2017 (12) TMI 361 - AT - Income Tax

Tribunal rules in favor of assessee, cancels retrospective cancellation of registration.

Sarlaben Bhansali Charities Trust C/o. V.N. Purohit & Co. Versus CIT (Exemptions), Kolkata

The Tribunal held that the order under section 263 was bad in law and allowed the appeal of the assessee. The Tribunal also partially allowed the appeal ... Revision of assessment u/s 263 - registration granted to the assessee trust u/s 12AA cannot be invoked retrospectively under section 12AA(3) - Held that:- Referring to Circular No. 1 of 2011 dated 06.04.2011 issued by the CBDT it is held that section 12AA(3) is applicable only from the assessment year 2011-12. Thus we hold that this ground on which an order under section 263 of the Act was passed by the Ld. CIT is bad in law. Coming to the second reason for which the Ld. CIT (Exemption) invoking powers under section 263, we find that the Ld. CIT (Exemption) records that the facts as narrated by him has been established in the assessment order passed under section 147/143(3) of the Act dated 27.03.2014. When this fact has been considered in the assessment by the Assessing Officer and a considered and possible view taken, there is no ground for invocation of powers under section 263 of the Act, specifically when there is no allegation of non application of mind by the A.O. or that any prejudice or any error was committed by the Assessing Officer which caused prejudiced to the revenue. The Ld. CIT (Exemption) mentioned that these facts were considered by the Assessing Officer in his order, thus ruling out non-application of mind to this issue by the A.O. Cancellation of registration granted to the under section 12AA by the Ld. CIT (Exemption) Kolkata by invoking his powers under section 12AA(3) - Held that:- Retrospectively cancellation of the registration granted to the assessee is bad in law. See case of Agra Development Authority vs CIT [2013 (8) TMI 549 - ITAT AGRA] Issues Involved:1. Validity of the order under section 263 of the Income Tax Act.2. Retrospective cancellation of registration under section 12AA(3) of the Income Tax Act.Detailed Analysis:Issue 1: Validity of the order under section 263 of the Income Tax ActThe revenue appealed against the order of the Commissioner of Income Tax (Exemptions), Kolkata, which held that the assessment order dated 27.03.2014 under section 147/143(3) was erroneous and prejudicial to the interest of the revenue. The CIT directed the Assessing Officer (A.O.) to conduct a fresh assessment. The assessee, a charitable trust, argued that the CIT's order under section 263 was based on the erroneous interpretation that the registration under section 12AA was cancelled retrospectively, which is not permissible under the law. The departmental representative countered that the CIT set aside the order under section 263 on two grounds: the retrospective cancellation of registration and an unrecorded cash donation of Rs. 15 lakhs.The Tribunal found that the registration under section 12AA cannot be cancelled retrospectively, citing the Agra Development Authority vs CIT 141 ITD 336 case, which clarified that the power of cancellation under section 12AA(3) was incorporated by the Finance Act, 2010, effective from 1st June 2010, and thus cannot apply to assessment year 2009-10. The Tribunal also referred to the Mukesh Bhansali Charities Trust vs CIT (Exemption) case, which reinforced that section 12AA(3) is applicable only from the assessment year 2011-12.On the second ground regarding the unrecorded donation, the Tribunal noted that the facts were considered in the assessment order dated 27.03.2014, and no non-application of mind by the A.O. was evident. The Tribunal cited various judgments, including the Supreme Court's ruling in Malabar Industrial Co. Ltd., which emphasized that an order is erroneous and prejudicial to the interests of the revenue only if it is unsustainable in law. The Tribunal concluded that the CIT did not provide adequate reasons to invoke section 263 and that the order of the A.O. was not erroneous or prejudicial to the revenue.Issue 2: Retrospective cancellation of registration under section 12AA(3) of the Income Tax ActThe assessee appealed against the cancellation of registration under section 12AA by the CIT (Exemption), Kolkata, effective from assessment year 2009-10. The Tribunal found that the cancellation of registration under section 12AA(3) cannot be done retrospectively, as supported by the decision in the Agra Development Authority vs CIT case. The Tribunal upheld the assessee's contention that the cancellation should be effective only from the date of the order, i.e., 11.12.2015.Conclusion:The Tribunal held that the order under section 263 was bad in law and allowed the appeal of the assessee. The Tribunal also partially allowed the appeal regarding the retrospective cancellation of registration under section 12AA(3), affirming that the cancellation cannot be applied retrospectively.Order Pronounced:The appeal ITA No. 663/Kol/2016 is allowed, and ITA No. 76/Kol/2016 is allowed in part. The order was pronounced in the Open Court on 30th November 2017.