Relief to Shri Sai Baba Sansthan Trust: Bombay HC halts Reopening Income Tax Assessment of A.Y. 2014-15 [Read Order]

The Bombay High Court granted relief to the The Shri Saibaba Sansthan Trust - Shirdi (Saibaba Trust), preventing the Revenue from reopening the assessment of the Trust for the Assessment Year (A.Y.)  2014-15.

The Shri Sai Baba Sansthan Trust is a public charitable trust managing the Shri Sai Baba Temple at Shirdi, and is involved in religious and charitable activities relating to the Shirdi temple and faith in reverence of Shri Sai Baba of Shirdi. The trust is registered under Section 12A and avails the donation benefits meted out to specified institutions under Section 80F of the Income Tax Act, 1961.

For A.Y. 2014-15, the Trust filed its income tax return under Section 143(3), declaring "nil" taxable income. Saibaba Trust continued to file their income tax returns for the subsequent years until March 2019, when the Deputy Commissioner of Income Tax issued a notice under Section 148 seeking to reopen the assessment, alleging discrepancy of the provisions of Section 11(5) of the Act.

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On 31 August, 2015, the Petitioner was issued with a notice under Section 143(2) of the Income Tax Act, 1961 indicating multiple issues with their return of income for the relevant assessment year. The return was subjected to scrutiny, and an assessment order under Section 143(3) was passed by the Assessing Officer (AO) on November 24, 2016, acceding to claims of exemptions under Section 11 raised by Saibaba Trust.

Subsequently, on March 31, 2019, the Deputy Commissioner of Income Tax (Exemptions) issued a notice under Section 148 of the  Income Tax Act, 1961 seeking to reopen the assessment for the A.Y. 2014-15. The notice leveled multifaceted allegations including failure of the Trust to convert donated ornaments and jewellery into permissible investments in contravention with the provisions of Section 11(5) of the Income Tax Act.

The Revenue further alleged discrepancies in disclosure in the financial statements, suggesting escapement of income in reference to anonymous donations received by Saibaba Trust in the form of cash in hundi boxes were also taxable under Section 115BBC(1) of the Income Tax Act, 1691.

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Though the Trust raised their objections towards the notice, the same were refuted by the AO who proceeded with reassessment. The present matter has been lodged before the High Court against the reassessment.

Appearing for the Trust, Senior Advocate S. Ganesh, along with Ashwin Shete and Anvi Vasani instructed by Jayakar & Partners submitted that all donations, both in kind and cash had been fully disclosed in the audited balance sheets during the original assessment. It was further alleged that the Assessing Officer had failed to raise objections at the initial stage, implying acceptance of the disclosures.

Furthermore, an injunction issued by the Bombay High Court on October 16, 2012, prohibited the Trust from selling donated valuables, rendering compliance with Section 11(5) impractical. Additionally, S. Ganesh underlined that the Section 80G certificate further validated compliance with exemption norms, reinforcing the legitimacy of the claims raised by Saibaba Trust.

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Conversely, Akhileshwar Sharma appearing for the Revenue reinforced their arguments that Donations in kind were not invested in the prescribed modes and that anonymous donations in cash were liable to be taxed under Section 115BBC, as the Trust did not qualify for exemption under Section 115BBC(2)(b) of the Act.

The Division Bench of Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla observed that the Assessing Officer had relied on the material available during the initial assessment while calling for reassessment, violating prescribed provisions and invalidating the reassessment.

The Bombay High Court further noted that requiring the Trust to comply with Section 11(5) was impossible owing to the 2012 injunction issued by the Bombay High Court, a fact that had already been known to the Assessing Officer.

The Bench further affirmed the charitable status of the trust noting that the Section 80G certificate had been valid during the relevant period and that the original assessment had rightfully recorded the disclosures including anonymous donations and donations in kind received by the Trust.

In light of the observations, the Bench proceeded to allow the petition impugning the reassessment Orders purported by the Revenue.

To Read the full text of the Order CLICK HERE

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