Case Name: Shri Saibaba Sansthan Trust (Shirdi) v. Union of India & Ors.
Case Number: Writ Petition No. 4817 of 2022
Date: December 20, 2024
Quorum: Hon’ble Justice G. S. Kulkarni and Hon’ble Justice Firdosh P. Pooniwalla
FACTS OF THE CASE
The Shri Saibaba Sansthan Trust looks after the staggering Sai Baba Temple in Shirdi, which draws millions of devotees across the world. The trust operates under the Shri Saibaba Sansthan (Shirdi) Act, 2002, and is mainly engaged in religious and charitable activities. For AY 2014-15, the trust filed a tax return stating that they were entitled to exemptions under Sections 11 and 12A of the Income Tax Act, 1961, which was assessed under Section 143(3) in 2016.
In 2019, the Deputy Commissioner of Income Tax reopened the assessment under Section 148 due to issues regarding anonymous donations and a claim of investment non-compliance as per Section 11(5). With the argument that the said reassessment was based on materials that were scrutinized during the first assessment, it was non-evident and had no new tangible evidence.
ISSUE OF THE CASE
Validity of reopening of assessment for AY 2014-15 u/s 148 of the Income-tax Act in the absence of any new tangible material but on previous scrutinized material alone?
LEGAL PROVISIONS
Section 11 of the Income Tax Act: This section shall be dealt with exempting property income held under a trust for religious or charitable purposes, provided such income shall be applied in establishing the purposes of the said trust and compliance with certain prescribed conditions.
Section 12A: This registration is mandatory for the trust to avail of exemption under Section 11. It ensures that the trust is formed exclusively for the purpose of genuine religious or charitable activities.
Section 115BBC: This section taxes an anonymous donation received by charitable trusts, except those fully religious trusts or complying with Section 115BBC(2)(b).
Section 148: The reopening of assessments in addition to many other procedural safeguards is undertaken under this section. The procedure must be followed meticulously, and the reopening must be backed by fresh tangible material.
ARGUMENTS
Arguments of the Petitioner (Shri Saibaba Sansthan Trust)
The petitioner contended that reopening of assessment was unlawful, since material had already undergone scrutiny back in 2016. It was asserted that the trust was both charitable and religious in nature, thus exempted from tax under the definition of anonymous donations as defined under Section 115 BBC(2)(b). Judicial orders had stalled the conversion of donated properties into prescribed investments under Section 11(5).
Arguments of the Respondents (Income Tax Department)
The respondents submitted that reopening of the assessment was in conformity with the law, because such reopening had been carried out within four years of the original assessment. They argued that the grounds for reassessment were supported by anonymous donations of the trust in violation of Section 11(5). These issues were not sufficiently addressed in the original assessment.
ANALYSIS
Such direction was re-iterated by this court that for the reopening of any assessment under Section 148, it is necessary to have in hand some new tangible material which was not available during the original proceedings. The reopening proceedings were initiated solely in regard to the materials which had undergone scrutiny earlier and that was in violation of the principles governing reassessments. Under the circumstances, the court also noted the judicial restraint forbidding the said petitioners from converting donated valuables into prescribed investments under Section 11(5), and so it found the trust’s non-compliance with the provisions of the said section excusable in light of the circumstances.
JUDGMENT
Reopening of the assessment based on the lack of fresh tangible material was completely squashed by the court. The notice under Section 148 and the order dismissing the petitioner’s objections were set aside. There will be no reassessment by Revenue on the stated grounds.
CONCLUSION
The judgment affirms that reassessment processes may not render chances for reopening adjudicated matters without new evidence. Ensures that charitable trusts do not fall prey to the procedural long reach while safeguarding the integrity of tax laws.
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WRITTEN BY MADHAV SAXENA
