Diocesan Technical Education Trust V. The Assistant Commissioner of Income Tax, Exemption Circle and The Deputy Commissioner of Income Tax, (Exemption) and The Principal Chief Commissioner of Income Tax (Exemption)

WP(C)/38276/2022

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The case involves the Diocesan Technical Education Trust, which challenged the draft order and notice issued under Sections 148 and 148A of the Income Tax Act, 1961, respectively, for the assessment year 2017-18. The dispute centered on the taxability of Rs.1,00,03,000 collected as capitation fee from NRI students, which was previously exempted. The Income Tax Department argued that this income had escaped assessment due to incorrect application of law and an audit objection. The court dismissed the petition, supporting the re-opening of the assessment based on the audit findings.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 678330 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 19-01-2024
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM
• Assessee Lawyers: ABRAHAM MARKOS; V MARKOS; ISAAC SHARAD JOSEPH KODANTHARA; P G CHANDAPILLAI; ABRAHAM VITHAYATHIL; JOSEPH MARKOSE
• Keywords: Assessment re-opening; Audit objection; Capitation Fee; Income Tax
• Section: 148; 143(3); 148A

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH FRIDAY, THE 19TH DAY OF JANUARY 2024 / 29TH POUSHA, 1945 WP(C) NO. 38276 OF 2022 PETITIONER/S: DIOCESAN TECHNICAL EDUCATION TRUST, BISHOP'S HOUSE, PALAI, KOTTAYAM, PIN - 686575 REPRESENTED BY ITS CHAIRMAN REV. MSGR. DR. JOSEPH MALEPARAMPIL BY ADVS. ABRAHAM JOSEPH MARKOS V.ABRAHAM MARKOS ISAAC THOMAS SHARAD JOSEPH KODANTHARA P.G.CHANDAPILLAI ABRAHAM JOHN VITHAYATHIL JOSEPH MARKOSE (SR.) RESPONDENT/S: 1 THE ASSISTANT COMMISSIONER OF INCOME TAX, EXTEMPTION CIRCLE , AAYAKAR BHAVAN, KAWADIAYAR P.O., THIRUVANANTHAPURAM, PIN - 695003 2 THE DEPUTY COMMISSIONER OF INCOME TAX, (EXTEMPTION), AAYAKAR BHAVAN, KAWADIAR P.O THIRUVANANTHAPURAM, PIN - 695003 3 THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX(EXEMPTION), NEW DELHI, PIN - 110001 BY ADV CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT OTHER PRESENT: CHRISTOPHER ABRAHAM-SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 19.01.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 38276 OF 2022 2 J U D G M E N T The present writ petition has been filed by the petitioner, who is an assessee under the provisions of the Income Tax Act, 1961 ('Act', for short) impugning Ext.P7 draft order passed under Section 148(d) of the Act and Ext.P8 notice under Section 148 of the Act requiring the petitioner to file return of its income for the assessment year 2017- 18. 2. The ground of challenge made to Ext.P7 impugned order is that an amount of Rs.1,00,03,000/-, the capitation fee collected from NRI students as corpus donation, was considered for exemption by the assessing authority in the assessment order dated 21.12.2009 passed under Section 143(3) of the Act and the assessing authority having got satisfied with the explanation of the petitioner-assessee regarding exemption from payment of tax on the said amount, assessed nil tax for the assessment year 2017-18. The very same WP(C) NO. 38276 OF 2022 3 income is now being sought to be levied with income tax by re-opening the assessment and this amounts to change of opinion and, therefore, the order passed under clause (d) of Section 148A of the Act is liable to be set aside, as on the mere change of opinion, the assessment order cannot be re-opened under Section 148 of the Act. 3. Shri.Christopher Abraham, learned Senior Standing Counsel for the Income Tax Department, however, submits that the petitioner is a registered Trust and is running an educational institution. Income of Rs.1,00,03,000/- had escaped assessment by applying incorrect provisions of law and there had been audit objection. In this background notice dated 22.8.2022 was issued requiring the petitioner-assessee to submit response with supporting documents, if any, on or before 2.9.2022. No response was submitted by the petitioner. Hence, notice dated 28.10.2022 with the prior approval of the Principal Chief Commissioner of Income Tax (Exemption), New Delhi WP(C) NO. 38276 OF 2022 4 and draft order dated 28.10.2022 under Section 148A(d) was issued to the petitioner-assessee. 4. The petitioner did not file response to the said notice on or before the date mentioned therein, but submitted response/reply after the due date. The proposal for re-opening of the assessment was made on the basis of the final objection raised by the Audit Wing of the Comptroller and Auditor General of India. The amended provision of Section 148 of the Act empowers re-opening of the assessment on the basis of audit objection. Therefore, it cannot be said that the assessment order is sought to be re-opened on the ground of change of opinion, but is based on the audit objection. 5. I find substance in the submission of the learned Senior Standing Counsel for the Revenue. The amount collected from NRI students is capitation fee. Capitation fee is collected as quid pro quo for giving admission and it is not voluntary in nature. The exemption under Section WP(C) NO. 38276 OF 2022 5 11(1)(a) of the Act is only in respect of voluntary contribution and capitation fee collected for giving admission to NRI students is not a voluntary contribution. 6. I, therefore, do not find much substance in the present writ petition, which is hereby dismissed. The petitioner is granted fifteen (15) days time to file return of its income on the basis of the notice under Section 148 of the Act. If the petitioner files reply/revised return as above, the assessing authority will proceed to finalise the assessment order, in accordance with law, however without being prejudiced with any observations made hereinabove. Pending interlocutory application, if any, in the present writ petition stands dismissed. Sd/- DINESH KUMAR SINGH JUDGE jg WP(C) NO. 38276 OF 2022 6 APPENDIX OF WP(C) 38276/2022 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE ASSESSMENT ORDER DATED 21.12.2019 ISSUED BY THE 1ST RESPONDENT FOR ASSESSMENT YEAR 2017-18. Exhibit P2 TRUE COPY OF THE NOTICE DATED 07.02.2019 ISSUED BY THE 1ST RESPONDENT UNDER SECTION 142(1) OF THE INCOME TAX ACT, 1961 FOR ASSESSMENT YEAR 2017-18 Exhibit P3 TRUE COPY OF THE REPLY DATED 01.03.2019 SENT BY THE PETITIONER TO THE 1ST RESPONDENT. Exhibit P4 TRUE COPY OF THE GOVERNMENT ORDER G.O.(MS) NO.17G/2012/H.EDN DATED 07.06.2012 ISSUED BY THE PRINCIPAL SECRETARY TO GOVERNMENT, HIGHER EDUCATION (G) DEPARTMENT, GOVERNMENT OF KERALA. Exhibit P5 TRUE COPY OF THE NOTICE DATED 22.08.2022 ISSUED BY THE 1ST RESPONDENT UNDER SECTION 148A OF THE INCOME TAX ACT. Exhibit P6 TRUE COPY OF THE E-MAIL DATED 12.09.2022 TOGETHER WITH THE REPLY FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT. Exhibit P7 TRUE COPY OF THE DRAFT ORDER DATED NIL ISSUED BY THE 2ND RESPONDENT UNDER SECTION 148 A(D) OF THE INCOME TAX ACT, 1961. Exhibit P8 TRUE COPY OF THE NOTICE DATED 28.10.2022 ISSUED BY THE 1ST RESPONDENT UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 "