High Court Of Punjab And Haryana
CIT (Exemptions) Chandigarh vs. Shri Shirdi Sai Darbar Charitable Trust (Dharamshala)
Section : 12AA
Ajay Kumar Mittal And Ramendra Jain, JJ.
IT Appeal No. 38 Of 2017
March  27, 2017
JUDGMENT
Ajay Kumar Mittal, J. – The appellant-revenue impugns the order dated 08.06.2016, Annexure A.2, passed by the Income Tax Appellate Tribunal Divisional Bench, Chandigarh (in short “the Tribunal”) through the present appeal filed under Section 260-A of the Income Tact Act, 1961 (in short “the Act”) in ITA No.692/CHD/2015, claiming following substantial questions of law:—
“(i) Whether on the facts and circumstances of the case, the order of the ITAT is not perverse in holding that the CIT has not made adverse remarks on the objects and activities of the applicant and thereby directing to grant registration to the applicant whereas the CIT was prevented from making such observations as the applicant had not got its accounts audited and had also not filed returns of income which would have enabled the CIT to go into the stated objects and activities and draw conclusion about the genuineness of the same?
(ii) Whether on the facts and circumstances of the case, the order of the ITAT is not perverse in holding that non filing of return of income is not a valid ground to deny registration under Section 12AA of the I.T. Act, 1961 when the CIT is fully empowered under Section 12AA(1)(a) to call for such documents to satisfy himself about the genuineness of the activities of the applicant. Whether the term ‘such documents’ would not include audited accounts and return of income for the purpose of determination of genuineness of activities of a trust?
(iii) Whether on the facts and circumstances of the case, the ITAT was justified in holding that the provisions of section 13(1)(c) comes in to play at the time of granting exemption under Section 11 whereas Section 12AA(4) empowers the CIT to cancel registration under Section 12AA(4) where violation of Section 13(1)(c) noticed?
(iv) Whether on the facts and circumstances of the case, the powers conferred under Section 12AA(4) inserted w.e.f. 01.10.2014 cannot be exercised by the CIT while granting registration under Section 12AA(1) even when the evidences adduced during the proceedings, reveal infractions of the statute?
(v) Whether on the facts and circumstances of the case, the ITAT has erred in directing the registration to be accorded instead of reverting it back for re-examination in the light of its findings?”
2. Briefly, the facts as narrated in the appeal, necessary for adjudication of the controversy involved, may be noticed. The respondent assessee, a trust, filed an application for registration under Section 12AA of the Act on 09.12.2014. Vide order dated 26.06.2015, Annexure A.1, the Commissioner of Income Tax (Exemptions) [CIT(E)] denied registration to the assessee on the ground that it had not filed any return of income for the assessment years 2012-13 to 2014-15. The assessee’s receipt for these years was Rs. 5,52,369/-, Rs. 15,15,442/- and Rs. 10,47,415/- respectively. It was further recorded that the accounts were not got audited by the assessee. Thus, the CIT (E) held that the accounts of the assessee were not reliable/genuine. Clause 12 of the objects of the assessee trust conferred absolute powers on the trustees to manage the property of the trust which in turn was liable to attract the provisions of Section 13 (1) (c) of the Act. Aggrieved by the order, the assessee filed an appeal before the Tribunal. Vide order dated 08.06.2016, Annexure A.2, the Tribunal allowed the appeal filed by the assessee and directed the CIT (E) to grant it registration. It was held that non-filing of the return was not a valid ground to deny registration as the CIT (E) had only to satisfy himself about the charitable nature of the objects and genuineness of the activities of the trust. It was further recorded that provisions of Section 13 of the Act were to be looked into by the Assessing Officer at the time of assessment proceedings and not at the time of granting registration under Section 12AA of the Act. Further, no adverse remarks had been made by the CIT (E) with regard to the objects contained in the memorandum of the trust. Hence, the instant appeal by the appellant-revenue.
3. We have heard learned counsel for the appellant-revenue.
4. The matter has been examined by the Tribunal after perusing the relevant statutory provisions. It has been categorically recorded by the Tribunal that the CIT (E) has to satisfy two conditions while granting registration under Section 12AA of the Act. Firstly, whether the objects of the assessee are charitable in nature and thus, the activities are genuine. It cannot be concluded on the basis that the assessee has not filed its income tax returns in earlier years that the activities of the assessee are not genuine. It has been further recorded that Section 13 of the Act comes into play at the time of granting exemption under Section 11 of the Act and not at the time of granting registration under Section 12AA of the Act. No adverse remarks have been recorded by the CIT (E) with regard to the objects contained in the memorandum of the assessee-trust to come to the conclusion that its activities are not genuine. Thus, it has been rightly directed by the Tribunal to the CIT (E) to grant registration under Section 12AA of the Act. The relevant observations recorded by the Tribunal read thus:—
“We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The first reason on the basis of which the Commissioner of Income Tax (Exemptions) has refused to grant registration to the assessee is that the assessee has not been filing its income-tax returns in the earlier years. We do not find that it is a good reason to reject the application for registration since the two conditions which the Commissioner of Income Tax (Exemptions) has to satisfy while granting the registration under Section 12A of the Act, are that the objects of the assessee are charitable in nature and the activities are genuine. Just because the assessee has not filed its income tax returns in earlier years, it cannot be said that the activities of the assessee are not genuine. Reliance placed by the learned counsel for the assessee on the judgment of the Allahabad High Court as well as the order of the Chennai Bench of the Tribunal are not out of place, whereby it has been held that non-filing of return cannot be one of the reasons for denying registration under Section 12A of the Act. With regard to the second objection raised by the Commissioner of Income Tax (Exemptions) that as per clause-12 of the Memorandum of trust, the trustees have been given absolute powers to manage the property. We have perused the clause-12 of the Memorandum of the trust, whereby the trustees are authorized to demise the immovable property or properties of the trust either from year to year or for any fixed term or for any term of years or on monthly basis at such rent and subject to such conditions as they deem fit and proper and also accept surrender of lease and may manage the property as they think proper. From the perusal of this clause, we observe that the trustees have been given powers to give property of the trust on lease or on rent. We do not find anything wrong in this clause so as to deny the assessee the registration under Section 12A of the Act. As regards the apprehension of the Commissioner of Income Tax (Exemptions) that his clause may attract the provisions of Section 13 (1)(c) of the Act, we are of the view that the conditions as provided in Section 13 or elsewhere are to be seen by the Assessing Officer at the time of assessment proceedings on yearly basis and not by the CIT (Appeals) while granting registration under Section 12A of the Act.
8. Sections 13 comes into play at the time of granting exemption under Section 11 of the Act and not at the time of granting registration under Section 12A of the Act. The only two requirements as stated hereinabove while granting registration under Section 12A of the Act, are with respect to the charitable nature of the objects of the assessee and genuineness of the activities. Since we observe that no adverse remarks have been made by the Commissioner of Income Tax (Exemptions) with regard to the objects contained in Memorandum and as stated hereinabove that the observations of the Commissioner of Income Tax (Exemptions) do not lead to the conclusion that the activities of the assessee are not genuine, we hereby direct the Commissioner of Income Tax (Exemptions) to grant registration under Section 12A of the Act to the assessee.”
5. Learned counsel for the appellant-revenue has not been able to show that the findings recorded by the Tribunal are in any way illegal or perverse warranting interference by this Court. Consequently, no substantial question of law arises and the appeal stands dismissed.
[Citation : 395 ITR 519]
