NGO Environics Trust Uses Foreign Funds To Stall Public Projects Of National Interest And Pay People Who Agitate Against Such Projects: Solicitor General Tells Supreme Court

Solicitor General Tushar Mehta, on behalf of the Income Tax Department, told the Supreme Court yesterday that Environics Trust gets funding from foreign contributions and that it is being used to stall public projects which are in the interest of India.

The SG also informed the Court that the people who agitate against the public projects are paid by this Trust using this money. 

The Bench of Justice Sanjiv Khanna and Justice Dipankar Datta was hearing a Special Leave Petition filed by Environics Trust against a Delhi High Court's Judgment whereby, it had rejected the Trust's plea challenging a show cause issued by the Revenue department.

Before the Petitioners made any submissions, the Court proceeded to pass an order issuing notice in the SLP. The Court also started dictating an interim order, when the Solicitor General who was appearing on behalf of the Income Tax Department on caveat interrupted.

Tushar Mehta submitted, "This is a trust which gets its entire contribution.."

Senior Advocate S. Murlidhar appearing for the Trust then objected saying that the Respondent is making submissions on merit before he starts arguing his case. When Tushar Mehta started responding to Murlidhar, Justice Khanna said that the Counsel should not argue inter se. 

Justice Khanna said, "One minute please! Mr. Murlidhar, look, we have to hear the caveator, we have without your arguing put forward what is the interim order. Let him answer that, it is for us to decide how to conduct our proceedings, and we may, to cut short, directly put a question to the Respondent and then ask for you to respond."

Murlidhar replied, "Very-well, very-well."

"Certainly, It is ultimately your Lordhships' word," the SG submitted. 

SG Mehta further submitted, "I have stated on Affidavit that, this is Trust which gets funding from foreign contributions, the entire contribution is against the interest of the Trust with which I am not seriously concerned. It is being used to stall public projects which are in the interest of India. The people who are going to agitate against public projects are paid by this Trust from this money." 

"Kindly file an Affidavit," Justice Khanna suggested. 

The SG continued, "This is a foreign-funded Trust to stall our projects."

Tushar Mehta also told the Court that the Petitioner Trust has suppressed the fact that their Section 12A license is cancelled and their FCRA license is also cancelled based on this material. The Court said that there has been a delay after the survey was done by the Department. 

Taking note of the submissions, the Bench ordered, "Issue notice, returnable in a week commencing 5th of August, 2024, rejoinder if any may be filed within a period of two weeks from today."

The Court continued to pass the interim Order and directed the Income Tax Department to continue with the Assessment proceedings. "In the meanwhile, the Assessment proceedings may continue, but the final Order will not be passed without the permission of this Court. The Petitioner must cooperate during the course of the assessment proceedings by joining the same and by furnishing documents as required" the Bench further directed.  

"I was in two minds whether to put it on record or not. But now it is time that we put it on record that projects are being thwarted designedly by some foreign power", the SG submitted.

The Court then remarked that it is not in agreement with the Petitioner on the merits of its legal submission and said that the limitation when amended is not retrospective. 

Pertinently, the Delhi High Court, on November 8, 2023 had observed that while considering a Writ Petition challenging a notice issued under Section 147/148 of the Income Tax Act, it cannot enter into the merits of the subjective satisfaction of the AO, or judge the sufficiency of the reasons recorded. While upholding the reassessment proceedings against Petitioner, the Court had held that wrongful application of the exemption availed under Section 11 / Section 12 of the Income Tax Act in relation to foreign contributions or funds would undoubtedly result in the AO forming the subjective satisfaction that the wrong availed exemption vis-à-vis foreign contributions escaped income for the purpose of assessment under the I-T Act.

The High Court finding that the Assessee had suppressed material facts regarding cancellation of its registration under Sections 12A, 12AA, and 12AB, concluded that such ground alone is sufficient enough to reject the Petition.

Cause Title: Environics Trust v. The Dept. Commissioner of Income Tax [Diary No. 53059-2023]