NIDAN V. THE COMMISSIONER OF INCOME TAX

MA/301/2010

AI Insights

The case involves Nidan, a society registered under the Society of Registration Act, 1860, which appealed against the order of the Income Tax Appellate Tribunal, Patna. The Tribunal had dismissed Nidan's appeal ex-parte, affirming the assessment made by the Commissioner of Income Tax, which included unspent grants as income due to the absence of a notice in prescribed Form No. 10 for accumulation beyond 15% of income. The High Court found that the dismissal of the appeal ex-parte violated the principles of natural justice, as there was no evidence of proper notice being served for the hearing date.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 751508 (HC-PATNA)
• Appeal Type: Others
• Pronouncement Date: 14-08-2012
• Assessment Year: misc
• Laws Referred To: Income Tax Act 1961, Income Tax Rules 1962
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: HARSHWARDHAN PRASAD; ARCHANA SINHA
• Assessee Lawyers: D V PATHY; ABHI SARKAR
• Keywords: Accumulation of income; Charitable Trust; Ex-parte; Natural Justice; Non-prosecution
• Section: 11(2); 11(1)(a)

Judgement Text

"IN THE HIGH COURT OF JUDICATURE AT PATNA Miscellaneous Appeal No.301 of 2010 ====================================================== Nidan, a Society registered under Society of Registration Act, 1860, having its office at Sudama Bhawan, Boring Road, P.O. and P.S. Sri Krishna Puri, Patna 800001 through its member, Sri Ranjan Kumar, son of Late Kamla Prasad Singh R/o sudama Bhawan, Boring Road, P.O. and P.S., Sri Krishna Puri, District, Patna 800001 .... .... Appellant Versus 1. The Commissioner Of Income Tax-I, Patna, having its office at 2nd Floor, Central Revenue Building, Birchand Patel Marg, Patna-800001 2. The Assistant Commissioner of Income Tax, Circle-1, Patna .... .... Respondents ====================================================== Appearance : For the Appellant/s : Mr. D.V. Pathy, Adv. : Mr. Abhi Sarkar, Adv. For the Respondent/s : Mr. Harshwardhan Prasad, Adv. : Mrs. Archana Sinha, Adv. ====================================================== CORAM: HONOURABLE MR. JUSTICE SHIVA KIRTI SINGH and HONOURABLE MR. JUSTICE VIKASH JAIN C.A.V. ORDER (Per: HONOURABLE MR. JUSTICE VIKASH JAIN) 8. 14.08.2012 1. The appellant is aggrieved by the order of the Income tax Appellate Tribunal, Patna Bench, Patna (hereinafter being referred to as ‘the Tribunal’) dated 15.09.2009 passed in I.T.A. No. 610/Pat/2007 for the assessment year 2004-05, by which the order of the first appellate authority passed against the Appellant has been endorsed and the appeal dismissed ex- parte on merits. 2. The appellant is a non-government organization claiming to be engaged in the activity of providing welfare measures to society at large, and is registered as a charitable trust by the Commissioner of Income Tax, Patna. For the year under reference, the appellant was assessed on a total income Patna High Court MA No.301 of 2010 (9) dt. 14.08.2012 2 of Rs. 15,24,830/- as against the total income of Rs. 56,810/- shown in the return filed by it. Such enhancement was made by adding the amount of unspent grants, on the ground that no notice had been given in the prescribed Form No. 10 by the Appellant for accumulation in excess of 15% of the income in terms of Section 11(2) of the Income tax Act 1961 (‘the Act’ for short) read with Rule 17 of the Income tax Rules 1962 (‘the Rules’). The exemption u/s 11(1)(a) of the Act was thus denied in respect of the excess amount over 15% of income which was brought to tax accordingly. 3. The disallowance of exemption by the Assessing Officer as aforesaid was confirmed by Commissioner of Income Tax (Appeals)-II, Patna, in his order dated 17.8.2007 passed in Appeal No. 687/06-07 which had been preferred by the appellant. 4. The matter was carried further in second appeal before the Income Tax Appellate Tribunal. It appears that initially the Tribunal dismissed the appeal for non-prosecution by its order dated 01.02.2008, which was however subsequently recalled on 16.05.2008 and the appeal restored for hearing on merits. 5. The appellant is aggrieved by the fact that the Tribunal has once again dismissed its appeal for non- prosecution and has decided the appeal ex-parte. It has been stated that upon restoration, the appeal was taken up on a few Patna High Court MA No.301 of 2010 (9) dt. 14.08.2012 3 dates and on 12.06.2009 the same was adjourned sine die on the request of appellant’s counsel. Thereafter, no notice was served upon the appellant fixing the date of hearing on 20.7.2009 when the appeal was taken up and dismissed ex- parte. It is therefore submitted that the impugned order passed by the Tribunal is in clear violation of natural justice and is liable to be set aside. 