Of Environment v. Cit & Ors., 216 Ctr (All) 167. In Thiscase, Follow

Page No.1 High Court of Judicature at Allahabad(Lucknow) ********** Court No. - 3 AFR Case :- INCOME TAX APPEAL No. - 3 of 2014 Appellant :- The Commissioner Of Income Tax Ayakar Bhawan Faizabad Respondent :- Raghuraji Devi Foundation Trust Akbarpur Ambedkar Nagar Counsel for Appellant :- Mr. Sidharth Dhaon,Manish MisraCounsel for Respondent :- Ashish Bansal,Surendra Kumar Garg Hon'ble Rajan Roy,J.Hon'ble Om Prakash Shukla,J. Heard Sri Manish Misra, learned counsel for theappellant. However, no one appears for the opposite party. This is an appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as 'the Act, 1961') by theRevenue. Notices were issued to the respondent herein vide orderdated 07.02.2014. By the same order, the appeal was admittedon the substantial questions of law as framed in the appealwhich read as under:- "(1) Whether in the facts and circumstances of the case theIncome Tax Appellate Tribunal was justified in applying thetime limit of 6 months provided in section 12AA(2) in a casewhere the order u/s 12AA is to be passed in second round toITAT'S directions. Page No.2 (2) Whether non disposal of application for registration bygranting or refusing registration before the expiry of sixmonths as provided u/s 12AA(2) of the Income Tax Act, 1961would result in deemed grant of registration. (3) Whether in the facts and circumstances of the case andthe Hon'ble Income Tax Appellate Tribunal was correct ingranting deemed registration u/s 12AA without appreciatingthe facts that the power to grant or refuse registration isstatutory power of the commissioner u/s 12AA. (4) Whether in the facts and circumstances of the case theIncome Tax Appellate Tribunal has erred in substituting itsown satisfaction in place of the satisfaction of thecommissioner of the income tax as provided u/s 12AA of theIncome Tax Act, 1961, thereby exceeding its jurisdiction." On 07.02.2014 itself, this Court had stayed the operationof impugned order dated 20.09.2013 passed in I.T.A. No.145and 146/Lkw/2012 by Income Tax Appellate Tribunal,Lucknow. The order sheet reveals that as per report of theprocess server, notices had been served personally uponopposite party no.1 on 10.04.2014. However, no one is presenton behalf of the respondent to contest the matter nor anyobjections/ counter affidavit has been filed on its behalf. The facts of the case in brief are that the respondent hadapplied for being registered under Section 12AA of the Act,1961 on 05.02.2010 in Form No.10A. Along with the saidapplication, another application was filed by the respondentunder Section 80G of the Act, 1961. The said application cameto be rejected by the Commissioner of Income Tax, Faizabadon 26.08.2010 on the ground that on an examination ofevidence on record, it is not possible to arrive at a satisfactionthat the appellant/ applicant is genuinely engaged in charitableactivities. By a separate order, the application under Section80G of the Act, 1961 was also rejected. Being aggrieved, the Page No.3 The facts of the case in brief are that the respondent hadapplied for being registered under Section 12AA of the Act,1961 on 05.02.2010 in Form No.10A. Along with the saidapplication, another application was filed by the respondentunder Section 80G of the Act, 1961. The said application cameto be rejected by the Commissioner of Income Tax, Faizabadon 26.08.2010 on the ground that on an examination ofevidence on record, it is not possible to arrive at a satisfactionthat the appellant/ applicant is genuinely engaged in charitableactivities. By a separate order, the application under Section80G of the Act, 1961 was also rejected. Being aggrieved, the Page No.3 respondent filed an appeal before the Income Tax AppellateTribunal bearing I.T.A. No.613 & 593/Luc/10. The said appealwas allowed on 12.01.2011 and the matter was remanded backto the Commissioner for reconsideration. The Commissioner ofIncome Tax, Faizabad reconsidered the applications of therespondent but again rejected the same vide his order dated23.01.2012. The ground of rejection were the same but theywere more detailed keeping in mind judgment of the Tribunal.Again being aggrieved, the respondent herein preferred anappeal bearing ITA No. 145 and 146/Lkw/2012 challenging theaforesaid order of the Commissioner dated 23.01.2012. Theappeals were allowed on 20.09.2013. The appeal against theorder passed under Section 12AA of the Act, 1961 was allowedon the ground that the order of rejection dated 23.01.2012 hadbeen passed more than six months since the passing of theorder dated 12.01.2011 in the earlier appeal by the Income TaxAppellate Tribunal. We may for convenience quote relevant extract of thejudgment of Income Tax Appellate Tribunal dated 20.09.2013which is impugned before us:- "7.Now we examine the present case on the touchstone oflegal provision. In this