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Commissioner of Income Tax (Exemptions), Kolkata vs. Batanagar Education and Research Trust - (Supreme Court) (02 Aug 2021)

An entity which is misusing the status conferred upon it by Section 12AA of IT Act is not entitled to retain and enjoy said status


Direct Taxation

Present appeal challenges the judgment passed by the High Court setting aside (i) the order passed by Commissioner of Income Tax (Exemption) (“CIT”) cancelling registration of the Respondent Trust (“Trust”) under Section 12AA of the Income Tax Act, 1961; and (ii) the order passed by the Income Tax Appellate Tribunal (“the Tribunal”) dismissing appeals arising therefrom.

The Trust was registered under Section 12AA of the IT Act vide order and was also accorded approval under Section 80G(vi) of the IT Act. In a survey conducted on an entity named School of Human Genetics and Population Health, Kolkata under Section 133A of the IT Act, it was prima facie observed that, the Trust was not carrying out its activities in accordance with the objects of the Trust. A show cause notice was, therefore, issued by the CIT.

The CIT, invoked the provisions of Section 12AA(3) of the IT Act and cancelled the registration granted under Section 12AA of the IT Act w.e.f. 1st April, 2012. Consequently, the approval granted to the Trust under Section 80G of the Act was also cancelled. The Trust being aggrieved, filed Income Tax Appeal before the High Court. By its order, the High Court allowed the appeal.

The answers given to the questionnaire by the Managing Trustee of the Trust show the extent of misuse of the status enjoyed by the Trust by virtue of registration under Section 12AA of the IT Act.

The answers also show that, donations were received by way of cheques out of which substantial money was ploughed back or returned to the donors in cash. The facts thus clearly show that, those were bogus donations and that the registration conferred upon it under Sections 12AA and 80G of the IT Act was completely being misused by the Trust. An entity which is misusing the status conferred upon it by Section 12AA of the IT Act is not entitled to retain and enjoy said status. The authorities were therefore, right and justified in cancelling the registration under Sections 12AA and 80G of the IT Act.

The High Court completely erred in entertaining the appeal under Section 260A of the IT Act. It did not even attempt to deal with the answers to the questions and whether the conclusions drawn by the CIT and the Tribunal were in any way incorrect or invalid.


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