2009 (10) TMI 9 - HC - Income Tax

High Court upholds dismissal of writ petition challenging tax exemption denial for educational trust.

The High Court dismissed the writ petition challenging the rejection of exemption under Section 10 (23-C) (vi) of the Income Tax Act for a charitable ... Exemption u/s 10(23-C) – rejection of – place of service of notice – opportunity of being heard – Petitioner in the writ petition as well as in rejoinder affidavit has tried to contend that notice was served on the petitioners. It has been reiterated that the petitioners have got its head office at Lcuknow and the petitioner is assessed at Lucknow, as such there was no occasion for serving notice at Bareilly. Petitioner in the writ petition as well as in rejoinder affidavit has tried to contend that notice was served on the petitioners. It has been reiterated that the petitioners have got its head office at Lcuknow and the petitioner is assessed at Lucknow, as such there was no occasion for serving notice at Bareilly. - held that - as such liberty is given to the petitioner to approach the CCIT ventilating its grievances. Issues:1. Validity of decision rejecting exemption under Section 10 (23-C) (vi) of the Income Tax Act.2. Adequacy of opportunity of hearing provided to the petitioner.3. Justification of decision taken by the Prescribed Authority.4. Service of notice and compliance with procedural requirements.Analysis:1. Validity of Decision on Exemption:The petitioner, a registered educational charitable trust, sought exemption under Section 10 (23-C) (vi) of the Income Tax Act for its educational institutions. The Prescribed Authority rejected the application citing non-compliance with essential requirements. The petitioner contended that the rejection was without adequate hearing and breached principles of natural justice. The respondent argued that ample opportunity was provided, but the petitioner did not avail it deliberately. The High Court observed that the petitioner should have substantiated their case before the authority instead of rushing to court. The Court dismissed the writ petition but granted liberty to the petitioner to approach the Chief Commissioner with grievances, considering the sufficiency of cause for non-appearance.2. Adequacy of Opportunity of Hearing:The Prescribed Authority fixed a hearing date after issuing a notice to the petitioner. The petitioner disputed the adequacy of the opportunity provided, claiming that notices were not properly served and the service through courier was invalid. The Court noted that the petitioner should have informed the authority of their non-appearance reasons instead of directly approaching the court. The Court emphasized the importance of proper communication between the parties and granted the petitioner an opportunity to address their grievances before the Chief Commissioner.3. Justification of Decision by Prescribed Authority:The Prescribed Authority rejected the exemption application due to non-satisfaction of essential requirements under Section 10 (23-C) (vi) of the Income Tax Act. The Authority provided an opportunity for a hearing, but the petitioner did not appear to satisfy the queries. The Court acknowledged the contentions from both sides regarding the hearing process. The judgment highlighted the need for parties to engage in a meaningful dialogue to address concerns before resorting to legal action.4. Service of Notice and Compliance:The petitioner disputed the service of notices, arguing that they were not properly served and the time provided was insufficient. The Court examined the service details mentioned in the counter affidavit, which indicated attempts to serve notices at different locations. The judgment emphasized the importance of proper service and communication between the parties. The Court directed the petitioner to approach the Chief Commissioner with their grievances, ensuring compliance with procedural requirements and the principles of natural justice.In conclusion, the High Court's judgment addressed the issues of validity of decision, adequacy of hearing opportunity, justification of decision by the Prescribed Authority, and service of notice, emphasizing the importance of proper communication, compliance with procedural requirements, and adherence to principles of natural justice in such matters.