AREEZ KHAMBATTA BENEVOLENT TRUST V. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1 EXEMPTION AHMEDABAD

SCA/16791/2018

AI Insights

The case involves the Areez Khambatta Benevolent Trust challenging a notice issued by the Deputy Commissioner of Income Tax under section 148 of the Income Tax Act, 1961, which sought to reopen the assessment for the year 2016-17. The reopening was based on the grounds that the trust had violated section 11(2) read with section 11(3)(d) of the Act by making a payment to CIMS Hospital Pvt. Ltd. for a Linac machine, which was not considered a charitable institution under the relevant sections. The trust argued that the reopening was based on incorrect application of the law, as CIMS Hospital did not fall under the categories specified in section 11(3)(d) and thus, the income should not be deemed as non-charitable.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 750838 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 13-02-2019
• Assessment Year: misc
• Other Referred Cases: Dhruv Parulbhai Patel vs. Assistant Commissioner of Income Tax, Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Private Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: B S SOPARKAR
• Keywords: Assessment Year 2016-17; Charitable Trust; Income tax exemption; Reopening of assessment; Section 11(2); Section 11(3)(d) violation
• Section: 148; 143(3); 11; 12AA; 13; 12; 10(23C); 11(2); 11(5); 11(1)(a); 11(3)(d)

Judgement Text

"C/SCA/16791/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 16791 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE DR.JUSTICE A. P. THAKER ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ========================================================== AREEZ KHAMBATTA BENEVOLENT TRUST Versus DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1 EXEMPTION AHMEDABAD ========================================================== Appearance: MR B S SOPARKAR(6851) for the PETITIONER(s) No. 1 MRS MAUNA M BHATT(174) for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE DR.JUSTICE A. P. THAKER Date : 13/02/2019 ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 17.05.2018 issued by Page 1 of 19 C/SCA/16791/2018 JUDGMENT the respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) whereby, the respondent seeks to reopen the assessment of the petitioner for assessment year 2016-17. 2. The petitioner, a public charitable trust, filed its return of income for assessment year 2015-16 on 29.09.2015 showing nil income. By an order dated 29.12.2017, the assessment came to be framed under section 143(3) of the Act disallowing deductions under sections 11 and 12 of the Act. The petitioner filed its return of income for assessment year 2016-17 on 10.05.2016. No scrutiny assessment was carried out in relation to the said assessment year. 3. Thereafter, by the impugned notice under section 148 of the Act, the assessment for assessment year 2016-17 is sought to be reopened. The reasons for reopening were furnished to the petitioner by a letter dated 12.06.2018. Vide letter dated 19.07.2018, the petitioner raised various objections on merits and requested the respondent to drop the reassessment proceedings. By a letter dated 08.10.2018, the respondent rejected the objections. Being aggrieved, the petitioner has filed the present petition. 4. Mr. B. S. Soparkar, learned advocate for the petitioner, invited the attention of the court to the reasons recorded for reopening the assessment to submit that there are no allegations of misuse or abuse of funds by the trustees of the trust and that the funds were accumulated as contemplated under the provisions of the Act. It was Page 2 of 19 C/SCA/16791/2018 JUDGMENT submitted that accumulation of funds does not make the object of the trust non-charitable. It was pointed out that the Assessing Officer seeks to reopen the assessment on the ground that there is violation of section 11(2) read with section 11(3)(d) of the Act as payment was made to CIMS Hospital Pvt. Ltd. for Linac machine. 4.1 Referring to section 11(3) of the Act, it was pointed out that, the same provides that any income referred to in sub-section (2), shall be deemed to be the income of such person of the previous year in which it is applied in the circumstances set out in clauses (a) to (d) thereunder. It was submitted that clause (d) can be invoked where such amount is credited or paid to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 of the Act. It was submitted that in the facts of the present case, CIMS Hospital Pvt. Ltd is neither an institution registered under section 12AA nor is it an institution referred to in the above referred sub-clauses of clause (23C) of section 10 and hence, the question of invoking section 11(3)(d) of the Act would not arise. It was submitted that the Assessing Officer, on the basis that there is violation of the provisions of section 11(3)(d) of the Act, has held that there is violation of section 11(2) of the Act, as the accumulated amount has not been used for charitable purposes. It was submitted that therefore, the reasons lacked validity insofar as they state that Page 3 of 19 C/SCA/16791/2018 JUDGMENT the petitioner has violated section 11(3)(d) of the Act which does not apply to this transaction and consequently, the allegation that there is breach of section 11(2) of the Act would also fall. 4.2 Reliance was placed upon the decision of a co-ordinate Bench of this court in case of Dhruv Parulbhai Patel vs. Assistant Commissioner of Income Tax, [2014] 45 taxmann.com 20 (Gujarat) wherein, the Court