9911796707
TMI Blog2012 (3) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... led to consider the grounds of objection submitted by the assessee - the reopening of the assessment is based purely on a change of opinion by the Assessing Officer and cannot be permitted in law - to allow the petition by setting aside the notice issued under Section 148 - Writ Petition No. 2535 OF 2011 - - - Dated:- 31-1-2012 - Dr D Y Chandrachud, M S Sanklecha, JJ. For Appellant: Mr P J Pardiwala, Sr Adv with Mr B V Jhaveri For Respondent: Mr Vimal Gupta JUDGEMENT Per: D Y Chandrachud: Rule; with the consent of Counsel for the parties returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal. 2. An assessment for assessment year 2004-05 is sought to be reopened by a notice dated 21 March 2011 issued under the provisions of Section 148 of the Income Tax Act, 1961. The objections filed by the assessee to the reasons disclosed by the Assessing Officer have been disposed of by an order dated 15 December 2011.The assessee is before this Court under Article 226 of the Constitution. 3. Section 10(23B) of the Income Tax Act, 1961 was introduced by the Finance Act, 1974 with effect from 1 June ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution was approved and recognized since 1969 and is engaged in promoting the village industries programme under the Schedule to the KVIC Act,1956. By a communication dated 13 November 2006, the Petitioner placed on the record of the Assessing Officer a branch wise list of donations made for medical aid to women members and to the staff of the Institution. Information was also set out in respect of the amounts paid for extending scholarship and for promoting education. 5. An order of assessment was passed on 29 December 2006 under Section 143(3). The Assessing Officer took note of the details filed with regard to income and expenditure alongwith the amount applied for charitable purposes which was stated to be examined and discussed . The Assessing officer also took note of the fact that the assessee is recognized by the Khadi Village Industries Commission. A reference was made in the order to the fact that the assessee had filed a copy of the letter dated 16 March 2005 issued by the State Director for Khadi Village Industries Commission. The Assessing Officer noted that the assessee is engaged in the village industries programme approved by KVIC and, under Section 10(23B) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. In Maharashtra, Sales Tax Department has raised the demand of Rs.49.32 crores including demand of Rs.1.55 crores of other state for the period from the year 1988 to 2005. The Central Excise department had also raised demand of Rs.4.49 crores during the year 1993 to 2005. During the previous year relevant to A.Y. 2004 -05, the sale of detergent powder and cake were shown at Rs.5937.43 lakhs. vii) The MRP of main product of institution of papad (branded as Lijjat Papad) is not less than the MRP of papad manufactured by the other firm M/s. Ganesh Industries, Kandivali, Mumbai. viii) The assessee institution has not provided any service for general benefit/public utility but it was commercially dealt with its service for a price depending upon the requirement in open market. ix) The assessee institution had not applied its income or accumulated for application solely for the development of village industries whereas the surplus money had been invested into the deposit in various banks (Rs.1976.75 lakhs as on 31 March 2004) and earned huge amount of interest of Rs.99.97 lakhs in previous year relevant to A.U. 2004-05. 7. The Assessing Officer has on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of its objects which was more than the net profit of Rs.6.54 crores as on 31 March 2004. In the course of the reply, the Petitioner dealt with each of the reasons which were furnished for reopening the assessment. As regards the first reason, the Petitioner submitted that it has 93 branches and divisions giving employment to more than 40,000 women to whom Papad rolling charges of Rs..47/- crores were paid. The net profit of Rs.6.54 crores on the total net sales of Rs.288.47 crores worked out to 2.27% of the turnover. As against the margin of Rs.6.54 crores, the trust had invested Rs.9.21 crores for setting up new branches and divisions. The trust had loans aggregating to Rs.12.87 crores and was therefore, required to generate income from which it can repay the loan liability. As regards the second reason, it was stated that during the previous assessment year 2004-05 the assessee had given scholarships aggregating to Rs.6.65 lacs. As regards the third reason, it was stated that the trust was providing medical aid to all its members from time to time, the details of which were set out. As regards the fourth reason, it was pointed out that the payments which were made to the memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat while recording the reasons for reopening, detailed discussions were made and the primary conditions for issuing a notice under Section 148 have been fulfilled. Counsel appearing on behalf of the Petitioner submitted that (i) During the course of the assessment proceeding a detailed enquiry was followed by the Assessing Officer in the course of which the Petitioner made a disclosure by its communications dated 10 June 2006, 16 June 2006 and 30 November 2006; (ii) Ex-facie, the reasons disclosed for reopening the assessment are based on material which was disclosed to the Assessing Officer in the Income and Expenditure Account and in the balance sheet as of 30 March 2004 and 30 March 2005; (iii) There was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for assessment year 2004-05; (iv) None of the reasons which have been disclosed by the Assessing Officer have a bearing on/or relevance to the entitlement of the assessee to claim the benefit for an exemption under Section 10(23B) ; (v) Even after the assessee received a notice under Section 148 for reopening the assessment for 2004-05, the Assessing Officer in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 10(23B), the Commission is empowered to withdraw the approval granted to an institution and to forward a copy of the order of withdrawal to the Assessing Officer if he is satisfied that the institution has not applied or accumulated its income in accordance with the provisions of the first proviso or the activities of the Institution are not being carried out in accordance with all or any of the conditions subject to which this Institution was approved. It is not in dispute before the Court that the Petitioner continues to have the approval of the Khadi and Village Industries Commission. The approval has not been revoked. 11. During the course of the assessment proceedings under Section 143(3), the Assessing Officer, followed a line of enquiry consequent upon which a notice was issued to the Petitioner under Section 143(2). The Petitioner had responded to the queries of the Assessing Officer by its replies dated 10 June 2006, 16 June 2006 and 30 June 2006. The Assessing Officer had gone through the balance sheet and the income and expenditure statements that were filed together with the return of income. The details of the expenses incurred by the trust, of the investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment was passed. There is, in these circumstances, absolutely no basis in the submission to the effect that there was a failure on the part of the assessee to disclose material facts fully and truly. Apart from this, the assessee had while filing objections to the reopening of the assessment furnished under a letter dated 18 November 2011, a detailed response to each of the grounds on which the assessment was sought to be reopened. The Assessing Officer has manifestly failed to consider or deal with the grounds of objection submitted by the assessee. What the Assessing Officer has recorded is that when the reasons were recorded for reopening the assessment, these were based on a detailed discussion of the issues. Hence, the primary condition for issuance of the notice under Section 148 was stated to be fulfilled. The Assessing Officer has completely ignored the objections which were filed by the assessee. If the Assessing Officer had applied its mind, he would have held that there was no basis for reopening the assessment beyond a period of four years in this case. Having considered the submissions and the reasons, we are of the view that the reopening of the assessment is ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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