2018 (3) TMI 1668 - HC - Income Tax

Registration of assessee u/s 12A cancelled - genuineness of the activities of the society - activities of the assessee were not being carried on in accordance with the provisions required to be fulfilled under Section 12A - Held that - After examining the matter at length recorded a finding of fact that since there was no cogent material or evidence to establish any violation of the provisions of Section 12AA(3) of the Act the cancellation of the registration retrospectively was illegal, bad in law and not justified and, therefore, the Tribunal has set it aside. We are of the opinion that there is no error in the conclusion reached by the Tribunal. Hence, the order of the Tribunal is upheld by this Court. The questions of law are answered in favour of the assessee and against the department.

Summary

Issues:
1. Justification of canceling registration u/s. 12AA (3) without evidence of breach of requirement.
2. Justification of the retrospective cancellation of registration u/s. 12AA (3) based on a specific decision.

Analysis:

Issue 1:
The appeal before the High Court concerned the cancellation of registration of the assessee under Section 12A of the Income Tax Act. The CIT had cancelled the registration retrospectively, alleging that the activities of the assessee were not in compliance with the provisions of Section 12A. The Tribunal, after examining the matter, found that the proceedings were initiated based on doubts without substantial evidence. The Tribunal concluded that there was no concrete evidence to establish any violation of Section 12AA(3) of the Act. Therefore, the retrospective cancellation of registration was deemed illegal, unjustified, and set aside by the Tribunal.

Issue 2:
The High Court addressed the question of law regarding the retrospective cancellation of registration under Section 12AA (3) of the Income Tax Act. The Tribunal had relied on a decision of the Allahabad High Court in a specific case to support its conclusion that cancellation of registration cannot be retrospective unless there is clear evidence of breach. The High Court agreed with the Tribunal's reasoning and upheld its decision. The Court found no error in the Tribunal's conclusion and answered the questions of law in favor of the assessee and against the department. Consequently, the appeal was dismissed, and no costs were awarded.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the importance of substantial evidence to support the cancellation of registration under Section 12AA (3) of the Income Tax Act. The judgment clarified that retrospective cancellation should not be arbitrary and must be based on concrete proof of non-compliance with statutory requirements.