2011 (6) TMI 785 - AT - Income Tax

Summary

Issues involved:
Cancellation of registration under section 12-AA of the Income-tax Act, 1961.

Cancellation of Registration under Section 12-AA:
The appeal was filed by the assessee challenging the cancellation of registration granted under section 12-AA of the Act. The registration was initially granted on 3rd September 2004 with effect from 1st April 2003. The Directorate of Income-tax (Exemptions) cancelled the registration based on various grounds, including false claims of salary payments, lack of reconciliation of corpus funds, and non-charitable expenditure. The assessee failed to provide adequate evidence during the proceedings to counter these findings.

Procedural Compliance and Opportunity of Being Heard:
The assessee argued that the power to withdraw registration under section 12-A could not be exercised for the period before 1st October 2004, as per the Finance Act (No.2) 2004. The assessee also claimed that sufficient opportunity was not granted to present their case, and allegations against them lacked a basis. The Directorate of Income-tax (Exemptions) relied on the findings of the Directorate General of Income Tax (Exemptions) and the Assessing Officer, stating that the trust's funds were not utilized for charitable purposes due to lack of proper vouchers and evidence.

Decision and Directions:
After considering the arguments from both parties, the Tribunal found that the assessee had not provided the necessary information and had not replied to show cause notices. While the cancellation of registration was deemed harsh, the Tribunal set aside the matter and directed the Directorate of Income-tax (Exemptions) to provide another opportunity for the assessee to present their case. The assessee was instructed to produce relevant documents to prove the charitable nature of their activities. The Tribunal did not decide on the issue of retrospective withdrawal of exemption, leaving it to be addressed by the Directorate of Income-tax (Exemptions) in the fresh proceedings.

Conclusion:
The appeal filed by the assessee was allowed for statistical purposes, and the matter was remanded back to the Directorate of Income-tax (Exemptions) for a fresh decision after providing the assessee with another opportunity to be heard and present their case.