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2022 (9) TMI 40 - HC - Income TaxExemption u/s 11 - deemed grant of registration - Tribunal justification in applying the time limit of 6 months provided in section 12AA(2) in a case where the order u/s 12AA is to be passed in second round to ITAT'S direction - HELD THAT - It is not the intention that if, on an appeal filed against such an order, any directions are issued and thereafter any decision is taken which is taken beyond the period of six months then such a decision would be a nullity in view of sub-Section (2) of Section 12A of the Act, 1961. Any such understanding of the provision would be against the express language of the provision. Once a decision is taken on the application within the period of six months envisaged in Section 12AA(2) then subsequent events are irrelevant so far as application of Section 12AA(2) of the Act is concerned. The period of six months referred in Section 12AA(2) has to be calculated from the end of the months in which the application under Section 12A was received and not from any other date. Therefore, we are of the opinion that substantial questions of law framed at point no.(1) has to be answered in favour of the Revenue and against the Assessee. Tribunal was not justified in applying Section 12AA(2) of the Act, 1961 in the facts of the present case and the order of Commissioner of Income Tax, Faizabad could not have been set aside on this ground. The decision of the Tribunal is based on a misreading and misunderstanding of Section 12AA(2) of the Act, 1961, its purport and scope. Deemed registration - Recent decision of Hon'ble the Supreme Court in 'Harshit Foundation Sehmalpur Jalalpur Jaunpur 2022 (5) TMI 179 - SC ORDER wherein this very question of 'deemed registration' arose and their Lordships of Hon'ble the Supreme Court after considering the Full Bench decision in the case of CIT vs. Muzafar Nagar Development Authority 2022 (5) TMI 179 - SC ORDER approved the same and dismissed the Special Leave Petition against the judgment of a Division Bench of this Court 2015 (3) TMI 99 - ALLAHABAD HIGH COURT (LB) rendered in Income Tax Appeal Defective No.24 of 2013 'Commissioner of Income Tax Faizabad vs. Harshit Foundation Sehmalpur Jalalpur Jaunpur'. Law on the question of 'deemed registration' which had already been clarified and declared by the Full Bench of this Court referred hereinabove stands further crystallized and approved by Hon'ble the Supreme Court by the aforesaid decision. In view of the aforesaid declaration of law, decision of the Division Bench of this Court in the case of Society for the Promotion of Education, Adventure Sport Conservation of Environment 2008 (4) TMI 700 - ALLAHABAD HIGH COURT is not good law as held by the Full Bench though it may be binding between the parties in view of the order passed in the civil appeal arising therefrom as already discussed. Substantial question no.(2) is answered in terms of the Full Bench decision in the case of CIT vs. Muzafar Nagar Development Authority 2015 (3) TMI 99 - ALLAHABAD HIGH COURT (LB) and decision of Hon'ble the Supreme Court in the case of Harshit Foundation Sehmalpur Jalalpur Jaunpur 2022 (5) TMI 179 - SC ORDER in favour of the Revenue as there is no question of deemed registration merely because the application is not decided within the period of six months referred in Section 12AA(2) of the Act, 1961. Power to grant or refuse registration - In view of the discussion already made in the context of substantial question nos.1 and 2 and for the reasons mentioned hereinabove, we hold that the Tribunal erred in granting deemed registration to the Assessee under Section 12AA of the Act, 1961. We, accordingly, answer question no.(3) in favour of the Revenue and against the Assessee.
Issues Involved:
1. Application of the six-month time limit under Section 12AA(2) of the Income Tax Act, 1961. 2. Deemed registration due to non-disposal of the application within six months. 3. Authority of the Commissioner to grant or refuse registration under Section 12AA. 4. Jurisdiction of the Income Tax Appellate Tribunal (ITAT) in substituting its satisfaction for that of the Commissioner. Issue-wise Analysis: 1. Application of the Six-Month Time Limit under Section 12AA(2): The primary issue was whether the ITAT was justified in applying the six-month time limit provided in Section 12AA(2) in a second round of litigation. The court examined Section 12AA(2), which mandates that every order granting or refusing registration must be passed within six months from the end of the month in which the application was received. The application in question was filed on 05.02.2010 and initially rejected on 26.08.2010, within the stipulated six months. The ITAT's decision to grant registration was based on the premise that the subsequent decision dated 23.01.2012 was beyond the six-month period, which the High Court found to be a misinterpretation. The six-month period should be calculated from the end of the month in which the application was originally received, not from any subsequent date. Thus, the court held that the ITAT was incorrect in applying the six-month limit in the second round of litigation. 2. Deemed Registration Due to Non-disposal within Six Months: The court addressed whether non-disposal of the application within six months results in deemed registration. The Full Bench decision in 'Commissioner Income Tax vs. Muzafar Nagar Development Authority' clarified that non-disposal within six months does not result in deemed registration. This position was further affirmed by the Supreme Court in 'Harshit Foundation Sehmalpur Jalalpur Jaunpur vs. Commissioner of Income Tax,' which upheld that there is no provision in the Act for deemed registration if the application is not decided within six months. Consequently, the court answered this issue in favor of the Revenue, stating that there is no deemed registration merely due to non-disposal within the stipulated time. 3. Authority of the Commissioner to Grant or Refuse Registration: The court reiterated that the power to grant or refuse registration under Section 12AA is a statutory power vested in the Commissioner. The ITAT's decision to grant deemed registration without the Commissioner's explicit approval was deemed incorrect. The court emphasized that the ITAT exceeded its jurisdiction by substituting its satisfaction for that of the Commissioner, thereby infringing upon the statutory authority of the Commissioner. 4. Jurisdiction of the ITAT in Substituting its Satisfaction: The court held that the ITAT erred in substituting its satisfaction for that of the Commissioner. The ITAT's reliance on the 'Head Notes' of a previous judgment rather than the body of the judgment was criticized. The court underscored that judgments should be referred to and relied upon based on the opinions expressed in the body of the judgment, not the 'Head Notes.' The ITAT's decision was based on a misreading and misunderstanding of Section 12AA(2), leading to an incorrect application of the law. Conclusion: The High Court quashed the ITAT's order dated 20.09.2013 and revived the order of the Commissioner of Income Tax, Faizabad dated 23.01.2012. The appeal was allowed in favor of the Revenue, and all substantial questions of law were answered against the Assessee. The court clarified that the six-month period for deciding an application under Section 12AA(2) is to be calculated from the end of the month in which the application was received, and there is no provision for deemed registration due to non-disposal within this period.
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