ITAT Cannot Grant S. 12A Registration Based Solely on Oral Submissions Without Evidence: Punjab & Haryana HC [Read Order]

In a recent ruling, the Punjab and Haryana High Court held that the Income Tax Appellate Tribunal cannot grant registration under Section 12A of the Income Tax Act only based on oral submissions which are not supported by pleadings or evidence.

The case started when the Society for the Study of Liver Diseases, a society registered under the Societies Registration Act, 1957 and functional since 2014, applied for registration under Section 12A. The Commissioner of Income Tax (Exemptions) checked the financial records for the relevant years.

For the financial year 2014-2015, the society received Rs. 35,05,000, mostly from pharmaceutical companies as donations, and spent Rs. 22,79,078 mainly on organizing conferences in leading hotels, and there was surplus left. For the financial year 2015-2016, the society received Rs. 17,26,000, again mainly from pharmaceutical companies, and spent Rs. 3,20,808 on conferences, which also resulted in surplus.

The Commissioner did not find any proof of spending on charitable work like helping poor patients, doing surveys, or publishing scientific papers. The Commissioner was of the view that the main activity of the society was organizing conferences and it appeared that it was acting like a bridge between pharmaceutical companies and doctors. Because of this, the application for registration under Section 12A was rejected.

The society then went to the Income Tax Appellate Tribunal. Before the Tribunal, the society argued that apart from conferences, it was also implementing the ECHO project in collaboration with the University of New Mexico Health Science Centre and under the guidance of PGIMER, Chandigarh. It was said that under this project, medical officers in Punjab prisons were trained to treat prisoners suffering from liver diseases and free test kits were distributed. The Tribunal accepted these submissions and set aside the Commissioner’s order and directed that registration be granted.

A Division Bench of Justice Deepak Sibal and Justice Lapita Banerji observed that it was admitted that no documentary evidence about the ECHO project was placed before the tribunal and no application for additional evidence was filed. The court explained that the tribunal relied only on oral submissions which were not supported by pleadings or documents, and this is not legally allowed.

The court also observed that the revenue was not given proper notice about these new claims which violated the principles of natural justice. The court further observed that just because registration was granted for later financial years, it does not mean that registration must be granted for the earlier years also, because each year has to be examined separately.

In view of this, the court set aside the order of the Tribunal and also the order of the Commissioner and sent the matter back to the Commissioner of Income Tax (Exemptions) for fresh decision. The Court directed that the matter should be decided again after considering the evidence already on record.

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