Facts of the Case

The petitioner challenged the assessment order dated 30.12.2018 for AY 2011–12, contending that the Assessing Officer relied only on a partial extraction of a reassessment order dated 31.12.2016 passed in the case of “Caruna Bal Vikas (CBV)”. The petitioner argued that the omitted portion of the reassessment order clearly indicated that CBV had provided a restricted sub-grant to the petitioner, thereby supporting its claim for tax exemption.

It was also noted that the petitioner had already filed a statutory appeal against the impugned assessment order, which had been pending since February 2019 without adjudication.

Issues Involved

  1. Whether the assessment order is vitiated due to reliance on an incomplete portion of a reassessment order.
  2. Whether denial of exemption under Sections 11 and 12 by invoking Section 13(1)(b) was justified.
  3. Whether delay in approaching the Court disentitles the petitioner from relief.
  4. Whether the appellate authority’s delay in disposing of the appeal warrants judicial intervention.

Sections Involved

  • Section 11 – Income from property held for charitable or religious purposes
  • Section 12 – Income of trusts or institutions
  • Section 13(1)(b) – Denial of exemption to trusts for benefit of particular religious community or caste
  • Relevant procedural provisions relating to reassessment and appellate remedies under the Income Tax Act, 1961

Petitioner’s Arguments

  • The Assessing Officer selectively relied upon the reassessment order of CBV and failed to consider its entirety, particularly paragraph 12 which supported the petitioner’s exemption claim.
  • CBV had granted a restricted sub-grant to the petitioner, which qualified for exemption under the Act.
  • The statutory appeal has remained pending for more than four years, causing prejudice.
  • The denial of exemption under Sections 11 and 12 was erroneous.

Respondent’s Arguments

  • The petitioner approached the Court after a considerable delay and is guilty of laches.
  • Since CBV had granted funds to the petitioner, the petitioner ought to have been aware of the reassessment proceedings and outcome earlier.

Court’s Findings / Order

  1. The assessment order was based on only a part of the reassessment order of CBV.
  2. The statutory appeal had not been disposed of for over four and a half years.

Directions Issued:

  • The appellate authority (Respondent No.2) shall dispose of the pending appeal within three months.
  • While adjudicating, the authority must consider:
    • The entire reassessment order dated 31.12.2016
    • Relevant judicial precedents on restricted grants
  • A personal hearing must be granted to the petitioner.

The writ petition was disposed of with these directions.

 

Important Clarification by Court

  • The Court held that delay and laches cannot defeat the petitioner’s right where the appellate authority itself failed to adjudicate the appeal within a reasonable time.
  • The appellate authority is obligated to consider complete material and not selectively rely on portions of earlier orders.
  • The concept of restricted grants routed through intermediary entities (CBV via Compassion International) must be properly examined.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS08052023CW58822023_145709.pdf 

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