2016 (5) TMI 1007 - AT - Income Tax

Tribunal overturns cancellation of registration, directs reconsideration by Income Tax Commissioner.

Sidhashram Versus Income Tax Officer, (Tech-II), Kolhapur

The Tribunal allowed the appeals of the assessee, remanding the case back to the Commissioner of Income Tax for reconsideration. The Tribunal held that ... Registration granted to the assessee u/s. 12AA cancelled - approval granted u/s. 80G(5) withdrawn - Held that:- The assessee stated at the Bar that the assessee trust has amended the trust deed by deleting/amending the objects of the assessee trust on which the Commissioner of Income Tax had raised objection. The amended trust deed could not be placed before the Commissioner of Income Tax as the amendment was carried out after the impugned order was passed. In view of the matter, we deem it appropriate to remit the file back to Commissioner of Income Tax for considering the amended trust deed and thereafter pass the order, in accordance with law. The consequent order passed by the Commissioner of Income Tax in withdrawing the approval u/s. 80G(5) is also set aside and the file is remitted back to the Commissioner of Income Tax for reconsideration in the light of our above findings. - Decided in favour of assessee for statistical purpose. Issues Involved:1. Cancellation of registration under Section 12AA of the Income Tax Act, 1961.2. Withdrawal of approval under Section 80G(5) of the Income Tax Act, 1961.Issue-Wise Detailed Analysis:1. Cancellation of Registration under Section 12AA:The assessee, a trust established by a registered trust deed dated 10-05-1998, was granted registration under Section 12AA of the Income Tax Act, 1961, on 24-08-1999. The Commissioner of Income Tax (CIT) cancelled this registration on 21-11-2011, citing that certain clauses in the trust deed granted unlimited powers to the President, which was against the spirit of a public charitable trust. The assessee appealed this cancellation, and the Tribunal initially set aside the CIT's order, remanding it for reconsideration with a directive to adhere to the principles of natural justice. Despite the assessee's amendments to the objectionable clauses, the CIT reaffirmed the cancellation, leading to the current appeal.The key contention from the assessee was that the CIT erred in invoking sub-section (3) of Section 12AA, introduced by the Finance (No. 2) Act, 2004, effective from 01-10-2004, to cancel a registration granted prior to this date. The Tribunal supported this argument, referencing multiple judgments, including Welham Boy’s School Society Vs. Central Board of Direct Taxes and Sinhagad Technical Education Society Vs. Commissioner of Income Tax, which held that the provisions of sub-section (3) to Section 12AA cannot be applied retrospectively.The Tribunal reiterated that the CIT's action amounted to a review of its own order, which is impermissible without explicit statutory authority. The Tribunal concluded that the CIT erred in applying sub-section (3) of Section 12AA retrospectively to cancel the registration granted in 1999.2. Withdrawal of Approval under Section 80G(5):Following the cancellation of the registration under Section 12AA, the CIT also withdrew the approval granted to the assessee under Section 80G(5) of the Income Tax Act. The Tribunal noted that the withdrawal of approval under Section 80G(5) was a consequential action based on the cancellation of registration under Section 12AA.Since the Tribunal found the cancellation of registration under Section 12AA to be erroneous, it also set aside the consequent withdrawal of approval under Section 80G(5). The Tribunal remanded the matter back to the CIT for reconsideration in light of the amended trust deed and the Tribunal's findings.Conclusion:The Tribunal allowed the appeals of the assessee for statistical purposes, remitting the files back to the Commissioner of Income Tax for reconsideration. The Tribunal emphasized the need to consider the amended trust deed and to pass orders in accordance with the law, ensuring that the principles of natural justice are upheld.Order Pronounced:The order was pronounced on Friday, the 15th day of April, 2016.