Hamdard Laboratories India And Anr v. Assistant Director Of Income Tax (Exemption

$~ * IN THE HIGH COURT OF DELHI AT NEW DELHIReserved on: 18.03.2015Pronounced on:18.09.2015 Reserved on: 18.03.2015 + W.P.(C) 3599/2012 & C.M. NO.7569/2012 + W.P.(C) 5715/2013 + W.P.(C) 5716/2013 + W.P.(C) 5718/2013+ W.P.(C) 5729/2013 HAMDARD LABORATORIES INDIA AND ANR...... Petitioners Through : Sh. Parag. P. Tripathi, Sr. Advocate with Sh. Simran Mehta, Advocate. with Sh. Simran Mehta, Advocate. versus ASSISTANT DIRECTOR OF INCOME TAX (EXEMPTION) ..... Respondent Through : Sh. Rohit Madan with Sh. Ruchir Bhatia, Advocates. + W.P.(C) 5711/2013 & C.M. NO.12626/2013 HAMDARD LABORATORIES (INDIA) AND ANR...... Petitioners Through : Sh. Parag. P. Tripathi, Sr. Advocate with Sh. Simran Mehta, Advocate. versus DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS) ..... Respondent Through : Sh. Rohit Madan with Sh. Ruchir Bhatia, Advocates. CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.K. GAUBA MR. JUSTICE S. RAVINDRA BHAT % 1. This judgment disposes of six writ petitions, primarily concerning the charitable status of Hamdard Laboratories (India) (hereafter referred to as “Hamdard” the first Petitioner in the six writ petitions) – under Section 10(23C)(iv) of the Income Tax Act, 1961 (hereafter “the Act”). The Director General of Income Tax (Exemptions) (“DGIT(E)”) – Respondent in W.P.(C) –5711 of 2013 by order dated 21.08.2013 retrospectively withdrew the exemption granted to Hamdard under Section 10(23C)(iv) of the Act with effect from assessment year (AY) 2004-05. 2. In W.P.(C) 5711 of 2013, Hamdard has impugned the said order of the DGIT(E). In W.P.(C) 3599 of 2012, Hamdard challenges reopening of its assessment for AY (assessment year) 2005-06, and impugns the notice of reopening dated 27.03.2012 issued under Section 148 of the Act as well as the order dated 25.05.2012 rejecting Hamdard‟s preliminary objections pertaining to the reopening of assessment proceedings. Hamdard contends that the reopening of assessment by Assistant Director of Income Tax (Exemptions) (“ADIT(E)”) is based on a mere change of opinion on the same set of facts. In WP (C) Nos. 5715 of 2013, 5716 of 2013, 5718 of 2013 and 5729 of 2013, Hamdard has challenged separate but identical orders dated 10.07.2013 passed by the Commissioner of Income Tax (Appeals) (“CIT(A)”) for AYs 2006-07, 2007-08, 2008-09 and 2009-2010, holding that Hamdard was not entitled to the benefit of exemption under Section 11 of the Act. Since the focal point of the dispute involves the withdrawal of Hamdard‟s exemption under Section 10(23C)(iv) of the Act, the Court would first discuss the facts in W.P.(C) 5711 of 2013 before proceeding to discuss the facts of the other writ petitions. The Income-tax department has hereinafter been referred to as “Revenue”, except in instances where the concerned officer is addressed specifically for contextual clarity. W.P.(C) 5711 of 2013 3. Hamdard is governed by its constitution dated 28.08.1948 (hereafter referred to as “the Deed”), under which the partners of a business known as the “Hamdard Dawakhana” dedicated the said business to charity. Hamdard – like its predecessor in interest - generates income from the manufacture and sale of Unani medicines and other allied products. The original Deed provided for “Qaumi Income” (charity) and “Khandani Income (family income). However, the concept of family income was abolished by a declaration of the Settlor/ Founder-Wakif Mutawalli dated 10.10.1985, with retrospective effect from 01.01.1973. The principal objects of Hamdard, as set out in the Deed dated 28.08.1948 are as under:- “44. The „Qaumi Income‟ of the Wakf, shall be spent only within the territories of the Union of India and only on objects of public charity, which satisfy the following two cumulative tests: “44. The „Qaumi Income‟ of the Wakf, shall be spent only within the territories of the Union of India and only on objects of public charity, which satisfy the following two cumulative tests: (a) They must be objects of public charity for the benefit of all persons irrespective of caste, colour or creed, such as relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity of profit, and (b) They must be consistent with the principles of the true teachings of Islam. Provided, however, that in spending the income on objects of public charity, priority shall be given to the collective needs of the country or to such needs as may benefit the largest number of persons or their generations. 45. Priority may be given to the following: (1) To establish and run an Institute for the promotion of medical education and research with emphasis on indigenous systems of medicine. (2) To establish and successfully conduct a Tibbia College in conformity with the recognised standards. (3) To establish and run charitable hospitals and clinics where poor patients are given free treatment. 46. Qaumi Income may also be spent on the following: (1) To establish and run educational institutions, and/or to aid those which are already in existence. (2) To build schools, laboratories, wells, or such other buildings of a public nature as may benefit the largest number of people in the country. (3) To publish books, pictures, maps or literature or to aid in publication of the same by the publication of which the object of Wakf are fulfilled or achieved. 47. Help may also be given to needy orphans, needy widows or helpless persons, needy authors and research scholars and victims of unforeseen calamities without restriction of caste, colour or creed.” 