2019 (6) TMI 254 - HC - Income Tax

Approval u/s 80(G)(5) - ITAT Lucknow remanded the instant matter to CIT (E) Lucknow - main contention raised by the assessee in this appeal is, the matter could not have been remanded back as the entire material was available before the ITAT to come to subjective satisfaction as to whether in the given circumstances the assessee was eligible for being granted a certificate u/s 80(G)(5), or not? - HELD THAT - For the purpose of deciding as to whether or not to grant approval u/s 80G, a CIT (Exemptions) has to only examine whether or not the conditions set out in Section 80G(5)(i) to (v) are satisfied. The first and foremost thing to be seen is whether or not any income earned by the assessee is not being liable to inclusion in its total income under any of the provisions of Sections 11and 12 or Clause (23AA) or Clause (23C) of Section 10 of the Act, 1961. Since the assessee is granted approval for the future years, and since there is no way that anyone can have the clairvoyance of knowing whether or not the assessee will eventually be able to comply with the conditions, if any, attached to the exemptions, as long as the exemption is available in principle and as long as the assessee can reasonably claim to be able to satisfy the conditions attached to such exemption, one has to proceed on the basis that the condition laid down u/s 80G(5)(i) is satisfied. Before the ITAT it seems, the appellant was able to point out the relevant documents from which charitable nature of the society could be deciphered. The ITAT therefore in the facts and circumstances of the case observed that the CIT (E) has not examined the entire documents placed before him, and these are matters which require factual verification of the CIT (E) who has the requisite machinery to undertake such an exercise. The appellate Court certainly have the power of remand, and the ITAT has rightly remanded the matter back to the CIT (E) for fresh decision, and sufficient reasons have been stated by the ITAT in support of its decision to remand the case which cannot be found wanting. ITAT rightly remanded the matter back to the CIT (E) for fresh consideration and decision on the basis of the evidence available on record regarding genuineness of the documents and to pass a speaking order. The questions are answered accordingly.

Summary

Issues Involved:
1. Remanding by ITAT.
2. Legal obligation of ITAT to decide on merits.
3. Grounds for remanding based on efficiency and legality of lower court's decision.

Issue-wise Detailed Analysis:

1. Remanding by ITAT:
The primary issue was whether the ITAT Lucknow could remand the matter to the Commissioner of Income Tax (Exemptions) when all issues had been adjudicated by the Commissioner. The ITAT remitted the case back to the Commissioner to verify the facts and determine the genuineness of documents, as the Commissioner had previously rejected the application for exemption under Section 80G(5) of the Income Tax Act, 1961. The Commissioner concluded that the applicant did not submit details regarding donors' identities, which appeared to be a malafide attempt to introduce unaccounted money as donations. The ITAT found that the Commissioner did not duly consider numerous documents submitted as evidence, leading to the remand for a fresh decision after a thorough examination of the evidence.

2. Legal Obligation of ITAT to Decide on Merits:
The appellant argued that the ITAT was legally obligated to decide the matter on its merits as all evidence was available. However, the court held that the Commissioner of Income Tax (Exemptions) must examine whether the conditions under Section 80G(5)(i) to (v) of the Act, 1961, were satisfied. The Commissioner must ensure that the income is not liable to inclusion under Sections 11, 12, or relevant clauses of Section 10, and that the institution's rules do not allow income or assets to be used for non-charitable purposes. The ITAT's remand was justified as the Commissioner could not form a subjective satisfaction due to incomplete document submission by the assessee.

3. Grounds for Remanding Based on Efficiency and Legality of Lower Court's Decision:
The appellant contended that remanding the matter simply because the lower court decided efficiently without questioning the order's veracity and legality was improper. The court referenced the Supreme Court's judgment in J. Balaji Singh vs. Diwakar Cole, supporting the remand for fresh trial based on additional evidence. The court found the ITAT's decision to remand appropriate, as the Commissioner had not examined all documents, necessitating factual verification. The ITAT's remand was supported by sufficient reasons and aligned with judicial precedents.

Conclusion:
The appeal was dismissed, and the ITAT's decision to remand the matter to the Commissioner of Income Tax (Exemptions) was upheld. The Commissioner was directed to decide on the application expeditiously within one month, considering all evidence and affording the assessee an opportunity for a hearing. The court also noted the overzealous representation by the appellant's counsel, who was a director and main functionary in the company, condemning the practice of not disclosing such relationships.