Tribunal restores charitable trust's tax exemption, deems cancellation illegal.

The Tribunal allowed the appeals of a charitable trust against the denial of exemption claimed under sections 11/12 of the Income Tax Act for the assessment years 2009-10 to 2013-14. The cancellation of registration under section 12AA by the Principal Commissioner of Income Tax was deemed illegal and not valid, leading to the restoration of the trust's registration. Consequently, reassessments denying exemption under sections 11/12 were set aside, and the Assessing Officer was directed to conduct fresh assessments, providing the trust with a fair hearing opportunity. The appeals were allowed for statistical purposes.

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Issues Involved:
1. Denial of exemption claimed u/s 11/12 of the Act.
2. Cancellation of registration u/s 12AA by the PCIT.

Summary:

Issue 1: Denial of exemption claimed u/s 11/12 of the Act

The assessee, a charitable trust, filed appeals against the orders of the Ld. Commissioner of Income Tax (Appeals)-26, New Delhi, which sustained the action of the Assessing Officer in denying the exemption claimed by the assessee u/s 11/12 of the Act for the assessment years 2009-10 to 2013-14. The denial was based on the cancellation of the registration u/s 12AA by the Pr.CIT (Central)-3, New Delhi.

Issue 2: Cancellation of registration u/s 12AA by the PCIT

The Ld. Counsel for the assessee argued that the cancellation of registration u/s 12AA by the PCIT was held illegal and not valid by the Tribunal in ITA No. 6054/Del/2018 dated 03/09/2020. Consequently, the registration granted u/s 12AA to the assessee was restored, and thus, the reassessments made by the Assessing Officer u/s 143 r.w.s. 147 denying exemption u/s 11/12 would not survive.

The Tribunal had previously set aside the PCIT's order dated 01/03/2016 and directed a fresh decision. The PCIT's subsequent order on 27.10.2017, which cancelled the registration u/s 12AA since inception, was also challenged and held invalid by the Tribunal on 03/09/2020. The Tribunal observed that the PCIT's cancellation was based on alleged nefarious activities and violations of the trust deed and Section 2(15) of the Act, which were not substantiated with concrete evidence. The Tribunal emphasized that the trust's activities were in line with its charitable objectives and provisions of the Act.

The Tribunal concluded that the PCIT's order dated 27.10.2017 cancelling the registration u/s 12AA(3) since inception was legally not valid. The Tribunal revoked the cancellation order and clarified that the decision was in accordance with the Income Tax Act, 1961, without affecting proceedings under other Acts. The revenue was granted liberty to approach the Tribunal if the trial against Sh. Ketan Desai recommenced.

As the Tribunal restored the registration u/s 12AA, the reassessments made by the Assessing Officer u/s 147/143, based on the PCIT's withdrawal of registration, were set aside. The Tribunal directed the Assessing Officer to conduct denovo assessments for the assessment years 2009-10 to 2013-14, providing adequate opportunity of being heard to the assessee.

The Ld. Counsel for the assessee only argued on the restoration of registration u/s 12AA, and no other arguments were advanced. Consequently, the appeals were allowed for statistical purposes.

Order pronounced in the open court on 21.04.2023.

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