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Aditanar Educational v. Assistant Director - WP.Nos.8856 of 2005  RD-TN 883 (12 March 2007)
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 12.3.2007
THE HONOURABLE MR.JUSTICE P.D.DINAKARAN
THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN
W.P.Nos.8856 of 2005 and 2107 to 2109 of 2006
Aditanar Educational Institution
rep. by its Chairman
86, E.V.K.Sampath Road
Chennai 600 007. .. Petitioner Vs
The Assistant Director of
Income Tax (Exemption-II)
Chennai-600 034. .. Respondent Prayer in W.P.No.8856 of 2005: Petition under Article 226 of the Constitution of India for the issue of a writ of Certiorari to call for the records of the respondent in GIR.No.2697A, dated 30.3.2005 and to quash the same. Prayer in W.P.Nos.2107 to 2109 of 2005: Petitions under Article 226 of the Constitution of India for the issue of a writ of Certiorarified Mandamus to call for the records of the respondent in GIR.No.2697A/1999-2000 to 2001-02 and 2003-04, dated 18.1.2005, ought to be 18.1.2006, to quash the same and to further direct the respondent not to proceed with the reassessment in pursuance of the notice dated 31.3.2005 issued under Section 148 of the Act for the assessment year 1999-2000. For Petitioner : Mr.G.Sarangan
For Respondent : Mr.T.Ravikumar
Jr.Standing Counsel (IT) O R D E R
(Order of this Court was made by P.D.DINAKARAN,J.) The petitioner, a society registered under the Societies Registration Act, 1960, had for its objects to establish, run, manage, or assist colleges, schools and other educational organisations existing solely for educational purposes, and taking note of the said object, exemption under Section 10(22) of the Income Tax Act, 1961 (for brevity, "the Act") was also being granted to the petitioner in respect of all its income arising from the educational institutions. Even though the Department denied exemption on the ground that the petitioner is not an educational institution within the meaning of Section 10(22) of the Act, this Court in Additional Commissioner of Income-tax Vs. Aditanar Educational Institution  118 ITR 235, held in favour of the petitioner and the same was confirmed by the Apex Court in Aditanar Educational Institution Vs. Additional Commissioner of Income-tax,  224 ITR 310. Thus, the petitioner was granted exemption up to the year 1998 under Section 10(22) of the Act.
2. By Finance Act, 1998, Section 10(22) of the Act was omitted and hence, the petitioner, after complying with the conditions stipulated under Sections 11, 12, 12AA of the Act, claimed exemption under Sections 11 and 12 of the Act.
3. With regard to the claim for exemption for the assessment years 1999-2000, 2000-01 and 2001-2002, the returns of income were filed on 9.10.1999, 25.10.2000 and 24.10.2001 respectively, and the respondent by order dated 31.3.2003 made under Section 143(1)(a) of the Act granted the exemption.
4. Apropos the claim of exemption under Sections 11 and 12 of the Act for the assessment year 2002-03, the respondent directed the petitioner to produce the records and after perusing the records, by communication dated 2.3.2005 intimated that there are violations to Section 13(1)(d) of the Act, as the petitioner was holding shares of Limited companies, and as a consequence the provisions of Sections 11 and 12 of the Act are not applicable, and accordingly, by assessment order dated 30.3.2005, the claim for exemption under Sections 11 and 12 of the Act was rejected. Hence, W.P.No.8856 of 2005.
5. The respondent, however, issued a notice under Section 148 of the Act on 31.3.2005 alleging that income had escaped assessment for the assessment years 1999-2000, 2000-01 and 2001-02. On repeated requests made by the petitioner seeking reasons for reopening and stating that the returns have already been filed on 7.12.2005, the respondent informed that there are violations to Section 13(1)(d) of the Act, as the petitioner was holding shares of Limited companies, and as a consequence the provisions of Sections 11 and 12 of the Act are not applicable. Questioning the validity of the reopening of assessments, the petitioner sent a reply on 21.12.2005. But, by proceedings dated 18.1.2006, stated as 18.1.2005, rejected the objection raised by the petitioner, without giving an opportunity. Hence, W.P.Nos.2107 to 2109 of 2006.
