2015 (1) TMI 1401 - AT - Income Tax

Exemption u/s. 11 denied - assessee has received capitation fee on behalf of students and the registration under 12AA(3) has already been cancelled by CIT, Central-III, Kolkata - Held that - Registration can be cancelled only in those cases where the registration has been granted under sub-sec. (ib) of sec. 12AA of the Act. This section nowhere empowers the Id CIT. to cancel or withdraw the registration granted u/s. 12A of the Act. In the absence of such express power, in our opinion, the registration granted u/s. 12A of the Act cannot be cancelled by invoking provisions of Sec. 22AA(3) of the Act. Identical issue was considered by the Hon ble Delhi High Court in the case of DIT (Exemption) vs. Mool Chand Khairati Ram Trust 2011 (4) TMI 563 - DELHI HIGH COURT . CIT(A) has denied exemption u/s. 11 of the Act on the entire premise that the registration u/s. 12AA(3) of the Act has been cancelled but the same has been restored by the Tribunal. There is no other reason for denying exemption in the orders of the lower authorities. - Decided in favour of assessee.

Summary

Issues:
- Denial of exemption u/s. 11 of the Income-tax Act due to cancellation of registration under section 12AA(3) by CIT, Central-III, Kolkata.
- Appeal challenging the order of CIT(A) confirming the addition made by AO.

Analysis:
The judgment by the Appellate Tribunal ITAT Kolkata involved an appeal by the assessee against the order of CIT(A) denying exemption u/s. 11 of the Income-tax Act. The denial was based on the cancellation of registration under section 12AA(3) by CIT, Central-III, Kolkata. The assessee raised three grounds in the appeal, emphasizing that the CIT(A) should have considered the legality of the assessment and the facts specific to the relevant assessment year. The Tribunal referred to its previous orders in the assessee's case for other assessment years, where similar issues were allowed in favor of the assessee. The Tribunal highlighted that the power to cancel registration under section 12AA(3) does not extend to registrations granted under section 12A of the Act. It emphasized that the registration granted under section 12A cannot be withdrawn or cancelled using the provisions of section 12AA(3).

The Tribunal further cited a decision by the Hon'ble Delhi High Court, which clarified that the power to cancel registration granted under section 12A was limited to registrations granted under specific clauses until an amendment in 2010. Following the Delhi High Court decision and previous Tribunal rulings, the Tribunal held that the cancellation of registration by CIT invoking section 12AA(3) was not in accordance with the law. Consequently, the Tribunal vacated the CIT's order and restored the registration granted to the assessee-trust under section 12A of the Act. As a result, the denial of benefit u/s. 11 of the Income-tax Act by the AO and confirmed by CIT(A) was quashed.

Given the restoration of registration under section 12A, the Tribunal allowed the assessee's appeal, as there were no valid grounds for denying exemption u/s. 11 of the Act. The judgment concluded with the allowance of the assessee's appeal, overturning the orders of the lower authorities.