JUDGMENT
B.P. Dharmadhikari, J.
1. Petitioner No. 1 before this Court is a Public Trust while petitioner No. 2 is its President. It appears that later on Joint Charity Commissioner by order dated 7-7-2000 appointed ad hoc body to administer said Trust and said body is joined as petitioner No. 3 as per orders of this Court dated 8-1-2002. All 3 respondents are officers of Union of India in its Income Tax department. The petitioners challenge order dated 29-7-1992 passed by respondent No. 1 Commissioner of Income Tax in proceedings under Section 132(12) of Income Tax Act, 1961, hereinafter referred to as “Act”. In short their contention is that they are exempt from provisions of Income Tax Act because of exemption available to Public Trust in view of Section 10(22) of Act and hence, in appeal under Section 132(12), respondent No. 1 was duty bound to record a finding about this status of petitioners and as that has not been recorded, said order dated 29-7-1992 is liable to be quashed and set aside. They also sought stay of assessment proceedings undertaken under Section 148 of Act and this Court has stayed those proceedings on 7-10-1992. The stay continues to operate even today.
2. The petitioner Trust has come into existence in 1888 and it was registered in 1927 initially under Society’s Registration Act and in 1961 under Bombay Public Trust Act. Petitioner has triple story building of which ground floor is let out to augment its income and it is running about 12 educational institutions. It is stated that on 27-6-1985 it deposited in three instalments amount of Rs. 20 lakhs with Director of Technology Education, Bombay for starting Polytechnic and to purchase 20 acres of land for it. On 14-2-1991 Income Tax Officer conducted search proceedings and seized fixed deposit receipts worth Rs. 9344450/- i.e. Ninty three lakhs Forty four thousand Four hundred fifty only. On 13-6-1991, Assistant Commissioner of Income Tax passed order under Section 132(5) of Act and determined tax liability of petitioner with interest at Rs. 31902458/- only i.e. Three crore Nineteen lakhs Two thousand Four hundred and Fifty eight only and on 17-6-1991, said authority issued notices under Section 148 for assessment years 1984-85 to 1990-91. This order was challenged by petitioners in proceedings under Section 132(11) on 12-7-1991 and on 31-12-1991 petitioners prayed for its expeditious disposal. On 31-1-1992, petitioners approach this Court in writ petition 380 of 1992 and challenged order dated 13-6-1991 and in the alternative sought direction to respondent No. 1 to dispose of their application under Section 132(11) immediately. Division Bench of this Court on 5th March, 1992 disposed of said writ petition after recording the submission of respondent No. 1 that appeal [application under Section 132(11)] could be disposed of by 15-4-1992 and directed deferring of proceedings under Section 148 of Act till its disposal. Accordingly, respondent No. 1 has disposed of said proceedings on 29-7-1992 and this order has been challenged in present petition.
3. I have heard Senior Advocate M.G. Bhangade with Advocate V. V. Bhangade for petitioners and Advocate A.S. Jaiswal for respondents.
The only grievance made in argument is about refusal of respondent No. 1 to exercise jurisdiction available to it under Section 132(11) by not considering the issue of entitlement of present petitioner to exemption in view of provisions of Section 10(22) of Act. The learned Senior Advocate argues that the lower authority while passing the order on 13-6-1991 has prima facie considered this issue and has answered the same against petitioner. It is argued that in proceedings under Section 132(11) very same order is being scrutinized by higher authority and hence, scope of this power is identical in all respects with that of lower authority. It is contended that said authority i.e. respondent No. 1 ought to have therefore appreciated the plea of present petitioners for exemption and grounds raised by them to object to the application of mind by Assistant Commissioner of Income Tax and thereafter only could have passed final orders on 29-7-1992. It is stated that by refusing to consider this issue, the remedy available to petitioner has been declined and hence, this Court must interfere and ask respondent No. 1 to reconsider this aspect.
Learned Advocate on behalf of respondents has stated that issue of exemption cannot be decided in limited jurisdiction under Section 132(11) of Act. it is stated that orders under Section 132(5) or 132(12) are not final but of interlocutory nature passed only with a view to determine whether entire assets or securities discovered in search need to be retained till finalization of assessment. He argues that the question of entitlement of petitioner to claim exemption will be considered in Section 148 proceedings and at present no interference in the matter is warranted. Reliance is placed upon judgment of Hon’ble Apex Court reported at , Aditanar Educational Institution v. Additional Commissioner of Income Tax, to show that exemption is required to be considered for each year separately and independently and hence, same can be done more conveniently while finalizing the liability of petitioner, if any, under Section 148 proceedings. Judgments of High Court in R. Ramchandra Naidu v. Commissioner of Income Tax, reported at 702 ITR 227 (Madras), Deputy Commissioner of Income Tax v. Harjivandas Juthabhai Zaveri, reported at 245 ITR 305 (Gujarat) and Narayan R. Bandekar v. 2nd ITO (Bombay) are relied upon by him to explain the nature of proceedings.
