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“If this certificate has to be cancelled for any reason, the appellant ought to have been put on notice and an opportunity must have been given to the appellant, failing which, such cancellation will be construed as a nullity in the eye of law.”
The petitioner company Crocs is a popular footwear brand with a widespread range of more than 300 styled for men, women and children which are popular both in India and abroad.
Supreme Court of India: Noting the donations being made to the Trust to be ‘bogus donations’ Bench of Uday Umesh Lalit and Ajay Rastogi, JJ., cancelled the registration of the Trust under Section 12AA and 80G of the Income Tax Act, 1963.
What transpired the present matter?
Present appeal challenged the decision of Calcutta High Court setting aside the order passed by Commissioner of Income Tax (Exemption) cancelling the registration of respondent Trust under Section 12AA of the Income Tax Act, 1961 and another order passed by the Income Tax Appellate Tribunal dismissing appeals therefrom.
Background
Trust was registered under Section 12AA of the Act and was also accorded approval under Section 80G (vi) of the Act.
It was stated that in a survey conducted on an entity named School of Human Genetics and Population Health, Kolkata under Section 133A of the Act, it was prima facie observed that the Trust was not carrying out its activities in accordance with the objects of the Trust. Hence a show-cause notice was issued by the CIT.
Hence CIT invoked the provisions of Section 12AA(3) of the Income Tax Act and cancelled the registration under Section 12AA of the Act. This resulted in cancellation of the approval granted to the Trust under Section 80G of the Act.
When the matter reached High Court, Trust submitted that it had received donations from various donors and the Trust was under no obligation to verify the source of the funds of the donor or whether those funds were acquired by performance of any unlawful activity.
Further, it was also added that the funds were applied for the purposes of trust and that there was no evidence to suggest that those funds were applied for any illegal or immoral purposes or that the Trust was a namesake.
High Court had allowed the appeal and set aside the order of cancellation of the registration of the Trust while directing for the restoration of its registration.
Analysis, Law and Decision
Bench noted that as per the answers to the questionnaire put forward to the Managing Trustee, it depicted the extent of misuse of the status enjoyed by the Trust by virtue of registration under Section 12AA of the Act.
The answers also showed that the donations were received by way of cheques out of which substantial money was ploughed back or returned to the donors in cash. As per the facts, the said donations were ‘bogus’ donations and that the registration conferred upon the Trust under Section 12AA and 80G of the Act was completely being misused by the Trust.
Hence, the authorities were right in cancelling the registration under Section 12AA and 80G of the Act.
Opinion on High Court’s decision
Supreme Court held that High Court erred in entertaining the appeal and 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.
Conclusion
While setting aside the decision under challenge, Court allowed the present appeal and restored the order passed by the CIT and the Tribunal. [Commissioner of Income Tax (Exemptions) v. Batanagar Education and Research Trust, 2021 SCC OnLine SC 529, decided on 2-08-2021]
Advocates before the Court:
| Pet. Advocate(s) | ANIL KATIYAR |
| Resp. Advocate(s) | ABHIJIT SENGUPTA[caveat] |
Supreme Court: In the matter where the moot question before the Court was that whether the Sub-Registrar (Registration) has authority to cancel the registration of any document including an Extinguishment Deed after it is registered? Similarly, whether the Inspector General (Registration) can cancel the registration of Extinguishment Deed in exercise of powers under Section 69 of the Registration Act, 1908, the Court said that in absence of any express provision regarding cancellation of registration, it is not open to assume that the Sub-Registrar (Registration) would be competent to cancel the registration of the documents in question. Similarly, the power of the Inspector General is limited to do superintendence of registration offices and make rules in that behalf. Even the Inspector General has no power to cancel the registration of any document which has already been registered.
In the present matter that was placed before the 3-Judge Bench of Ranjan Gogoi, P.C. Pant and A.M. Khanwilkar, JJ owing to the difference of opinion between Dipak Misra and V. Gopala Gowda, JJ while deciding the question as to authority of the sub-registrar to register the Extinguishment deed, the Court explained that the fact whether the document was properly presented for registration cannot be reopened by the Registrar after its registration. The power to cancel the registration is a substantive matter. Section 35 of the Act does not confer a quasi-judicial power on the Registering Authority. The Registering Officer is expected to reassure that the document to be registered is accompanied by supporting documents. He is not expected to evaluate the title or irregularity in the document as such. The examination to be done by him is incidental, to ascertain that there is no violation of provisions of the Act of 1908. He cannot decide as to whether a document presented for registration is executed by person having title, as mentioned in the instrument. The validity of such registered document can, indeed, be put in issue before a Court of competent jurisdiction.
Another question that was placed before bench was whether in absence of any specific Rule in the State of Madhya Pradesh with regard to the registration of an Extinguishment Deed, the general principle laid down in the case of Thota Ganga Laxmi v. Government of Andhra Pradesh, (2010)15 SCC 207 would be applicable where it was held that a unilateral cancellation deed cannot be registered with reference to Rule 2(k)(i) of the Rules framed by the State of Andhra Pradesh under Section 69 of the Act of 1908. The Court held that the said judgment was dealing with the express provision as applicable in the State of Andhra Pradesh and the dictum in that decision cannot have universal application to all the States and hence, in absence of such an express provision, in other State legislations, the Registering Officer would be governed by the provisions in the Act of 1908. [Satya Pal Anand v. State of M.P., 2016 SCC OnLine SC 1202, decided on 26.10.2016]