Friends of WWB, India vs Deputy Commissioner of Income Tax (Exemption)

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Akil Abdul Hamid Kureshi, J.—Heard learned counsel for the parties for final disposal of the petition. The petitioner has challenged the notice dated March 22, 2013, issued by the respondent, the Assessing Officer, for reopening the assessment of the petitioner for the assessment year 2008-09. The facts are as under:

The petitioner is a charitable trust registered under the Bombay Public Trust Act. For the assessment year 2008-09, the petitioner had filed a return of income declaring a total income of nil. Along with the return, the petitioner also submitted Form 10 and necessary resolutions of the petitioner trust. In the declaration under Form 10, the petitioner had disclosed that in the previous year relevant to the assessment year 2008-09, and subsequent years, an amount of Rs. 1.30 crores (rounded off), i.e. 5.35 per cent of the income of the trust was accumulated or set apart till March 31, 2013, for the purpose of advancement and promotion of direct participation of women and their families in full use of the economy and for such purpose to provide loan guarantee or security to banks and other financial institutions to advance loan to women for their business or occupation or other related activities. It was requested that in view of this, the petitioner complied with the conditions laid down in section 11(2) of the Income-tax Act, 1961, and the benefit thereof may, therefore, be given exempting the income in respect of such accumulated or set apart income. The petitioner also produced a resolution of the trust dated May 3, 2008, resolving to accumulate such income for a period of five years for the object of the trust.

The return of the petitioner was taken in scrutiny. The Assessing Officer had doubt about such accumulation. He, therefore, called for the details in following manner by his letter dated May 31, 2010:

"2. Details of amount accumulated or set apart for the last 5 years and its utilisation in subsequent years. Produce computation of income and statutory form for accumulation under section 11(2)."

In response to such query of the Assessing Officer, the petitioner replied under a communication dated June 21, 2010, as under:

"2. An amount of Rs. 93,20,000 has been accumulated or set apart under section 11(2) for the assessment year 2007-08 but there has been no accumulation for any of the four years prior to the assessment year 2007-08. However, for the year under consideration, i.e., the assessment year 2008-09, the amount of Rs. 1,30,75,000 has been set apart under section 11(2).

It was after such scrutiny that the Assessing Officer passed the order of assessment on October 29, 2010. With respect to the said issue of accumulation of the trust''s income, though he did not give any specific reasons, he accepted the entire claim of deduction under section 11(2) of the Act. He made disallowance of the claim of depreciation of Rs. 16.30 lakhs with which we are not concerned in this petition.

After such scrutiny assessment, the Assessing Officer issued the impugned notice dated March 22, 2013. At the request of the petitioner, he supplied the reasons recorded by him for issuing the notice. Such reasons read as under:

"The assessee, an organisation established to advance and promote direct participation of poor women, filed return of income for the assessment year 2008-09 having deficit of Rs. (-) 8,35,863 on September 30, 2008. The case was assessed under section 143(3) completed on October 29, 2010, determining the income at Rs. 7,95,101 the assessee had shown gross receipts Rs. 24,44,05,668 during the assessment year and claimed accumulation of Rs. 3,66,60,850 under section 11(1) and Rs. 1,30,75,000 under section 11(2) of the Income-tax Act.

Scrutiny of Form No. 10 submitted by the assessee-trust revealed that Rs. 3.60 crores has been set apart without any specific purpose and it is for the expenditure of the general objects of the trust, mentioned in the memorandum of association. Since the purpose of the provision of sub-section 11(2) is to allow accumulation of funds for specific purpose only, the deduction claimed by the assessee under section 11(2) was irregular and required to be treated as income of the trust for the assessment year 2008-09 and brought to tax. Omission to do so resulted in underassessment of Rs. 1,30,75,000.

For the above reasons, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Income-tax Act, for the assessment year 2008-09 and the case needs to be reopened under section 148 of the Income-tax Act."

The petitioner raised detailed objections under communication dated September 11, 2013, to the action of the Assessing Officer reopening the assessment. The Assessing Officer, however, rejected the objections under his order dated February 7, 2014. Hence, this petition.

Having heard the learned counsel for the parties and having perused the material on record, it emerges that the entire issue on the basis of which the assessment is sought to be reopened was examined by the Assessing Officer in the original assessment. It is true that the present case pertains to notice of reopening issued within the period of four years from the end of the relevant assessment year. The additional requirement flowing from the proviso to section of such income chargeable to tax having escaped assessment for the failure of the assessee to disclose truly and fully all material facts, therefore, need not be satisfied. Nevertheless, if an issue had been examined by the Assessing Officer in the original assessment proceedings, any reopening on the basis of such issue without any additional material would be a mere change of opinion. As held by this court in the case of Gujarat Power Corporation Ltd. Vs. Assistant Commissioner of Income Tax, , even when the Assessing Officer in an order of assessment had accepted the assessee''s stand and granted the claim as put forth, reopening on the same issue would not be permissible on the basis of the self-same material on record. Similar view is also taken by the Delhi High Court in the case of Commissioner of Income Tax-VI, New Delhi Vs. Usha International Limited, . In the present case, the Assessing Officer had raised a pointed query with respect to the amount accumulated or set apart for utilisation in subsequent years. He called upon the petitioner to give details and to produce computation of income and statutory form for accumulation of amount under section 11(2) of the Act. It was in response to such query, the petitioner pointed out that an amount of Rs. 93.20 lakhs was accumulated or set apart for the assessment year 2007-08 and in the year under consideration, i.e., 2008-09, a further sum of Rs. 1.30 crores was set apart under section 11(2) of the Act. In the return filed itself, the petitioner had produced Form 10 as well as the resolution of the trust setting apart such amount for a period of five years to be utilised for the purpose of the trust. It was after scrutinising the claim of deduction under section 11(2) of the Act that the Assessing Officer framed the assessment. He made no disallowance on such claim. He disallowed a part of the depreciation claimed by the petitioner. Though there was no reason given by the Assessing Officer for making any disallowance on this score, nevertheless, in the facts of the case, it cannot be stated that he had not scrutinised the petitioner''s claim for deduction under the said provision. Under the circumstances, the impugned notice can be said to be based on mere change of opinion on the part of the Assessing Officer. The same is, therefore, quashed. The petition is allowed and disposed of accordingly.