2019 (5) TMI 1202 - HC - Income Tax

Cancellation of registration u/s 12AA - registration was cancelled by the CIT(C), Ludhiana retrospectively from 1.10.2004 on the ground that the activities of the assessee were not genuine and charitable allegedly on account of additions made during the assessment proceedings for the assessment years 2005-06 and 2006-07 - HELD THAT - Tribunal while allowing the appeal of the assessee had noticed that the first addition was in respect of unaccounted cash found and seized from the residence of the trustees of the assessee. In the quantum appeal, the revenue's appeal was dismissed by confirming the relief granted to the assessee. As far as unaccounted payment of ₹ 8 lakhs made to M/s R.K. Engineering Works is concerned, the same had been deleted and no appeal was filed against the deletion of the addition. The issue regarding unexplained cash transfer entry was also decided in favour of the assessee. Further, the assessee had been granted registration again on 30.11.2008 which was made effective from the assessment year 2008-09 finding the activities of the assessee as genuine and the objective being charitable. The Tribunal 2012 (7) TMI 398 - ITAT DELHI while allowing the appeal held that the addition was based on the cancellation of the assessee trust u/s 12AA and denying the exemption u/s 11 of the Act. Since we have allowed the appeal of the assessee for granting the registration, therefore, we set aside the orders of the authorities below. - Decided in favour of the assessee.

Summary

Issues:
1. Interpretation of Section 12AA(3) of the Income Tax Act regarding cancellation of registration.
2. Extending consequential benefits under sections 80G and 11 of the Income Tax Act.

Issue 1: Interpretation of Section 12AA(3) of the Income Tax Act regarding cancellation of registration.
The High Court dealt with a bunch of appeals involving identical questions of law and facts. The first appeal, ITA-276-2012, was filed by the revenue challenging the order passed by the Income Tax Appellate Tribunal. The main issue revolved around the interpretation of Section 12AA(3) of the Income Tax Act. The Court examined whether the cancellation of registration, ordered by the Commissioner, is sustainable when additions made to the returned income during assessment years have been deleted in appeal. The Tribunal had observed that cancellation of registration should not be based solely on the sustainability of income but on an analysis of the trust's activities. The Court analyzed various activities and additions made to the trust's income, ultimately concluding that there was no basis for denial of registration, and upheld the Tribunal's decision.

Issue 2: Extending consequential benefits under sections 80G and 11 of the Income Tax Act.
In the second appeal, ITA-277-2012, the Court examined whether the ITAT erred in granting approval under section 80G of the Income Tax Act when the cancellation of registration under section 12AA was justified. Similarly, in the third appeal, ITA-286-2012, the question was whether the Tribunal was correct in extending exemption under section 11 of the Act to the Corpus Fund. The Tribunal had allowed the appeals of the assessee, setting aside the orders of authorities below. The Court reviewed the Tribunal's decisions and found no illegality or perversity in their findings. Consequently, the Court dismissed the appeals, ruling in favor of the assessee and upholding the consequential benefits granted under sections 80G and 11 of the Income Tax Act.

In conclusion, the High Court analyzed the issues related to the interpretation of Section 12AA(3) of the Income Tax Act and the extension of consequential benefits under sections 80G and 11. The Court upheld the Tribunal's decisions in favor of the assessee, finding no merit in the revenue's appeals.