Mahatma Gobarji Seva Sansthan ILOL Vs ITO (Gujarat High Court)
The Gujarat High Court addressed a petition filed by Mahatma Gobarji Seva Sansthan ILOL, challenging the reopening of its income tax assessment for the assessment year 2019-2020. The petitioner, a public charitable trust, argued that the reopening was invalid due to the absence of any genuine information indicating escaped income. The Income Tax Officer (ITO) had initially issued a notice under Section 148A(a) of the Income Tax Act, 1961, based on information suggesting large cash deposits by the trust. However, the trust clarified that the deposits were maintenance grants from the state government and not cash deposits, providing audited financial statements and bank records as evidence.
Despite the petitioner’s explanation and supporting documents, the ITO proceeded with the reopening, changing the basis for doing so. Instead of focusing on the alleged cash deposits, the ITO claimed that there was an excess of income over expenditure and undisclosed bank credits, leading to an alleged escapement of income. The Gujarat High Court found this change in rationale problematic. The court noted that the initial information regarding cash deposits was incorrect, as acknowledged by the ITO in their affidavit. Furthermore, the petitioner’s documents indicated an excess of expenditure over income, contradicting the ITO’s revised claims. The court emphasized that Section 148 of the Income Tax Act requires the Assessing Officer to possess information suggesting escaped income before reopening an assessment. In this case, the court concluded that no such valid information existed. Therefore, the High Court quashed the order under Section 148A(d) and the subsequent notice under Section 148, ruling that the reopening of the assessment was invalid due to the lack of escaped income and the improper consideration of the assessee’s explanation.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
