2022 (4) TMI 92 - AT - Income Tax

Appeal Success: Registration Cancellation under Income Tax Act Reversed

Last Hour Ministry, Love India Ministries, Ayana Charitable Trust, Believers Eastern Church Versus CIT (Exemptions), Kochi

Last Hour Ministry, Love India Ministries, Ayana Charitable Trust, Believers Eastern Church Versus CIT (Exemptions), Kochi - TMI Issues:Cancellation of registration u/s. 12AA of the Income Tax Act, 1961.Analysis:Issue 1: Grounds for Cancellation of RegistrationThe appeals were filed against the cancellation of registration u/s. 12AA by the Ld. CIT(Exemption)-Kochi. The reasons cited for cancellation included lack of independence among trust/entities, incorrect income filings, improper fund usage, non-alignment of expenditures with trust objects, violations of FCRA, and more. The assessee argued that the cancellation was based on violations of 13(1)(c) and 13(1)(d) of the Act, which could have resulted in additions. However, the reasons did not question the genuineness of the trust. The cancellation was challenged on the grounds that the search proceedings could only result in assessments under Section 153A, and all earlier pending proceedings should abate post-search.Issue 2: Arguments and Counter-ArgumentsThe appellant contended that the cancellation was based on evidence found during the survey, which the assessee couldn't respond to adequately due to prohibitory orders on records. The retraction of statements was dismissed as an afterthought. The respondent argued that the cancellation was justified based on survey evidence and sworn statements, irrespective of the search proceedings. The respondent emphasized that Section 153A abatement did not affect the cancellation decision, which was supported by the show cause notice referencing actions taken post-survey.Issue 3: Legal Provisions and Quashing of CancellationThe Tribunal analyzed Section 12AA(4) and highlighted that cancellation required an order by the AO, a quasi-judicial authority, after due assessment procedures. The cancellation without such an order hindered fair assessment and infringed on the assessing authority's independence. The Tribunal ruled that cancellation without a completed assessment was premature and violated the provisions of Section 12AA(4). The liberty provided to the assessee to show reasonable cause post-assessment was also emphasized. Additionally, the abatement of pending assessments due to Section 153A further supported the quashing of the cancellation.ConclusionThe Tribunal allowed all appeals, annulling the cancellation of registration u/s. 12AA. The decision was based on the premature nature of the cancellation, lack of completed assessment procedures, and the infringement on the assessing authority's independence. The judgment emphasized the importance of following due process and completing assessments before taking such drastic actions.The detailed analysis of the judgment provides insights into the legal reasoning behind the decision to annul the cancellation of registration under Section 12AA of the Income Tax Act, 1961.