9911796707
TMI Blog2025 (3) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has raised various grounds of appeal and has also filed additional grounds [15] dated 06.10.2024, challenging the action both on merits and on legal grounds as well. At the outset itself, the Ld. AR of the assessee drew our attention to the legal issue that has been raised wherein the reopening u/s. 147/148 of the Income-tax Act, 1961 (hereinafter referred to as the "Act") of the AO has been challenged by the assessee, therefore, we are inclined to adjudicate first the legal issue raised before us, because if there is merit on the legal issue then it goes to the root of the reassessment order framed pursuant to reopening itself. 3. We first take up the appeal in ITA No. 1372/Chny/2024 for AY 2010-11. The brief facts are that, the assessee is a Charitable Trust and is registered u/s.12AA of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') vide order dated 03.01.2001 and is also approved u/s.80G of the Act vide order dated 18.07.2011. Thereafter, under the new regime/amendment in law, the Trust again applied for renewal of registration u/s.12AB as well as u/s.80G of the Act, both of which were granted vide order dated 01.10.2021. Further, it is also noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the case was re-opened by issuing notice u/s.148 of the Act dated 30.03.2017 on the strength of the following reasons recorded by the AO as under: "As per the information received from DCIT(Exemptions) Chennai on 07.03.2017, it is seen that an amount of Rs. 1,00,15,671/- was received by the assessee trust, M/s The Gate of Hope of Charitable Trust" from M/s. Caruna Bala Vikas, during the year, to carryout religious activities. The fund was provided to M/s Gate of Hope of Charitable Trust, by Compassion International, USA, also for religious activities, and the same has been utilized for religious activities by M/s. The Gate of Hope of Charitable Trust" under the project names "Ayanavaram Child Development Centre", the place of project being Ayanavaram, Chennai and "Chengalpattu Child Development Centre", Chengalpet. The assessee trust M/s. The Gate of Hope charitable trust is a trust registered for Charitable purposes u/s.12AA of the IT Act, 1961 vide the order of the Commissioner of Income tax, TN-V in C.No:2039(58)/2000-01/TN-V dated 02.01.2001. The assessee is also granted approval u/s.80G vide order in DIT(E) No.2039(58)/00-01 dated 18.07.2011. The assessee Trust filed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d record "reason to believe" that the income chargeable to tax for that assessment year has escaped assessment. If this condition is not satisfied at the first place, then it cannot be said the AO has validly assumed jurisdiction u/s. 147 of the Act. Therefore, the question for consideration is whether on the basis of the reasons recorded by the AO, he could have validly reopened the assessment. For that it has to be seen as to whether the AO on the basis of whatever material before him, [which he had indicated in his "reasons recorded"] had reasons warrant holding a belief that income chargeable to tax has escaped assessment. It is important to remember that the reasons recorded by AO to reopen has to be evaluated on a stand-alone basis and no addition/extrapolation can be made or assumed, while adjudicating the legal issue of AO's usurpation of jurisdiction u/s. 147 of the Act. The Hon'ble Bombay High Court, in the case of Hindustan Lever Ltd. vs. R.B. Wadkar [(2004) 268 ITR 332], has, inter alia, observed that ".......... It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person instructed in law in understanding jurisdictional fact and law (mixed question of fact and law) the reason to believe escapement of income (supra). 9. The AO, who is a quasi-judicial authority is empowered to reopen the completed assessment only in a given case wherein there is reason to believe escapement of chargeable income to tax which is the jurisdictional fact & law and sine qua non to assume jurisdiction to reopen a completed assessment. It must be kept in mind that reasons to believe postulates foundation based on information and belief based on reason. Even if there is foundation based on information there must be some reason warrant holding the belief that income chargeable to tax has escaped assessment. It has to be kept in mind that the Hon'ble Supreme Court in Ganga Saran & Sons P. Ltd. Vs. ITO (1981) 130 ITR 1 (SC) held that the expression "reason to believe" occurring in sec. 147 "is stronger" than the expression "if satisfied" and such requirement has to be met by the AO in the reasons recorded before usurping the jurisdiction u/s. 147 of the Act. It must be kept in mind that information adverse against the assessee may trigger "reason to suspect" then t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 147 of the said Act were invalid. 