4. Following its objectives, Hamdard claims that it is involved in various secular, charitable, nation building activities and humanitarian objectives; and it is not guided by factors relating to caste, creed or religion. It asserts that it is a pioneer in the development and growth of the Unani system of medicine. Hamdard has set up around 25 medical, educational, literary, scientific and cultural organisations including, inter alia, the All India Unani Tibbi Conference, Institute of History of Medicine and Medical Research, Indian Institute of Islamic Studies, Ghalib Academy, Rabea Girls Public School, Hamdard Education Society, Majeedia Hospital, Jamia Hamdard (University), Rufaida Nursing School, Hamdard Study Circle, Hamdard Coaching Centre, Hamdard Primary School, Hamdard College of Pharmacy etc. 5. To carry out its charitable activities, Hamdard created a special purpose vehicle, a registered society for philanthropic purposes, i.e Hamdard National Foundation (HNF) on 12.05.1964. HNF‟s objects and functions are as follows: “The objects for which the Society is established are as follows:- 1. To receive, control and supervise proper utilisation of the income of the Foundation received from Hamdard Dawakhana (Wakf), Delhi, as Qaumi Income and from any other body, person or concern, Indian and foreign, in any form as aid, grant or bequests, with or without any condition, to protect and promote the interests of the Society, and to safeguard the rights, privileges and interests of all those who derive benefit from the Society. 2. To spend the income of the Foundation only within the territories of India and only on objects of public charity which satisfy the following two cumulative tests: (a) They must be objects of public charity for the benefit of all persons irrespective of caste, colour or creed such as relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity for profit; and (b) they must be consistent with the principles of the true teachings of Islam. 2. To spend the income of the Foundation only within the territories of India and only on objects of public charity which satisfy the following two cumulative tests: (a) They must be objects of public charity for the benefit of all persons irrespective of caste, colour or creed such as relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity for profit; and (b) they must be consistent with the principles of the true teachings of Islam. Provided, however, that in spending the income on objects of public charity, priority shall be given to the collective, needs of the country or to such needs as may benefit the largest number of persons or their future generations. 3. To collaborate and cooperate with institutions having similar objects. Functions 1. Priority may be given to the following:- (a) To establish and run an Institute for the promotion of medical education and research with emphasis on indigenous systems of medicines. (b) To establish and successfully conduct a Tibbia college in conformity with the recognised standards. (c) To establish and run charitable hospitals and clinics where poor patients are given free treatment. 2. Income of the Foundation may also be spent on the following:- (a) To establish and run education institutions, and/or to aid those which are already in existence. (b) To build schools, laboratories, libraries, or such other buildings of a public nature as may benefit the largest number of people in the country. (c) To publish books, pictures, maps or literature or to add in publications of the same by the publication of which the objects of the wakf are fulfilled or achieved. 3. Help may also be given to needy orphans, needy widows or helpless persons, needy authors, scholars research scholars and students and victims of unforeseen calamities without restriction of castes, colour or creed.” 6. Both Hamdard and HNF are registered under Section 12A read with 12AA of the Act. In Additional Commissioner of Income Taxv.Hamdard Dawakhana (Wakf), (1986) 157 ITR 639, this Court examined Hamdard‟s objects and activities and held them to be charitable. Hamdard had been enjoying exemption under Section 10(23C)(iv) of the Act since AY 1984-85. For renewal of the said exemption for AY 2004-2005, Hamdard submitted its application in the prescribed form. The Revenue sought clarifications from Hamdard and upon an examination of the objects, activities and financial records, renewed the exemption under Section 10(23C)(iv) of the Act on 28.12.2007, with effect from AY 2004-2005, subject to certain conditions stipulated in the order dated 28.12.2007. 7. On 14.01.2009, the DGIT(E) issued a show cause notice to Hamdard, for 03.02.2009, for rescinding the exemption order dated 28.12.2007 on the ground that Hamdard had violated terms (a) and (c) of the exemption order. Hamdard responded to the said show cause notice on 30.01.2009 and alleged that the notice was vague and pre-mediated. The DGIT(E) sought several clarifications and responses from Hamdard, which were provided. While these proceedings were pending, on 24.12.2010, the DGIT(E) issued another notice for withdrawal of the exemption under Section 10(23C)(iv) of the Act, stating that conditions (a) and (c) imposed in the exemption order dated 28.12.2007 had been violated. 7. On 14.01.2009, the DGIT(E) issued a show cause notice to Hamdard, for 03.02.2009, for rescinding the exemption order dated 28.12.2007 on the ground that Hamdard had violated terms (a) and (c) of the exemption order. Hamdard responded to the said show cause notice on 30.01.2009 and alleged that the notice was vague and pre-mediated. The DGIT(E) sought several clarifications and responses from Hamdard, which were provided. While these proceedings were pending, on 24.12.2010, the DGIT(E) issued another notice for withdrawal of the exemption under Section 10(23C)(iv) of the Act, stating that conditions (a) and (c) imposed in the exemption order dated 28.12.2007 had been violated. 