2011 (11) TMI 815 - HC - Income Tax

Summary

Issues involved: Rejection of renewal/approval of certificate u/s 35(1)(ii) of the Income Tax Act, 1961 based on failure to maintain separate account books, late submission of documents, and absence of certificate from a Chartered Accountant.

Issue 1: Rejection of renewal/approval of certificate u/s 35(1)(ii) based on failure to maintain separate account books:

The petitioner argued that the rejection was without jurisdiction as it was not passed by the Central Government, citing a previous judgment. The respondents supported the impugned order, stating that the approval of the Finance Minister indicated the validity of the decision. The impugned order dated 22.10.2010 was found to be signed by the Director (ITAII) and not by the Finance Minister, leading to the conclusion that the order lacked proper authority. The Court directed respondent no.1 to pass fresh orders within three months, emphasizing the need for a decision by the Central Government or its authorized officer u/s 35(1) of the Income Tax Act, 1961.

Issue 2: Rejection of renewal/approval of certificate u/s 35(1)(ii) based on late submission of documents:

The respondents argued that the rejection was justified as the conditions of eligibility were not met and were expressly breached. They contended that the findings of fact in the impugned order supported the decision to reject the application for renewal. However, the Court found that the order lacked proper authorization and quashed the decision made by the Director (ITAII) on 22.10.2010.

Issue 3: Rejection of renewal/approval of certificate u/s 35(1)(ii) based on absence of certificate from a Chartered Accountant:

The communication dated 17th October, 2011 highlighted the procedure followed by the CBDT, indicating that the Finance Minister's approval was necessary for the final decision. While the respondents argued that the Finance Minister's approval validated the impugned order, the Court emphasized that the order was not passed by the Finance Minister but by the Director (ITAII). The Court concluded that the impugned order lacked proper authorization and directed respondent no.1 to issue fresh orders within three months.

Conclusion:

The High Court quashed the impugned order dated 22.10.2010 passed by the Director (ITAII) and directed respondent no.1 to pass fresh orders within three months, ensuring that the decision is made by the Central Government or its authorized officer as per Section 35(1) of the Income Tax Act, 1961. All other contentions and questions were left open, and no costs were awarded in the case.