2021 (4) TMI 908 - AT - Income Tax

Approvals u/s.10(23C)(vi) rejected - HELD THAT - We observe in this clinching backdrop that the PCIT(Central) has erred in law and on facts not only in assuming his Section 10(23C)(vi) jurisdiction on 16-09-2019 (before having being confirmed the prescribed authority s jurisdiction to this effect on 05-11-2019) but also he has wrongly withdrawn the assessee s approval with effect from the date it had been granted the same - And that the latter action also involved illegality since this approval had come way back in the year 2009 as against the search carried out almost after a decade i.e., 23-03-2018. We thus adopt strict interpretation in the given facts and circumstances of the case in the light of Rule2CA of the Income Tax Rules, 1962 and going by hon ble apex court s constitutional bench decision in CCCE Vs. Dilip Kumar and Company 2018 (7) TMI 1826 - SUPREME COURT and conclude that the impugned order withdrawing the assessee s approval is not sustainable for want of the Pr.CIT(Central) s jurisdiction. We make it clear that we are dealing with an instance of patent lack of jurisdiction at the threshold itself which cannot be made good in latter stages. There is yet another equally significant aspect of the matter before us. There is hardly any dispute that the Pr.CIT s order; assuming but not accepting it as correct, has withdrawn the assessee s approval from the day which was granted the very relief i.e., from 27-03-2008 turning out to be well beyond the period of show cause notice itself. And that too, without even indicating as to how the assessee had violated the conditions of its approval granted earlier in all these intervening assessment years wherein it had also been assessed without any violation of the approval s conditions. We therefore rely upon our foregoing detailed discussion and hold that Pr.CIT(Central) herein has erred in law and as on facts in withdrawing the assessee s approval granted u/s.10(23C)(vi) of the Act. The assessee has also filed a detailed case law paper book as well as citing various judicial precedents but we do not deem it appropriate to deal with any of them since it is an instance of the Pr.CIT(Central) s lack of jurisdiction. The assessee s impugned approval is restored as a necessary corollary.

Summary

Issues Involved:
1. Delay in filing appeals.
2. Withdrawal of Section 10(23C)(vi) approvals.
3. Pr.CIT(Central)'s jurisdiction to withdraw approvals.
4. Non-maintenance of proper books of accounts.
5. Alleged violations of the conditions for approval under Section 10(23C)(vi).
6. Retrospective withdrawal of approvals.
7. Additional grounds raised by the assessee.

Detailed Analysis:

1. Delay in Filing Appeals:
The appeals filed by the assessees suffered from a 121-day delay, attributed to communication gaps and other uncontrollable factors. The Revenue did not rebut these claims. Referring to the Supreme Court's decisions in Collector, Land Acquisition Vs. Mst. Katiji & Ors and University of Delhi Vs. Union of India, the Tribunal condoned the delay, prioritizing substantial justice over technicalities.

2. Withdrawal of Section 10(23C)(vi) Approvals:
The primary contention in the appeals was the correctness of the Pr.CIT's orders withdrawing the Section 10(23C)(vi) approvals. The lead case, Karshak Vidya Parishad, raised multiple grounds challenging the withdrawal, including claims of arbitrariness, lack of proper reasons, and procedural errors in issuing show cause notices.

3. Pr.CIT(Central)'s Jurisdiction:
The Tribunal examined whether the Pr.CIT(Central) had the jurisdiction to withdraw the approvals. The Pr.CIT(Central) issued a show cause notice on 16-09-2019 before the CBDT notification dated 05-11-2019, which authorized the Pr.CIT(Central) to act as the prescribed authority. The Tribunal found that the Pr.CIT(Central) lacked jurisdiction at the time of issuing the show cause notice, rendering the entire withdrawal process invalid.

4. Non-Maintenance of Proper Books of Accounts:
The Pr.CIT(Central) cited non-maintenance of proper books of accounts and manipulation of financial statements as reasons for withdrawal. The Tribunal noted that the assessee failed to substantiate claims of regular maintenance and auditing of books. However, the Tribunal emphasized that the lack of jurisdiction overshadowed these findings.

5. Alleged Violations of Conditions for Approval:
The Pr.CIT(Central) alleged that the assessee violated conditions for approval under Section 10(23C)(vi), including non-application of income for approved objectives, unsubstantiated payments, and diversion of funds. The Tribunal found these allegations insufficient to justify withdrawal, especially given the jurisdictional flaw.

6. Retrospective Withdrawal of Approvals:
The Tribunal criticized the retrospective withdrawal of approvals from 2009, a decade before the search in 2018. The Tribunal highlighted that the Pr.CIT(Central) failed to indicate specific violations in the intervening years, making the retrospective action legally untenable.

7. Additional Grounds Raised by the Assessee:
The assessee sought to raise additional grounds challenging the Pr.CIT's jurisdiction. The Tribunal admitted these grounds, citing the Supreme Court's decisions in National Thermal Power Co. Ltd. Vs. CIT and All Cargo Global Logistics Ltd. Vs. DCIT, which allow purely legal issues to be raised at any stage if relevant facts are on record.

Conclusion:
The Tribunal concluded that the Pr.CIT(Central) lacked jurisdiction to withdraw the approvals and that the retrospective withdrawal was legally flawed. The orders withdrawing the approvals were reversed, and the approvals under Section 10(23C)(vi) were restored. The appeals were allowed in favor of the assessees.