DALHOUSIE PUBLIC SCHOOL EDUCATIONAL SOCIETY vs. CHIEF COMMISSIONER OF INCOME TAX AND ANR.

PDF · subscribers
CWP/12072/2009HC Punjab & HaryanaPHHC01059594200922 September 2009Author: MR. JUSTICE M.M. KUMAR,MR JUSTICE JASWANT SINGH6 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the writ petition. Regarding the first issue, the Court held that the Chief Commissioner's refusal to grant exemption for assessment year 2007-08 was arbitrary and illegal. The Court reasoned that administrative or quasi-judicial orders must be sustainable with recorded reasons. The omission to assign any reason for denying exemption for the third year, especially when the surplus income percentage was lower than the previous year for which exemption was granted, made the refusal wholly arbitrary. The Court found no material to justify withholding the exemption. Concerning the second issue, the Court held that the rejection of the application as time-barred was not sustainable. The Court noted that the petitioner had already filed a rectification application under Section 154, and the respondent authority was delaying the decision. The subsequent application was filed as an abundant caution, and the petitioner was legally entitled to the exemption based on the earlier application. Therefore, declining exemption solely on the ground of the second application being beyond the period of limitation was unjustified. The impugned orders were quashed, and the petitioner was held entitled to exemption for assessment year 2007-08. The Court also directed the Chief Commissioner to decide the pending application for subsequent assessment years within two months.

What were the facts?

The petitioner, Dalhousie Public School Educational Society, runs a school and sought exemption from income tax under Section 10(23C)(vi) of the Income Tax Act, 1961. The society had previously been granted exemption for assessment years 2004-05, 2005-06, and 2006-07. An application for exemption for assessment years 2005-06 to 2007-08 was filed. Exemption was granted for 2005-06 and 2006-07. The society then sought rectification under Section 154 to include 2007-08. Subsequently, a fresh application for exemption from 2006-07 onwards was filed on March 26, 2008. The Chief Commissioner rejected the rectification application, stating no mistake was apparent, and also rejected the fresh application for 2007-08, deeming it time-barred. The society filed a writ petition challenging these orders.

What were the issues?

1. Whether the Chief Commissioner erred in rejecting the application for rectification under Section 154 of the Income Tax Act, 1961, when the exemption for assessment year 2007-08 was omitted without assigning any reasons, despite granting it for prior years? 2. Whether the Chief Commissioner erred in rejecting the application for exemption for assessment year 2007-08 on the grounds of being time-barred, considering the prior application for rectification and the circumstances? Assessee's Arguments: The petitioner argued that the omission to grant exemption for 2007-08 was an error apparent on the face of the record, rectifiable under Section 154, as no reasons were provided for the denial. They also contended that the subsequent application was filed due to the delay in deciding the rectification application and that they were legally entitled to the exemption based on earlier approvals. The petitioner stated that a prior appeal before the ITAT was not pursued as it was filed under a misconception and was dismissed for non-prosecution. Revenue's Arguments: The respondents argued that the grant of exemption is discretionary and cannot be claimed as a right. They asserted that the absence of reasons for not granting exemption for 2007-08 does not constitute a mistake rectifiable under Section 154. Regarding the second order, they contended that the application filed on March 26, 2008, was time-barred as it should have been filed by March 31, 2007, as per the 14th Proviso to Section 10(23C)(vi), and there is no provision for condoning such delay.

Which sections of the Income-tax Act were involved?

Section 154,Section 10(23C)(vi)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CWP No.12072/2009 Date of Decision: 22.9.2009. Dalhousie Public School Educational Society ..........Petitioner. Versus Chief Commissioner of Income Tax,Amritsar and another. ..........Respondent CORAM: HON'BLE MR.JUSTICE M.M.KUMAR HON'BLE MR.JUSTICE JASWANT SINGH. Present: Mr. Sanjay Bansal,Senior Advocate with Mr.Ravi Shankar,Advocate for the petitioner. Ms.Naveender PK Singh,Advocate for the respondents.

1.

To be referred to the Reporter or not ?

2.

Whether the judgement should be reported in the Digest ? JASWANT SINGH,J. Petitioner-Society has filed the present writ petition under Articles 226/227 of the Constitution for issuance of a writ in the nature of certiorari for quashing of the impugned orders dated 25/26.3.2009 (P/1 and P/2) vide which respondent no.1-Chief Commissioner of Income Tax, Amritsar- respondent no.1 exercising powers under CWP No.12072/2009 2 Section 154 and 10(23C)(vi) of Income tax Act,1961 has rejected the application of the petitioner for grant of approval for exemption for the assessment year 2007-2008. The facts giving rise to matter in controversy are that the petitioner-Society is registered under the Societies Registration Act, 1860 and is running a school in the name of Dalhousie Public School in Tehsil Pathankot, District Gurdaspur. It is alleged by the petitioner that the school is run solely for the educational purposes and not for making any profit and is having its permanent account number with the Assessing Officer at Pathankot by showing income nil after grant of exemption from payment of income tax by the Chief Commissioner of Income Tax vide orders dated 22.3.2005 and 23.9.2005 (P/3 and P/4) right from the assessment year 2004-05. It is further alleged that in the assessment year 2005-06, the petitioner society submitted an application dated nil (P/5) to respondent no.1 for grant of exemption for a period of three years for the assessment years 2005-06 to 2007-08 and on the basis of that exemption was granted to the petitioner-Society only for a period of two assessment years i.e. 2005-06 and 2006-07 vide order dated 29.5.2006 (P/6). Thereafter the petitioner-Society moved an application dated 5.6.2006 (P/7) for rectification of the order dated 29.5.2006 (P/6) requesting for grant of exemption for the assessment year 2007-08 also. During the pendency of the said application the petitioner-society filed its return for the year 2007-08 showing its income as nil. The said return is alleged to have been CWP No.12072/2009 3 accepted by the Assessing Officer vide intimation/acknowledgment dated 31.10.2007 (P/8). On 26.3.2008 the petitioner-society submitted an application (P/9) in form 56D to respondent no.1 for grant of exemption for the assessment year 2006-07 onwards. Respondent no.1 vide impugned order dated 26.3.2009 (P/1) rejected the application dated nil (P/5) by holding that there is no mistake which can be rectified under Section 154 of the Income Tax Act,1961 (for short the Act). Vide order of even date (P/2) the application dated 26.3.2008 (P/9) seeking exemption for the assessment year 2007-08 was also rejected by respondent no.