case the matter was remitted to the fileof CIT by the ITAT vide order dated 12.01.2011. The CITpassed the order rejecting the registration vide order dated23.01.2012. Admittedly the order was passed beyond thestipulated period of six months. Under the circumstances, wefind that the plea of the ld. Counsel for the assessee is cogentthat the assessee has become entitled for registration underIncome section 12AA and also approval under section 80G ofthe Act. In this regard, we draw support from the Hon'blejurisdictional High Court decision in the case of Society forthe Promotion of Education, Adventure Sports & Conversation Page No.4 of Environment vs. CIT & Ors., 216 CTR (All) 167. In thiscase, following was expounded:- (Head notes only) "Charitable trust - Registration under s. 12A-Effect ofnon-passing of order within the time-limit - Takingthe view that non-consideration of the registrationapplication within the time fixed by s. 12AA(2) wouldresult in deemed registration, may at the worst causeloss of some revenue or income-tax payable by theindividual assessee-On the other hand, if a contraryview is taken, it would leave the assessee totally atthe mercy of the IT authorities inasmuch as theassessee has not been provided any remedy under theAct against non-decision-Moreover, the former viewfurthers the object and purpose of the statutoryprovision - Thus, the better interpretation would beto hold that the effect of non-consideration of theapplication for registration under s. 12A within thetime fixed by s 12AA(2) would be a deemed grant ofregistration. Respectfully following the precedent as above and also thelegal provision discussed above, we are of the opinion that theorder of ld. CIT in this case is liable to be set aside and theassessee be granted deemed registration and approval asapplied.legal provision discussed above, we are of the opinion that theorder of ld. CIT in this case is liable to be set aside and theassessee be granted deemed registration and approval asapplied. 9. In the result, these appeals filed by the assessee areallowed."allowed." Respectfully following the precedent as above and also thelegal provision discussed above, we are of the opinion that theorder of ld. CIT in this case is liable to be set aside and theassessee be granted deemed registration and approval asapplied.legal provision discussed above, we are of the opinion that theorder of ld. CIT in this case is liable to be set aside and theassessee be granted deemed registration and approval asapplied. 9. In the result, these appeals filed by the assessee areallowed."allowed." While allowing the appeal, the Tribunal held that oncethe application of the respondent herein was not decidedwithin the period of six months stipulated under Section 12AAof the Act, 1961 after the judgment of the ITAT dated12.01.2011 then, the assessee became entitled for registrationunder Section 12AA and also approval under Section 80G ofthe Act, 1961. In this regard, it drew support from a decisionof this Court in the case of 'Society for the Promotion ofEducation, Adventure Sport & Conservation of Environment vs.Commissioner of Income Tax & Ors.' 216 CTR (All) 167. Page No.5 We are constrained to comment that in doing so, theITAT referred to the 'Head Notes' of the aforesaid report whichreflects very poorly upon the functioning of the ITAT which isa statutory body comprising of a Judicial Member and aMember from Accounts Services. Judgments are to be referred,relied and quoted with regard to the opinion expressed in thebody of the judgment and not in the 'Head Notes' which isprepared by the editor of the journal concerned. But leaving the matter at that, we now proceed toconsider the issue involved herein. From the substantial questions of law on which theappeal was admitted, first and foremost, we are required toconsider as to whether in the facts and circumstances of thecase, Income Tax Appellate Tribunal was justified in applyingthe limit of six months provided in Section 12AA(2) of the Act,1961 in a case where the order under Section 12AA of the Act,1961 has been passed in the second round of litigationconsequent to directions of the Income Tax Appellate Tribunalin the first appeal before it. In this context, we may, first ofall, refer to the relevant provision contained in Section 12AA(2)of the Act, 1961 which reads as under:- "(2) Every order granting or refusing registration under clause(b) of sub-section (1) shall be passed before the expiry of sixmonths from the end of the month in which the applicationwas received under clause (a) [or clause (aa) [or clause (ab)] ofsub-section (1)] of section 12A.]" As is evident from the reading of the aforesaid provisionevery order granting or refusing registration under clause (b) ofsub-Section (1) shall be passed before the expiry of six months Page No.6 "(2) Every order granting or refusing registration under clause(b) of