AHMEDABAD SOUTH INDIAN ASSOCIATION CHARITABLE TRUST vs THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, EXEMPTION, AHMEDABAD

C/SCA/9731/2024 JUDGMENT DATED: 03/08/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 9731 of 2024

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE A.S. SUPEHIA Sd/-
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI Sd/-

==========================================================
Approved for Reporting Yes No
✔
==========================================================
AHMEDABAD SOUTH INDIAN ASSOCIATION CHARITABLE TRUST
Versus
THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, EXEMPTION,
AHMEDABAD
==========================================================
Appearance:
MR TUSHAR HEMANI, SENIOR ADVOCATE with MS VAIBHAVI K
PARIKH(3238) for the Petitioner(s) No. 1
MS MAITHILI D MEHTA(3206) for the Respondent(s) No. 1
==========================================================
CORAM: HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI

Date : 03/08/2026
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)
RULE. Learned Senior Standing Counsel
Ms.Mehta waives service of notice of rule for and
on behalf of the respondent.

1. In this writ petition, the petitioner-Trust
is challenging the notice dated 08.04.2024 issued
under section 148 of the Income Tax Act, 1961
(for short "the Act") as well as the order of the
even date i.e. 08.04.2024 passed under section
148A(d) of the Act seeking reopening of income
tax assessment for Assessment Year (AY) 2017-18.
The petitioner has also challenged the assessment
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order dated 06.03.2026 passed during the pendency
of this writ petition under section 147 of the
Act read with section 144B of the Act along with
consequential demand notice for the AY 2017-18.
2. The petitioner is a Trust, which is eligible
for claiming exemption under section 10(23C)(vi)
of the Act. The petitioner filed its return of
income for the year under consideration on
31.10.2017 declaring total income at Rs. Nil. The
case of the petitioner-Trust was selected for
scrutiny assessment by issuing a notice dated
01.10.2019 under section 142(1) of the Act, and
the petitioner-Trust furnished all the details
and information vide letter dated 02.10.2019.
However, the Assessing Officer vide notice dated
29.11.2019 issued under section 142(1) of the Act
called upon the petitioner-Trust to furnish
certain details in respect of transactions with
persons specified under section 13(3) of the Act
including details pertaining to remuneration of
Rs.42,00,000/- paid to Mr.M.P.Chandran (Executive
Director and Trustee). The petitioner-Trust
furnished all its details along with the
explanation in respect of remuneration to
Mr.Chandran. Eventually, an assessment was framed
under section 143(3) of the Act vide order dated
10.12.2019, whereby the claim of exemption under
section 10(23C)(vi) of the Act was not disturbed
by the then Assessing Officer.
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3. Thereafter, the respondent - Deputy
Commissioner of Income Tax Circle 1 (Exemption),
issued a show-cause notice dated 28.03.2024 under
clause (b) of section 148A of the Act, calling
upon the petitioner-Trust to furnish information
with regard to the remuneration of Rs.42,00,000/-
to Mr.Chandran, which is not allowable expense in
view of the order dated 13.05.2019 passed by the
Fee Regulatory Committee. Further details of cash
system of accounting, common expenses on the
incurred staff, staff welfare were called upon,
including the sponsor of J.G. University, and
also the remarks made by the auditor for various
divisions, fees, and entry of the amount
Rs.58,07,622/- were called upon. The petitioner-
Trust furnished a detailed reply to the show-
cause notice vide letter dated 03.04.2024,
dealing with all the objections/queries raised
therein. The respondent vide order dated
08.04.2024 passed under section 148A(d) of the
Act concluded that there is escapement of income
chargeable to tax to the tune of Rs.3,01,56,352/-
and hence, it was opined that it is a fit case
for issuance of notice under section 148 of the
Act. Accordingly, the notice dated 08.04.2024 was
issued under section 148 of the Act seeking to
reopen the case, which has been assailed in the
writ petition.
