Wa/78/2020 Of Income Tax Officer v. Payyannur Sree Subramanya Swami Temple

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE MR.JUSTICE MOHAMMED NIAS C.P. TUESDAY, THE 31 DAY OF MAY 2022/10TH JYAISHTA, 1944 W.A NO.78 OF 2020AGAINST THE JUDGMENT DATED 01.07.2019 IN WP(C).NO.8524/2019 OFHIGH COURT OF KERALA APPELLANTS/RESPONDENTS 1, 2 & 3: 1INCOME TAX OFFICER INCOME TAX DEPARTMENT, WARD-4, KANNUR, AAYAKAR BHAVAN, CHOVVA POST, KANNOTHUMCHAL, KANNUR-670006. 2THE PRINCIPAL COMMISSIONER OF INCOME TAX, KOZHIKODE 670 006.KOZHIKODE 670 006. 3THE CENTRALIZED PROCESSING CENTRE REPRESENTED BY ITS AUTHORISED OFFICER, INCOME TAX DEPARTMENT, POST BAG NO.2, ELECTRONIC CITY POST OFFICE, BANGALORE-560100. BY SRI.CHRISTOPHER ABRAHAM, SC, INCOME TAX DEPARTMENT RESPONDENT/PETITIONER/RESPONDENTS 4, 5 & 6: 1PAYYANNUR SREE SUBRAMANYA SWAMI TEMPLEREPRESENTED BY ITS EXECUTIVE OFFICER, SS TEMPLE, PAYYANUR-670307.REPRESENTED BY ITS EXECUTIVE OFFICER, SS TEMPLE, PAYYANUR-670307. 2UNION OF INDIA,REPRESENTED BY ITS SECRETARY TO GOVERNMENT, MINISTRY OF FINANCE, NEW DELHI-110001.REPRESENTED BY ITS SECRETARY TO GOVERNMENT, MINISTRY OF FINANCE, NEW DELHI-110001. W.A.NO.78 OF 2020 :: 2 :: 3THE MALABAR DEVASWOM BOARD,REPRESENTED BY ITS SECRETARY, HOUSEFED COMPLEX, P.O.ERANHIPALAM, KOZHIKODE-673006.REPRESENTED BY ITS SECRETARY, HOUSEFED COMPLEX, P.O.ERANHIPALAM, KOZHIKODE-673006. 4THE SENIOR MANAGER,THE KANNUR DISTRICT CO-OPERATIVE BANK, PAYYANUR BRANCH, PAYYANUR, KANNUR-670307.THE KANNUR DISTRICT CO-OPERATIVE BANK, PAYYANUR BRANCH, PAYYANUR, KANNUR-670307. BY ADV.SRI.MAHESH V RAMAKRISHNAN BY ADV.SRI.B.RAMACHANDRAN, CGC BY ADV.SRI.R.LAKSHMI NARAYAN, SC, MALABAR DEVASWOM BOARD BY ADV.SRI.M.SASINDRAN, SC, KANNUR DISTRICT CO.OP. BANKCO.OP. BANK THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON31.05.2022, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: W.A.NO.78 OF 2020 :: 3 :: J U D G M E N T A.K. Jayasankaran Nambiar, J. This is an Appeal preferred by the Income Tax Departmentagainst the judgment dated 01.07.2019 of the learned Single Judge inW.P.(C).No.8524/2019. The brief facts necessary for disposal of thisWrit Appeal is as follows: The writ petitioner is an institution coming within the definitionof the Madras Hindu Religious & Charitable Endowments Act, 1951,and for administration and overseeing the functions of the Institution,there is a board of Trustees constituted under the provisions of thesaid Act. The issue projected in the writ petition arose out of theassessment under the Income Tax Act [hereinafter referred to as the'IT Act'], in relation to the petitioner for the assessment years 2014-15and 2015-16. It would appear that based on the returns submitted bythe petitioner for the said years, the Centralized Processing Centre ofthe Income Tax Department processed the returns and determine thenet tax payable by the petitioner at Rs.29,69,290/- and Rs.28,44,340/- The writ petitioner is an institution coming within the definitionof the Madras Hindu Religious & Charitable Endowments Act, 1951,and for administration and overseeing the functions of the Institution,there is a board of Trustees constituted under the provisions of thesaid Act. The issue projected in the writ petition arose out of theassessment under the Income Tax Act [hereinafter referred to as the'IT Act'], in relation to the petitioner for the assessment years 2014-15and 2015-16. It would appear that based on the returns submitted bythe petitioner for the said years, the Centralized Processing Centre ofthe Income Tax Department processed the returns and determine thenet tax payable by the petitioner at Rs.29,69,290/- and Rs.28,44,340/- respectively. Aggrieved by the said intimation received by it, thepetitioner preferred rectification application before the Departmentinter alia on the contention that the assessment of income on thepetitioner had been erroneously made treating the petitioner as a'trust', whereas in fact, the petitioner