sub-section (1) shall be passed before the expiry of sixmonths from the end of the month in which the applicationwas received under clause (a) [or clause (aa) [or clause (ab)] ofsub-section (1)] of section 12A.]" As is evident from the reading of the aforesaid provisionevery order granting or refusing registration under clause (b) ofsub-Section (1) shall be passed before the expiry of six months Page No.6 from the end of the month in which the application wasreceived under clause (a) or clause (aa) or clause (ab) of sub-Section (1) of Section-12A of the Act, 1961. The application inquestion in this case was filed on 05.02.2010, therefore, basedon the language used in sub-Section (2) of Section 12AA of theAct, 1961, the period of six months referred therein was toexpire on 28/29.08.2010. The record reveals that in this case,the application was rejected on 26.08.2010 and there is nofactual dispute in this regard. Therefore, rejection mentioned insub-Section (2) of Section 12A of the Act, 1961 was beforeexpiry of six months from the end of the month in which theapplication of the respondent was received. At this stage, it isnot out of place to mention here that Section 12AA of the Act,1961 refers to the procedure of registration whereas theapplication itself is to be filed under Section 12A of the Act,1961 that is why reference to Section 12A in sub-Section (2) ofSection 12AA of the Act, 1961. The said application forregistration is for the purposes of Section 11 and 12 of the Act,1961. Therefore, purely on facts, we find that the initialrejection was within the period stipulated in sub-Section (2) ofSection 12A of the Act, 1961. Now, the respondent preferredan appeal against the said order before the Income TaxAppellate Tribunal which was decided on 12.01.2011 and thematter was remanded back to the Commissioner for a decisionafresh. This fresh decision was taken on 23.01.2012 and theapplication of the respondent was again rejected. When thematter went up in appeal for the second time before theIncome Tax Appellate Tribunal, the Tribunal, vide its judgment,which is impugned herein and is dated 20.09.2013, has taken Page No.7 the view that this subsequent decision dated 23.01.2012 wastaken after expiry of six months and accordingly, it has arrivedat a conclusion that it being so, the respondent was entitled forregistration under Section 12AA and also approval underSection 80G of the Act, 1961 relying upon a Division Benchjudgment of this Court in the case of Society for the Promotionof Education, Adventure Sport & Conservation of Environment(supra)wherein it was held that such an eventuality wouldresult in deemed registration. First and foremost, we are of the opinion that in the factsof this case, the application was rejected for the first time on26.08.2010 within the period of six months envisaged in sub-Section (2) of Section 12A of the Act, 1961. If the aggrievedparty initiates proceedings in appeal thereafter and inpursuance to the orders passed in such an appeal, any decisionis to be taken afresh then there is no question of suchsubsequent decision being hit on account of expiry of period ofsix months referred in Section 12AA of the Act, 1961 for thereason that the said period as is evident from the languageused therein is to be calculated from the end of the month inwhich the 'application was received' which is indicative of thefact that legislature intended that the decision has to be takenbefore expiry of six months from the end of the month inwhich the application mentioned therein was received. It is notthe intention that if, on an appeal filed against such an order,any directions are issued and thereafter any decision is takenwhich is taken beyond the period of six months then such adecision would be a nullity in view of sub-Section (2) of Page No.8 Page No.8 Section 12A of the Act, 1961. Any such understanding of theprovision would be against the express language of theprovision. Once a decision is taken on the application withinthe period of six months envisaged in Section 12AA(2) thensubsequent events are irrelevant so far as application of Section12AA(2) of the Act is concerned. The period of six monthsreferred in Section 12AA(2) has to be calculated from the endof the months in which the application under Section 12A wasreceived and not from any other date. Therefore, we are of theopinion that substantial questions of law framed at point no.(1)has to be answered in favour of the Revenue and against theAssessee. The Tribunal was not justified in applying Section12AA(2) of the Act, 1961 in the facts of the present case andthe order of Commissioner of Income Tax, Faizabad could nothave been set aside on this ground. The decision of theTribunal is based on a misreading and misunderstanding ofSection 12AA(2) of the Act, 1961, its purport and scope. As regards the substantial questions of law framed atpoint nos.