Muvendar Trust vs The The Income Tax Officer

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

DATED: 16.12.2021

CORAM:

THE HONOURABLE MR.JUSTICE M.SUNDAR

W.P.(MD)No.22287 of 2021 and W.M.P(MD).No.18848 of 2021

Muvendar Trust : Petitioner

Vs.

1. The The Income Tax Officer, Exemption Ward, Trichy Main Building, Williams Road, Cantonment, Trichy – 620015.

2. Additional/Joint/Deputy/Assistant Commissioner of Income Tax/ Income Tax Officer, National Faceless Assessment Centre, Delhi. : Respondents

PRAYER: Writ Petitions filed under Article 226 of the Constitution of India for issuance of Writ of Certiorari calling for the records of impugned Assessment Order in DIN No.ITBA/AST/S/143(3)/2021-22/1035839283(1) dated 23.09.2021 https://www.mhc.tn.gov.in/judis

1/24 W.P.(MD)No.22287 of 2021

passed by the second respondent herein and quash the same.

For Petitioner : Mr.T.Ramesh for S.Radhakrishnan

For Respondents : Mr.N.Dilip Kumar, Senior Standing Counsel for Income Tax

ORDER

********************

In the captioned main writ petition an 'assessment order dated

23.09.2021 bearing reference DIN

No.ITBA/AST/S/143(3)/2021-22/1035839283(1)' (hereinafter 'impugned

order' for the sake of convenience and clarity) being an assessment order

made under Section 143(3) read with Section 144B of 'the Income Tax

Act, 1961' [hereinafter 'said Act' for the sake of convenience and brevity]

has been assailed.

2. Mr.T.Ramesh, learned counsel appearing on behalf of the

counsel on record for writ petitioner submitted that the impugned order

made by the second respondent is liable to be quashed, notwithstanding

very many averments made in the writ affidavit and very many grounds

raised in the writ affidavit, learned counsel in his campaign against the https://www.mhc.tn.gov.in/judis

2/24 W.P.(MD)No.22287 of 2021

impugned order made three pointed submissions and they are as follows:

(a) The registration of the assessee (which

according to him) is a registered 'Public Charitable Trust'

under Section 12AA of said Act has been cancelled vide

the impugned order without giving an opportunity to the

writ petitioner-assessee;

(b) The benefit of Sections 11 and 12 of said Act

vide registration under Section 12AA of said Act is being

given to the writ petitioner-assessee for over thirty years

and it has suddenly been declined;

(c) The impugned order is a non-speaking order and

therefore, it calls for interference in writ jurisdiction.

3. Before I proceed further, it is necessary to give short facts or in

other words, factual matrix in a nutshell containing essential facts that

are imperative for appreciating this order. Short facts shorn of

unnecessary particulars are that the writ petitioner-assessee claims to be a

public charitable trust having been so registered vide a Trust deed on the

file of Sub-Registrar, Peravurani, Thanjavur District; that the writ

petitioner-assessee applied for registration under Section 11 of said Act, https://www.mhc.tn.gov.in/judis

3/24 W.P.(MD)No.22287 of 2021

exemption was granted vide letter Ref No.CNo.2039(43)/87; that

approval under Section 80G of said Act was also granted in respect of

donations received by the petitioner under same reference dated

29.12.1988; that the exemption was subsequently renewed vide letter C

No.2039)43)/87 dated 29.09.1992 for the period 05.12.1991 to

31.03.1994; that the exemption was periodically renewed until

31.03.2000 vide communication dated 03.03.1999; that the writ

petitioner-assessee did not seek approval under Section 80G after

31.03.2000 as the petitioner discontinued taking voluntary contributions

and donations from anyone; that the petitioner's accounts have been

regularly audited as required under said Act and the petitioner has been

filing income tax returns along with the audit report as required under

Section 12A(b) of said Act from the year of grant of registration under

Section 12A of said Act; that the impugned order was preceded by a

notice under Section 143(2) of said Act being notice dated 30.09.2020

and the writ petitioner-assessee uploaded its reply saying that registration

under Section 12AA of said Act had not been cancelled; that there were

two reminders thereafter from the second respondent i.e., Department

dated 25.02.2021 and 30.08.2021 requesting the writ petitioner-assessee

to upload the registration certificate but the writ petitioner-assessee did https://www.mhc.tn.gov.in/judis

4/24 W.P.(MD)No.22287 of 2021

not respond; that thereafter the impugned (assessment) order came to be

made inter-alia negativing the claim of the writ petitioner of being a trust

entitled Sections 11, 12 benefits qua said Act and taking the total income

of the assessee trust i.e., taking the gross income; that assailing the

impugned order captioned main writ petition has been filed.

