2019 (10) TMI 705 - AT - Income Tax

Approval u/s 10(23C)(vi) - educational institution - CIT(E) observed that assessee was not eligible for approval since it did not satisfy the conditions necessary for grant of approval being existing solely for education and not earning profits AND assessee had rented property from related parties thus attracting the provisions of section 13(1)(c) of the Act and on that certain information and submissions called for as being necessary for the grant of approval, were not filed by the assessee - HELD THAT - A perusal of the order reveals that the Ld.CIT(E) has not carried out any investigation into the matter which are relevant for the grant of approval u/s 10(23C)(vi) - As pointed out by the CIT(E) himself in para 4 of the order, that for the purpose of grant of approval under the said section, the applicant needs to specify that it exists solely for educational purposes and not for the purpose of profit. From the entire order of the CIT(E) we find that there is no examination on the aspect of existence of the assessee for imparting education. There are no findings as to how the school was established by the society. Whether affiliation was granted to the school by any Board of Education, if so, the number of students being taught in the school and teachers therein, their qualifications and such other aspects to completely bring out the fact of the society existing solely for the purpose of education. We find that even the assessee has not brought out these facts in the letters submitted to the CIT(E). Restore the issue back to the CIT(E) for considering the approval afresh. The same was confronted to both the counsels who did not object to the same. - Appeal of the assessee stands allowed for statistical purposes.

Summary

Issues:
1. Condonation of delay in filing appeal against denial of approval u/s 10(23C)(vi) of the Income Tax Act.
2. Denial of approval u/s 10(23C)(vi) based on existence solely for education and not for profit.
3. Discrepancies in documents submitted by the assessee.
4. Lack of confrontation of adverse findings to the assessee.
5. Restoration of the issue back to the CIT(E) for fresh consideration.

Analysis:
1. The appeal was time-barred by one day, and the assessee sought condonation of the delay due to delayed postal delivery. The delay was condoned considering the reasonableness and shortness of the delay, allowing the appeal to proceed.

2. The denial of approval u/s 10(23C)(vi) was based on the finding that the assessee did not satisfy the conditions for approval, as it was not existing solely for education and was generating surplus beyond reasonable limits. The CIT(E) also noted discrepancies in financial statements and intermingling of entities, leading to the rejection of approval.

3. The CIT(E) found discrepancies in the documents submitted by the assessee, including mismatched names in registration certificates, by-laws, and financial reports. This raised concerns about the genuineness of the activities and the eligibility for approval under the specified section.

4. The assessee contended that adverse findings were not properly confronted, and there was a denial of a fair opportunity for a hearing. The CIT(E) did not investigate crucial aspects related to the existence of the society solely for educational purposes, affiliation details, student-teacher ratios, and establishment history, which were essential for approval consideration.

5. The Tribunal decided to restore the issue back to the CIT(E) for fresh consideration, emphasizing the need for a comprehensive review, adequate opportunity for the assessee to present its case, and a thorough examination of all relevant aspects before making a decision. The appeal was allowed for statistical purposes, and the matter was remanded for further assessment.

This detailed analysis encapsulates the key issues, arguments presented, findings by the CIT(E), discrepancies noted, and the Tribunal's decision to remand the case for a fresh review, ensuring a fair opportunity for the assessee to address the concerns raised during the initial denial of approval.