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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’: NEW DELHI
Before: SH. ABY T. VARKEY & SH. O.P. KANT
ORDER PER BENCH: These appeals by the assessee are directed against four separate orders dated 10.07.2013 passed by learned Commissioner of Income Tax (Appeals) for the assessment years 2006-07 to 2009-10. Identical grounds of appeal are raised in all the four appeals, therefore, for the sake of brevity and convenience, the grounds of appeal raised in , are reproduced below: i. The order passed by the CIT (A) is erroneous and contradictory both on facts and in law and required to be set aside on this ground itself. ii. The order passed by the CIT (A) as the successor in office to his predecessor (who had heard the appeal partly) without giving any fresh opportunity of being heard, to the appellant, is not only violative of the principles of natural justice but a nullity in law and deserves to be set aside on these grounds.
2 iii. The CIT (A) in fact did not hear the appeal but merely recorded the attendance of the company's employee who was neither competent to argue the appeal and nor authorized to do so alongwith the name of the counsel who in fact never appeared in the matter as would be apparent from the order sheet of the proceedings before the successor CIT (A). iv. Without prejudice to the preceding grounds which are independent of each other the CIT (A) erred in disposing off the numerous grounds in the appeal in a casual manner without even referring to the detailed written submissions and statement of facts filed before his predecessor. The order deserves to be set aside on these grounds. v. The CIT (A) erred both on facts and in law in upholding the action of the AO in denying to the assessee the benefit of exemption u/s 11 of the IT. Act, 1961 on grounds which are patently erroneous in law and violative of the 'principles of consistency' since said exemption has been allowed to it in past assessment years on the same set of facts and the position of law remains unchanged. vi. The CIT (A) while denying exemption u/s 11 failed to appreciate that the business of 'Hamdard Dawakhana' was irrevocably dedicated to charity and the principal predominant and primary object was genuine charitable activity and the commercial activity carried on by the appellant was merely a means to effectuate the charitable object. vii. That the CIT (A) like the AO erred in relying on the order passed by the Director General (E) whereby he withdrew the notification granted to the appellant vi] s 10(23C)(iv) being aware of the fact that the said order had been quashed by the Delhi High Court to be made afresh. viii. That the claim for exemption u/s 11 has been rejected on non- existent and erroneous grounds whereas the appellant has complied with the requirements of section 11 to 13 and was entitled to the benefit of the said provision. ix. Without prejudice to the aforesaid grounds and without prejudice to the main argument that the assessee was entitled to the benefit of exemption u/s 11 both on facts and in law the CIT (A) erred in disallowing depreciation on the assets purchased and put to use in the years prior to the assessment year under appeal. x. The CIT(A) further erred in upholding the action of the AO in bringing to tax a sum of Rs.3,87,454/- on account of deletions in the fixed assets during the year under consideration. xi. Without prejudice to the main ground that the assessee was entitled to the exemption u/s 11 the CIT (A) after rejecting the claim should have computed the income after considering various outgoings including the expenditure of Rs.1,98,17,621/- on the Okhla and Manesar Projects. xii. The CIT(A) further erred in confirming the action of the AO to bring to tax a sum of Rs. 45,12,97,947/- being the accumulation made out of the 3 incomes for the assessment years 2004-05, 2005-06 and 2006- 07. No part of these accumulations was taxable in the assessment year 2006-07. xiii. The CIT (A) has further erred in confirming the levy of interest u/s 234B, 244A and 234D to the tune of Rs. 17,73,69,651/ -, Rs.12,424/- and Rs. 72,229/- respectively. The assessee was not liable in law for any such levies. xiv. The appellant reserves to itself, the right to add, alter, amend, substitute, withdraw and/or any Ground(s) of Appeal at or before the date of hearing.
At the outset, the learned Authorized Representative brought to our notice the judgment of the Hon’ble High Court in Civil Writ Petition filed by the assessee against the impugned order of Commissioner of Income Tax (Appeals).
3. The facts in brief are that in the case of the assessee the exemption granted under Section 10(23C)(iv) of the Income-tax Act, 1961 (for short “the Act”) was withdrawn by the ld. Director General of Income Tax (Exemptions), New Delhi on 22.02.2012. Relying on this order, learned Assessing Officer withdrawn the exemption granted under Section 11 of the Act in respect of the assessment years 2006-07 to 2009-10. Aggrieved against the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). Simultaneously, the assessee challenged the order dated 22.02.2012 of the ld. Director General of Income Tax (Exemption) before the Hon’ble High Court in Writ Petition (Civil) bearing WP(C) No. 3598/2010. The said writ petition was allowed by the Hon’ble Court on 11.04.2013 remanding the matter back to the ld. Director General of Income Tax (Exemptions) to decide the issue afresh. The ld. Director General of Income Tax (Exemptions) vide his order dated 21.08.2013, again held that the assessee was not entitled to 4 exemptions under the said provisions and withdrew the exemptions w.e.f. the assessment year 2004-05. Just before withdrawing the exemptions by the ld. Director General of Income Tax (Exemptions), the learned Commissioner of Income Tax (Appeals) also decided all the four appeals filed by the assessee in respect of assessment years 2006-07 to 2009-10 on 10.07.2013, confirming the actions of the ld. Assessing Officer. Aggrieved, the assessee is in appeal before us in respect of all the four assessment years. Simultaneously, the assessee also filed writ petition bearing WP(C) No. 3599/2012 before the Hon’ble High Court seeking to quash the order of the ld. Director General of Income Tax (Exemptions) withdrawing the exemptions under Section 10(23C)(vi) of the Act as well as to quash the order of the learned Commissioner of Income Tax (Appeals) i.e. the impugned orders for the assessment years 2006-07 to 2009-10.
