Katie Wilcox Education Association V. Income Tax Officer Ward II (4), Range \\u2013 II

WP(MD)/4639/2011

AI Insights

M/s. Katie Wilcox Education Association, represented by its Secretary from Lady Doak College, filed two writ petitions against the Income Tax Officer, challenging the garnishee order and the rejection of their stay application concerning tax collection. The petitioner argued that despite being a charitable institution registered under Section 25 of the Companies Act and having an exemption under Section 12AA of the Income Tax Act, the tax was levied based on incorrect assessments of government grant receipts. The court found that the immediate action taken by the assessing officer to collect the tax before the petitioner could contest the stay rejection was hasty and directed the appellate authority to expedite the appeal process.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 797857 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 21-04-2011
• Assessment Year: misc
• Laws Referred To: Article 226 of the Constitution of India, Section 25 of the Companies Act, Section 12AA of the Income Tax Act 1961, Section 220(6) of the Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: R KRISHNAMOORTHY
• Assessee Lawyers: PUSHIYA SEETHARAMANI
• Keywords: Appeal Pending; Charitable institution; Garnishee Order; Income Tax; Tax Exemption; Writ of Certiorari; Writ of Certiorarified Mandamus
• Section: 12AA; 220(6); 226(3)

Judgement Text

"1 BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 21.04.2011 CORAM: THE HONOURABLE MR.JUSTICE B.RAJENDRAN W.P.(MD).Nos.4639 & 4640 of 2011 And M.P.(MD).Nos. 1, 1 & 2 of 2011 M/s.Katie Wilcox Education Association Represented by its Secretary Lady Doak College Campus Madurai : Petitioner in both W.Ps. Vs The Income Tax Officer Ward II (4), Range – II 2, C.R.Buildings V.P.Rathinsamy Nadar Road Bibikulam, Madurai – 625 002 : Respondents in both W.Ps. PRAYER IN W.P.(MD).No. 4639/2011: Writ Petition filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorarified Mandamus calling for the records of the respondent in P.A.No. AAAAK0221A and quash the notice dated 17.02.2011 under Section 226(3) of the Income Tax Act and direct the respondent to return the amount of Rs.33,28,724/- withdrawn from the petitioner's account in the State Bank of India, Lady Doak College Branch, Madurai on 21.02.2011 pursuant to the impugned notice. PRAYER IN W.P.(MD).No. 4640/2011: Writ Petition filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorari calling for the records of the respondent in PAN.No. AAAAK0221A and quash the respondent's order dated 31.12.2010 as modified by the order dated 11.01.2011. *** For Petitioner in both W.Ps. : Mrs.Pushiya Seetharamani for Mr.K.K.Senthil For Respondent in both W.Ps. : Mr.R.Krishnamoorthy O R D E R Mr.R.Krishnamoorthy, learned counsel takes notice on behalf of the respondent. By consent of both sides, these Writ Petitions are taken up for final hearing. 2. The main point raised by the writ petitioner is that the Company has been registered under Section 25 of the Companies Act. Their main contention is that it is not a religious institution but an charitable institution. Unfortunately, this has not been taken into consideration even though they have been granted exemption under Section 12AA of the Income Tax Act 1961. On scrutiny in respect of assessment order 2008- 2009, the income tax authorities have levied the tax on the ground that https://hcservices.ecourts.gov.in/hcservices/ 2 the total amount of grant receipt from the Government is less than 50% ; whereas they had got 45% of the total expenditure. As against the assessment order passed for the year 2008-2009, they have already preferred an appeal and the same is pending before the appellate authority, namely, the Commissioner of Income Tax, CET Appeals, Madurai. Pending appeal, since there was a move to collect the tax, they approached the assessing Officer under Section 220(6) of the Act for staying all further proceedings, viz., collection of tax. Unfortunately, the authority without taking into consideration, that till date the exemption was not cancelled under Section 12AA of the Act and only a show cause notice was issued, the authority has rejected the petition for stay. In that rejection order, it is also stated that they cannot approach the Court also and that there is no need for such a stay. Apart from stay, being rejected on the very next day, the assessing Officer had issued a garnishee order to the Bank and also compelled the Bank to give the demand draft for the amount due and also collected the amount even prior to the service of the order. Therefore, aggrieved against the same, they have challenged the garnishee order as well as the rejection order passed by the assessing authority. Hence, these two Writ Petitions are filed. 3. At the admission stage, Mr.R.Krishnamoorthy, the learned counsel took notice for the respondent. He would contend that since the appeal itself is pending, the appeal itself will be taken and disposed of at an early point of time and there is no need for the writ petition as it is only challenges the interim order. 4. Heard both sides. 5. The only point raised by the Senior counsel for the petitioner is that even before the order of rejection of the stay is received by the petitioner, the assessing officer had immediately taken steps not only to issue the distraint order or the garnishee order to the Bank but collected the tax. The assessing officer has issued order of dismissal of stay application and immediately send the garnishee order to the bank and obtained the demand draft from the bank on the very same day without even giving the petitioner any opportunity to contest. Even otherwise, it is also the contention of the petitioner that their request for stay during the pendency of the appeal has not at all been considered, especially when the authority has only stated that the Commissioner has issued the show cause notice only to cancel, but not cancelled the exemption granted under Section 12AA of the Act. Therefore, the authority has acted very hastily passed the order was the main ground of attack. 6. The learned counsel appearing for the respondent would contend that since the money was lying in the bank, it is only sought to be attached . It was only passed after the stay petition was dismissed. Unfortunately, the fact remains that the appeal is pending. When the appeal is pending, it is always open for the assesses to move the authority for a stay and the stay has been moved rightly. But it has been rejected by the authority concerned. 7. Now that it is only a matter relating within a rejection of the interim order, as rightly pointed out by the learned counsel appearing https://hcservices.ecourts.gov.in/hcservices/ 3 for the respondent, it is better to immediately dispose of the appeal as the matter pertains to college and the funds for the working of the college has been totally attached and then recovered. Since the college has to re-open in the month of June for the new academic year, suffice to direct the appellate authority, namely, the Commissioner, CET Appeals, where the appeal is pending from January 2011, which has been presented by the petitioner to dispose of the same in accordance with law within a period of 30 days from the date of receipt of a copy of this order. 8. It is also made clear that the other Writ Petition, the jurisdiction point has been raised in so far as to the authority of the respondent in issuing the order that question is left upon. It can be decided by the appellate authority. Since this Court has already directed the appeal itself to be disposed of, the penalty proceedings will await the disposal of the appeal. 9. With the above said direction, this Writ Petition is disposed of. Consequently, connected Miscellaneous Petitions are closed. No costs. Sd/- Deputy Registrar (L.A) /True Copy/ Assistant Registrar To The Income Tax Officer Ward II (4), Range – II 2, C.R.Buildings V.P.Rathinsamy Nadar Road Bibikulam, Madurai – 625 002 + 1 cc to Mr.K.K.Senthil, Advocate, SR No.14783 + 2 ccs' to Mr.R.Sathiamoorthy, Advocate, SR Nos.14705, 14706 W.P.(MD).Nos.4639 & 4640 of 2011 And M.P.(MD).Nos. 1, 1 & 2 of 2011 21.04.2011 vsg RJ/26.4.11 (IT) 3p/5c https://hcservices.ecourts.gov.in/hcservices/ "