2021 (10) TMI 1012 - AT - Income Tax

Cancellation of registration u/s 12A - powers of CIT (Exemptions) when the matter is pending with the Settlement Commission - HELD THAT - As due to search on the assessee, cash was found at the premises of the Trust as well as with the trustees and which the assessee claimed to have received as cash gifts from students, and the assessee for the purpose of bringing these donations to tax, filed application before Settlement Commission and learned CIT (Exemptions) proceeded to cancel the registration u/s 12A on the basis of these facts. We hold that issue of cancellation of registration u/s 12A arose from the search conducted on the assessee and there was no other reason to initiation of proceedings for cancellation of registration therefore, as per the provisions of section 245D read with order of Hon'ble Delhi High Court in the case of Tahiliani Design Pvt. Ltd. 2021 (2) TMI 106 - DELHI HIGH COURT all the powers of income tax authorities including power to cancel the registration u/s 12A got vested exclusively with Settlement Commission. The assessee filed the application before Settlement Commission on 05/01/2017 which had been accepted by the Settlement Commission on 17/01/2017. The learned CIT (Exemptions) has passed the order on 26/03/2019 which is after the date on which the Settlement Commission had admitted the application filed by the assessee The important findings in this case law are contained in para C D wherein their Lordships have held that powers of Settlement Commission under section 245D(4) also extend to examining such further evidence as may be placed before it or may be obtained by it and then the Hon'ble court held that since Settlement Commission was still seized of the matter, it would be within its rights to deal with the aspect of violation of Section 269ST of the Act. The Hon'ble court further held in para D that the issue of section 271DA and that of section 153A both had their origin in the search and therefore, held that both are part of the same. In the case before us also we have observed that the instance of going to Settlement Commission regarding settlement of dues as well as cancellation of registration by learned CIT (Exemptions) occurred due to a search on the assessee and therefore, both incidents are part of the same search. We are in agreement with the arguments of learned A.R. and hold that learned CIT (Exemptions) was not empowered to pass the order u/s 12A cancelling the registration granted to the assessee when the issue was still pending with Settlement Commission. The written arguments filed by the Revenue relate to the merits of cancellation of the registration and do not relate to arguments raised by learned A.R. therefore, these submissions are of no help to Revenue. Ground nos. 2 3 of the appeal are allowed and order of CIT (Exemptions), cancelling the registration, is cancelled.- Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of the cancellation of registration under section 12A of the I.T. Act by CIT (Exemptions).
3. Jurisdiction of the Settlement Commission versus the CIT (Exemptions) during the pendency of the application before the Settlement Commission.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal against the order of the Pr. CIT (Central), Lucknow, dated 20/03/2019, which was served on the assessee on 25/03/2019. The appeal should have been filed by 23/05/2019. However, the assessee, on professional advice, initially filed a writ petition in the Allahabad High Court on 24/04/2019, which delayed the appeal filing by 216 days. The Tribunal condoned the delay, finding the explanation plausible and without objection from the CIT, D.R.

2. Validity of the Cancellation of Registration under Section 12A:
The assessee, a public charitable trust registered under section 12A/80G, was engaged in running educational and medical institutions. Following a search on 18/09/2014, cash was found, which the assessee claimed as gifts from students. The Pr. CIT (Exemptions) canceled the registration on 20/03/2019, based on findings from the search.

The Tribunal examined whether the CIT (Exemptions) had the authority to cancel the registration while the matter was pending before the Settlement Commission. The Tribunal referred to section 245F of the I.T. Act, which grants exclusive jurisdiction to the Settlement Commission once an application is admitted. The Tribunal concluded that since the application was admitted on 17/01/2017, the CIT (Exemptions) did not have the jurisdiction to cancel the registration on 20/03/2019.

3. Jurisdiction of the Settlement Commission versus the CIT (Exemptions):
The Tribunal analyzed the provisions of section 245F, which state that the Settlement Commission has exclusive jurisdiction over all matters related to the case once an application is admitted. The Tribunal relied on the Delhi High Court's decision in Tahiliani Design Pvt. Ltd. vs. JCIT, which held that the Settlement Commission's jurisdiction extends to all matters arising from the search, including those not explicitly covered in the application.

The Tribunal found that the cancellation of the registration by the CIT (Exemptions) was based on the same search that led to the Settlement Commission proceedings. Therefore, the CIT (Exemptions) overstepped its jurisdiction, as the Settlement Commission had exclusive jurisdiction over the case.

Conclusion:
The Tribunal allowed the appeal, setting aside the order of the CIT (Exemptions) canceling the registration under section 12A. The Tribunal held that the CIT (Exemptions) did not have the jurisdiction to cancel the registration while the matter was pending before the Settlement Commission. All other grounds raised by the assessee were deemed academic and not adjudicated.