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SUBMISSIONS ON BEHALF OF THE PETITIONER-TRUST
4. Learned senior advocate Mr.Hemani on behalf
of the petitioner-Trust has submitted that the
provisions of section 147 of the Act are
illegally invoked in the present case as there is
no escapement of income chargeable to tax. In
this regard, it is submitted that the petitioner-
Trust is eligible for exemption under section
10(23C)(vi) of the Act for the year in
consideration. It is submitted that even if sum
of Rs.3,01,56,352/- is excluded from total
application of Rs.31,84,16,553/-, then also the
balance sum of Rs.28,52,60,201/- will be treated
as amount utilized for charitable purpose, which
is more than 85%. It is thus, submitted that
under such circumstances, the petitioner-Trust
will still be eligible for a claim of exemption
under section 10(23C)(vi) of the Act, and hence,
it cannot be said that there is any escapement of
income chargeable to tax.
5. It is contended and pointed out that the
petitioner-Trust, extensively, explained each and
every allegations leveled in the show-cause
notice through its reply however, while passing
the impugned order, the explanation tendered by
the petitioner-Trust is entirely ignored. It is
contended that the Assessing Officer has not
applied mind to the provisions of section 10(23C)
(vi) of the Act. In this context, he has referred
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to the provisions of section 152 of the Act and
has submitted that despite the petitioner-Trust
having clearly demonstrated that even if the
amounts which are disputed by the Revenue are
excluded from the amount applied for the purpose
of the petitioner-Trust, then also there will be
no impact on taxable income and hence, it is
urged that in view of section 152 of the Act, the
reopening may be declared as illegal and invalid.
Finally, he has submitted that reopening of the
assessment is nothing but a change of opinion as
in the scrutiny assessment all the queries
relating to as mentioned in the show-cause notice
were already satisfied by the petitioner-Trust by
providing documentary evidence, which has been
accepted by the then Assessing Officer and hence,
it is urged that the action of the respondents in
reopening the assessment is quite uncalled for.
SUBMISSIONS ON BEHALF OF THE RESPONDENT
6. Opposing the present writ petition and
foregoing submissions, learned Senior Standing
Counsel Ms.Mehta, while referring to the impugned
assessment order, has urged that the same may not
be interfered with as it is precisely passed
since the petitioner-Trust has failed to
substantiate various claims as the application of
income for charitable purpose during the year
under consideration. She has referred to the
conclusion drawn by the Assessing Officer in the
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impugned order and has submitted that the
remuneration of Rs.42,00,000/- paid to the
trustee has been treated as application of income
for the benefit of a specified person in view of
section 13(1)(c) of the Act read with section
13(2)(c) of the Act, and also the provision for
gratuity amounting to Rs.75,49,997/- has been
found to be a mere book provision without
evidence of actual payment or contribution to an
approved gratuity fund during the relevant
financial year. She has submitted that similarly,
the staff welfare expenses of Rs.21,31,962/-
remain unsubstantiated due to the absence of
complete and verifiable supporting documentation
during the reassessment proceedings. Similarly,
she has referred that the claim of Rs.58,07,622/-
towards fee waiver/scholarship has not been
supported by documentary evidence. Finally, she
has also supported the observations made by the
Assessing Officer relating to sponsorship
expenses of Rs.1,04,66,771/- relating to J.G.
University, which have not been shown to be
allowable application. Ultimately, she has
submitted that the aggregate amount of
Rs.3,01,56,352/- is disallowed and added to the
income of assessee and penalty proceedings are
also proposed under section 270A of the Act.
Thus, it is urged that the writ petition may not
be entertained.
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ANALYSIS AND OBSERVATIONS
7. Before delving into the submissions advanced
by the learned advocates of the respective
parties, at this stage, we may refer that during
the pendency of the writ petition, despite an
interim order passed by this Court restraining
the Assessing Officer to pass the assessment
order, the same has been passed on 06.03.2026,
without obtaining any permission from this Court.
8. This Court vide order dated 27.07.2026 had
opined to initiate contempt proceedings against
the Assessing Officer, who had passed the order
dated 06.03.2026, though by the interim order,
the Court had restrained the Assessing Officer to
do so. Pursuant to that order dated 27.07.2026,
learned Senior Standing Counsel Ms.Mehta has
tendered the affidavit-in-reply dated 01.08.2026.
