Income Tax Officer vs Payyannur Sree Subramanya Swami ...
2022 Latest Caselaw 5829 Ker

              IN THE HIGH COURT OF KERALA AT ERNAKULAM
                              PRESENT
         THE HONOURABLE MR.JUSTICE A.K.JAYASANKARAN NAMBIAR
                                   &
            THE HONOURABLE MR.JUSTICE MOHAMMED NIAS C.P.
        TUESDAY, THE 31ST DAY OF MAY 2022/10TH JYAISHTA, 1944
                        W.A NO.78 OF 2020
 AGAINST THE JUDGMENT DATED 01.07.2019 IN WP(C).NO.8524/2019 OF
                      HIGH COURT OF KERALA


APPELLANTS/RESPONDENTS 1, 2 & 3:

    1       INCOME TAX OFFICER
            INCOME TAX DEPARTMENT, WARD-4, KANNUR,
            AAYAKAR BHAVAN, CHOVVA POST, KANNOTHUMCHAL,
            KANNUR-670006.

    2       THE PRINCIPAL COMMISSIONER OF INCOME TAX,
            KOZHIKODE 670 006.

    3       THE CENTRALIZED PROCESSING CENTRE
            REPRESENTED BY ITS AUTHORISED OFFICER,
            INCOME TAX DEPARTMENT, POST BAG NO.2,
            ELECTRONIC CITY POST OFFICE, BANGALORE-560100.

           BY SRI.CHRISTOPHER ABRAHAM, SC, INCOME TAX DEPARTMENT




RESPONDENT/PETITIONER/RESPONDENTS 4, 5 & 6:

    1       PAYYANNUR SREE SUBRAMANYA SWAMI TEMPLE
            REPRESENTED BY ITS EXECUTIVE OFFICER, SS TEMPLE,
            PAYYANUR-670307.

    2       UNION OF INDIA,
            REPRESENTED BY ITS SECRETARY TO GOVERNMENT,
            MINISTRY OF FINANCE, NEW DELHI-110001.
 W.A.NO.78 OF 2020            :: 2 ::




 3        THE MALABAR DEVASWOM BOARD,
          REPRESENTED BY ITS SECRETARY, HOUSEFED COMPLEX,
          P.O.ERANHIPALAM, KOZHIKODE-673006.

 4        THE SENIOR MANAGER,
          THE KANNUR DISTRICT CO-OPERATIVE BANK,
          PAYYANUR BRANCH, PAYYANUR, KANNUR-670307.

         BY ADV.SRI.MAHESH V RAMAKRISHNAN
         BY ADV.SRI.B.RAMACHANDRAN, CGC
         BY ADV.SRI.R.LAKSHMI NARAYAN, SC, MALABAR DEVASWOM
         BOARD
         BY ADV.SRI.M.SASINDRAN, SC, KANNUR DISTRICT
         CO.OP. BANK

       THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON
 31.05.2022, THE COURT ON THE SAME DAY DELIVERED THE
 FOLLOWING:
 W.A.NO.78 OF 2020                :: 3 ::




                             JUDGMENT

A.K. Jayasankaran Nambiar, J.

This is an Appeal preferred by the Income Tax Department

against the judgment dated 01.07.2019 of the learned Single Judge in

W.P.(C).No.8524/2019. The brief facts necessary for disposal of this

Writ Appeal is as follows:

The writ petitioner is an institution coming within the definition

of the Madras Hindu Religious & Charitable Endowments Act, 1951,

and for administration and overseeing the functions of the Institution,

there is a board of Trustees constituted under the provisions of the

said Act. The issue projected in the writ petition arose out of the

assessment under the Income Tax Act [hereinafter referred to as the

'IT Act'], in relation to the petitioner for the assessment years 2014-15

and 2015-16. It would appear that based on the returns submitted by

the petitioner for the said years, the Centralized Processing Centre of

the Income Tax Department processed the returns and determine the

net tax payable by the petitioner at Rs.29,69,290/- and Rs.28,44,340/-

 W.A.NO.78 OF 2020                    :: 4 ::




respectively.       Aggrieved by the said intimation received by it, the

petitioner preferred rectification application before the Department

inter alia on the contention that the assessment of income on the

petitioner had been erroneously made treating the petitioner as a

'trust', whereas in fact, the petitioner had to be seen as a management

body entitled to the benefit of Section 10(23BBA) of the IT Act, and

hence, its entire income was to be excluded from the computation of

total income under the IT Act. When no action was taken by the

respondents on the rectification application preferred by the petitioner

and notices were received demanding the payment of assessed tax, the

petitioner approached this Court through the writ petition

aforementioned seeking to quash the intimation letters received by it

and for a declaration that the income of the petitioner was entitled for

unconditional exemption under Section 10(23BBA) of the IT Act.

There was also an incidental prayer for a direction to the respondents

to refund the amounts recovered from the petitioner.

2. A counter affidavit has been filed by the respondent Income

Tax Department, wherein, the stand taken was that the claim for

exemption under Section 10(23BBA) of the IT Act had not been raised

by the petitioner in the returns filed by it for the relevant assessment W.A.NO.78 OF 2020 :: 5 ::

years. It is stated that inasmuch as the petitioner had filed its returns

by indicating that it was a 'trust', the benefit of any exemption under

the IT Act was denied on the finding that it had not complied with the

necessary procedural requirements for getting the exemption in

respect of a trust. In substance, the averments in the statement are to

the effect that it was only on account of the erroneous declaration by

the petitioner assessee that the petitioner was assessed to the higher

amounts indicated in the intimation served on it.

