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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 ..... 016-17 on 10.05.2016. No scrutiny assessment was carried out in relation to the said assessment year. 3. Thereafter, by the impugned notice under section 148 of the Act, the assessment for assessment year 2016-17 is sought to be reopened. The reasons for reopening were furnished to the petitioner by a letter dated 12.06.2018. Vide letter dated 19.07.2018, the petitioner raised various objections on merits and requested the respondent to drop the reassessment proceedings. By a letter dated 08.10.2018, the respondent rejected the objections. Being aggrieved, the petitioner has filed the present petition. 4. Mr. B. S. Soparkar, learned advocate for the petitioner, invited the attention of the court to the reasons recorded for reopening the assessment to submit that there are no allegations of misuse or abuse of funds by the trustees of the trust and that the funds were accumulated as contemplated under the provisions of the Act. It was submitted that accumulation of funds does not make the object of the trust non-charitable. It was pointed out that the Assessing Officer seeks to reopen the assessment on the ground that there is violation of section 11(2) read with section 11(3)(d) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of 36 months. The court found that reference to section 54E was not an error which was manifest from the reasons recorded and that therefore, the reasons on which the notice for reopening was issued, lacked validity as section 54E of the Act was neither applicable nor sought to be applied by the assessee. The court observed that it is well settled that notice for reopening has to be sustained and supported only on the basis of the reasons recorded by the Assessing Officer and not with the help of extraneous ground, material or possible improvement. 4.3 In conclusion, it was submitted that therefore, the assumption of jurisdiction on the part of the Assessing Officer under section 147 of the Act is without authority of law and that the impugned notice being invalid is required to be quashed and set aside. 5. Vehemently opposing the petition, Ms. Mauna Bhatt, learned senior standing counsel for the respondent, submitted that the Assessing Officer, on the basis of material on record, has formed the belief that income chargeable to tax has escaped assessment because the activities of the assessee are not charitable in nature. Referring to the reasons recorded, it was submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax v. Rajesh Jhaveri Stock Brokers Private Limited, (2007) 291 ITR 500 (2008) 14 SCC 208, wherein, it has been held thus: "19. Section 147 authorises and permits the assessing officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the assessing officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the assessing officer should have finally ascertained the fact by legal evidence or conclusion. The function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. 20.As observed by the Delhi High Court (sic the Supreme Court) in Central Provinces Manganese Ore Co. Ltd. v. ITO, [1991] 191 ITR 662, for initiation of action under Section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not render the assessing officer powerless to initiate reassessment proceedings even when intimation under Section 143(1) had been issued." 5.3 The learned senior standing counsel further submitted that in the facts of the present case also, there was no scrutiny assessment and, therefore, the above-referred decision is squarely applicable to the facts of the present case and that as long as the ingredients of section 147 of the Act are fulfilled, the Assessing Officer is free to initiate proceedings thereunder. It was submitted that the Assessing Officer having reason to believe that income chargeable to tax has escaped assessment, at this stage, he is not required to conclusively prove that such income has actually escaped assessment. Therefore, there is no warrant for intervention by this court and that the petition, being devoid of merits, deserves to be dismissed. 6. In rejoinder, Mr. B. S. Soparkar, learned advocate for the petitioner submitted that the reasons are clear and unambiguous. It was submitted that in the reasons recorded, the Assessing Officer has held that the petitioner has violated the provisions of section 11(3)(d) of the Act which is wrong on facts and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to exemption under sections 11 and 12 of the Act is based upon the finding of contravention of section 11(3)(d) of the Act, it may be germane to first deal with the said issue. 11. In this case, the assessee has donated Rs. 3,00,00,000/- to CIMS Hospital Pvt. Ltd. which is admittedly not a charitable institution registered under section 12AA of the Act. Reference may be made at this juncture, to section 11 of the Act. Section 11 of the Act falls under Chapter III of the Act which bears the heading "Incomes which do not form part of total income", and to the extent the same is relevant for the present purpose, reads thus: "Income from property held for charitable or religious purposes.- 11.(1) xxxxxx (2) Where eighty-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 India, such income so accumulated or set apart shall not be included in the total income of the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or, as the case may be, of the previous year immediately following the expiry of the period aforesaid." 12. Thus, sub-section (2) of section 11 of the Act permits the assessee to accumulate the income referred to in clause (a) or clause (b) of sub-section (1) in the manner provided thereunder. In this case, it is an admitted position that the assessee has accumulated income in terms of section 11(2) of the Act. 13. Sub-section (3) of section 11 of the Act provides for the circumstances, in which, the income referred to in sub-section (2) thereof, shall be deemed to be income of such person. In this case the Assessing Officer has placed reliance upon clause (d) of subsection (3) of section 11. On a plain reading of the provisions of clause (d), it is manifest that to fall within the ambit thereof income should have been credited or paid to (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved by the prescribed authority:" 14. In the facts of the present case, it is an admitted position that CIMS Hospital Pvt. Ltd does not fall within the ambit of any of the above clauses. As rightly submitted by the learned counsel for the petitioner, income of the institutions that are registered under section 12AA of the Act or fall within the ambit of sub-clauses (iv), (v), (vi) and (via) of clause (23C) of section 10 of the Act is exempt income and, therefore, if any amount is paid to such institutions, the very same income would get double benefit, namely that, it would be exempted in the hands of the assessee and then again in the hands of the recipient. In the present case, since CIMS Hospital Private Ltd. does not fall within the ambit of any of the above provisions, section 11(3)(d) of the Act would not be attracted in respect of any amount paid to it. 15. At this stage it may be pertinent to refer to paragraph 5.2 of the reasons recorded by the Assessing Officer for reopening the assessment, which reads thus: "5.2 Thus, assessee has clearly violated the Section 11(2) r.w.s. 11(3)(d). Accordingly, payment to CIMS Hospital Pvt. Ltd will be deemed income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 11 and 12 of the Act. However, nothing has been stated as to how there is violation of sections 11 to 13 of the Act if CIMS Hospital Pvt. Ltd. is not registered under section 12AA or covered by the above-referred sub-clauses of clause (23C) of section 10 of the Act. Section 11 of the Act requires the funds to be used for charitable purposes, but it does not say that such funds have to be given only to the institutions which are registered under section 12AA or covered by the above-referred clauses. Besides, if any funds are given to any such institution which is registered under section 12AA or covered by the above-referred clauses, by virtue of section 11(3)(d) of the Act, the amounts so given, would not be exempted. 18. On behalf of the respondent, it has been argued that if there is violation of any other provision of section 11(3) other than clause (d) thereof, it would not make the reopening bad as the escapement of income may be relatable to some other provision of the Act.In the opinion of this court, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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