Fateh Chand Charitable Trust vs. CIT (Allahabad High Court)

Shock & Anguish expressed at mal-administration by AO & CIT. CBDT directed to take action against erring officials

The assessee, a charitable trust registered u/s 12A, received donations of Rs. 5.23 crore in AY 2006-07. The assessee filed a ROI offering Nil income and the same was accepted by the AO u/s 143(3) without making any inquiry. Subsequently, the CIT initiated proceedings u/s 12AA(3) for cancellation of registration of the assessee as a charitable trust. However, this was dropped without assigning any reasons. Thereafter, the AO issued a notice u/s 148 seeking to reopen the assessment on the ground that the said donation was bogus as the donor had no financial capacity to give the donation. The assessee filed a Writ Petition to challenge the reopening. HELD by the High Court dismissing the Petition:

It is a shocking to note that as a matter of fact, the said assessment order is no assessment order in the eyes of law. There is not even a whisper with regard to the receipt of donation of Rs. 1.57 crore. It is really not understandable under what circumstances the said assessment order came into existence. The assessment order is bereft of any discussion with regard to the genuineness of the donation given or the creditworthiness of the donor to part with such a huge amount. It is also shocking to note that the CIT passed an order dropping the proceedings for cancellation of registration without assigning any reason. One fails to understand what impelled him to do so. The order being bereft of any reason is no order in the eyes of law and is liable to be ignored being illegal and void. The income tax authorities are required to administer the Act. The right to administer cannot obviously include the right to mal-administer. Thus, we find no words to express anguish as what kind of governance it had been. Failure to give reasons amounts to denial of justice. It is a case where the AO, the Addl. CIT and the CIT have abdicated their duties. The Court in the exercise of supervisory jurisdiction under Articles 226 and 227 of the Constitution of India cannot be a mute spectator. Such actions on the part of the department not only bring disrepute to the department but also encourages the dishonest assessees and promotes the nefarious activities which not only causes loss to revenue but also promotes dishonestly. An honest tax payer feels cheated. Let the matter be examined by the Chief Commissioner of Income-tax and appropriate departmental proceedings may be taken out against the erring officials. A copy of this judgment may also be sent to the Chairman of the CBDT for appropriate action.