Case Law Details
St. John The Baptist Church Vs ITO (Kerala High Court)
Introduction: The recent judgment by the Kerala High Court in the case of St. John The Baptist Church vs. Income Tax Officer (ITO) has significant implications for both religious institutions and tax compliance. This article provides a detailed analysis of the court’s decision and its repercussions.
Detailed Analysis: The crux of the matter revolves around a challenge against Ext.P9 order of the Income Tax Department, initiated under Section 148A(d) of the Income Tax Act. St. John The Baptist Church, registered under Section 12AA of the Income Tax Act, faced allegations of failing to account for certain cash loans and repayments during the assessment year 2016-2017.
The court observed that the appellant had not provided satisfactory explanations regarding the unaccounted transactions, leading to the issuance of notice under Section 148 of the Income Tax Act. Despite arguments from the appellant’s counsel regarding tax exemptions under Section 12AA, the court maintained that the proceedings under Section 148 were initiated to examine the merits of the alleged violations.
In dismissing the writ petition, the court emphasized the need for a thorough investigation into the unaccounted transactions to determine their eligibility for tax exemption. The appellant was given an opportunity to file a return within two weeks, with the assessing authority instructed to finalize the proceedings within three months of receipt.
Conclusion: The Kerala High Court’s refusal to intervene in the proceedings against St. John The Baptist Church underscores the importance of tax compliance and transparency, particularly for religious institutions enjoying exemptions under the Income Tax Act. This decision highlights the judiciary’s stance on ensuring thorough scrutiny of financial dealings to uphold the integrity of tax laws.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The writ petitioner in WP(C).No.18468 of 2023 is the appellant before us aggrieved by the judgment dated 15.01.2024 of the learned Single Judge.
2. Briefly stated, the facts necessary for a disposal of this writ appeal are as follows:
The Writ Petition was filed challenging Ext.P9 order of the Income Tax Department under Section 148A(d) of the Income Tax Act. A perusal of the said order clearly reveals that the appellant herein, who is an assessee under the Income Tax Act and registered under Section 12AA of the Income Tax Act in its capacity as St. John the Baptist Church, a religious institution, had not accounted for certain cash loans and repayments for the assessment year 2016-2017. It was with a view to scrutinizing the said unaccounted transactions and to ascertain whether there had been a violation of the provisions of Section 12AA of the Income Tax Act, and a possible violation of Section 269 SS and 269 T of the Income Tax Act that the notice under Section 148A was served on the appellant. In response to the said notice, the appellant, vide its response dated 05.04.2023, sought an adjournment for 15 days to submit details. The said adjournment request was acceded to and time was granted up to 20.04.2023 for furnishing the reply. In the reply submitted by the appellant on 18.04.2023, no explanation was given in respect of the unaccounted cash loan and repayments, and hence, the authorities had no option but to pass Ext.P9 order to issue notice under Section 148 of the Income Tax Act for reassessment of the income of the appellant for the said assessment year.
3. The learned Single Judge who considered the challenge against Ext.P9 order found that the appellant’s acceptance of Rs.1,87,69,000/- in cash and repayment of the same was an apparent violation of Section 12AA and the action of the assessing authority in issuing the notice under Section 148 could not be said to be erroneous in law. The Writ Petition was, therefore, dismissed as devoid of merit.
4. In the appeal before us, it is the contention of Sri.K.N.Sreekumaran, the learned counsel for the appellant, that the alleged escaped income, even if taken into account, would not attract any tax liability since the appellant enjoys an exemption in terms of Section 12AA of the Income Tax Act. We note, however, that the exemption under Section 11 read with Section 12AA of the Income Tax Act is one that is subject to certain conditions, and the question to be decided in the proceedings under Section 148 of the Income Tax Act is essentially as to whether the unaccounted transactions and the alleged escaped income would merit an exemption or not. It is for the said examination on merits that the proceedings under Section 148 of the Income Tax Act have been initiated. At this stage, where what is impugned is Ext.P9 order under Section 148 A(d), we see no reason to interdict those proceedings at the instance of the appellant. The Writ Appeal, therefore, fails and is accordingly dismissed.
Before parting with this appeal, and taking note of the request of the learned counsel for the appellant, we make it clear that if the appellant files the return in response to the notice under Section 148 within two weeks from the date of receipt of a copy of this judgment, then, the assessing authority shall consider the return and finalize the proceedings under Section 148 of the Income Tax Act after hearing the appellant within a period of three months thereafter.
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