BAIJNATH SABOO Vs. INCOME TAX OFFICER J WARD

JUDGEMENT

(1.) In this application under Article 226 of the Constitution the subject-matter of challenge is a notice issued under Section 148 of the Income-tax Act, 1961, dated the 29th March, 1973, for the assessment year 1968-69. The petitioners are the trustees of a trust known as Birla Janakalyan Trust. The assessment for the assessment year 1968-69 in respect of the said trust was completed on or about 27th February, 1969. As the trust in respect of which the petitioners are the trustees is a public charitable trust, the income of the said trust was entirely exempt. The said trust had claimed that it had received as gift certain shares from a private trust and, therefore, the taxes that were deducted at source in respect of the dividends on the shares which had been gifted to the public charitable trust, were refunded to the trust of which the petitioners are the trustees. It transpired or came to the knowledge of the Income-tax Officer, according to him, that the gift by the private trust in favour of the public trust was void as the private trust had no power to make the gift. Therefore, the refund of the taxes deducted at source given to the public charitable trust, according to the Income-tax Officer, were wrongly given and had to be rectified. It was for this purpose that the assessment for the assessment year 1968-69 was sought to be reopened. The grounds for such reopening can best be stated in the words of the Income-tax Officer as stated in the affidavit-in-opposition in paragraph 14. The statements are as follows:

(2.) The question, therefore, is whether there has been any escapement of income of the trust of which the petitioners are the trustees entitling the revenue authorities to reopen, the said assessment. Section 147 of the Income-tax Act entitles the Income-tax Officer to reopen the assessment if he has reason to believe that income chargeable to tax has either, (i) escaped assessment for the relevant year ; or (ii) has been under-assessed ; or (iii) has been assessed at too low a rate ; or (iv) has been made the subject of excessive relief; or (v) excessive loss or depreciation allowance has been computed. As the trust of which the petitioners are the trustees is a public charitable trust, its income was not assessable to tax. Therefore, there is no question of any income escaping assessment because the income was not assessable, nor was there any question of any under-assessment or assessment at too low a rate. In this case, there is also no question of excessive loss or depreciation allowance being computed. If that was the position, then the only ground on which the assessment could have been reopened was that the income chargeable to tax had been made the subject of excessive relief. The income being not chargeable to tax, being the income of a public charitable trust, there was no question of that income being given excessive relief. Therefore, the fact that the petitioners got away with refund which the petitioners were not entitled in law, does not authorise the income-tax authorities to say that the petitioners had been given excessive relief on income chargeable to tax. This position seems to be fortified by the decision of the Supreme Court in the case of P.S. Subramanyan v. Simplex Mills Ltd. [1963] 48 ITR 182. It appears that a similar view was also taken by the Kerala High Court in the decision of the case of Moidu v. Income-tax Officer [1965] 2 ITJ 336.

(3.) In that view of the matter, the notice under Section 148 cannot be sustained and must be held to be without jurisdiction. This order, however, will not prevent the revenue authorities, if they are entitled in law, to proceed against the private trust or against the trustees of the said private trust or to rectify the order of refund in favour of the petitioners in accordance with law, if they are otherwise entitled to. Subject to the observations as aforesaid, the rule is made absolute and the notice is quashed. There will, however, be no order as to costs. Stay asked for is granted for a period of four weeks.