2012 (7) TMI 125 - AT - Income Tax

Refusal to grant approval u/s 80G(5)(vi) - scope of enquiry by Commissioner while dealing with an application under section 80G(5)(vi) - the assessee trust/institution runs an educational institution and enjoyed continuous registration u/s. 12AA - Held that - On examination of objects of the assessee institution, the same were prima facie appeared to be charitable in nature. Therefore, according to Rule 11AA of the IT Rules, the assessee complied with the requirements for extension of the approval. All inquiries have been conducted by the ITO (Tech.) - Held that - Order sheet written by ITO (Tech.) was not approved by former CIT or officiating CIT who passed the order denying grant of approval. Thus, there was no reason to believe that any of the Commissioners, above, have called for any documents or information from the assessee institution in order to satisfy themselves about the genuineness of the activities of the assessee institution or the funds as desired under the Rule 11AA . The impugned order is passed by CIT, Aligarh without giving any opportunity of being heard to the assessee and the impugned order was also passed beyond the period of 6 months from the date of filing of application - These facts would clearly prove that enquiries were done by the ITO (Tech.) without any authority of law as genuineness of the activities of the assessee and give opportunity of being heard to the assessee institution, cannot be delegated to the ITO (Tech.) - that the impugned order is passed in most mechanical manner without complying with the provisions of law, thus grant of renewal of approval u/s. 80G(5)(vi)is warranted - decided against revenue.

Summary

Issues Involved:
1. Rejection of application for approval under Section 80G of the Income-tax Act, 1961.
2. Deemed approval under Section 80G due to delay in passing the order.
3. Continuation of registration under Section 12A of the Income-tax Act, 1961.
4. Principles of natural justice and equity in the impugned order.
5. Jurisdiction and procedural lapses in the issuance of the order.

Detailed Analysis:

1. Rejection of Application for Approval under Section 80G:
The appellant's application for approval under Section 80G(5)(vi) of the Income-tax Act, 1961, was rejected by the Commissioner of Income Tax (CIT), Aligarh. The CIT found that the trust was primarily engaged in supporting its offshoots, R.K. Hospital and R.K. Medical Store, which operated on commercial lines. Consequently, the CIT concluded that the trust did not fulfill the conditions for approval under Section 80G.

2. Deemed Approval under Section 80G Due to Delay:
The appellant argued that the approval under Section 80G should be deemed granted as the application was submitted on 23.03.2010, and the order was passed on 28.09.2010, exceeding the six-month period prescribed under Rule 11AA(6) of the IT Rules. The tribunal agreed, noting that the CIT's order was passed beyond the six-month period and thus violated the time limit.

3. Continuation of Registration under Section 12A:
The appellant highlighted that the trust was continuously registered under Section 12AA of the Income-tax Act, 1961, which implies that the trust was recognized for its charitable activities. The tribunal observed that the trust enjoyed continuous registration under Section 12AA and had complied with the provisions of Section 80G(5).

4. Principles of Natural Justice and Equity:
The appellant contended that the CIT's order was arbitrary and against the principles of natural justice. The tribunal found that the CIT did not conduct any independent enquiry and relied solely on the report prepared by the ITO (Technical). Moreover, the CIT did not provide the appellant with an opportunity to be heard, violating the principles of natural justice.

5. Jurisdiction and Procedural Lapses:
The tribunal noted several procedural lapses in the issuance of the order. The ITO (Technical) conducted the enquiry and prepared the draft order without proper authorization from the CIT. The CIT merely approved the draft order prepared by the ITO (Technical) without conducting any independent examination. The tribunal emphasized that the powers of the CIT to satisfy himself about the genuineness of the activities of the trust could not be delegated to the ITO (Technical).

Conclusion:
The tribunal set aside the order of the CIT, Aligarh, and directed him to grant approval under Section 80G(5)(vi) of the Income-tax Act, 1961. The tribunal found that the CIT did not conduct any independent enquiry, violated the principles of natural justice, and passed the order beyond the prescribed time limit. The appellant's appeal was allowed, and the tribunal directed the CIT to grant the approval as prayed for by the appellant.