Institute Of Design Of Electrical Measuring Instruments v. Director Of Income Tax (Exemptions), Mumbai And Ors

kambli IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 1124 OF 2013 ... Institute of Design of Electrical MeasuringInstruments .. PetitionerV/sDirector of Income Tax (Exemptions), Mumbaiand Ors. .. Respondents ... Mr. Girish Dave with Mr. Sameer G. Dalal for the petitioner.Mr. Suresh Kumar for the respondents. ... CORAM:MOHIT S. SHAH, C.J. & M.S.SANKLECHA, J.DATE :4 FEBRUARY 2014 P.C.: Rule. Returnable forthwith. By consent of parties taken up for final disposal. This petition filed under Article 226 of the Constitution of India challenges the order dated 28 March 2013 passed by respondent No.1-Director of Income Tax (Exemption) (Director) dismissing the petitioner's revision application under Section 264 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). 2.The petitioner is an institute set up by the Government of India with the object of designing and developing electrical measuring instruments and also imparting training in that field. The Governing Council of the institute is composed of nominees of Government of India and also various Research Institutes like National Physical Laboratory and BARC. kambli 3.For the Assessment Year 2008-09, the petitioner filed its return of income declaring loss of Rs.99.67 lacs with respondent No.2- Deputy Director of Income Tax (Exemption)-2 (Deputy Director). 4.On 20 March 2009, a notice was issued by respondent No.2-Deputy Director under Section 143(2) of the Act to the petitioner for the purpose of completing the assessment. As the notice dated 20 March 2009 calling upon the petitioner to attend the hearing was received only on 3 April 2009, that is after the time fixed in the notice for compliance, the petitioner sought time. 5.In the meantime, on 25 October 2010, respondent No.3- Income Tax Officer-21(2)-4 (ITO) issued a notice under Section 142(1) of the Act directing the petitioner to file certain details in respect of Assessment Year 2008-09 and fixed a personal hearing on 8 November 2010. The petitioner complied with the notice dated 25 October 2010 and filed necessary particulars as called for. 6.On 6 December 2010 the petitioner's representative attended the hearing before the respondent No.3-ITO. At the hearing the petitioner informed the respondent No.3-ITO that notice was also received from respondent No.2-Deputy Director in respect of the same assessment proceedings. On being informed of the same, respondent No.3-ITO assured the petitioner that he would transfer the file and papers relating to the petitioner to respondent No.2-Deputy Director, who alone has jurisdiction over the petitioner. kambli 7.In the meantime, respondent No.2-Deputy Director fixed the hearing of the petitioner's case on 2 December 2010. On that date the authorized representative of the petitioner was unable to attend. Another representative of the petitioner attended the hearing but no proceeding took place on that date as the representative was not carrying his authorization to appear for the petitioner. The petitioner was, thereafter, awaiting a fresh date of hearing from respondent No.2-Deputy Director.. 8.All of a sudden, on 4 January 2011, the petitioner received an undated exparte assessment order passed by respondent No.2-Deputy Director under Section 144 of the Act. The above undated assessment order determined the petitioner's income tax at Rs.3.12 crores. 9.On 23 December 2011, the petitioner preferred a revision application before respondent No.1-Director. By the impugned order dated 28 March 2013 the respondent No.1-Director dismissed the petitioner's revision application. 8.All of a sudden, on 4 January 2011, the petitioner received an undated exparte assessment order passed by respondent No.2-Deputy Director under Section 144 of the Act. The above undated assessment order determined the petitioner's income tax at Rs.3.12 crores. 9.On 23 December 2011, the petitioner preferred a revision application before respondent No.1-Director. By the impugned order dated 28 March 2013 the respondent No.1-Director dismissed the petitioner's revision application. 10.Mr.Girish Dave, learned counsel in support of the petition submits that the impugned order dated 28 March 2013, unfairly, refuses to exercise jurisdiction under Section 264 of the Act vested in him. The refusal to exercise jurisdiction is on the ground that the assessee has not placed anything on record to indicate that it had filed the necessary claims with respondent No.2-Deputy Director, who appropriately had jurisdiction over the petitioner. The impugned order holds that no evidence was led to substantiate the submissions being made in the course of revision proceedings that the same issue was kambli raised before the Deputy Director. It is submitted that the Director failed to notice the fact, the assessment order was passed exparte. Besides, it was pointed that sum of Rs.3.80 crores, which was grant-in-aid received from the Government of India was for procurement of machinery, and equipments to carry out civil work, which was capital in nature. Therefore, the grant-in-aid of Rs.3.80 crores was not in the nature of income and could not be subjected to tax. In view of the above, it is submitted that the impugned order dated 28 March 2013 of the Director and the impugned Assessment Order passed by respondent No.2-Deputy Director for Assessment Year 2008-09 be set aside. It was prayed that the Deputy Director be directed to pass a fresh order for Assessment Year 2008-09 after following the principles of natural justice. 11.Mr.Sureshkumar, the learned counsel for the revenue submits that the impugned order calls for no interference. It is submitted that the petitioner had not attended the hearing fixed by the respondent No.2-Deputy Director resulting in passing of assessment order under Section 144 of the Act. In view of the above, the petitioner cannot have any legitimate grievance against the impugned order dated 28 March 2013 dismissing the revision application. 12.We have considered the rival submissions. We find that the impugned order dated 28 March 2013 ignores the basic thrust of the petitioner's submission that there has been a miscarriage of justice in view of the fact that two authorities, viz. Deputy Director and ITO simultaneously exercised jurisdiction over the petitioner for Assessment Year 2008-09. The petitioner did attend the hearing before the ITO, who at the conclusion of the hearing informed the petitioner that he kambli would transfer the papers to the Deputy Director. Moreover, when the hearing took place before the Deputy Director, the petitioner had sought time, but the same was ignored as the person seeking time did not have an authority letter. This confusion would not have taken place, if the Deputy Director alone had exercised jurisdiction. It was on account of the ITO & Deputy Director, that an exparte assessment order came to be passed. This exparte assessment order resulted in the petitioner being subjected to tax, when it is the claim of the petitioner that it has suffered a loss of Rs.99.67 lacs during the relevant Assessment Year 2008-09. In fact, the petitioner's case that the amount of Rs.3.80 crores received as grant-in-aid was capital in nature was not examined by any of the authorities. In the circumstances , there has been a miscarriage of justice. 13.In view of the above, the impugned order dated 28 March 2013 passed by the Director and also the undated Assessment Order passed by the Deputy Director for Assessment Year 2008-09 are set aside. The Deputy Director-respondent No.2 is directed to grant a fresh hearing to the petitioner and complete the petitioner's assessment for the Assessment Year 2008-09 after following the principles of natural justice, preferably by 31 May 2014. 14.Petition is disposed of in the above terms. No order as to costs. CHIEF JUSTICE (M.S.SANKLECHA, J.)