The Delhi Bench of Income Tax Appellate Tribunal (ITAT) dismissed the stay application by the Life Trust,upholding the Principal Commissioner of Income Tax (PCIT)’s cancellation order of 30th September 2023. The Trust failed to prove a prima facie case, balance of convenience, or irreparable loss, leading to the denial of the stay.
Legal Initiative For Forest And Environment (LIFE Trust), the appellant-assessee, was formed on 20th May 2008 by Shri Ritwick Dutta, Shri Rahul Chaudhary, and Shri Priyabrata Satapathy to address environmental issues and promote transparency in decision-making.
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The Trust was registered under Section 12A(a) of the Act on 5th September 2011, effective from Assessment Year (AY) 2011-12, and received updated registration on 24th September 2021. These details were noted during cancellation proceedings initiated by the PCIT), with the assessee providing this information in its reply dated 9th March 2023.
The PCIT noted that a survey was conducted by the Income Tax Department at LIFE Trust’s office on 7th September 2022. The materials collected during the survey were shared with the Assessing Officer (AO) and later transferred to the PCIT,on 17th January 2023. The PCIT found that some activities of LIFE Trust appeared to be either not in line with its objectives or not genuine.
Consequently, the PCIT issued show cause notices on 4th February 2023 and 17th August 2023, asking LIFE Trust to provide relevant details and supporting documents. In response, the Trust’s authorized representative, Chartered Accountant Manmohan Aggarwal, attended hearings and submitted replies on several occasions. The PCIT considered these explanations before issuing the final order on 30th September 2023.
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The PCIT, after reviewing specific sections of his order, found that the association between the assessee and Earth Justice, as well as certain activities and employee dealings, did not align with the Trust’s objectives and were not genuine. He canceled the Trust’s registration under Section 12A/12AA for FY 2013-14 to FY 2020-21 and under Section 12AB from FY 2021-22 onwards. Additionally, the PCIT identified non-compliance in rent payments to Smt. Amita Dutta and LIFE LLP, and payments for litigation to Mr. Kaustav Dhar, leading to further cancellation of registration under Section 12AB from FY 2022-23 onwards.
The tribunal, on considering the rival submissions, contended that the primary issue was the maintainability of the stay application. The assessee had argued, citing M.K. Mohammed Kunhi, ITO v. Khalid Mehdi Khan, and CIT v. ITAT, that the ITAT had the authority to grant stays related to appeals under Section 253 of the Act. In CIT vs. ITAT, the Delhi High Court had affirmed the Tribunal’s decision to stay assessment proceedings following a CIT order under Section 263, which was under appeal.
The court has found that the ITAT has the power to grant a stay on an order under appeal if not doing so would make the appeal ineffective. Despite the department’s claim, the Tribunal can grant stays under Section 254(1).
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Although the re-assessment proceedings were separate and initiated before the cancellation order, the court recognized that the cancellation could impact ongoing assessments. Following high court precedents, the Tribunal affirmed its authority to stay the cancellation order of 30th September 2023 if warranted. However, it decided not to grant a stay in this case.
The bench determined that to grant a stay, the assessee must meet three conditions: a prima facie case, balance of convenience, and irreparable loss. Failure to satisfy any of these conditions will result in denial of the stay.
It was found that PCIT(Central)-2, Delhi had jurisdiction to cancel the assessee trust’s registration with retrospective effect by his order dated 30.09.2023. Given Board Notification No. 70/2014 and the lack of consideration of this notification in the cases cited by the assessee, no prima facie case in favor of the assessee has been established.
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The tribunal dismissed the assessee’s stay application, finding that the trust’s activities were not aligned with its stated objectives. Evidence from a survey conducted on 07.09.2022 revealed contradictions, including suspicious emails and financial transactions with Earth Justice, suggesting a lack of transparency.
The two-member bench comprising Kul Bharat (Judicial Member) and Brajesh Kumar Singh (Accountant Member) found that the assessee failed to prove a prima facie case, irreparable loss, or balance of convenience. The trust’s actions against national interests justified the cancellation order of 30.09.2023.
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