The court emphasized the requirement of tangible material before the Assessing Officer to form a belief that income has escaped assessment, and upheld the reopening of the assessment based on the material revealed in the investigation by the Economic Offences Wing (EOW) and the filing of a chargesheet.

(Dr. D.Y. Chandrachud. J.)

1. The challenge in this proceeding under Article 226 of the Constitution of India is to the reopening of an assessment for Assessment Year 2004-2005 by a notice dated 29 March 2011.

2. For Assessment Year 2004-2005 the assessee filed a return of Income declaring a nil income, in view of the exemption which was claimed under section 11 of the Income Tax Act, 1961. An order of assessment was passed under section 143(3) on 22 December, 2006. While completing the assessment, the Assessing Officer determined the total income of the Assessee at Rs.47,32,738/-. The Assessment is now sought to be reopened by a notice under section 148, which was issued on 29 March, 2011.

3. The reasons on the basis of which the assessment is sought to be reopened, have been disclosed to the assessee on 19 August, 2011. Briefly stated, the reasons are as follows :

(i) During the course of the scrutiny assessment for Assessment Year 2008-2009, the Assessing Officer came to know of the fact that the assessee had lodged a First Information Report (FIR) on 16 March, 2006 against Mr. Jagmohan Dalmiya, the then Secretary of the Board of Control for Cricket in India and others inter alia for misappropriation of funds;

(ii) The FIR was transferred to the Economic Offences Wing (EOW), Crime Branch, CID, Mumbai and was investigated since 21 March, 2007. The FIR sets out that in order to conduct the World Cup cricket tournament in 1996, a Committee called PILCOM was formed amongst Pakistan, India and Srilanka of which Mr. Jagmohan Dalmiya, the then Secretary of BCCI was appointed as Convener Secretary. Another Committee in India called INDCOM was formed for the purpose of disbursing prize money to the teams and players;

(iii) A chargesheet was filed against Mr. Jagmohan Dalmiya by the EOW in the Court of the Additional Chief Metropolitan Magistrate, 19th Court, Esplanade, Mumbai in which it is alleged that Mr. Dalmiya and certain others had committed offences inter alia punishable under sections 409, 420, 465, 467, 468, 477A, read with section 34 and section 120(B) of the Penal Code by using funds to the extent of Rs. 2.90 Crores from the INDCOM account opened at a Kolkatta Branch of 4 WP No.373 of 2012 the Indian Overseas Bank for their own use from 1 July, 1997 to 4 February, 2006.

(iv) The chargesheet indicated that an amount of Rs.30,79,802/-was misappropriated during the financial year 2003-2004;

(v) The investigation by the EOW would indicate that the assessee was not conducting its activities in accordance with its objects, which was mandated, in order to avail of the exemption under section 11 of the Act and the continuation of the registration under Sections 12A/12AA;

(vi) The assessee, during the course of assessment proceedings for Assessment Year 2004-2005, had not furnished any intimation to the Assessing Officer about the alleged misappropriation of funds. Though the FIR was lodged by the Assessee on 16 March, 2006 and the assessment proceedings for Assessment Year 2004-2005 were completed thereafter on 22 December, 2006, the filing of the FIR was not disclosed to the Assessing Officer;

(vii) In the light of the alleged misappropriation of funds, the Assessee's claim to exemption under Section 11, for continuation of its registration under Sections 12A/12AA and the provisions of Section 13 need to be examined and the claim of the assessee may have to be disallowed;

(viii)There was a failure on the part of the assessee to fully and truly disclose all material facts necessary for its assessment for Assessment Year 2004-2005. Though the FIR was filed by the assessee on 16 March, 2006 and the assessment proceedings for Assessment Year 2004-2005 were completed on 22 December, 2006, the figures set out in the FIR were not disclosed to the Assessing Officer.

(ix) On this basis, the Assessing Officer has stated that there was reason to believe that at the minimum, income of the appellant in the amount of Rs.30,79,802/-ch