recorded that, in the reasons recorded, the Assessing Officer had observed that from the record of the assessee it was revealed that from its income and capital gain it was allowed exemption of capital gain income under section 54E of the Act. However, it was an admitted position that the claim of the assessee was under section 54 and not 54E of the Act. That the Assessing Officer in the reasons recorded desired to disallow the claim on the ground that as required under section 54E of the Act, the assessee did not invest the surplus for a minimum period of 36 months. The court found that reference to section 54E was not an error which was manifest from the reasons recorded and that therefore, the reasons on which the notice for reopening was issued, lacked validity as section 54E of the Act was neither applicable nor sought to be applied by the assessee. The court observed that it is well settled that notice for reopening has to be sustained and supported only on the basis of the reasons recorded by the Assessing Officer and not with the help of extraneous ground, material or possible improvement. 4.3 In conclusion, it was submitted that therefore, the assumption of jurisdiction on the part of the Assessing Officer under section 147 Page 4 of 19 C/SCA/16791/2018 JUDGMENT of the Act is without authority of law and that the impugned notice being invalid is required to be quashed and set aside. 5. Vehemently opposing the petition, Ms. Mauna Bhatt, learned senior standing counsel for the respondent, submitted that the Assessing Officer, on the basis of material on record, has formed the belief that income chargeable to tax has escaped assessment because the activities of the assessee are not charitable in nature. Referring to the reasons recorded, it was submitted that there was ample material with the Assessing Officer to form the belief that the assessee has not incurred the expenditure in question for charitable purposes and that apart from section 11(3)(d) of the Act, the Assessing Officer has also found that there is violation of sections 11 to 13 of the Act and hence, it cannot be stated that the Assessing Officer has formed the belief that income chargeable to tax had escaped assessment only on the ground of violation of section 11(3)(d) of the Act. 5.1 It was submitted that the surplus of Rs. 17,69,131/- is sought to be disallowed on the ground that the accumulated amount has not been used for charitable purpose. From the reasons recorded it is established that the petitioner is not engaged in any charitable activities since the inception. The donations received by the petitioner are only accumulated under section 11(1)(a) or 11(2) of the Act and subsequently, utilized for the private purpose as discussed in the reasons recorded and, therefore, the assessee is not eligible for any exemption and consequently, exemption under Page 5 of 19 C/SCA/16791/2018 JUDGMENT sections 11 and 10 of the Act is not available to the petitioner. Moreover, as per the return of income for assessment year 2016-17, the total voluntary contribution received by the petitioner trust is Rs. 1,08,60,931/- and the revenue expenditure, as shown in the return of income, is to the tune of Rs. 90,91,800/-. Thus, surplus amount of Rs. 17,69,131/- is required to be considered as the petitioner's income and assessed under sections 28 to 44 of the Act as the petitioner is not eligible for exemption under sections 11 and 12 of the Act. It was submitted that therefore, the above referred surplus has escaped assessment as the petitioner has filed return of income at nil for assessment year 2016-17. 5.2 It was further submitted that as on date, there is a prima facie opinion formed by the Assessing Officer that income chargeable to tax has escaped assessment. It was submitted that insofar as consideration as to which provision of sub-section (3) of section 11 of the Act is applicable in the facts of this case, can be decided at the time of claiming exemption and that, at this stage, the court may not interfere on the ground that the Assessing Officer has referred to section 11(3)(d) of the Act. Reliance was placed on the decision of Supreme Court in case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Private Limited, (2007) 291 ITR 500 (2008) 14 SCC 208, wherein, it has been held thus: “19. Section 147 authorises and permits the assessing officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word “reason” in the phrase Page 6 of 19 C/SCA/16791/2018 JUDGMENT “reason to believe” would mean cause or justification. If the assessing officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the assessing officer should have finally ascertained the fact by legal evidence or conclusion. The function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. 20.As observed by the Delhi High Court (sic the Supreme Court) in Central Provinces Manganese Ore Co. Ltd. v. ITO, [1991] 191 ITR 662, for initiation of action under Section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is “reason to believe”, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the assessing officer is within the realm of subjective satisfaction [see ITO v. Selected Dalurband Coal Co. (P) Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO, [1999] 236 ITR 34 (SC)]. 