2011 (2) TMI 315 - AT - Income Tax

Renewal of approval u/s 80G - As per the proviso attached to the section 293C of the Act it is crystal clear that even if any Income-tax Authority wants to withdraw approval he shall issue a show cause notice against the proposed withdrawal to the assessee concerned and after giving a reasonable opportunity of being heard shall withdraw approval after recording reasons for doing so - Held that - the ld. Commissioner of Income-tax was not justified in withdrawing approval once granted because the Legislature in all its wisdom has sought to omit this proviso to section 80G(5)(vi) of the Act and after omission of the said proviso the approval once granted shall continue to be valid in perpetuity unless and until a show cause notice is issued by the concerned CIT showing his intention to withdraw already granted such approval - However the CIT without issuing any such notice has withdrawn approval - Therefore set aside the impugned order of the ld. Commissioner of Income-tax and accordingly approval under section 80G(5) of the Act already granted to the assessee shall continue unless and until the concerned authority takes appropriate action in accordance with law - Decided in favour of assessee.

Issues Involved:
1. Rejection of the claim for renewal under section 80G(5) of the I.T. Act, 1961.
2. Refusal of renewal under section 80G(5) despite the registration under section 12A not being canceled.
3. Lack of opportunity to the appellant Trust to present its case.
4. Rejection of renewal despite submission of audited accounts and supporting documents.
5. Ignorance of the charitable nature and public utility of the Trust's activities.

Detailed Analysis:

Issue I: Rejection of the Claim for Renewal under Section 80G(5)
The appellant Trust's claim for renewal under section 80G(5) was rejected by the CIT-I, Lucknow. The Trust argued that the proviso to section 80G(5)(vi) had been omitted effective from 1-10-2009, implying that no fresh approval was required and that the existing approval was valid for life. The Tribunal found that the amendment to section 80G(5)(vi) indeed allowed for perpetual validity of approvals granted after 1-10-2009, thus the order rejecting the renewal was not sustainable.

Issue II: Refusal of Renewal Despite Registration under Section 12A Not Being Canceled
The appellant contended that since the registration under section 12A was not canceled, the renewal under section 80G(5) could not be justifiably rejected. The Tribunal noted that the Trust had been granted approval under section 80G(5)(vi) previously and that the renewal should have been automatic under the new amendment, thus supporting the appellant's position.

Issue III: Lack of Opportunity to Present the Case
The Trust argued that the CIT did not afford it an opportunity to present its case or comply with the reasons for rejection. The Tribunal highlighted that the CIT failed to issue a show cause notice as required under section 293C, which mandates a reasonable opportunity for the assessee to respond before any withdrawal of approval. This procedural lapse invalidated the CIT's rejection.

Issue IV: Rejection Despite Submission of Audited Accounts and Supporting Documents
The appellant provided copies of audited accounts, the registered Trust Deed, and other supporting documents. The CIT ignored these submissions and held that there was no evidence of genuine charitable activities. The Tribunal found that the CIT's decision was not justified as the documents provided were sufficient to prove the Trust's existence and genuineness.

Issue V: Ignorance of Charitable Nature and Public Utility
The Trust's activities were charitable and for public utility, not for profit. The CIT's rejection overlooked this aspect. The Tribunal emphasized that the charitable nature of the Trust's activities was evident from the records and that the CIT's decision was not justified.

Conclusion:
The Tribunal concluded that the CIT was not justified in rejecting the renewal of approval under section 80G(5) without issuing a show cause notice as required by section 293C. The approval once granted should continue in perpetuity unless specifically withdrawn following due process. The Tribunal set aside the CIT's order and allowed the appeal, ensuring that the approval under section 80G(5) would continue unless appropriate legal action was taken.

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