2016 (2) TMI 1259 - HC - Income Tax

High Court overturns ITAT order cancelling Section 12A registration, remands case for fresh decision

The High Court set aside the order of the Income Tax Appellate Tribunal (ITAT) cancelling the appellant's registration under Section 12A of the Income Tax ... Cancelling registration u/s 12A - One of the principal grievances of the Appellant both before the ITAT and this Court is regarding violation of principles of natural justice and denial of sufficient opportunity to the Appellant in response to the show cause notice (‘SCN’) issued on 18th November 2011 - HELD THAT:- Revenue states that the Revenue would have no objection if the matter is remanded to the ITAT for fresh determination of all the pleas raised in the Assessee's appeal before the ITAT. This Court sets aside the impugned order passed by the ITAT and restores it to the file of the ITAT for a fresh decision in accordance with law. It will be permissible for the Appellant as well as the Revenue to file their respective written notes of submissions in advance of the date of hearing of the appeal with reference to the grounds raised in the appeal and the documents already on record. In rendering a fresh decision in the appeal, the ITAT will be uninfluenced by its earlier which has been set aside by this order. Issues Involved:1. Appeal against cancellation of registration under Section 12A of the Income Tax Act, 1961.2. Violation of principles of natural justice and denial of sufficient opportunity.3. Justification of the order cancelling registration.4. Adverting to reasons not mentioned in the show-cause notice or order.Analysis:Issue 1: Appeal against cancellation of registration under Section 12A of the Income Tax Act, 1961The appeal was directed against the order passed by the Director of Income Tax (Exemptions) cancelling the registration granted to the Appellant under Section 12A of the Act. The Appellant sought relief from the High Court against this decision.Issue 2: Violation of principles of natural justice and denial of sufficient opportunityThe Appellant raised concerns regarding the violation of principles of natural justice and denial of sufficient opportunity. It was highlighted that the order under Section 12AA (3) of the Act was passed without adequately considering the reply filed by the Appellant in response to the show cause notice issued.Issue 3: Justification of the order cancelling registrationThe Appellant contested the justification of the order cancelling registration, arguing that reasons beyond those stated in the show-cause notice and the order of the Director of Income Tax (Exemptions) were considered by the Income Tax Appellate Tribunal (ITAT). Specifically, the ITAT referred to the Appellant not achieving the objectives for which the Trust was formed in terms of research activities undertaken.Issue 4: Adverting to reasons not mentioned in the show-cause notice or orderThe Appellant contended that the ITAT introduced additional reasons not included in the show-cause notice or the Director's order. This raised concerns about procedural fairness and adherence to the principles of natural justice.The High Court set aside the impugned order passed by the ITAT and remanded the case back to the ITAT for a fresh decision in accordance with the law. Both the Appellant and the Revenue were permitted to submit written notes of submissions in advance of the hearing. The ITAT was instructed to make a fresh decision uninfluenced by its earlier order that was set aside. The appeal was disposed of accordingly.