2011 (6) TMI 833 - AT - Income Tax

Summary

Issues Involved:
1. Withdrawal/Cancellation of Registration u/s 12A.
2. Interpretation of s. 12AA(3) of the IT Act, 1961.
3. Charitable nature of the trust's objects.
4. Proceedings under ss. 80G and 12A as separate entities.
5. Adequate opportunity for the assessee to present its case.

Summary:

1. Withdrawal/Cancellation of Registration u/s 12A:
The primary grievance of the assessee was the withdrawal/cancellation of the registration granted to the society u/s 12A of the IT Act, 1961. The CIT-I, Lucknow, withdrew the registration on the grounds that the trust's objects were meant for the welfare and progress of persons belonging to minorities, which was deemed contrary to the provisions of the Act.

2. Interpretation of s. 12AA(3) of the IT Act, 1961:
The CIT-I misinterpreted s. 12AA(3) by erroneously cancelling the registration. The section empowers the CIT to cancel registration only if the activities are not genuine or not carried out in accordance with the objects of the trust. The assessee argued that their activities were genuine and in line with their registered objects.

3. Charitable nature of the trust's objects:
The CIT-I held that the objects of the trust were not charitable, which was a misinterpretation. The Tribunal found that the objects were considered charitable when the registration was initially granted and there was no evidence of any change in the objects or activities of the trust.

4. Proceedings under ss. 80G and 12A as separate entities:
The CIT-I considered the proceedings under s. 80G while deciding on the cancellation of registration u/s 12A, which was incorrect. The Tribunal emphasized that proceedings under ss. 80G and 12A are separate, distinct, and independent of each other.

5. Adequate opportunity for the assessee to present its case:
The assessee contended that they were not given sufficient time and opportunity to present their case. The Tribunal noted that the CIT-I's actions, including the denial of adjournment requests, indicated a lack of reasonable opportunity for the assessee to be heard.

Conclusion:
The Tribunal set aside the order of the CIT-I, Lucknow, and directed the restoration of the registration granted to the assessee society u/s 12A of the IT Act, 1961. The appeal was allowed, emphasizing that the CIT-I's action did not fall within the parameters of s. 12AA(3) and was thus unsustainable.