2000 (4) TMI 14 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notice u/s 148 of the Income-tax Act, 1961.
2. Entitlement of the trust to exemption u/s 80G(5) of the Income-tax Act, 1961.
3. Legality of penalty proceedings initiated u/s 271(1)(a), 271(1)(c), and 273(2)(b) of the Income-tax Act, 1961.

Summary:

1. Validity of Notice u/s 148:
The court examined the issuance of notice u/s 148 for the assessment year 1984-85. The petitioners argued that the notice was issued without jurisdiction as there was no material indicating that income had escaped assessment. The court referenced the apex court's decisions in Madhya Pradesh Industries Ltd. v. ITO and Union of India v. Rai Singh Deb Singh Bist, emphasizing that the Income-tax Officer must provide reasons and material for reopening the assessment. Since the respondents failed to file an affidavit or provide necessary material, the court quashed the notice issued u/s 148 dated February 10, 1989.

2. Entitlement to Exemption u/s 80G(5):
The trust, registered under the Bombay Public Trusts Act, 1950, and recognized u/s 12A(a) of the Income-tax Act, was denied exemption u/s 80G(5) by the Income-tax Officer on the grounds that its objects were not of general public utility. The court noted that the trust's purpose of aiding employees of the Gujarat Law Society in cases of death, illness, or disability is a charitable purpose benefiting a section of the public. The court highlighted that registration u/s 12A is not an idle formality and once granted, the benefits cannot be denied. The court referenced various apex court decisions, including Addl. CIT v. Surat Art Silk Cloth Manufacturers Association and CIT v. Federation of Indian Chambers of Commerce and Industry, to support the view that an object beneficial to a section of the public is an object of general public utility. Consequently, the court quashed the order rejecting the application for exemption u/s 80G(5) and directed the Income-tax Officer to decide the same in accordance with law.

3. Legality of Penalty Proceedings:
Given the quashing of the notice u/s 148 and the recognition of the trust's charitable status, the court also quashed the penalty proceedings initiated u/s 271(1)(a), 271(1)(c), and 273(2)(b) for the assessment year 1985-86.

Conclusion:
The petition was allowed, quashing the notice u/s 148, the order rejecting exemption u/s 80G(5), and the penalty proceedings. The court directed the Income-tax Officer to reconsider the application for exemption in accordance with law. Rule was made absolute to the aforesaid extent.