1.

In these circumstances, the present writ petition has been filed. Aggrieved against the impugned orders (P/1 and P/2), the petitioner-Society filed the present writ petition. Notice of motion was issued. Respondents filed written statement inter alia stating therein that the present writ petition is filed against two orders of even date 25/26.3.2009 (P/1 and P/2) and one is passed under Section 154 read with Section 10(23C)(vi) whereas the other one is under Section 10(23C) (vi). So far as order under Section 154 refusing rectification is concerned the same is justified by reiterating the reasoning given in the impugned order that the grant of exemption is purely at the discretion of respondent no.1 and exercise of such a discretion cannot be claimed as a matter of right and that the discretion has been exercised in accordance with law. The absence of reasons for grant of exemption for the year 2007-08 does not amount to mistake which could be rectified under Section 154 of the Act. It is CWP No.12072/2009 4 further submitted that against this order the petitioner filed an appeal before the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar and the same is still pending. So far as the second impugned order under Section 10(23C)(vi) and (via) is concerned, it is submitted that the petitioner filed an application in Form 56D for grant of exemption for the financial year 2007-08 onwards on 26.3.2008, i.e. after a lapse of almost one year as the same ought to have been filed on or before 31.3.2007 as per 14th Proviso to Section 10(23C)(vi) of the Act. It is further submitted that there is no provision in the Act for condonation of aforementioned delay. The legislative intention makes it clear that application under Section 10(23C)(vi) for seeking exemption shall be made before the end of the financial year from which the exemption is sought and in this way the application for grant of exemption beyond the period of limitation cannot be condoned. The petitioner-Society filed replication and controverted the preliminary objection no.4 by asserting that the appeal filed by the petitioner before the Income Tax Appellate Tribunal, Amritsar was not pursued being not maintainable and the same was filed under a misconception of law and which remained unadmitted and was finally dismissed on account of non-prosecution and has placed the documents Annexures P/10 to P/12.

We have heard learned counsel for the parties and perused the paper book carefully. In our considered opinion the claim of petitioner is meritorious and deserves to be accepted.

CWP No.12072/2009 5 A perusal of the impugned order reveals that while granting exemption for assessment years 2005-06 and 2006-07, no reason has been assigned for declining the exemption for the assessment year 2007-08. The stand of respondents that it was discretion of respondent no.1 to grant or not grant exemption for the 3rd year is not tenable as there must be some reasons recorded in the impugned order while withholding the exemption for the third year i.e. 2007-08. The recording of reasons would be necessary for any administrative/quasi judicial order for it to be sustainable in the eyes of law. There is no material available on record to withhold the exemption for the third year. Thus the refusal to grant exemption in respect of third year i.e. 2007-08 would be wholly arbitrary especially when the table produced by the respondents in para 2 of the reply on merits shows the percentage of surplus income of the petitioner- institution, after deducting all expenses including depreciation, to be less than the previous year i.e. 2006-07, for which exemption has been granted. So far as the contention of the respondents that the application was moved only on 26.3.2008 and thus being time barred as the same ought to have been filed on or before 31.3.2007 is also not sustainable as the petitioner-Society had already filed application dated nil (P/5) for rectification of the omission of grant of exemption for the year 2007-08 under Section 154 of the Act but the respondent no.1 was sitting over the matter and only in these circumstances another application dated 26.3.2008 was filed as an abundant caution as it is CWP No.12072/2009 6 apparently clear that the petitioner is legally entitled to grant of exemption for the year 2007-08 on the basis of its earlier application and therefore, there is no justification for declining the same only on the ground that the application dated 26.3.2008 is beyond the period of limitation. The action of the respondents while declining exemption for the year 2007-08 is thus arbitrary and illegal and not sustainable. Accordingly, the writ petition is allowed, impugned orders dated 26.3.2009 (P/1 and P/2) are quashed and the petitioner-Society is held entitled to exemption for the assessment year 2007-08. With regard to the prayer of the petitioner that for the subsequent assessment years i.e. 2008-09 onwards the application is pending, we direct the Chief Commissioner to decide the same within a period of two months from the date of receipt of certified copy of this order. (M.M.Kumar) (Jaswant Singh) Judge Judge 22.9.2009. joshi

More judgments on Section 154

All 8,676 judgments and leading authorities on Section 154 →

Recent GST High Court judgments

Search GST case law →