M/S PARMESHWARI HANSRAJ JAIN KHANGA DOGRA TRUST,,LUDHIANA vs. CIT (EXAMPTION),, CHANDIGARH

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. No. 220(Asr)/2017 Assessment Year: [PAN: AACTP 4714A]

M/s. Parmeshwari Hansraj Jain Vs. C. I. T. (Exemptions), Khanga Dogra Trust, 160-F, C. R. Building, 17-E, Major Gurdial Singh Road, Chandigarh. Civil Lines, Ludhiana. (Appellant) (Respondent)

Appellant by : Sh. Hari Om Arora (Adv.) Respondent by: Smt. Balwinder Kaur (D.R.) Date of Hearing: 31.01.2018 Date of Pronouncement: 16.02.2018

ORDER Per Sanjay Arora, AM: This is an Appeal agitating the Order u/s. 12AA(b)(ii) of the Income Tax Act, 1961 ('the Act' hereinafter) by the Commissioner of Income Tax (Exemptions), Chandigarh ('CIT(E)', for short) dated 28.02.2017, denying registration to the assessee trust u/s. 12AA.

2 ITA No.220 (Asr)/2017(AY) Parmeshwari Hansraj Jain KD Trust v. CIT office of the ld. CIT(E) (also referred to as a competent authority) (PB pages 1-2). The same was duly replied vide letter dated 20.12.2016, also attending before the Dy. CIT (Exemptions) (HQ), Chandigarh (‘Dy. CIT(E)’, for short), who had signed the letter dated 13.12.2016 (at PB pages 3-4). Further requisitions as made and information/clarifications called for were furnished vide letters dated 08.02.2017 (on 09.02.2017), 17.02.2017 (on 20.02.2017) and finally on 21.02.2017 (PB pages 5, 6-7, 8), addressed to and appearing before the Dy. CIT(E), who conducted the proceedings. The impression conveyed by him was that the registration would follow, while what the assessee-trust received was the impugned order rejecting the application for registration. No personal hearing in the matter was at any stage granted by the competent authority, who could not possibly delegate the power to grant or refuse registration to another authority and, besides, is to exercise the power of refusal (of registration) only after grant of personal hearing, as mandated by section 12AA(b)(ii), reading as under, through which we were taken through during hearing.

‘Procedure for registration. 12AA. (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) of sub-section (1) of section 12 A, shall— (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he— (i) shall pass an order in writing registering the trust or institution;

(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution,

3 ITA No.220 (Asr)/2017(AY) Parmeshwari Hansraj Jain KD Trust v. CIT and a copy of such order shall be sent to the applicant : Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.’ [emphasis, supplied] The Hon'ble jurisdictional High Court had recently per its decision in CIT(E) v. Ameliorating India [2017] 399 ITR 196 (P&H) held likewise, reading out the cache notes of the said decision, which read as under:

‘Section 12AA of the Income-tax Act, 1961 provides that the Commissioner on receipt of the application for registration shall call for the documents and after satisfying himself about the objects of the trust or institution and genuineness of its activities, he shall pass an order registering the institution or refusing to register the institution. It also provides that no order under sub-clause (ii) shall be passed unless the assessee has been given a reasonable opportunity of being heard. The section does not enable the Commissioner of Income-tax to delegate his power.’ Even on merits, the impugned order is without due application of mind in-as-much as it draws on irrelevant considerations and wrong premises. Further, though in the facts of that case, the matter was remanded back for grant of opportunity to the applicant by the competent authority, the impugned order is void ab initio as the applicant-appellant had submitted all the details/information called for from time to time. The ld. Departmental Representative (DR) would submit that there is nothing on record to show that the Dy. CIT had conveyed a ‘no objection’ to the grant of registration, as being suggested by the ld. AR. The competent authority had passed a speaking order by considering all the material on record, including the assessee’s explanations/clarifications, consideration of which is apparent from the impugned order. The same could be possibly challenged on merits, but on procedure; the Dy. CIT(E) acting as a channel for the processing of the application.

