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TMI Blog2019 (4) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... violation has been alleged only as a consequence of violation of the provisions of section 11(3)(d) of the Act. Therefore, on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment. from the reasons recorded it is evident that the Assessing Officer has consciously decided that there was violation of section 11(3)(d) of the Act, and since on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment, the impugned notice under section 148 of the Act lacks validity and cannot be sustained. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... CIMS Hospital Pvt. Ltd is neither an institution registered under section 12AA nor is it an institution referred to in the above referred sub-clauses of clause (23C) of section 10 and hence, the question of invoking section 11(3)(d) of the Act would not arise. It was submitted that the Assessing Officer, on the basis that there is violation of the provisions of section 11(3)(d) of the Act, has held that there is violation of section 11(2) of the Act, as the accumulated amount has not been used for charitable purposes. It was submitted that therefore, the reasons lacked validity insofar as they state that the petitioner has violated section 11(3)(d) of the Act which does not apply to this transaction and consequently, the allegation that there is breach of section 11(2) of the Act would also fall. 4.2 Reliance was placed upon the decision of a co-ordinate Bench of this court in case of Dhruv Parulbhai Patel vs. Assistant Commissioner of Income Tax, [2014] 45 taxmann.com 20 (Gujarat) wherein, the Court recorded that, in the reasons recorded, the Assessing Officer had observed that from the record of the assessee it was revealed that from its income and capital gain it was allowed e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the petitioner are only accumulated under section 11(1)(a) or 11(2) of the Act and subsequently, utilized for the private purpose as discussed in the reasons recorded and, therefore, the assessee is not eligible for any exemption and consequently, exemption under sections 11 and 10 of the Act is not available to the petitioner. Moreover, as per the return of income for assessment year 2016-17, the total voluntary contribution received by the petitioner trust is ₹ 1,08,60,931/- and the revenue expenditure, as shown in the return of income, is to the tune of ₹ 90,91,800/-. Thus, surplus amount of ₹ 17,69,131/- is required to be considered as the petitioner's income and assessed under sections 28 to 44 of the Act as the petitioner is not eligible for exemption under sections 11 and 12 of the Act. It was submitted that therefore, the above referred surplus has escaped assessment as the petitioner has filed return of income at nil for assessment year 2016-17. 5.2 It was further submitted that as on date, there is a prima facie opinion formed by the Assessing Officer that income chargeable to tax has escaped assessment. It was submitted that insofar as considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of Section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under Section 147(a) two conditions were required to be satisfied, firstly, the assessing officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and 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 fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the assessing officer could have jurisdiction to issue notice under Section 148 read with Section 147(a) but under the substituted Section 147 existence of only the first condition suffices. In other words if the assessing officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11(3)(d) of the Act. 8. It is the case of the Assessing Officer that in view of the fact that the petitioner trust has given an amount ₹ 3,00,00,000/- to CIMS Hospital Pvt. Ltd in breach of section 11(3)(d) of the Act, such amount cannot be stated to have been given for any charitable purpose, and the amount accumulated under section 11(2) of the Act having been used for private purposes, the assessee is not entitled to exemption under sections 11 and 12 of the Act. In the assessment year 2016-17, the assessee has received voluntary contributions of ₹ 1,08,60,931/- and the revenue expenditure shown in the return of income is ₹ 90,91,800/-. The surplus amount comes to ₹ 17,69,131/-. Since the assessee is not entitled to exemption, the assessee has to be assessed as an association of persons as per sections 28 to 44 of the Act. Accordingly, the surplus amount of ₹ 17,69,131/- is treated as income having escaped assessment as the assessee had filed return of income showing nil income. The Assessing Officer has further formed the opinion that income to the tune of ₹ 3,00,00,000/- has escaped assessment due to violation of section 11(3)(d) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f five years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded. Explanation.-Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12-AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (vi-a) of clause (23-C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter. (3) Any income referred to in sub-section (2) which- (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose, reads as under: "10. Incomes not included in total income -In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- (23C) any income received by any person on behalf of- (iv) any other fund or institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States; or (v) any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, which may be approved by the prescribed authority], having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof; (vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 3,00,00,000/- for violation of section 11(3)(d) of the Act and ₹ 17,69,131/- on the ground of violation of section 11(2) of the Act. As discussed hereinabove, considering the reasons recorded by the Assessing Officer for reopening the assessment, there was no material with him on the basis of which he could have formed the belief that on account of donation of ₹ 3,00,00,000/- to CIMS Hospital Pvt. Ltd., the petitioner had violated the provisions of section 11(3)(d) of the Act. Insofar as violation of section 11(2) is concerned, such violation has been alleged only as a consequence of violation of the provisions of section 11(3)(d) of the Act. Therefore, on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment. 17. It may be noted that in paragraph 4.4 of the affidavit-in-reply of the respondent, it has been asserted that the payments in question were made out of accumulated funds under section 11(2) of the Act as accepted by the assessee in its reply and thus, payments were in contravention of section 11(3)(d) of the Act and thus, held to be deemed income of the assessee for the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 54 was examined by the assessing officer. (2) Undisputedly, however, the claim of the assessee was under section 54 and not 54E of the Act. (3) The assessing officer in the reasons recorded desired to disallow the claim on the ground that as required under section 54E of the Act, the assessee did not invest the surplus for a minimum period of 36 months. (4) Though through the affidavit-in-reply it is now pointed out that reference to section 54E is mere typographical error and the intention was to refer to section 54 of the Act, we are of the opinion that such stand is wholly incorrect. Had this been a case of mere typographical error, we would have ignored the mistake and referred to the correct statutory provision. The fact that reference under section 54E was however, not an error is manifest from the reasons recorded. It referred to the requirement of investing the surplus fund for a minimum period of 36 months. Such requirement flows from section 54E of the Act and not section 54. Section 54 in fact requires the assessee to acquire a new unit within a year or build himself within three years. In the later case he has to invest the surplus in specified investments. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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