8. os wp 2866 18.doc R.M. AMBERKAR (Private Secretary) IN HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. WRIT PETITION NO. 2866 OF 2018 Hinduja Foundation .. Petitioner Versus Income Tax Officer, Exemptions 1(3), Mumbai & Anr. .. Respondents ................... Mr. Mihir Naniwadekar a/w Mr. Ruturaj Gurjar for Petitioner Mr. Charanjeet Chanderpal a/w Ms. Pragya Chandra for Respondent ................... CORAM : AKIL KURESHI & M.S. SANKLECHA, JJ. DATE : FEBRUARY 15, 2019. P.C.: 1. petitioner has challenged notice of reopening of assessment dated 23.3.2018 issued by respondent - Assessing Officer under Section 148 of Income Tax Act, 1961 ("the Act" for short). 2. Brief facts are as under:- 2.1 Petitioner - Hinduja Foundation is registered trust. petitioner had filed return of income for assessment year 2013-14 on 27.9.2013 disclosing NIL income after taking benefit of Section 11 of Act. 1 of 11 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:48:19 ::: 8. os wp 2866 18.doc return was taken in scrutiny by Assessing Officer. He passed order of assessment under Section 143(3) of Act on 29.1.2016 in which he accepted petitioner's declaration of NIL Income. To reopen such assessment, Assessing Officer issued impugned notice which, as can be seen was done within period of four years from end of relevant assessment year. In order to do so, he had recorded following reasons:- " Reasons for re-opening of assessment u/s. 148 of Income Tax Act, 1961 for A.Y. 2013-14 1. assessee is trust which is registered with Director of Income Tax (Exemption), Mumbai u/s. 12A under registration No. TR/H(a)/33/74-758 of Income Tax Act, 1961. trust is also registered with Charity Commissioner, Mumbai. 2. main object of trust is as under:- i) Operating, Running, Continuing education and vocational school. ii) Establishment & support of Professorships, Instructorships, Fellowships, Lectureships, Scholarships and prizes at any school, colleges or other educational institutions. iii) Establishment & Maintenance of hostels and / or boarding houses to students and those connected with institutions. iv) Grant of subscriptions and donations to hospitals, dispensaries, convalescent homes, asylums, nursing homes, orphanages, etc. 2 of 11 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:48:19 ::: 8. os wp 2866 18.doc v. Establishment of cheap or low rent chawls / buildings / housing for poor etc. 3. In this case, assessee filed return of income on 27.9.2013 for Asst. Year 2013-14 and declaring total income at Rs. NIL after claiming exemption u/S. 11 of Income Tax Act, 1961. assessment u/S. 143(3) of I.T. Act,1961 has been completed in this case on 29.1.2016 assessing total income at Rs. NIL. 4. During course of assessment proceedings for A.Y. 2014-15 which was completed u/S. 143(3) vide order dated 31.12.2016 assessing total income at Rs. 4.29 crores, it is observed that assessee has received of Rs. 1,98,71,842/- from P.D. Hinduja National Hospital & Research Centre (PDHNHRC) and shown as Reimbursement of expenses. Hence, claim of exemption u/s 11 was denied. 4.1 In this regard, assessee had not furnished any documents regarding agreement between P.D. Hinduja Hospital & Reseach Centre (PDHNHRC) during course of proceedings for A.Y. 2014- 15. 4.2 Definition of Income as per 2(24)(iia) is reproduced as under:- Voluntary contribution received by trust created wholly or partly for charitable or religious purposes or by institution established wholly or partly for such purposes [or by association or institution referred to in clause (21) or clause (23), or by fund or trust or institution referred to in sub-clause (iv) or sub-clause (v) [or by any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via)] of clause (23C) of Section 10 or by electoral trust;] 3 of 11 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:48:19 ::: 8. os wp 2866 18.doc Explanation For purposes of this sub-clause, "trust" includes any other legal obligation;] From plain reading of Section 2(24)(iia) of I.T. Act, 1961, it is clear that any income derived from property held under trust forms parts of its income. 4.4 Findings during assessment proceedings for A.Y. 2014- 15:- If senior functionaries are working with P.D. Hinduja National Hospital & Research Centre (PDHNHMRC), then why PDHNHMRC is not able to pay these functionaries directly, is not divulged by assessee. question arises that why PDHNHMRC is using assessee as tool to make payment to these functionaries. When it can reimburse it then it can pay them directly also. 4.5 transaction is observed as follows:- Whatever nomenclature used by assessee,here assessee has received fund / donation for its object and has utilized for person who has donated money to assessee. 