(1) This is a petition under Articles 226 and 227 of the Constitution praying for a writ of certiorari directing the Income-tax Officer, Special Circle, Ambala, respondent, to forward the file of the case of Lala Gopi Mal Kuthiala Charitable Trust to this Court and to quash the notice dated the 4th March 1959 issued to the petitioner under section 22(2) of the Income-tax Act by the respondent.
(2) It is stated in the petition that as soon as the notice was issued, a writ petition was filed in this court on 5th August 1959 which came up for preliminary hearing before Dulat and R. P. Khosla JJ., who dismissed it on 6-8-1959 on the ground that it was premature. The petitioner, however, states that the learned Judges, while so dismissing the petition, expressed the view that the objections raised in that petition should first be raised by the petitioner before the Income Tax Officer, and the petitioner should obtain a decision on the preliminary question of jurisdiction from him, and, if he went against the petitioner, then the petitioner should approach this Court. I may here notice the objection raised on behalf of the respondents, that this Court cannot, and should not, take notice of any oral observations made by the Bench when the previous writ petition was dismissed in limine, and the only material which is admissible is the written order of the Bench. On the facts and circumstances of this case, I would decline to take into account any oral observations alleged by the petitioner to have been made by the learned judges while dismissing the previous writ petition, and would only take notice of the fact that they held the previous petition to be premature and dismissed it.
(3) The petition proceeds that after the dismissal of the previous writ petition the authorised representative of the petitioner submitted his objections to the respondent in which the notice issued under S. 22(2) of the Income Tax Act was assailed as bad and without jurisdiction on the following grounds:
(a) Income from property, which as per Supreme Court's decision in J.K. Trust, Bombay v. Commr. of Income-tax, Excess Profits Tax, Bombay : 32ITR535(Bom) also includes business, held upon trust is not liable to tax being exempt under S. 4(3)(i);
(b) the trust as constituted under the Deed does not fall within the category of a 'religious or charitable institution';
(c) a business which is itself held upon trust does not answer the description of 'a business carried on, on behalf of a religious or charitable institution' to which alone the proviso to section 4(3)(i) applies;
(d) the income of the petitioner's business is exempt under substantive part of clause (1) in spite of non-fulfillment of the conditions stated in the proviso thereto; and
(e) no notice could be issued to the trust as such Without giving any decision on the objections raised the respondent, according to the petitioner, insisted upon the filing of the return by the petitioner. On 20th February 1960 the authorised representative again invited the respondent's attention to the preliminary objections raised, but the respondent has replied that when the petitioner had earlier been called upon to file its return immediately, the objections raised were to be considered to have been obviously overruled. The petitioner was thus once again called upon to file a return of its income, failing which the respondent has threatened to proceed ex parte against the petitioner. I may here mention that the impugned notice under s. 22(2) of the Income Tax Act is obviously meant to call upon the petitioner to make a return of its income, and the notice relates to the assessment year 1958-59.
(4) In the reply filed on behalf of the respondent the counsel for the Revenue has drawn my attention to para 11, wherein it is stated that it is not possible to give any decision o the objections raised by the petitioner unless and until the notice under S. 22(2) is complied with and the case is examined fully with reference to the account books and the terms of the trust deed. In para 13, it has been explained that the expression used by the respondent in the reply, namely 'objections raised by assessee were obviously overruled' were meant to convey that objections regarding jurisdiction were overruled. As regards other objections regarding the taxability of the income no decision has been given since it was not possible to do so without examining the assessee's account-books.
(5) At the hearing Shri Hem Raj mahajan raised a preliminary objection that there was a complete machinery provided by the Income Tax Law which enables the assessees to claim redress of the their grievances before the Income Tax tribunals, and that the present writ petition, which is meant to short-circuit the prescribed procedure, is incompetent and must therefore be dismissed as such. He has drawn my attention, to begin with to C.A. Abraham v. Income Tax Officer, Kottayam : 41ITR425(SC) decision by the Supreme Court given in November, 1960. In the head note it is stated that the Income Tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed by the Income Tax authorities. The taxpayer can not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he has adequate remedy open to him by way of an appeal to the Appellate Tribunal.
The next decision to which reference has been made, is K. S. Rashid and Son v. Income-tax Investigation Commission : 25ITR167(SC) another decision of the Supreme Court, where the appellant having already availed himself of the remedy provided for in S. 8(5) of the Investigation Commission Act and a referenced having already been made to the High Court of Allahabad in terms of that provision which was awaiting decision, it was considered not to be proper to allow the appellant to invoke the discretionary jurisdiction under Article 226 at that stage.
