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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘B’, LUCKNOW
Before: SHRI A. D. JAIN & SHRI T. S. KAPOOR
PER A. D. JAIN: V.P.
This is an appeal filed by the assessee against the order of learned CIT (Exemptions) Lucknow dated 24/12/2020. The assessee has taken the following grounds of appeal:
“1. The Ld. C.I.T. (Exemption) erred on facts and in law in rejecting the Registration under section 12AA of I.T. Act, 1961 without appreciating that due compliance of the terms of notice dated 30.07.2020 has been made on 18.09.2020 with Annexure through e-filing and through hard copy.
The Ld. C.I.T. [Exemption] did not appreciate that compliance of Sr. No. 24 and 25 of the notice had been duly made with supporting evidence as per submission dated 18.09.2020,
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hence non submission of compliance for Sr. No. 24 and 25 cannot be treated as ground of rejection of Registration u/s 12AA of I. T. Act.
The Ld. C.I.T. [Exemption] failed to appreciate that she arbitrarily held that we have not obtained any permission / approvals / affiliation for implementing its object as stated in the Para 6.1 of the Order without appreciating that due compliance has been made and nowhere in the notice she has asked for the affiliations as stated in Para 6.1 of the Notice, hence the same cannot be the reason for rejection of 12AA of I.T. Act.
WITHOUT PREJUDICE TO ABOVE
3.1 The Ld. C.I.T. [Exemption] failed to appreciate that we have made due and proper other affiliation from Medical Council and Other required certificates from Fire and Lift Safety, Water and Sanitary which are required for running Pharmacy College. Thus, there is no irregularity in this regard. The same has never been asked to submit by her.
That the Rejection u/s 12AA of I.T. Act is contrary to the provisions of Law and in violation of natural justice.”
Learned counsel for the assessee, at the outset, submitted that the assessee had made an application for registration u/s 12AA of the Act which the learned CIT (Exemptions) has rejected by holding that the assessee has not made compliance of Sr.No. 24 and 25 of the questionnaire, which the learned CIT (Exemptions) had issued. Learned counsel for the assessee invited our attention to Sr.No. 24 & 25 of the questionnaire, placed at pages 7 & 8 of the paper book. He also invited our attention to copy of reply dated 18/09/2020, placed at pages 12 to 15 of the paper book, and our specific attention was invited to reply to questionnaire at Sr. No. 24 & 25 which appeared at page 15 of the paper book. Learned counsel for the assessee elaborating on question No. 24 & 25 submitted that learned CIT (Exemptions) wanted the information on the number of students enrolled
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during the last three years under Right to Education Act and further she wanted to know the status of approvals/permissions received from competent authorities under the relevant respective laws. Learned counsel for the assessee submitted that since the assessee was running a professional college and therefore, the provisions of Right to Education Act did not apply as the assessee was not covered by the Right to Education Act and stated that this answer was given by the assessee vide reply dated 18/09/2020 and as regards the approvals and permissions, as required by question No. 25, our attention was invited to answer at same page no. 15 where the assessee had enclosed copies of permissions and approvals and our attention was also invited to paper book pages 54 to 64 where copies of such approvals, submitted to learned CIT (Exemptions), were placed. Therefore, in view of these facts and circumstances, it was prayed that the allegation of learned CIT (Exemptions) that assessee had not replied to these questions, is not correct. Regarding the objects of the assessee, Learned counsel for the assessee submitted that undisputedly they are charitable in nature and learned CIT (Exemptions) has not commented adversely on such objects and activities of the assessee and therefore, it was prayed that the registration u/s 12A may be granted to the assessee.
Learned CIT (D.R.) was confronted with these arguments and was asked to verify from the records of CIT (Exemptions) as to whether the submissions made by the assessee, vide letter dated 18/09/2020 along with the annexures relating to approval etc. were available on record, to which learned CIT (D.R.) affirmed in positive. However, she placed reliance on the order of learned CIT (Exemptions).
