GOVENDA BHAT, C. J.

( 1 ) THIS is an appeal brought on behalf of the Additional Commissioner of income-Tax, Karnataka, and the First Income Tax Officer, Mangalore Circle, mangalore, against the order made in WP. 597 of 1973 by Venkata- ramiah, J, by which the learned Judge allowed the writ petition filed by the respondent herein and directed the Commr of Income-Tax to dispose cf the proceedings initiated by him under S. 263 of the Income-Tax Act, 1961, hereinafter called 'the Act', in the light of the interpretation of S. 11 of the Act made in the said order.

( 2 ) THE relevant facts in brief are: Respondent A. L. N. Rao Charitable trust, Mangalore, is a Charitable Trust. For the assessment year 1969-70, the respondent, hereinafter referred to as 'the assessee', submitted its return to the First Income-Tax Officer, Mangalore Circle. In the said return, the assessee claimed that a sum of Rs. 85,262, which was the surplus income of the previous year, was exempt from tax under Sec. 11 (1) (a) and sub- sec (2) of the said section. On the Assessing Authority holding that the assessee is not a genuine Trust and therefore not entitled to claim the benefit of Section 11, the assessee preferred an appeal before the Appellate assistant Commissioner, which was dismissed. In the second appeal preferred by the assessee before the Income-Tax Appellate Tribunal, it was held tha,t the assessee was a Charitable Trust and therefore was entitled to claim exemption from tax under S. 11 of the Act In ITRC. 31 of 1973 which was a reference made at the instance of the Department, this Court by its judgment dt. 4-8-1975 answered the question referred in favour of the assessee and against the Dept. Therefore, that the assessee is a Charitable Trust entitled to claim the benefits of S. 11 is no longer in dispute.

( 3 ) THE Assessing Authority took up the assessment to pass an order in accordance with the judgment of the Tribunal and made an order on 21-1- 1972 by which it held that the assessee, after complying with the requirement of giving notice under S. 11 (2) (a), had invested 75 per cent of the accumulated income intended to be applied for charitable purposes in future years as required by Cl (b) of Sec. 11 (2) and therefore, the entire surplus income was exempt from tax.

( 4 ) THE Commr of Income-Tax, hereinafter referred to as 'the Commissioner' on looking into the order dt. 21-1-1972 passed by the Assessing authority, was of the view that the order of the Assessing Authority was erroneous as he had not applied his mind to the question whether the assessee had complied with the provisions of S. 11 (2) and that if he had applied his mind to the said provision, would have noticed that the assessee had not invested the entire surplus income, viz, Rs. 85,262 (but only rs. 70,975) and therefore the assessee was not entitled to the exemption provided under S. 11 of the Act. Thus, in the opinion of the Commr, the order of the Income-Tax Officer was erroneous inasmuch as it was prejudicial to the interests of the Revenue. He issued a show-cause notice under s. 263 of the Act on 18-1-1973 to the assessee to show-cause as to why the entire surplus income of Rs. 85,262 should not be brought to tax. The ossessee, on receipt of the said notice, approached this Court for relief under Arts. 226 and 227 of the Constitution and prayed for the issue of a writ in the nature of certiorari to quash the notice dt. 18-1-1973 issued by the Commr. In that writ petition (WP. 597 of 1973), Venkataramiah, J, made an order directing the Commr to dispose of the proceedings initiated under S. 263 in the light of his order as to the interpretation of S. 11 (1) (a) and Section 11 (2) of the Act.

( 5 ) BEFORE the learned single Judge, the contention of the Dept was that in order to claim exemption under S. 11, the assessee should have invested the entire surplus income in one or the other of the securities mentioned in S. 11 (2) (b) of the Act and it is not sufficient if 75 per

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