6. Mr.G.Sarangan, learned counsel for the petitioner submits that the shares were acquired by the petitioner long before 1983 and the petitioner was granted exemption till 1998 under Section 10(22) of the Act and therefore, the refusal to grant exemption is arbitrary and unreasonable.
7. Mr.T.Ravikumar, learned Standing Counsel for the Revenue submits that the respondent, after perusing the records found that there are violations to Section 13(1)(d) of the Act, as the petitioner was holding shares of Limited companies, and as a consequence the provisions of Sections 11 and 12 of the Act are not applicable, and such finding of the respondent, in the light of materials available on record does not warrant interference and moreover, it is submitted that against the orders impugned in these writ petitions statutory appeals are available and therefore, the petitioner is not entitled to the relief as prayed for in the above writ petitions by way of judicial review.
8. When the respondent, based on records, found that the petitioner had made some investments and is holding shares, and the same is disputed by the petitioner stating that the said shares are in possession ever since 1983, the same is a disputed question of fact, which, in our considered opinion, cannot be gone into in judicial review exercising the power conferred under Article 226 of the Constitution of India.
9. The remedy under Article 226 by way of judicial review is purely a discretion and where the petitioner fails to avail the effective statutory alternative remedy within the prescribed time due to his own fault, he cannot be permitted to urge that as a ground to exercise the discretion conferred under Article 226 of the Constitution of India in his favour, vide A.V.Venkateswaran v. R.S.Wadhwani, AIR 1961 SC 1506.
10. Again in Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433 =AIR 1983 SC 603, a Bench of Three Judges of the Apex Court held that where efficacious statutory alternative remedy is available in the statute by way of an appeal and second appeal under the Sales Tax Act, and the petitioner failed to avail relief in the appeals, the writ petition is not maintainable in law. In the said decision, it is held that: "The Act provides for a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under Article 226 of the Constitution. It is now well recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of." (emphasis supplied)
11. The same view is reiterated by another Bench of Three Judges in CCE v. Dunlop India Ltd., (1985) 1 SCC 260 = AIR 1985 SC 330 in the following words: "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." (emphasis supplied)
12. Following the ratio laid down in: i.G.Veerappa Pilla v. Raman and Raman Ltd., AIR 1952 SC 192; ii.Union of India v. T.R.Varma, AIR 1957 SC 882; iii.C.A.Abraham v. ITO, AIR 1961 SC 609;
iv.Titaghur Paper Mills Co. Ltd. v. State of Orissa, AIR 1983 SC 603; v.Asst. Collector of Central Excise v. Dunlop India Ltd., AIR 1985 SC 330; vi.Sheela Devi v. Jaspal Singh, AIR 1999 SC 2859; and vii.A.Venkatasubbiah Naidu v. S.Chellappan, 2000 (7) SCC 695, a Division Bench of this Court in Dr.K.Nedunchezhian v. Deputy CIT,  279 ITR 342, held that when there is an alternative remedy, it may not be proper for this Court to invoke Article 226 of the Constitution of India and the above principles apply with great force in tax proceedings.