We have heard the rival parties and have gone through the material placed on record. We find from the copy of trust deed, placed at pages 16
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to 37 of the paper book, that the assessee is engaged in educational activities which undisputedly fall into the definition of charitable purposes as per section 2(15) of the Act. The learned CIT (Exemptions) has rejected the application of the assessee by primarily relying that assessee had not submitted answers to queries listed at Sr.No. 24 & 25 of the questionnaire. Learned counsel for the assessee has demonstrated that assessee had replied to these queries and which learned CIT (D.R.) also affirmed after examining the record of learned CIT (Exemptions). The learned CIT (Exemptions) has not recorded any finding regarding object clause of the assessee nor did she record any finding regarding genuineness of the activities of the assessee and rather she has rejected the application of the assessee by holding that assessee had not made compliance of laws towards achieving the objects mentioned in the trust deed and has also held that necessary approvals/permissions for implementing the objects, have not been obtained, which findings are contrary to the facts on record. Learned counsel for the assessee has prayed that since objects of the assessee are charitable in nature and such objects and activities of the assessee have not been adversely commented therefore, learned CIT (Exemptions) be directed to grant registration u/s 12A of the Act. The question as to whether the Tribunal, at its own, can direct learned CIT (Exemptions) to grant exemption u/s 12A or not, has been examined by Hon'ble Allahabad High Court in the case of Reham Foundation in I.T.A. No.37 of 2017, where vide order dated 26/09/2019, the Hon'ble court has held as under:
“19. The terminology ' as it thinks fit' in relation to the powers of the Appellate authority have been considered by Hon'ble Supreme Court in the case of Babu Lal Nagar versus Shree Synthetics Limited and others reported in 1984 (supp) SCC 128. The relevant paragraph of the judgment is as follows:
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“16. Section 66(1) of the Act provides that the Industrial Court omitting the portion not relevant for the present purpose, may call for and examine the record of such case and pass order in reference thereto as it thinks fit. If the Industrial Court has the jurisdiction to pass any order in reference to a case called for by it as it thinks fit, obviously it can come to a conclusion on the same set of facts different from the one to which the Labour Court had arrived. It was however urged that this jurisdiction of wide amplitude has been cut down by the proviso which provides that the Industrial Court shall not vary or reverse any order of the Labour Court under Section 66(1) unless — (i) it is satisfied that the Labour Court has — (a) exercised jurisdiction not vested in it by law; or (b) failed to exercise a jurisdiction so vested; or (c) acted in exercise of its jurisdiction illegally or with material irregularity. It was urged that these clauses so circumscribe and cut down the jurisdiction of the Industrial Court under Section 66 as to be on par with Section 115 of the Code of Civil Procedure. The main part of Section 61 (sic 66) clearly spells out the jurisdiction of the Industrial Court to pass any order in reference to the case brought before it as it thinks fit. The expression “as it thinks fit” confers a very wide jurisdiction enabling it to take an entirely different view on the same set of facts. The expression “as it thinks fit” has the same connotation, unless context otherwise indicates, “as he deems fit” and the latter expression was interpreted by this Court in Raja Ram Mahadev Paranjype v. Aba Maruti Mali [AIR 1962 SC 753 : 1962 Supp (1) SCR 739] to mean to make an order in terms of the statute, an order which would give effect to a right which the Act has elsewhere conferred. Is this jurisdiction so circumscribed as to bring it on par with Section 115 of the Code of Civil Procedure? Proviso does cut down the ambit of the main provision but it cannot be interpreted to denude the main provision of any efficacy and reduce it to a paper provision. Both must be so interpreted as to permit interference which if not undertaken there would be miscarriage of justice. Sub-clause (c) of the first proviso to Section 66(1) will permit the Industrial Court to interfere with the order made by the Labour Court, if the Labour Court has acted with material irregularity in disposal of the dispute before it. If the finding recorded by the Labour Court is such to which no reasonable man can arrive, obviously, the Industrial Court in
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exercise of its revisional jurisdiction would be entitled to interfere with the same even if patent jurisdictional error is not pointed out.”