3. The learned Single Judge, who considered the matter, took

note of the averments in the statement filed on behalf of the Income

Tax Department, especially the averments therein that suggested that

no declaration was necessary if the claim of the petitioner was for an

exemption under Section 10(23BBA) of the IT Act, and found that

inasmuch as there was no dispute by the Department with regard to

the entitlement of the petitioner for the benefit under Section

10(23BBA) of the IT Act, the petitioner was entitled to the benefit of

the said Section as also to a refund of the tax already collected from it.

For the purposes of securing a refund of tax already collected from it,

the petitioner was given liberty to apply to the Commissioner of

Income Tax under Section 264 of the IT Act, for passing a W.A.NO.78 OF 2020 :: 6 ::

consequential order in view of the declarations in the judgment.

4. It would appear that when, pursuant to the aforesaid

judgment of the learned Single Judge, no further action for refund of

the amounts due to the petitioner were forthcoming from the

Department, the petitioner preferred a Contempt of Court Case

[Con.Case(C).No.2580/2019], which was later closed on the

Department reporting compliance with the directions in the judgment

of the learned Single Judge in the writ petition. Immediately thereafter

however, the Department preferred the present Writ Appeal

impugning the judgment of the learned Single Judge. In the Writ

Appeal, the grievance of the Department appears to be that the

learned Single Judge did not provide an opportunity to the Revenue to

examine the entitlement for exemption when an alternate claim for

exemption, as a charitable institution, was available to the petitioner

assessee as also when no claim for exemption under Section

10(23BBA) of the IT Act was made by the petitioner in its returns of

income for the relevant period.

5. We have heard Sri.Christopher Abraham, the learned

Standing counsel for the appellant Income Tax Department as also W.A.NO.78 OF 2020 :: 7 ::

Sri.Mahesh V. Ramakrishnan, the learned counsel for the

respondent/writ petitioner.

6. Before us, it is the submission of the learned Standing

counsel for the Income Tax Department that the learned Single Judge

ought not to have issued a direction based on a declaration of the

entitlement of the petitioner for exemption under Section 10(23BBA)

of the IT Act. According to him, this was an aspect that had to be

considered by the Assessing Authority for an effective adjudication

based on factual materials perused by him at the time of completing

the assessment.

On a consideration of the said submissions of the learned

Standing counsel for the Income Tax Department, the appellant

herein, we find that the grievance projected in the Writ Appeal does

not arise for consideration by this Court. As already noticed, at the

time when a Contempt of Court Case was filed by the writ petitioner

alleging non-compliance of the directions in the judgment impugned in

this Writ Appeal, the appellant itself proceeded to consider the

revision petitions preferred by the writ petitioner in the meanwhile,

and pass orders dated 24.9.2019 for the assessment years 2014-15 W.A.NO.78 OF 2020 :: 8 ::

and 2015-16. In the orders passed for the said assessment years,

under Section 264 of the IT Act, the Principal Commissioner of Income

Tax, Kozhikode, effectively set aside the earlier intimations issued to

the writ petitioner for the said assessment years, and directed the

Assessing Officer to verify and pass necessary orders in accordance

with law on the contention raised by the petitioner as regards its

entitlement for exemption under Section 10(23BBA) of the IT Act, after

affording due opportunity to the petitioner assessee. Acting on the

directions of the Principal Commissioner of Income Tax, the Assessing

Authority concerned, by orders dated 12.12.2019, found that the

petitioner assessee was in fact entitled to the benefit of exemption

under Section 10(23BBA) of the IT Act, and accordingly, that no tax

was payable by the petitioner assessee for the said assessment years.

The amounts already collected from the petitioner assessee were held

to be refundable together with interest under Section 244A of the IT

Act. It is not in dispute before us now that the assessee has since

received the said amounts by way of refund as well. It is also not in

dispute that the proceedings of the Commissioner under Section 264

of the IT Act and the subsequent proceedings of the Assessing

Authority, in compliance with the directions of the Principal

Commissioner, were not the subject matter of any proceedings W.A.NO.78 OF 2020 :: 9 ::

initiated at the instance of the Department, and were not provisional in

nature subject to the outcome of the Writ Appeal. In that view of the

matter, we feel that there is nothing left to be adjudicated in the Writ

Appeal preferred by the Department. We are also of the view that, at

any rate, the orders passed by the Principal Commissioner under

Section 264 of the IT Act and the consequential orders passed by the

Assessing Authority giving effect to the said orders of the Principal

Commissioner effectively manifest the concept of fairness in taxation

that the State is bound to observe especially in cases where it comes

to its notice that an assessee has committed a mistake while filing its

returns before the Department. In this connection, we refer to the

Circular No.14 (XL-35) dated 11.04.1955 of the Central Board of

Direct Taxes, which mandates that Officers of the Department must

not take advantage of the ignorance of an assessee as to his rights

rather it has to seen as one of the duties of the Officers of the

Department to assist a taxpayer in every reasonable way, particularly

in the matter of claiming and securing reliefs and towards this end,

the Officers have to take initiative in guiding a taxpayer where

proceedings or other particulars before them indicate that some

refund or relief is due to him. The said Circular of the Income Tax

Department was apparently issued so as to inspire confidence in an W.A.NO.78 OF 2020 :: 10 ::

assessee, who would thereafter be convinced that he would get a fair

deal from the Department. Thus, we find no merit in the Writ Appeal,

and the same is accordingly dismissed.

Sd/-

A.K.JAYASANKARAN NAMBIAR JUDGE

Sd/-

MOHAMMED NIAS C.P.

JUDGE prp/2/6/22