Appeal allowed as CIT lacked jurisdiction to cancel registration under IT Act Section 12A

The ITAT allowed the appeal, holding that the CIT lacked jurisdiction to cancel the registration granted to the appellant society under section 12A of the IT Act. The ITAT emphasized that the CIT's power to cancel registration was not retrospective and did not apply to trusts registered before the relevant amendments. The appeal succeeded based on the lack of jurisdiction in the CIT's order, leading to the quashing of the cancellation of registration.

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Issues:
1. Jurisdiction of the CIT in cancelling registration under section 12AA(3) of the IT Act.
2. Legitimacy of the activities of the appellant society in accordance with its objects.

Issue 1: Jurisdiction of the CIT in cancelling registration under section 12AA(3) of the IT Act:

The appeal challenged the jurisdiction of the CIT in cancelling the registration granted to the appellant society under section 12A of the IT Act. The CIT withdrew the registration on the grounds that the society was diverting income and assets for personal benefit, thereby losing its charitable nature. The CIT issued a notice to the society to explain why the registration should not be withdrawn. The society argued that it was engaged in charitable activities as defined in section 2(15) and that the AO's reasons for denying tax exemption were related to lease rent payments and a resolution to transfer the school building. The CIT, however, disagreed with the society's submissions and cancelled the registration under section 12AA(3) of the Act.

The ITAT analyzed the legal provisions and the timing of the registration and cancellation. It noted that section 12AA(3) was inserted in the Act in 2004, granting the CIT the power to cancel registration if the activities were not genuine or aligned with the trust's objectives. Referring to the Oxford Academy case, the ITAT highlighted that the CIT's power to cancel registration was not retrospective and that the CIT could not rescind registration granted before 2004. The ITAT also considered the 2010 amendment to section 12AA(3), clarifying that if a trust was registered before 2004, the CIT had no authority to cancel the registration under section 12AA(3). As the society's registration was granted in 1999, prior to the relevant amendments, the ITAT held that the CIT had no jurisdiction to cancel the registration. Therefore, the ITAT quashed the CIT's order cancelling the registration.

Issue 2: Legitimacy of the activities of the appellant society in accordance with its objects:

The second ground of appeal raised by the appellant questioned the legitimacy of the CIT's claim that the society's activities were not genuine or aligned with its objectives. However, since the ITAT had already determined that the CIT's order under section 12AA(3) was without jurisdiction, the issue raised under this ground was considered of academic interest only. Consequently, the ITAT did not provide any specific findings on this issue, as the appeal had already been allowed based on the lack of jurisdiction in the CIT's order.

In conclusion, the ITAT allowed the appeal, holding that the CIT had no jurisdiction to cancel the registration granted to the appellant society under section 12A of the IT Act. The ITAT's decision was based on the legal provisions, precedents, and the timing of the registration and subsequent cancellation, emphasizing that the CIT's power to cancel registration was not retrospective and did not apply to trusts registered before the relevant amendments.

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