Upon a perusal of the powers of the Appellate authority as indicated in section 254(1) of the Act, 1961, it can be seen that the widest jurisdiction has been conferred upon the Appellate authority in the wisdom of the legislature. The said power has not been proscribed in any manner whatsoever.
Hon'ble the Supreme Court in the case of Clariant International Limited and another versus Securities and Exchange Board of India reported in (2004) 8 SCC 524 has held that once the jurisdiction of the Appellate authority is not fettered by statute, it exercises all the jurisdiction. It has also been held that the limits to jurisdiction of the Appellate authority would have been stated explicitly in the statute had that been the intention of legislature.
The relevant paragraphs of the judgment in the case of Clariant International Limited (supra) are as follows;-
“73. Had the intention of Parliament been to limit the jurisdiction of the Tribunal, it could say so explicitly as it has been done in terms of Section 15-Z of the Act whereby the jurisdiction of this Court to hear the Appeal is limited to the question of law.”
”74. The jurisdiction of the Appellate Authority under the Act is not in any way fettered by the statute and, thus, it exercises all the jurisdiction as that of the Board. It can exercise its discretionary jurisdiction in the same manner as the Board.”
In view of the aforesaid judgments of Hon'ble the Supreme Court, it is clearly evident that the provisions of the Act 1961 have to be interpreted strictly in accordance with what it explicitly states. Once the legislature in its wisdom has not fettered the jurisdiction of the Appellate Tribunal, it would not be appropriate for the courts to put fetters upon such jurisdiction since doing so would amount to doing violence to the specific provisions of statute.
A perusal of Section 254 of the Act of 1961 shows that the Appellate Tribunal is given power to pass such orders, as it thinks fit.
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The powers given under Section 254 of the Act of 1961 is to be read along with other provisions of the Act. Section 12AA of the Act of 1961 requires satisfaction about the genuineness of the activities and the objects of a Trust before its registration by the Commissioner. The arguments of learned counsel for Revenue in reference to the requirement of satisfaction on the genuineness of activities of a Trust is to be exercised by the Commissioner and that the Tribunal should not direct registration of Trust unless satisfaction, as envisaged under Section 12 (AA) of the Act, 1961 is recorded, is only partly correct.
Upon consideration of the judgments referred to herein above, we are of the considered opinion that in case where the Commissioner has refused to accept the application for registration of Trust after recording its finding on the basis of material on record before him holding that the activities and object of the Trust are not genuine and the Appellate Tribunal on the basis of the same material on record comes to the conclusion that the order of the Commissioner is perverse since it has been passed ignoring, misconstruing or misinterpreting such evidence, then it can direct registration of the Trust without remanding the matter to the Commissioner.
Remand of the case to the Commissioner in the said circumstance after recording of satisfaction by the Appellate Tribunal about the genuineness of objects and activities of the Trust, on the basis of material on record, would be an empty formality because the Commissioner in such a case can not go against the specific finding recorded by the Appellate Tribunal.
In view of the unfettered power of the Appellate Tribunal in terms of section 254 (1) of the Act, 1961 the Tribunal can very well record its satisfaction on the genuineness of the activities and object of the Trust and can very well direct registration of the Trust without remand of case to the Commissioner in case such satisfaction is recorded on the basis of documents and material already available on record at the stage of examination by Commissioner.
However it would be a different matter where the Appellate Tribunal records such satisfaction on the basis of material or documentary evidence which was not available before the Commissioner while exercising his powers under Section 12 (AA) of the Act, 1961, which is our opinion would require remand.
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Remand to the Commissioner can also be affected in a case where the Commissioner rejects the application on a technical ground without recording its opinion on facts or genuineness of the activities and object of the Trust but the Tribunal finds ground for rejection on such technical ground thereby reopening the issue of recording satisfaction in terms of Section 12 (AA) of the Act, 1961.