4. In R. Ramchandra Naidu (supra) Hon’ble Division Bench of Madras High Court has held that Officer invoking Section 132(5) is expected to exercise caution and deal with matter of summary assessment with such anxiety and fairness as would be required in order to avoid any unreasonable or unfair interference with private rights of individual. It is further held that Court will not normally interfere with summary orders unless and until it is found to be capricious or mala fide or not honest. Hon’ble Division Bench of Gujarath High Court in case of Harjivandas Juthabhai Zaveri (supra) observed that Section 132(5) contemplates an opportunity of hearing to be given to person concerned and order under said provision is not final and conclusive for all purposes. Similarly Hon’ble Division Bench of this High Court in case of Narayan R. Bandekar (supra) held that order under Section 132(5) is order of summary nature and does not conclude the rights of petitioner because while passing the assessment order, it is always open to him to point out that assets recovered in search do not represent undisclosed income. It is further observed that if there is any violation in exercise of that power by income tax authority, the proper remedy is to lodge an appeal before the Appellate Authority. Hon’ble Division Bench therefore refused to interfere with order under Section 132(5) on the contention raised that Officer passing that orders relied upon certain statements without giving assessee an opportunity to cross-examine those persons, as the assets recovered were to be held in custody by Officer till completion of assessment proceedings. It is therefore clear that the assessee there had remedy of filing appeal under Section 132(11) and he approached Hon’ble High Court without exhausting it. Judgment of Hon’ble Apex Court in case of Aditanar Educational Institution (supra) states that and availability of exemption under Section 10(22) of the Act is to be evaluated each year to find out whether the institution existed during the relevant year solely for educational purposes and not for purposes of profit.
5. Petitioners here have already filed appeal or proceedings under Section 132(11) of Act challenging adverse order passed against it by respondent No. 1. It cannot be forgotten that there was earlier writ petition in which this Court issued certain directions to respondent No. 1 and accordingly, orders have been passed by respondent No. 1 on 29-7-1992. The Division Bench judgment in case of Naravan R. Bandekar (supra) therefore is not relevant and applicable. No doubt, the order under Section 132(5) is of summary nature and also provisional one because it is not binding upon assessee in assessment proceedings which follow thereafter. However, the fact that assessee needs to be heard, provision therein for inquiry, time limit for passing order and previous approval of superior to such orders as also provision for appeal to higher authority against it reveal that legislature has provided for enough protection to the assessee even in these proceedings. The power of search and seizure is extraordinary power and hence, legislature has incorporated these measures to safeguard the interest of assessee. The provision being in favour of assessee and that too in a taxing statute, it needs to be interpreted liberally in favour of assessee. The provision is made only to see that power of search is not misused to the prejudice of citizen and the officer must find out the quantum of asset or security which reasonably is sufficient to meet the total existing liability of tax with interest upon undisclosed income discovered in such search. If assets or securities with him are in excess, he has to return the same to assessee forthwith. Though this order is not final and subject to assessment orders made in regular proceedings, still legislature has taken precaution to see that there is no unnecessary harassment of assessee in the matter. In such circumstances, when a Public Trust like petitioner which runs number of educational institutions has claimed exemption in view of provisions of Section 10(22) of Act, the officer passing orders under Section 132(5) has also to find out at least prima facie as to why and how such trust is not entitled to exemption or how income discovered in search is liable to be treated as undisclosed income. In the facts of present case respondent No. 3 has discharged this obligation and after applying its mind, said authority has rejected the claim of petitioner for such exemption. Had respondent No. 3 not considered this aspect, it would have amounted to denial of reasonable opportunity to petitioner. The appeal or application provided by statute under Section 132(11) is against this order and hence, it requires identical application of mind and consideration even by appellate authority. The scope of proceedings under Section 132(11) of Act cannot be curtailed in any way and this remedy cannot be circumscribed by the considerations which are not relevant under Section 132(5) of Act. Appellate authority i.e. respondent No. 1 is equally obliged to prima facie consider correctness or otherwise of entitlement of present petitioners to claim exemption. If in summary inquiry, it is found that petitioner is entitled to claim exemption, there is no question of respondent No. 1 or respondent No. 3 retaining any assets or property towards tax liability if undisclosed income is otherwise explained.
6. In present case respondent No. 1 has refused to consider claim for exemption on the ground that it would result in premature decision of matters which need to be decided during course of regular assessment proceedings. It is obvious that there is failure to exercise jurisdiction on part of respondent No. 1. The said order therefore to that extent is unsustainable and matter needs to be remanded back to respondent No. 1 to prima facie consider correctness or otherwise of the claim for exemption made by petitioners and its appreciation by respondent No. 3 in its order dated 13-6-1991 under Section 132(5) of the Act.
7. Accordingly impugned order dated 29-7-1992 passed by respondent No. 1 to the extent it refuses to consider plea of present petitioners for exemption under Section 10(22) of Act is hereby quashed and set aside. The matter is remanded back to respondent No. 1 to consider this aspect and to pass order in relation thereto as early as possible and in any case within period of three months from today. The finding of respondent No. 1 on this issue of exemption along with the findings already recorded in order dated 29-7-1992 shall then be treated as an order under Section 132(12) of Income Tax Act, 1961. The interim orders passed by this Court on 7-10-1992 shall remain in force during pendency of proceedings before respondent No. 1. The petitioner Trust shall not encumber in any manner any of its interest in any security or asset to the prejudice of respondents in the meanwhile. Rule is thus made absolute accordingly with no order as to costs.