Wp/22044/2014 Of Manipal Academy Of Higher Education v. Chief Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 4[th]DAY OF DECEMBER 2014 BEFORE THE HON’BLE MR.JUSTICE HULUVADI G.RAMESH Writ Petition No.22044/2014 +-C/w. W.P.Nos.22045 & 22111-22112 / 2014 (TIT} BETWEEN: Manipal Academy of Higher Education,Manipal University, University Building,Manipal, Udupi, Karnataka,Rep.by its RegistrarDr.Gopalakrishna Prabhu K.,__. PetitionerAged 47 yrs.(common) ( By Sri Arvind P. Datar, Sr.Counsel, Sri $.K.Tulasiyan, Sr.Counsel, Smt.Radhika Goutam, Smt.Nailina Mayegowda and Sri Prateek Ruth, Advocates ) AND: 1.Chief Commissioner of Income Tax“Aayakar Bhavan”, Plot No.9,EDC Complex, Patto Plaza,Panaji.“Aayakar Bhavan”, Plot No.9,EDC Complex, Patto Plaza,Panaji. OoThe Union of India,Through its Revenue Secretary,North Block, New Delhi.Through its Revenue Secretary,North Block, New Delhi. 3.The Chairman,Central Board of Direct Taxes,North Block, New Delhi.Central Board of Direct Taxes,North Block, New Delhi. 4.The Commissioner of Income TaxCentral Revenues Building,Attavar, Mangalore.Central Revenues Building,Attavar, Mangalore. 5.The Additional CommissionerOt Income Tax, Udupi Range,|Aayakar Bhavan, Maple Road,|Ambalpady Post, Adiudupi, Udupi.Ot Income Tax, Udupi Range,|Aayakar Bhavan, Maple Road,|Ambalpady Post, Adiudupi, Udupi. 6.The Deputy Commissioner,Of Income Tax, Circle-1,.Aayakar Bhavan, Maple Road,|Ambalpady Post, Adiudupi, Udupi... Respondents|(common)Of Income Tax, Circle-1,.Aayakar Bhavan, Maple Road,|Ambalpady Post, Adiudupi, Udupi... Respondents|(common) (By Sri E.I.Sanmati, Advocate) These Writ Petitions are filed under Articles 226 & 227 ot theConstitution of India praying to quash and set aside the show causenotice dated 19.3.2014 issued by the Office of the R-1 videAnnexure-H. These Writ Petitions coming on for preliminary hearing in B’|eroup this day, the Court made the following : ORDER These Writ Petitions are filed by the petitioner praying for|quashing the show cause notice dated 19.3.2014 videAnnexure-H issued by the 1[st]respondent — Chief Commissionerof Income Tax, Panaji. 2. Petitioner is a trust registered under Section 12(A)(a)| of the Income Tax Act, 1961 (hereinaiter referred to as the Act)for short. It is the case of the petitioner that it is a deemedUniversity managing various institutions in the field of education. The petitioner-Trust has been granted exemptionunder Section 10(23C)(vi) of the Act by the Central Board ofDirect Taxes, New Delhi vide order dated 2.7.2004 for theassessment years 1999-2000 to 2001-2002 and exemption wasalso granted independently tor the assessment years 2002-03to 2004-05 vide order dated 17.8.2004, for the assessment year2005-06 to 2007-O8 vide order dated 29.11.2004 and trom theassessment year 2008-09 onwards vide order dated 25.4.2008.It is the case of the petitioner that in none of the aboveexemption orders, there is a reference to the exemption grantedfor the assessment year 1999-00 to 2000-01. For theassessment year 2001-02, petitioner filed returns claiming thatits income was exempted under Section 10(23C)(vi) and he wasalso eligible for exemption under Section 11 and 12 of the Act.The exemption claimed was not granted on the ground that thepetitioner had advanced a sum of Rs.37/ crores to oneDayananad Pai vide agreement dated 8.95.2000 for purchase ofland, which was not an admissible investment under Section|1l1(5) of the Act. It was concluded by the Assessing Officer byrecording a finding that the said amount of Rs.37 crores cannot be considered as utilized for educational purposes. Againstthis, petitioner preferred appeal before the Commissioner ofIncome Tax (Appeals), Mangalore. The Commissioner videorder dated 20.8.2004, partly allowed the appeal and held thatsince an exemption under Section 10(23C)(vi) of the Act hadalready been granted, the entire income of the trust wouldqualify for exemption. The Department preferred appeal beforethe Income Tax Appellate Tribunal, Bangalore Bench. Theappeal came to be dismissed vide order dated 21.4.2006. TheDepartmentpreferredallappealbeforethis|CourtinITA.No.1344/2006. The Division Bench of this Court