Kerala State Ex-Services League vs The Assistant Director of Income Tax (Exemption)

A.K. Jayasankaran Nambiar, J.—The petitioner is a welfare and charitable organisation of ex-servicemen. By an application dated 16.12.2004 preferred before the Income Tax Authorities, it had applied in terms of Section 12A of the Income Tax Act for registration under Section 12AA of the said Act. By Ext.P3 order dated 28.09.2006, the registration was granted to the petitioner association with effect from 01.04.2005. Insofar as the date of incorporation of the petitioner association was 05.02.1992, and the registration that was sought for by the petitioner was with effect from that date, the petitioner preferred an application before the 5th respondent for giving effect to Ext.P3 registration from 05.02.1992 onwards. The said application was rejected by the 5th respondent by Ext.P6 order dated 17.09.2008, on the ground that the application, in respect of the period from 05.02.1992, had been preferred after more than 12 years. Aggrieved by Ext.P6 order, therefore, the petitioner approached the Income Tax Appellate Tribunal by way of an appeal. By Ext.P7 order dated 03.11.2009, the appellate tribunal took note of the fact that the 5th respondent had not decided the issue raised by the petitioner on merits and therefore set aside Ext.P6 order and remitted the file back to the 5th respondent for proper adjudication on merits, after affording an opportunity of being heard to the petitioner. It is pointed out that no consequential order as directed by the Appellate Tribunal has been passed by the 5th respondent till date. In the meanwhile, however, by Ext.P1 assessment order for the assessment year 2003-2004, the petitioner was denied the benefit of exemption under the Income Tax Act on the income earned by it. This was on account of the fact that the petitioner association did not have a registration under Section 12AA of the Act for the said assessment year. The petitioner therefore preferred an appeal before the 3rd respondent, which also came to be rejected by Ext.P2 order dated 20.01.2010 for the same reasons. Realising, therefore, that no purpose would be served by preferring a further appeal against Ext.P2, before the Income Tax Appellate Tribunal, in a situation where the petitioner had not been granted a registration under Section 12AA for the assessment year in question, and the 5th respondent had not passed consequential orders pursuant to Ext.P7 order of the Appellate Tribunal, the petitioner opted to challenge Ext.P2 order also through the present writ petition. Thus, in the writ petition, while Ext.P2 order of the 3rd respondent is impugned, there is also a direction sought to the 5th respondent to pass consequential orders pursuant to Ext.P7 order.

I have heard Dr. K.P. Pradeep, the learned counsel for the petitioner and Sri. Jose Joseph the learned Standing counsel for the respondent Income Tax Department.

On a consideration of the facts and circumstances of the case, as also the submissions made across the Bar, I note that in the instant case, the Income Tax Appellate Tribunal, by Ext.P9 order dated 03.11.2009, had set aside Ext.P6 order passed by the 5th respondent and directed him to pass a fresh order, on the application preferred by the petitioner, on merits. The order to be passed by the 5th respondent, pursuant to the directions of the Appellate Tribunal in Ext.P7 order, would have a bearing on the eligibility of the petitioner for exemption in respect of the assessment years prior to 2005-2006. It is therefore necessary that the 5th respondent passes orders expeditiously on the application preferred by the petitioner, for granting the effect of the registration granted under Ext.P3 from 05.02.1992, the date on which the petitioner association was incorporated. The 5th respondent is therefore directed to pass orders, as directed by the Appellate Tribunal in Ext.P5 order, within a period of two months from the date of receipt of a copy of this judgment, after hearing the petitioner. I further note that, in Ext.P2 order passed by the 3rd respondent in the appeal preferred by the petitioner against Ext.P1 assessment order, reliance is placed on Ext.P6 order of the 5th respondent for dismissing the appeal preferred by the petitioner. In view of the fact that the Appellate Tribunal had in Ext.P7 order set aside Ext.P6 order of the 5th respondent, I feel that Ext.P2 order passed by the 3rd respondent also needs to be set aside for basing its decision on an order of the 5th respondent that was since set aside by the Appellate Tribunal. That apart, I am of the view that, unless the 5th respondent passes orders pursuant to the directions in Ext.P7 order of the Tribunal, there will be no meaningful adjudication of the appeal preferred by the petitioner against Ext.P1 assessment for the assessment year 2003-2004, where the issue of whether or not the petitioner has a registration under Section 12AA of the Income Tax Act would have a bearing. Thus, I quash Ext.P2 order of the 3rd respondent and direct him to consider the appeal preferred by the petitioner against Ext.P1 assessment order afresh, after hearing the petitioner and after considering the order to be passed by the 5th respondent pursuant to the directions of the Appellate Tribunal in Ext.P7 order.

Resultantly, the writ petition is disposed as above. It is made clear that, pending final orders to be passed by the 3rd respondent in the appeal preferred by the petitioner against Ext.P1 assessment order, no recovery steps for realisation of any differential tax amount shall be pursued against the petitioner.