The Delhi High court upholds the reassessment against the trust for wrongfull application of foreign contributions
Title-Enviornics Trust vs The Dept Commissioner of Income tax
Decided on- 8/11/2023
+W.P.(c) 14191/2023
CORAM- HON’BLE CHIEF JUSTICE & HON’BLE JUSTICE MR. TUSHAR RAO GEDELA
INTRODUCTION
The petition is been filed by the petitioner i.e environic trust challenges the order dated 19/04/2023 issued by Respondent ( Revenue department under section 148A(d) of the income tax act,1961 (the impugned order) pursuant to show cause notice issued under section 148 (b) of the IT act dated 29/03/2023 and the consequent reassessment notice dated 19/04/2023 issued by the respondent under section 148 ig the IT act.
FACTS
As per the facts the petitioner is a trust registered under the applicable laws with an objective to conduct research & development of environmental issues and human behaviour to innovate and implement technical and institutional design for integrated social development and provide assistance to various local and national authorities and have done impactful work for the ecological and environmental conservation.as on 05/10/2023 the petitioner was granted registation under foreign contribution (Regulation ) Act 1976 for the purpose of receiving foreign contributions and under FCRA petitioner was declared to be social nature and there was survey which was conducted by the respondent for which no incriminating material were found. whereas on 16/ 01/2023 a notice was recieved by the petitioner from FCRA wing Ministry of Home affairs seeking information of foreign contributions received and utilized by the petitioner as the respondent issued the impunged show cause notice to the Petitioner in relation to an alleged escaped assessment of income to the extent of INR 2,23,95,787 on account of a wrongful claim qua foreign contribution under Section 11 of the IT Act.As on 10.04.2023, the Petitioner vehemently denied the allegations made by the Respondent against the Petitioner in the Impugned SCN. Thereafter, the Impugned Order and the Impugned Notice came to be issued wherein it has been insinuated that the Petitioner engaged identified persons including the Legal Initiative for Forest and Environment (“LIFE”) to initiate litigation in India for lobbying against certain economic activitie.the petitioner submission has been that under the amended Section 149(1) of the IT Act1 the reassessment period was limited to 3 years from the end of the relevant AY and 10 years if the evaded income exceeded INR 50,00,000 and was represented as an asset in the financials of the asessee and petitioner also states that that prior to a notice under Section 148A, the Assessing Officer (“AO”) must have had information which suggested the escapement of tax. Lastly the petitioner has drawn the attention of this Court to a decision dated 25.05.2023 in W.P (C) No. 7324 of 2023. It has been submitted that in a parallel case, this Court has entertained theafore mentioned writ petition and accordingly, has also granted a stay qua the proceedings. Whereas per the learned council for respondent states that Impugned Proceedings were predicated on the premise that certain identified foreign income had escaped assessment. The aforesaid culminated in the issuance of the Impugned Notice and has been submitted that the AO has on the basis of (i) the trust deed of the Petitioner Trust (the “Trust Deed”); and (ii) the statement of Mr. Ramamurthi Sreedhara, Managing Trustee of the Petitioner Trust has come to the conclusion that the Petitioner through an identified advocate and LIFE was involved in litigation against the Union of India. Furthermore, it has been submitted that the Petitioner was funded through OXFAM India to mobilize local workers union against the coal sector in India. Accordingly, it is submitted that the aforesaid activities could not be construed to be activities in furtherance of the object of the Petitioner Trust and as a consequence, the exemption under Section 11 / Section 12 of the IT Act was wrongly availed and also state that Petitioner has suppressed a material fact under the present petition and also state that its status as a charitable trust had not been cancelled whereas, vide an order dated 29.09.2023 the registration of the Petitioner under Section 12A and 12AA had been cancelled qua Financial Year and Accordingly, it has been submitted that this Court ought not to entertain this present petition.
THE COURT ANALYSIS AND DECISION
As after hearing both the side learned council ,The fulcrum of the dispute before thw Court is two-fold i.e. whether the AO could have initiated reassessment proceedings pursuant to Section 149(1) of the IT Act and whether the AO had requisite material / information to arrive at a subjective satisfaction that there was an escapement of income qua the Petitioner. As regarding to the first issue the court observed that the arguments advanced by the Petitioner qua the expiry of limitation in relation to the issuance of the Impugned Notice cannot be sustained as the income escaped assessment extended to higher that the minimum and the initiation of reassessment proceedings in the case herein would resultantly extend to 10 (ten) years in light of the fact that the AO had in its possession inter alia books of accounts evidencing voluntary deposits in bank account and the Court is satisfied 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 and accordingly, the wrongful application of the exemption availed under Section 11 / Section 12 of the IT Act 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 income for the purpose of assessment under the IT ACT as in the present case, the Petitioner has unquestionably suppressed material facts in relation to the cancellation of its registration under Section 12A, 12AA and 12AB of the IT Act and the court observed If the applicant does not disclose full facts or suppresses relevant materials or is otherwise guilty of misleading the court, the court may dismiss the action without adjudicating the matter and accordingly the court reject the petition and also petitioner failed to make out a case warranting the interference so this writ petition along with pending application stands disposed off.
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Written by – Prachee Novo Mukherjee
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