Section 12 AA Registration Can’t Be Cancelled on basis of the Set of Provision of Trust: Jharkhand High Court

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The Jharkhand High Court ruled that the registration granted under section 12AA of the Income Tax Act 1961 cannot be cancelled on the basis of the same set of provisions of the Trust.

Background 

The Appeal has been preferred by the Appellant being aggrieved by the order passed in ITA by Income Tax Appellate Tribunal, Ranchi, wherein the order passed by Respondent-Commissioner of Income Tax (Exemption), Ranchi cancelling registration of the Appellant under Section 12AA of the Income Tax Act, 1961 has been upheld.

Arguments 

Advocate Sumeet Gadodia, appearing for the Appellant, emphasized that the foundational basis of the order passed by CIT (Exemption) was the order of the High Court passed in the Public Interest Litigation, and, since the said order has been set aside by the Apex Court, the very foundation of the impugned order was rendered nonest and void.

Advocate Ratnesh Nandan Sahay, appearing for Revenue, contended that the CIT (Exemptions), while cancelling the registration certificate, has specifically held that since the Trust Deed was changed contrary to the wishes of the founder for selling the property of the deity, the activity of the Trust was held to be not genuine by CIT (Exemptions), which is the correct position in the eye of law. 

Decision 

The division bench of Justice Aparesh Kumar Singh and Justice Deepak Roshan agreed with Judgment of the Madras High Court and declared that once registration has been granted under section 12AA after satisfying about genuineness of the activities of the Trust, the same cannot be cancelled on the basis of the same set of provisions of the Trust. 

“ITAT, despite the order of the Hon’ble Apex Court, being brought to its notice, held that the activity of the Trust is not genuine and bona fide, as the Pujari of the Trust changed the original Trust Deeds and it has violated the objects of the Trust in transferring the property of the Trust. This finding of ITAT is directly in the teeth of the Judgment of the Hon’ble Apex Court in the case of the Appellant-Trust itself and is not sustainable in the eye of law” the court said. 

It was observed by the court that Appellant-Trust has deposited the sale proceeds in fixed deposit with the Bank for a period of more than six months and, thus, it cannot be said that Appellant-Trust has utilized the sale proceeds contrary to the objects of the Trust. Thus, the finding of ITAT in impugned order that Appellant failed to utilize the sale proceeds for the objectives of the Trust is perverse. 

The court said that it is trite law that the Tribunal cannot travel beyond the reasons recorded in the order impugned before it and develop a complete de novo case for the Revenue, which was not the basis of the order passed by revenue authority.

The bench allowed the Appeal and set aside the order passed by ITAT, Ranchi Bench, Ranchi, and, thus, consequently, further quashed and set aside the order passed by CIT (Exemptions) under section 12AA(3) of the I.T. Act cancelling registration of the Appellant-Trust under section 12A/12AA of the I.T. Act.

Case title: Sri. Ramjanki Tapovan Mandir v/s The Commissioner of Income Tax (Exemptions) and Ors.

Citation: T.A. No. 04 of 2020

Click here to read the Order/Judgment

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