8. The Tribunal gave detailed reasons for concluding that the proceedings under Section 147 were invalid. Instead of adding anything to the said reasons, we think it would be appropriate if the same are reproduced: -- "In the case at hand, as is seen from the reasons recorded by the AO, we find that the AO has merely stated that it has been informed by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 that the above named company was involved in giving and taking bogus entries/transactions during the relevant year, which is actually unexplained income of the assessee company. The AO has further stated that the assessee company has failed to disclose fully and truly all material facts and source of these funds routed through bank account of the assessee company. In the reasons recorded, it is nowhere mentioned as to who had given bogus entries/transactions to the assessee or to whom the assessee had given bogus entries or transactions. It is also nowhere mentioned as to on which dates and through which mode the bogus entries and transactions were made by the assessee. What was the information given by the Director o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be made to those reasons. Therefore, the details of entries or amount mentioned in the assessment order and in respect of which ultimate addition has been made by the AO, cannot be made a basis to say that the reasons recorded by the AO were with reference to those amounts mentioned in the assessment order. The reasons recorded by the AO are totally silent with regard to the amount and nature of bogus entries and transactions and the persons with whom the transactions had taken place. In this respect, we may rely upon the decision of Hon'ble jurisdictional Delhi High Court in the case of CIT v. Atul Jain [2000] 299 ITR 383, in which case the information relied upon by the AO for initiating proceedings u/s 147 of the Act did indicate the source of the capital gain and nobody knew which shares were transacted and with whom the transaction has taken place and in that case there were absolutely no details available and the information supplied was extremely scanty and vague and in that light of those facts, the Hon'ble Jurisdictional Delhi High Court held that initiation of proceedings u/s 147 of the Act by the AO was not valid and justified in the eyes of law. The recent d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble High Court observed that, the Supreme Court itself in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P). Ltd. (supra) had held that, even where proceedings under Section 147 are sought to be taken with reference to an intimation framed earlier under Section 143(1), the ingredients of Section 147 have to be fulfilled. The Hon'ble High Court observed that, the language employed in Section 147 makes no distinction between an order passed under section 143(3) and the intimation issued under section 143(1) and hence it is not permissible to adopt different standards while interpreting the words "reason to believe". The ingredient is that there should exist "reason to believe" that income chargeable to tax has escaped assessment. The High Court thus held that the requirement of "reason to believe" cannot be dispensed with even with reference to an intimation under Section 143(1). The High Court categorically observed that, an assessment cannot be reopened on the basis of a mere guess, suspicion, gossip or rumour. It was held that, one needs to give a schematic interpretation to the words "reason to believe" failing which, section 147 would give arbitrary powers to the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for religious purposes. It is also not discernible as to which particular religion was being propagated and in which manner and why the utilization at the child development centers was being baldly inferred as religious activities. 14. In the second paragraph, the AO notes that the assessee Trust is registered u/s.12AA of the Act as a Charitable Trust in 2001 and granted approval also u/s.80G in the year 2011. In the third paragraph, the AO notes that the assessee Trust had filed its RoI for AY 2010-11 on 20.09.2010 admitting 'NIL' income which was processed u/s.143(1) of the Act on 02.02.2012 and the gross receipts of the assessee Trust was to the tune of Rs. 1,04,33,790/- which consists of foreign contributions granted M/s.CBV of Rs. 1,00,18,456/- as well as local account and bank interest. These observations are noted to be general in nature giving the background facts of the assessee trust. 15. Thereafter, according to the AO, the major claim of the assessee Trust was under one project, but again no details of such project is given in the recorded reasons. The AO further observes that, out of the foreign contributions of Rs. 1,00,18,456/-, the assessee has applied a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry so that it can be found out whether there is any substance or material to substantiate that there is merit in the information adduced by the DCIT(E) and after post enquiry the AO has to take an independent decision whether to re-open the assessment or not. And at the cost of repetition, we say that the AO should not act on dictate of any other authority like in this case from DCIT(E) because then it would be borrowed satisfaction of the jurisdictional fact & law which is not permitted by law and consequently vitiate the assumption of jurisdiction by AO to reopen u/s. 147 of the Act. 18. In the present case, reading of the aforesaid reasons recorded reveals that, the core allegation is that, the assessee utilized the funds given to it by M/s.CBV& M/s. Compassion International for religious purposes rather than for charitable purposes. However, nowhere in the body of the reasons recorded, the AO has