4 ITA No.220 (Asr)/2017(AY) Parmeshwari Hansraj Jain KD Trust v. CIT 3. We have heard the parties, and perused the material on record. Without any iota of doubt, the information, details and clarifications sought for during the course of the proceedings before, and the show cause dated 13.12.2016 issued by, the Dy. CIT(E) is only for and on behalf of the competent authority, of whose office he forms an official and integral part. He has, it may be appreciated, no locus standi in the matter otherwise. In fact, the ld. DR has shown that his letter also makes this abundantly clear in-as-much as he states of having been directed to act in the manner he does. The letter-head used for communication itself is of the office of the competent authority. His actions, and the proceedings before him, cannot be regarded as de hors or independent of the competent authority. All official acts must even otherwise be, in terms of section 114(e) of the Evidence Act, 1872, regarded as regularly performed. The said notices/ requisitions or proceedings therefore cannot be called into question. Why, would the assessee, even as observed by the Bench during hearing, object thereto if it had been successful, and had been granted registration in pursuance to its’ said application and the said proceedings? We are therefore unable to persuade ourselves to agree with the contention that the proceedings are legally not valid as the same were conducted by the Dy. CIT(E). In fact, the assessee relies on the information and clarifications furnished in the said proceedings to argue of the impugned order as being void ab initio. That is, contradicts itself. Be that as it may, we find considerable force in the assessee’s first argument. This is as the law itself clearly provides that any order refusing registration, as the impugned order, could only follow a reasonable opportunity of hearing (to the applicant trust or institution). This hearing, firstly, is to be before the competent authority, and cannot be delegated, even as clarified by the Hon'ble jurisdictional High Court in Ameliorating India (supra). This is as it is he who is to be in law satisfied, or not so, about the merits qua the grant of registration. That is, it is his

5 ITA No.220 (Asr)/2017(AY) Parmeshwari Hansraj Jain KD Trust v. CIT personal satisfaction and judgment alone that is relevant, and it is he who is therefore to form an informed opinion after hearing the applicant. Two, the hearing has to be specifically qua the grounds with reference to which the competent authority considers the application for registration as failing or as infirm, so that the same ought to be refused/not allowed. Not so doing would render nugatory the very purpose of hearing. Why, time and again we find the assessees bringing to our notice facts which could have easily been brought to the notice of the Revenue authorities if only they had disclosed the doubts being entertained or clarifications deemed proper by them. Rather, it is the grant of opportunity that the law postulates in-as-much as an adjudicating authority cannot compel the applicant to avail that opportunity. In the facts of the present case, the only aspect, among the several that inform the denial of registration, as a perusal of the impugned order shows, on which the assessee was show caused, is the absence of dissolution clause in the trust deed. And qua which in fact the assessee, vide para (xi) of its letter dated 20.12.2016, states to have been since added. Under the circumstances, therefore, the impugned order, passed without observing the due process of law, is procedurally deficient, constituting an irregularity. The same therefore would warrant a restoration back to the stage at which the irregularity had occurred (Hazari Mal Kuthiala v. ITO [1961] 41 ITR 12 (SC)). There is, it needs to be appreciated, no vested right in procedure (CWT v. Sharvan Kumar Swarup [1994] 210 ITR 886 (SC)). We, accordingly, setting aside the impugned order, direct the disposal of the assessee’s application by the competent authority in accordance with law, even as was by the Tribunal in Ameliorating India (supra), whose order stands upheld by the Hon'ble jurisdictional High Court. Needless to add, we do not, in doing so, express any opinion on the merits of the assessee’s application. We decide accordingly.

6 ITA No.220 (Asr)/2017(AY) Parmeshwari Hansraj Jain KD Trust v. CIT 4. In the result, the assessee’s appeal is allowed for statistical purposes. Order pronounced in the open court on February 16, 2018

Sd/- Sd/- (N. K. Choudhry) (Sanjay Arora) Judicial Member Accountant Member Date: 16.02.2018. /GP/Sr. Ps. Copy of the order forwarded to: (1) The Appellant: Parmeshwari Hansraj Jain Khanga Dogra Trust, (2) The Respondent: CIT (E), Chandigarh (3) The CIT(E), Chandigarh. (4) The CIT, concerned. (5) The Sr. DR, I.T.A.T.