[Cites 12, Cited by 0]
Bombay High Court
Commissioner Of Income Tax - Exemption, ... vs Muniwar Abad Charitable Trust on 29 April, 2026
2026:BHC-OS:11202-DB
P.H. JAYANI 07 WITH 10 ITXA1457.2018 .DOC
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISIDICTION
INCOME TAX APPEAL NO. 2515 OF 2018
Commissioner of Income Tax- (Exemption),
R.No. 617 Mumbai, Piramal Chamber,
Lalbaug, ...Appellant
Mumbai - 400 012.
Versus
M/s. Muniwar Abad Charitable Trust
405A/407, Jolly Bhavan No.1 10,
New Marine Lines, Mumbai - 400 020. ... Respondent
WITH
INCOME TAX APPEAL NO. 1457 OF 2018
Commissioner of Income Tax- (Exemption),
Mumbai, Piramal Chamber, Lalbaug,
Mumbai - 400 012. ...Appellant
Versus
M/s. Muniwar Abad Charitable Trust
405A/407, Jolly Bhavan No.1 10,
New Marine Lines, Mumbai - 400 020. ... Respondent
Mr. Suresh Kumar for the Appellant.
Mr. Balakrishna V. Jhaveri for the Respondent.
CORAM: SUMAN SHYAM &
SHYAM C. CHANDAK, JJ.
RESERVED ON : 26th MARCH, 2026
PRONOUNCED ON : 29th APRIL, 2026
JUDGMENT :
(PER : SHYAM C. CHANDAK, J.)
1. These are Appeals under the provisions of Section 260-A of
the Income Tax Act, 1961 (for short 'the Act') preferred by the
Revenue challenging the common Order dated 6 th September, 2017
passed by the Income Tax Appellate Tribunal (for short 'ITAT'),
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Mumbai in Income Tax Appeal No.784/Mum/2015 (A.Y.2004-05)
and in Income Tax Appeal No.785/Mum/2015 (A.Y.2005-06)
respectively. Thereby said Appeals filed by the Respondent
(Assessee) were allowed. Income Tax Appeal No.2515/2018 relates
to the Assessment Year 2004-05 and Income Tax Appeal
No.1457/2018 pertains to the Assessment Year 2005-06.
2. The assessee resisted the Appeals by filing the Affidavit-in-
Reply of its trustee Mr. Ahmed Akbarali Sundrani.
3. Heard Mr. Suresh Kumar, the learned counsel appearing for
the Appellant and Mr. Balakrishna Jhaveri, the learned counsel
appearing for the Respondent.
4. The Appeals raise following substantial questions of law :-
"A. Whether on the facts and in the circumstances of the
case and in law, the Hon'ble Tribunal was correct in holding
proceedings u/S. 147 invalid on the ground that the income
has not escaped assessment for non disclosure of true and
full disclosure of facts by the assessee despite the fact that in
the Return of Income and during assessment proceedings
neither the complete and correct facts relating to
computation of capital gain and claim of deduction u/S.
11(1A) were disclosed nor they were verified by the A.O. in
original proceedings u/S. 143(3) of the I.T. Act ?
B. Whether on the facts and in the circumstances of the
case and in law, the Hon'ble ITAT was right by ignoring the
decision of Hon'ble Bomby High Court in the case of Yuvraj
Vs. Union of India 315 ITR 84 (Bombay HC) wherein it was
held that points not decided while passing assessment order
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u/S. 143(3) is not a case of change of opinion and
reassessment proceedings to verify the facts not decided in
original order are valid action on the part of AO?
C. Whether on the facts and in the circumstances of the
case and in law, the Hon'ble ITAT is correct in not
adjudicating other issue on merit?
5. Since both Appeals arise out of similar set of facts, involving
common substantial questions of law, we are referring to the facts
of only Income Tax Appeal No.2515/2018 herein below :-
That, an Order was passed u/S. 143(3) of the Act on
30/11/2006 assessing the total income of the assessee at Rs.Nil.
Subsequently, the said assessment was re-opened with the prior
approval of the DIT(E), Mumbai. The Assessing Officer ('AO', for
short ) then passed an Order u/S. 143(3) read with Section 147 of
the Act on 27/12/2011 and made an addition of Rs.7,80,00,000/-
on account of sale consideration being Development Right on land
being Bandivali Property, Mumbai on the ground that the assessee
had violated the provisions of Section 11(5) of the said Act.
