9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (11) TMI 217 - AT - Income TaxCancelation of Registration u/s. 12AA Held that - Condition precedent to cancellation of registration u/s. 12AA(3) of the Act are not satisfied because once registration is granted, Ld. CIT can cancel registration only if he satisfies that the activities of such Trust or institution are not genuine or are not been carried out in accordance with the objects of the Trust or institution - Merely because some amount has been spent by assessee society which is not in accordance with its aims and objects, at the time of giving exemption u/s. 11 & 12 of the Act, benefit of exemption could be denied to assessee for the said claim but it could not be the basis for cancellation of registration of assessee society - reasons given by Ld. CIT in the impugned order for cancellation of registration is not in accordance with law - cancellation of registration of assessee set aside.
Issues Involved:
1. Validity of the notice issued under Section 12AA(3) of the Income-Tax Act. 2. Cancellation of registration under Section 12AA(3) of the Income-Tax Act. 3. Alleged violations of Section 13(3) of the Income-Tax Act. 4. Alleged misuse of funds and administrative expenses. 5. Surplus income and its implications under Section 11(5) of the Income-Tax Act. 6. Principles of natural justice and fair play. Issue-wise Analysis: 1. Validity of the Notice Issued Under Section 12AA(3): The Tribunal observed that the notice dated 15.02.2011 was issued by the Income Tax Officer and not under the signature and seal of the Commissioner of Income-Tax (CIT). The notice did not state the reasons or basis for the proposed cancellation of registration. The Tribunal held that the notice was invalid as it did not provide the assessee with a fair and reasonable opportunity to respond, thereby violating the principles of natural justice. 2. Cancellation of Registration Under Section 12AA(3): The Tribunal noted that the CIT can cancel registration if the activities of the institution are not genuine or not carried out in accordance with its objects. However, the Tribunal found that the CIT did not provide sufficient reasons or evidence to support the cancellation. The Tribunal emphasized that mere existence of surplus income does not disqualify an institution from being considered as existing for educational purposes. 3. Alleged Violations of Section 13(3): The CIT alleged that salary payments to the Chairman and his wife were in contravention of Section 13(3). The Tribunal found that the CIT did not specify whether the salaries were unreasonable or excessive. The Tribunal clarified that reasonable salary payments for services rendered do not violate Section 13(3). 4. Alleged Misuse of Funds and Administrative Expenses: The CIT claimed that huge amounts were withdrawn under the guise of administrative expenses without proper justification. The Tribunal noted that the CIT did not provide specific details or evidence of misuse. The Tribunal held that if any amount was not spent for the aims and objects of the society, the benefit of Section 11 could be denied to that extent, but it could not be a ground for cancellation of registration. 5. Surplus Income and Its Implications Under Section 11(5): The CIT argued that the society had surplus income and did not invest it as per Section 11(5). The Tribunal observed that the CIT did not consider capital outlay and depreciation while calculating the surplus. The Tribunal referred to various judicial precedents and CBDT circulars, concluding that mere existence of surplus does not disqualify an institution from being considered for educational purposes. 6. Principles of Natural Justice and Fair Play: The Tribunal emphasized that the CIT violated the principles of natural justice by not providing the assessee with a fair opportunity to respond to the notice. The Tribunal cited various judicial precedents to support its view that adherence to the principles of natural justice is fundamental, especially when an adverse order is passed. Conclusion: The Tribunal quashed the order of the CIT canceling the registration of the assessee society, holding that the notice issued under Section 12AA(3) was invalid and the reasons provided for cancellation were not sustainable in law. The appeal of the assessee was allowed.
|
