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2012 (7) TMI 561 - HC - Income TaxDenial to grant approval u/s 10(23C)(vi) - petitioner is a society registered under the Societies Registration Act - Held that - As the petitioner has been approved in the past for the purposes of Section 10(23C)(vi) and it has also been approved for the purposes of Section 80G and hitherto no fault has been found in the manner in which the books of accounts have been maintained and expenses and payments have been made. The registration under Section 12A continues to remain in force - the suspicious approach of the respondent towards the evidence adduced by the petitioner without noticing the crucial facts such as payment by cheques etc., it seems to us that the respondent was not justified in law in readily inferring that the petitioner manipulated and fabricated its books of accounts and vouchers and also debited personal, bogus and exaggerated expense - in favour of assessee.
Issues Involved:
1. Refusal to grant approval under Section 10(23C)(vi) of the Income Tax Act, 1961. 2. Treatment of the approval granted as non-est under Section 154 of the Income Tax Act, 1961. Detailed Analysis: 1. Refusal to Grant Approval under Section 10(23C)(vi): The petitioner, a society registered under the Societies Registration Act, 1860, engaged in imparting education, sought approval under Section 10(23C)(vi) of the Income Tax Act, 1961 for the assessment years 2008-09 to 2010-11. The Director General of Income Tax (Exemption), Delhi (DGIT(E)), the prescribed authority, refused the approval by order dated 29th July, 2009, citing serious irregularities, manipulations, and fabrications in the petitioner's books of accounts. The DGIT(E) identified four categories of payments deemed irregular: - Payments to Mahavir Video Studio for annual day celebrations. - Payments to M/s Beli Ram Chaman Lal Jain for silver articles for the Silver Jubilee Celebration. - Payments to Shankar Halwai for supplies during the annual day function. - Payments involving two identical sets of bills for the same amount. The DGIT(E) concluded that these payments were either unsubstantiated, forged, fabricated, or represented personal, bogus, or exaggerated expenses. Consequently, it was determined that the petitioner did not apply its income wholly and exclusively to its educational objectives. Upon review, it was noted that the petitioner had previously been granted exemptions under Section 10(23C)(vi) and Section 80G and was registered under Section 12A. The DGIT(E) had not provided evidence that the petitioner existed for profit-making purposes. The court examined whether the DGIT(E)'s conclusions about the petitioner's alleged manipulations were justified. Payments to Mahavir Video Studio: The DGIT(E) found discrepancies, such as an undated bill, which the petitioner explained was dated by them for identification purposes. The court found the DGIT(E)'s focus should have been on whether the payment was made, which was not disputed. The court agreed with the petitioner that the charge of fabrication was not justified. Payments to M/s Beli Ram Chaman Lal Jain: The DGIT(E) questioned the timing of the bills relative to the event date and inferred personal use of the silver articles. The court found this inference farfetched, noting that delayed billing is not uncommon. Payments to Shankar Halwai: The DGIT(E) alleged forgery and manipulation without substantial evidence. The court noted the petitioner's accounts were audited annually, and payments were made through cheques, which were not questioned by the DGIT(E). The court concluded that the DGIT(E) was not justified in inferring manipulation and fabrication of accounts and that the petitioner's income was not applied wholly and exclusively for education. The impugned order dated 29th July, 2009, was quashed, and the DGIT(E) was directed to reconsider the application afresh, granting the petitioner an effective hearing. 2. Treatment of Approval as Non-Est under Section 154: WP(C) No.5113/2010 challenged the DGIT(E)'s order dated 8th May, 2010, which treated the approval granted on 19th March, 2010, as non-est under Section 154 of the Act. Since the court quashed the initial refusal order dated 29th July, 2009, the subsequent order under Section 154 was also quashed. Conclusion: The writ petitions were allowed, quashing both the impugned orders with no order as to costs. The DGIT(E) was instructed to pass fresh orders in accordance with the law after reconsidering the petitioner's application.
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