2017 (5) TMI 1170 - HC - Income Tax

Grant of registration u/s 12AA - whether the Trust failed to establish genuineness of its actual activities? - Held that - Looking to the reasons given by Income Tax Appellate Tribunal, Circuit Bench, Ranchi in allowing the claim it appears that factually wrong aspects have been appreciated and wrongly this appeal has been allowed of the respondent. It has been observed by the Income Tax Appellate Tribunal that there was an application for renewal of the registration. It is factually a wrong aspect of the matter. Moreover, previously the registration was granted under Section 12AA is also not a fact of this case. It ought to be kept in mind by the Income Tax Appellate Tribunal that whenever they decide more than one matter, all care should have been taken for factual aspects of each & every case, otherwise, this type of error is bound to occur. In view of these facts, we, hereby, quash and set aside the order passed by the Income Tax Appellate Tribunal, Circuit Bench, Ranchi and we hereby remand the matter to Income Tax Appellate Tribunal, Circuit Bench, Ranchi for its afresh decision.

Summary

Issues:
1. Justification of quashing order u/s 12AA(1)(b)(ii) by ITAT without considering CIT's rejection basis
2. Correctness of ITAT's direction to grant registration u/s 12AA without verifying Trust's independent existence
3. Legality of ITAT's direction to grant registration u/s 12AA without considering the Settler's rights
4. Validity of ITAT's direction to grant registration u/s 12AA without establishing genuineness of Trust's activities
5. Error in ITAT's direction to grant registration u/s 12AA without producing essential documents
6. Legality of ITAT's common order involving different Assessees
7. Perversity of the impugned order

Analysis:

1. The Tax Appeal challenged the ITAT's decision to quash the order under section 12AA(1)(b)(ii) of the Income Tax Act, 1961 without delving into the CIT's rejection basis. The appellant contended that the factual aspects were mixed up, leading to an incorrect allowance of the respondent's application. Various substantial questions of law were raised regarding the justification of ITAT's decision.

2. The appellant further contested the correctness of ITAT's direction to grant registration under section 12AA without verifying the independent existence of the Trust. Concerns were raised about the Settler reserving all rights, which was deemed contrary to the spirit of a Charitable Trust.

3. Additionally, the appellant challenged the legality of ITAT's direction to grant registration without assessing the Trust's genuineness in establishing its activities vis-a-vis its stated objectives. The failure to produce essential documents like the Original Trust Deed, Resolution Register, and Donation Register was highlighted as a crucial flaw.

4. The ITAT's decision to pass a common order involving different Assessees was questioned for its legality and potential procedural errors. The appellant argued that such an approach could lead to inaccuracies and improper considerations in individual cases.

5. The court, after analyzing the facts and circumstances, found that the ITAT's decision was based on factually incorrect aspects and wrongly allowed the respondent's appeal. It was observed that the ITAT failed to consider the specific details of the case, leading to an erroneous judgment.

6. Consequently, the court quashed and set aside the ITAT's order, remanding the matter for a fresh decision. The ITAT was instructed to reevaluate the case on its merits, considering the evidence on record. The respondent was granted an opportunity to be heard and present additional evidence if necessary.

7. In conclusion, the Tax Appeal was allowed and disposed of, emphasizing the importance of accurate consideration of facts and individual case details in judicial decisions to prevent errors and ensure fair outcomes.