CONSEQUENCE OF NON-CONSIDERATION OF THE APPLICATION FOR REGI

HIGH COURT OF ALLAHABAD Society for the Promotion of Education Adventure Sport & Conservation of Environment v. CIT Civil Misc. Writ Petition (Tax) No. 109 of 2008 April 3, 2008 THE HIGH COURT OBSERVED, INTER ALIA, AS UNDER : ** ** ** ** 5. Admittedly, no decision was taken on the petitioner’s application within the time of six months fixed by the aforesaid provision and in fact, even after a lapse of almost 5 years, no decision had been taken as per the counter affidavit. And for want of a decision by the Commissioner, the Assessing Officer has continued to make block assessment of the Petitioner under section 158BD, raising huge tax demands in excess of rupees two crores. 6. What has to be examined in this writ petition is the consequence of such a long delay on part of Income Tax Authorities in not deciding the petitioner’s application dated 24-2-2003. Admittedly after the statutory limitation the Commissioner would become functus officio, and he cannot thereafter pass any order either allowing or rejecting the registration. It is obvious that the application cannot be allowed to be treated as perpetually undecided. Therefore the key question arises whether upon lapse of the six month period without any decision, the application for registration should be treated as rejected or it should be treated as rejected or it should be treated as allowed. 10. In the present case, we find that there is no such public element or public interest. Taking the view that non-consideration of the registration application within the time fixed by section 12AA(2) would result in deemed registration, may at the worst cause loss of some revenue or income tax payable by that individual assessee. This would be similar to a situation where the Assessing Authority fails to make the assessment or reassessment within the limitation prescribed for the same. That also leads occasionally to loss of revenue from that individual assessee. 11. On the other hand, taking the contrary view and holding that not taking a decision within the time fixed by section 12AA(2) is of no consequence would leave the assessee totally at the mercy of the Income Tax Authorities, inasmuch as the assessee had not been provided any remedy under the Act against non-decision. 12. Besides, the above view does not create any irreversible situation, because under section 12AA(3), the registration can always be cancelled by the Commissioner, if he is satisfied that the objects of such Trust or Institution are not genuine or the activities are not being carried out in accordance with the objects of the trust or Institution. The only drawback is that such cancellation would operate only prospectively. Therefore, if a view is taken that non-consideration of the registration application within the time fixed by section 12AA(2) would amount to deemed grant of registration, the only adverse consequence likely to flow from such a view in respect of any case of that assessee arising in future would at best be some loss of revenue from that individual assessee from the date of expiry of the limitation under section 12AA(3) till the date of cancellation of that registration, if such cancellation is called for. 18. Considering the pros and cons of the two views, we are of the opinion that by far the better interpretation would be to hold that the effect of non-consideration of the application for registration within the time fixed by section 12AA(2) would be a deemed grant of registration. We do not find any good reason to make the assessee suffer merely because the Income Tax Department is not able to keep its officers under check and control, so as to take timely decisions in such simple matters such as consideration of applications for registration even within the large six month period provided by section 12AA(2) of the Act.