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2016 (4) TMI 311 - GUJARAT HIGH COURT

2016 (4) TMI 311 - GUJARAT HIGH COURT - TMI - Reopening of assessment - non filing of Form No.10 resolution on or before the time allowed under section 139 of the Act as per section 11(2)(a)- Held that:- In view of the clear language of sub-sections (2) and (3) of section 11 of the Act, sub-section (3) of section 11 of the Act would be applicable only in case certain funds have been set apart or accumulated in terms of the provisions of clauses (a) and (b) of sub-section (2) of section 11 of the .....

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come chargeable to tax has escaped assessment in the assessment years under consideration. The assumption of jurisdiction by the Assessing Officer under section 147 of the Act by issuing the impugned notices under section 148 is, therefore, without any authority of law. Consequently, the impugned notices cannot be sustained.

Insofar as assessment year 2008-09 is concerned, there is an additional factor which renders the impugned notice unsustainable. As pointed out by the learned coun .....

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as to which factor would have weighed with him for the purpose of arriving at the belief that income chargeable to tax has escaped assessment and to what extent the decision is vitiated. The Assessing Officer, having taken into consideration facts which are contrary to the record for the purpose of forming the belief that income chargeable to tax has escaped assessment, for this reason also it cannot be said that he could have formed the belief that income chargeable to tax has escaped assessme .....

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y these petitions under Article 226 of the Constitution of India, the petitioner has challenged the notices issued by the respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) seeking to reopen the assessment of the petitioner for assessment years 2008-09, 2009-10, 2010-11 and 2011-12 respectively. 2. Since the facts in all these petitions are common and the parties are also common, the same were taken up for hearing together and are decided by this commo .....

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09.11.2003 showing deficit of ₹ 5,57,062/-. Subsequently, by the impugned notice dated 04.03.2015, the assessment for the assessment year 2009-10 is sought to be reopened under section 147 of the Act. For assessment year 2004-05, the petitioner filed return of income on 19.01.2005 showing deficit of ₹ 58,02,739/-. Subsequently, a notice dated 04.03.2015 came to be issued under section 148 of the Act seeking to reopen the assessment of the petitioner for assessment year 2010-11. In re .....

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ees of the trust clearly mentioning the intention of the trust for which such an accumulation has been done before the Assessing Officer on or before the stipulated time allowed as per section 139(1) of the Act. For the above referred assessment years, the assessee had not filed Form No.10 resolution on or before the time allowed under section 139 of the Act. Moreover, the time of five years allowed under section 11(2) had also elapsed. In view of the aforesaid, the amounts as mentioned in the r .....

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tention of the court to the reasons recorded for reopening the assessment for assessment year 2008-09 to submit that whereas the reasons state that Form No.10 is not filed, the fact is that it has been filed. It was pointed out that by a letter dated 24.10.2015 of the petitioner s Chartered Accountant addressed to the Assessing Officer, a copy of the return, Form No.10 and computation of surplus of ₹ 95,917/- were again filed along with the letter. It was argued that the entire reasons sho .....

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position that when the officer concerned has taken into consideration an irrelevant fact, it cannot be said with certainty as to which factor would have weighed with him for the purpose of arriving at the belief that income chargeable to tax has escaped assessment. 6.1 Next, it was submitted that as per the reasons recorded for reopening the assessment in each of the assessment years, on the one hand it is the case of the Assessing Officer that the petitioner had not filed Form No.10 in assessm .....

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nt within the next five year. It was submitted that in the absence of any Form No.10 having been filed, there was no corresponding obligation to spend such amount within the next five years; and if there was no obligation to spend within the next five years, nothing is taxable in law in the assessment years under consideration because of non-spending within the five years. It was reiterated that in relation to assessment year 2008-09, the Assessing Officer has proceeded on the basis of wrong fac .....

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etitioner (assessee) had not filed Form No.10. According to the learned counsel, if Form No.10 has not been filed in respect of accumulated income, then there was no question of complying with the conditions of section 11(2) of the Act and hence, on the grounds stated in the reasons recorded, the Assessing Officer could not have formed the opinion that any income chargeable to tax has escaped. It was, accordingly, urged that assumption on the part of the Assessing Officer by issuance of notices .....