4. This Court having set out the factual matrix in a nutshell, before

proceeding further, deems it appropriate to say that the factual matrix

narrated supra is based on the writ affidavit averments and the

submissions made before this Court. This Court notices that the

registration (as set out supra) is not under Section 12A but it is under

Section 12AA of said Act.

5. Mr.N.Dilip Kumar, learned Senior Standing Counsel for Income

Tax accepted notice on behalf of both the respondents. Owing to the

narrow compass on which captioned writ petition turns, with the consent

of learned counsel on both sides, captioned main writ petition was taken

up and heard out.

https://www.mhc.tn.gov.in/judis

5/24 W.P.(MD)No.22287 of 2021

6. In response to the points raised by learned counsel for writ

petitioner, learned Revenue counsel made submissions a summation of

which is as follows:

(a) Cancellation of registration under Section 12AA

of said Act is not vide the impugned order but the

impugned order merely records the fact and more

particularly, the impugned order records the fact that the

writ petitioner-assessee has not uploaded the Section

12AA registration certificate either in response to notice

under Section 142(1) of said Act or two reminders

thereafter;

(b) It is incorrect to say that the writ petitioner-

assessee is being continuously given the benefit of

exemption under Section 12AA of said Act for thirty

years as even according to the writ petitioner and even

according to the case file placed before this Court, such

exemption was negatived for the assessment year 2018-19

vide assessment order dated 30.04.2021 bearing reference

DIN ITBA/AST/S/143(3)/2021-22/1032744474(1);

(c) It is not tenable to say that the impugned order https://www.mhc.tn.gov.in/judis

6/24 W.P.(MD)No.22287 of 2021

is a non-speaking order as it clearly records the trajectory

and the reason for not extending Section 12AA benefit to

the writ petitioner-assessee.

7. In addition to the aforementioned submissions in terms of reply,

a reply to the arguments projected by learned counsel for writ petitioner,

learned Revenue counsel also brought to the notice of this Court that

there is a effective and efficacious alternate remedy qua impugned order

as the same is appealable under Section 246 of said Act.

8. By way of reply submissions, learned counsel for writ petitioner

submitted that in 2018-19, Section 12AA of said Act registration has not

been cancelled by way of the assessment order i.e., the aforementioned

assessment order dated 30.04.2021 and therefore the question of

assailing the same in writ jurisdiction does not arise.

9. This Court carefully considered the rival submissions and this

Court is of the considered view that this is not a fit case for interfering

with the impugned order in writ jurisdiction and that the prayer of the

writ petition in the captioned main writ petition cannot be answered in https://www.mhc.tn.gov.in/judis

7/24 W.P.(MD)No.22287 of 2021

affirmative i.e., cannot be acceded to and the reasons are as follows:

(a) The relevant part of the impugned order which

deals with Section 12AA of said Act issue is captured in

two paragraphs of impugned order and the same read as

follows:

'...For further proceedings of the case, Notice U/s 143(2) of the Income-Tax Act, 1961 dated 30/09/2020 was issued and duly served upon the assessee but the assessee has not complied. Further, reminder letters dated 25/02/2021 and 30/08/2021 were issued to the assessee requested to make compliance to upload registration certificate. But till date no reply has been received from the assessee.

Considering the above and going through the reason for selection of the case for scrutiny i.e the Registration of the Trust under Section 12AA of the Income-Tax Act,1961 has been cancelled. Therefore, the authenticity of assessee being a bnafide registered trust not fully confirmed. Hence, without evidence of registered documents, the assessee's claim of being trust is not accepted and taxed as per Income Tax Act, 1961 and the total income of the assessee trust is assessed taking the gross income received by the trust of Rs.

5,75,93,708/- during the Financial Year 2018-19...'

https://www.mhc.tn.gov.in/judis

8/24 W.P.(MD)No.22287 of 2021

A careful perusal of the aforementioned two

paragraphs leaves this Court with the considered view

that the cancellation of registration under Section 12AA

of said Act is not vide the impugned order but it only

records the cancellation;

(b) There is nothing to demonstrate why the writ

petitioner did not upload the registration certificate under

Section 12AA of said Act in spite of adequate ample and

multiple opportunities being given to the writ petitioner,

all of which is captured in the aforementioned two

paragraphs;