6. Mr. D.V.Pathy, Learned Counsel for the Appellant, further states that an application for accumulation of income in the prescribed Form No. 10 had been filed, though belatedly on 10.4.2008, before the Commissioner of Income Tax-I, Patna which was pending and required to be disposed of in the light of Board’s Circular No. 273 dated 03.06.1980 allowing for admission of belated applications. It is claimed that a paper book dated 12.6.2009 had been filed before the Tribunal, inter alia, containing a copy of the said application, but the Paper- Book has not been taken into consideration at all by the Tribunal while disposing of the appeal ex-parte on merits. 7. With the consent of parties, this appeal is being disposed of at the stage of admission itself. 8. With regard to the issue involving the alleged violation of Natural Justice on the Appellant’s plea that no notice was validly served in respect of the date of hearing fixed on 20.7.2009, this Court by its order dated 19.4.2012 granted time to the appellant to place the relevant facts on affidavit. In Patna High Court MA No.301 of 2010 (9) dt. 14.08.2012 4 compliance, the appellant has, inter alia, filed a certified copy of the order sheet recorded in the appeal by the Tribunal. 9. We find on a perusal of the said order sheet that after the initial ex-parte order was recalled, the appeal was fixed for hearing from time to time, and on 12.6.2009 the hearing was adjourned sine die on the request of the authorised representative of the appellant. Thereafter, the order sheet shows that on 14.07.2009, the case was fixed for hearing within a week thereof on 20.07.2009 and notice directed to be issued. However, there is nothing on the order sheet to show that the notice was in fact issued, or if issued the same was actually served on the appellant. On the date so fixed on 20.07.2009, the appeal was taken up and dismissed ex-parte on merits. 10. On his part, learned Senior Standing Counsel for the Income tax Department, Mr. Harshvardhan, was unable to controvert the Appellant’s plea by bringing on record a copy of the service report or any other material to establish that notice had in fact been served upon the appellant in respect of the date fixed on 20.7.2009 for hearing of the appeal. 11. As regards the Appellant’s Paper-Book dated 12.06.2009, he informed that a copy thereof had been served on the Department. He however ventured to submit that the belated notice for accumulation in Form No. 10 having not been filed prior to conclusion of assessment proceedings or even Patna High Court MA No.301 of 2010 (9) dt. 14.08.2012 5 until disposal of the first appeal was too belated to be considered valid or the delay condoned. 12. In view of the entries as appearing in the order sheet of the Tribunal and also in view of the inability of the respondents to bring any material on record to show that notice had validly been served or that the appellant had information of the date of hearing fixed on 20.7.2009, we are of the view that there has occurred a failure of natural justice in the instant case. 13. We accordingly set aside the impugned order dated 15.09.2009 passed by the Tribunal in I.T.A. No. 610/Pat/2007 for the assessment year 2004-2005 with a direction that the appeal shall be reheard and disposed of afresh after grant of adequate and reasonable opportunity to the parties by observing the principles of natural justice. 14. The Tribunal shall take into consideration all relevant materials including the paper book dated 12.06.2009 claimed to have been filed by the appellant, if found on the records, and dispose of the appeal on its own merits after hearing the parties. 15. We need not detain ourselves over the submission on behalf of the Department with regard to the validity of belated filing of notice for accumulation in Form No. 10, as the issue neither arises out of the Tribunal’s order nor has the Appellant raised a substantial question of law on the point Patna High Court MA No.301 of 2010 (9) dt. 14.08.2012 6 before us. 16. With the above observations and directions, this appeal stands disposed of. There will be no order as to costs. Fahad./- (Vikash Jain, J) I agree. (Shiva Kirti Singh, J) (Shiva Kirti Singh, J) "