By TIOL News Service

CHENNAI, FEB 27, 2019: THE issue at hand before the bench was whether the writ court has any scope to intervene in assessment orders challenging cancellation of a trust's registration u/s 12AA, where the grounds of challenge are already considered in orders passed by the Appellate authorities. NO is the answer.

The High Court also held that attachment of movable property merits being partially lifted where such proceedings adversely affect third parties who have no relation with the dispute between the assessee & the Revenue

Facts of the case

THE assessee is a trust engaged in managing an engineering college. It is registered u/s 12AA and obtained approval u/s 10(23C)(vi). During the relevant AY, it was subjected to Search proceedings, pursuant to which assessment orders were passed denying exemption u/s 10(23C)(vi) and Section 11. Additions were also made regarding unaccounted fees & capitation fees. The assessee then approached the CIT(A). Pending disposal of appeal, the jurisdictional DGIT (Inv) initiated proceedings to cancel benefit u/s 10(23C)(vi) and registration granted u/s 12AA.

However, the proceedings for cancellation were not immediately pursued by the Department & were continued after a three-year gap. The assessee's registration was cancelled despite objections advanced. The approval u/s 10(23C)(vi) was cancelled with retrospective effect from the relevant AY. The assessee's appeals before the CIT(A) were dismissed, as were the appeals filed before the Tribunal thereafter. The assessee then filed Miscellaneous Applications seeking review of the Tribunal's order, claiming that its grounds of appeal were not taken into consideration. Stay petitions were also filed seeking to stay the operation of the CIT(A)'s order and on the demands raised for the relevant AYs. However, during the pendency of the applications and stay petitions, the Department initiated action for recovery of demands. The assessee requested the Tax Recovery Officer to grant time to settle the tax due, but the same was denied on grounds that tax dues of about Rs 6.09 crores could not be stayed. The assessee was directed to pay the entire amount due. Meanwhile, the Department issued certificate to attach four buses owned by the assessee, triggering the present writs contesting such actions as well as the demands raised.

In writ, the High Court held that,

++ the assessee rightly approached the appellate authorities challenging the cancellation of registration under section 12AA as well as the orders of assessment dated 28.03.2013. The litigation has traveled through the hierarchy of appeals and is now pending before the Appellate Tribunal, the final fact finding authority. As such, there is no avenue to interfere with the orders of assessment orders at this juncture, also for the reason that the orders of assessment challenged, stand telescoped into appellate orders passed by the CIT(A) and by the Tribunal. Thus the assessee's plea to have the assessments declared as invalid, cannot be granted;

++ regarding attachment of the movables, it is seen that the buses are used to facilitate the movement of students between their homes and the college. Students should not be made to suffer on account of the conflict inter se the assessee and the Income Tax Department. Thus, while the attachment dated 07.02.2019 will continue, the Department is directed to release the buses to the assessee solely for use in college activities. No opinion is expressed on merits.

(See 2019-TIOL-480-HC-MAD-IT)