2018 (4) TMI 138 - HC - Income Tax

Grant of approval u/s 10(23C)(iv) - application before the wrong authority - Held that - We have no reason to reject the plea of the petitioner that inadvertently the application was filed before respondent No. 4. When the petitioner filed the application before the wrong authority the same should have been returned. As noted hereinbefore instead of returning the petitioner s application an enquiry was held and additional material was sought for obviously making the petitioner to believe that its application is pending consideration. Therefore the blame is equally apportionable to both parties. If the petitioner is entitled to exemption on merits it would be iniquitous to deny consideration of its application merely because it was not addressed to the correct authority. Therefore we are of the opinion that it would be in the fitness of things if application dated September 30 2015 filed by the petitioner is treated as the one filed before the competent authority i.e. respondent No. 1. Accordingly respondent No. 4 is directed to forward the application filed by the petitioner for exemption in form 56 along with the enclosures to respondent No. 1 within two weeks from the date of receipt of a copy of this order. Within two months thereafter respondent No. 1 shall hold an enquiry pass an appropriate order and communicate the same to the petitioner.

Summary

Issues:
1. Mandamus to set aside order of the Commissioner of Income-tax (Exemptions) and grant approval under section 10(23C)(iv) of the Income-tax Act, 1961.
2. Consideration of application for exemption under section 10(23C)(iv) of the Act by the competent authority.
3. Allegation of incorrect filing of application and subsequent rejection by respondent No. 1.

Analysis:
1. The writ petition sought a mandamus to set aside the order of the Commissioner of Income-tax (Exemptions) and grant approval under section 10(23C)(iv) of the Income-tax Act, 1961. The petitioner, a newly constituted Board, applied for exemption similar to its predecessor, APPCB. The application was filed on September 30, 2015, and subsequent delays led to the petitioner's plea for deemed approval due to non-rejection within the stipulated time frame. However, respondent No. 1 rejected the application on March 7, 2017, citing procedural issues. The High Court directed the application to be treated as filed before the competent authority, i.e., respondent No. 1, emphasizing equitable consideration despite the incorrect filing.

2. The High Court noted that although respondent No. 1 was the competent authority to receive applications for exemption, the petitioner inadvertently filed the application before respondent No. 4. Despite this error, respondent No. 4 did not return the application promptly but initiated an enquiry and requested additional documents, leading the petitioner to believe its application was under consideration. The Court found fault on both sides and deemed it unfair to deny consideration based solely on the incorrect filing. Consequently, the Court directed respondent No. 4 to forward the application to respondent No. 1 for proper evaluation and decision within a specified timeframe.

3. The judgment highlighted that there was no evidence of deliberate malintent in filing the application before the wrong authority by the petitioner. The Court emphasized the need for procedural fairness and equitable treatment, especially when the merits of the exemption claim were not in question. By directing the correct authority to consider the application, the Court aimed to rectify the procedural misstep without penalizing the petitioner for the inadvertent error. The judgment balanced the interests of both parties and emphasized the importance of fair administrative processes in matters of tax exemptions under the Income-tax Act, 1961.