8. Rejecting the submissions made by Hamdard, on 22.02.2012, the DGIT(E) passed an order withdrawing the exemption granted to Hamdard under Section 10(23C)(iv) of the Act. Relying on this order, on 19.04.2012, the Assessing Officer (“AO”) raised a demand of ` 112 crores against Hamdard for AYs 2006-2007 to 2009-2010 and re-opened the assessment proceedings for the AY 2005-2006. Hamdard challenged the order dated 22.02.2012 before this Court in W.P.(C) 3598 of 2012. The said writ petition was allowed by this Court on 11.04.2013 and the order dated 22.02.2012 was quashed. The Court remanded the matter to the DGIT(E) to decide the issue afresh. Thereafter, Hamdard made detailed written submissions before the DGIT(E) on the issue of exemption under Section 10(23C)(iv) of the Act. The DGIT(E), vide its impugned order dated 21.08.2013, again held that Hamdard was not entitled to exemption under the said provision and withdrew it with effect from AY 2004-05. W.P.(C) 3599 of 2012 9. In the course of assessment proceedings for AY 2005-2006, the Revenue raised several queries in its questionnaire dated 17.01.2007 regarding the objects and activities of Hamdard. Hamdard answered those queries vide letters dated 01.02.2007, 20.02.2007 and 12.03.2007. On 21.03.2007, an order of assessment in Hamdard‟s case was passed under Section 143(3) of the Act for AY 2005-2006. In the said order, Hamdard‟ssurplus from manufacture and sale of unani medicines was held to be exempt under Section 11 of the Act. The relevant part of the order reads as under: “The assessee is registered u/s 12A of the Income Tax Act vide registration dated 20-07-1998. The assessee was also notified u/s 10(23C)(iv) of the Income Tax Act vide notification dated 15-04-2002 which was effective for the assessment years 2001-02 to 2003-04 and renewal of notification for subsequent years has also been applied for by the assessee which is pending. The main activity of the assessee is to provide healthcare in the field of Unani medicine, production, sale and marketing of unani and ayurvedìc medicines, the proceeds of which are governed by the Wakf Deed, and applied for charitable purposes. The activities of the assessee are within the meaning of section 2(15) of the Income Tax Act. As such, exemption is allowed to the assessee u/s 11 of the Income Tax Act, as claimed.” 10. On 27.03.2012, the Revenue issued a notice to Hamdard under Section 148 of the Act, seeking to re-open its assessment proceedings for AY 2005-2006. The Revenue supplied the reasons for reopening assessment proceedings for AY 2005-06 to Hamdard on 16.04.2012. The said letter highlighted the sales and expenditure figures of Hamdard and based on such figures, concluded that Hamdard‟s activities were commercial in nature. It further stated that Hamdard had made huge surpluses and had made accumulations over the years for expansion of manufacturing units. Though Hamdard‟s objects are charitable, its activities were held to be not charitable in nature. Revenue also stated that Hamdard had violated Section 11(4A) of the Act by not maintaining separate books of accounts for incidental business activities, had not utilised the accumulations made during the relevant assessment year (AY 2005-06) in line with its objects and that it was giving donations to HNF, which was not in furtherance of its charitable activities. 11. According to Hamdard, all the material issues raised in the said reasons were disclosed and were known to the Revenue. Hamdard urged preliminary objections to the reopening of assessment proceedings on the ground that it was based merely on change of opinion. However, those objections were rejected by the Revenue on 25.05.2012. 12. In W.P.(C) 3599 of 2012, Hamdard impugns the notice dated 27.03.2012 issued under Section 148 of the Act and the order dated 25.05.2012 rejecting Hamdard‟s preliminary objections pertaining to the reopening of assessment proceedings. Hamdard contends that the Revenue -has sought to reopen Hamdard‟s assessment proceedings for the AY 20052006, based on a mere change of opinion on the same set of facts. WP (C) NOS. 5715, 5716, 5718 AND 5729 OF 2013 13. In these writ petitions, Hamdard impugns four separate orders, all dated 10.07.2013, passed by the CIT(A), in Appeal Nos. 27-30/2012-13 for AYs 2006-07 to 2009-10. Hamdard submits that based on the order dated 22.02.2012 passed by the DGIT(E) withdrawing the approval granted to Hamdard under Section 10(23C)(iv) with retrospective effect from 2004-05, the ADIT(E) denied its claim for charitable status. Thus, the ADIT(E) by orders dated 19.04.2012 brought Hamdard‟s income to tax for AYs 2006-07 to 2009-10. The orders dated 19.04.2012 were confirmed by the CIT(A) in its impugned orders dated 10.07.2013. 14. According to Hamdard, the proceedings before CIT(A) commenced in January 2013, and the matter was heard on several occasions. Hamdard filed written submissions dated 04.03.2013 and 06.05.2013 before the CIT(A). On 28.06.2013, Hamdard‟s representative – the second Petitioner in the four writ petitions - reached the office of CIT(A) for hearing of the appeal and was awaiting the presence of the counsel for Hamdard. However, he was informed by the CIT(A) that he was under transfer and that he had already –handed over charge to a new incumbent the second Respondent in the writ petitions; and thus would not hear the appeal. The second Petitioner accordingly informed Hamdard‟s counsel and waited for secondRespondent‟s arrival. It is further submitted that as the second Respondent did not attend office for two hours and no firm time for this purpose was indicated by his staff, the second Petitioner returned to his own office. 