(2) and (3), learned counsel for the appellant hasplaced before us a Full Bench decision of this Court renderedin Income Tax Appeal No.348 of 2008 ''Commissioner IncomeTax vs. Muzafar Nagar Development Authority'wherein thequestions considered by the Full Bench were as under:- "(i) Whether the non disposal of an application forregistration, by granting or refusing registration, before theexpiry of six months as provided under Section 12AA(2) of theIncome Tax Act, 1961 would result in deemed grant ofregistration; and (ii) Whether the Division Bench judgment of this Court in thecase of Society for the Promotion of Education, AdventureSport & Conservation of Environment vs. Commissioner of Income Tax holding that the effect of non consideration of theapplication for registration within the time fixed by Section12AA(2) would be deemed grant of registration, is legallycorrect." The said questions after a detailed discussion of law on the subject were answered as under:- "In the circumstances, we answer the questions referred to the Full Bench for reference in the following terms: (i) Non disposal of an application for registration, bygranting or refusing registration, before the expiry ofsix months as provided under Section 12AA (2) of theIncome Tax Act 1961 would not result in a deemedgrant of registration; andgranting or refusing registration, before the expiry ofsix months as provided under Section 12AA (2) of theIncome Tax Act 1961 would not result in a deemedgrant of registration; and (ii) the judgment of the Division Bench of this Court inSociety for the Promotion of Education Adventure Sport& Conservation of Environment (supra) does not laydown the correct position of law.Society for the Promotion of Education Adventure Sport& Conservation of Environment (supra) does not laydown the correct position of law. The reference is, accordingly, answered. The appeal shallnow be placed before the regular bench in accordance withthe roster for final disposal in terms of the questions soanswered." In this context, we may also mention that the decision in Society for the Promotion of Education, Adventure Sport &Conservation of Environment (supra) which was declared as notlaying down the correct position of law, was challenged by theRevenue before Hon'ble the Supreme Court by means of SpecialLeave Petition (C) No.9705 of 2009 which after being convertedinto Civil Appeal No.1478 of 2016 was decided on 16.02.2016in the following terms:- "1. Leave granted. 2. There is no appearance on behalf of the sole respondentdespite service of notice and adjournment sought for on acouple of occasions earlier. 3. The short issue is with regard to the deemed registration ofan application under Section 12AA of the Income Tax Act. TheHigh Court has taken the view that once an application ismade under the said provision and in case the same is not Page No.10 Society for the Promotion of Education, Adventure Sport &Conservation of Environment (supra) which was declared as notlaying down the correct position of law, was challenged by theRevenue before Hon'ble the Supreme Court by means of SpecialLeave Petition (C) No.9705 of 2009 which after being convertedinto Civil Appeal No.1478 of 2016 was decided on 16.02.2016in the following terms:- "1. Leave granted. 2. There is no appearance on behalf of the sole respondentdespite service of notice and adjournment sought for on acouple of occasions earlier. 3. The short issue is with regard to the deemed registration ofan application under Section 12AA of the Income Tax Act. TheHigh Court has taken the view that once an application ismade under the said provision and in case the same is not Page No.10 responded to within six months, it would be taken that theapplication is registered under the provision. 4. The learned Additional Solicitor General appearing for theappellants, has raised an apprehension that in the case of therespondent, since the date of application was of 24.02.2003, atthe worst, the same would operate only after six months fromthe date of the application. 5. We see no basis for such an an apprehension since that isthe only logical sense in which the Judgment could beunderstood. Therefore, in order to disabuse any apprehension,we make it clear that registration of the application underSection 12AA of the Income Tax Act in the case of therespondent shall take effect from 24.08.2003. 