(c) On a demurrer, even if it is to be construed that

the cancellation is vide impugned order cancellation of

registration under Section 12AA of said Act is also

revisable under Section 264 of said Act. Suffice to say

that there is an effective and efficacious alternate remedy

even against cancellation. To be noted, as mentioned in

the opening part of this point this is on a demurrer;

https://www.mhc.tn.gov.in/judis

9/24 W.P.(MD)No.22287 of 2021

(d) The submission that the writ petitioner-assessee

being given the benefit of registration under Section

12AA of said Act for thirty years continuously falls flat

on its face in the light of aforementioned assessment

order dated 30.04.2021 made for the assessment year

2018-19. The most relevant portion of this assessment

order is contained in paragraph 14 thereat and the

relevant paragraph 14 reads as follows:

'It is also undisputed that the assessee trust has applied for registration u/s.12A and exemption u/s.80G of the Act on 12.08.1986 onwards. From that time onwards, there has been constant renewal of exemption u/s.80G of the Act but in the case of assessee, the assessee was not able to provide the copy of application for registration u/s 12A and exemption u/s 80G from the inception of the trust i.e. 15/07/1985.Even, the submission of the assessee that it was granted 12A vide ref No.2039(43)/87 by the CIT, Tamilnadu-V, Chennai in the year 1987 is not acceptable. From the copy of ITR of the A.Y. 2013-14 to A.Y. 2015-16 this fact was clear that the assessee did not have 12A registration. Further, the assessee had entered registration no and date of 80G registration in the ITR of A.Y. 2016-17. From this https://www.mhc.tn.gov.in/judis

10/24 W.P.(MD)No.22287 of 2021

fact, it is clear that the registration number given and claim that it was issued it I 1987 was the registration number of 80G issued on 29/09/1992. Further, In A.Y. 2013-14, the auditor has made audit (as per ITR of A.Y. 13-14) as per section 10(23)(iv) of the Act.'

To be noted, there are two 'paragraph 14' in the

previous assessment order and I am referring to the first

of the two paragraphs at pages 61 and 62 of the typed set

of papers that has been placed before me;

(e) The impugned order, in the considered view of

this Court cannot be said to be a non-speaking order.

Two critical paragraphs in the impugned order which has

captured the crux and gravamen of the matter had been

extracted and reproduced supra. Those two paragraphs

by itself and of course the rest of the order make it clear

that it is not a non-speaking order. It may at best be a

terse order. An order can be tersely eloquent, it cannot be

construed to be a non-speaking order unless it is laconic,

not when it is epigrammatic or merely because it is terse.

Therefore, this Court is of the considered view that the https://www.mhc.tn.gov.in/judis

11/24 W.P.(MD)No.22287 of 2021

argument that the impugned order is a non-speaking

order becomes a non-starter i.e., an argument which does

not take off;

(f)This takes this Court to the alternate remedy

aspect. Alternate remedy no doubt is a self-imposed

restraint. It is not an absolute rule. Alternate remedy rule

is a rule of discretion. Notwithstanding alternate remedy

rule being a rule of discretion, Hon'ble Supreme Court

which in a long line of case laws i.e., in a catena of case

laws starting from Dunlop India case [Assistant

Collector of Central Excise, Chandan Nagar, West

Bengal Vs. Dunlop India Ltd., and others reported in

(1985) 1 SCC 260] ; Satyawati Tandon [United Bank of

India Vs. Satyawati Tondon and others reported in

(2010) 8 SCC 110] and K.C.Mathew [Authorized

Officer, State Bank of Travancore and another Vs.

Mathew K.C. reported in (2018) 3 SCC 85], has held that

in fiscal law Statutes, alternate remedy rule has to be

applied with utmost rigour. Relevant paragraph in

Dunlop case is paragraph No.3 and relevant portion of https://www.mhc.tn.gov.in/judis

12/24 W.P.(MD)No.22287 of 2021

the same reads as follows:

'3. ....... Article 226 is not meant to short-circuit or circumvent statutory procedures. It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations, as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article 226 of the Constitution. But then the Court must have good and sufficient reason to bypass the alternative remedy provided by statute. Surely matters involving the revenue where statutory remedies are available are not such matters. We can also take judicial notice of the fact that the vast majority of the petitions under Article 226 of the Constitution are filed solely for the purpose of obtaining interim orders and thereafter prolong the proceedings by one device or the other. The practice certainly needs to be strongly discouraged.'

