By Jagdish D. Shah
Jagdish T. Punjabi
Chartered Accountants
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Tribunal New
(Full text of the following Tribunal decisions are available at the Society’s
office on written request. For members desiring that the Society mails a copy to
them, Rs.30 per decision will be charged for photocopying and postage.)
Part B :
Unreported Decisions
15 Pirojsha Godrej Foundation v.
ADIT (Exemptions)
ITAT ‘C’ Bench, Mumbai
Before D. K. Agarwal (JM) and
Pramod Kumar (AM)
ITA No. 1976/Mum./2008
A.Y. : 2001-02. Decided on : 31-5-2010
Counsel for assessee/revenue : P. J. Pardiwala/K. K. Mahajan
Income-tax Act, 1961 — S. 143(1)(a), S. 147. Even when the
original assessment is u/s.143(1) and even when reassessment proceedings are
initiated within a period of four years, it is still necessary that there should
be reasons to believe that income had escaped assessment and such reasons are
subject to judicial scrutiny.
Per Pramod Kumar :
Facts :
The assessee was a charitable trust, registered u/s.12A of
the Act, notified, for the relevant period, u/s.10(23C)(iv) of the Act. The
assessee in its return of income filed on 29th October, 2001 declared exemption
u/s.10(23C) and declared nil taxable income. This return was processed u/s.
143(1)(a). On 26th May, 2004, the assessee was served a notice u/s.148 and
income of the assessee was proposed to be reassessed. The Assessing Officer (AO)
had, in the reasons recorded, stated that since the assessee has not invested a
sum of Rs.1.02 crores in accordance with the provisions of S. 11(5), the said
sum of Rs.1.02 crores is chargeable to tax and has escaped assessment.
Aggrieved the assessee preferred an appeal to the CIT(A) and
challenged the validity of the jurisdiction assumed u/s.147 of the Act on the
ground that the AO had resorted to reassessment proceedings without having a
valid reason to believe that the income had escaped assessment. The CIT(A)
upheld the action of the AO.
Aggrieved the assessee preferred an appeal to the Tribunal.
Held :
(1) The
recorded reasons that the violation of S. 11(5) r.w. S. 13(1)(d) by the assessee
leads to the amount of Rs.1.02 crores to be included in the assessee’s total
income are clearly contrary to the legal position which is that while the
assessee may lose exemption u/s.10(23)(c) for not adhering to the conditions of
S. 11(5), this does not result in the said amount being chargeable to tax in the
hands of the assessee. The Tribunal held that the reasons for reopening of
assessment have been recorded without application of mind and without
considering the applicable legal position, as expected of an AO while exercising
his powers u/s.147.
(2) The Tribunal after examining the reasons recorded in the
light of the observations of the Bombay High Court in the case of Hindustan
Lever Ltd. (268 ITR 332) and of the Supreme Court in the case of Kelvinator of
India Ltd. (320 ITR 561) concluded that there was no material before the AO that
any income, leave aside the income of Rs.1.02 crores has escaped assessment. The
Tribunal observed that no reasonable person, with basic understanding of the
scheme of income-tax law, can come to the conclusion that the AO has arrived at.
It held that there was no cause and effect relationship between what the AO has
noticed in the attachments to the income-tax return and the conclusion he has
arrived at.
(3) Even when the original assessment is u/s. 143(1) and even
when reassessment proceedings are initiated within a period of four years, it is
still necessary that there should be reasons to believe that income had escaped
assessment and such reasons are subject to judicial scrutiny. No doubt that at
the stage of reassessment proceedings, it is not necessary to establish that
there has been an escapement of income, but essentially there have to be valid
reasons to believe that the income has escaped assessment and these reasons, on
a stand-alone basis, must be considered appropriate for arriving at the
conclusion arrived at by the Officer recording the reasons.
The Tribunal held the very initiation of the reassessment
proceedings, on the facts of this case and on the basis of the reasons recorded
by the AO to be bad in law and quashed the reassessment proceedings. The
Tribunal allowed the appeal filed by the assessee.
Cases referred :
(1) CIT v. Kelvinator of India Ltd., (320 ITR 561) (SC)
(2) Prashant S. Joshi v. ITO, (Writ Petition No. 2287 of
2009, judgment dated 22-2-2010)
(3) Hindustan Lever Ltd. v. R. B. Wadkar, (268 ITR 332) (Bom.)
