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TMI Blog2013 (6) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... dental, para medical sciences etc. by providing educational institutions, running of hospital for providing medical relief to the needy, to receive and give donation from/to any institution or individual for fulfilment of object of the trust. The dispute relates to the Assessment Year 2006-2007, under the Income Tax Act. The petitioner is registered under section 12A of the Income Tax Act and Sections 11 and 12 of the Act are applicable to the income derived by it. For the Assessment Year 2006-2007 it filed its return of income on 31st of October, 2006 disclosing the donations received as Rs.5,23,00,000/-. The taxable income was declared nil. Proceedings for assessment under section 143(3) of the Income Tax Act was initiated for the relevant Assessment Year. The petitioner alleges that as many as five show cause notices were issued by the Assessing Authority which were duly replied. Thereafter, the assessment was completed by the order dated 27th of March, 2008. During the course of the assessment proceedings, the petitioner revised its return of income. The further allegation is that the proceedings under section 12A for cancellation of registration of the petitioner as charitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 143 (3) of the Act, there is no justification for serving the impugned notice under section 148 of the Act. Elaborating the argument, he submitted that before completing the assessment as many as five notices were served by the Assessing Authority which were duly replied. The submission is that Assessing Officer was apparently satisfied with the reply filed by the petitioner, there was no need to discuss them in the assessment order. These queries raised by the Assessing Authority related to the donation of Rs.1,55,00,000/- received by the assessee from Nav Jyoti Vikas Sansthan (hereinafter referred to as NJVS). The donation was received through bank cheques and on the asking of the Assessing Officer, the office bearers of the said NJVS were also examined and they filed affidavits confirming the donations. The other limb of the argument is that in view of the proviso to section 147 of the Act, the proceeding is barred. Notice for reassessment could have been given within four years from the end of the Assessment Year 2006-2007. While it was given on 19th of April, 2010. The other limb of the argument is that the reassessment proceeding cannot be initiated on the mere c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 31-10-2006. The assessee is a registered society under the Society Act and the society is also registered under section 12AA vide letter C.No. 40(2)/Nibandan/M.Nagar/CIB/92-93/12020 dated 30-10-1992 issued by the Commissioner of Income Tax, Meerut. In compliance to notice under section 143(2)/142(1) Sh. Rajeev Singhal, CA is attended and the case is discussed. During assessment proceedings the assessee is filed a revised computation of income claiming exemption of Rs.117507559/- against total income of Rs.59121584/-. The claim of carrying forward of losses is not allowable to the assessee as there is no provision to carry forward the losses. After discussion the income is computed at nil. Issue notice and demand and challan." It is a shocking to note that as a matter of fact, the said assessment order is no assessment order in the eyes of law. There is not even a whisper with regard to the receipt of donation from NJVS amounting to Rs.1,57,00,000/-. It is really not understandable under what circumstances the said assessment order came into existence. The assessment order is bereft of any discussion with regard to the genuineness of the donation given by NJVS or the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and noticed that the M/s. Nav Jyoti Vikas Sansthan has also shown to have provide the donation of Rs.1,57,00,000/- to the assessee. After conducting the necessary enquiries it is concluded that M/s. Nav Jyoti Vikas Sansthan is having no capacity to pay the donation and the amount of donation given to the assessee is not genuine. This information is received through the Commissioner of Income Tax, Ghaziabad. 4. The details of the enquiries conducted by the Addl. Commissioner of Income Tax is summarized as under i Nav Jyoti Vikas Sansthan is having it's Bank account in Nainital Bank, Ghaziabad. The account is introduced by Shri Vineet Kumar, holding his account in the name of Varun Trade Center. The account of Sri Vineet Kumar is introduced by Shri Sunil the prop. of Sharma Associate. ii The bank account lying with Nainital Bank shows various cheques credited are issued Mahamedha Co-operative Bank Ltd. Ghaziabad. The enquiries shows that the maximum cheques have been issued from two accounts one is the account of Vinod Kumar Gupta prop. Varun Trade centre, 48, Prahalad Gari, GT Road, Ghaziabad and other is related to Vineet Kumar prop. Sharma Associates, SH-280A, Shastri Nagar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,02,791 /- 2003-04 to 2006-07 01.04.2003 to 15.05.2005 vi It is thus noticed that aforesaid bank account have been utilized to have accommodation entries. vii Shri Devender Singh s/o Shri Dal Singh r/o/ J-3A Sanjay Nagar Ghaziabad is one of the member of the Nav Jyoti trust and