(Underlining made by this Court to supply emphasis and

highlight)

Relevant paragraph in K.C.Mathew case is paragraph 10 and the

same reads as follows:

'10. In Satyawati Tondon the High Court had restrained further proceedings under Section 13(4) of the Act. Upon a detailed consideration of the statutory scheme under the https://www.mhc.tn.gov.in/judis

13/24 W.P.(MD)No.22287 of 2021 SARFAESI Act, the availability of remedy to the aggrieved under Section 17 before the Tribunal and the appellate remedy under Section 18 before the Appellate Tribunal, the object and purpose of the legislation, it was observed that a writ petition ought not to be entertained in view of the alternate statutory remedy available holding: (SCC pp.123 & 128, Paras 43 & 55)

“43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this Rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.

55.It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts https://www.mhc.tn.gov.in/judis

14/24 W.P.(MD)No.22287 of 2021

continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.'

(underlining made by this Court to supply emphasis and highlight)

Paragraph 10 of K.C.Mathew case extracts the Satyawati Tandon

principles i.e., portions of the case law from Satyawati Tandon and the

same has been reproduced. Therefore, I deem it appropriate to not to

burden this order with extracts from Satyawati Tandon case. To be

noted, these three case laws are not an exhaustive list qua alternate

remedy principle in Fiscal Law Statute but they are illustrative qua a long

line of case laws.

In addition to the above line of authorities, the latest case law is

Commercial Steel Limited case [The Assistant Commissioner of State

Tax and others Vs. M/s.Commercial Steel Limited in Civil Appeal No.

5121 of 2021] which was rendered by a three Member Bench of the

https://www.mhc.tn.gov.in/judis

15/24 W.P.(MD)No.22287 of 2021

Hon'ble Supreme Court on 03.09.2021. Three Member Hon'ble Bench

had culled out the exceptions to the alternate remedy rule and had clearly

held that interference in writ jurisdiction will arise only in exceptional

cases where the exception adumbrated therein are attracted. Relevant

paragraphs in Commercial Steel case are paragraph Nos.11, 12 and the

same read as follows:

'11 The respondent had a statutory remedy under section 107. Instead of availing of the remedy, the respondent instituted a petition under Article 226. The existence of an alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226 of the Constitution. But a writ petition can be entertained in exceptional circumstances where there is: (i) a breach of fundamental rights; (ii) a violation of the principles of natural justice; (iii) an excess of jurisdiction; or (iv) a challenge to the vires of the statute or delegated legislation.

12 In the present case, none of the above exceptions was established. There was, in fact, no violation of the principles of natural justice since a notice was served on the person in charge of the conveyance. In this backdrop, it was CA 5121/2021 7 not appropriate for the High Court to entertain a writ petition. The assessment of facts would have to be carried out by the appellate authority. As a matter of fact, the High Court has while doing this exercise proceeded on the basis of surmises. However, since we are inclined to relegate the respondent to the pursuit of the alternate statutory https://www.mhc.tn.gov.in/judis

16/24 W.P.(MD)No.22287 of 2021

remedy under Section 107, this Court makes no observation on the merits of the case of the respondent.'

In addition to the above the oft quoted and celebrated Whirlpool

principle [Whirlpool Corporation Vs. Registrar of Trade Marks,

Mumbai and others reported in (1998) 8 SCC 1] case law also fortifies

the view that is being taken by this Court. The Whirlpool Corporation

case is such an oft quoted case law that it has come to stay in litigation

parlance as 'Whirlpool exceptions'. In the case on hand, the only

arguments that comes closest to an exception is the writ petitioner

allegedly not being given an opportunity before cancellation of Section

12AA registration. As already alluded to supra, this Court is of the view

that the impugned order may not be the order by which the Section 12AA

registration has been cancelled. Though not specifically pointed out, I am

of the view that this alleged NJP violation if at all and if that be so would

be predicated and posited on the proviso to Sub-section (3) of Section

12AA of said Act. This did not arise as the impugned order merely

records a cancellation. This is buttressed and bolstered by the writ

petitioner not uploading the registration certificate more so when it is the

positive and categoric averment of the writ petitioner that the 12AA

https://www.mhc.tn.gov.in/judis

17/24 W.P.(MD)No.22287 of 2021

registration has been repeatedly renewed for over a continuous period of

time whereas only the 80G registration was discontinued post

31.03.2000. To be noted, even now, even in this writ petition case file,

Section 12AA registration certificate has not been produced. This Court

is of the considered view that the writ petitioner has not given any

acceptable reason for not uploading the 12AA registration certificate

which the writ petitioner claims is in its possession.

10. The above takes us to Section 142(1) notice which becomes

relevant. A scanned reproduction of 142(1) notice dated 30.08.2021 is as

follows:

https://www.mhc.tn.gov.in/judis

18/24 W.P.(MD)No.22287 of 2021

What is of relevance is serial No.4 thereat. The second respondent has

sought for the registration certificate under Section 12AA of said Act

with utmost clarity and specificity but the same has not been uploaded.

