Chaitanya Memorial Educational Society V. The Commissioner of Income Tax (Exemption) and The Joint Commissioner of Income Tax (Exemption) and The Income Tax Officer (Exemption), Ward 1 (1) and Additional/Joint Deputy/Assistant Commissioner of Income Tax, National E-Assessment Centre

WP/25241/2023

AI Insights

The case involves Chaitanya Memorial Educational Society, a charitable and educational institution, challenging an order from the Commissioner of Income Tax (Exemption) regarding a tax demand for the assessment year 2018-19. The petitioner argued that the demand was illegal and arbitrary, seeking a writ of mandamus to quash the order and stay the recovery of the demand. The High Court found that the petitioner had a strong prima facie case, considering the prolonged pendency of related applications and the charitable nature of the institution, which justified staying the recovery proceedings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 815988 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 09-10-2023
• Assessment Year: misc
• Other Referred Cases: IJTI v/s INCOME TAX OFFICER
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A RADHA KRISHNA
• Assessee Lawyers: C P RAMASWAMI
• Keywords: Assessment year 2018-19; Charitable purpose; Income tax exemption; Stay of recovery; Writ of Mandamus
• Section: 154; 12A; 151; 226; 220(16)

Judgement Text

"[ 3386 ] HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) IVONDAY, THE NINTH DAY OF OCTOBER TWO THOUSAND AND TWENTY THREE PRESENT THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE LAXMI NARAYANA ALISHETTY WRIT PETITION NO: 25241 OF 2023 Between: AND 1 tr//s. chaitanya lvlemorial Educational Society_., _a. .1:990, It/ahabho-opalJt/anzil, JirUagn, Hyderabad - 500'195, Telangana, PAN.No.aAATC2521L' Rep bv iti SLii\"ir.v. Shri. J. Vikramdev Rao'-S/o. Ramdev Rao J., Aged 81 years, R/o. Plot No.476, Road No.22, Jubilee Hills - 500033. ...PETITIONERS The Commissioner of lncome Tax (Exemption), Aaykar Bhavan, Opposite L.B. Stadium, Basheerbagh, Hyderabad - 500004. The Joint commissioner of lncome Tax (Exemption)' Aai/lar Bhavan, Opposite L.B. Stadium, Basheerbagh, Hyderabad - 500004' The lncome Tax Officer (Exemption), Ward 1 (1), Aaykar Bhavan, Opposite L.B. Stadium, Basheerbagh. Hyderabad - 500004. Additional/JoinuDeputy/Assistant commissioner of lncome Tax, lncome Tax Officer, National E-Assessment Centre, Delhi. 2 3 4 ...RESPONDENTS Petition under Article 226 of lhe constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High court may be pleasedtoissueanappropriateWrit,Directionororder,particularlyoneinthe nature of writ of Mandamus declaring the lmpugned order dated o4.o9.2023 for the Assessment year 2018-19 under DIN and Letter No. ITBA/COM|F|17|2O23- 2411055733255(1)issuedbyRespondentNo'l,asillegal,arbitraryand unsustainable in law and consequently, to quash the same, and grant stay of recovery of the entire demand raised by the Respondent No- 4, by the notice of demandunderSectionl56datedlg.o3.202lbyDlNandNotice No lrBA/AST/s 115612020-211103160821s(1) tiil the disposar of the appear fired by the Petitioner on 17.04.2021 vide Annexure p-7 and pending before the First Appellate Authority ( Faceless) lA NO: 1 OF 2023 Petition under Section 151 cpc praying that in the circumstances stated in the affidavit filed in support of the petition, the High court may be preased to stay all recovery proceedings in terms of the notice of demand under section 156 dated 19 03.2021 bv DrN and Notice No rrBA/AST/s/15612020 21r1031608215 (1) Counsel for the Petitioner: SRI C. p. RAMASWAMI Counsel for the Respondents: SRI A. RADHA KRISHNA The Court made the following: ORDER l THE HON'BLE SRI JUSTICE P.SAM KOSHY AND THE HON'BLE SRI JUSTICE LAXMI NARAYANA ALISHETTY WRIT PETITION No.25 241 of 2023 ORDER (per Hon'btc Si Justice P.SAM KOSHI) J'he instant,uvrit perition is filed assailing the order dated 04.o9.2023 passed by the respondent No. l /The commissioner of Income Tax (Exemption) vide DIN & Letter No: ITBA/COM/F/ tZ /2023_24/!OSST332S5 1(i) for the q.ssessment year 2OlB-19. Vide the said impugned order, ttre No. I while deciding a stay application, pending challenging the assessment order for the assessment year 20Lg_ 19, allowed