Supreme Court Dismisses IT Department's Challenge Against Interim Relief To Centre For Policy Research

The Supreme Court has dismissed the Income Tax Department's appeal against stay granted in favour of public policy think tank Centre for Policy Research ("Organization") in respect of cancellation of its registration under Section 12A of the Income Tax Act.

"In view of the fact that the order impugned is interim in nature, we are not inclined to interfere with the impugned judgment passed by the High Court", said a Division Bench of Justices PS Narasimha and Aravind Kumar.

The Organization had moved the High Court of Delhi against the Revenue's order, which sought to cancel its registration under Section 12A with retrospective effect, thereby taking away its tax exemption status. It was represented by Senior Advocate Arvind P Datar, who argued that cancellation of registration could have been ordered only for the previous year in which violation was noticed, and if at all, for “subsequent previous years”. It was urged that the impugned order cancelled registration for several Financial Years, while dealing with "issue-wise" purported violations, which infracted Section 12AB(4)(ii) of the Act.

Datar had also raised the issue of violation of principles of natural justice before the High Court, contending that the Organization was not given opportunity to cross-examine persons whose statements were recorded by the Revenue and relied upon in its order. Further, it was highlighted that in connection with a Show Cause Notice, no personal hearing was granted.

Without going into the merits of the case, the High Court limited itself to considering if principles of natural justice had not been adhered to. After hearing rival submissions, it was of the prima facie opinion that the Organization's registration could not have been cancelled for years earlier than May 28, 2021.

Though the High Court granted stay over the operation of the Revenue's order, the relief was subject to conditions such as the Organization maintaining a proper account of the contributions received by it, including details of contributors. If there was any violation, the Revenue could bring the same to the notice of the court to seek variation of the interim order.

In arriving at its decision, the High Court had noted that pursuant to cancellation of registration, the Organization could not accept any contribution from domestic contributors.

Considering that the Organization's employees and work survived on the contributions, the balance of convenience was held to be in its favor. It was added that depriving the Organization of contributions could derail its programmes that were in pipeline.

Accordingly, notice was issued in the matter and a stay granted.

Counsels for petitioners: ASG N Venkatraman; Senior Advocate Arijit Prasad; AOR Raj Bahadur Yadav; Advocates HR Rao, Ashok Panigrahi and Rajan Kumar Choursia 

Counsels for respondents: Senior Advocate Arvind P Datar; AOR B Vijayalakshmi Menon; Advocates Sachin Jolly, Anuradha Dutt, Disha Jham 

Case Title: Principal Commissioner of Income Tax (Central) Delhi & Anr. v. Centre for Policy Research, SLP(C) Diary No(s). 44698/2023

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