The same is ordered to be taken on record. She
has referred to the averments made in paragraph
Nos.4 and 5, which are as under:
“4. I state that the Petitioner thereupon file Civil
Application (for Amendment) No. 2 of 2026 in the
captioned writ petition, placing on record the
assessment order passed in the captioned matter
without the permission of this Hon’ble Court, as
directed. I further state that, upon due
consideration of the said Civil Application filed by
the Petitioner bringing on record the assessment
order dated 06.03.2026, the deponent communicated to
the office of CIT(Exemption) Ahmedabad that FAO
passed the order u/s.147 r.w.s 144B of the Act on
06.03.2026 despite the Hon’ble High Court vide order
dated 17.09.2025 stayed the final assessment order as
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the issue was not decided on merits. Considering the
sensitivity of the matter involved and the demand
being not enforceable as the final assessment way
already stayed by Hon’ble High Court, the recovery of
the demand has been marked as “stay” on the portal.
(Annexure R1). Further, the stay order was also
communicated to the assessee vide letter dated
29.07.2026. (Annexure-R2)
5. As per the directions of the Hon’ble High Court
vide order dated 27.07.2026 the Hon’ble High Court
has directed that by the next date of hearing i.e.
03.08.2026, either the assessment order dated
06.03.2026 shall be withdrawn, or the Court will be
constrained to initiate the contempt proceedings
against the concerned Assessing Officer. Best efforts
were made to comply with the directions, however
there exists no functionality to withdraw an
Assessing Order. Further, guidance was also sought
from the ITBA team (Systems) vide mail dated
29.07.2026. Reply was received and it was stated that
“In this regard it is informed that there is no
provision under the Income-tax Act, 1961 for
withdrawal of a concluded assessment order.
Accordingly, no functionality has been provided in
ITBA for withdrawal or cancellation of an assessment
order once it has been passed and accounted for by
CPC. Further, where the assessment order has already
been accounted for by CPC, the same cannot be revived
or reversed through the ITBA backend, as the
accounting carried out by CPC is not reversible
through the system.” Further as suggested by
DDIT(ITBA)-5, a pendency for the assessment may be
created by utilizing “set aside” functionality on
ITBA. In this regard, the Hon’ble High Court may
kindly grant directions to set aside the proceedings.
(Annexure-R3).”
9. Thus, in the affidavit in reply, the Revenue
has accepted the mistake committed in flouting
the interim orders passed by this Court however,
they have expressed their inability to withdraw
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the assessment order dated 06.03.2026 as no
functionality exists in the portal.
10. At this stage, it would be apposite to refer
to the provision of section 264 of the Act, which
is as under:
“Revision of other orders.
264. (1) In the case of any order other than an order
to which section 263 passed by an authority
subordinate to him, the Principal Commissioner or
Commissioner may, either of his own motion or on an
application by the assessee for revision, call for
the record of any proceeding under this Act in which
any such order has been passed and may make such
inquiry or cause such inquiry to be made and, subject
to the provisions of this Act, may pass such order
thereon, not being an order prejudicial to the
assessee, as he thinks fit.
11. In our considered opinion, as and when the
Revenue is confronted with the issue of framing
of the assessment order by flouting the orders of
this Court, the powers by the Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner, as mentioned in the provisions of
section 264 of the Act can always be exercised,
and any order which is not prejudicial to the
interest of the assessee can be passed by the
Commissioner. Thus, by invoking the provision of
section 264 of the Act, the Commissioner can
always either revoke or set aside the order
passed by the Assessing Officer which is passed
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in defiance or in contravention of the interim
orders or the orders passed by this court. The
Revenue cannot cite the excuse of non-
availability any functionality in the system of
withdrawing the assessment order, which has been
passed in defiance of the interim orders / orders
of this Court. The power under section 264 of the
Act is always available for the higher
authorities i.e. the Commissioner to either
modify or set aside the orders passed by the
Assessing Officer in case, it is found that the
Assessing Officer has passed the assessment order
de hors the interim orders passed by this Court.
