Dalhousie Public School Educational Society v. Chief Commissioner Of Income Tax,Amritsar And Another

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. CWP No.12072/2009Date of Decision: 22.9.2009. Dalhousie Public School Educational Society ..........Petitioner. Versus Chief Commissioner of Income Tax,Amritsar and another. ..........Respondent CORAM: HON'BLE MR.JUSTICE M.M.KUMARHON'BLE MR.JUSTICE JASWANT SINGH. Present:Mr. Sanjay Bansal,Senior Advocate with Mr.Ravi Shankar,Advocate for the petitioner.Ms.Naveender PK Singh,Advocate for the respondents. 1. To be referred to the Reporter or not ? 2. Whether the judgement should be reported in the Digest ? JASWANT SINGH,J. Petitioner-Society has filed the present writ petition underArticles 226/227 of the Constitution for issuance of a writ in the natureof certiorari for quashing of the impugned orders dated 25/26.3.2009(P/1 and P/2) vide which respondent no.1-Chief Commissioner ofIncome Tax, Amritsar- respondent no.1 exercising powers under CWP No.12072/2009 2 Section 154 and 10(23C)(vi) of Income tax Act,1961 has rejected theapplication of the petitioner for grant of approval for exemption for theassessment year 2007-2008. The facts giving rise to matter in controversy are that thepetitioner-Society is registered under the Societies Registration Act,1860 and is running a school in the name of Dalhousie Public School inTehsil Pathankot, District Gurdaspur. It is alleged by the petitioner thatthe school is run solely for the educational purposes and not for makingany profit and is having its permanent account number with theAssessing Officer at Pathankot by showing income nil after grant ofexemption from payment of income tax by the Chief Commissioner ofIncome Tax vide orders dated 22.3.2005 and 23.9.2005 (P/3 and P/4)right from the assessment year 2004-05. It is further alleged that in theassessment year 2005-06, the petitioner society submitted anapplication dated nil (P/5) to respondent no.1 for grant of exemptionfor a period of three years for the assessment years 2005-06 to 2007-08and on the basis of that exemption was granted to the petitioner-Societyonly for a period of two assessment years i.e. 2005-06 and 2006-07vide order dated 29.5.2006 (P/6). Thereafter the petitioner-Societymoved an application dated 5.6.2006 (P/7) for rectification of the orderdated 29.5.2006 (P/6) requesting for grant of exemption for theassessment year 2007-08 also. During the pendency of the saidapplication the petitioner-society filed its return for the year 2007-08showing its income as nil. The said return is alleged to have been CWP No.12072/2009 3 accepted by the Assessing Officer vide intimation/acknowledgmentdated 31.10.2007 (P/8). On 26.3.2008 the petitioner-society submittedan application (P/9) in form 56D to respondent no.1 for grant ofexemption for the assessment year 2006-07 onwards. Respondent no.1vide impugned order dated 26.3.2009 (P/1) rejected the applicationdated nil (P/5) by holding that there is no mistake which can berectified under Section 154 of the Income Tax Act,1961 (for short theAct). Vide order of even date (P/2) the application dated 26.3.2008(P/9) seeking exemption for the assessment year 2007-08 was alsorejected by respondent no.1. In these circumstances, the present writpetition has been filed. Aggrieved against the impugned orders (P/1and P/2), the petitioner-Society filed the present writ petition. Notice of motion was issued. Respondents filed writtenstatement inter alia stating therein that the present writ petition is filedagainst two orders of even date 25/26.3.2009 (P/1 and P/2) and one ispassed under Section 154 read with Section 10(23C)(vi) whereas theother one is under Section 10(23C) (vi). So far as order under Section154 refusing rectification is concerned the same is justified byreiterating the reasoning given in the impugned order that the grant ofexemption is purely at the discretion of respondent no.1 and exercise ofsuch a discretion cannot be claimed as a matter of right and that thediscretion has been exercised in accordance with law. The absence ofreasons for grant of exemption for the year 2007-08 does not amount tomistake which could be rectified under Section 154 of the Act. It is CWP No.12072/2009 4 further submitted that against this order the petitioner filed an appealbefore the Income Tax Appellate Tribunal, Amritsar Bench, Amritsarand the same is still pending. So far as the second impugned orderunder Section 