had to be seen as a managementbody entitled to the benefit of Section 10(23BBA) of the IT Act, andhence, its entire income was to be excluded from the computation oftotal income under the IT Act. When no action was taken by therespondents on the rectification application preferred by the petitionerand notices were received demanding the payment of assessed tax, thepetitioner approached this Court through the writ petitionaforementioned seeking to quash the intimation letters received by itand for a declaration that the income of the petitioner was entitled forunconditional exemption under Section 10(23BBA) of the IT Act.There was also an incidental prayer for a direction to the respondentsto refund the amounts recovered from the petitioner. 2. A counter affidavit has been filed by the respondent IncomeTax Department, wherein, the stand taken was that the claim forexemption under Section 10(23BBA) of the IT Act had not been raisedby the petitioner in the returns filed by it for the relevant assessment years. It is stated that inasmuch as the petitioner had filed its returnsby indicating that it was a 'trust', the benefit of any exemption underthe IT Act was denied on the finding that it had not complied with thenecessary procedural requirements for getting the exemption inrespect of a trust. In substance, the averments in the statement are tothe effect that it was only on account of the erroneous declaration bythe petitioner assessee that the petitioner was assessed to the higheramounts indicated in the intimation served on it. 3. The learned Single Judge, who considered the matter, tooknote of the averments in the statement filed on behalf of the IncomeTax Department, especially the averments therein that suggested thatno declaration was necessary if the claim of the petitioner was for anexemption under Section 10(23BBA) of the IT Act, and found thatinasmuch as there was no dispute by the Department with regard tothe entitlement of the petitioner for the benefit under Section10(23BBA) of the IT Act, the petitioner was entitled to the benefit ofthe said Section as also to a refund of the tax already collected from it.For the purposes of securing a refund of tax already collected from it,the petitioner was given liberty to apply to the Commissioner ofIncome Tax under Section 264 of the IT Act, for passing a consequential order in view of the declarations in the judgment. consequential order in view of the declarations in the judgment. 4. It would appear that when, pursuant to the aforesaidjudgment of the learned Single Judge, no further action for refund ofthe amounts due to the petitioner were forthcoming from theDepartment, the petitioner preferred a Contempt of Court Case[Con.Case(C).No.2580/2019], which was later closed on theDepartment reporting compliance with the directions in the judgmentof the learned Single Judge in the writ petition. Immediately thereafterhowever, the Department preferred the present Writ Appealimpugning the judgment of the learned Single Judge. In the WritAppeal, the grievance of the Department appears to be that thelearned Single Judge did not provide an opportunity to the Revenue toexamine the entitlement for exemption when an alternate claim forexemption, as a charitable institution, was available to the petitionerassessee as also when no claim for exemption under Section10(23BBA) of the IT Act was made by the petitioner in its returns ofincome for the relevant period. 5. We have heard Sri.Christopher Abraham, the learnedStanding counsel for the appellant Income Tax Department as also W.A.NO.78 OF 2020 :: 7 :: Sri.Mahesh V. Ramakrishnan, the learned counsel for therespondent/writ petitioner. 