The counsel has also cited some other decision in support of his objection but after considering the matter from all its aspects in my view the provisions of Article 226 of the Constitution being wide and unqualified in terms do not impose any constitutional limitation. It is only in exercising is powers under this Article that the High Court can and does as a matter of almost universal practice take into account inter alia the nature of the right claimed to have been violated and the existence or otherwise of an adequate alternative remedy, for coming to a just and satisfactory decision whether or not to grant relief on the writ side as also the extent to the relief which the circumstances of the case demand. The pith of the matter thus is that relief can always be granted and indeed should be granted by means of a prerogative writ in cases of threat by State to realise without authority of law tax from a citizen by using coercive machinery but generally speaking there should be a clear cut case of lack of jurisdiction or of a gross violation of mandatory provisions of law and the interests of justice should call for interference. Merely because it is alleged that ultimately assessment is likely to be contrary to law, this court would be disinclined ton such allegation alone to by-pass the usual machinery provided by the legislature and to proceed itself to investigate into the merits of the controversy. In view of the position just stated it is difficult to say as matter of law that the present writ petition is incompetent and should not therefore be entertained and must be thrown out without hearing the petitioner.
(6) On the merits the counsel has contended that the liability of the petitioner to be assessed depends upon a pure question of law and therefore without putting the petitioner to the avoidable and unnecessary botheration of submitting the return of income and producing the accounts, its liability to submit the return should first be decided by the respondent or by his Court in the present proceedings. After addressing arguments for some time the counsel ultimately summarised his contention by stating that his case falls within the purview of S. 4(3)(I) of the Income Tax Act and not of S.4(3)(I) provision (b) as is claimed by the Revenue. He maintains that under S. 4(3)(I) the question which falls for determination is a question of law which has nothing to do with the application of income.
The argument, properly probed, is that the trust deed by virtue of which the petitioner trust has been constituted furnishes almost conclusive evidence that the petitioner is exempt from being required to submit the return. Here it is helpful to reproduce the two provisions of law just mentioned-
'4. (1) * * * *
(2) * * *
(3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them:
(i) Subject to the provisions of clause (c) of sub-section (1) of S. 16, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto:
Provided that such income shall be included in the total income-
(a)* * *
(b) in the case of income derived from business carried on behalf of a religious or charitable institution, unless the income is applied wholly for the purposes of the institution and either-
(ii) the work in connection with the business is mainly carried on by beneficiaries of the institution';
(7) Now it is obvious that even in the case of S.4(3)(I) application of the income to such religious or charitable purposes or accumulation of such income for application to such purposes is essential for claiming exemption. When confronted with this position, the counsel dropped his argument and had virtually to concede that this was not a clear cut question of law the decision of which will afford a final solution of the controversy in the case in hand.
(8) The only submission which the counsel then made is that he would submit the return and produce the accounts but the respondent must be directed to decide the question of the petitioner's exemption. This argument has been raised because of the reply sent by the respondent to the petitioner on 22nd August 1960 in which it is stated that the objections raised by the petitioner regarding jurisdiction had obviously been overruled when a request was made my the respondent to the petitioner to file the return immediately. The counsel has, in this connection, also referred me to para 7 of the written statement filed by the respondent in this Court where it is asserted that the assessee trust is clearly an institution having been brought about to effect the purpose and to carry out the objects for which the trust was founded and as such the contention of the assessee does not appear to be well-founded. In this para a reference has been made to the observations of Lord Macnaghten in Manchester Corporation v. McAdam, 1896 AC 500 quoted in commissioner of Income Tax v. Radhaswami Satsang Sabha : 25ITR472(All) .
On behalf of the respondent, however, reference has been made to para 11 of the written statement which states that it is not possible to give any decision on the objections raised by the petitioner unless and until the notice under S. 22(2) is complied with and the case is examined fully with reference to the account books and the terms of the trust deed. In para 13 also the respondent has in unequivocal terms stated that it is incorrect to say that objections raised by the assessee were obviously overruled. With reference to the letter referred to above it is further pleaded that the objection regarding jurisdiction were overruled and that so far as other objections relating to the taxability of the income were concerned, no decision has been given because it is not possible to do so without examining an assesee's account books.
(9) In view of the foregoing discussion, in my opinion, no good and cogent ground has been made out in this case for by-passing the normal procedure prescribed by the Income-tax Act and for inducing this Court to hold an inquiry in proceedings for a prerogative writ under Article 226 of the Constitution. It is apparent that the respondent will decide the validity of the objections claiming exemption from assessment after the whole relevant material is placed before him and the apprehension on behalf of the petitioner does not seem to be well-founded.
(10) In the result, this petition fails and is dismissed, but with no costs.
(11) Petition Dismissed