2021 (4) TMI 214 - AT - Income Tax

Exemption u/s 11 denied - cancel the registration u/s 2AA(3)/(4) - cancellation of registration under section 12AA(3)/(4) - effective date of cancellation of registration - Authority to cancel the registration under section 12AA(3)/(4) - Principal Commissioner of Income-Tax-17 cancelling the registration of the Appellant - HELD THAT - We see no reasons to take any other view of the matter than the view so taken by the coordinate bench in the case of Navajbai Ratan Tata Trust vs PCIT 2021 (3) TMI 1146 - ITAT MUMBAI . These observations will apply mutatis mutandis in the present case as well. Respectfully following the same, we hold that the impugned order cancelling registration granted to the assessee trust will have effect from the date on which hearing, on the first show cause notice requiring the assessee to show cause as to why registration under section 12A not be cancelled, and the assessee formally acquiesced to the said notice 10.03.2015, i.e on 20th March 2015.

Issues Involved:
1. Jurisdictional validity of the Principal Commissioner of Income Tax (PCIT) to cancel the registration under section 12AA(3)/(4) of the Income Tax Act, 1961.
2. Validity of the surrender of registration by the appellant.
3. Effective date of cancellation of registration.
4. Principles of natural justice and factual correctness of the PCIT's conclusions.
5. Applicability of section 13(2)(h) of the Income Tax Act and adherence to the trust deed.

Issue-wise Analysis:

1. Jurisdictional Validity of PCIT's Order:
The appellant argued that the PCIT lacked jurisdiction to cancel the registration as this power rests with the Commissioner of Income-tax (Exemption) [CIT(E)], who initially granted the registration. The appellant contended that the PCIT's order dated 31.10.2019 was void ab initio since the registration was originally communicated without a formal order, and thus no formal order was required to acknowledge its surrender.

2. Validity of the Surrender of Registration:
The appellant maintained that the surrender of registration via a letter dated 26.02.2015 was valid, asserting that there is no legal provision preventing such surrender. The appellant argued that the registration ceased upon acquiescing to the Show Cause Notice (SCN) dated 10.03.2015. The PCIT, however, held that the surrender was invalid as there was no formal statutory order, and the registration carried responsibilities and obligations beyond being a mere benefit.

3. Effective Date of Cancellation of Registration:
The appellant argued that the cancellation should be effective from the date of the surrender application (26.02.2015), or at least from the date of the initial SCN (10.03.2015). The PCIT's order dated 31.10.2019 was seen as an attempt to apply the provisions of section 115TD, which would not have applied if the surrender was accepted earlier. The appellant contended that the PCIT failed to dispose of the SCN dated 10.03.2015 and improperly expanded the scope of subsequent SCNs.

4. Principles of Natural Justice and Factual Correctness:
The appellant claimed that the PCIT violated principles of natural justice by denying an opportunity to make submissions and drew factually incorrect conclusions. The PCIT's observations regarding the control of Tata group companies by Tata Trusts were also challenged as exceeding jurisdiction.

5. Applicability of Section 13(2)(h) and Adherence to Trust Deed:
The appellant argued that the PCIT erred in applying section 13(2)(h) of the ITA and misinterpreted the trust deed. The appellant emphasized that the trust had applied its income for charitable purposes and that the trust deed did not mandate registration or surrender under section 12A. The PCIT's conclusion that the appellant was controlling a large business group through Tata Sons Limited was deemed erroneous.

Tribunal's Findings:

1. Jurisdictional Validity:
The tribunal did not explicitly address the jurisdictional argument but focused on the broader issue of the effective date of cancellation.

2. Validity of the Surrender:
The tribunal acknowledged that the registration under section 12A is a benefit that cannot be forced upon an unwilling assessee. It was held that the assessee had the right to surrender the registration and that the PCIT should have acted upon the surrender request promptly.

3. Effective Date of Cancellation:
The tribunal concluded that the cancellation should be effective from the date the hearing on the first SCN was concluded (20.03.2015), as the PCIT had the duty to act upon the surrender request and the subsequent delay was unjustified.

4. Principles of Natural Justice:
The tribunal did not delve deeply into the principles of natural justice but implicitly acknowledged the appellant's grievances by ruling in favor of an earlier effective date for cancellation.

5. Applicability of Section 13(2)(h) and Adherence to Trust Deed:
The tribunal did not make specific findings on these issues, focusing instead on the procedural aspects of the cancellation.

Conclusion:
The tribunal held that the cancellation of registration should be effective from 20.03.2015, aligning with the appellant's contention that the surrender should have been acknowledged promptly. The tribunal emphasized that the registration under section 12A is a benefit that cannot be imposed on an unwilling assessee and that the PCIT's delay in acting on the surrender request was unjustified.

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