by orderdated 1.4.2013 set aside the orders passed by all theauthorities and remitted the matter to the Assessing Authoritydirecting that a show cause notice be issued in case ofviolation. It is the grievance of the petitioner, the directions ofthis Court have not been complied with and without giving anopportunity,theimpugnedordercameTObe.passedwithdrawing the exemption granted to the petitioner undersection 10(23C)(vi) of the Act for the assessment year 2001-02to 2004-05. Hence, petitioner is before this Court. Heard the learned Senior Counsel appearing for the)petitioner and the learned Standing Counsel for respondents. 3. It appears, the Division Bench of this Court in|ITA.No.1344/2006 had directed to hear the matter and passorders whether there is any violation of Section 11(5) of the|Income Tax Act and in this regard, when the matter wasremanded by the Division Bench to the appropriate authority,the appropriate authority commenced its proceeding by letterdated 19.3.2014 with regard to rescinding from givingexemption granted under Section 10(23)(c)(6) of the Act inrespect of this petitioner. Of course, the content of the letter|indicates that the petitioner is requested to attend the officeon that date in person or through a representative dulyauthorised in this behalf, thereby commencement of veryproceeding itself is without giving show cause notice. Apartfrom that, with regard to investment of Rs.37/ crores made bythe real estate agent, it is noticed by the Assessing Officer thatthere are some irregularities. As such, he sought to opine thatthere is non-compliance of Section 11(5) of the Act and therebytried to exercise the power in withdrawing the recognition eranted seeking for an exemption from payment of income taxby the petitioner as a charitable trust. According to thepetitioner, without examining the documents produced byit, |the impugned order came to be passed. 4. Be that as it may, the Division Bench of this Court in |ITA.No.1344/2006 filed by the Commissioner of Income Tax,Mangalore against the petitioner, in para-13 has observed thatthe Assessing Authority shall on the facts available as ontoday, go into the question whether assessee has violated theterms and conditions of Section 11(5) of the Act subject towhich, exemption was granted. If it records a finding thatthere is violation of Section 11(5) of the Act, then it shall bring|the said violation to the notice of the prescribed authority. Onsuch violation being brought to the notice of the prescribedauthority, the prescribed authority shall issue a show causenotice to the assessee to show cause why the order ofexemption should not be rescinded and after hearing him, passorders on merits, in accordance with law. If the prescribedauthority decides to rescind the order of exemption grantedearlier, it shall do so and shall send a copy of the same to the Assessing Authority as well as to the assessee. On receipt ofsuch order, the Assessing Authority shall proceed to frame theassessment order and proceed in accordance with law. Thatwould meet the ends of justice. So, this is the clear indicationof requirement in following the principles of natural justice.That is not being done in the present case. As irregularprocedure is adopted by the Assessing Authority andprescribed authority, the impugned order needs interference. Assessing Authority as well as to the assessee. On receipt ofsuch order, the Assessing Authority shall proceed to frame theassessment order and proceed in accordance with law. Thatwould meet the ends of justice. So, this is the clear indicationof requirement in following the principles of natural justice.That is not being done in the present case. As irregularprocedure is adopted by the Assessing Authority andprescribed authority, the impugned order needs interference. In that view of the matter, the impugned order is set|aside and the matter is remitted to the Assessing Authority andthe Assessing Authority shall consider the case in accordancewith the observations made by the Division Bench inITA.No.1344/2006 and pass appropriate orders in accordancewith law. Ordered accordingly. Writ Petitions are disposed of. Sd/-JUDGE|