13. In State of H.P. & Ors. v. Gujarat Ambuja Cement Ltd., JT 2005 (6) SC 228, the Apex Court held the relief under Article 226 of the Constitution of India can be granted in spite of the availability of alternative remedy under the statute, only based on undisputed facts, but when the High Court finds that factual disputes are involved it would not be desirable to deal with them in a writ petition. In Paragraphs 15, 16 and 17 of the said decision, it is held as follows:
"15. If, as was noted in Ram and Shyam Co. v. State of Haryana & Ors., AIR 1985 SC 1147, the appeal is from Caesar to Caesars wife the existence of alternative remedy would be a mirage and an exercise in futility. In the instant case the writ petitioners had indicated the reasons as to why they thought that the alternative remedy would not be efficacious. Though the High Court did not go into that plea relating to bias in detail, yet it felt that alternative remedy would not be a bar to entertain the writ petition. Since the High Court has elaborately dealt with the question as to why the statutory remedy available was not efficacious, it would not be proper for this Court to consider the question again. When the High Court had entertained a writ petition notwithstanding existence of an alternative remedy this Court while dealing with the matter in an appeal should not permit the question to be raised unless the High Courts reasoning for entertaining the writ petition is found to be palpably unsound and irrational. Similar view was expressed by this Court in First Income Tax Officer, Salem v. M/s.Short Brothers (P) Ltd., 1966 (3) SCR 84, and State of U.P. v. Indian Hume Pipe Co. Ltd., 1977 (2) SCC 724. That being the position, we do not consider the High Courts judgment to be vulnerable on the ground that alternative remedy was not availed. There are two well-recognised exceptions to the doctrine of exhaustion of statutory remedies. First is when the proceedings are taken before the forum under a provision of law which is ultra vires, it is open to a party aggrieved thereby to move the High Court for quashing the proceedings on the ground that they are incompetent without a party being obliged to wait until those proceedings run their full course. Secondly, the doctrine has no application when the impugned order has been made in violation of the principles of natural justice. We may add that where the proceedings itself are an abuse of process of law the High Court in an appropriate case can entertain a writ petition. 16. Where under a statute there is an allegation of infringement of fundamental rights or when on the undisputed facts the taxing authorities are shown to have assumed jurisdiction which they do not possess can be the grounds on which the writ petitions can be entertained. But normally, the High Court should not entertain writ petitions unless it is shown that there is something more in a case, something going to the root of the jurisdiction of the officer, something which would show that it would be a case of palpable injustice to the writ petitioner to force him to adopt the remedies provided by the statute. It was noted by this Court in L. Hirday Narain v. ITO, AIR 1971 SC 33 that if the High Court had entertained a petition despite availability of alternative remedy and heard the parties on merits it would be ordinarily unjustifiable for the High Court to dismiss the same on the ground of non-exhaustion of statutory remedies; unless the High Court finds that factual disputes are involved and it would not be desirable to deal with them in a writ petition.
17. At this juncture, it would be appropriate to take note of the few expressions in Reg v. Hillingdon, London Borough Council, 1974 (1) QB 720, which seems to bring out well the position. Lord Widgery, C.J. stated in this case: "It has always been a principle that certiorari will go only where there is no other equally effective and convenient remedy. " The statutory system of appeals is more effective and more convenient than an application for certiorari and the principal reason why it may prove itself to be more convenient and more effective is that an appeal to [say] the Secretary of State can be disposed of at one hearing. Whether the issue between them is a matter of law or fact or policy or opinion or a combination of some or all of these whereas of course an application for certiorari is limited to cases where the issue is a matter of law a nd then only it is a matter of law appearing on the face of the order."
"An application for certiorari has however this advantage that it is speedier and cheaper than the other methods and in a proper case therefore it may well be right to allow it to be used. I would, however, define a proper case as being one where the decision in question is liable to be upset as a matter of law because on its face it is clearly made without jurisdiction or in consequence of an error of law." (emphasis supplied)
14. In the instant case, concededly, the claim for exemption was rejected in view of violations to Section 13(1)(d) of the Act found by the respondent, insofar as the petitioner was holding shares of Limited Companies, which goes to the root of the issue and it is factually disputed, which in our considered opinion, cannot be gone into under Article 226 of the Constitution of India. Hence, the petitioner is not entitled for the relief as prayed for in the above writ petitions. For the reasons aforesaid, these writ petitions are dismissed. No costs. Consequently, W.P.M.P.Nos.12526 of 2005 and 2402, 2404 and 2406 of 2006 are closed. sasi
The Assistant Director of
Income Tax (Exemption-II)
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