Aggrieved, the assessee filed an Appeal impugning the Order
dated 27/12/2011 before the learned CIT (Appeals), Mumbai
being Appeal No.CIT(A)-I/IT/E-I/(64)/2011-12. The learned CIT
(Appeals) upheld the re-opening of the assessment by observing
that, various essential and material facts relating to the nature and
mode of capital assets held by the trust and sold out during the
year, were not fully disclosed; that, the Assessing Officer had also
not verified and examined the mode and nature of acquisition of
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the capital assets held by it; that, it had not provided the full
details; that, it had not placed on record the necessary details and
documents which could lead to the conclusion that there were
material discrepancies in receipt of the sale consideration and the
alleged fixed deposits purchased by the assessee; that, the record
of cash and bank balances reflecting common pool of funds, was
not sufficient to segregate the amounts and dates of fixed deposits
as required for making the claim of exemption u/S. 11(1A) of the
said Act; that, the claim of fixed deposits classified and recorded in
the balance sheet under the head cash and bank balances was
incomplete disclosure; that, it was misleading accounting; that,
there was no full and true disclosure by the assessee on the issue of
sale and acquisition and subsequent compliance or condition in the
context of capital assets. Accordingly, the CIT(A) passed an Order
dated 18.12.2014.
Being further aggrieved, the assessee preferred Income Tax
Appeal No.784/Mum/2015 (A.Y.2004-05) before the ITAT,
Mumbai. Vide impugned Order dated 6th September, 2017 the said
Appeal was allowed by the ITAT, Mumbai holding that the AO has
not established the failure of the assessee to disclose truly and fully
the material facts necessary for making the original assessment. It
has been observed that failure of the assessee is not only to be
alleged but has to be demonstrated by positive evidences. The AO
has used the terminology used in the Section, but has not
explained as to how and which material facts the assessee did not
or had failed to disclose. All the facts about the sale of
development rights and investments of sale proceeds in form of
FDRs was dealt with by the AO in great details in the original
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assessment. Further, the ITAT has also held that there is no failure
on the part of the assessee to disclose fully and truly the material
facts as the assessee had filed all the details of the impugned
transaction. Being aggrieved, the Revenue has preferred the
Appeal.
6. Mr. Suresh Kumar, the learned counsel for the Appellant
submitted that although this is a case of re-opening the assessment
after a lapse of 4 years from the end of relevant assessment year, it
was within permissible limits, i.e., wilful suppression of material
information about the income. Despite such a suppression on the
part of the assessee, the ITAT has declined to accept that fact.
Thus, the impugned decision and Order suffers from non-
application of mind and therefore it is liable to be quashed and set-
aside. To support these submissions, Mr. Suresh Kumar has relied
upon the decision in the case of Yuvraj v. Union of India reported
in [2009] 315 ITR 84 (Bombay).
7. In contrast, Mr. Jhaveri the learned counsel for the assessee
has submitted that the impugned Order is a speaking order as it
recorded sufficient reasons to disagree with the findings and the
Order of the AO and thereafter, in the Order passed by the CIT
(Appeals). Said findings clearly indicate that there was no
suppression of the income by the trust. Consequently, this was not
a fit case for re-opening the assessment after a lapse of the period
of 4 years. Therefore, the impugned Order is sustainable in law.
8. We have considered these submissions and perused the
entire order.
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9. The AO reopened the case on the ground that the taxable
income had escaped the assessment. Accordingly, notice u/S. 148
of the Act was issued to the assessee. The assessee vide its letter
dated 31/03/2011 requested the AO to consider the original
returns filed in response to the notice. After hearing the objection
of assessee in respect to the supply of reasons for reopening, the
AO observed and held that the assessee had sold a plot of land and
received sale consideration of Rs.7,80,00,000/-. However, the
assessee had failed to invest the sale consideration as required by
Section 11(5) of the Act. Therefore, the assessee cannot get the
benefit of accumulation as per sub-clause (b) of Section 11(2) of
the Act. As a result, the sale consideration of Rs.7,80,00,000/- was
added to the income of the assessee for the year under the Appeal.