ti.re application subject to the petitioner/assessee amount oI lis.35,00,0O0/- out of the totai outstanding demand of Rs.2,50,33 ,S3O / _, 2. Heard Sri C.p depositing an petitioner and Sn A 3 Ramaswami, learned Ramakrishna Reddy, respondent an appeaJ counsel for the learned Starrding Counscl for Income Tax appearing for the respondents. The facts of the case in brief are that the petitioner is a-n educational and charitable soclety engaged ln activities of educationarl and medical relief, It is a society registered uncler 2 Income Tax Act' 1961 (for short'thc Act) The Section 12A of tl-r e petitioner's return gross receiPts of Rs and therefore' the Assesstng was taken uP for scruttny and the entrre Rs.5,25,06,298l - has been brought to tax' Off-rcer had levied a total tax habilitY ot Rs'2'50'00'000/ ' 4. The said demand against the petitioner was subjected to cl-rallenge before the Appellate Authority Pending the appeal' the petitioner moved arr application under Section 22016 of the Act seeking stay of the demand notice pending the appeal lt is this application under Sectio n 22016 of the Act which has been decided on 04 'O9 '2023' whereby' the petitioner was directed to pay a sum of Rs'35'00'0OO/- before the Assessing Ofhcer by 14 -Og.2023' Subject to the compliance of which' there shall be stay and effect of the operation of demand notice dated lg.O3'2O2 issued by the respondent No'4' 5. lmmediately aJter the demand was raised against the petitioner, an application requesting for rectification '|as sent to the Assessing Ofhcer by e-mait in terms of Section 154 of the Act and the same was required to be disposed of within a period of six (6) months' However' till date' the same has not been decided. At the same time the petitioner had preferred an appeal ..': 3 against the order of assessment and similarly, an application for rectification of the order was also filed. Both of which are till date pending in spite of more than 2 yz years have lapsed. In between after the appeal was filed, the petitioner on O5.05.2O2 1 preferred an application seeking stay of the demand rajsed agarnst the petitioner. The said application also was pending /z years and order. The decided the before the authorities concerned for more than 2 has only now been Appellate Authority in decided by the impugned the mea_nwhile could have appeal itself or have decided the rectification application itself and upon a decision on either of the two, the grievance of the petitioner could have got redressed. 6. Though the learned counsei for the respondents have entered appeara_nce artd filed their counter firstly denying the fact that there was a rectification application filed by the petitioner and secondly, that in terms of the circular goveming the field, ar order of payment of 20 percent out of the total outstanding demand cannot be found fault with. w 4 7. The High Court of Bombal in the case ol IJTI IlIVTUAL FIiND v/s INCOME TAx 1FFICERI in ParagraPh No' 18 held as undcr \"counset aPPeaing ?: ::!:'f\";{^Y?\"f::i#: lt; ';:::', :',;l ',,\"!ii oZI ;:i:; ; ;;;*\"is 2 o 1 3 t a ki\" s thc uietLt that in \" *'Ji\"\"* *ritter ^an inteim ordcr sho,tld be passed on'g'i'n\"ih\" .,os'\" o1 gt\"':in'e frnonctal nordship and not \"'h\"#i;'; ilitn 'itlp\"\"t' the\"order of the Karnataka High cotrilonnot be iead' b mean that consid-eration o7 *n\"tnJ'\" on- assessee has made out a ';;;;;\"';;,i:\"*::Jfr .lii,*,:L\",yi;'::;i:,\"{^;, demand is irreleuant'.;:\";\";*;;rn;p, no stig onthe 'tz:z:;\":L:?;ijti3:,zi:i;:x;;\"2':I:#22; 'li1!,'nlZ i\"{\" ji\"oJi\"'\"i i\"iaa\"s'?\"t:!'thec'l'';urL : ;,;; bou id .. ro r:i*i;r::1\",!f;f,lL,'li, :':,i.:[ lLnanciat hardshtp \" -\"';:\";;;; iiaute issue has been ol!,!!orliii,,il'.::foi;;:;;izii'n\"ry\"1io^nordcPosit' ',i'[[oV;,-i^,t:i,-rt'^irtr*:\"#,^*::\"i3::t*i:::\"' the Diuision Bench o1 ; If the panll has made out a strong prima facie case, -that bg itself *\"\"ti A\" a strong ground in the matter of exercise tl\"iit*r:ii\" as calting on the patlg to deposit tnt o^ouniJuii'i-pn*9 f\":* i:-:* tiabte to 'i\"i.ii,\",,-n-^1f T:Y::::i',!\"0!'n';;f ,\"#\";:X'r'y, ;t.r,if rttould result 1t 'rZil\"a\"7i\"'' to dePosit the amount' Where a strong prima facie case has been made out calling upon the 'J'i\"\"*\"i*\"a\"p\"tit' tuould itselJ' occasion undue n*iiniii' wnere thl issue has raised a' strong pima fo\"?