6. Subject to the above clarification and leaving all otherquestions of law open, the appeal is disposed of with no orderas to costs." From a bare perusal of the said judgment, specificallypara no.6 thereof, it is evident that Hon'ble the Supreme Courtclarified the matter as to the date from which the period of sixmonths referred in Section 12AA of the Act, 1961 was to becounted but it left all other questions of law open. Therefore,on the question of deemed registration, in our humble opinion,the Full Bench decision of this Court still holds the ground asHon'ble the Supreme Court did not express any opinion on thesaid question. We may in this context refer to a recent decision ofHon'ble the Supreme Court dated 22.04.2022 passed in SpecialLeave to Appeal (C) No(s).26978/2017 'Harshit FoundationSehmalpur Jalalpur Jaunpur vs. Commissioner of Income Tax'wherein this very question of 'deemed registration' arose andtheir Lordships of Hon'ble the Supreme Court after consideringthe Full Bench decision in the case of CIT vs. Muzafar NagarDevelopment Authority (supra) approved the same anddismissed the Special Leave Petition against the judgment of a Page No.11 Division Bench of this Court dated 31.01.2017 rendered inIncome Tax Appeal Defective No.24 of 2013 'Commissioner ofIncome Tax Faizabad vs. Harshit Foundation SehmalpurJalalpur Jaunpur'. The judgment of Hon'ble the Supreme Courtreads as under:- "We have heard Mr. Abhinav Mehrotra, learned counselappearing on behalf of the petitioner and Mr. N.Venkataraman, learned ASG appearing on behalf of therespondent. The only question which is posed for consideration before theHigh Court was whether on non-deciding the application forregistration under Section 12AA (2) of the Income Tax Act,1961 (for short the Act') within a period of six months, thereshall be deemed registration or not. The aforesaid aspect has been dealt with and considered indetail by the Full Bench of the Allahabad High Court in itsdecision in the case of Commissioner of Income Tax vs.Muzafar Nagar Development Authority [ITA 348 of 2008]. "We have heard Mr. Abhinav Mehrotra, learned counselappearing on behalf of the petitioner and Mr. N.Venkataraman, learned ASG appearing on behalf of therespondent. The only question which is posed for consideration before theHigh Court was whether on non-deciding the application forregistration under Section 12AA (2) of the Income Tax Act,1961 (for short the Act') within a period of six months, thereshall be deemed registration or not. The aforesaid aspect has been dealt with and considered indetail by the Full Bench of the Allahabad High Court in itsdecision in the case of Commissioner of Income Tax vs.Muzafar Nagar Development Authority [ITA 348 of 2008]. After considering in detail the provisions of Section 12AA (2)of the Act and having found that there is no specific provisionin the Act by which it provides that on non-deciding theregistration application under Section 12AA (2) within a periodof six months there shall be deemed registration, the FullBench of the High Court has rightly held that even if in acase where the registration application under Section 12AA isnot decided within six months, there shall not be any deemedregistration. We are in complete agreement with the view taken by theFull Bench of the High Court.The Special Leave Petition stands dismissed." In view of this pronouncement, the law on the questionof 'deemed registration' which had already been clarified anddeclared by the Full Bench of this Court referred hereinabovestands further crystallized and approved by Hon'ble theSupreme Court by the aforesaid decision. In view of theaforesaid declaration of law, decision of the Division Bench ofthis Court in the case of Society for the Promotion of Page No.12 Education, Adventure Sport & Conservation of Environment(supra)is not good law as held by the Full Bench though itmay be binding between the parties in view of the orderpassed in the civil appeal arising therefrom as alreadydiscussed. In view of the above, substantial question no.(2) isanswered in terms of the Full Bench decision in the case ofCIT vs. Muzafar Nagar Development Authority (supra) anddecision of Hon'ble the Supreme Court in the case of HarshitFoundation Sehmalpur Jalalpur Jaunpur (supra) in favour of theRevenue as there is no question of deemed registration merelybecause the application is not decided within the period of sixmonths referred in Section 12AA(2) of the Act, 1961. In view of the discussion already made in the context ofsubstantial question nos.1 and 2 and for the reasons mentionedhereinabove, we hold that the Tribunal erred in grantingdeemed registration to the Assessee under Section 12AA of theAct, 1961. We, accordingly, answer question no.(3) in favour ofthe Revenue and against the Assessee. As regards substantial question no.(4), in view of ourdiscussion of substantial question nos.(1), (2) and (3) and forthe reasons already given hereinabove, we hold that theTribunal has erred in passing the impugned judgment andorder. We answer this question in favour of the Revenue andagainst the Assessee. In view of the above discussion, the order of Income TaxAppellate Tribunal dated 20.09.2013 cannot be sustained. It is Page No.13 accordingly quashed. The order of Commissioner of IncomeTax, Faizabad dated 23.01.2012 stands revived. The appeal is allowed in the aforesaid terms. Order Date :- 23.8.2022Shanu/- (Om Prakash Shukla,J.)(Rajan Roy,J.)