In view of the aforesaid discussion, it is clear that the power and jurisdiction of the Appellate Tribunal under Section 254(1) of the Act, 1961 is unfettered thereby enabling the Appellate Tribunal to direct registration of the Trust at its level itself but the same is not open as a matter of course and such power is to be exercised only in circumstances indicated herein above.
The said onus on the Appellate Tribunal to remand the matter in cases indicated herein above is also in view of the strict interpretation of the powers of the Commissioner under Section 12 (AA) of the Act, 1961 because if the Appellate Tribunal is given such wide powers to direct registration of Trust in all or any circumstances, it would render the provisions of Section 12(AA) otiose, which again can not be the intention of legislature.
In view of the above the answer to questions referred are answered as under:- (i) The income tax Appellate Tribunal while hearing an Appeal under Section 254(1) in a matter where registration under Section 12(AA) has been denied by Commissioner income tax can itself pass an order directing commissioner to grant registration in case the income tax Appellate Tribunal disagrees with the satisfaction of the Commissioner on the basis of material already on record before the Commissioner.
However the said power is not to be exercised as a matter of course and that remand to the Commissioner income tax is to be made where the income tax Appellate Tribunal records a divergent view on the basis of material which has been filed before the Appellate Tribunal for the first time.
Remand for determination of question regarding grant of registration to a Trust would also be necessitated in cases where the registration application has been rejected by the Commissioner income tax on technical grounds without recording his satisfaction as
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contemplated under Section 12 (AA) of the Act, 1961 and such decision is overturned by the income tax Appellate Tribunal.
The power of the Appellate Tribunal are co-extensive with the power of the Commissioner under Section 12 (AA) of the Act, 1961 subject to what has been indicated herein above. However order for registration can be issued only after recording satisfaction with regard to genuineness of activities of the Trust as provided under Section 12 (AA) of the Act, 1961.
In view of the aforesaid the reference is answered.
The Registry is directed to place Appeals before the appropriate court dealing with the matter.”
4.1 The above judgment of Hon'ble High Court clearly states that Tribunal is all powerful to grant registration to the assessee at its own where the learned CIT (Exemptions), on the basis of material on record before him, held that the activities and objects of the trust are not genuine and the Tribunal, on the basis of the same material on record, comes to the conclusion that the order of the CIT (Exemptions) is perverse since it has been passed ignoring, misconstruing or misinterpreting such evidence. The Hon'ble court further held that in a case where the CIT (Exemptions) rejects the application on a technical ground without recording his/her opinion on facts or genuineness of the activities or object of the Trust but the Tribunal finds ground for rejection on such technical ground wrong, then the Tribunal should remand the case to the CIT (Exemptions) for reconsidering the issue and after reconsidering the issue and after recording necessary satisfaction for allowing or rejecting the application of the assessee. In the present case, since the genuineness of the activities and objects of the assessee have not been commented by learned CIT (Exemptions) and she has merely rejected the application of the assessee on a technical ground which from the records we have found that such technical ground did not exist as the
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Learned counsel for the assessee has demonstrated that necessary replies were filed to the queries raised by learned CIT (Exemptions) therefore, we remit the issue back to the file of learned CIT (Exemptions) for reconsidering the application of the assessee and for allowing or rejecting the application as the case may be, depending upon her satisfaction regarding genuineness of the activities with respect to objects clause of the assessee. The learned CIT (Exemptions) is expected to pass fresh order within a period of three months from the passing of this order. Needless to say that assessee will co-operate in the proceedings before learned CIT (Exemptions).
In the result, the appeal of the assessee stands allowed for statistical purposes.
(Order pronounced in the open court on 04/08/2022)
Sd/. Sd/. ( T. S. KAPOOR ) ( A. D. JAIN ) Accountant Member Vice President
Dated:04/08/2022 *Singh
Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow Assistant Registrar