\"'ht\"'' *ni'n requires seriousl consideration o, ,n,tnJ}nsent case, a requirement of ' ru13 Lawsuit (Bom) 340 ',l'.: --7 8 on 5 establishment is an educational and charitable society registered itself under Section 12A of the Act. It is relevan t at this juncture to consider the fact that the Income Tax Department itself had issued a circular No'11 of 2008 dated lg'12'2OOB r'vhereby the dehnition of charitable purpose under Section 2(15) of the Act has been clarified which for ready reference is reproduced herein under: Having hea-rd the contentions put forth on either side and perusal of records, undoubtedly the petitioner's predeposit tttould itself be a matter of hardship' Finallll ' u)e express o11r set'tous disapproual of the,manner in 7rLi\"i{ri. pernn n hc's 'ougit'to brush rtside a binding Z.riti.\" i ,ns court in the case of the assess ee' on the i:;;\"\"'\"\"i; \"log on enforcement for the preuious gear' \";;;-;b of tiw has an abiding ualue in our legal )L'ii*\" Nip\"btic authoritg' includittg the .Reuenue' can ',;i;:;; ii'ii\"'iptt of \"precedert' certaints in tax 'Xii\"r'\"rtlZri\"\" i{ q 'cirdinat importance and its \"ii ti*\" undermine s public confidence' \" \"The neuly inserted Prouiso to Section 2(15) Luill not ;;;;;\" i.spe.t of rhe first three limbs of s.ection ;if;i ;';.-rii\"r oi the poor' education or medical llit\"'r'a\"\"r\"i;L\"iia, u-nLre the purpose of a trust or 'r1'!7irii\"'iJrJ;.i't the poor' education or medical relief, it uill constitute 'ciaritabte purpose' euen if it 'rlliil'.i\"r'i i\",J'i' 'n' carryins on of commerciat actiuities. \" 6 9. If the contention of the learned counsel for the petitioner is to be accepted then, the petitioner has been availing the exemptior-r of pa'ment of Income Ta-x on account of the fact that the pctrtioner is a charitable institution and the works executed b,t, it again is r.r'ith a charitable purpose. Since the petitioner availed rhe sard benefits ail along prior to the issuance of demand notice and even in the subsequent yea-rs as rvell, there does not seem to be any prejudice going to be caused il the sta_y application under Section 220(61 is decided in favour of the petitioncr. Yet another fact s,hich is more important to be appreciated is rhat though the appeal u,as filed as early as on 17 .O4.2O21 and the rectihcation application also was filed on 20 .O3 .2021 , and both the rectification application and the appeal b1' no'r, are still pending consideration or is undecided for more than 2 Yz years. 10. Under these circumstances, we are of the considered opinion that given thc aforesaid factual matrix and also considering the status or the petitioner which is a charitable establishment u,ith a charitable object and purpose, the Assessing Authority should have allowed the application under Section 220(61 of the Act 7 't I i q 11. In view of the same, we are inclined to allow the Writ Petition. The impugned order dated 04.09.2023 lor the reasons stated above stands set aside/quashed. It is ordered that there shall be stay of the recovery of the entire demand raised by the respondent No.4 dated lg.O3.2O2I till the disposal of the appeal filed by the petitioner on 17 .04.2021 . No order as ro costs. As a sequel, miscellaneous petitions, pending it any, shall To, starld closed sD/- K. AMMAJI //TRUE COPY// ASSISTAN T REGIST SECTI OFFICER The Commis sroner of lncome Tax rabad (Exem - 500004 ption), Aaykar Bhavan, Opposite 1.8. Stadium Basheerbagh, Hyde The Joint comrntssioner of lncome TAX Exemption ), Aaykar Bhava n, 1 2. 3. 4. Opposite L B Stadium, Basheerba gh, yderabad ( The lncome Tax Officer (Exemptio , Ward 1 (1), Aaykar Bhavan, Opposite - 500004 H L.B Stadium, Basheerb agh, Hyderabad - S00oo4 Additional/JoinUDeputylA sment C ssistant Commission entre, Delhi er of lncome Tax, lncome Tax Officer, National E-Asies One CC to Sri C. P. Ramaswami Advocate oPucl n 5 t) 7 TJ GJP One CC to Sri A. Radha Krishna sc [oPUC Two CD Copres t -- k- HIGH COURT DATED:0911012023 ORDER WP.No.25241 of 2023 ALLOWING THE WRIT PETITION WITHOUT COSTS. { .l: $E STATE ( q , c ,J s I t{0I 2$'8 7. o L ir ,1 r:F'ir: ,-( t1L ' -. "