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TMI Blog2022 (6) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... is granted under Section 35[1][ii] of the I-T Act is to file a copy of the approval and the details of the donations made, and if the approval is later withdrawn because of certain allegations against the entity which has granted approval, even if such approval is withdrawn retrospectively, the concluded assessment proceedings cannot be reopened, it would suffice for this Court to opine that this will have to be examined as part of the reassessment proceedings based on the further material that would be available on record by the petitioner and would not be a reason for interference at this threshold. - Writ Petition Nos. 44636/2017 C/W, 52268/2017 And 52269/2017 (T-IT) - - - Dated:- 16-3-2022 - B. M. Shyam Prasad , J. For the Appellant : S. Parthasarathi and Jinita Chatterjee, Advocates For the Respondents : K.V. Aravind, Advocate ORDER The common petitioner in WP Nos. 44636/2017 and 52268/2017 has impugned the notices issued under section 148 of the Income-tax Act [for short, 'I-T Act'] for the AY: 2013-14 and 2015-16 and the second respondent's corresponding order dated 10.08.2017. The second respondent, by these orders, has rejected the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s applied for scientific research. 3.3 This approval is also subject to the condition that the Central Government shall withdraw the approval if M/s. Herbicure fails to maintain separate books of accounts as required, or fails to furnish its audit report, or fails to furnish its statement of the donation received and sums applied for scientific research, or if it ceases to carry on its research activities, or its research activities is found to be not genuine or ceases to conform and to comply with the provisions of section 35(1)(ii) of the I-T Act and the related rules. 3.4 The petitioner in the AY 2015-16 has again donated a sum of Rs. 1,00,00,000/- M/s. Herbicure and this is also disclosed in the returns filed. After the returns are filed, the petitioner is issued with the intimation dated 24.10.2016 under section 143 (1) of the I-T Act and consequently the income offered to tax is accepted. However, the petitioner's returns for the AY: 2013-14 is allowed by the assessment order dated 14.03.2016 under section 143(3) of the I-T Act. Admittedly, before the conclusion of the assessment for these two respective assessment years as aforesaid, a survey under section 133A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the donation. 3.8 The petitioner has responded to the reasons offered denying and disputing the allegations of bogus transactions emphasizing that M/s. Herbicure is a company registered under section 25 of the Companies Act, 1956 and is granted approval under section 35(1)(ii) of the I-T Act. The petitioner has relied upon the provisions of section 35(1) of the I-T Act to contend that the benefit under the aforesaid provisions cannot be denied merely on the ground that, subsequent to donation of the amounts to M/s. Herbicure, the approval granted is withdrawn; even if the withdrawal should apply, it must only apply prospectively. The petitioner has also contended that assessment cannot be reopened only because of suspicion, and the reason for reassessment must be rooted in probable reasoning to sufficiently believe that there was indeed bogus transaction and not otherwise. 3.9 The AO has rejected the petitioner's objection referring to the withdrawal of the notification dated 14.03.2008 retrospectively and reiterating that M/s. Herbicure was engaged in bogus donation transactions through various brokers for commission. The entire information was not available during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation dated 06.09.2016 inter alia on the ground that the notification could have been issued only by the Central Government and not by the Central Board of Direct Taxes. This canvas can be justified in the light of the decision of the High Court of Bombay in Indian Planetary Society v. Central Board of Direct Taxes and others (2009) 318 ITR 102 (BOM). But the petitioners cannot really challenge this notification for lack of locus and if there is to be any challenge to this notification, it must be from M/s. Herbicure. But, the petitioners have challenged the notification to emphasize that the approval granted to M/s. Herbicure, pursuant to which the donations are made by the petitioners, cannot be withdrawn retrospectively to the petitioners' detriment. 5.2 However, it would be open to the petitioner, who is obviously affected by the retrospective withdrawal of the approval granted to M/s. Herbicure, to successfully contend that the benefit extended to the donor/assessee [the petitioners in these cases] cannot be denied the benefit of the allowance under section 35(1)(ii) of the I-T Act notwithstanding the withdrawal when there is no evidence to substantiate that the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2013-14 and therefore, even the survey at the premises of the M/s. Herbicure cannot have a live nexus to the reason to believe that there should be reassessment, and when there is no nexus, the reassessment would be impermissible. Hence, this Court must intervene even on this ground. 6. The submissions by Sri K.V. Aravind, the learned counsel for the revenue: 6.1 Sri K.V. Aravind, relying upon the decision of the Honourable Supreme Court in Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stockbrokers (P) Ltd. (2008) 14 SCC 208 submits that at the stage of issuance of notice the only question which is to be examined is whether there is any relevant material upon which a reasonable person could form the requisite belief, and at this stage whether the material can conclusively prove the escapement would not be a relevant test. Relying upon this decision, Sri K.V. Aravind also submits when the two conditions viz., when the assessing officer has reason to believe that income chargeable to tax has escaped assessment and escapement is because the assessee has not fully and truthfully disclosed all the relevant material, the AO will have jurisdiction to issue notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the question for consideration would be whether there is relevant material on record from which a reasonable person could have form the requisite belief that there is reason to opine that income has escaped assessment, and the question whether these materials would conclusively prove the escapement is not of significance Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stockbrokers (P) Ltd. supra . 8.2. Secondly, the question whether there are relevant materials from which requisite belief as aforesaid could be formed will have to be tested against the requirements such as the AO's tentative or prima facie opinion that there is either under assessment or escapement of assessment; the opinion must be in writing and the opinion cannot be a mere suspicion; the reasons recorded for the opinion and the documents available should show a nexus that is germane and relevant to the subjective opinion; where the assessment is under Section 143[1] of the I-T Act, there should be failure or omission on the part of an assessee to disclose full and true material facts. 8.3. Thirdly, the respective amendments to section 147 of the I-T Act in the year 1988 and 1989 combined t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is under section 143[1] of the I-T Act. The assessment Orders are dated 14.03.2016 and 12.03.2015 respectively. The intimation under Section 143(1) of the I-T Act is issued on 24.10.2016, which is after the withdrawal of the approval granted to M/s. Herbicure on 14.03.2008 with retrospective effect vide the Notification dated 06.09.2016. The survey in the premise of M/s. Herbicure is in the months between January and April of 2015. Thus, all the assessments are not concluded prior to the survey in the premises of M/s. Herbicure. These circumstances would be material and will have to be given due importance, especially at this stage when this Court is testing the initiation of the reassessment proceedings in the light of the settled propositions referred to above. 10. The survey in the petitioner's premises under Section 133A of the I-T Act is on 03.03.2016. Indeed, the statement recorded of the founder director of M/s. Herbicure and an Assistant of this organization is put to the petitioners' Account Officer, and he has responded to those statements saying he has no knowledge. Significantly, when queried about M/s. Herbicure giving accommodation entries for the donat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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