it is gathered from him that the activities of the trust is closed..................................." Time and again, it has been laid down that the existence of belief can be challenged by the assessee but not sufficiency of reasons for belief. In S. Narayanappa and others Versus CIT, (1967) 63 ITR 219 (SC), and Ganga Saran and Sons Private Limited Versus ITO (1981) 130 ITR 1 SC, it has been laid down that in considering all questions of existence of material for the belief of the Assessing Officer that the income had escaped the assessment, the Court can go into the question whether the material are relevant or irrelevant. In the case on hand, the financial capacity of NJVS to donate a sum of Rs.1,55,00,000/- to the petitioner is material and relevant. Noticeably, the said issue was not taken into consideration by the Assessing Officer while framing the assessment order. It appears that the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. At this stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether the materials would conclusively prove the escapement is not concerned at that stage. This is so because the formation of the belief by the Assessing Officer is in the realm of subjective satisfaction. The Apex Court has made reference of its earlier judgments in the case of RTO Vs. Selected Dalurband Coal Pvt. Ltd., (1996) 217 ITR 597, and Raymond Woolen Mills Limited Vs. ITO (1999) 236 ITR 34. It also compared the existing section 147 after amendment with the old section 147 and has held that under old section 147 (a) two conditions were required to be satisfied; firstly the Assessing Officer must have reason to believe that the income, profit or gains, chargeable income tax have escaped assessment; secondly, he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose full or all the material facts necessary for that assessment year. Thereafter, the Apex Court with regard to section 147 as it exists now, has held; "Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The said proviso on the facts of the present case is not at all attracted. Now, we may discuss the decisions relied upon by the learned counsel for the petitioner in support of his contention that it is a case of change of opinion and therefore, the provision of section 147 is not available to the department. Reference was made to (1) Asian Paints Limited Vs. Deputy Commissioner of Income Tax, (2009) 223 CTR 141. In this case, the action of the Assessing Officer to reopen the assessment on the ground that some material which was available on record while the assessment was made was inadvertently excluded from the consideration. It was held that it amounts to reopening of assessment merely on the basis of the change of opinion which is not permissible under law. (2) CIT Versus CFIL Stock Broking Limited, 233 CTR 69. Delhi High Court in this case has held that as there is no material to show that the Assessing Officer has applied his mind to the formation and independently arrived at a belief on the basis of the material before him that the income had escaped assessment, is no ground to reopen the assessment. In (3) Pardeshi Developers and Infrastructure Private Limited Versus CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax, Ghaziabad, it was unearthed that prima facie the donation given by the NJVS to the petitioner is in the nature of accommodation entries and fictitious. Thereafter, the petitioner's Assessing Officer has recorded his satisfaction that the income of the assessee has escaped assessment. By no stretch of imagination, the said inquiry can be said to have no nexus with the escapement of the petitioner's income. In the case of Pardeshi Developpers and Infrastructure Limited (supra), the finding of fact was recorded by the High Court that the opinion on the basis of which reassessment proceeding was sought to be initiated was already available with the Assessing Officer which is not so in the case on hand. Besides the above, we find that in none of the decisions, the decisions of the Apex Court on the point was brought to the notice of the High Court therein. The relied upon judgments by the learned counsel for the petitioner should be read and understood subject to the judgment of the Apex Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Limited (supra) and other judgments including Phool Chand Bajrang Lal Vs. ITO,(1993) 203 ITR 456, Raymond Woolen Mills Limited Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inistration." Failure to give reasons amounts to denial of justice. Reasons are live links between the mind of the decision - taker to the controversy in question and the decision or conclusion arrived at. Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the " inscrutable face of the sphinx, it can, by its silence, render it virtually impossible for the courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before Court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made; in other words, a speaking-out. The "inscrutable face of the sphinx" is ordinarily incongruous with a judicial or quasi-judicial performance." A feeble argument was advanced that the Commissioner of Income Tax being higher in hierarchy than Additional Commissioner of Income Tax, the initiation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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