2024 (7) TMI 1477 - AT - Income Tax

Denial of approval u/s 80G(5) - approval being sought as being u/s. 12AA as already obtained - approval u/s. 80G(5) can be denied to an applicant is on the ground of non-satisfaction of the conditions set out in s. 80G(5)(vi) - HELD THAT - The impugned order is clearly is a cryptic order. Apart from the fact that it refers to s. 12AB of the Act, reference to sec 80G or the rules there-under in conspicuous by its absence. There is no reference therein to the provisional approval u/s. 80G(5)(iv) on 17/3/2022. It is only a perusal of the application that one discovers that the same is qua an application for approval u/s. 80G(5) r/w r. 11AA of the Rules. It is perhaps for the reason that both the provisions provided for application in the same format that led to it being construed by the competent authority as for another. Whatever may be the cause, it is indeed very unfortunate that an application by a charitable institution is treated in such a careless and cavalier manner, which in fact deserves imposition of cost. There is, resultantly, no question of the assessee s application being decided on merits, i.e., qua the said grant or otherwise of the approval under s. 80G(5)(iv), which an order granting approval or, as the case may be, denying it, is to specify in clear terms along with reasons therefor. We, accordingly, have no hesitation in, setting aside the impugned order, direct (re)adjudication by the competent authority on merits, per a speaking order, and in accordance with law, allowing the assessee a reasonable opportunity of being heard. Assessee s appeal is allowed.

Summary

Issues:
Appeal against denial of approval under section 80G(5) of the Income Tax Act, 1961.

Analysis:
The judgment pertains to an appeal by the Assessee challenging the denial of approval under section 80G(5) of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax. The Assessee had already obtained approval under section 12AA of the Act, following a two-step process introduced by the Taxation and Other Laws Act. The Assessee, a trust set up in memory of a deceased son, sought provisional approval under section 80G(5)(iv), which was granted for a two-year period. The denial of approval under section 80G(5) can only be based on non-satisfaction of conditions specified in the Act and the Income Tax Rules. The Counsel for the Assessee argued that the denial lacked merit and the CIT-DR failed to counter the contentions effectively.

The impugned order rejecting the application for approval under section 12AB lacked clarity and did not reference section 80G or the relevant rules. The order did not acknowledge the provisional approval granted earlier. The tribunal found the order to be careless and unfortunate, deserving cost imposition. Consequently, the tribunal set aside the impugned order and directed a fresh adjudication on merits by the competent authority, ensuring a speaking order with clear reasons provided. The Assessee was granted a reasonable opportunity to be heard, with a request for a personal hearing made by the Counsel, subject to the faceless scheme protocol.

The tribunal emphasized the importance of due consideration on merits for the Assessee's application, highlighting the need to prevent undue hardship caused by non-consideration. The appeal was allowed in favor of the Assessee, with the order pronounced under the relevant rules. The judgment underscores the significance of procedural fairness and adherence to legal provisions in matters of tax approvals and denials, ensuring that applications are duly considered based on merit and in accordance with the law.