The Hon’ble High Court has decided all the Writ Petitions and quashed the order of the ld. Director General of Income Tax (Exemptions) and the order of the ld. Commissioner of Income Tax (Appeals). The relevant findings of the Hon’ble High Court are as under:
“108. The CIT(A) through separate but identical orders dated 10.07.2013 for AY 2006-07 to AY 2009-10 dismissed Hamdard‟s appeal against the AO‟s orders denying exemption under Section 11 of the Act. Hamdard contends that the CIT(A) passed the said orders dated 10.07.2013 without providing an opportunity of oral hearing to Hamdard. It is contended that the CIT(A) has passed the order without taking into consideration its submissions. The Revenue, on the other hand, defends the impugned orders on the ground that the CIT(A)‟s predecessor had given several opportunities of hearing to Hamdard, and that the case was heard on 08.07.2013 by the CIT(A) who passed the impugned orders.
5 109. This Court holds that the second Respondent, acting as the CIT(A), has passed the impugned orders dated 10.07.2013 in violation of the principles of the natural justice, without having given Hamdard an opportunity of presenting its case and having failed to consider Hamdard‟s written submissions in the impugned orders. The Supreme Court in G. Nageswara Rao (supra) held in unequivocal terms and dismissed the notion that an authority that decides a dispute may be different from the one that heard the same. The material on record establishes that the CIT(A), the second Respondent in the four writ petitions herein, assumed charge on 28.06.2013 and the submissions by Hamdard were made prior to the said date before the second Respondent‟s predecessor. There is no dispute regarding the fact that second Respondent did not hear the matter on 28.06.2013. As regards the scheduled hearing on 08.07.2013, Hamdard contends that no such hearing took place on the said date whereas the second Respondent contends that Hamdard‟s counsel - Mr. R.M. Mehta - made W.P.(C) 3599/12, 5715/13, 5716/13, 5718/13, 5729/13 & 5711/13 Page 73 submissions on that date. Hamdard has placed on record letters dated 19.07.2013 and 04.09.2013 wherein the second Respondent was urged to clarify that Hamdard‟s counsel did not appear before the second Respondent on 08.07.2013. Further, a perusal of the impugned orders dated 10.07.2013 would indicate that the second Respondent has omitted to consider Hamdard‟s submissions filed before the second Respondent‟s predecessor on 04.03.2013 and 06.05.2013. Indeed, this Court‟s order dated 11.04.2012 in W.P.(C) 3598 of 2012, whereby it set aside the order of withdrawal of Hamdard‟s exemption under Section 10 (23C)(iv) dated 22.02.2012, does not even find mention in the four impugned orders, notwithstanding that this fact was highlighted by Hamdard in its written submissions dated 06.05.2013. The case law cited by Hamdard in its written submissions of the said date also do not find any mention in the impugned orders. This Court cannot go into the propriety of Hamdard‟s submission that the second Respondent got orders dated 28.06.2013 and 08.07.2013 signed by Hamdard‟s representative on a false pretext. However, the other facts discussed above are sufficient to establish that the second Respondent violated principles of natural justice in passing the impugned orders. Even on merits, it is apparent that the ground for denial of exemption underSection 11 is that Hamdard is not engaged in charitable activities within the meaning of Section 2(15) of the Act. The CIT(A) held in this regard as follows: "4.9 I have considered the order of the AO and the submissions of the assessee and I do not find any merit in the submissions of the assessee. There is no dispute and it is in fact admitted by the assessee that the assessee is engaged in business activities of manufacturing and sale of Hamdard medicines. The assessee W.P.(C) 3599/12, 5715/13, 5716/13, 5718/13, 5729/13 & 5711/13 Page 74 itself is wholly and solely engaged in business activity and the assessee by itself is not engaged in any 6 charitable activity except the donations made to HNF, which the assessee considers as a charitable organization. But it is seen that even the activities of HNF is not charitable as no free treatment or free medicines are distributed to the poor. The exemption u/s. 11 is available when the assessee is engaged in charitable activities, but in the present case it is an admitted fact that the assessee is engaged in business and is not directly involved in any charitable activity as provided u/s. 2(15). After considering all the facts and circumstances of the case, I am of the view that the assessee is not a charitable organization as provided u/s. 2(15) and as such assessee is eligible for exemption u/s. 11 and accordingly, the action of the AO in denying the exemption u/s.11 is confirmed."
The charitable status of Hamdard under Section 2(15) has been affirmed in W.P.(C) 5711 of 2013 above. For this reason as well, the impugned orders dated 10.07.2013 concerning AYs 2006-07 to 2009-10 are set aside.
As we find from the above that the impugned orders of the learned Commissioner of Income Tax(Appeals) has already been set aside therefore all these appeals filed by the assessee do not survive and become infractuous and hence, are dismissed accordingly.
In the result, all the four appeals filed by the assessee are dismissed. The decision is pronounced in the open court on 18th December, 2015.