In a significant case, the Delhi High Court dismissed the writ petition challenged against cancellation of registration under section 12 A of the Income Tax Act, 1961 by suppressing material facts.
The Petitioner Environics Trust challenged the order issued by the Respondent / Revenue Department under Section 148A(d) of the Income Tax Act, 1961 (the “IT Act”) (the “Impugned Order”) under a show cause notice (“SCN”) issued under Section 148A(b) of the IT Act.
The Petitioner is a trust registered under the applicable laws; to conduct research & development of inter alia environmental issues and human behavior. The Petitioner has conducted impactful work in diverse fora for ecological and environmental conservation.
The Petitioner was granted registration under the Foreign Contribution (Regulations) Act 1976 (the “FCRA”) vide a registration to receive foreign contributions in the Petitioner’s accounts. The Respondent surveyed Section 133 of the IT Act (the “Survey”). Pertinently, it has been submitted that no incriminating materials were found during the Survey however, it is alleged that the Respondent with an ulterior motive conducted a roving and fishing enquiry against the Petitioner. The Respondent seized books of accounts / financial documents and mobile phones belonging to the Petitioner Trust.
The Petitioner received a letter from the FCRA Wing, Ministry of Home Affairs (the “Ministry”) seeking among other things information on the foreign contributions received and utilised by the Petitioner under the FCRA.
It was submitted that after a prolonged period of 6 (six) years, the Respondent issued the Impugned SCN to the Petitioner. It was alleged that income escapement in the assessment of income to the extent of INR 2,23,95,787 on account of a wrongful claim qua foreign contribution under Section 11 of the Income Tax Act.
It was found that the wrongful application of the exemption availed under Section 11 / Section 12 of the Income Tax Act about such funds would undoubtedly result in the AO forming the subjective satisfaction that the wrong availed exemption vis-à-vis foreign contributions escaped income for assessment under the Income Tax Act.
Chief Justice Satish Chandra Sharma and Justice Tushar Rao Gedela observed that an individual seeking to invoke the equitable jurisdiction of a High Court must approach this Court displaying bona fides. The Petitioner has unquestionably suppressed material facts to the cancellation of its registration under Sections 12A, 12AA and 12AB of the Income Tax Act. The Petitioner has failed to make out a case warranting the interference of the Court under Article 226 of the Constitution of India.
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