2019 (10) TMI 151 - HC - Income Tax

ITAT can direct Commissioner to grant Section 12AA registration if refusal is based on existing material.

Commissioner Of Income Tax Exemption U.P State Cons. & Infra. Versus M/s Reham Foundation Kandhari Lane Lal Bagh Lucknow

The Income Tax Appellate Tribunal (ITAT) can direct the Commissioner to grant registration under Section 12AA if it finds the Commissioner's decision ... Power and jurisdiction of the Appellate Tribunal u/s 254(1) - Power of the Appellate Tribunal co-extensive with the power of the Commissioner under Section 12 (AA) Grant of registration to a Trust u/s 12AA - Whether ITAT while hearing Appeal in a matter where registration under Section 12AA has been denied by Commissioner Income Tax can itself pass an order directing Commissioner to grant registration or should leave the matter to be considered by Commissioner Income Tax to consider matter afresh giving rise to further litigation in the matter? HELD THAT:- 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. 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. 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. 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. 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. Order:- (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 contemplated under Section 12 (AA) of the Act, 1961 and such decision is overturned by the income tax Appellate Tribunal. (ii) 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. Issues Involved:1. Whether the Income Tax Appellate Tribunal (ITAT) can direct the Commissioner to grant registration under Section 12AA or should remand the matter for fresh consideration.2. Whether the ITAT has co-extensive appellate jurisdiction similar to that of the authorities below.Issue-wise Detailed Analysis:Issue 1: ITAT's Authority to Direct RegistrationThe Full Bench was constituted to address whether the ITAT can itself pass an order directing the Commissioner to grant registration under Section 12AA or should remand the matter. The Revenue contended that the power to register a trust under Section 12AA lies solely with the Commissioner, who must be satisfied with the genuineness of the trust's activities. They argued that the ITAT should remand the case if it finds merit in the appeal, rather than directing registration itself, citing the Division Bench's decision in Commissioner of Income Tax, Meerut vs. M/S. A.R. Trust Meerut.The assessee's counsel argued that if the ITAT, upon reviewing the material, is satisfied with the genuineness of the trust's activities, it can direct registration to avoid unnecessary remand and litigation. They emphasized that the ITAT has the power under Section 254 of the Act to pass such orders as it thinks fit, including directing registration if the Commissioner's refusal was based on perverse findings.The court examined Section 12AA, which mandates the Commissioner's satisfaction regarding the genuineness of the trust's activities before granting registration. It was noted that the ITAT, as the last court of facts, has wide jurisdiction under Section 254(1) to pass orders it deems fit. The court concluded that if the ITAT finds the Commissioner's order perverse based on the same material, it can direct registration without remand. However, if new material is presented at the ITAT level or if the Commissioner's refusal was on technical grounds, remand would be necessary.Issue 2: Co-extensive Appellate JurisdictionThe court considered whether the ITAT's appellate jurisdiction is co-extensive with that of the Commissioner under Section 12AA. The court referred to various judgments, including Shiv Shakti Cooperative Housing Society vs. Swaraj Developers, which emphasized that an appeal is a continuation of the original proceedings and the appellate authority can take a different view on the same set of facts.The court also referred to the judgment in Clariant International Limited vs. SEBI, which stated that the appellate authority's jurisdiction is not fettered unless explicitly limited by statute. The court concluded that the ITAT's powers are co-extensive with those of the Commissioner under Section 12AA, meaning it can pass orders regarding the registration of a trust after recording satisfaction about the genuineness of its activities.Conclusion:1. The ITAT can direct the Commissioner to grant registration under Section 12AA if it disagrees with the Commissioner's satisfaction based on the material already on record. This power should not be exercised as a matter of course, and remand is necessary if new material is presented or if the Commissioner's refusal was on technical grounds.2. The ITAT's powers are co-extensive with those of the Commissioner under Section 12AA, subject to recording satisfaction regarding the genuineness of the trust's activities.The reference was answered accordingly, and the registry was directed to place the appeals before the appropriate court.