21.The scope and effect of Section 147 as substituted with effect from 1-4-1989, as also Sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of Section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under Section 147(a) two conditions were required to be satisfied, firstly, the assessing officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly, he must also have reason to believe that such escapement has occurred Page 7 of 19 C/SCA/16791/2018 JUDGMENT by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the assessing officer could have jurisdiction to issue notice under Section 148 read with Section 147(a) but under the substituted Section 147 existence of only the first condition suffices. In other words if the assessing officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to Section 147. The case at hand is covered by the main provision and not the proviso. 22.So long as the ingredients of Section 147 are fulfilled, the assessing officer is free to initiate proceeding under Section 147 and failure to take steps under Section 143(3) will not render the assessing officer powerless to initiate reassessment proceedings even when intimation under Section 143(1) had been issued.” 5.3 The learned senior standing counsel further submitted that in the facts of the present case also, there was no scrutiny assessment and, therefore, the above-referred decision is squarely applicable to the facts of the present case and that as long as the ingredients of section 147 of the Act are fulfilled, the Assessing Officer is free to initiate proceedings thereunder. It was submitted that the Assessing Officer having reason to believe that income chargeable to tax has escaped assessment, at this stage, he is not required to conclusively prove that such income has actually escaped assessment. Therefore, there is no warrant for intervention by this court and that the petition, being devoid of merits, deserves to be dismissed. Page 8 of 19 C/SCA/16791/2018 JUDGMENT 6. In rejoinder, Mr. B. S. Soparkar, learned advocate for the petitioner submitted that the reasons are clear and unambiguous. It was submitted that in the reasons recorded, the Assessing Officer has held that the petitioner has violated the provisions of section 11(3)(d) of the Act which is wrong on facts and in law and therefore, his holding, that the petitioner is not carrying on any charitable activities, is also wrong. Therefore, the allegation, that the surplus is bad, also has no legs to stand. It was, accordingly, urged that the petition deserves to be allowed. 7. In this case, the assessment is sought to be reopened on the ground that the funds received by the assessee by way of donation are either parked in fixed deposits and bank accounts and the assessee is earning interest thereon and the interest so earned, has not been utilized for any charitable purpose and it is either accumulated under section 11(2) or 11(1)(a) at the rate of 15% under the Act; and that the assessee has made payment of Rs. 3 crores to CIMS Hospital Pvt. Ltd. from such accumulated fund which is in contravention of section 11(3)(d) of the Act. 8. It is the case of the Assessing Officer that in view of the fact that the petitioner trust has given an amount Rs. 3,00,00,000/- to CIMS Hospital Pvt. Ltd in breach of section 11(3)(d) of the Act, such amount cannot be stated to have been given for any charitable purpose, and the amount accumulated under section 11(2) of the Act having been used for private purposes, the assessee is not entitled to exemption under sections 11 and 12 of the Act. In the assessment Page 9 of 19 C/SCA/16791/2018 JUDGMENT year 2016-17, the assessee has received voluntary contributions of Rs.1,08,60,931/- and the revenue expenditure shown in the return of income is Rs.90,91,800/-. The surplus amount comes to Rs.17,69,131/-. Since the assessee is not entitled to exemption, the assessee has to be assessed as an association of persons as per sections 28 to 44 of the Act. Accordingly, the surplus amount of Rs.17,69,131/- is treated as income having escaped assessment as the assessee had filed return of income showing nil income. The Assessing Officer has further formed the opinion that income to the tune of Rs. 3,00,00,000/- has escaped assessment due to violation of section 11(3)(d) of the Act. Thus, a total income of Rs.3,17,69,131/- has escaped assessment. 9. In this case, insofar as escapement of income of Rs.17,69,131/- is concerned, the same is based upon the finding that there was contravention of section 11(3)(d) of the Act as the amount was given for a purpose which was not charitable. Therefore, both the issues are closely connected. 10. Since the issue regarding the assessee not being entitled to exemption under sections 11 and 12 of the Act is based upon the finding of contravention of section 11(3)(d) of the Act, it may be germane to first deal with the said issue. 11. In this case, the assessee has donated Rs.3,00,00,000/- to CIMS Hospital Pvt. Ltd. which is admittedly not a charitable institution registered under section 12AA of the Act. Reference may be made at Page 10 of 19 C/SCA/16791/2018 JUDGMENT this juncture, to section 11 of the Act. Section 11 of the Act falls under Chapter III of the Act which bears the heading “Incomes which do not form part of total income”, and to the extent the same is relevant for the present purpose, reads thus: “Income from property held for charitable or religious purposes.— 11.(1) xxxxxx (2) Where eighty-five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:— (a) such person furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5); (c) the statement referred to in clause (a) is furnished on or before the due date specified under sub-section (1) of Section 139 for furnishing the return of income for the previous year: Provided that in computing the period of five years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set Page 11 of 19 C/SCA/16791/2018 JUDGMENT apart, due to an order or injunction of any court, shall be excluded. Explanation.—Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12-AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (vi-a) of clause (23-C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter. (3) Any income referred to in sub-section (2) which— (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5), or (c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof, (d) is credited or paid to any trust or institution registered under Section 12-AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (vi-a) of clause (23-C) of section 10, shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so Page 12 of 19 C/SCA/16791/2018 JUDGMENT accumulated or set apart or ceases to remain so invested or deposited or credited or paid or, as the case may be, of the previous year immediately following the expiry of the period aforesaid.” 12. Thus, sub-section (2) of section 11 of the Act permits the assessee to accumulate the income referred to in clause (a) or clause (b) of sub-section (1) in the manner provided thereunder. In this case, it is an admitted position that the assessee has accumulated income in terms of section 11(2) of the Act. 13. Sub-section (3) of section 11 of the Act provides for the circumstances, in which, the income referred to in sub-section (2) thereof, shall be deemed to be income of such person. In this case the Assessing Officer has placed reliance upon clause (d) of sub- section (3) of section 11. On a plain reading of the provisions of clause (d), it is manifest that to fall within the ambit thereof income should have been credited or paid to (i) any trust or institution registered under section 12AA, or (ii) to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-section (iv) or sub- clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10. Section 12AA of the Act provides for procedure for registration and sub-section (1) thereof provides for registration of a trust or institution. Admittedly, CIMS Hospital is not a trust or institution registered under section 12AA of the Act. To ascertain whether CIMS Hospital falls within the ambit of the sub-clauses of clause (23C) of section 10 of the Act, reference may be made to Page 13 of 19 C/SCA/16791/2018 JUDGMENT clause (23C), which, to the extent the same is relevant for the present purpose, reads as under: “10. Incomes not included in total income -In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- (23C) any income received by any person on behalf of- (iv) any other fund or institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States; or (v) any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, which may be approved by the prescribed authority], having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof; (vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority; or (via) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiac) or sub-clause (iiiae) and which may be approved by the prescribed authority:” Page 14 of 19 C/SCA/16791/2018 JUDGMENT 14. In the facts of the present case, it is an admitted position that CIMS Hospital Pvt. Ltd does not fall within the ambit of any of the above clauses. As rightly submitted by the learned counsel for the petitioner, income of the institutions that are registered under section 12AA of the Act or fall within the ambit of sub-clauses (iv), (v), (vi) and (via) of clause (23C) of section 10 of the Act is exempt income and, therefore, if any amount is paid to such institutions, the very same income would get double benefit, namely that, it would be exempted in the hands of the assessee and then again in the hands of the recipient. In the present case, since CIMS Hospital Private Ltd. does not fall within the ambit of any of the above provisions, section 11(3)(d) of the Act would not be attracted in respect of any amount paid to it. 15. At this stage it may be pertinent to refer to paragraph 5.2 of the reasons recorded by the Assessing Officer for reopening the assessment, which reads thus: “5.2 Thus, assessee has clearly violated the Section 11(2) r.w.s. 11(3)(d). Accordingly, payment to CIMS Hospital Pvt. Ltd will be deemed income of the assessee in A.Y. 2016-17. It is pertinent to mention here that CIMS Hospital Pvt. Ltd to whom payment for Linac Machine is made is not even registered u/s. 12AA or covered under sub-clause (iv) or sub- clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 of the I.T. Act. Thus, it is not only gross violation of section 11(2) r.w.s. 11(3)(d) but also violation of section 11 to 13 of the I.T. Act. Thus, assessee is not entitled for exemption u/s. 11 & 12 of the I.T .Act.” Page 15 of 19 C/SCA/16791/2018 JUDGMENT 16. Thus, the specific ground for reopening of the assessment is for breach of section 11(3)(d) of the Act. Thereafter, there is a general allegation of breach of sections 11 to 13, without stating as to why such violation is alleged. Thus, the Assessing Officer seeks to disallow Rs.3,00,00,000/- for violation of section 11(3)(d) of the Act and Rs. 17,69,131/- on the ground of violation of section 11(2) of the Act. As discussed hereinabove, considering the reasons recorded by the Assessing Officer for reopening the assessment, there was no material with him on the basis of which he could have formed the belief that on account of donation of RS.3,00,00,000/- to CIMS Hospital Pvt. Ltd., the petitioner had violated the provisions of section 11(3)(d) of the Act. Insofar