Reopening not justified when there is no evidence to show that there was escapement of income due to failure on the part of assessee to disclose fully and truly all material facts necessary for assessment
Navodaya Grama Vikas Charitable Trust Vs ACIT
ITA No.552 & 553/Bang/2018
Reopening not justified when there is no evidence to show that there was escapement of income due to failure on the part of assessee to disclose fully and truly all material facts necessary for assessment. With this observation, assessee’s appeal allowed by ITAT, Banglore.
Short Overview of the case:
The assessee is a charitable trust engaged in the charitable activities of helping the rural poor by forming Self Help Groups (SHG) and providing them with financial and other assistance.
The assessee had filed Return declaring NIL income after claiming exemption u/s 11 and thereafter assessment was completed u/s 143(3) accepting the income declared by the assessee.
The AO later on passed order u/s 143(3) r.w.s. 147 determining the total income of the assessee at Rs.85,29,235 as excess of income over application u/s 11 by changing the method of computing the income and application excluding the loans advanced by the assessee to SHG and recovery of the loans from SHG that was considered as income.
The AO arrived at the belief that income had escaped assessment by virtue of the fact that Pushparaj Jain has received an advance of Rs.2.50 Crores towards sale of land from the assessee and had also made certain advances to M N Rajendra Kumar, the trustee of the assessee trust.
The AO was of the opinion that the trust was diverting its funds violating section 13(2) to specified people mentioned in Sectin 13(3) of the Act without adequate security or compensation resulting in loss of revenue to the trust, improper application of trust funds in investments and the income of Rs.2.5 Crores diverted to the trustee and treated as taxable income and is charged at maximum marginal rate.
On appeal, the CIT(A) concurred with the action of the Assessing Officer.
On appeal, the ITAT on the issue as to whether reopening is justified when there is no evidence to show that there was escapement of income due to failure on the part of assessee to disclose fully and truly all material facts necessary for assessment, held No.
It observed as under :
++ from the reasons recorded it can be said that the original assessment is sought to be reopened in exercise of powers u/s 147/148 on change of opinion by the AO, which is not permissible more particularly when the original assessment is sought to be reopened after a period of four years from the end of the assessment year. In the present case, the original assessment for the assessment year 2009-10 was completed u/s. 143(3) on 25/11/2011 and notice for re-opening of assessment was issued to the assessee on 13/04/2015. As per the provisions of section 147 of the I.T. Act if in any assessment year and if after expiry of four years from the end of the relevant assessment year, action sought to be taken u/s. 147 of the I.T. Act, such action can be only in cases where income chargeable to tax has escaped assessment in such assessment year by reason of failure on the part of the assessee to disclose truly and fully all material facts necessary for his assessment in such assessment year. It is seen from the reasons recorded for re-opening of assessment that it does not show that there was escapement of income due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment of income of the assessee for the assessment year 2009-10. Under the circumstances, the conditions stipulated under first proviso to section 147 are not satisfied and therefore, on the said ground alone, the impugned notice deserves to be quashed and set aside.
