2010 (6) TMI 562 - AT - Income Tax

Registration u/s 12AA - assessee filed a rectification application before the ld. Commissioner of Income-tax - The provisions contained in section 12AA were amended with effect from 1-10-2004 conferring jurisdiction on the Commissioner of Income-tax to withdraw the registration granted earlier provided the Commissioner is satisfied that the activities are not genuine or are not being carried out in accordance with the objects - owever such a deemed allowance in this case would have the effect that the assessee would get exemption under section 11 in respect of application of its income for the benefit of its members which cannot be said to be a charitable purpose - It is no doubt true that on the date when the Commissioner of Income-tax passed the order this section did not exist on the statute book. However this provision existed on the statute book on the date of hearing of the case - there is nothing in the Income-tax Act which will prevent him from passing an order withdrawing the registration on the grounds taken by him in order under section 12AA(3) - There is no apparent error on the records - hence the appeal is dismissed

Summary

Issues Involved:
1. Legality of the cancellation of registration under section 12AA of the Income-tax Act, 1961.
2. Validity of the rectification application under section 154 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Legality of the Cancellation of Registration under Section 12AA:

The core issue revolves around the cancellation of the registration of the assessee-society under section 12AA of the Income-tax Act, 1961. The registration was initially granted by the Commissioner of Income-tax (CIT), Meerut, with effect from 1-4-1996. However, the succeeding CIT at Ghaziabad canceled this registration on 16-1-2004, citing that the society was not engaged in any "charitable activity" and was instead generating income for its members. The cancellation was challenged based on the argument that the power to cancel such registration was only conferred upon the CIT from 1-10-2004 through the insertion of sub-section (3) in section 12AA by the Finance (No. 2) Act, 2004.

The Tribunal acknowledged that the CIT did not have the power to cancel the registration on 16-1-2004, as this authority was only granted later. This position was supported by precedents from the Hon'ble Uttranchal High Court in Welham Boys' School Society v. Central Board of Direct Taxes and the Allahabad High Court in Oxford Academy for Career Development v. Chief CIT, which held that the CIT lacked inherent power to cancel registration in the absence of statutory provision.

2. Validity of the Rectification Application under Section 154:

The assessee filed a rectification application on 15-1-2008, arguing that the order dated 16-1-2004 was invalid due to the absence of statutory power at that time. This application was rejected by the CIT on 7-12-2009, stating that the order dated 16-1-2004 was reasonable and justified. The Tribunal considered the facts and submissions, noting that the amended provision under section 12AA(3) existed at the time of hearing, thereby empowering the CIT to cancel the registration if the activities were not genuine or not in accordance with the objects.

The Tribunal discussed various cases, including Society for the Promotion of Education, Adventure Sport & Conservation of Environment, which dealt with the deemed allowance of registration applications due to undue delay by the CIT. However, it distinguished these cases based on the facts and circumstances, noting that the delay in the present case was not inordinate and the order was a continuation of the earlier order dated 16-1-2004.

The Tribunal also referenced the Larger Bench decision in B.T. Patil & Sons Belgaum Construction (P.) Ltd., which held that the position of law at the date of passing the order should be considered. Since the amended provision under section 12AA(3) was in force at the time of hearing, it was applicable.

The Tribunal concluded that the issues raised by the assessee did not constitute a mistake apparent from the record, and even if the order was set aside, the CIT could re-issue the order under the current law. Thus, the appeal was not sustainable.

Conclusion:

In conclusion, the Tribunal dismissed the appeal, holding that the cancellation of registration and the rejection of the rectification application were justified under the amended provisions of the Income-tax Act, 1961. The issues raised did not constitute any mistake apparent from the record, and the appeal was not maintainable.