Wp/22649/2008 Of Sri Raja Rajeshwari Educational Society, Karepally Village v. The Chief Commissioner Of Income Tax, Hyderabad-Ii

THE HON’BLE SRI JUSTICE V.V.S.RAOAND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.22649 of 2008 Dated:16.11.2010 Between: Sri Raja Rajeshwari Educational Society. and …Petitioner 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.RAOAND 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 exemptionto the petitioner – Institution, under Section 10(23C)(vi) of the IncomeTax Act, 1961 (the Act), for the assessment year 2007-2008 is underchallenge in this writ petition as illegal and without jurisdiction, and aconsequential direction is sought to declare that the petitioner isentitled for grant of exemption in terms of Section 10(23C)(vi) of the Actfor the assessment year 2007-2008. The petitioner claims to be a Charitable Institution running anonprofitable Educational Institution in the name and style ofM/s.S.R.R.Engineering College, Karepally Village in KhammamDistrict. It initially filed an application in Form No.56D dated12.03.2007, for three assessment years 2005-2006, 2006-2007 and2007-2008. While permission was accorded for the assessment years 2005-2006 and 2006-2007, it is the petitioner’s case that they were notintimated about what transpired with regards their application for 2007-2008 necessitating their filing an application afresh dated 08.03.2008seeking exemption for the assessment years 2007-2008 and 2008-2009. While considering the second application, the first respondentheld that, since the application is required to be made during thefinancial year immediately preceding the assessment year, the secondapplication is belated. However, with regards the application forassessment year 2008-2009, the first respondent held that theapplication would be considered separately. He observed that theclaim for exemption for assessment year 2007-2008 could not be entertained. Sri V.Bhaskar Reddy, learned Counsel for the petitioner, wouldsubmit that the provisos to Section 10(23C)(vi) of the Act required thefirst respondent to intimate the petitioner about rejection of theirapplication; before rejecting the petitioner’s application, the firstrespondent was required to put them on notice, call for necessaryrecords including the audited accounts, give them an opportunity ofbeing heard and only thereafter pass an order granting or refusing togrant exemption under Section 10(23C)(vi) of the Act. LearnedCounsel would submit that even if the petitioner’s second applicationis 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 givethe petitioner an opportunity of being heard would necessitate therejection order being set aside. Sri S.Shashidhar Reddy, learned Counsel appearing on behalfof the respondents, would submit that, since the application itself wasnot in accordance with the statutory requirement, the first respondentwas justified in not entertaining the application; failure to entertain animproper application would not necessitate an inference that the saidapplication was rejected; the application was in fact not evenexamined as it was not in the prescribed form; and the defect in theapplication cannot be cured subsequently. Sri S.Shashidhar Reddy, learned Counsel appearing on behalfof the respondents, would submit that, since the application itself wasnot in accordance with the statutory requirement, the first respondentwas justified in not entertaining the application; failure to entertain animproper application would not necessitate an inference that the saidapplication was rejected; the application was in fact not evenexamined as it was not in the prescribed form; and the defect in theapplication cannot be cured subsequently. The second proviso to Section 10(23C)(vi) of the Act requiresthe prescribed authority (Chief Commissioner of Income Tax), beforegranting approval to any Educational Institution under sub clause (vi)of Section 10(23C) of the Act, to call for such documents includingaudited annual accountsetc., as it thinks necessary in order to satisfyitself about the genuineness of the activities of such EducationalInstitution. The second proviso also enables the prescribed authorityto make such enquiry, as it deems necessary in this regard. It isevident from the second proviso that the information which the Chief Commissioner is empowered to call for includes the audited annualaccounts of the petitioner – Institution. The mere fact that theapplication submitted in Form No.56D was not accompanied by theaudited annual accounts for the financial year relevant to theassessment year 2007-2008 did not necessitate the application noteven being examined by the first respondent. The first respondentought to have called upon the petitioner to submit the audited annualaccounts for the financial year relevant to the assessment year 2007-2008, and thereafter consider the application on its merits and inaccordance with law. As the first application submitted by the petitioner is within thetime stipulated under the unamended fourteenth proviso to Section10(23C)(vi) of the Act, and in as much as the second proviso toSection 10(23C)(vi) of the Act requires the Chief Commissioner to callfor the audited annual accounts, failure on his part to do so wouldnecessitate his being now required to examine the petitioner’s firstapplication afresh, call for necessary information including the auditedannual accounts relating to the assessment year 2007-2008, andthereafter pass orders in accordance with law. The decision of the Chief Commissioner of Income Tax inrefusing to entertain the application for the financial year relevant to theassessment year 2007-2008 on the ground that it was notaccompanied by the audited annual accounts for the assessment year2007-2008 is set aside. The first respondent shall, within a period offour months from the date of receipt of a copy of this order, give thepetitioner an opportunity of being heard, call for all such information ashe may require including the audited annual accounts for the year2007-2008, and thereafter pass orders in accordance with law. The Writ Petition is disposed of accordingly. There shall be noorder as to costs. _______________(V.V.S.RAO, J) _____________________________(RAMESH RANGANATHAN, J) 16.11.2010vs