2010 (11) TMI 668 - HC - Income Tax

Rejection grant of exemption u/s 10(23C)(via) by writ of certiorari under articles 226 and 227 of the Constitution of India. - Held that - From a perusal of the papers and in particular the impugned order, it is apparent that the petitioner-society has neither maintained proper books of account nor proper receipts of donations. Also salaries are shown to have been paid to the employees even though they had resigned. - it was obvious that the applicant s books of account were manipulated and its activities were not genuine and charitable. Writ jurisdiction of high court - In the absence of any contravention of fundamental rights or violation of the principles of natural justice or gross unreasonableness or arbitrariness, this court would neither interfere nor substitute its own views in place of the decision taken by the DGIT(E). The writ jurisdiction is not intended to be an appellate jurisdiction. - decided against Assessee

Issues Involved:
1. Violation of principles of natural justice.
2. Condonation of delay in filing the application.
3. Consideration of previous exemptions and registrations.
4. Examination of the genuineness of the petitioner-society's activities.
5. Applicability of the principle of res judicata.
6. Scope of judicial review in writ jurisdiction.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The petitioner-society argued that the DGIT(E) passed the impugned order without affording an opportunity of being heard, thus violating the principles of natural justice. However, it was established that the petitioner-society was granted opportunities of being heard on six occasions. The court noted that the petitioner-society sought adjournments on three occasions and made submissions on the remaining three, indicating that the principles of natural justice were not violated.

2. Condonation of Delay in Filing the Application:
The application for exemption under section 10(23C)(via) of the Act was filed beyond the prescribed date. The petitioner-society attributed the delay to the newness of the provision. The court held that ignorance of law is not an excuse and found the explanation unconvincing. Thus, the application was barred by limitation. Despite this, the court proceeded to examine the case on its merits.

3. Consideration of Previous Exemptions and Registrations:
The petitioner-society contended that its activities had already been examined by the Income-tax Department while granting exemptions under sections 12A and 80G of the Act and during the assessment for the year 2005-06. The court held that each assessment year is independent, and previous grants do not automatically entitle the petitioner-society to approval under section 10(23C) in subsequent years.

4. Examination of the Genuineness of the Petitioner-Society's Activities:
The DGIT(E) examined the books of account, donation records, and salary registers of the petitioner-society and found them manipulated. The court noted discrepancies, such as donations not recorded in receipt books and salaries shown to be paid to resigned employees. The DGIT(E) cross-examined witnesses and found their statements contrary to the records, leading to the conclusion that the petitioner-society's activities were not genuine and charitable.

5. Applicability of the Principle of Res Judicata:
The court agreed with the respondent that the principle of res judicata does not apply to the facts of the case. In taxation matters, each year's assessment is independent, and previous decisions do not estop the authorities from re-evaluating the position in subsequent years. The court cited the Supreme Court's decision in Municipal Corporation of City of Thane v. Vidyut Metallics Ltd. to support this view.

6. Scope of Judicial Review in Writ Jurisdiction:
The court emphasized that in its writ jurisdiction, it cannot re-evaluate the evidence presented before the DGIT(E). The DGIT(E) reached factual findings after appreciating the evidence and cross-examining witnesses. The court stated that in the absence of any contravention of fundamental rights, violation of principles of natural justice, or gross unreasonableness, it would not interfere with or substitute its own views for the decision taken by the DGIT(E).

Conclusion:
The court dismissed the petition, finding it devoid of merit, and upheld the DGIT(E)'s decision to reject the exemption under section 10(23C)(via) of the Act. The court did not award any costs.

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