2016 (3) TMI 1273 - AT - Income Tax

Tribunal Overturns Orders, Emphasizes Procedural Fairness

The Tribunal allowed both appeals, setting aside the orders rejecting the applications under section 80G(5)(vi) and section 12AA of the Income Tax Act. ... Registration under section 12AA - approval under section 80G(5)(vi) - right to reasonable opportunity of being heard - genuineness of activities and satisfaction of the registering authority - non-delegation of adjudicatory power - invalid administrative delegationRegistration under section 12AA - approval under section 80G(5)(vi) - right to reasonable opportunity of being heard - non-delegation of adjudicatory power - Validity of the orders rejecting the assessee's applications for registration and approval where proceedings were recorded by Deputy Director (Systems) and no proper personal hearing was afforded by the CIT(Exemptions). - HELD THAT: - The tribunal found from the order sheets that the Director of the assessee-society had appeared in proceedings but the substantive entries and actions were recorded by the Deputy Director (Systems), with only initials of the CIT(Exemptions) at the end. Section 12AA requires the Commissioner to call for documents, satisfy himself as to the objects and genuineness of activities and to give the assessee a reasonable opportunity of being heard before passing an order. The proceedings in the present case show that the Deputy Director(Systems) conducted the enquiry and recorded the steps, and the CIT(Exemptions) did not personally hear the matter. The law does not permit the CIT(Exemptions) to delegate his adjudicatory function in hearing and deciding applications under section 12AA and section 80G(5)(vi). For these reasons the impugned orders are violative of the statutory requirement of personal consideration and of the assessee's right to a hearing, and therefore cannot be sustained. [Paras 4, 5, 6]Impugned orders set aside; matter remitted to CIT(Exemptions) Chandigarh to re-decide both applications afresh in accordance with law after giving the assessee a reasonable opportunity of being heard, and the CIT(Exemptions) shall personally hold the proceedings and shall not delegate this power to the Deputy Director (Systems). Appeals allowed for statistical purpose.Final Conclusion: The tribunal set aside the CIT(Exemptions)'s orders rejecting registration and 80G approval for want of personal hearing and improper delegation, and remitted the matters for fresh decision by the CIT(Exemptions) after affording reasonable opportunity of hearing; appeals allowed for statistical purposes. Issues:1. Rejection of application under section 80G(5)(vi) and section 12AA of the Income Tax Act.Analysis:The judgment pertains to two appeals by the assessee challenging orders of the Ld. CIT(Exemption) rejecting applications under section 80G(5)(vi) and section 12AA of the Income Tax Act. The impugned orders were based on the assessee's failure to provide requested information and the absence of maintained books of account, leading to doubts about the genuineness of the trust's activities. The assessee argued that the orders were arbitrary as proper opportunities for being heard were not granted. The order sheet revealed that the proceedings were conducted by Deputy Director (Systems) instead of the Ld. CIT(Exemptions), contrary to the requirements of the Act.The Tribunal observed that the law does not authorize the Deputy Director (Systems) to handle matters under section 12AA and 80G(5)(vi) of the Act. Only the Ld. CIT(Exemptions) has the authority to conduct proceedings, provide opportunities for being heard, and pass orders. Since the proceedings were not conducted by the Ld. CIT(Exemptions) himself, the orders were deemed violative of the law. Consequently, the Tribunal set aside the impugned orders and directed the matter to be reconsidered by the Ld. CIT(Exemptions) personally, emphasizing the need for a fair opportunity for the assessee to present their case.In conclusion, the Tribunal allowed both appeals for statistical purposes, highlighting the necessity for the Ld. CIT(Exemptions) to personally conduct the proceedings and make decisions in accordance with the law. The judgment underscores the importance of procedural fairness and adherence to legal requirements in matters of registration and approval under the Income Tax Act.