2024 (3) TMI 39 - HC - Income Tax

Validity of Reopening of assessment - reasons to believe - reliance on audit objection - treatment to be given for the corpus fund and whether this income of the corpus fund received by the petitioner in the relevant assessment year is exempt under Section 11 or not - HELD THAT - In the present case, the provisions have been drastically changed with effect from 01.04.2022, and the audit objection is one of the reasons for reopening the assessment. If the revenue audit raises an objection that the assessment was not completed in accordance with the provisions of the Act, it cannot be treated as a change of opinion because this is the statutory prescription and statutory ground/reason for re-opening the assessment. Assessing Authority has proceeded strictly in accordance with the provisions of Clause (ii) of Explanation 1 to Section 148 of the Act. Therefore, find no error of law or jurisdiction in the impugned order. Therefore, the writ petition is dismissed. If the petitioner has not filed the return of his income in pursuance of the notice dated 07.02.2023 in Ext. P8, the petitioner may file his return within a period of four weeks.

Summary

Issues involved:
The issues involved in this case are the re-opening of assessment under Clause (d) of Section 148A of the Income Tax Act 1961 based on revenue audit objection, treatment of corpus donation received by a Trust under Section 11 of the Act, and the applicability of the amended Section 148 regarding audit objections as a ground for re-opening assessments.

Re-opening of Assessment based on Revenue Audit Objection:
The petitioner, a Trust registered under Section 12A of the Act, filed returns for the Assessment Year 2016-17 declaring 'Nil' income. However, a revenue audit objection highlighted that corpus donations received by the petitioner were not included in the income for application under Section 11, resulting in an alleged escape of assessment income amounting to Rs. 1,60,39,464. Subsequently, the Assessing Officer decided to re-open the assessment and issued a notice under Section 148 of the Act to furnish a fresh return within 30 days.

Treatment of Corpus Donation under Section 11:
The petitioner contended that the corpus fund received should not be considered part of its income under Section 11 of the Act. The petitioner argued that the audit objections were contrary to the statutory provisions of Section 11 and that the reasons recorded for the assessment re-opening were incorrect. The petitioner's explanation regarding the applicability of Section 11 to the corpus fund was not adequately considered, leading to the challenge of the Order under Section 148A(d) as being legally flawed.

Applicability of Amended Section 148 regarding Audit Objections:
The Standing Counsel for the Income Tax Department argued that the amended Section 148, effective from 01.04.2022, allows audit objections as grounds for re-opening assessments. It was emphasized that the Assessing Officer must consider revenue audit objections when recording reasons for re-opening assessments. The Counsel contended that the impugned order under Section 148A(d) was in compliance with the statutory provisions, specifically Clause (ii) of Explanation 1 of Section 148, and thus, there was no legal error warranting interference by the Court.

Judgment:
The Court, after considering the arguments from both sides, held that the Assessing Officer acted in accordance with the amended provisions of Section 148 and the statutory grounds for re-opening assessments based on audit objections. The Court noted that the petitioner's reliance on prior judgments was not applicable due to the significant changes in the law post-April 2022. As the Assessing Authority followed the statutory requirements, the Court found no error of law or jurisdiction in the impugned order and dismissed the writ petition. The petitioner was granted the opportunity to file the income return within four weeks, with a hearing before the finalization of the assessment order on re-opening.

Separate Judgment:
There is no separate judgment delivered by the judges in this case.