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hin a period of five years, whereas such accumulated fund has not been utilized and therefore, the same is required to be taxed in the sixth year. Referring to the reasons recorded, it was submitted that there is no room for doubt about the ground of formation of belief that the income chargeable to tax has escaped assessment inasmuch as, the ground for formation of such belief is that the accumulated fund has not been utilized. It was submitted that the Assessing Officer is clear that there are .....

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gist of the reasons is the applicability of sub-section (3) of section 11 of the Act. Therefore, on the reasons recorded, the formation of the belief that the income chargeable to tax has escaped assessment for the assessment years under consideration is wholly justified. Under the circumstances, there is no lack of jurisdiction on the part of the Assessing Officer, warranting interference by this court. 8. Before adverting to the rival submissions, it may be germane to refer to the reasons rec .....

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e A.R. of the assessee trust, it came to notice that assessee trust has filed return of income for A.Y. 2002-03 declaring income of ₹ 10,77,884/-. Computation of income for the said A.Y. 2002-03 reveals that total income of the trust is of ₹ 10,77,884/-, out of which an amount of ₹ 9,31,331/- was accumulated and shown as an amount to be accumulated/set apart for future application towards the object of the trust. As per section 11(2)(a) of the Income Tax Act, the trust is requi .....

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2014 reveals that trust has not filed Form No.10 resolution on or before time allowed u/s 139. Moreover, time of five years allowed u/s 11(2) has also elapsed. In view of these, an amount of ₹ 9,31,331/- is required to be treated as chargeable income u/s 11(2) of the Act in A.Y. 2008-09. As there is an under assessment of income to the tune of ₹ 9,31,331/- within the meaning of section 147 of the Income Tax Act, 1961 on account of accumulated funds not utilized by the assessee trust .....

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with a resolution of the trust passed by the trustees of the trust clearly mentioning the intention of the trust for which the accumulation had been done, before the Assessing Officer on or before the stipulated time allowed as per section 139(1) of the Act. It is further the case of the Assessing Officer that the amount as mentioned in the reasons recorded had been accumulated and set apart for future application towards the object of the trust. It is also the case of the Assessing Officer that .....

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erty held for charitable or religious purposes . Sub-section (2) of section 11, as it stood at the relevant time, provided that where seventy-five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in Ind .....

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rs; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5). Sub-section (3) of section 11 of the Act, inter alia, provides that any income referred to in sub-section (2) which is not utilized for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry of such period, shall be deemed to be the income of such person in the pr .....

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e Assessing Officer has also recorded that the assessee has not filed Form No.10 on or before the time allowed under section 139 of the Act. Thus, it is the categorical case of the Assessing Officer that the petitioner has not complied with the requirements of clause (a) of sub-section (2) of section 11 of the Act. Nonetheless, it is the case of the Assessing officer that since the amount so accumulated or set apart has not been utilized within the period of five years as stipulated under the Ac .....

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mount should have been set apart or accumulated in terms of clause (a) of sub-section (2) of section 11. In the present case, in the reasons recorded for reopening the assessments, it is the specific case of the Assessing Officer that the petitioner has not filed Form No.10 in the prescribed manner and that the petitioner has not complied with the requirements of clause (a) of sub-section (2) of section 11 of the Act. As a necessary corollary it follows that no amount had been accumulated or set .....

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2004-05 and 2006-07, the petitioner had not utilized the sums referred to in the reasons recorded by the Assessing Officer, without following the procedure prescribed under section 11(2) (b) of the Act for setting apart or accumulation of funds, such amounts would be the income of the said assessment years and ought to have been taxed in those assessment years. This view is fortified by the decision of the Supreme Court in Commissioner of Income-tax, Vidarbha, Nagpur v. Nagpur Hotel Owners Assoc .....

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of fact, this benefit of excluding this particular part of the income from the net of taxation arises from Section 11 and is subject to the conditions specified therein. Therefore, it is necessary that the assessing authority must have this information at the time he completes the assessment. In the absence of any such information, it will not be possible for the assessing authority to give the assessee the benefit of such exclusion and once the assessment is so completed, in our opinion, it wo .....

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Act and taxing such amount after the lapse of a period of five years would not arise. In view of the clear language of sub-sections (2) and (3) of section 11 of the Act, sub-section (3) of section 11 of the Act would be applicable only in case certain funds have been set apart or accumulated in terms of the provisions of clauses (a) and (b) of sub-section (2) of section 11 of the Act. In the absence of any funds having been set apart under rule 17 of the Income Tax Rules, 1962 by filing Form No. .....

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