Appeal successful: Registration cancellation order deemed legally flawed. Charitable activities upheld.

The Tribunal allowed the appeal of the assessee, concluding that the order canceling the registration under Section 12A(1)(ab) was legally flawed. The Tribunal found the assessee's activities to be charitable, ordering the continuation of registration under Section 12AA. The decision emphasized that cancellation of registration requires meeting specific grounds under the law, which were not satisfied in this case.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Withdrawal of registration under Section 12AA of the I.T. Act, 1961.
3. Applicability of Section 2(15) of the I.T. Act, 1961 to the assessee's activities.
4. Jurisdiction and procedural correctness of the CIT(E)'s order.

Detailed Analysis:

1. Condonation of Delay:
The assessee filed an appeal with a delay of 53 days due to the Covid-19 pandemic. The Bench acknowledged the pandemic as a sufficient cause for delay, citing the Hon'ble Supreme Court's principle that a liberal approach should be adopted to serve the ends of justice. Consequently, the delay was condoned.

2. Withdrawal of Registration under Section 12AA:
The assessee society, registered under the Rajasthan Societies Registration Act, was initially granted registration under Section 12AA in 2001. The society filed an application under Section 12A(1)(ab) in 2019 to comply with amended provisions but later sought to withdraw it. Despite the withdrawal, the CIT(E) examined the case and rejected the registration, stating that the assessee's activities were not charitable but commercial in nature, thus failing the conditions of Section 2(15).

3. Applicability of Section 2(15):
The CIT(E) argued that the assessee's activities under General Public Utility (GPU) involved substantial contractual payments, which constituted business/commercial receipts, thus violating the proviso to Section 2(15). The assessee countered that their activities were welfare-oriented and funded by the government, falling under different limbs of Section 2(15) such as medical relief, education, and relief of the poor. The Tribunal found that the assessee's activities were inseparably linked to government welfare schemes and did not constitute trade, commerce, or business.

4. Jurisdiction and Procedural Correctness:
The Tribunal noted that the CIT(E) lacked jurisdiction to cancel the registration based solely on the proviso to Section 2(15), as the grounds for cancellation under Section 12AA(3) and 12AA(4) were not met. The Tribunal emphasized that the registration remains valid unless canceled by due process. The Tribunal also referenced the CBDT Circular No. 21/2016, which clarified that exceeding the cut-off specified in the proviso to Section 2(15) does not mandate cancellation of registration unless necessary grounds are established.

Conclusion:
The Tribunal concluded that the order passed by the CIT(E) canceling the registration under Section 12A(1)(ab) was bad in law and on facts. The assessee's activities were deemed charitable, and the registration under Section 12AA was ordered to be continued. The appeal of the assessee was allowed.

Order:
The appeal of the assessee is allowed, and the registration under Section 12AA is to be continued.

Pronouncement:
Order pronounced in the open court on 11/03/2022.

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