No Reassessment to verify bank account of assessee if already reflected in ITR : HC

By | April 16, 2018
(Last Updated On: April 16, 2018)

HIGH COURT OF GUJARAT

Sunrise Education Trust

v.

Income-tax officer (Exemption)

AKIL KURESHI AND B.N. KARIA, JJ.
SPECIAL CIVIL APPLICATION NO. 16726 OF 2017

FEBRUARY  19, 2018

Ms. Vaibhavi K. Parikh, Advocate for the Petitioner. Mrs. Mauna M. Bhatt, Advocate for the Respondent.
ORDER

 

Akil Kureshi, J. – Petitioner has challenged a Notice dated 31st March 2017 issued by the respondent-Assessing Officer to reopen the petitioner’s assessment for Assessment Year 2010-2011.

2. Brief facts are as under :

The petitioner is a registered Public Charitable Trust. For the Assessment Year 2010-2011, the petitioner had filed return of income on 13th August 2010 declaring nil income. Such return was accepted by the Assessing Officer under Section 143 [1] of the Income-tax Act, 1961 [“the Act” for short] without scrutiny. To reopen such assessment, the Assessing Officer issued the impugned notice. In order to do so, he had recorded the following reasons :

“As per information available with this office, assessee trust had deposited Cash of Rs. 33,97,775/- in Gandhidham during the year under consideration. It is seen from the office records that no return of income filed by the assessee trust for A.Y. 2010-11. As it is evidence from the office records that assessee trust failed to disclose true and correct financial statement of its income for A.Y. 2010-11 and also not offered any income for tax purpose. Thus I have reasons to believe that cash deposited in bank by the trust, ought to have been brought to tax has escaped the assessment within the meaning of section 147 of the I.T. Act. Therefore, I propose to assess/reassess the income of the assessee trust for A.Y.2010-11 as per the provisions of section 147 of the Income tax Act, subject to the provisions of Section 148 to 153 of the Income Tax Act, 1961.”

3. The petitioner raised objections to the notice of reopening under a communication dated 25th July 2017. In such objections, the assessee pointed out that the Trust files regular returns and for the present year also, such return was filed and duly acknowledged by the Department. The assessee appended a copy of such return. It was therefore urged that the reasons proceeded on wrong footing that no return was filed. The assessee raised several other contentions. While disposing of such objections, the AO observed as under :

“The objection has been gone through and is disposed off as follows :

The assessee’s connection is not correct as the information available with this office that the assessee trust has deposited cash of Rs. 33,97,775/- in the Bank Account. Further, if at all any cash transaction has been done that issue will be examined at the time of re-assessment proceedings. A.O. made satisfaction and recorded reason that I have reason to believe that cash deposited in bank by the trust, ought to have brought to has escaped the assessment within the meaning of section 147 of the I.T. Act. In this assessment year 2010-11, no scrutiny assessment has been done. Therefore, the contention of the assessee had disclosed all materials fully and truly for making assessment is factually wrong.”

4. The assessee thereupon filed the present petition.

5. Having heard learned counsel for the parties and having perused the documents on record, it could be straightway seen that the Assessing Officer in the reasons recorded, proceeded on the erroneous footing that the assessee had not filed return at all. The first premise for issuing the notice was thus factually incorrect. It is now not disputed by the Revenue that the assessee did file return of income for the year under consideration which was duly acknowledged by the Department. The entire reasoning thus proceeded on the wrong premise that the assessee had never filed the return. This itself would be sufficient to annul the notice of reopening the assessment.

6. Counsel for the Revenue however contended that in such return, the assessee had not disclosed the income of Rs. 33.97 lacs which the assessee-trust received in cash and deposited in a bank account. This assertion also is not borne out from the record. The assessee had from the outset been contending that the assessee’s accounts are duly audited and such audited accounts are presented alongwith the return. This has been so asserted in the objections before the Assessing Officer as well as in the petition before us. Both times, the response of the Assessing Officer in the order disposing of the objections and the affidavit-in-reply filed in this petition is that the assessee’s cash deposits can only be verified through assessment proceedings. In other words, the Assessing Officer does not even contended that the said cash deposits were not duly reflected in the return filed, but that he wishes to verify the validity of such deposits and the assessee’s claim of exemption, being a Trust. It is well settled through series of judgments of this Court that re-assessment, even in a case where the return was not scrutinized before acceptance originally, cannot be resorted to unless the Assessing Officer had a reason to believe that the income chargeable to tax has escaped assessment. In other words, for mere verification or for a fishing inquiry, reopening of the assessment is not permissible.

7. In the result, the impugned notice is set-aside. Petition is allowed accordingly.

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