10. The learned ITAT observed that the power to reopen an
assessment u/S. 147 of the Act is in the nature of an exception to
the general principle that an assessment order once made would
be final. The effect of reopening is to partly vacate or set aside the
original order of assessment and to substitute it. No doubt,
escapement of income includes both non-assessment/under-
assessment, but, it is mandated by the provisions of the Act that
reasons to believe must necessarily show, indicate and
communicate why and on what grounds it can be said that any
income has escaped assessment. Reasons recorded must be
germane, pertinent and disclose a prima facie belief that income
has escaped assessment. The relevance of reason has to be
established. So, if the reasons do not show any nexus or
connection with the allegation of under assessment, they fall in the
realm of suspicion, surmise or conjecture. It is observed that
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reasons to believe must have a rational connection and should be
relevant for the formation of a belief regarding escapement of
income and should not be extraneous or irrelevant, otherwise they
will be considered as invalid since they do not meet the statutory
prerequisites. The policy of law is that there should be finality in
all legal proceedings. Thus, stale or irrelevant issues should not
and cannot be a ground to reactivate closed and concluded
proceedings. Formation of rational belief that income chargeable to
tax had escaped assessment is a condition precedent for validly
initiating reassessment proceedings.
11. In the case of United Shippers Ltd. v. CIT reported in 2015
SCC OnLine Bom 733, this Court has held that when an assessment
is sought to be reopened after the expiry of four years from the
end of the relevant assessment year, the proviso to Section 147 of
the Act stipulates a requirement that there must a failure on the
part of the assessee to disclose fully and truly all material facts
necessary for the assessment of income for that year. This is the
primary and the jurisdictional requirement being the mandate of
the proviso to the provisions of section 147. In this context, the
ITAT observed that, "failure" on the part of the assessee is not
restricted to the Income-tax return and the columns of the return
or the tax audit report. The expression "failure to fully and truly
disclose material facts" also relates to the stage of the assessment
proceedings and there can be omission and failure on the part of
the assessee during the course of the assessment proceedings.
However, it was also observed that it is the duty of the AO to make
an enquiry and if he did not make an enquiry, it is a case of
oversight and it could not be said that the income chargeable to
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tax had escaped assessment by reason of the omission or failure on
the part of the assessee to disclose fully and truly all material facts.
It is trite that, even in cases where the AO has made a
mistake/error in assessing the income of an assessee, recourse to
Section 147 of the Act is not available and the appropriate course
would be for the Commissioner to pass an order u/S. 263 of the
Act, if he finds that the assessment order is erroneous inasmuch as
its is prejudicial to the interest of the Department.
12. As per the settled principles of taxation-law, when a notice
for reassessment is challenged, the burden is on the Revenue to
establish that the jurisdictional requirement stands satisfied. So far
as reason to believe on the part of the AO is concerned, at the
stage of issuing the notice only a prima facie and not a conclusive
case of income escaping assessment should be established to turn
down a challenge to the reopening notice.
13. In case of Nishith Surendrabhai v. CIT reported in 2016 SCC
OnLine Guj 9980 referred by the learned ITAT, the conclusions of
the Assessing Officer were based on verification of the case record.
In other words, there was no material outside the assessment
proceedings which enabled the Assessing Officer to conclude that
income chargeable to tax had escaped assessment. The notice for
reopening was issued beyond a period of four years from the end
of the assessment year. The claim was also examined by the AO
during the assessment proceedings. Therefore, it was held that
having accepted the claim in law, but having made partial
disallowance after considering the facts, it was not open to the
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Assessing Officer to issue notice for reopening, that too, without
any additional material which would suggest that the assessee had
made a false declaration or provided inaccurate particulars.
14. In the light of aforesaid principles governing the re-opening,
when the ITAT examined the matter, it found that the AO had not
referred to any material, other than what was examined in the
initial round of assessment proceedings, to form his belief that the
assessee's income had escaped assessment. The AO's belief was
based solely on the basis of material already examined by him
during the first round of assessment proceedings. This aspect was
confirmed by the fact that the notice issued u/S. 148 started with
the sentence "On perusal of the records it is noticed that ...". This
denoted that the notice was not issued on the basis of new tangible
material, but on the reappraisal of the same material.
