at a subjective satisfaction that there was an escapement of income - whether the AO could have initiated reassessment proceedings pursuant to Section 149(1) ?- HELD THAT - Undoubtedly, the same clarifies that deposits in bank accounts form a part of the assets of the Petitioner, and accordingly, in the considered opinion of this Court, the arguments advanced by the Petitioner qua the expiry of limitation in relation to the issuance of the Impugned Notice cannot be sustained as the income escaped assessment extends to a sum of INR 2,23,95,787 i.e., higher that the minimum threshold of INR 50,00,000 enshrined under Section 149 - Accordingly, the limitation vis- -vis the initiation of reassessment proceedings in the case herein would resultantly extend to 10 (ten) years in light of the fact that the AO had in its possession inter alia books of accounts evidencing voluntary deposits in bank accounts extending to more than INR 50,00,000. Accordingly, following Acorus Unitech Wireless Pvt. Ltd. 2014 (3) TMI 154 - DELHI HIGH COURT this Court is satisfied that the AO based its opinion on tangible and concrete information in the form of the Petitioner s Trust Deed; and statement of Managing Trustee that certain identified foreign contributions received by the Petitioner were utilized for a purpose divergent to its object as disclosed in the Trust Deed, and accordingly, the wrongful application of the exemption availed under Section 11 / Section 12 of the IT Act in relation to such funds would undoubtedly result in the AO forming the subjective satisfaction that the wrong availed exemption vis- -vis foreign contributions escaped income for the purpose of assessment under the IT Act. Lastly, it is a well settled position of law that an individual seeking to invoke the equitable jurisdiction of a High Court must approach this Court displaying bona fides. However, in the present case, the Petitioner has unquestionably suppressed material facts in relation to the cancellation of its registration under Section 12A, 12AA and 12AB of the IT Act. As decided in Supreme Court in Prestige Lights Ltd. 2007 (8) TMI 446 - SUPREME COURT it is well settled that a prerogative remedy is not a matter of course. In exercising extraordinary power, therefore, a writ court will indeed bear in mind the conduct of the party who is invoking such jurisdiction. If the applicant does not disclose full facts or suppresses relevant materials or is otherwise guilty of misleading the court, the court may dismiss the action without adjudicating the matter. Petitioner has failed to make out a case warranting the interference of this Court under Article 226 of the Constitution of India.

Summary

Issues Involved:
The Petitioner challenges the order issued by the Revenue Department under the Income Tax Act, 1961, the show cause notice, and the reassessment notice collectively referred to as the "Impugned Proceedings."

Judgment Details:

Issue 1 - Reassessment Proceedings Initiated by Revenue Department:
The Petitioner contested the initiation of reassessment proceedings under Section 149(1) of the IT Act, arguing that the AO lacked information suggesting tax evasion. The Petitioner relied on a decision of the Madras High Court and the Finance Act, 2022. However, the Respondent argued that the AO had sufficient grounds based on the Trust Deed and statements to conclude that the Petitioner wrongly availed exemptions. The Court held that the AO's opinion was based on tangible information, extending the reassessment period to 10 years due to the amount exceeding INR 50,00,000.

Issue 2 - Judicial Review and Suppression of Facts:
The Court emphasized the limited scope of judicial review regarding the correctness of the Impugned Notice, citing precedents. It noted the Petitioner's suppression of material facts regarding the cancellation of its registration under the IT Act, highlighting the importance of disclosing true facts when invoking the court's equitable jurisdiction. Despite the suppression, the Court addressed the issues framed in the judgment but ultimately found no grounds for interference under Article 226 of the Constitution of India.

Conclusion:
The Court disposed of the writ petition and related applications, concluding that the Petitioner failed to establish a case warranting the Court's intervention. The judgment highlighted the importance of transparency in legal proceedings and the court's role in ensuring the integrity of the process.