Facts of the Case

The assessee, a registered educational trust enjoying exemption under Section 12AA and 80G, filed nil income returns for AY 2006-07 and AY 2007-08. Initially, assessments were completed under Section 143(3).

Subsequently, based on information received from the Income Tax Investigation Wing and CBI reports, it was revealed that large sums of money were deposited as donations through accommodation entries. The investigation disclosed that:

  • Donations were routed through intermediaries.
  • Several alleged donors denied making any donations.
  • Cash was allegedly converted into cheques to show bogus donations.

Accordingly, reassessment proceedings were initiated under Section 147/148, and additions were made under Section 68 treating donations as unexplained income.

 

Issues Involved

  1. Whether reopening of assessment under Section 147 was valid based on information from CBI/investigation wing.
  2. Whether the Assessing Officer had “reason to believe” income had escaped assessment.
  3. Whether donations received by the assessee could be treated as unexplained cash credits under Section 68.

 

Petitioner’s Arguments

  • The assessee contended that donations were genuine and supported by:
    • Confirmations
    • Bank statements
    • Income tax records of donors
  • It argued that reopening was invalid as:
    • No independent inquiry was conducted by the Assessing Officer
    • Reopening was based merely on external information
  • Reliance was placed on earlier ITAT order accepting donations as genuine.
  • The CBI report was claimed to be irrelevant and not connected to the assessee.

 

Respondent’s Arguments

  • The Revenue argued that:
    • Reopening was based on credible and tangible material from CBI investigation
    • Donors were found to be bogus and denied making donations
    • Cash deposits were routed through accommodation entries
  • The assessee failed to prove:
    • Identity
    • Creditworthiness
    • Genuineness of donors

 

Court Findings / Order

The Delhi High Court dismissed the appeals and upheld the orders of lower authorities, holding:

1. Valid Reopening under Section 147

  • The Assessing Officer had tangible material based on CBI investigation.
  • There was a live nexus between information and belief of escaped income.
  • Reopening was legally justified.

2. Bogus Donations – Addition u/s 68 Upheld

  • Donors denied giving donations during investigation.
  • Evidence submitted during original assessment was found to be false.
  • The assessee failed to discharge the burden of proof.

3. Earlier Assessment Not Binding

  • Once reassessment is validly initiated, earlier findings lose significance.

4. No Substantial Question of Law

  • The issues were factual in nature and did not warrant interference under Section 260A.

 

Important Clarifications by Court

  • Reopening can be valid even after 4 years if there is failure to disclose true facts.
  • Information from investigative agencies like CBI constitutes tangible material.
  • Mere submission of documents is insufficient if later found to be false.
  • Burden of proof under Section 68 lies on the assessee to prove:
    • Identity
    • Creditworthiness
    • Genuineness

Sections Involved

  • Section 147 – Income Escaping Assessment
  • Section 148 – Issue of Notice for Reassessment
  • Section 151 – Sanction for Reopening
  • Section 68 – Unexplained Cash Credit
  • Section 143(3) – Assessment
  • Section 254 – ITAT Powers

 

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:3701-DB/SVN22122020ITA1542020_155446.pdf

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