Rastra Sahayak Vidhyalaya Samiti vs Chief Commissioner of Income Tax and Others

Dr. Vineet Kothari, J.—The petitioner, an assessee under the IT Act, 1961 (for short, hereinafter referred to as ''Act'') being aggrieved of the order dt. 26th March, 2009 passed by respondent-Chief CIT, Jodhpur denying approval under s. 10(23C)(vi) of the Act on the ground that the petitioner violated the basic mandate of s. 10(23C)(vi) of the Act, and therefore, the petitioner was not entitled to such approval, which in turn would have entitled the petitioner-trust to avail exemption from the income tax as per the said provision of s. 10(23C) of the Act. Learned counsel for the petitioner-assessee, keeping open other contentions, essentially made a limited prayer and emphasized that the petitioner was not given proper and adequate opportunity of hearing in compliance of principles of natural justice in true sense and merely on the basis of allegations made against the petitioner-trust, without allowing the petitioner-assessee to controvert the adverse material allegedly collected by the Revenue authorities in a survey conducted at the premises of the petitioner under s. 133A of the Act on 29th Nov., 2006 and subsequently the respondent-Chief CIT arrived at the finding against the petitioner-assessee and denied such approval under s. 10(23C) of the Act.

Mr. Vikas Balia, learned counsel for the petitioner- assessee submitted that in fact, after service of the show-cause notice upon the petitioner on the given dt. 11th Feb., 2009 itself, the petitioner-assessee furnished due explanation of the allegations made against it and thereafter only on 17th March, 2009, the case was discussed by the respondent Chief CIT with Mr. Rajendra Jain, Authorised Representative of the petitioner; and even though it is mentioned in internal p. 3 of the impugned order that said authority had referred to material on record like report of CIT, Bikaner, its enclosures and other material collected through reports of subordinate authorities, no such material was supplied to the petitioner-assessee and nine days thereafter on 26th March, 2009, the impugned order was passed against the petitioner-assessee rejecting such approval under s. 10(23C) of the Act. He submitted that without allowing the assessee to rebut the allegations by supplying him the adverse material, the principles of natural justice cannot be said to be complied with, therefore, the impugned order deserves to be quashed and set aside.

Learned counsel for the petitioner also submitted that as far as registration of the petitioner-trust under s. 12A of the Act is concerned as charitable trust/institution since the Departmental authorities denied the same on the ground of same survey under s. 133A of the Act, contesting the appeal before the learned Tribunal. However, the learned Tribunal finally allowed the assessee''s appeal vide order dt. 18th Nov., 2008, copy whereof has been placed on record as Annex. 3.

On the other hand, Mr. K.K. Bissa, learned counsel for the Revenue urged that the petitioner-trust was not an educational institution running for educational purposes and profit motive could be inferred from the nature of the allegations like withdrawal from the salary accounts of the teachers made through employees of the petitioner-trust. large sums withdrawn from the teachers'' bank account amounted to anonymous donations in view of fifteenth proviso to s. 10(23C) of the Act and giving grant to other educational institution like one of Rs. 9,75,000 given by the petitioner to Rastra Sahayak Vidhyalaya Higher Secondary School, and therefore, the learned Chief CIT was justified in rejecting approval under s. 10(23C) of the Act on the basis of material before it. He also submitted that copy of statement of principal of the school Mrs. Anita Sugandha was supplied to the petitioner-trust and therefore, in absence of any such rebuttal material produced by the petitioner, the findings of the learned Chief CIT cannot be interfered with and the present writ petition deserves to be dismissed.

Having heard learned counsel for the parties, this Court is of the opinion that the impugned order passed by learned Chief CIT Department on 26th March, 2009 does not fully meet the requirement of fulfillment of principles of natural justice. In penultimate para, just before findings given by the learned Chief CIT, it is clear that on 17th March, 2009 only the case was discussed with the Authorized Representative of the petitioner-trust and by that date, it appears that the said respondent had also certain other adverse material against the petitioner-assessee like report of CIT, Bikaner, its enclosures and other material collected through reports of the subordinate authorities. This adverse material relied upon by the learned Chief CIT does not appear to have been supplied to the petitioner at all. In response to the show-cause notice given by the respondent, the petitioner submitted its detailed reply on 11th Feb., 2009 giving the explanation to all the allegations raised against the petitioner-trust; however, the adverse material on the basis of which such allegations were made, does not appear to have been fully supplied to the petitioner-trust, still relying upon the same material, adverse findings have been arrived by the learned Chief CIT. This, in the opinion of this Court, falls short of the meeting of the requirement of the principles of natural justice. While the power of learned Chief CIT to arrive at such findings after properly and duly allowing the opportunity of hearing and supplying the adverse material to the petitioner-trust is not in doubt but at the same time, withholding the adverse material from the petitioner-assessee, not allowing him the chance of rebuttal and then relying on the same material for denying the approval under s. 10(23C) of the Act, cannot be sustained.

Therefore, in the opinion of this Court, the matter deserves to be remanded back to the learned Chief CIT for deciding the said proceedings de novo from the stage of 17th March, 2009 when the order refers to certain adverse material collected by the said authority after which no proceedings appear to have been taken place in the presence of the petitioner or his Authorized Representative except passing of the impugned order dt. 26th March, 2009. Consequently, this writ petition is allowed and the impugned order Annex. 9 dt. 26th March, 2009 is set aside and the matter is restored back to the learned Chief CIT, Jodhpur for deciding the said proceedings under s. 10(23C) of the Act afresh after giving reasonable and proper opportunity of hearing and allowing the petitioner to rebut the allegations and adverse material supplied to him. After taking due explanation and evidence on record, it goes without saying that the learned Chief CIT, Jodhpur shall be free to pass fresh orders in accordance with law. No costs.