9911796707
TMI Blog2007 (8) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... istration shall be passed by the CIT before the expiry of six months from the end of the month in which the application was received by him. In the case before us the CIT ought to have passed an order granting or refusing registration on or before 30th April, 2002, He however passed the order refusing registration to the trust on 26th May, 2003 which was beyond the period laid down in Section 12AA(2). He had however initiated certain enquiries by letter dt. 3rd April, 2002, which was well within the period of six months, to which the assessee responded by furnishing the relevant details. The enquiry continued well beyond 30th April, 2002 and ultimately the CIT passed the order refusing to register the assessee institution. 3. When the appeal of the assessee against the order of the CIT was originally taken up for hearing, the argument of the assessee was that once the time-limit fixed by Section 12AA(2) expired without the CIT having passed any order, it must be deemed that the registration has been granted and in support of this contention, two orders of the Tribunal, one of the Delhi Bench in Sambandh Organisation v. CIT (ITA No. 5582/Del/2003) and another of the Bangalore Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied, he will pass an order refusing registration. However, an opportunity of being heard shall have to be provided to the applicant before an order of refusal to grant registration is passed by the Chief CIT or the CIT. The reasons for refusal of registration shall also have to be mentioned in that order. The order granting or refusing registration has to be passed within six months from the end of the month in which the application for registration is received by the Chief CIT or the CIT and a copy of such order shall be sent to the applicant. 19.3 It has also been provided that the grant of registration shall be one of the conditions for grant of income-tax exemption. 19.4 These amendments shall take effect from the 1st day of April, 1997. (Sections. 5 and 6). The argument of the learned Counsel for the assessee before us is that (a) the right to obtain registration is a valuable or substantive right conferred upon the assessee and is the entry point for obtaining exemption of income under Section 11 of the Act; (b) a right of appeal has been provided to the Tribunal against an order refusing registration w.e.f. 1st June, 1999; (c) having regard to the object for which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the return in the course of the assessment proceedings and he is also empowered to verify the application of the monies of the trust for charitable object, investment of the funds, etc. and thus no prejudice would be caused to the Revenue because of the deemed registration. Dr. Gupta thus says that if registration is deemed to be allowed no prejudice would be caused to the Revenue and at the same time the assessee's rights or interests are also protected. 6. In support of the above arguments, Dr. Gupta relied on the view expressed in Chaturvedi & Pithisaria's Commentary on Income-tax, 5th Edn., Vol. 1, p. 1090, under the head "Time-limit prescribed for passing order granting or refusing registration". The authors have expressed the view that if no order is passed within the six months period, a presumption would arise that registration has been granted. The view expressed by Dr. Avadesh Oza in his Commentary on Income-tax Law, Vol. 1, 2nd Edn. (2003) at p. 1301 to the same effect is also relied upon. 7. In addition, Dr. Gupta drew our attention to analogous situations arising under Section 139, under which it has been held that if the application for extension of time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s "Interpretation of Statutes" (2006 Edition) as to the effect of a friction or uncertainty in the statute. It may be recalled that he had earlier submitted that Section 12AA did not provide for a situation where no order was passed by the CIT within 6 months from the end of the month in which the application for registration was filed. The consequence, according to him, was thus uncertain. In such a situation, he contends that the dictum of Lord Shaw in Shannon Realities Ltd. v. St. Michel (Ville De) (1924) AC 185 (PC) should be followed, which is to the effect that "where alternative constructions are equally open that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to be regulating; and that alternative is to be rejected which will introduce uncertainty, friction or confusion into the working of the system". Strong reliance was placed on the author's commentary under the head "Considerations of general inconvenience in statutes imposing public duty; provisions as to time; provisions for consultation" at p. 381 of the treatise particularly the following observations at p. 382 : "If performance of a publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be directory, the IT Act has taken care of the same by providing, for instance, in Section 250(6A) and Section 254(2A) that the CIT(A) and the Tribunal shall dispose of the appeals "where it is possible" within a particular time-frame. We therefore do not have any doubt that it is mandatory for the CIT to dispose of the application for registration within six months from the end of the month in which the application was filed. 12. The other question presents some difficulty. That question is about the consequence of the failure of the CIT, for whatever reason, to pass the order within the period prescribed. Dr. Gupta, it may be recalled, had argued that the only consequence would be that registration will be deemed to have been granted. After a good deal of deliberation upon the argument, we are inclined to think that it would be so. If the application for registration is to abate because the CIT did not pass an order thereon and the assessee is asked to file another application again that would be putting, the assessee to the grind all over again for no fault of his. That consequence should be avoided. If the application is to be treated as pending, then again the CIT would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as application of income, investment of the funds and so on. In other words, by not passing the order within the time-limit, the claim of the trust/charitable institution can be frustrated, albeit unintentionally. There is no good ground shown before us, nor does any appear to exist in the scheme of the Act, to hold that the time-limit within which the CIT has to pass an order on the application for registration of the trust or institution is merely directory. 14. It is not merely a question of prejudice being caused to the assessee, but it is something which in our opinion goes to the very root of good administration and obedience to the law. If you talk of prejudice to the assessee, may be in the present case it could be argued that there is none, as the assessee has the right to file an appeal to the Tribunal and in fact had done so and thus has an opportunity to correct the perceived injustice. But the more fundamental question, with respect, is whether the CIT should take the time-limit lightly and whether he could not have conducted and completed his enquiry and passed an order whether granting or refusing registration--when a sufficiently large time-frame is given by the Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore often than not, determinative of the very question whether the provision is mandatory or directory...the negligence of those to whom public duties are entrusted cannot by statutory interpretation be allowed to promote public mischief and cause public inconvenience and defeat the main object of the statute....". Applying these observations to the question posed before us, it appears to us that the interpretation which Dr. Gupta wants us to place on Sub-section (2) of Section 12AA is the better one. 16. It is well to remember that the CIT is exercising a power vested in him under the Act which will decide, subject to appeal, the fate of the claim of the trust or institution for exemption under Section 11. It is an important power. Sufficient time has been given to him to conduct all enquiries into the claim for registration. The section itself was introduced to provide for the procedure for registration which had not been provided earlier. The only condition before the introduction of the section was that an application for registration should be made to the CIT (Section 12A). Section 12AA was introduced to provide for the procedure for registration, enquiry into the claim and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing for pre-emptive purchase of a property by the Government came up for consideration. A statement in Form No. 37-1 was filed before the appropriate authority. It was found to be in order, It was filed within the time prescribed. Under the section the appropriate authority had to pass an order within three months from the receipt of the statement purchasing the property or to give a "no objection" certificate. The petitioner before the Court had complied with all the conditions imposed on it. But the appropriate authority did not pass any order within the period of three months mentioned above for purchase of the property by the Central Government. The Supreme Court held that in these circumstances "the appropriate authority is duty-bound to issue no objection certificate to the transfer of the property". The only difference, without any substantial distinction, is that while the time-limit of three months was prescribed in the first and second provisos to Section 269UD, the time-limit of 6 months from the month in which the application for registration was filed is prescribed in the Sub-section (2) itself of Section 12AA. Another difference, again without any distinction, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