15. In the four writ petitions, Hamdard states that on 29.06.2013, the second Petitioner received a call from the second respondent, asking him to come to his office. Upon reaching there, he was informed by the said Respondent that he was to go abroad for some official work and that he would take up the appeal after returning; he further expressed his inclination to await the passing of a fresh order by the DGIT(E), on the issue of exemption under Section 10(23C) (iv) of the Act. However, Hamdard in its rejoinder affidavit submits that these events transpired on 01.07.2013 and not on 29.06.2013, and that the reference to 29.06.2013 was an inadvertent error as the events described hereinabove had occurred on the „next working day‟, which had been incorrectly stated as 29.06.2013. 16. Hamdard further states that on 08.07.2013, the second Respondent again called up the second petitioner asking him to go to his office. There, it is alleged, he made the second petitioner sign two order sheets, one for 28.06.2013 and the other for 08.07.2013. The same read as under: “28/06/2013 Shri Javed Naseem, C.A. (Corporate head finance) appeared for hearing and requested for adjournment. Shri V.K. Tiwari CIT (A) XXI was hearing this case and he has been transferred out in AGT-2013. order of CBDT, and in his place, I Md. Mohsin Alam CIT has taken over the change on 28/6/2013. The case is adjourned to 8/7/2013 at 11.30 A.M. 8/7/2013 Shri Javed Naseem, CA appeared and the case was heard.” 16. Hamdard further states that on 08.07.2013, the second Respondent again called up the second petitioner asking him to go to his office. There, it is alleged, he made the second petitioner sign two order sheets, one for 28.06.2013 and the other for 08.07.2013. The same read as under: “28/06/2013 Shri Javed Naseem, C.A. (Corporate head finance) appeared for hearing and requested for adjournment. Shri V.K. Tiwari CIT (A) XXI was hearing this case and he has been transferred out in AGT-2013. order of CBDT, and in his place, I Md. Mohsin Alam CIT has taken over the change on 28/6/2013. The case is adjourned to 8/7/2013 at 11.30 A.M. 8/7/2013 Shri Javed Naseem, CA appeared and the case was heard.” 17. Hamdard alleges that the second Petitioner‟s signatures were obtained on the said order sheets under the pretext of “just completing the record”, and that nothing was heard by the second Respondent on the merits of the matter on 08.07.2013. Hamdard‟s counsel, it is alleged, who was authorized to argue the matter was not present and second petitioner, who was present, was not competent or equipped to argue the matter. Apparently, he was not even carrying the file of the case with him. It is alleged that the second Respondent informed the second Petitioner that it was not certain he would resume his official duties, after his foreign visit. Thus, no further date was given on the order sheet and fresh intimation was to be sent to Hamdard. It is alleged that however, on 11.07.2013, the second Petitioner was informed by the second respondent‟s office that Hamdard‟s appeal against the ADIT(E)‟s orders dated 19.04.2012 had been dismissed by orders dated 10.07.2013. Submissions on Behalf of Hamdard I Withdrawal of Exemption Under Section 10(23C)(iv) 18. Mr. Parag Tripathi, Hamdard‟s Senior Counsel urges that the order withdrawing Hamdard‟s exemption under Section 10(23C)(iv) of the Act is erroneous and legally untenable. Hamdard is an established public charity enjoying exemption from tax for the last six decades; including under the 1922 Act. The nature of its activities has remained unchanged since its inception. Hamdard is a business held under trust for charitable purposes, which business is only the corpus of the trust and its source of income and not its object. It has not effected any change in its avowed activities and objects and has not violated any condition of the grant of exemption dated 28.12.2007; the present being merely a case where the Revenue seeks to take a different view on the same set of facts. The manufacture and sale of unani medicines is the Hamdard‟s business since its inception and this pre-existing business was dedicated to the cause of public charity by the founder-Wakif Mutawalli in 1948. Hamdard submits that comparing it with a commercial private pharmaceutical company is ill-founded and perverse as in the case of commercial companies the profits and gains are free for distribution amongst shareholders and there is no obligation to apply the same for charitable objects. On the other hand, no part of its income is distributed or is capable of distribution for the private benefit of the mutawallis. 19. Considerable reliance is placed on the fact that Hamdard has been enjoying exemption from tax for a considerable period of time. Specifically, Hamdard cites this Court‟s decision in Additional Commissioner of Income Tax v. Hamdard Dawakhana (Wakf), [1986] 157 ITR 639, where its objects and the exact nature of its activities have been examined by this Court in detail in light of the Supreme Court‟s decision in ACIT v.Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1, and were held to be charitable. It is submitted that this Court in the said decision had also held that Hamdard‟s objects fall within the ambit of the first three heads of charity under Section 2(15) of the Act, viz. „medical relief‟, „education‟ and 19. Considerable reliance is placed on the fact that Hamdard has been enjoying exemption from tax for a considerable period of time. Specifically, Hamdard cites this Court‟s decision in Additional Commissioner of Income Tax v. Hamdard Dawakhana (Wakf), [1986] 157 ITR 639, where its objects and the exact nature of its activities have been examined by this Court in detail in light of the Supreme Court‟s decision in ACIT v.Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1, and were held to be charitable. It is submitted that this Court in the said decision had also held that Hamdard‟s objects fall within the ambit of the first three heads of charity under Section 2(15) of the Act, viz. „medical relief‟, „education‟ and „relief of the poor‟. It is emphasised that the decision in Hamdard Dawakhana (Wakf) has been consistently applied, followed and affirmed by this Court in a catena of judgments; including the case of Hamdard itself as also in the case of other parties. 20. As regards HNF, it is submitted that the Assessment order in its case for AY 2007-2008 - by which the AO had rescinded its charitable status was reversed by the CIT(A) on 31.01.2012 and was thus non-est on the date of passing of the impugned order. HNF is a mechanism having the same objects as that of Hamdard and is a beneficiary of donations made by Hamdard, for effectuating the charitable mandate of the the Trust Deed. The grant of a donation by one charitable institution to another, for the purpose of carrying on charitable activities amounts to an application of income for charitable purposes. Hamdard relies on the UK Court of Appeal‟s decision in Inland Revenue Commissioners v. Helen Slater Charitable Trust Ltd., [1980] 3 WLR 157, to say that this view has been followed and relied upon by the Courts in India in, inter alia, CIT v. Sarladevi Sarabhai Trust, [1988] 172 ITR 698 (Guj); CIT v. Nirmala Bakubhai Foundation, [1997] 226 ITR 394 (Guj), CIT v. Hindustan Charity Trust [1983] 139 ITR 913 (Cal), CIT v. M. Ct. Muthiah Chettiar Family Trust, [2000] 245 ITR 400 (Mad.), CIT v. Trustees of the Jadi Trust, [1982] 133 ITR 494 (Bom), CIT v. Shri Ram Memorial Foundation [2004] 26 ITR 35 (Del). 21. Hamdard relies upon Instruction No. 1132 dated 05.01.1978, issued by the CBDT, which states that a charitable trust will not lose exemption under the Act if it passes a sum of money to another charitable trust for utilization by the donee trust towards its charitable purposes, and that it shall be proper utilization of money by the donor trust for charitable purposes. It is further submitted that, since the formation of HNF in 1964, Hamdard has been carrying out its charitable activities through HNF. This has been undisputedly accepted by the Revenue for all these years in granting registration under Section 12A, according approval under Section 10(23C)(iv) and making assessments under Section 143(3) of the Act. 22. It is urged that the DGIT(E) erroneously surmised that Hamdard did not apply/accumulate its surplus towards its objects in violation of condition (a) of the order of exemption dated 28.12.2007. As correctly observed by the DGIT(E), the manufacture and sale of medicinal products is not the object of Hamdard in terms its Trust Deed. Not only are Hamdard‟s objects charitable but the activities are also charitable, the business being an asset dedicated to charity, and Hamdard utilizes the income generated from the manufacture and sale of Unani and Ayurvedic medicines for the attainment of the charitable objects. The details of accumulation and purpose thereof are a part of the return of income. Accumulation of income for the capital expansion of the asset is indispensable and incidental to put into effect the charitable purpose. No part of the surplus of Hamdard is distributable amongst the sons and grandsons of the Wakif Mutawallis, who are the current mutawallis. Like other employees of Hamdard, the mutawallis are also drawing nominal, fixed salaries. 23. As regards the investment in the Okhla and Manesar projects, Hamdard submits that the purpose and nature of the accumulations for these projects has been consistent since long and has been disclosed to and accepted by the Revenue at every stage. To support this contention, Hamdard relies upon the audited accounts filed by it with the Revenue for the Financial Years 2003-2004, 2004-2005, 2006-2007 and 2007-2008. 24. Mr. Tripathi submits that the accumulation of income for legitimate expansion of the activities of Hamard is merely ancillary to the predominant charitable purpose. Further, details of the same have been specifically stated in the documents accompanying the return of income and have been accepted by the Revenue. 25. Hamdard submits that a genuine, unintentional inability to spend the accumulated amount in a particular assessment year, for reasons beyond its control, cannot result in a permanent and retrospective withdrawal of the approval under Section 10(23C)(iv) of the Act. 26. Based on the Supreme Court‟s decision in ACIT v.Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1, Hamdard urges as follows:- 1) If the real, principal, predominant purpose of an entity is charitable then the said charitable intent will not stand vitiated merely because the activities of the entity result in profit or income which can be measured by standards applicable to commercial activity. 