2020 (4) TMI 266 - HC - Income Tax

Revision of order u/s 264 - CIT rejected the review application - Best judgment assessment passed ex parte - Exemption u/s 11 denied - petitioner not entitled to exemption being a Religious and Charitable Institution - only ground for rejection of the review is that the petitioner did not respond to the notices issued u/s 142 - HELD THAT - Writ petition is bereft of material. The Officers vested with an obligation to discharge judicial functions are legitimately expected to resort to application of mind in a pragmatic and reasonable manner which is conspicuously absent in the instant case. For that reason, the impugned order Ext.P6 is set aside. The matter is remitted to the Commissioner of Income-tax (Exemption), Kochi to consider the revision petition afresh after affording an opportunity of hearing to the petitioner.

Issues:
1. Rejection of review petition under Section 264 of the Income Tax Act, 1961.
2. Denial of exemption under Section 11 for a Religious and Charitable institution.
3. Lack of cogent reasons in the impugned order.
4. Failure to respond to notices issued under Section 142(1) of the Act.

Analysis:

1. The petitioner challenged the order rejecting the review petition under Section 264 of the Income Tax Act, claiming to be a Religious and Charitable institution seeking exemption under Section 11. The assessment was completed under Section 144, resulting in a substantial tax liability. The petitioner contended that no effective opportunity was provided to claim exemption under Section 12A, leading to an ex parte assessment. The High Court observed that the impugned order lacked reasons for denying the exemption and merely cited the petitioner's failure to respond to notices as the basis for rejection.

2. The core issue revolved around the denial of exemption under Section 11 for the Religious and Charitable institution. The court noted that the impugned order failed to provide cogent reasons for disallowing the exemption. The petitioner's contention of not being granted a fair opportunity to present their case regarding the exemption under Section 12A was upheld. The court emphasized the importance of proper reasoning and application of mind by the Assessing Officer in such cases.

3. The lack of cogent reasons in the impugned order was a significant concern raised by the petitioner. The court agreed that the order lacked substantive reasoning for denying the exemption and merely cited the petitioner's failure to respond to notices as the sole ground for rejection. This lack of detailed analysis and reasoning was deemed insufficient for a valid rejection of the review petition.

4. Another crucial issue was the failure to respond to notices issued under Section 142(1) of the Act. While the Income-tax Department supported the impugned orders on this basis, the court found that the petitioner not responding to the notices was not a sufficient ground to reject the review petition. The court emphasized the need for a fair opportunity to be provided to the petitioner, especially in cases involving exemptions for Religious and Charitable institutions.

In conclusion, the High Court set aside the impugned order and remitted the matter to the Commissioner of Income-tax (Exemption) for a fresh consideration, emphasizing the importance of providing a fair hearing and proper reasoning in such cases involving exemptions for Religious and Charitable institutions under the Income Tax Act.

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