Sri Raja Rajeshwari Educational Society V. The Chief Commissioner of Income Tax, Hyderabad-II and Income Tax Towers, AC Guards, Hyderabad

WP/22649/2008

AI Insights

The case involves Sri Raja Rajeshwari Educational Society, which operates a non-profit educational institution, challenging the decision of the Chief Commissioner of Income Tax, Hyderabad-II, for refusing to grant exemption under Section 10(23C)(vi) of the Income Tax Act, 1961 for the assessment year 2007-2008. The petitioner initially filed an application for exemption which was partially granted for the years 2005-2006 and 2006-2007. However, the application for 2007-2008 was not processed due to the absence of audited annual accounts, leading to the filing of a subsequent application which was also deemed belated. The court found that the Chief Commissioner failed to follow the procedural requirements by not calling for the necessary documents or providing an opportunity to be heard before rejecting the application.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 817124 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 16-11-2010
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: S REDDY
• Assessee Lawyers: V REDDY
• Keywords: Application; Charitable institution; Educational institution; Exemption; Income Tax; Audit Accounts
• Section: 10(23C)(vi)

Judgement Text

" THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.22649 of 2008 Dated:16.11.2010 Between: Sri Raja Rajeshwari Educational Society. …Petitioner and The Chief Commissioner of Income Tax, Hyderabad-II, Income Tax Towers, AC Guards, Hyderabad, And another. …Respondents THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.22649 of 2008 ORDER: (per Hon’ble Sri Justice Ramesh Ranganathan) The action of the first respondent in refusing to grant exemption to the petitioner – Institution, under Section 10(23C)(vi) of the Income Tax Act, 1961 (the Act), for the assessment year 2007-2008 is under challenge in this writ petition as illegal and without jurisdiction, and a consequential direction is sought to declare that the petitioner is entitled for grant of exemption in terms of Section 10(23C)(vi) of the Act for the assessment year 2007-2008. The petitioner claims to be a Charitable Institution running a nonprofitable Educational Institution in the name and style of M/s.S.R.R.Engineering College, Karepally Village in Khammam District. It initially filed an application in Form No.56D dated 12.03.2007, for three assessment years 2005-2006, 2006-2007 and 2007-2008. While permission was accorded for the assessment years 2005-2006 and 2006-2007, it is the petitioner’s case that they were not intimated about what transpired with regards their application for 2007- 2008 necessitating their filing an application afresh dated 08.03.2008 seeking exemption for the assessment years 2007-2008 and 2008- 2009. While considering the second application, the first respondent held that, since the application is required to be made during the financial year immediately preceding the assessment year, the second application is belated. However, with regards the application for assessment year 2008-2009, the first respondent held that the application would be considered separately. He observed that the claim for exemption for assessment year 2007-2008 could not be entertained. Sri V.Bhaskar Reddy, learned Counsel for the petitioner, would submit that the provisos to Section 10(23C)(vi) of the Act required the first respondent to intimate the petitioner about rejection of their application; before rejecting the petitioner’s application, the first respondent was required to put them on notice, call for necessary records including the audited accounts, give them an opportunity of being heard and only thereafter pass an order granting or refusing to grant exemption under Section 10(23C)(vi) of the Act. Learned Counsel would submit that even if the petitioner’s second application is held to be belated, since the first application was filed within time, failure on the part of the first respondent to call for information and give the petitioner an opportunity of being heard would necessitate the rejection order being set aside. Sri S.Shashidhar Reddy, learned Counsel appearing on behalf of the respondents, would submit that, since the application itself was not in accordance with the statutory requirement, the first respondent was justified in not entertaining the application; failure to entertain an improper application would not necessitate an inference that the said application was rejected; the application was in fact not even examined as it was not in the prescribed form; and the defect in the application cannot be cured subsequently. The second proviso to Section 10(23C)(vi) of the Act requires the prescribed authority (Chief Commissioner of Income Tax), before granting approval to any Educational Institution under sub clause (vi) of Section 10(23C) of the Act, to call for such documents including audited annual accounts etc., as it thinks necessary in order to satisfy itself about the genuineness of the activities of such Educational Institution. The second proviso also enables the prescribed authority to make such enquiry, as it deems necessary in this regard. It is evident from the second proviso that the information which the Chief Commissioner is empowered to call for includes the audited annual accounts of the petitioner – Institution. The mere fact that the application submitted in Form No.56D was not accompanied by the audited annual accounts for the financial year relevant to the assessment year 2007-2008 did not necessitate the application not even being examined by the first respondent. The first respondent ought to have called upon the petitioner to submit the audited annual accounts for the financial year relevant to the assessment year 2007- 2008, and thereafter consider the application on its merits and in accordance with law. As the first application submitted by the petitioner is within the time stipulated under the unamended fourteenth proviso to Section 10(23C)(vi) of the Act, and in as much as the second proviso to Section 10(23C)(vi) of the Act requires the Chief Commissioner to call for the audited annual accounts, failure on his part to do so would necessitate his being now required to examine the petitioner’s first application afresh, call for necessary information including the audited annual accounts relating to the assessment year 2007-2008, and thereafter pass orders in accordance with law. The decision of the Chief Commissioner of Income Tax in refusing to entertain the application for the financial year relevant to the assessment year 2007-2008 on the ground that it was not accompanied by the audited annual accounts for the assessment year 2007-2008 is set aside. The first respondent shall, within a period of four months from the date of receipt of a copy of this order, give the petitioner an opportunity of being heard, call for all such information as he may require including the audited annual accounts for the year 2007-2008, and thereafter pass orders in accordance with law. The Writ Petition is disposed of accordingly. There shall be no order as to costs. _______________ (V.V.S.RAO, J) _____________________________ (RAMESH RANGANATHAN, J) 16.11.2010 vs "