Source: Delhi High Court

Why in News?

A bench of Chief Justice Satish Chandra Sharma and Justice Tushar Rao Gedela rejected a petition by upholding the reassessment proceedings against Enviornics Trust for wrongful application of foreign contribution.

• The Delhi High Court gave this judgment in the case of Enviornics Trust v. The Dept. Commissioner of Income Tax.

What is the Background of Enviornics Trust v. The Dept. Commissioner of Income Tax Case?

• The Petitioner is a registered trust which conducts research & development.
• The Petitioner was granted registration under the Foreign Contribution (Regulations) Act, 1976.
• A survey was conducted by the Respondent under Section 133 of the Income Tax Act, 1961 (IT Act).
• It has been submitted that no incriminating materials were found during the Survey.
• However, the Respondent conducted an enquiry against the Petitioner where Respondent seized books of accounts / financial documents and mobiles phones belonging to the Petitioner Trust related to tax breaches.
• And a consequent notice for reassessment proceedings was issued by the Respondent under Section 148 of the IT Act.

What were the Court’s Observations?

• The Delhi HC held that “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.”.
• The SC further said that. “It is a well-settled position of law that an individual seeking to invoke the equitable jurisdiction of a High Court must approach this Court displaying bona fides”.

What is Reassessment Proceeding?

• The Income Tax Department may initiate reassessment proceedings if they have reason to believe that income has escaped assessment.
• This could be due to oversight, omission, incorrect information, or other factors that lead to the underassessment of income.
• The taxpayer is issued a notice by the Income Tax Department, informing them about the intention to reopen the assessment.
• The taxpayer is given an opportunity to provide explanations and submit relevant documents before the reassessment is finalized.
• After considering the taxpayer's response, the assessing officer completes the reassessment, and if necessary, may make adjustments to the tax liability.
• If the taxpayer disagrees with the reassessment, they have the right to appeal the decision to higher authorities, such as the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal.

What is Legal Provision Involved?

Section 148 of the IT Act: Issue of notice where income has escaped assessment

(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139.

(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.