2) A clear distinction has to be drawn between a charitable object and the incidental and ancillary means employed to feed the same, which may result in profit. 3) Surplus, if any accruing from the activities of such an entity has to be applied for the charitable purpose, which also includes expansion of the activities of the entity and the said surplus should not be capable of distribution in the hands of the trustees. 27. Mr. Tripathi relies on the concurring judgment of Pathak J, in Surat Art Silk (supra), stating that it drew a clear distinction between a charitable purpose on the one hand and the method, mode and powers applied and adopted for the fulfillment of that purpose. Any application/permitted accumulation of the income of Hamdard for the capital expansion and maintenance of the charitable assets is ex-facie indispensable and incidental to the effectuation of the charitable purpose. 28. Furthermore, the period of accumulation provided in clause (a) of the third proviso to Section 10 (23C) of the Act is only five years and the Revenue had no jurisdiction to embark upon an enquiry into accumulations prior to AY 2002-2003; which were incidentally old details not in the possession of Hamdard. Mr. Tripathi submits that DGIT(E) fell into error in determining that Hamdard violated clause (b) of the third proviso to Section 10(23C) of the Act by reinvesting in its on going projects; as the said projects are an application of monies for charitable purposes. Further, Mr. Tripathi submits that Hamdard has made all investments in the specified modes, therefore, the Revenue‟s finding to the contrary is unfounded. No query or show cause, was raised in regard to this aspect of the matter. If the Revenue had issued a show cause regarding the violation of clause (b) of the third proviso to Section 10(23C) of the Act, Hamdard would have relied upon the details of its fixed deposits, being investments in specified modes, to show that the same had increased from ` 134.45 Crores in AY 2004-2005 to `419.56 Crores in AY 2012-2013. 29. Mr. Tripathi argues that the law laid down by the Supreme Court in CIT v. Thanti Trust, [2001] 247 ITR 985 has been misconstrued by the DGIT(E) in its application to Hamdard‟s case. Hamdard submits that the 29. Mr. Tripathi argues that the law laid down by the Supreme Court in CIT v. Thanti Trust, [2001] 247 ITR 985 has been misconstrued by the DGIT(E) in its application to Hamdard‟s case. Hamdard submits that the principle that a business undertaking can also be in the nature of a “property held under a trust”, entitling it to tax exemptions, finds statutory recognition in section 11(4) of the Act. In light of this Court‟s decision in CIT v. Mehta Charitable Prajnalay Trust, (2013) 357 ITR 560 (Del), it is urged that Section 11(4A) is not applicable to Hamdard‟s case, and thus, the DGIT(E) erred in concluding that condition (c) of the order of exemption had been violated. 30. Relying upon Section 11 (4A), the DGIT(E) accepted that the business of Hamdard is incidental to the attainment of the objectives of the Trust since separate books are required to be maintained for such a business. As a matter of fact such books of accounts are being maintained all along and have never been a focal point of dispute between the assessee and the department. The principle that a business undertaking can also be in the nature of “a property held under a trust” thereby entitling it to tax exemptions finds statutory recognition in Section 11(4) of the Act. 31. As regards the amendment in definition of „charitable purpose‟ in Section 2(15) of the Act with effect from 01.04.2009, it is submitted that the said amendment does not extend to the first three heads of charity in Section 2(15). Hamdard relies upon CBDT‟s Circular No. 11/2008 dated 19.12.2008, which clarified that the newly inserted proviso to Section 2(15) does not apply in respect of „relief of the poor‟, „education‟ or „medical relief‟. “2.1 The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e. relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute „charitable purpose‟ even if it incidentally involves the carrying on of commercial activities.” … 3.The newly inserted proviso to section 2 (15) will, apply only to entities whose purpose is „advancement of any other object of general public utility‟ i.e. the fourth limb of the definition of „charitable purpose‟ contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23 C) of the Act if they carry on commercial activities.” 3.2 In the final analysis, however, whether the assessee has for its object „the advancement of any other object of general public utility‟ is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose.” Reliance is also placed on the speech of the Finance Minister relating to the amended definition of „charitable purpose‟, wherein he had stated that it is not meant to apply to genuine charitable organisations. 32. Thus, Hamdard submits that the scope, ambit and mischief of the newly introduced proviso is confined only to organisations which come under the fourth category of the definition of “charitable purpose”, namely “advancement of any other object of general public utility” and it is not the intention of the legislature to target institutions engaged in genuine charitable activities. Further, it is contended that this Court in Hamdard Dawakhana (Wakf)(supra)has held that Hamdard‟s objects and activities are specifically relatable to and identifiable with the first three heads of charity; and that Hamdard‟s business is a business held under trust and is merely incidental to the effectuation and fulfillment of the charitable purpose. Therefore, given the decision in Dharmadeepti v. CIT, (1978) 3 SCC 499, Hamdard‟s objects cannot be said to fall outside the scope of definition of „charitable purpose‟ in Section 2(15). Reopening of Assessment Proceedings purpose. Therefore, given the decision in Dharmadeepti v. CIT, (1978) 3 SCC 499, Hamdard‟s objects cannot be said to fall outside the scope of definition of „charitable purpose‟ in Section 2(15). Reopening of Assessment Proceedings 33. Hamdard contends that the reopening of assessment proceedings is based merely on a change of opinion on the same set of facts, and thus, the notice of reopening of proceedings and order dismissing Hamdard‟s preliminary objections to such reopening ought to be quashed. 