2010 (8) TMI 757 - AT - Income Tax

Exemption u/s 11 - Withdrawing registration granted earlier u/s 012A - . HELD THAT - In the instant case, it is not the case of the CIT that the activities of the assessee society are not genuine or are not being carried out in accordance with the objects of the society. Thus, both the conditions laid down in sub-section (3) of section 12AA regarding cancellation of registration are missing. In our considered view, object per se cannot be re-examined under the provisions of sub-section (3) of section 12AA. As per the provisions of sub-section (3) of section 12AA, the CIT should be satisfied that the activities of the assessee society are not genuine or are not being carried on in accordance with the objects of the society and only then the CIT has power to cancel the registration granted to the assessee society. In our considered view, cancellation/withdrawal of registration by the learned CIT amounts to reviewing its earlier order. Hence, the impugned order passed u/s12AA(3) is illegal and unsustainable. In view of the above, we set aside the order of the learned CIT passed u/s 12AA(3) of the Act and allow the appeal of the assessee. In the result, the appeal is allowed.

Summary

Issues:
Withdrawal of registration under section 12AA(3) of the Income-tax Act, 1961 based on non-charitable object of the society.

Detailed Analysis:

1. Withdrawal of Registration: The appeal was against the withdrawal of registration granted under section 12AA(1)(b)(i) of the Income-tax Act, whereby the registration was withdrawn retrospectively by the learned CIT-II, Lucknow. The withdrawal was based on the non-charitable nature of one of the objects of the society, specifically related to providing accommodation and facilities for "persons in need."

2. Legal Background: The power to cancel registration under section 12AA(3) arises if the CIT is satisfied that the activities of the trust or institution are not genuine or not in line with its objects. In this case, it was argued that the CIT did not claim the activities were not genuine or aligned with the society's objects. The CIT's cancellation was deemed as a review of its earlier order, which is not allowed under the law unless specific conditions are met.

3. Judicial Interpretation: Referring to the case law, it was highlighted that the CIT, once having granted registration, cannot review its decision unless specific legal conditions are met. The judgment emphasized that the CIT acted beyond its authority by canceling the registration without meeting the criteria specified in the law.

4. Decision: The ITAT Lucknow set aside the order of the learned CIT passed under section 12AA(3) of the Act, allowing the appeal of the assessee. The judgment concluded that the withdrawal of registration by the CIT was illegal and unsustainable as it amounted to reviewing its earlier order without meeting the legal requirements.

5. Final Outcome: The appeal was allowed, and the withdrawal of registration under section 12AA(3) was overturned, emphasizing the importance of legal provisions and the limitations on the CIT's power to cancel registrations without proper grounds as specified in the law.