2023 (1) TMI 228 - HC - Income Tax

Exemption u/s 11 - registration u/s 12A Cancelled - HELD THAT - We may note that suggestion of Mr Maratha that a fresh application may be filed, as the registration of the petitioner u/s 12A of the Act is still operable, in our view, would not be the most efficacious approach in the matter, given the fact that a detailed application is already available with the CIT (Exemption), Delhi. Therefore, in our opinion the best way forward would be to set aside the impugned order with a direction to the CIT (Exemption) Delhi to decide the application afresh after giving due opportunity to the petitioner and/or its authorized representatives to present the petitioner s case. For this purpose, the authorized representatives of the petitioner will appear before the CIT (Exemption) Delhi on 06.01.2023 at 11 AM. CIT (Exemption), Delhi will give due opportunity to the authorized representative of the petitioner to place on record the relevant document/material and thereafter, will pass a speaking order. In case the order passed by the CIT (Exemption) Delhi is adverse to the interests of the petitioner, the petitioner will have liberty to assail the same, albeit, as per law.

Issues:
1. Rejection of application under Section 12A(1)(ac)(v) of the Income Tax Act, 1961 leading to cancellation of registration.
2. Failure to consider the assessment order under Section 143(3) of the Act concerning AY 2020-2021.
3. Instructions from respondent regarding the impugned order.
4. Next steps for the petitioner - filing a fresh application or preferring an appeal.

Analysis:
1. The judgment concerns the rejection of the petitioner's application under Section 12A(1)(ac)(v) of the Income Tax Act, 1961, resulting in the cancellation of their registration. The petitioner's counsel argued that the registration certificate was initially issued on 18.11.2016 and later on 28.05.2021, following an amendment to the Act. The registration issued on 28.05.2021 was provisional, and the petitioner filed an application in Form 10AB, responding to queries raised by the CIT(Exemption). Notices and replies were exchanged, and an assessment order for AY 2020-2021 showed the petitioner's total income as 'nil', qualifying for exemption due to charitable activities.

2. The judgment highlights the failure of the CIT(Exemption) to consider the assessment order under Section 143(3) of the Act for AY 2020-2021, where the petitioner's income was accepted as 'nil'. This oversight was deemed crucial and warranted attention. The respondent's suggestion of filing a fresh application was considered inefficient, given the existing detailed application. The court decided to set aside the impugned order and directed the CIT(Exemption) to reevaluate the application, providing the petitioner with an opportunity to present their case.

3. Instructions from the respondent indicated that the petitioner's existing registration under Section 12A and Section 80G of the Act remained valid, and there was no violation of natural justice in the impugned order. The respondent suggested filing a fresh application or preferring an appeal with the Tribunal. However, the court deemed reevaluation by the CIT(Exemption) as the appropriate course of action, emphasizing the need for a fair opportunity for the petitioner to present their case.

4. The judgment concluded by disposing of the writ petition with directions for the petitioner's authorized representatives to appear before the CIT(Exemption) on a specified date for a reevaluation of the application. The CIT(Exemption) was instructed to allow the petitioner to present relevant documents and pass a speaking order. The petitioner retained the right to challenge any adverse decision in accordance with the law, ensuring a fair and transparent process moving forward.

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