as violation of section 11(2) is concerned, such violation has been alleged only as a consequence of violation of the provisions of section 11(3)(d) of the Act. Therefore, on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment. 17. It may be noted that in paragraph 4.4 of the affidavit-in-reply of the respondent, it has been asserted that the payments in question were made out of accumulated funds under section 11(2) of the Act as accepted by the assessee in its reply and thus, payments were in contravention of section 11(3)(d) of the Act and thus, held to be deemed income of the assessee for the assessment year 2016-17. It is also averred that CIMS Hospital Pvt. Ltd is not even registered under section 12AA of the Act covered under sub-clause (iv) or sub- clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of Page 16 of 19 C/SCA/16791/2018 JUDGMENT section 10 of the Act. Thus, it is not only violation of section 11(2) read with section 11(3)(d) but also violation of sections 11 to 13 of the Act and hence, the assessee is not entitled for exemption under sections 11 and 12 of the Act. However, nothing has been stated as to how there is violation of sections 11 to 13 of the Act if CIMS Hospital Pvt. Ltd. is not registered under section 12AA or covered by the above-referred sub-clauses of clause (23C) of section 10 of the Act. Section 11 of the Act requires the funds to be used for charitable purposes, but it does not say that such funds have to be given only to the institutions which are registered under section 12AA or covered by the above-referred clauses. Besides, if any funds are given to any such institution which is registered under section 12AA or covered by the above-referred clauses, by virtue of section 11(3)(d) of the Act, the amounts so given, would not be exempted. 18. On behalf of the respondent, it has been argued that if there is violation of any other provision of section 11(3) other than clause (d) thereof, it would not make the reopening bad as the escapement of income may be relatable to some other provision of the Act.In the opinion of this court, from the reasons recorded it is evident that the Assessing Officer has consciously decided that there was violation of section 11(3)(d) of the Act, and since on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment, the impugned notice under section 148 of the Act lacks validity and cannot be sustained. Page 17 of 19 C/SCA/16791/2018 JUDGMENT This view is fortified by the view adopted by this court in case of Dhruv Parulbhai Patel vs. Assistant Commissioner of Income Tax (supra) wherein it has been held thus: “6. On the basis of documents on record and the submissions made before us following aspects emerge: (1) Assessment previously framed after scrutiny is sought to be reopened within a period of four years from the end of relevant assessment year. There is nothing conclusive on record to suggest that the question of assessee’s claim for exemption from capital gain under section 54 was examined by the assessing officer. (2) Undisputedly, however, the claim of the assessee was under section 54 and not 54E of the Act. (3) The assessing officer in the reasons recorded desired to disallow the claim on the ground that as required under section 54E of the Act, the assessee did not invest the surplus for a minimum period of 36 months. (4) Though through the affidavit-in-reply it is now pointed out that reference to section 54E is mere typographical error and the intention was to refer to section 54 of the Act, we are of the opinion that such stand is wholly incorrect. Had this been a case of mere typographical error, we would have ignored the mistake and referred to the correct statutory provision. The fact that reference under section 54E was however, not an error is manifest from the reasons recorded. It referred to the requirement of investing the surplus fund for a minimum period of 36 months. Such requirement flows from section 54E of the Act and not section 54. Section 54 in fact requires the assessee to acquire a new unit within a year or build himself within three years. In the later case he has to invest the surplus in specified investments. This was thus not a mere typographical error but a conscious decision on the part Page 18 of 19 C/SCA/16791/2018 JUDGMENT of the assessing officer to disallow the exemption claimed, for breach of the requirement of section 54E of the Act. 7. What thus emerges from the above discussion is that the reasons on which the notice for reopening is issued lacks validity. Section 54E of the Act was neither applicable nor sought to be applied by the assessee. The question of denying any such claim under the said provision for breach of condition therein therefore simply did not arise. It is well settled that notice for reopening has to be sustained and supported only on the basis of reasons recorded by the assessing officer and not with the help of extraneous ground, material or possible improvement. Reference in this respect can be made to the decision of this Court in the case of Aayojan Developers vs. Income-tax Officer reported in [2011]335 ITR 234 (Guj).” 19. For the forgoing reasons, the petition succeeds and is accordingly allowed. The impugned notice dated 17.05.2018 issued by the respondent under section 148 of the Income Tax Act, 1961 seeking to reopen the assessment of the petitioner for assessment year 2016-17, is hereby quashed and set aside. Rule is made absolute accordingly with no order as to costs. (HARSHA DEVANI, J) (A. P. THAKER, J) JYOTI V. JANI Page 19 of 19 "