34. The AO in the assessment order of HNF for Assessment Year 2005-06 observed as under: “The main source of income is derived from Hamdard Dawakhana (Wakf). The income of the assessee is also stated to be applied on public charity as relief to the poor, education, medical relief and advancement of other objects of general utility. The activities of the assessee are charitable within the meaning of section 2(15) of the Income-tax Act. As such, exemption is allowed to the assessee u/s 11 of the Income-tax Act, as claimed.” It is submitted that there is no change in the objects and activities of Hamdard since AY 2004-2005. For AY 2005-06, it has duly declared a sum of `25,63,40,455/- as profits and gains of business or profession, leaving no doubt about the disclosure made by it. Further, the fact that Hamdard was donating its income to HNF was known to the Revenue even at the time of passing of the original assessment order and has been so since 1964. This does not, in law, denude Hamdard of its charitable character. Hamdard also highlights that HNF‟s charitable nature has been affirmed by the Revenue. 35. Hamdard further submits that the proviso to Section 147 is squarely applicable, disabling the Revenue from issuing the notice of reopening after the expiry of 4 years from the end of the concerned assessment year. Further, it is a change of opinion on the part of the AO on the same facts as had been examined by his predecessor and the AO is not empowered to review the order passed by his predecessor by invoking the provisions of section 147/148 of the Act. Reliance is placed on the decisions in CIT v. Kelvinator of India Ltd., (2002) 256 ITR 1, approved by the Supreme Court in (2010) 320 ITR 561 (SC); BLB Limited v. ACIT, (2012) 343 ITR 129 (Delhi); Atma Ram Properties Pvt. Ltd. v. DCIT, (2012) 343 ITR 141; CIT v. Purolator India Ltd., (2012) 343 ITR 155; Titanor Components Ltd. v. ACIT, (2012) 343 ITR 183; CIT v. Cray Research India Ltd., (2012) 343 ITR 212; and Artech Infosystems (P) Ltd. v.CIT, 206 Taxman 432. Finally, it is stated that the reference to the withdrawal of the notification under Section 10(23C)(iv) of the Act does not justify the reopening and exemption can still be examined under Section 11 of the Act. Orders dated 10.07.2013 passed by the CIT(A) 36. Hamdard submits that the orders dated 10.07.2013 wrongly record the presence of the authorized counsel for Hamdard, who never attended any proceedings before the second respondent. No such presence is recorded in the order sheets of 28.06.2013 and 08.07.2013. The presence recorded in the order dated 10.07.2013 is contrary to the order sheets dated 28.06.2013 and 08.07.2013. Prior to 28.06.2013, the second Respondent had not even assumed charge of the office of CIT(A). Accordingly, on 19.07.2013, the counsel for Hamdard wrote to the second respondent, categorically refuting the factum of his presence, even once, in the appellate proceedings before the said officer. 37. Hamdard further contends that the orders dated 10.07.2013 do not deal with any submission or authority contained in the detailed written submissions dated 04.03.2013 and 06.05.2013, filed by it or the submissions made by Hamdard‟s counsel before Respondent No. 2‟s predecessor. They are a replica of the order dated 22.02.2012 passed by the DGIT(E), which was set aside by this Court in WP No. 3598 of 2012. the factum of his presence, even once, in the appellate proceedings before the said officer. 37. Hamdard further contends that the orders dated 10.07.2013 do not deal with any submission or authority contained in the detailed written submissions dated 04.03.2013 and 06.05.2013, filed by it or the submissions made by Hamdard‟s counsel before Respondent No. 2‟s predecessor. They are a replica of the order dated 22.02.2012 passed by the DGIT(E), which was set aside by this Court in WP No. 3598 of 2012. 38. According to Hamdard, a valuable right of oral hearing available to it has been rendered nugatory by the second respondent. It is incomphrensible that an appeal which was heard at length by the predecessor of the second Respondent over several months was allegedly “heard” by the second Respondent on one day, and that too in the absence of the counsel for Hamdard. The appeals filed by Hamdard were heard in part by Mr. V.K. Tiwari, the erstwhile CIT(A), and were never heard by the second respondent, who passed the appellate (impugned) orders. In a judicial or a quasi-judicial proceeding, the passing of a final order by an officer who has not himself heard the matter is violative of the principles of natural justice. Without having heard the matter personally, the second Respondent could not have drawn sustenance from presence of the counsel for Hamdard in the proceedings before his predecessor, as admittedly the said counsel has never appeared and argued the matter before him. Hamdard relies upon the decisions in G. Nageswara Rao v. APSRTC, AIR 1959 SC 308; R. Jagdishchand v. Dy. Collector of Customs, AIR 1963 Cal 331; Amir Singh v. Government of India, AIR 1965 Punjab 84 and Chatro Devi v. Union of India, 137 (2007) DLT 14. 