2007 (3) TMI 178 - HC - Income Tax

Charitable purpose - Revenue denied the exemption u/s 11 and 12 on the ground that assessee had violated the provisions of sections 13(1)(d) - assessee filed a writ petition against the order - Held that assessee not entitled for exemption and factual questions could not be adjudicated in writ proceedings

Summary

Issues:
1. Exemption under Section 10(22) of the Income Tax Act, 1961.
2. Claim for exemption under Sections 11 and 12 of the Act.
3. Rejection of exemption for violations under Section 13(1)(d) of the Act.
4. Validity of reopening assessments under Section 148 of the Act.
5. Availability of alternative statutory remedies and judicial review under Article 226 of the Constitution of India.

Exemption under Section 10(22) of the Income Tax Act, 1961:
The petitioner, a registered society, was granted exemption under Section 10(22) of the Act for its educational activities. Previous court judgments supported the petitioner's eligibility for exemption. However, Section 10(22) was omitted by the Finance Act, 1998, leading to a transition for the petitioner to claim exemption under Sections 11 and 12 of the Act.

Claim for exemption under Sections 11 and 12 of the Act:
The petitioner filed for exemption under Sections 11 and 12 for specific assessment years. While exemption was granted for some years, it was rejected for the assessment year 2002-03 due to violations of Section 13(1)(d) as the petitioner held shares of Limited companies. This rejection led to a legal challenge through a writ petition.

Rejection of exemption for violations under Section 13(1)(d) of the Act:
The respondent rejected the claim for exemption under Sections 11 and 12 due to the petitioner's ownership of shares in Limited companies, which was deemed a violation of Section 13(1)(d) of the Act. The court held that factual disputes regarding the ownership of shares could not be addressed under Article 226 of the Constitution of India, emphasizing the need for statutory remedies.

Validity of reopening assessments under Section 148 of the Act:
The respondent initiated a reassessment under Section 148 alleging income had escaped assessment for certain years. The petitioner contested the validity of the reassessment, citing violations of Section 13(1)(d). The court noted the availability of statutory appeals against such reassessments and emphasized the importance of exhausting statutory remedies before seeking judicial review.

Availability of alternative statutory remedies and judicial review under Article 226 of the Constitution of India:
The court highlighted the principle that Article 226 should not be used to bypass statutory procedures, especially in tax matters where alternative remedies exist. Citing various legal precedents, the court emphasized the need to exhaust statutory remedies before resorting to judicial review. The court dismissed the writ petitions, stating that the petitioner failed to avail themselves of the available statutory remedies in a timely manner.

This detailed analysis of the judgment covers the issues related to exemption under the Income Tax Act, rejection of exemption due to violations, validity of reassessments, and the importance of exhausting statutory remedies before seeking judicial review.