4.6 Here donation given by PDHNHMRC is more than Rs. 50,000/-. Therefore PDHNHMRC is covered u/S. 13(3)(b) of I.T. Act, 1961. 4.7 assessee has reimbursed for Chief Expenditure offer (CEO) and two directors remuneration. As PDHNHMRC is itself trust and all three persons are covered u/S. 13(3) of I.T. Act, 1961 and therefore, PDHNHMRC is using assessee trust as tool so that there should not be any objection regarding denial of Section 11 of I.T. Act, 1961 of PDHNHMRC. Here, assessee is only tool in hands of PDHNHMRC and payment which should have been paid by itself. It has used assessee as tool to distinguish its transaction. Hence, 4 of 11 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:48:19 ::: 8. os wp 2866 18.doc assessee has routed funds through PDHNHMRC which should have been paid by itself to distinguish transaction. 4.8 Section 13(3)(b) reads as under:- person referred to in clause 1 of sub-section (1) and sub- section (2) are following namely:- any person who has made substantial contribution to trust or institution, that is to say, any person whose total contribution up to end of relevant previous year exceeds fifty thousand rupees; Section 13(1)(c) reads as under:- 13.(1) Nothing contained in section 11 or section 12 shall operate so as to exclude from total income of previous year of person in receipt thereof (i) if such trust or institution has been created or established after commencement of this Act and under terms of trust or rules governing institution, any part of such income enures, or (ii) if any part of such income or any property of trust or institution (whenever created or established) is during previous year used or applied, directly or indirectly for benefit of any person referred to in sub-section (3). Section 13(2)(g) reads as under:- 2) Without prejudice to generality of provisions of clause I and clause (d) of sub-section (1), income or property of trust or institution or any part of such income or property shall, for purposes of that clause, be deemed to have been used or applied for benefit of person referred to in sub-section (3), 5 of 11 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:48:19 ::: 8. os wp 2866 18.doc (g) if any income or property of trust or institution is diverted during previous year in favour of any person referred to in sub-section (3): Provided that this clause shall not apply where income,or value of property or , as case may be, aggregate of income and value of property, so diverted does not exceed one thousand rupees; From plain reading of above section 13(1)(c) & 13(2)(g) of I.T. Act, 1961 it is clear that transaction of assessee with PDHNHMRC is covered u/s. 13(1)(c) & 13(2)(g) r.w.s. 13(3) OF I.T. Act, 1961. 4.9 Accordingly, provision of Section 13(1)(c) & 13(2)(g) r.w.s. 13(3) of I.T. Act, 1961 were invoked and exemption u/s. 11 was denied to assessee. 5. In A.Y. 2013-14 as well, assessee has received Rs. 76,59,018/- from PDHNHRC and again spent it on officers / Directors of PDHNHRC and claimed it as reimbursement of expenses. Here, PD Hinduja National Hospital & Research Centre (PDHNHRC) is covered u/S. 13(3)(b) of I.T. Act, 1961 as it has donated / given sum of Rs. 76,59,018/- to assessee. Here, assessee become 'Special Purpose Vehicle (SPV) of Hinduja Group. Assessee is making payment to three senior functionaries of PDHNHMRC, who are working with PDHNHMRC, and showing it as applicable of income. What assessee has stated is that it has entered into agreement to provide senior functionaries. Therefore, here again provisions of Section 13(1)(c) and 13(2) (g) r.w.s. 13(3) is applicable in A.Y. 2013-14 also and exemption u/s. 11 claimed by assessee of Rs. 87,71,567/- needs to be looked into. 6. Therefore, in view of above discussion and in order to arrive at real income of assessee, its computation needs to be re-worked for relevant assessment year, as far as above issue is concerned. 7. In view of above facts, I have been reason to believe that amount of more than Rs. 1,00,000/- which has been claimed as exempt u/s. 11 of I.T. Act, 1961 for A.Y. 2013-14 has escaped assessment within meaning of section 147 of I.T. Act, 1961. Therefore, I am satisfied that this is fit case for reopening u/S. 147 6 of 11 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:48:19 ::: 8. os wp 2866 18.doc of I.T. Act, 1961 for issue of notice u/s. 148 of Income Tax Act, 1961. 8. sanction u/s. 151(2) of Income Tax Act, 1961 is solicited for issuance of notice u/S. 148 of Act, if approved, as assessment is completed u/s 143(3) of Act." 3. Upon being supplied reasons, petitioner raised objections to notice of reopening of assessment under communication dated 16.7.2018. Such objections were rejected by Assessing Officer by order dated 24.8.2018 upon which this petition has been filed. 