39. Further, it argued that the second Respondent abused his position and power as a senior appellate authority, and exercised undue influence over the second Petitioner by making him sign backdated order sheets, under the pretext of completing the record. The second Respondent did not indicate to the second Petitioner that the matter was being concluded and that he was on the verge of passing an order. The right of first appeal before the CIT(A) is a valuable remedy, available to an assessee, and the same cannot be set at naught by the adoption of such an improper and mala fide approach. Thus, it is submitted that the orders dated 10.07.2013 have been rendered in the exercise of a colourable procedure and in gross violation of the principles of natural justice, and are thus, void and non-est. Submissions on Behalf of Revenue Withdrawal of Exemption Under Section 10(23C)(iv) 40. Mr. Rohit Madan, learned Counsel for the Revenue, justifies the withdrawal of exemption under Section 10(23C)(iv) of the Act, stating that the impugned order comprehensively deals with all the facts in light of the prevalant position of law. It is stated that Hamdard is engaged purely in business activities and accordingly notification dated 28.12.2007 under Section 10(23C)(iv) for AY 2004-05 onwards has been withdrawn. The assessment records for AY 2006-07 to 2009-10 show that Hamdard is carrying on the business of manufacturing and sale of medicine on commercial scale and donating a part of its surplus to its sister organization – HNF. Revenue has relied on the following chart in support of its contention: 41. The Revenue argues that a bare reading of Section 2(15) reveals that Hamdard‟s purposes are not covered by the definition of „charitable purpose‟ because it engages only in manufacture and sale of Ayurvedic and Unani Medicines like any other organization manufacturing pharmaceutical products. The revenue also urges that Hamdard has enjoyed huge profit margins year after year and generates huge surplus. Therefore, by no stretch of imagination, it contends, can this activity be equated with any charitable organisation. 41. The Revenue argues that a bare reading of Section 2(15) reveals that Hamdard‟s purposes are not covered by the definition of „charitable purpose‟ because it engages only in manufacture and sale of Ayurvedic and Unani Medicines like any other organization manufacturing pharmaceutical products. The revenue also urges that Hamdard has enjoyed huge profit margins year after year and generates huge surplus. Therefore, by no stretch of imagination, it contends, can this activity be equated with any charitable organisation. 42. Revenue disputes that the objects of Hamdard and HNF are identical. While both Hamdard and HNF are registered under Sections 12A read with 12AA of the Act, the objects of Hamdard are commercial in nature, i.e. manufacture and sale of Ayurvedic and Unani Medicines on commercial basis like any other pharmaceutical organization manufacturing medicines - with the sole intention of earning profit. The revenue submits that although Hamdard‟s objects are charitable, its entire activity is of manufacturing and selling medicines, which implies that it is a commercial organization. Transfer of a part of the surplus generated from such activity to a charitable organization (HNF) would not mean that the assessee is also a charitable institution. 43. In response to Hamdard‟s reliance on this Court‟s decision in Hamdard Dawakhana (Wakf)(supra), the Revenue submits that this Court did not minutely analyse Hamdard‟s activities in that case. Since this was done for the first time, it cannot be said that the Revenue has attempted to dislodge a settled position of law. Further, it is submitted that the Court in Hamdard Dawakhana (Wakf)(supra)did not find Hamdard‟s activities to be falling within the first three heads of charity under Section 2(15) of the Act; in fact, Hamdard‟s activities fall within the residual category under Section 2(15). 44. Mr. Madan urges that the DGIT(E) has correctly held that Hamdard violated conditions (a), (b) and (c) of the order granting exemption dated 28.12.2007. Hamdard has accumulated and applied its income towards its –business activities involving manufacture and sale of unani medicines and other allied products. This does not constitute application/accumulation of income towards its objects. Further, Hamdard has accumulated its income in excess of five years, in violation of the second part of condition (a) in the order of exemption. 45. Mr. Madan reiterates that Hamdard has not invested its surplus in accordance with the provisions of Section 11(5) of the Act, as the said provision does not permit investment in business activities. He submits that none of the decisions relied upon by Hamdard deal with a case of investment in business. 46. As regards condition (c), it is stated that it is an admitted fact that Hamdard has not been maintaining separate books of accounts for its income applied to charitable activities. Hence, there is a blatant violation of condition (c) imposed in the order of exemption as well seventh proviso to Section 10(23C), which disentitles it for the exemption granted by the revenue under the law. Hamdard‟s contention that Section 11(4A) does not apply to businesses held in trust does not hold good in light of the Supreme Cour