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| DATE: | August 5, 2014 (Date of publication) |
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| Click here to download the judgement (parkar_costs_254_2B.pdf) |
S. 254(2B): Even though action of the CIT in canceling registration u/s 12AA(3) is illegal, costs cannot be awarded as the said action is in discharge of duty & not mala fide
The assessee filed an appeal challenging the order of the CIT u/s 12AA(3) canceling the registration granted to the assessee trust. The assessee also pleaded for award of costs u/s 254(2B) on the ground that the action of the department of canceling registration was illegal and an abuse of powers and that it had has caused serious prejudice and injustice to the assessee. It was pointed out that wrong signals had been transmitted in the society that the assessee trust is a big fraud and that this had adversely affected the reputation of the trust and its trustees who are eminent medical practitioners. It was also claimed that there is an unpleasant social environment in Ratnagiri and that since the trustees are from the minority community, the department’s action have embarrassed the trustees and the trust. HELD by the Tribunal:
(i) As per s. 12AA(3) the CIT can cancel the registration granted earlier if he /she is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or the institution. In the instant case, there is no such finding given by the CIT that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the trust. While granting registration u/s 12A, the CIT has gone through the objects of the trust and the genuineness of the activities. There is no change in the objects of the trust in the meantime. The CIT has not brought on record any material to show that the activities of the Trust are not being carried out in accordance with the objects of the Trust or the institution. Once registration is granted to the trust/institution and if subsequently the AO finds during the assessment proceedings that the income of the charitable trust is applied directly or indirectly for the benefit of the persons referred to in s. 13(3), then he has ample power to deny exemption to that extent u/s 13(1)(c) of the Act (Modern Defence Shikshan Sansthan 108 TTJ (Jodh) 732, Himachal Pradesh Environment Protection and Pollution Control Board 125 TTJ (Chd) 98, Maharashtra Academy of Engineering as Educational Board 133 TTJ 706 (Pune) followed)
(ii) The CIT has passed the order u/s 12AA(3) of the Act during the course of discharge of her duty as CIT. While discharging her duty, her action might have caused some hardship to the assessee due to error of judgement but that in our opinion does not warrant levy of cost on the department. In Pooran Mal vs. Director 93 ITR 505 (SC), it was noted that s. 132 causes serious invasion of the privacy of a person. Still it was held that even though the innocent is likely to be harassed by a raid for the purpose of search and seizure, that cannot be helped. In the instant case, there is no such action of search and seizure which causes serious invasion in the privacy of the person. The CIT was discharging her quasi-judicial duty. Further, there is nothing on record to suggest that the action of the CIT was mala fide. Therefore, there is no merit in the claim for award of costs for the action of the CIT in cancelling the registration granted earlier u/s 12AA of the Act (UOI vs. Raja Mohammed Amir Mohammad Khan (SC), Urban Improvement Trust, Bikaner vs. Mohanlal (2010) (1 SCC 512) (SC) & Charanjilal Tak Shyam Parwani vs. UOI 252 ITR 333 (Raj) distinguished)
This decision not awarding costs seems to take a path different from the present judicial trend.
The present judicial trend is that courts are taking strict view in awarding costs in cases where due to actions of the authorities, hardship is caused to the assessee and in the appellate proceedings such actions of lower authorities were found to be unjustified.
This decision has again sparked of the debate that the judges are not supreme and there should be accountability for judiciary then common man will get justice in its real sense .
A justice is not only to be done ,but should be seen to have been done. refusal to award the cost is not a good law.
The mala fide order is NOT the only criteria for awarding costs. The order passed by the CIT has caused serious injustice to the trust & the society. The Hon. ITAT ought to have awarded heavy costs as the learned CIT did not honour neither the circular of CBDT nor the decision of the jurisdictional tribunal. The decision cannot be a binding precedent on the matter of awarding costs.
The Refusal to award cost on the ground that the order was not malafide shocks the conscious of any student of law. The order is arbitrary & against the well settled law. In my opinion the substantial cost ought to have been awarded.
Dear Sir,
On going through the appellate order Parkar Medical Foundation vs. DCIT (ITAT Pune)
I am of the opinion that the Hon.ITAT should have been decided the ground NO.2;3 &4, when it was specifically raised in respect of violation of provision of section 13(1)(c) and 11(5) of the I T Act. Similarly, I am of the opinion when appeal is allowed on the other grounds, there appears injustice with the appellant and hence I am of the opinion that assessee deserve for cost.
S.K.Rumale
After reading the judgment, it reminds me of the decision of the Hon.I.T.A.T. C Bench Chennai in ITA No.586/Mds/2012 – (Assessment Year: 2004-05) in the case of M/s. Qmax Test Equipments Pvt.Ltd. v/s A.C.I.T. pronounced on 27/09/2012 wherein while awarding the cost to the assessee the Hon. ITAT has observed as under:
We are of the considered opinion that the order has been passed by the CIT(A) in a non-judicious and arbitrary manner. The order of the CIT(A) is not only against the law laid down by the Hon’ble High Court but smacks malafide on the part of the CIT(A). It is evident that the CIT(A) has committed “intellectual dishonesty” extending it to the limit of perversity. The impugned order has burdened the assessee with the avoidable cost of litigation before the Tribunal and harassment. We feel that the instant case is one of the rare and fit case where the Revenue should compensate the assessee for causing unnecessary mental and financial harassment. The valuable time of the Tribunal has also been lost in adjudicating the issue which is squarely covered by the judgement of the Hon’ble High Court. Therefore, the appeal of the assessee is allowed with costs of Rs. 25,000/-.
It is most unfortunate that the Hon.ITAT in the case of Parkar Medical Foundation has refused to award cost to the appellant assessee.
The Hon. ITAT has lost sight of the decisions of its co-ordinate bench and the jurisdictional Bombay High Court in the matter of awarding cost. This decision is a backward step of the modern trend to curb arbitrary orders being passed by the tax administrators. This decision frustrates the reasonable expectations of the common man from the judicial forums.