12. As far as the merits of the matter is
concerned, after threadbare analysis of the
impugned order as well as the documentary
evidence produced by the petitioner-Trust on
record, which were tendered to the Assessing
Officer, we are of the opinion that the reopening
of the assessment for the year in consideration
demands interference, and the same is required to
be quashed and set aside. The impugned notice as
well as the assessment order is required to be
quashed and set aside on a sole reason, which has
been canvassed by the assessment in this writ
petition as well as before the Assessing Officer
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to the extent that there would be no escapement
of income chargeable to tax in any case, even if
the findings of the Assessing Officer in the
impugned order is taken as it is to the extent of
income chargeable to tax to the tune of
Rs.3,01,56,352/- is required to be allowed.
13. We may at this stage, incorporate the
comparative assessment of the income of the
petitioner, which is not disputed by the
respondents, and also incorporated in the
impugned assessment order by the Assessing
Officer, which is as under:
Particulars As per “Assessee” Revised Computation
is proposed
disallowance is
considered as per
SCN
A) Gross receipts Rs.33,16,43,048 Rs.33,16,43,048
B) Utilization Rs.31,84,16,553 Rs.31,84,16,553
C) Escapement NIL Rs.3,01,56,352
D) Utilization (B-C) Rs.31,84,16,553 Rs.28,82,60,201
E) “%” of utilization 96.01% 86.92%
14. We may at this stage, refer to the provision
of section 10(23C)(vi) of the Act, which reads as
under:
“ 10. Incomes not include 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—
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(23C) any income received by any person on behalf of—
"(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 [Principal Commissioner or
Commissioner]; or … … …
xxxx
Provided also that the fund or trust or institution
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)—(a)applies its income, or
accumulates it for application, wholly and
exclusively to the objects for which it is
established and in a case where more than fifteen per
cent of its income is accumulated on or after the 1st
day of April, 2002, the period of the accumulation of
the amount exceeding fifteen per cent of its income
shall in no case exceed five years… … … "
15. Thus, the combined reading of proviso to
Section 10(23C)(vi) of the Act, permits the 15%
limit of the maximum amount of income an approved
educational institution can save or accumulate
for future use without losing its tax exemption,
provided the remaining 85% is spent on education
during that year. It is not denied by the
respondent that the petitioner-Trust is covered
under these provisions. In the present case, as
per the percentage of utilization of income
declared income by the petitioner 96.01%, which
above the threshold limit of the 85%, whereas as
per the respondent it is 86.92%. Thus, in either
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case, the threshold limit gets maintained , and
hence the petitioner trust would still be
eligible to claim exemption under section 10(23C)
(vi) of the Act read with third Proviso (a). This
facts were substantiated by the petitioner-Trust
along with the particulars of income in its
reply, which is also incorporated by the
Assessing Officer. However, in the final
conclusion drawn, there is not a whisper on the
comparative utilization, which is quintessential
feature for the exemption under 10(23C)(vi) of
the Act. Thus, when the Revenue, has not
expressly denied the aforesaid fact to the extent
of utilization of the amount for charitable
purpose, which is more than 85% in either case
i.e. calculated by the petitioner-Trust or by the
respondent, the reopening of assessment calls for
interference by this Court, the re-opening of the
assessment needs to be set aside.
