2019 (4) TMI 971 - HC - Income Tax

Exemption u/s 11 and 12 - Petitioner already enjoyed registration u/s 12AA - fresh order on assessment - breach of judicial discipline - AO not carried out the directions of the Tribunal - scope of AO in remand proceedings - HELD THAT - In the present case, the AO was passing a fresh order on assessment as directed by the Tribunal. The Tribunal, in its order dated 30/11/2017, had made it clear that the Petitioner already enjoyed registration under Section 12AA. Only question was, on facts, the Petitioner's claim of exemption under Sections 11 and 12 was valid. Since AO had not applied his mind on this aspect of the matter, the Tribunal remanded proceedings before the AO. The scope of the fresh order that the AO would pass, pursuant to this order of the Tribunal, was, therefore, confined to the inquiry in relation to the Petitioner's claim of exemption under Section 11 and 12. The issue of the validity of the registration of the Petitioner under Section 12AA was not at large before him. Perusal of the order of the AO and in particular, the quoted portion thereof, would convince us that the AO has travelled far beyond the scope of the inquiries before him and has breached all propriety of judicial discipline. AO has held that the Tribunal was not correct in granting deemed registration to the Petitioner. He has, in fact, criticized the Judgment of the Supreme Court on the ground that such Judgment notes a Division Bench Judgment of the High Court but not a larger Bench Judgment. Assessing Officer does not indulge into such bravado in future. Firstly, it was not within his scope to decide whether the decision of the Tribunal was correct or incorrect. Far more serious is his conduct of criticizing the Supreme Court Judgment. The entire hierarchy of judicial set up would be disturbed if a quasi judicial authority or for that matter, any Court or subordinate Judicial Officer were allowed to disregard questioning the correctness of the decision of a higher authority, forum or Court. The impugned orders are set aside. Since the Assessing Officer has not carried out the directions of the Tribunal to examine the Petitioner's claim of exemption under Sections 11 and 12 of the Act on merits, we place back the proceedings before him for passing a fresh order.

Summary

Issues:
Petitioner's entitlement to deemed registration under Section 12AA of the Income Tax Act, 1961 and the subsequent assessment of its income for the Assessment Year 2009-2010.

Analysis:
1. The Petitioner, a cooperative society running a hospital, applied for registration under Section 12AA of the Act. The Income Tax Appellate Tribunal (ITAT) granted deemed registration to the Petitioner, allowing exemption under Sections 11 and 12 of the Act. The Tribunal directed the Assessing Officer to verify the expenditure claimed by the Petitioner and recompute the income if necessary. The Tribunal emphasized that the Assessing Officer should consider the conditions of Sections 11 and 12 while assessing the Petitioner's income.

2. The Assessing Officer, in a subsequent order, expanded the scope of inquiry beyond the Tribunal's directions. He questioned the validity of the deemed registration and criticized the Tribunal's decision based on certain court judgments. The Assessing Officer also raised concerns about the Petitioner's charitable status and initiated penalty proceedings for inaccurate income particulars.

3. The High Court found that the Assessing Officer overstepped his authority by re-examining the issue of deemed registration, which was conclusively decided by the Tribunal. The High Court emphasized that the Assessing Officer's role was limited to assessing the Petitioner's claim for exemption under Sections 11 and 12. Criticizing the Tribunal's decision and questioning the Supreme Court's judgment were deemed inappropriate and against judicial discipline.

4. Consequently, the High Court set aside the Assessing Officer's orders and remanded the proceedings for a fresh assessment focusing solely on the Petitioner's claim for exemption under Sections 11 and 12. The High Court highlighted the importance of judicial hierarchy and the need for quasi-judicial authorities to adhere to prescribed roles without questioning higher judicial decisions.

5. In conclusion, the High Court disposed of all petitions, emphasizing the Assessing Officer's duty to follow the Tribunal's directions and assess the Petitioner's income for the relevant assessment year based on the provisions of Sections 11 and 12 of the Income Tax Act, 1961.