2019 (5) TMI 300 - HC - Income Tax

Withdrawal of approval granted u/s 10(23C)(vi) - violating the provisions of Section 10(23C) (vi) - show cause notice has to contain details of the allegations made against the noticee in order to effectively answer the notice - reasonable opportunity of being heard - principal of natural justice - HELD THAT - In MR.S.N. SINHA Vs. THE STATE OF KARNATAKA, BY ITS SECRETARY DEPARTMENT OF REVENUE AND OTHERS 2011 (12) TMI 721 - KARNATAKA HIGH COURT it is held that for a notice to be valid in law, should be clear and precise so as to give the party concerned adequate information of the case he has to meet. The adequacy of notice is a relative term and must be decided with reference to each case. The test of adequacy of notice will be whether it gives sufficient information so as to enable the person concerned to put up an effective defence. If a notice is vague or it contains unspecified or unintelligible allegations, it would imply a denial of proper opportunity of being heard. Natural Justice is not only a requirement of proper legal procedure but also a vital element of good administration. On a careful perusal of the notice issued by the Income Tax Department and the law laid down by the Hon ble Apex Court and this Court in GORKHA SECURITY SERVICES VERSUS GOVT. OF NCT OF DELHI ORS. 2014 (8) TMI 1081 - SUPREME COURT MR.S.N. SINHA (supra), we are of the considered view, that the respondent-revenue has not given reasonable opportunity to the appellants to put forth their case effectively. In the circumstances, the notice dated 28.11.2017 is unsustainable in law - Appeals are allowed

Summary

Issues:
Withdrawal of approval under Section 10(23C)(vi) of the Income Tax Act, 1961 based on a raid conducted on an Educational Trust.
Validity of the show cause notice issued by the Income Tax Department.
Compliance with principles of natural justice in the issuance of the notice.

Detailed Analysis:
1. The judgment pertains to the withdrawal of approval under Section 10(23C)(vi) of the Income Tax Act, 1961, granted to an Educational Trust following a raid conducted by the Income Tax Department. The Trust was issued a notice on 28.11.2017, calling for a show cause as to why the approval should not be withdrawn due to alleged violations of the Act. The order withdrawing approval was challenged in the writ petitions, which were dismissed by the Hon'ble Single Judge, leading to the filing of writ appeals by the appellants.

2. The primary contention raised by the Senior Counsel for the appellants was regarding the adequacy of the show cause notice. It was argued that the notice lacked specific details of the allegations against the Trust, thereby hindering the effective response to the notice. The notice mainly highlighted the raid conducted, seizure of documents, and alleged misuse of Trust funds by the Trustees without providing further particulars.

3. In response, the counsel for the Revenue supported the impugned order, emphasizing that a significant number of documents were seized during the raid, and the Trustees were well aware of the alleged misconduct. The Revenue contended that the Trustees had provided a detailed reply through their Chartered Accountant, justifying the withdrawal of approval. They opposed any interference with the order passed by the Hon'ble Single Judge.

4. The High Court, after considering the arguments from both parties and examining the records, analyzed the content of the show cause notice issued by the Income Tax Department. Referring to legal precedents, including the case of GORKHA SECURITY SERVICES Vs. GOVT. OF NCT OF DELHI and MR.S.N. SINHA Vs. THE STATE OF KARNATAKA, the Court concluded that the notice failed to provide a reasonable opportunity for the appellants to present their case effectively. The Court held that the notice was unsustainable in law due to its lack of specificity and clarity regarding the alleged breaches and the proposed action.

5. Consequently, the High Court allowed the appeals, setting aside the notice dated 28.11.2017, the order dated 21.12.2017, and the impugned order of the Hon'ble Single Judge. The Court reserved liberty for the Revenue to issue a fresh show cause notice to the appellants within a specified timeframe, emphasizing the importance of providing clear particulars for the appellants to furnish their reply effectively. All contentions were left open, and ancillary matters were disposed of accordingly.