2021 (9) TMI 1435 - AT - Income Tax

Exemption u/s 11 - cancelling the assessee s Section 12AA registration - HELD THAT - We find no reason to express our agreement with the Revenue s arguments supporting the same. This is for the precise reason that the CIT(E) passed his impugned order in furtherance to the corresponding show cause notice dt.08-02-2018 which had in fact been issued by the DCIT(E) only. This latter authority has nowhere been vested any jurisdiction to issue such a show cause notice u/s.12AA of the Act. Case law CIT Vs. Modern School Society 2019 (2) TMI 824 - SC ORDER holds that whilst affirming the corresponding hon'ble high court s judgment 2018 (7) TMI 1874 - RAJASTHAN HIGH COURT that any order passed under the provisions of the Act by an authority without having any jurisdiction is a non est action only. CIT-DR fails to dispute that the CIT(E) had not issued any other show cause notice proposing to finalise the impugned action. We therefore hold that the CIT(E) s impugned order is not sustainable on law since based on an invalid show cause notice. Quashed accordingly.

Summary

Issues involved: Appeal against order cancelling Section 12AA registration based on alleged fraudulent transactions and violation of IT Act provisions.

Analysis:
1. Grounds of Appeal: The assessee raised multiple substantive grounds challenging the CIT(Exemptions)-Hyderabad's order cancelling the registration under Section 12AA(3) and 12AA(4) of the Income Tax Act, 1961. The appellant denied involvement in fraudulent transactions, disputed the allegations made by the CIT, and contended that the activities were solely focused on promoting science and technology for charitable purposes. The appellant also refuted any violation of Section 13 of the IT Act and fraudulent claims of exemption under Section 35. The appellant emphasized acting in good faith and within the objects for which it was incorporated.

2. Jurisdictional Issue: The Tribunal analyzed the jurisdictional aspect of the case, highlighting that the show cause notice leading to the impugned order was issued by an authority, the DCIT(E), not vested with the power to issue such notices under Section 12AA of the Act. Citing relevant case law, the Tribunal held that any order passed by an authority lacking jurisdiction is considered a non est action. The CIT-DR did not contest the lack of jurisdiction in issuing the show cause notice, leading the Tribunal to conclude that the impugned order was unsustainable in law due to being based on an invalid notice.

3. Decision and Outcome: Considering the jurisdictional flaw in the issuance of the show cause notice, the Tribunal quashed the CIT(E)'s order cancelling the registration under Section 12AA. The Tribunal deemed all other arguments on merits as academic in light of the jurisdictional issue. Consequently, the assessee's appeal was allowed, and the order was pronounced in favor of the appellant on 7th September 2021.

This detailed analysis of the judgment provides insights into the grounds of appeal, jurisdictional challenges, and the ultimate decision of the Tribunal in favor of the appellant due to the jurisdictional flaw in the proceedings.