stated to have alleged whether the funds given to assessee has been used for advancement, support or propagation of a particular religion and its tenets. It has also not been mentioned as to the manner in which the funds were diverted for religious purposes and as to how the monies sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any particular religion, community or caste, the question of disallowing the exemption claimed u/s 11 for registered trust u/s.12A of the Act does not arise. In this case, there is no whisper in the recorded reasons about assessee applying its income for the benefit of any particular religious or caste in violation of Section 13(1)(a) of the Act. Even the reference to the information stated in Para No.1 and conclusion thereafter, has got no nexus whatsoever basis which any prudent person properly instructed in law could draw a linkage that the AO was in possession of tangible material that there is an escapement of income from assessment to the tune of Rs. 90,71,612/-. At the cost of repetitions, we note that AO simply on the basis of the letter from DCIT(E) has jumped into conclusion that there is an escapement of income which is erroneous since it does not satisfy the jurisdictional fact and law for reopening as envisaged u/s. 147 of the Act. The AO simply taking note of the DCIT(E) letter has borrowed the satisfaction without independent application of mind to form reason warrant holding a belief that income chargeable to tax has escaped assessment. Just because a letter has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act to carry out the projects viz., (a)Ayanavaram Child Development Centre, Ayanavaram, Chennai and (b) Chengalpatu Child Development Centre, Chengelpet. However, the assessee, M/s. The Gate of Hope Charitable Trust had carried out the religious activities as against its charitable objects. The relevant portion of the information is as under: "M/s. Caruna Bal Vikas, is a society registered under Section 12AA of the Income Tax Act and assessed in this office. The assessee society, M/s. Caruna Bal Vikas was referred to Special Audit u/s. 142(2A) of the Act for the AY 2013-14. During the course of Special Audit, it is seen that M/s. Compassion International is transferring funds to M/s. Caruna Bal Vikas, the funds are given to many channel partners to carry out religious activities. As directed by M/s.Compassion International and M/s. Caruna Bal Vikas, the entire funds are to be used by the chanel partners for the purpose of carrying out activities as per objectives of M/s. Compassion International which is religious. It is noticed that M/s. The Gate of Hope Charitable Trust had received funds during the AYs. 2010-11 to 2014-15. The said M/s. The Gate of Hope Charitable Trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p the reopening jurisdiction can be discerned from perusal of the above reasons recorded by the AO. It is observed that, the Para 1 contains the general information & background facts concerning the assessee's case for AY 2011-12. The relevant paras to be examined are Paras 2 & 3. It is observed that, in Para No.2, the AO takes note of the information which he received from the DCIT(E), Chennai dated 02.02.2017 wherein the said DCIT(E) observed that, the assessee Trust had received funds from M/s.Caruna Bal Vikas (hereinafter referred to as 'M/s.CBV') to carry out projects at "Ayanavaram Child Development Centre" at Chennai as well as "Chengalpattu Child Development Centre", Chengalpattu. According to the DCIT(E) of the donor, the accounts of M/s CBV was referred for Special Audit and that it was gathered that M/s. Compassion International is transferring funds to M/s. CBV, which in turn is giving the funds to many channel partners to carry out religious activities. The DCIT(E) of the donor M/s CBV thus is noted to have suspected that the funds received by the assessee Trust would have been used to carry out religious activities against its charitable objects. The AO in Para 3 is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the latter at child development centers and there is no allegation levelled in the recorded reasons that these child development centers are only a façade or that, in these child development centers, the assessee is conducting any activities for a particular religion or caste in violation of Section 13(1)(a) of the Act. Only because, the special auditor of M/s CBV found that M/s CBV was receiving funds from M/s Compassion International, which was existing for religious purposes, it cannot be presumed that the further utilization of funds in India was also for religious purposes. If that be so, it was incumbent upon the AO at least bring some material or evidence on record through the recorded reasons basis which any prudent person could arrive at a reasonable belief that, the funds received from the donor by the assessee which were meant to be utilized for its charitable objects, had been diverted for propagation of any particular religion/religious purposes. However, it is noted that, there is no such whisper or allegation in the above extracted recorded reasons. Nowhere in the body of the reasons recorded, the AO or Special Auditor has stated to have alleged as to how or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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