2024 (3) TMI 956 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe - cash deposits in bank account as alleged unexplained - nformation received from the Investigation Officer, Kolhapur that Petitioner made some cash deposit by assessee-trust - HELD THAT - The reasons recorded clearly indicate that notice has been issued and the reopening has been initiated on a mere change of opinion. In the earlier scrutiny assessment, Respondent No. 1 had the opportunity to specifically scrutinize the cash deposits made by Petitioner. A specific query was also raised by the IO, Kolhapur regarding the cash deposits under Section 133(6) of the Act, to which Petitioner had replied stating that the said issue was being examined in the scrutiny assessment. The reason recorded and the impugned order are based on issues which have already been examined and verified during the original scrutiny assessment and the same cannot, in law, be a valid ground to reopen Petitioner s assessment for AY 2016-17 as the same would amount to a review . The same facts and materials on record cannot be re-examined for change of opinion under the garb or reassessment proceedings. It has been held in a catena of judgments that reassessment proceedings cannot be initiated by the AO when he has accepted the matter in an original assessment and the same would amount to a mere change of opinion and would not give rise to reasons to believe . Also further noticed from the documents on record that there was no reason nor any justification given in the notice to even arrive at prima facie finding that the cash deposits led to escapement of income. There was no response to Petitioner s requests for information regarding alleged undisclosed income pertaining to cash deposits over and above the deposits in the bank account. The impugned order does not even controvert the objection raised by Petitioner that the cash collected was not only deposited in its bank account but was also duly offered to tax. It is settled law that a reason to suspect is not the same as reason to believe. There has to be a rational connection and the live link between the material coming to the notice of the AO and the formation of belief regarding escapement of income. See Sheo Nath Sing case 1971 (8) TMI 6 - SUPREME COURT The reasons to believe in the present matter merely adverts to information from the Investigation Officer, Kolhapur that Petitioner made some cash deposits. But it is an admitted fact that Petitioner, a charitable trust registered under Section 12A of the Act, eligible to avail exemption under Section 11 of the Act has deposited the donations received in cash in its bank account and thereby disclosed Nil total income for the relevant assessment year. Moreover, the accounts of Petitioner are recorded, accounted and audited and hence, undoubtedly, there is no undisclosed cash over and above the deposits in its regular bank accounts which were offered for taxation. Thus, there is no material or fact which has been stated in the reasons for reopening assessment in the present case on which any belief can be founded of the nature contemplated by law. Decided in favour of assessee.

Summary

Issues Involved:
The issues involved in this judgment are the challenge to a notice issued by the Income Tax Officer under Section 148 of the Income Tax Act, 1961 and the rejection of objections raised by the Petitioner regarding the reopening of assessment proceedings.

Details of the Judgment:

Issue 1: Reopening of Assessment Proceedings
The Petitioner, a public charitable trust registered under the Bombay Public Trusts Act, received a notice for reopening the assessment for the Assessment Year 2016-17 based on alleged cash deposits. The Petitioner had previously filed its return of income claiming exemption under Section 11 of the Act. The AO had accepted the total returned income for the year after scrutiny. The Petitioner raised objections to the reopening, arguing that the reasons provided were not tangible and amounted to a mere change of opinion. The Court held that the reasons for reopening lacked a live link with the formation of belief required for escapement of income, as the same issues had been examined during the original assessment. The Court cited precedents emphasizing the need for tangible material to support reopening and ruled in favor of the Petitioner, setting aside the notice and rejecting the objections.

Issue 2: Legal Principles and Precedents
The Court referred to legal principles established in various judgments, including the distinction between review and reassessment, the requirement of tangible material for reopening assessments, and the importance of a rational connection between the material and the belief of income escapement. Citing decisions such as Commissioner of Income Tax v. ICICI Bank Ltd. and Commissioner of Income Tax v. Kelvinator, the Court emphasized that a reason to suspect is not equivalent to a reason to believe, and there must be a rational link between the material and the belief formed by the assessing officer. The Court held that in this case, there was no live link between the material before the AO and the belief required for reopening, leading to the setting aside of the notice and rejection of objections.

Conclusion:
Based on the analysis of the reasons provided for reopening the assessment and the rejection of objections, the Court found that there was no valid ground for the reopening of the Petitioner's assessment for the relevant year. The notice and order rejecting objections were set aside, and the Petition was allowed. The Court made the rule absolute with no order as to costs.