St. John the Baptist Church, Moonumury, Mattathur, Irinjalakuda, Thrissur V. The Income Tax Officer (Exemption), Aayakar Bhavan, Income Tax Office, Sakthanthampuran Nagar, Thrissur and The Income Tax Officer (Exemption), San Juan Tower, Behind C R Building, Ernakulam and The Commissioner of Income Tax (Exemption), San Juan Tower, Behind C R Building, Ernakulam and The Principal Chief Commissioner of Income Tax (Exemption), 25th Floor, E2 Block, Pratyaksh Kar Bhawan Civic Centre, J.L.N. Marg, New Delhi and The Additional Director of Income Tax (Inv), Aayakar Bhavan, Income Tax Office, Sakthanthampuran Nagar, Thrissur and The Assistant Commissioner of Income Tax (CPC), Centralized Processing Centre, Post Bag No: 2, Bangalore

WP(C)/18468/2023

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The case involves St. John the Baptist Church, a religious institution, which filed a writ petition against the Income Tax Department's order concerning financial transactions recorded for the assessment year 2016-17. The church had accepted and repaid substantial cash loans, which were not reflected in their audited financial statements, leading to allegations of income escapement. The Income Tax Department issued a notice under Section 148A, followed by a notice under Section 148, to reassess the income. The church contested these notices, arguing that the transactions were exempt under their registration. However, the court found no merit in their arguments and dismissed the petition, allowing the reassessment to proceed.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 814414 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 15-01-2024
• Assessment Year: misc
• Other Referred Cases: Red Chilli International Sales vs. Income Tax Officer & Anr
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH; CHRISTOPHER ABRAHAM
• Assessee Lawyers: P J ANILKUMAR; K N SREEKUMARAN; N SANTHOSHKUMAR
• Keywords: Cash loans; Escapement of income; Income Tax; Penal provisions; Re-opening of assessment; Religious Institution; Writ petition; Violation of Section 12AA
• Section: 148; 12AA; 148A; 269SS; 269T