This 142(1) notice, as already alluded to supra was followed by not one

but two reminders i.e., dated 25.02.2021 and 30.08.2021. There is

nothing to demonstrate that the writ petitioner-assessee responded to

these two reminders. There is no response which has been placed before

me. There is no averment that the writ petitioner-assessee responded to

these reminders. On the contrary, specific submission made, on

instructions, before this Court today is that the writ petitioner does not

readily have the 12AA registration certificate.

11. Reverting to the alternate remedy facet of the matter on hand

which has been alluded to supra, interestingly and intriguingly, as rightly

pointed out by learned Revenue counsel in one of the previous

https://www.mhc.tn.gov.in/judis

19/24 W.P.(MD)No.22287 of 2021

assessment year i.e., 2018-19 assessment order dated 30.04.2021

(referred to supra) has been assailed by the writ petitioner by way of an

appeal. Furthermore, the submission of learned Revenue counsel that

even vide the assessment order for 2018-19, the 12AA benefit has been

considered and negatived. The reasons in paragraph 14 to which my

attention was drawn has already extracted and reproduced supra. The

above is buttressed by the positive averment of the writ petitioner in

paragraph 5 of the writ affidavit. Relevant portion of paragraph 5 reads

as follows:

'Without considering any of the submissions, the Assessing Officer passed an order dated 30/4/2021 for the Assessment Year 2018-19 denying the status of public charitable trust to the petitioner and treated the total income of the petitioner as gross income. The Respondent also initiated action for imposing penalty under Section 274 read with Section 270 A of IT Act for underreporting of income. In the said Assessment Order there is no finding or mention with regard to the cancellation or otherwise of the Registration Certificate earlier issued to the petitioner under the IT Act. Against the said order, the petitioner has filed an Appeal before Commissioner (Appeals) and the same is pending.'

https://www.mhc.tn.gov.in/judis

20/24 W.P.(MD)No.22287 of 2021

12. A perusal of above averment makes it clear that it is the stated

position of the writ petitioner i.e., the stated case of the writ petitioner

that the assessment order qua 2018-19 has been assailed by the writ

petitioner by way of a statutory appeal. The arguments that vide

assessment order 2018-19 there is cancellation of 12AA registration

certificate, does not hold water and does not carry the writ petitioner any

further for two reasons. One reason is as already alluded to supra, the

impugned order is not the order by which the cancellation has been made

and on a demurrer even if that be so, the same is revisable under Section

264 of said Act and more importantly the second reason is sauce for

Goose is sauce for Gander too. If the writ petitioner can assail the

assessment order for 2018-19 (where Section 12AA benefit have been

negatived) by way of a statutory appeal under Section 246 of said Act,

there is no reason as to why the writ petitioner cannot do it qua impugned

assessment order. This by itself downs the curtains from all these

arguments and it douses the writ petitioner's campaign against the writ

petitioner.

13. Notwithstanding the dismissal of the captioned writ petition, if

the writ petitioner chooses to avail the alternate remedy either by way of https://www.mhc.tn.gov.in/judis

21/24 W.P.(MD)No.22287 of 2021

an appeal under Section 246 of said Act or by way of a revision under

Section 264 of said Act as the case may be, subject to limitation and

subject to pre-deposit condition, the appellate authority/revisional

authority can consider the appeal/revision on its own merits and in

accordance with law untrammelled by observations made in this order as

the observations made in this order are for the purpose of deciding the

tenability of interference qua the impugned order in writ jurisdiction.

14. In the light of the narrative, discussion and dispositive

reasoning set out supra, the sequitur is the captioned writ petition fails

and the same is dismissed. Consequently, captioned W.M.P is also

dismissed. There shall be no order as to costs.

16.12.2021

Index : Yes / No Internet : Yes / No pkn

https://www.mhc.tn.gov.in/judis

22/24 W.P.(MD)No.22287 of 2021

To

1. The The Income Tax Officer, Exemption Ward, Trichy Main Building, Williams Road, Cantonment, Trichy – 620015.

2. Additional/Joint/Deputy/Assistant Commissioner of Income Tax/ Income Tax Officer, National Faceless Assessment Centre, Delhi.

https://www.mhc.tn.gov.in/judis

23/24 W.P.(MD)No.22287 of 2021

M.SUNDAR., J.

pkn

W.P.(MD)No.22287 of 2021

16.12.2021

https://www.mhc.tn.gov.in/judis

24/24