SWATANTRA SENANI R.D. SOMANY SIKSHAN V. UNION OF INDIA AND ORS.

CWP/1548/2008

AI Insights

The case involves Swatantra Senani R.D Somany Sikshan Sansthan (SSRDS), an educational institute, challenging the non-renewal of its tax exemption under Section 10(23C) of the Income Tax Act, 1961. The exemption was initially granted but was not renewed due to findings from a search operation that uncovered unaccounted cash, evidence of capitation fees, inflated salary payments, and personal expenses being paid by the institute. The petitioner argued that the non-renewal was premature as no final assessment had been made regarding the seized cash and other allegations. However, the court upheld the decision to reject the exemption based on the evidence of financial misconduct.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 735310 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 01-09-2008
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: ANJALI KUKKAR
• Assessee Lawyers: AKSHAY BHAN
• Keywords: Capitation Fees; Educational institute; Inflated expenditure; Personal expenses; Unaccounted cash; Exemption renewal
• Section: 12AA; 10(23C); 80G; 11(5); 132(1)

Judgement Text

"C.W.P No. 1548 of 2008 ::1:: IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH C.W.P No. 1548 of 2008 Date of decision : September 01, 2008 Swatantra Senani R.D Somany Sikshan Sansthan (SSRDS), ...... Petitioner through Mr.Akshay Bhan, Advocate v. Union of India & others, ...... Respondents through Ms. Anjali Kukkar, Advocate CORAM : HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY TEWARI *** 1. Whether Reporters of Local Newspapers may be allowed to see the judgment ? 2. To be referred to the Reporters or not ? 3. Whether the judgment should be reported in the Digest ? *** AJAY TEWARI, J This writ petition has been filed challenging the order dated 31.12.2007 whereby the application of the petitioner for renewal of exemption under Section 10(23C) of the Income Tax Act, 1961 (for short “the Act”) beyond 1.4.2005 was dismissed. The petitioner-society is running an educational institute under the name of Swatantra Senani R.D Somany Sikshan Sansthan at Rewari and had earlier been granted exemption under Section 10(23C)(vii) of the Act by the CCIT Panchkula for the assessment years 2003-04 to 2005-06 vide order dated 21.11.2006. On 24.8.2006 during searches at the premises of the members of the petitioner-society, a survey was also undertaken C.W.P No. 1548 of 2008 ::2:: against the petitioner-society. It was later converted into a search under Section 132(1) of the Act on discovery of cash of Rs.18.42 lacs. Certain documents and other records having a bearing on the activities of the petitioner-society were found and seized from its premises. In the present case, we are not concerned with the tax implication of the seizure but only with the justification or otherwise of the non-renewal of the exemption beyond 1.4.2005. For this purpose, a notice was issued to the petitioner pointing out the following circumstances and requiring it to show cause by 28.11.2007 as to why the application for renewal of exemption should not be rejected :- (i) During the course of the above search, cash of Rs.18.42 lakh was found, out of which Rs.18.06 lakh was seized as unaccounted asset, since as per the statement of the accountant, books of accounts of the Society were incomplete. No documentary evidence regarding handing of cash to the wife of the Chairman of the society was found either at the institute or at the residential premises of the Chairman. (ii) Documentary evidence seized during the search indicated that the institute is receiving capitation fees/donations from students over and above the prescribed fee structure of the affiliating university. (iii) The institute was found inflating expenditure as per documentary evidence seized which showed that the salary paid to teachers as per record is higher than the actual salary paid to them. C.W.P No. 1548 of 2008 ::3:: (iv) Personal expenses of the Chairman of the Society and his family members were found to have been incurred by the institute in violation of provisions of Section 11(5) of the Income Tax Act 1961. (v) Registration u/s 12AA and approval u/s 80G of the Income Tax Act 1961 were refused by the then CIT, Rohtak vide his orders dated 21.6.2002.” The petitioner filed a detailed reply and also requested for personal hearing, which was granted on 26.12.2007. After going through the entire material, respondent No.3 by a detailed order found that the petitioner-society was set up by the family members of Shri R.D.Somany and at the time of raid it was in possession of huge unaccounted cash, atleast a part of which had come out of amounts collected from students over and above the scheduled prescribed fees. Respondent No.3 further found that salary payments were being inflated and that unaccounted funds were being recycled to family members and Chairman of the Society. On these grounds the exemption application was rejected. The primary contention of learned counsel for the petitioner is that since no assessment had been finalized with respect to the cash seized and the other allegations of charging exorbitant fees and inflation of expenditure had not been proved, it was not open to respondent No.3 to reject the application for exemption. In our opinion it cannot be said that such an exemption, which is in the nature of a concession, can be granted only if a final assessment order has been passed with respect to the unaccounted cash etc. The only C.W.P No. 1548 of 2008 ::4:: question before this Court in the circumstances would be whether the order rejecting the application for exemption is either based upon no reasons or is perverse. On a conspectus of all the facts, we do not find these conditions to have been satisfied. In the circumstances, the writ petition is dismissed with no orders as to costs. ( AJAY TEWARI ) JUDGE ( ADARSH KUMAR GOEL ) JUDGE September 01, 2008 'kk' "