Exemption u/s 11 & 12 of Income Tax Act Denied Without Prior Notice through Portal: Karnataka HC Suspends Recovery [Read Order]

The High Court of Karnataka has suspended the recovery of demand till the disposal of the appeal finding that the denial of exemption under Sections 11 and 12 of the Income Tax Act, 1961 was done without uploading prior notice to the assessee through the online portal.

The petitioner assessee M/S. Rajya Vokkaligara Sangha, represented by Sri Annamalai S has sought for issuance of a writ in the nature of mandamus or appropriate direction to modify the order granting stay whereby the authority in its order while considering the request for grant of stay, has directed the assessee to pay an amount of 20% of the demand and accordingly, has granted a conditional order of stay of the demand.

The petitioner contended that the denial of exemption is done without a proper application of mind and without considering the detailed response submitted by the petitioner. The petitioner also highlighted that the issue had been favorably resolved in previous proceedings related to the assessment year 2016-17.

The petitioner challenged the denial of exemption under Sections 11 and 12 of the Income Tax Act, 1961 as being carried out without any prior notice being uploaded on the portal.

The respondents, the Commissioner of Income Tax (Exemptions) and the Assistant Commissioner of Income Tax (Exemptions), Bengaluru represented by Sri. E. I. Sanmanthi submitted that at the most, the order requires to be set aside and the matter be remanded for consideration in accordance with the applicable requirements.

The bench observed that there is absence of proper reasoning in the stay order and acknowledged that the appeal had been pending since January 2019.

The single bench of Justice S Sunil Dutt Yadav directed the respondents not to take any precipitative steps to recover the demand until the appeal is disposed of by the First Appellate Authority. The bench also instructed the authority to expedite the appeal hearing process.

Accordingly, the petition is disposed of and the order is set aside subject to the observations made.

To Read the full text of the Order CLICK HERE

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