6. Before us, it is the submission of the learned Standingcounsel for the Income Tax Department that the learned Single Judgeought not to have issued a direction based on a declaration of theentitlement of the petitioner for exemption under Section 10(23BBA)of the IT Act. According to him, this was an aspect that had to beconsidered by the Assessing Authority for an effective adjudicationbased on factual materials perused by him at the time of completingthe assessment. On a consideration of the said submissions of the learnedStanding counsel for the Income Tax Department, the appellantherein, we find that the grievance projected in the Writ Appeal doesnot arise for consideration by this Court. As already noticed, at thetime when a Contempt of Court Case was filed by the writ petitioneralleging non-compliance of the directions in the judgment impugned inthis Writ Appeal, the appellant itself proceeded to consider therevision petitions preferred by the writ petitioner in the meanwhile,and pass orders dated 24.9.2019 for the assessment years 2014-15 W.A.NO.78 OF 2020 :: 8 :: and 2015-16. In the orders passed for the said assessment years,under Section 264 of the IT Act, the Principal Commissioner of IncomeTax, Kozhikode, effectively set aside the earlier intimations issued tothe writ petitioner for the said assessment years, and directed theAssessing Officer to verify and pass necessary orders in accordancewith law on the contention raised by the petitioner as regards itsentitlement for exemption under Section 10(23BBA) of the IT Act, afteraffording due opportunity to the petitioner assessee. Acting on thedirections of the Principal Commissioner of Income Tax, the AssessingAuthority concerned, by orders dated 12.12.2019, found that thepetitioner assessee was in fact entitled to the benefit of exemptionunder Section 10(23BBA) of the IT Act, and accordingly, that no taxwas payable by the petitioner assessee for the said assessment years.The amounts already collected from the petitioner assessee were heldto be refundable together with interest under Section 244A of the ITAct. It is not in dispute before us now that the assessee has sincereceived the said amounts by way of refund as well. It is also not indispute that the proceedings of the Commissioner under Section 264of the IT Act and the subsequent proceedings of the AssessingAuthority, in compliance with the directions of the PrincipalCommissioner, were not the subject matter of any proceedings W.A.NO.78 OF 2020 :: 9 :: W.A.NO.78 OF 2020 :: 9 :: initiated at the instance of the Department, and were not provisional innature subject to the outcome of the Writ Appeal. In that view of thematter, we feel that there is nothing left to be adjudicated in the WritAppeal preferred by the Department. We are also of the view that, atany rate, the orders passed by the Principal Commissioner underSection 264 of the IT Act and the consequential orders passed by theAssessing Authority giving effect to the said orders of the PrincipalCommissioner effectively manifest the concept of fairness in taxationthat the State is bound to observe especially in cases where it comesto its notice that an assessee has committed a mistake while filing itsreturns before the Department. In this connection, we refer to theCircular No.14 (XL-35) dated 11.04.1955 of the Central Board ofDirect Taxes, which mandates that Officers of the Department mustnot take advantage of the ignorance of an assessee as to his rightsrather it has to seen as one of the duties of the Officers of theDepartment to assist a taxpayer in every reasonable way, particularlyin the matter of claiming and securing reliefs and towards this end,the Officers have to take initiative in guiding a taxpayer whereproceedings or other particulars before them indicate that somerefund or relief is due to him. The said Circular of the Income TaxDepartment was apparently issued so as to inspire confidence in an W.A.NO.78 OF 2020 :: 10 :: assessee, who would thereafter be convinced that he would get a fairdeal from the Department. Thus, we find no merit in the Writ Appeal,and the same is accordingly dismissed. Sd/- A.K.JAYASANKARAN NAMBIAR JUDGE prp/2/6/22 Sd/- MOHAMMED NIAS C.P. JUDGE