Plea to check institutes exploiting tax exemptions disposed

The first bench comprising of Chief Justice Sanjay Kishan Kaul and Justice R Mahadevan closed the plea after recording the submission of the Director General (Investigation) of Income Tax Department that, “Wherever the concealment of income was detected, exemption/approval granted to charitable educational institutions are withdrawn.” 

The bench also held that, “The counter affidavit filed by the department makes it clear that on the aforesaid eventuality arising, the cash is seized and the assesses is furnished with the opportunity to participate in the proceedings and offer explanation on the documents recovered, more specifically in respect of the cash fund and thereafter an assessment would be made.” 

“Moreover, on prima facie coming to the conclusion that there is concealment of income, the same is communicated to the approval granting authority, who, after giving reasonable opportunity of show cause, is empowered to rescind the notification or withdraw the approval resulting in denial of exemption and consequent taxing of incomes at the hands of the institution at regular rates with consequential penal provisions,” the bench said. 

Also, on holding that naturally these are aspects subject to the statutory appeals/revision remedies even before the High Court, the bench said, “In our view, the intent of the department is to follow up the matter logically, but those would naturally be subject to the rights of the assesses to challenge the orders passed by the department and thus, no further directions can be passed in this matter.” 

The petitioner Jawaharlal Shanmugam of Chennai had moved the plea seeking to consider revoking the exemption granted under Income Tax to the charitable organisations if serious violations of rules and fraudulent acts are committed. 

He had contended that the Income Tax department had held raids on as many as four medical institutes and unearthed huge amounts of black money.