10(23C)(vi) and (via) is concerned, it is submitted thatthe petitioner filed an application in Form 56D for grant of exemptionfor the financial year 2007-08 onwards on 26.3.2008, i.e. after a lapseof almost one year as the same ought to have been filed on or before31.3.2007 as per 14[th] Proviso to Section 10(23C)(vi) of the Act. It isfurther submitted that there is no provision in the Act for condonationof aforementioned delay. The legislative intention makes it clear thatapplication under Section 10(23C)(vi) for seeking exemption shall bemade before the end of the financial year from which the exemption issought and in this way the application for grant of exemption beyondthe period of limitation cannot be condoned. The petitioner-Society filed replication and controvertedthe preliminary objection no.4 by asserting that the appeal filed by thepetitioner before the Income Tax Appellate Tribunal, Amritsar was notpursued being not maintainable and the same was filed under amisconception of law and which remained unadmitted and was finallydismissed on account of non-prosecution and has placed the documentsAnnexures P/10 to P/12. We have heard learned counsel for the parties and perusedthe paper book carefully. In our considered opinion the claim ofpetitioner is meritorious and deserves to be accepted. CWP No.12072/2009 5 The petitioner-Society filed replication and controvertedthe preliminary objection no.4 by asserting that the appeal filed by thepetitioner before the Income Tax Appellate Tribunal, Amritsar was notpursued being not maintainable and the same was filed under amisconception of law and which remained unadmitted and was finallydismissed on account of non-prosecution and has placed the documentsAnnexures P/10 to P/12. We have heard learned counsel for the parties and perusedthe paper book carefully. In our considered opinion the claim ofpetitioner is meritorious and deserves to be accepted. CWP No.12072/2009 5 A perusal of the impugned order reveals that whilegranting exemption for assessment years 2005-06 and 2006-07, noreason has been assigned for declining the exemption for theassessment year 2007-08. The stand of respondents that it wasdiscretion of respondent no.1 to grant or not grant exemption for the 3[rd]year is not tenable as there must be some reasons recorded in theimpugned order while withholding the exemption for the third year i.e.2007-08. The recording of reasons would be necessary for anyadministrative/quasi judicial order for it to be sustainable in the eyes oflaw. There is no material available on record to withhold theexemption for the third year. Thus the refusal to grant exemption inrespect of third year i.e. 2007-08 would be wholly arbitrary especiallywhen the table produced by the respondents in para 2 of the reply onmerits shows the percentage of surplus income of the petitioner-institution, after deducting all expenses including depreciation, to beless than the previous year i.e. 2006-07, for which exemption has beengranted. So far as the contention of the respondents that the applicationwas moved only on 26.3.2008 and thus being time barred as the sameought to have been filed on or before 31.3.2007 is also not sustainableas the petitioner-Society had already filed application dated nil (P/5)for rectification of the omission of grant of exemption for the year2007-08 under Section 154 of the Act but the respondent no.1 wassitting over the matter and only in these circumstances anotherapplication dated 26.3.2008 was filed as an abundant caution as it is CWP No.12072/2009 6 apparently clear that the petitioner is legally entitled to grant ofexemption for the year 2007-08 on the basis of its earlier applicationand therefore, there is no justification for declining the same only onthe ground that the application dated 26.3.2008 is beyond the period oflimitation. The action of the respondents while declining exemptionfor the year 2007-08 is thus arbitrary and illegal and not sustainable. Accordingly, the writ petition is allowed, impugned ordersdated 26.3.2009 (P/1 and P/2) are quashed and the petitioner-Society isheld entitled to exemption for the assessment year 2007-08. Withregard to the prayer of the petitioner that for the subsequentassessment years i.e. 2008-09 onwards the application is pending, wedirect the Chief Commissioner to decide the same within a period oftwo months from the date of receipt of certified copy of this order. (M.M.Kumar) (Jaswant Singh) Judge Judge