Citation- St. Mary's Charity Fund v. Union of India
High Court- High Court of Kerala
ITA No: W.P.(C) No. 29203 of 2016
Assessment Year: 2009-10
Date of Order- August 30, 2024
Brief Facts:
The assessee was a registered charitable society and had accumulated ₹50 lakhs under section 11(2) for the purpose of construction of buildings.
However, the asesseee had to sell its properties and decided to use the accumulated funds to purchase new land instead of constructing buildings. Consequently, it invoked section 11(3A) w.r.t the funds accumulated under section 11(2) with an application to Deputy Commissioner seeking permission to modify the purpose of the accumulated funds, but no orders were issued on the application.
The income tax return filed by the assessee was selected for scrutiny and the Assessing Officer issued a reopening notice under Section 148, claiming that the assessee used the accumulated income to purchase land for purposes not specified in Form No. 10, and without the AO's permission, which constituted a violation of Section 11(3A).
Observations of the Tribunal:
The High Court held as follows:
In order to invoke section 148, the notice has to be issued within 4 years from the end of the assessment year. The period of 4 years had lapsed. In order to justify re-opening with an extended time limit of 6 years under section 149(1)(b), the AO should have a "reason to believe" that income had escaped assessment to tax and such "reason to believe" had to be on account of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Both conditions had to be satisfied if the six year period of limitation was to be considered by the revenue department.
It was clear that the department had been notified regarding accumulation for one purpose and utilization for another purpose in 2011 itself. It was also evident that the department was aware of this and hence, it could not be said that the petitioner had withheld any material information that justified the department to have recourse to the extended period of six years for issuing the notice under Section 149.
Further, it was important to examine whether the notice issued was a case of ‘"mere change of opinion on the part of the assessing authority “. The SC in CIT v. Kelvinator of India Ltd. [320 ITR 561 (SC)] had held that the assessing officer had power to reopen, provided there was "tangible material" to come to the conclusion that there had been escapement of income from assessment and the reasons had a live link with the formation of the belief. Hence, it was held by the Apex Court that the AO had the power to re-assess and not to review.
Once a query has been raised by the AO during the assessment proceedings and the assessee has responded to that query, it would necessarily follow, that the Assessing Officer has accepted the assessee's submissions, so as to not deal with that issue in the assessment order.
Hence, the reason for notice issued to re-open the assessment had to be examined. The said reason was with reference to the accumulation and mobilization of amounts for different purposes.
The contention of the revenue, that the reason was a different one could not be accepted. Even with a cursory glance at the notice issued by revenue and the reply from the assessee would show that the reasons highlighted for initiation of re-opening the assessment by the revenue were one and the same. Since no query was raised, there cannot be any change of opinion by revenue.
Hence, the Court held that the notice of re-opening had to be set aside since it was a case of ‘mere change of opinion’.
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