The Delhi High Court Tuesday pulled up the Income Tax Department, orally inquiring if it would “ask for someone’s creditworthiness” who makes voluntary nominal contributions to an NGO while dealing with a petition by former IAS officer Harsh Mander’s Aman Biradari Trust (ABT).
ABT’s registration under the Income Tax Act was cancelled in September 2024, and the NGO is seeking the quashing of this cancellation order before the High Court. A public charitable trust established by Mander, ABT was registered initially in 2005, and again in 2022.
ABT moved the Delhi High Court in March this year, challenging a September 23, 2024, order by the principal commissioner of Income Tax, cancelling the Trust’s registration under the I-T Act in 2005 as well as the subsequent registration in 2022 under the Finance Act 2020.
The cancellation, the order stated, was owing to two ‘specified violations’. The first violation alleges that ABT has not maintained the PAN and address details against some of the voluntary contributions received by the Trust in FY 2017-18, FY 2018-19, and FY 2019-20 in violation of provisions of the I-T Act.
For the three years, the department has made a tax demand of over Rs 3.92 crore. The demand notice issued in November 2024 is already under challenge before the Income Tax Appellate Tribunal (ITAT).
Taken up by a bench of Justices Vibhu Bakhru and Tejas Karia Tuesday, Justice Bakhru, addressing the I-T Department’s counsel, said, “The other (specified violation) is where they’re getting anonymous donations, they don’t have PAN, they give you the names of it… Look at the amounts of donations. What is the donation amount? Are you going to ask for someone’s creditworthiness? You want creditworthiness for someone to give Rs 5,000?”
The court also observed that prima facie, the activities of ABT, which the I-T Department has raised an issue over, appear to be covered under the objectives set out by the Trust.
As reflected in the I-T department’s cancellation order, the voluntary contributions range from Rs 50 to a few donations over Rs 1 lakh. The voluntary contributions of the three years, which the I-T department has listed in its September 2024 order, amount to around Rs 92 lakh.
Secondly, the I-T Department said in its registration cancellation order that the trust has incurred expenses on account of ‘Media Fellow’ towards documenting issues on constitutional values and secularism practice in India, which is purportedly not a part of the ‘main objects’ of the Trust.
To this, Justice Bakhru, addressing the I-T Department’s counsel, remarked, “We are looking at the grounds you are saying. One is (saying) it’s contrary to the object. Can you explain what’s not contrary to the object?… Plain reading of the object indicates prima facie that it is covered. So one (specified violation) goes.”
The department had issued a show cause notice before the cancellation, first on March 30, 2024, followed by two other notices in May that year.
ABT, through its counsels, has argued that the cancellation cannot be retrospective, and that powers of Section 12AB(4) of the I-T Act can only be invoked against a specified violation during any “previous year”, which has been defined as the financial year immediately preceding the assessment year. It is ABT’s case that in the absence of a specified violation in the financial year 2022-23, the powers of Section 12AB(4) could not have been invoked.
The Trust has pointed out that as a charitable trust, it is exempt from providing addresses against voluntary contributions, adding that statutory requirements of maintaining PAN details against voluntary contributions only came into effect by way of the Finance Act, 2021, which cannot apply retrospectively for financial years 2017-20.
In its plea, ABT has also pointed out that in its response to the show cause notices, the trust had provided the details of the available donors and the amount they have contributed during the period 2017-2018, 2018-2019 and 2019-2020 financial year “demonstrating full cooperation with the tax authorities.”
It has also contended in the response to the notices that the objective of the media fellowship programme “such as creating alternative media to challenge the discourse of hatred is similar to the petitioner’s trust objectives as enumerated in the trust deed which, inter alia, talks about developing alternative educational material and methods to build and strengthen humanistic and secular values.”
It had also submitted that the trust did not incur any expenses as it was funded by a grant.
Meanwhile, the Delhi High Court suggested ABT’s counsels to take instructions from the petitioner if they want to avail their alternate remedy before ITAT first, posting the matter for further hearing on August 5.
