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2019 (10) TMI 976 - AT - Income TaxApproval granted u/s 10(23C)(vi) cancelled - funds have not been utilized for the purpose of the trust as required u/s 10(23C)(vi) - The scheme of forgery and manipulation of bank accounts and diversion of funds according to him proves beyond doubt the intention of Shri Sanjay Bansal to misuse the exemption granted u/s 10(23C)(vi) - competent authority i.e., the prescribed authority to cancel the approval granted - HELD THAT - We donot find merit in assessee's objection that since the approval was granted earlier by the CCIT, Dehradun therefore, he is the competent authority to cancel the approval granted earlier and, therefore, DGIT (Inv.) has no authority to issue the show cause notice and, thereafter cancel the registration in view of the Notification No.20/2015 dated 5th March, 2015 Second objection that the show cause notice dated 22.11.2013 was issued by the Joint Director of Income-tax as the same has to be issued by the prescribed authority at the relevant time. Here also we do not find any merit in the argument of the ld. counsel. A perusal of the show cause notice dated 22.11.2013 shows that the Joint Director of Income-tax (Inv.) (Hqrs.) has signed the notice on behalf of the Director General of Income-tax (Inv.), Lucknow. The letter was issued from the office of the Director General of Income-tax (Inv.) and not from the office of the Joint Director of Income-tax (Inv.). Therefore, the second objection of the ld. counsel also is without any merit and the same is rejected. Third objection of that the ld. Director General of Income-tax (Inv.) could not have withdrawn the approval granted u/s 10(23C)(vi) of the IT Act with retrospective effect from assessment year 2007-08 onwards on the basis of order dated 26th March, 2015 finds no merit. The order passed by the DGIT (Inv.) is based on the numerous incriminating documents found and seized during the course of search and post search enquiries which establishes various forged documents, the manipulation of the bank accounts and the diversion of funds for personal purposes which proves beyond doubt that the trustees were misusing the benefit of exemption granted u/s 10(23C)(vi) of the IT Act. Therefore, the argument of the ld. counsel on this issue is also without any merit and accordingly the same is dismissed. So far as the argument of the ld. counsel that the Director General of Income-tax (Inv.) has passed an ex parte order without giving any proper and reasonable opportunity of presenting its case and on being heard is concerned, we find from the order of the DGIT (Inv.) that he had given number of opportunities to the assessee, however, the assessee has not availed of those opportunities. Since various incriminating documents found during the course of search and evidence gathered during post search enquiries give details of siphoning of funds by the assessee, manipulation and forgery of documents, etc., the same needs to be answered by the assessee. No doubt despite repeated opportunities granted by the DGIT (Inv.), vide letters dated 03.01.2014, 31.01.2014 and 08.07.2014, the assessee has failed to avail the opportunities granted to him. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of DGIT (Inv.) with a direction to give one final opportunity to the assessee to substantiate its case by filing the requisite details. The assessee is hereby directed to appear before the DGIT (Inv.) without seeking any adjournment under any pretext, failing which the DGIT (E) shall pass appropriate order as per law. Needless to say, the ld. DGIT (E) shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. Appeal filed by the assessee is partly allowed for statistical purposes.
Issues Involved:
1. Validity of the show cause notice issued by the Joint Director of Income-tax (Investigation). 2. Jurisdiction of the Director General of Income-tax (Investigation) to cancel the approval granted under section 10(23C)(vi) of the Income Tax Act. 3. Retrospective effect of the cancellation of approval under section 10(23C)(vi). 4. Alleged violation of principles of natural justice by passing an ex parte order. 5. Merits of the case regarding the utilization of funds and compliance with conditions for exemption under section 10(23C)(vi). Detailed Analysis: 1. Validity of the Show Cause Notice: The assessee argued that the show cause notice issued by the Joint Director of Income-tax (Investigation) was invalid as it should have been issued by the prescribed authority. The Tribunal rejected this argument, noting that the notice was issued from the office of the Director General of Income-tax (Investigation) and signed on behalf of the Director General, thus maintaining its validity. 2. Jurisdiction of the Director General of Income-tax (Investigation): The assessee contended that the Director General of Income-tax (Investigation) lacked the authority to cancel the approval granted under section 10(23C)(vi), asserting that only the Chief Commissioner of Income-tax, who initially granted the approval, had such authority. The Tribunal dismissed this argument by referencing Notification No. 20/2015 dated 5th March 2015, which designated the Director General of Income-tax (Investigation) as the competent authority for such matters. 3. Retrospective Effect of the Cancellation: The assessee challenged the retrospective cancellation of approval from the assessment year 2007-08 onwards, arguing that the Director General of Income-tax (Investigation) had overstepped his authority. The Tribunal found no merit in this argument, stating that the cancellation was based on substantial evidence of forgery, manipulation, and diversion of funds for personal use, which justified the retrospective application. 4. Violation of Principles of Natural Justice: The assessee claimed that the order was passed ex parte without adequate opportunity to present its case. The Tribunal acknowledged that multiple opportunities were provided to the assessee, which were not availed. However, to ensure justice, the Tribunal remanded the case back to the Director General of Income-tax (Investigation) for one final opportunity for the assessee to present its case, with a strict directive to the assessee to comply without seeking adjournments. 5. Merits of the Case: The Director General of Income-tax (Investigation) based the cancellation on evidence gathered during search and post-search inquiries, which indicated that the society’s activities did not comply with the conditions for exemption under section 10(23C)(vi). The Tribunal noted that the assessee failed to provide any justification or evidence to counter the findings of irregularities, bogus transactions, and diversion of funds. The Tribunal directed the assessee to substantiate its case before the Director General of Income-tax (Investigation) with proper evidence. Conclusion: The Tribunal partly allowed the appeal for statistical purposes, emphasizing the need for the assessee to present its case with relevant details before the Director General of Income-tax (Investigation). The Tribunal upheld the validity of the show cause notice and the jurisdiction of the Director General of Income-tax (Investigation) while ensuring that the principles of natural justice were adhered to by granting the assessee one final opportunity to be heard.
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