1992 (3) TMI 47 - HC - Income Tax

Summary

Issues:
1. Exemption under section 80P(2)(a)(vi) of the Income-tax Act for income earned from forest produce.
2. Disallowance of exemption by Commissioner of Income-tax and subsequent legal proceedings.
3. Application under section 220(6) for treating the society as not in default.
4. Orders passed under section 226(3) for recovery of tax and challenge to the same.
5. Imposition of conditions by Assessing Officer for payment of tax.
6. Assessment of relevant aspects before rejecting application under section 220(6).
7. Impact of conditions imposed on the working of the society.
8. Consideration of society's financial position and fixed deposits.
9. Judicial review of orders passed by Assessing Officer and Commissioner of Income-tax.
10. Direction for attachment of deposited amounts until disposal of appeals.

Analysis:
The judgment addresses a case involving a cooperative society of laborers engaged in forest coupe-cutting, sharing profits with the government. The society claimed exemption under section 80P(2)(a)(vi) of the Income-tax Act for income from selling forest produce. Disallowance of this exemption by the Commissioner of Income-tax led to a series of legal proceedings, including appeals to the Tribunal. The Assessing Officer imposed conditions for payment of tax, leading to challenges regarding coercive recovery methods. The court emphasized the need for the Assessing Officer to consider all relevant aspects before rejecting an application under section 220(6) and highlighted the impact of imposed conditions on the society's operations. It was noted that the society's financial position, including fixed deposits, should have been taken into account. The court found errors in the actions of the Assessing Officer and Commissioner of Income-tax, leading to a directive for attachment of deposited amounts until the appeals are resolved. Orders under section 226(3) were modified to safeguard the Income-tax Department's interests, requiring the society to provide an undertaking not to encash fixed deposits until the appeals are concluded. Ultimately, the court partly allowed the petition, quashing certain orders and modifying others, with a directive for the society to file an undertaking within a specified timeframe.