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2013 (8) TMI 549 - AT - Income TaxCancellation of registration granted to a Charitable Trust under section 12A of the IT Act Held that - Section 12AA(3) of the Act empowers the CIT to cancel such registration if he satisfy that activities of the trust or institutions are not genuine or are not being carried out in accordance with objects of the trust or institution as the case may be - The power of cancellation of registration under section 12A of the Act came to be incorporated by way of amendment introduced by Finance Act 2010 w.e.f. 01.06.2010 - The C.B.D.T. Circular No.1/2011 dated 06.04.2011 explains that this amendment will apply for A.Y. 2011-12 and subsequent years. Whereas, in the case under consideration, the CIT cancelled registration under section 12A of the Act for A.Y. 2009-10 which is not in accordance with the law - This view is fortified by the judgment of Hon ble Delhi High Court in the case of DIT(E) v. Mool Chand Khairati Ram Trust 2011 (4) TMI 563 - DELHI HIGH COURT Even otherwise also, as we notice that registration under section 12A/12AA can be cancelled in the circumstances provided in section 12AA(3) of the Act of which detail has been discussed above in Para no 19 of this order. If we apply the said condition stipulated in section 12AA(3), we find that there is no finding of the CIT that activities of the assessee, Agra Development Authority are non-genuine or not being carried out in accordance with the object of the assessee, Agra Development Authority - In the case under consideration, the condition stipulated in section 12AA(3), that activities of the assessee, Agra Development Authority are non-genuine or not being carried out in accordance with the object of the assessee, Agra Development Author is not satisfied - The CIT by his own motion added one more condition in section 12AA (3) that the object of the assessee, Agra Development Authority is not charitable as per amended provisions of section 2(15) of the Act for which the CIT is not empowered to add such own condition in the statute. - Appeal allowed Decided in favor of Assessee.
Issues Involved:
1. Legality of the cancellation of registration under section 12A. 2. Applicability of section 12AA(3) for cancellation of registration retrospectively. 3. Examination of the assessee's activities in light of the amended definition of 'charitable purpose' under section 2(15). 4. Validity of the CIT's findings regarding the nature of the assessee's activities. 5. Admissibility of additional evidence by the Revenue. 6. Judicial discipline and adherence to higher appellate authority orders. Issue-wise Detailed Analysis: 1. Legality of the cancellation of registration under section 12A: The assessee argued that the cancellation of registration under section 12A by the CIT was illegal as the power to cancel such registration was introduced prospectively from 01.06.2010 by the Finance Act, 2010. The CIT cancelled the registration w.e.f. A.Y. 2009-10, which was prior to the effective date of the amendment. The Tribunal agreed with the assessee, stating that the CIT did not have the authority to cancel the registration for periods before 01.06.2010, thus making the cancellation for A.Y. 2009-10 invalid. 2. Applicability of section 12AA(3) for cancellation of registration retrospectively: The Tribunal noted that section 12AA(3) was amended to allow the CIT to cancel registration obtained under section 12A only from 01.06.2010 onwards. The Tribunal emphasized that the amendment was prospective and applicable from A.Y. 2011-12 onwards, as clarified by the CBDT Circular No. 1/2011. Therefore, the CIT's cancellation of registration for A.Y. 2009-10 was not permissible under the law. 3. Examination of the assessee's activities in light of the amended definition of 'charitable purpose' under section 2(15): The CIT examined the assessee's activities and concluded that they fell under the fourth limb of 'advancement of any other object of general public utility' and involved activities in the nature of trade, commerce, or business. The Tribunal, however, found that the CIT did not establish that the activities were non-genuine or not in accordance with the objects of the trust. The Tribunal noted that the activities and objects of the assessee remained the same as when the registration was initially granted, and thus, the CIT's findings were not sufficient to justify the cancellation of registration. 4. Validity of the CIT's findings regarding the nature of the assessee's activities: The CIT identified various sources of income for the assessee, including land development, leasing properties, and other commercial activities, and concluded that these were in the nature of trade, commerce, or business. The Tribunal, however, stated that even if the activities were not charitable, it could not be said that they were non-genuine or not carried out in accordance with the objects of the assessee. The Tribunal held that the CIT added his own conditions to the statute, which he was not empowered to do. 5. Admissibility of additional evidence by the Revenue: The Tribunal accepted the additional evidence in the form of an audit report under section 142(A) submitted by the Revenue. The Tribunal provided an opportunity for both sides to be heard on the additional evidence, ensuring a fair hearing process. 6. Judicial discipline and adherence to higher appellate authority orders: The Tribunal emphasized the importance of judicial discipline, criticizing the CIT for not adhering to the Tribunal's earlier order which annulled his previous order due to lack of jurisdiction. The Tribunal cited several Supreme Court and High Court judgments to underline that lower authorities must follow the orders of higher appellate authorities to maintain the integrity of the judicial system. Conclusion: The Tribunal set aside the CIT's order cancelling the registration under section 12A and restored the registration for the assessee. The Tribunal did not express an opinion on the merits of the CIT's findings regarding the nature of the assessee's activities, as the primary issue was resolved in favor of the assessee based on the procedural grounds discussed. The appeal filed by the assessee was allowed.
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