4. Mr. Naniwadekar, learned counsel appearing for petitioner has raised following two main contentions:- (i) Assessing Officer has proceeded on entirely erroneous factual basis. impugned notice should, therefore, be quashed; (ii) Even going by reasons recorded by Assessing Officer, it cannot be stated that any income chargeable to tax in hands of assessee had escaped assessment. In other words, reasons recorded lack validity. 5. On other hand, learned counsel for Revenue opposed petition contending that Assessing Officer has recorded proper reasons. At this stage, Court would 7 of 11 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:48:19 ::: 8. os wp 2866 18.doc not examine sufficiency of reasons. 6. Having heard learned counsel for parties and having perused documents on record, we may recall that impugned notice has been issued within period of four years from end of relevant assessment year in case where original assessment was framed after scrutiny. It is not case of petitioner that ground on which Assessing Officer desires to reopen assessment, came up for discussion during original scrutiny assessment. In other words, assessee does not press ground of change of opinion to attack impugned notice. 7. To appreciate petitioner's contention, we may summarize reasons which Assessing Officer has recorded. These reasons are some what long but in short, what Assessing Officer has contended is that petitioner Hinduja Foundation had received donation from Hinduja Hospital which is also registered trust of sum of Rs. 76.59 lacs. This amount was spent on officers / directors of Hinduja Hospital and was claimed as 8 of 11 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:48:19 ::: 8. os wp 2866 18.doc reimbursement of expenditure. According to Assessing Officer, therefore, such receipt was hit by Section 13(3)(b) of Act. In process, Assessing Officer refers to detail exercise which he had undertaken in case of assessee for assessment year 2014-15. We are prepared to accept contention of learned counsel for petitioner that sum of Rs. 76.59 lacs is not accurate and in fact, petitioner trust had received sum of Rs. 68.16 lacs from Hinduja Hospital. However, mere minor inaccuracy in indicating figure in reasons recorded, would not shake very foundation of reasons so as to nullify notice of reopening based on such reasons. We are also prepared to proceed on basis as contended by learned counsel for petitioner that there may be some differences in situation emerging out of return for assessment year 2014-15 and present one. Nevertheless, when we examined situation in present year, on basis of reasons recorded by Assessing Officer, we are unable to accept either of two contentions. Once, we proceed on basis that petitioner Hinduja Foundation received sizable donation from 9 of 11 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:48:19 ::: 8. os wp 2866 18.doc Hinduja Hospital and Assessing Officer asserts on prima facie information available with him that such sum was spent on officers / directors of Hinduja Hospital, question of applicability or non-applicability of Section 13(3) (b) in context of provisions contained in Section 13(1) (c)(ii) would arise. When such issue was never examined by Assessing Officer during original scrutiny assessment, we would be well advised not to carry out incisive inquiry into question which would inquiry, necessarily be factual as well as legal. opinion of law can be rendered only once facts are conclusively established. It is settled law that at stage of examining validity of notice of reopening of assessment in Writ Petition, Court would not, in exercise of writ jurisdiction, go into sufficiency of reasons recorded by Assessing Officer. Reference in this respect can be made to decisions of Supreme Court in case of Raymond Woollen Mills Ltd Vs. I.T.O. & Ors.1 and in case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt Ltd2. 1 (1999) 236 ITR 34 (SC) 2 (2007) 291 ITR 500 (SC) 10 of 11 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:48:19 ::: 8. os wp 2866 18.doc 8. In result, petition is dismissed. 9. At this stage, learned counsel for petitioner prayed that interim relief against carrying out assessment may be continued to enable petitioner to carry matter in appeal. Even in absence of continuation of stay, Assessing Officer is unlikely be able to complete assessment in hurry. Request for continuation of stay is refused. [ M.S. SANKLECHA, J. ] [ AKIL KURESHI, J ] 11 of 11 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:48:19 ::: Hinduja Foundation v. Income-tax Officer, Exemptions 1(3), Mumbai & Anr