Exemption will go if income is concealed, I-T dept tells Madras HC

HC had said whether the benefit for charitable institutions should continue if income concealment was found

The Madras High Court was on Tuesday apprised by the Director General of Income Tax (Investigation) that wherever concealment of income is detected, exemption or approval granted to the charitable educational institutions concerned is withdrawn.

Recording the submission of the tax department in an affidavit, the high court closed a PIL petition.

The HC posed questions to the department on a PIL, seeking to consider revoking exemption granted under the Income Tax Act to charitable organisations if they were found violating rules and if fraudulent acts were committed.

The high court, in its July 4, 2016 order, had said that the only aspect of concern was whether the benefit for charitable educational institutions should continue if income concealment was found or large amounts of cash was recovered during raids.

"In such a situation, the question arises whether there should be also cancellation/revocation of the Essentiality Certificate/ No Objection Certificate."

To this poser, the tax department in its counter affidavit had said, "Under Section 10 (23C) and registration granted under Section 12 AA (3) are withdrawn and appropriate proceedings have been launched against the offending parties of the Charitable Educational Institutions."

The department's counter affidavit made it clear that after prima facie coming to the conclusion that there was concealment of income, the same is communicated to the approval granting authority.

Such an authority, after giving reasonable opportunity of showing cause to the aggrieved, is empowered to rescind the notification or withdraw the approval to charitable institutions in question, it said.

It may result in denial of exemption and consequent taxing of incomes at the hands of the institution at regular rates with consequential penal provisions, the department said, which the HC recorded.