Form 10 Disclosure of Accumulation Purpose Satisfies S. 11(2): Bombay HC Quashes Reopening as Change of Opinion [Read Order]

The Bombay High Court, in a recent case, has clarified the scope of compliance under Section 11(2) of the Income Tax Act, 1961, and the limits of reassessment powers under Section 148. The Bench quashed notices issued under Sections 148A(b), 148A(d), and 148, holding that reopening based on audit objections constituted a change of opinion.

The petitioner, a charitable trust registered under Section 12A, had filed its return of income for AY 2018–19, claiming exemption under Section 11. Alongside Form 10, the trustees passed a resolution in September 2018 to accumulate ₹3.17 crore, representing 66.72% of income, for medical, educational, and social relief to members of the Zoroastrian community, and for conservation and upkeep of trust properties. The assessment was completed under Section 143(3), with the accumulation accepted.

Subsequently, the AO issued notices under Section 148A(b), alleging that Form 10 merely repeated the general objects of the trust without specifying particular purposes, thereby failing to meet Section 11(2)(a).

The petitioner responded that Form 10 had limited space and explicitly referred to the trustee resolution, which contained detailed purposes. The AO nevertheless passed an order under Section 148A(d), disallowing the accumulation and reopening the assessment based on internal audit objections.

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The Court examined Section 11(2), which requires a trust to furnish a statement in Form 10 specifying the purpose and period of accumulation, not exceeding five years. It noted that the petitioner had disclosed the purposes, medical, educational, social relief, and conservation, in Form 10, and had annexed the trustee resolution for further detail.

The Court rejected the Revenue’s contention that the resolution was belated, observing that the resolution was passed in September 2018 and furnished during assessment proceedings.

On the procedural aspect, the Divisional bench of Justice B. P. Colabawalla and Justice Amit Satyavan Jamsandekar emphasised that the issue of accumulation had already been scrutinised in the original assessment. The AO had sought details under Sections 142(1) and 143(2), and the petitioner had furnished comprehensive replies. The assessment order of February 2021 had accepted the accumulation.

In such circumstances, reopening the case on identical grounds amounted to a review of the earlier decision, which is impermissible. Audit objections, the Court held, do not constitute “information” justifying reassessment under Section 148.

The Bench concluded that the petitioner had complied with Section 11(2), and that the Revenue’s attempt to reopen the assessment was based on a mere change of opinion. Accordingly, the notices and order under Sections 148A(b), 148A(d), and 148 were quashed.

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