16. We may at this stage, also deal with the
aggregate amount of Rs.3,01,56,352/-, which is
ordered to be disallowed by the Assessing
Officer. The said amount comprises of the
gratuity amount to the tune of Rs.75,49,997/- in
addition to staff welfare expenses of
Rs.21,31,962/-, fee waiver/scholarship of
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Rs.58,07,622/-, and sponsorship expenses of
Rs.1,04,66,771/- relating to J.G. University. The
fee waiver petitioner-Trust, in order to
substantiate the aforesaid income along with the
remuneration of Rs.42,00,000/- paid to
Mr.Chandran, who is the trustee, had produced the
documentary evidence in the scrutiny assessment,
which comprised of legal opinion of consultant,
board resolution passed in 2016, Form 16 of
Mr.Chandran, list of institutions, assessment
order dated 10.12.2019 along with the quotation
received from LIC for taking gratuity policy for
its employees, who have completed 05 (five) years
on 31.03.2017, detailed explanation about the
school and activities carried out by the school
towards staff welfare and its expenses incurred
on food provided to the teachers, details of
documentary evidence showing the allowability of
expenses towards catering, such expenses such as
copy of catering contract, breakup of expenses
and payment, Form 16A vis-a-vis canteen contract,
and bills of catering contractor. For waiver of
fees, the petitioner-Trust had submitted that the
amount of Rs.58,07,622/- is not with respect to
staff welfare expenses, but scholarship fees and
concession amount.
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17. For sponsorship expenses of Rs.1,04,66,771/-,
the documents such as proposal for setting up
J.G. University, letter of intent by Government
of Gujarat, permission by the Government of
Gujarat were furnished with an explanation that
J.G. Trust is sponsoring body of J.G. University.
Pursuant to the proposal by the petitioner-Trust
for establishing J.G. University, the Government
of Gujarat had issued a letter of intent stating
that such proposal was being considered for
permission to establish State Private University
in the name of J.G. University. It was further
explained by the petitioner-Trust that all
employees and professionals are required to be
engaged by the petitioner-Trust in the capacity
of sponsoring body of the proposed university and
such expenses are to be paid till the approval of
the university by the Government. These
explanations are also brushed aside and not
considered by the Assessing Officer. The
petitioner in the scrutiny assessment has called
upon to furnish details of transactions with
trustee, and eventually the Assessing Officer
passed the assessment order dated 10.12.2019
under section 143(3) of the Act.
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18. We may at this stage refer to the provision
of section 152(1) of the Act.
“Other provisions
152. (1) In an assessment, reassessment or
recomputation made under section 147, the tax shall
be chargeable at the rate or rates at which it would
have been charged had the income not escaped
assessment.
(2) Where an assessment is reopened under section
147, the assessee may, if he has not impugned any
part of the original assessment order for that year
either under section 246 to 248 or section 264, claim
that the proceedings under section 147 be dropped on
his showing that he had been assessed on an amount or
to a sum not lower than what he would be rightly
liable for even if the income alleged to have escaped
assessment had been taken into account, or the
assessment or computation had been properly made :
Provided that in so doing he shall not be entitled to
reopen matters concluded by an order under section
154, 155, 260, 262 or 263.
xxx xxx xxx ”
19. Section 152(1) of the Act mentions about the
assessment, reassessment or re-computation made
under section 147 of the Act. The provisions of
sub-section (2) of section 152 of the Act enables
the assessee to claim dropping of the proceedings
under section 147, if he establishes that he had
been assessed on an amount or to a sum not lower
than what he would be rightly liable for, even if
the income alleged to have escaped assessment, had
been taken into account or the assessment or
computation had been properly made. The petitioner-
Trust through the documentary evidence has
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successfully demonstrated that even if the amounts
in dispute are excluded from the amount applied for
the purpose of the petitioner-Trust, then also
there will be no impact on taxable income. We have
already previously dealt with the issue of
exemption as provided in the provisions of section
10(23C)(vi) of the Act.
20. It is interesting to note that ultimately,
even after filing of the writ petition and the
averments made in the writ petition were known to
the Assessing Officer, without application of mind
to the averments made in the writ petition and
despite the interim order, the assessing officer
passed the assessment order dated 06.03.2026. Thus,
on an overall analysis of the matter and the manner
in which the assessment order has been framed, we
are inclined to quash and set aside the same.
21. In light of the foregoing analysis and
observations, the writ petition succeeds. The
impugned notice and the impugned order dated
08.04.2024 and the assessment order dated
06.03.2026 are hereby quashed and set aside. Rule
made absolute.
Sd/-
(A. S. SUPEHIA, J)
Sd/-
(VAIBHAVI D. NANAVATI,J)
NVMEWADA/26
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