In A Writ Petition Challenging Notice U/S 148 Income Tax Act, Court Cannot Enter Into Merits Of Subjective Satisfaction Of Assessing Officer: Delhi HC
The Delhi High Court observed that while considering a writ petition challenging a notice issued under Section 147/148 Income Tax Act, it cannot enter into the merits of the subjective satisfaction of the AO, or judge the sufficiency of the reasons recorded.
While upholding the reassessment proceedings against Petitioner, the Delhi High Court held that wrongful application of the exemption availed under Section 11 / Section 12 of the Income Tax Act in relation to foreign contributions/ funds would undoubtedly result in the AO forming the subjective satisfaction that the wrong availed exemption vis-à-vis foreign contributions escaped income for the purpose of assessment under the I-T Act.
The Division Bench comprising of Chief Justice Satish Chandra Sharma and Justice Tushar Rao Gedela observed that “the AO based its opinion on tangible and concrete information in the form of the Petitioner’s Trust Deed; and statement of Mr. Ramamurthi Sreedhara, Managing Trustee that certain identified foreign contributions received by the Petitioner were utilized for a purpose divergent to its object as disclosed in the Trust Deed”.
Senior Advocate Suruchi Aggarwal appeared for the Petitioner/ Assessee while the Respondent/ Revenue was represented by Solicitor General Tushar Mehta and Additional Solicitor General Balbir Singh.
The brief facts of the case were that the Assessee, a trust engaged in work related to ecological and environmental conservation, registered under FCRA with object of ‘social nature’ and was entitled to receive foreign contribution. During the relevant year, a survey was conducted on the Assessee wherein no incriminating material was found. However, books of accounts / financial documents and mobiles phones were seized. Later, on receiving information in relation to the foreign contributions received and utilized by the Assessee under FCRA, a show cause notice was issued on account of escapement of income for wrongful claim of foreign contribution under Section 11 of the I-T Act. During assessment, the AO held that there was apparent inconsistency between the purpose declared under the FCRA and return filed vis-a-vis the activities undertaken by the Assessee. The AO further opined that the Assessee’s status is submitted as a charitable trust, however, the registration of the Assessee under Section 12A and 12AA was cancelled and registration under Section 12AB was also cancelled.
After considering the submission and taking cognizance of narrow scope of judicial review in relation to testing the validity of reassessment proceedings, the Bench observed that an individual seeking to invoke the equitable jurisdiction of a High Court must approach this Court displaying bona fides.
Referring to the co-ordinate bench ruling in Acorus Unitech Wireless Pvt. Ltd v. ACIT [(2014) 362 ITR 417], the Bench reiterated that “the AO based its opinion on tangible and concrete information in the form of Trust Deed and statement of Managing Trustee that certain identified foreign contributions were utilized for a purpose divergent to its object as disclosed in the Trust deed, accordingly, wrongful application of the exemption availed under Section 11 / Section 12 in relation to such funds would undoubtedly result in the AO forming the subjective satisfaction that the wrong availed exemption vis-à-vis foreign contributions escaped assessment”.
Accordingly, the High Court finding that the Assessee had suppressed material facts regarding cancellation of its registration under Section 12A, 12AA and 12AB, concluded that such ground alone is sufficient enough to reject the petition.
Cause Title: Enviornics Trust v. The Dept Commissioner of Income Tax [Neutral Citation: 2023: DHC: 8136-DB]
Click here to read/download the Judgment