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH MONDAY, THE 15TH DAY OF JANUARY 2024 / 25TH POUSHA, 1945 WP(C) NO. 18468 OF 2023 PETITIONER: ST. JOHN THE BAPTIST CHURCH, MOONUMURY, MATTATHUR, IRINJALAKUDA, THRISSUR, PIN – 680684 (REPRESENTED BY ITS VICAR, FR. GEORGE VEZHAPARAMBIL). BY ADVS. SRI. P. J. ANILKUMAR (A-1768) SRI. K. N. SREEKUMARAN SRI. N. SANTHOSHKUMAR RESPONDENTS: 1 THE INCOME TAX OFFICER (EXEMPTION), AAYAKAR BHAVAN, INCOME TAX OFFICE, SAKTHANTHAMPURAN NAGAR, THRISSUR, PIN – 680001. 2 THE INCOME TAX OFFICER (EXEMPTION), SAN JUAN TOWER, BEHIND C R BUILDING, ERNAKULAM-682018. 3 THE COMMISSIONER OF INCOME TAX (EXEMPTION), SAN JUAN TOWER, BEHIND C R BUILDING, ERNAKULAM-682018. 4 THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX (EXEMPTION), 25TH FLOOR, E2 BLOCK, PRATYAKSH KAR BHAWAN CIVIC CENTRE, J.L.N. MARG, NEW DELHI-110002. 5 THE ADDITIONAL DIRECTOR OF INCOME TAX (INV), AYAKAR BHAVAN, INCOME TAX OFFICE, SAKTHANTHAMPURAN NAGAR, THRISSUR-680001. 6 THE ASSISTANT COMMISSIONER OF INCOME TAX (CPC), CENTRALIZED PROCESSING CENTRE, POST BAG NO: 2, BANGALORE -560100. BY ADVS. SRI. JOSE JOSEPH – SC - INCOME TAX DEPARTMENT, SRI. CHRISTOPHER ABRAHAM – SC - INCOME TAX DEPARTMENT THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 15.01.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 18468 OF 2023 2 DINESH KUMAR SINGH, J. -------------------------- W.P.(C) No. 18468 of 2023 ------------------------- Dated this the 15th day of January, 2024 JUDGMENT 1. The present writ petition has been filed impugning the order in Exhibit P-9 dated 20.04.2023 passed under Clause (d) of Section 148A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for short). 2. The petitioner claims to be a religious institution. Petitioner has been registered under Section 12AA dated 21.09.2007 w.e.f. 01.04.2006. The petitioner has been filing return of its income. The Assistant Director of Income Tax (Investigation), Thrissur had uploaded certain information in respect of financial transactions of the petitioner for the relevant assessment year 2016-17. A perusal of the data provided by the Assistant Director of Income Tax (Investigation) would reveal that the petitioner had accepted (interest free) cash loans (IFL) amounting to Rs. 1,87,69,000/- during the financial year 2015-16 relevant to the assessment year 2016-17 and, out of the said amount Rs.1,69,65,611/- has been repaid by cash during the said financial year itself. It is also evident from the data WP(C) NO. 18468 OF 2023 3 collected that unpaid loan amount of Rs. 19,30,000/- was outstanding on 31.03.2016 which had also been repaid by cash during the financial year 2016-17. The competent authority was of the opinion that the said transaction in cash was a clear case of violation of the provisions of registration under Section 12AA of the Act and these transactions attract penal provisions under Section 269SS and 269T of the Act. 3. A checking of the e-filing portal reveals that the assessee had filed return of income for the assessment year 2016-17 on 14.06.2017. The gross receipts were stated to be Rs. 2,37,72,528/- with application of income to the tune of Rs. 2,45,92,429/-. The said information obtained from the Directorate of Income Tax (Investigation) would suggest re-opening of assessment due to escapement of income from tax on account of non reflection of cash loan and repayment in audited statements. A show cause notice under Section 148A was issued and served on the assessee on 31.03.2023 to show as to why notice under Section 148 should not be issued in this case. The petitioner had participated in the proceedings. However, on careful consideration of the reply of the assessee, the assessing authority was of the opinion that the WP(C) NO. 18468 OF 2023 4 petitioner has no explanation relating to the acceptance and payment of loan in cash to the tune of Rs. 1,87,69,000/-. The petitioner/assessee has also not confirmed whether these acceptance and repayment have reflected in their audited financials. Instead, the petitioner had requested to exempt him from 148 proceedings as the Commissioner of Income Tax has initiated separate penalty proceedings. 4. Considering aforesaid facts and in the absence of any materials coming forth from the petitioner or explanation for accepting and making repayment of Rs. 1,87,69,000/- in cash, the notice under Section 148 was issued as in the opinion of the assessing authority, the income chargeable to tax to the tune of Rs. 1,87,69,000/- has escaped assessment in the case of the petitioner for the assessment year 2016-17. 5. Considering the aforesaid fact that the petitioner’s alleged acceptance of Rs. 1,87,69,000/- in cash and repayment of the same was in clear violation of Section 12AA and the assessing authority has been of the opinion that prima facie the said amount was an income of the petitioner which had escaped assessment from payment of the tax, I do not find that the assessing authority had WP(C) NO. 18468 OF 2023 5 committed any error of law or jurisdiction in passing the impugned order under Section 148A(d) of the Act. 6. The petitioner is required to file his return in response to the notice under Section 148 and if he files the return, the assessing authority shall examine the returns and will finalise the assessment order after hearing the petitioner. At this stage, I do not find any ground to interfere with the impugned order. In the above facts and circumstances, this writ petition being devoid of merits and substance is hereby dismissed. Sd/- DINESH KUMAR SINGH JUDGE Svn WP(C) NO. 18468 OF 2023 6 APPENDIX OF WP(C) 18468/2023 PETITIONER’S EXHIBITS EXHIBIT P1 INCOME TAX RETURN FOR A Y 2016-17 FILED ALONG WITH THE COMPUTATION OF INCOME DATED 14..06..2017 EXHIBIT P2 AUDIT REPORT FOR AY 2016-17 IN FORM 10B FILED VIDE WITH E-FILING ACKNOWLEDGEMENT NO. 804489061150617 DATED 15..06..2017 EXHIBIT P3 NOTICE DATED 31..03..2023 U/S.274 READ WITH SEC.271D OF THE ACT ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER EXHIBIT P4 NOTICE DATED 31.03..2023 U/S 274 READ WITH SEC.271E OF THE ACT ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER EXHIBIT P5 REPLY DATED 13..05..2023 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT AGAINST EXHIBIT-P3 NOTICE VIDE ACKNOWLEDGMENT NO. 146870211130523 EXHIBIT P6 REPLY FILED BY THE PETITIONER DATED 13..05..2023 BEFORE THE 2ND RESPONDENT AGAINST EXHIBIT-P4 NOTICE VIDE ACKNOWLEDGEMENT NO. 146753951130523 EXHIBIT P7 NOTICE U/S 148A DATED 31..03..2023 ISSUED BY THE 2ND RESPONDENT ON THE GROUND OF NON-REFLECTION OF CASH LOAN TRANSACTIONS IN THE AUDITED STATEMENTS EXHIBIT P8 REPLY DATED 18..04..2023 FILED BY THE PETITIONER AGAINST EXT-P7 NOTICE EXHIBIT P9 ORDER DATED 20..04..2023 U/S148A(D) OF THE INCOME TAX ACT ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER EXHIBIT P10 NOTICE DATED 20..04..2023 U/S.148 OF THE INCOME TAX ACT ALLEGED INCOME ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC.147 EXHIBIT P11 TRUE COPY OF THE ORDER IN RED CHILLI INTERNATIONAL SALES VS. INCOME TAX OFFICER & ANR, SLA(C) 86/2023 DATED 03..01..2023 "