2012 (10) TMI 242 - AT - Income Tax

Tribunal overturns CIT's rejection, emphasizes procedural fairness and timely decisions

Shiksha Sankalp Society Versus Commissioner of Income-tax, Aligarh

Shiksha Sankalp Society Versus Commissioner of Income-tax, Aligarh - [2012] 53 SOT 26 (Agra) (URO). Issues Involved:1. Rejection of application for renewal of approval under section 80G of the Income Tax Act, 1961.2. Deemed approval due to delay in passing the order beyond six months.3. Jurisdiction and authority of the CIT in passing the impugned order.4. Principles of natural justice and equity in the decision-making process.Issue-Wise Detailed Analysis:1. Rejection of Application for Renewal of Approval under Section 80G:The assessee filed an application for renewal of approval under section 80G(5)(vi) of the IT Act on 19.01.2010. The CIT rejected the application on 27.07.2010, noting discrepancies in the accounts and questioning the genuineness of the charitable activities. The CIT highlighted issues such as unexplained differences in corpus fund, secured loans, and interest payments, and non-compliance with section 11 provisions. The CIT concluded that the accounts were not duly maintained and that the trustees might have a beneficial interest in the funds.2. Deemed Approval Due to Delay in Passing the Order Beyond Six Months:The assessee argued that since the order was passed beyond six months from the application date, approval should be deemed to have been granted as per Rule 11AA(6) of the IT Rules. The Tribunal agreed, citing precedents from ITAT Amritsar and Delhi Benches, which held that rejection of application beyond six months entitles the assessee to approval. The Tribunal noted that no delay could be attributed to the assessee for not complying with the CIT's directions, as no such directions were issued.3. Jurisdiction and Authority of the CIT in Passing the Impugned Order:The Tribunal found that the ITO (Tech.) conducted inquiries and drafted the order, which the CIT merely approved. This was deemed improper as the CIT should have personally conducted inquiries and provided the assessee an opportunity to be heard. The Tribunal emphasized that the powers to satisfy the genuineness of activities and call for documents cannot be delegated to the ITO (Tech.). The Tribunal also noted that the CIT who passed the order assumed charge only on 22.07.2010, and there was no evidence of any inquiry conducted by the previous CITs.4. Principles of Natural Justice and Equity in the Decision-Making Process:The Tribunal held that the impugned order was passed in a mechanical manner without giving the assessee an opportunity to be heard, violating the principles of natural justice. The Tribunal criticized the casual approach of the CIT and highlighted that the assessee had continuously enjoyed registration under section 12AA and complied with section 80G(5) provisions. The Tribunal found that the reasons given for refusal were not valid and that the assessee maintained proper books of accounts.Conclusion:The Tribunal set aside the order of the CIT dated 27.07.2010 and directed the CIT to grant renewal of approval under section 80G(5)(vi) of the IT Act. The appeal of the assessee was allowed, emphasizing the importance of adherence to procedural rules, timely decision-making, and the necessity of providing a fair hearing to the assessee.