15. Additionally it was observed that, although the assessee had
filed detailed objections against re-opening, the AO had not passed
a speaking or reasoned order as to why the objections were not
sustainable. It was found that the AO had not established the
failure of the assessee to disclose truly and fully the material facts
necessary for making original assessment. All the facts about sale
of development rights and investments were produced and
deliberated upon during the original assessment proceedings.
Nevertheless, the AO had not explained as to how the assessee had
failed in his statutory duty to disclose the material facts leading to
"Rs. Nil" tax liability.
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16. As to the facts of the case, the learned ITAT found that the
issue of sale of development rights and investment of sale proceeds
in the form of FDRs was dealt with by the AO in great details in the
original Assessment. It was noticed that the assessee had filed
various details of the transaction including the details of FDRs on
02/08/2006 and 20/09/2006 before the AO. The note in the
computation of income for the year under appeal contained the
details about the transaction. The assessee had also supplied the
details of dates of receipt of consideration amounts, dates of
deposits and amounts invested by the assessee during the year
under consideration. By its letter dated 02/08/2006, the assessee
had filed detailed note on sale of the property, order of the charity
commissioner sanctioning the sale of property dated 17/03/2003
and a copy of sale agreement with VDL. Later on, by its letter
dated 20/09/2006, the assessee had filed details about names and
addresses of the partners of VDL, copies of fixed deposits with
Development Credit Bank, a copy of bank book giving detailed
narration of all the receipts and payments. It was also emphasised
that all the deposits were for the term exceeding 6 months
including renewals. It was also found that it had disclosed receipt
of compensation of Rs.31.78 lakhs for assigning the development
rights in respect of an adjacent plot on which there was a
reservation. The assessee had renewed certain earlier fixed deposit
and same had no connection with the compensation received on
sale of plot of land. After considering the above submissions of the
assessee and after deliberating upon the documents furnished by
it, the AO had passed the scrutiny assessment. He had formed an
informed opinion that the assessee was entitled to benefit of the
provisions of Section 11 of the Act and that it had made the
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investment on sale of one kind of assets in other assets within the
stipulated time and in prescribed manner. Later on, he issued a
notice u/S. 148 of the Act and has reappraised the same facts and
has reached on a different conclusion. It was a clear case of change
of opinion. There was no failure on the part of the assessee to
disclose fully and truly the material facts. In the facts of the case,
Mr. Suresh Kumar, the learned counsel could not take any
exception to the aforesaid observations by the learned ITAT.
17. In wake of above, the learned ITAT has reversed the order of
the FAA and answered the first effective ground of the appeal in
favour of the assessee. As a result, it was held that the
reassessment proceedings were invalid and declined to decide the
other issues raised by the assessee.
18. As noted above, the facts of the Income Tax Appeal
No.785/Mum/2015 were identical. The only difference was the
location of the property sold and the sale price received. During
the relevant financial year, the plot of land was sold in Pune for
Rs.11.93 crores. Therefore, following the findings, reasons and the
Order in Income Tax Appeal No.784/Mum/2015, the learned ITAT
had decided the effective ground of Income Tax Appeal
No.785/Mum/2015 in favour of the assessee and held that the
impugned Order passed by the AO u/S. 147 was invalid.
19. In so far as the cited decision in Yuvraj v. Union of India
(supra) is concerned, the facts of the said case are materially
distinct from the facts of the case in hand. While examining the
impugned Order in that case, this Court did not find any
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application of mind to the facts of the case, the issue to be dealt
with and the reasons for passing the Order. In contrast to this, in
the case in hand, the impugned Order is the outcome of a
thoughtful consideration of the facts, appreciation of the evidence
on record in its correct perspective and application of the settled
principles of law in the field. Therefore, the cited case is of no avail
to the Revenue.
20. In view of the above discussion, we are of the view that
there is no perversity or an infirmity in the impugned Order so as
to interfere with the same. No substantial question of law arises in
the Appeals. As a result, we refuse to admit both the aforesaid
Appeals and dismiss the same at the stage of admission.
(SHYAM C. CHANDAK, J.) (SUMAN SHYAM, J.)
PREETI
HEERO
JAYANI
29th April, 2026
