IMPORTANT POINT
Registration under Section 12AA cannot be denied solely for not commencing activities if the trust's objectives are charitable.

JUDGMENT :

1. Heard Ms. Smita Das De, learned senior standing counsel for the appellant/Income Tax Department. None appears for the respondent.

2. This appeal was admitted by this Court by order dated 20.08.20196 on the following substantial question of law:-

“Whether on facts and in the circumstances of the case, there were fit grounds for cancellation of registration of the assessee under Section 12AA of the Income Tax Act, 1961 and the order of the tribunal was perverse in setting aside such cancellation of registration made by the authorities below ?

Facts :

3. Briefly stated, facts of the present case are that the respondent is a trust which came into existence on 29.04.2016. The trust filed an application in Form-10A on 17.11.2016 for grant of registration under Section 12AA of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act, 1961’) and also submitted an application of even date for granting registration under Section 80G of the Act, 1961. The Commissioner of Income Tax (Exemption) examined the application of the respondent for grant of registration under Section 12A(1) of the Act,1961 and rejected it by the order dated 01.05.2017 on the ground that the respondent trust is yet to start charitable activities as defined in Section 2(ii) of the Act, 1961. Consequently, the application for registration under Section 80G of the Act, 1961 was also rejected by a separate order dated 11.07.2018. Aggrieved with the aforesaid orders, the respondent preferred two separate appeals being ITA Nos.1366 & 1367/Kol/2017 before the Income Tax Appellate Tribunal, “A” Bench, Kolkata. The ITAT allowed the appeal by the impugned order dated 11.07.2018. Aggrieved with the aforesaid order of the ITAT, the revenue has filed present appeal which was admitted on the afore-noted substantial question of law.

Submission :

4. Learned Counsel for the appellant submits that the order passed by the CIT(E) was correct and the Tribunal has committed a manifest error of law to interfere with it. No other submission has been advanced before us by learned counsel for the appellant.

Discussion & Findings :

5. We have carefully considered the submission of the learned Counsel for the appellant and perused the paper book.

6. Before we proceed to examine the impugned order and the submission of learned counsel for the appellant, it would be appropriate to reproduce Section 12A(1) of the Act as under:

12AA. Procedure for registration.-(1) The [***] [Principal Commissioner or Commissioner), on receipt of an application for registration of a institution made under clause (a) for clause (aa) (or clause (ab)] trust or of sub-section (1)) of section 12A, shall-

[(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about,-

(i) the genuineness of activities of the trust or institution; and

(ii) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects, and may also make such inquiries as he may deem necessary in this behalf; and]

(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities [as required under sub-clause

(i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause], he-

(i) shall pass an order in writing registering the trust or institution;

(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant:

Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.”

7. The CIT(E) while refusing to grant registration under Section 12A of the Act, 1961 has neither doubted nor recorded his dis-satisfaction with regard to the objects of the trust. In other words, the CIT(E) has neither held nor doubted the objects of