Section 10(14) exemption dispute: invalid tax demand, consequential notice and bank account attachment could not survive.

Income-tax demand raised by disallowing exemption under section 10(14) was held unsustainable in light of an earlier Division Bench ruling that had already settled the exemption controversy. As the demand itself lacked legal basis, the consequential notice of demand also could not stand. The attachment of the bank account, being purely consequential to the invalid demand, likewise lost its foundation and had to be withdrawn forthwith.

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Issues: Whether the demand of income-tax raised by disallowing exemption under section 10(14) of the Income-tax Act was liable to be quashed, and whether the consequential notice of demand and bank account attachment could survive.

Analysis: The parties relied on an earlier Division Bench decision which had settled the controversy regarding the claimed exemption. In view of that position, the demand raised on the petitioner by disallowing the exemption was not sustainable. Once the demand itself fell, the notice of demand and the attachment action taken in pursuance thereof also lost their foundation.

Conclusion: The demand was quashed, the notice of demand was also quashed, and the respondents were directed to withdraw any attachment of the bank account forthwith.

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