2024 (6) TMI 1053 - AT - Income Tax

ITAT condones 97-day delay, quashes registration cancellation under Section 12AA for attempting to unsettle decided matters

ITAT Cuttack condoned 97-day delay in filing appeal against cancellation of registration u/s 12AA, as delay occurred while pursuing writ petition before ... Cancellation of registration under section 12AB(4) - Document Identification Number (DIN) requirement and effect on validity of orders - show cause notice for cancellation of registration - specified violations for cancelling registration - finality of appellate orders / res judicata - retrospective cancellation of registration Document Identification Number (DIN) requirement and effect on validity of orders - cancellation of registration under section 12AB(4) - Whether the order of the Commissioner cancelling registration is vitiated for want of a DIN and liable to be quashed, and the effect of the Supreme Court stay on that question. - HELD THAT: - The Tribunal recognised that the CBDT Circular requiring recording of a DIN is binding on subordinate authorities and that the impugned order of the Commissioner of Income Tax (Exemptions) dated 20.6.2023 was issued without recording a DIN. On that statutory-administrative basis the order is non-est and liable to be quashed. However, the Tribunal noted that the Supreme Court has stayed the question whether cancellation/annulment of an order is permissible solely on account of absence of a DIN in Brandix Maritius Holdings Ltd., and therefore the Tribunal's quashing on the ground of non-recording of DIN will remain suspended until the Supreme Court decides the issue. The order is prima facie vitiated for want of DIN and liable to be quashed, but the effect of that quashment is suspended in view of the Supreme Court stay. Finality of appellate orders / res judicata - show cause notice for cancellation of registration - specified violations for cancelling registration - Whether cancellation of registration under section 12AB(4) on the grounds raised in the 6.10.2022 show cause notice can be sustained where the same matters had been earlier examined and adjudicated on appeal to finality. - HELD THAT: - The Tribunal examined the grounds in the 6.10.2022 show cause notice (survey, corpus receipts, donation to Aids Awareness Trust of Orissa, characterization of microfinance activity) and found that the principal controversies-whether the microfinance activity was charitable or commercial and the genuineness/identity of donors-had been adjudicated in favour of the assessee by earlier appellate fora. The Assessing/ appellate authorities had accepted the assessee's claims for relevant assessment years and the Tribunal's earlier decisions in the assessee's own case had sustained charitable character. Further, the High Court had quashed the Commissioner's revision order under section 263 concerning the corpus donations, confirming that details of donors had been furnished. The 2016 show cause proceedings were not continued into an order and the 2022 notice did not treat itself as a continuation; consequently the Commissioner could not revive settled issues to cancel registration. On these merits, the Tribunal concluded that the impugned cancellation sought to unsettle issues already finally decided and therefore could not be sustained. The cancellation of registration by the Commissioner under section 12AB(4) is annulled on merits because the grounds relied upon had been previously examined and had attained finality in favour of the assessee. Show cause notice for cancellation of registration - continuation of earlier proceedings - Whether the show cause notice dated 6.10.2022 operated as a continuation of the proceedings initiated by the 18.10.2016 notice and whether prior inaction amounted to deemed dropping of proceedings. - HELD THAT: - The Tribunal noted that proceedings initiating cancellation were issued in 2016 and that the assessee replied; thereafter no order was communicated. The 6.10.2022 notice does not reference the 2016 notice and therefore cannot be treated as a mere continuation of earlier proceedings. The Tribunal observed that absence of action after the 2016 reply and the distinct character of the 2022 notice preclude treating the 2022 notice as a lawful continuation to revive previously dormant proceedings for cancellation. The 2022 show cause notice is not a continuation of the 2016 proceedings such as would validate cancellation based on matters already concluded; prior inaction cannot be used to revive settled disputes for cancelling registration. Condonation of delay - alternate remedy by filing writ petition - Whether the delay of 97 days in filing the appeal before the Tribunal should be condoned. - HELD THAT: - The Tribunal accepted the assessee's explanation that the delay occurred because the assessee pursued an alternate remedy before the High Court by filing a writ petition which was subsequently withdrawn with liberty to file an appeal before the Tribunal. The revenue did not press a substantial objection to condonation. In view of these circumstances the Tribunal exercised its discretion to condone the delay. Delay of 97 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits. Final Conclusion: The appeal is allowed: the Tribunal condoned the delay, quashed the Commissioner's cancellation of registration on merits because the matters relied upon had attained finality in favour of the assessee, and observed that the order is also vitiated for want of DIN though the effect of that ground is suspended by the Supreme Court stay; the stay petition is dismissed as withdrawn. Issues Involved:1. Withdrawal of stay petition.2. Delay in filing the appeal.3. Non-availability of Document Identification Number (DIN) in the order.4. Merits of the cancellation of registration under Section 12AA.5. Retrospective cancellation of registration.Issue-wise Detailed Analysis:1. Withdrawal of Stay Petition:The assessee's representative submitted a request to withdraw the stay petition No.12/CTK/2023. Consequently, the stay petition was dismissed as withdrawn.2. Delay in Filing the Appeal:The appeal was delayed by 97 days due to the assessee initially filing a writ petition before the Hon'ble Jurisdictional High Court of Orissa. With the permission of the High Court, the writ petition was withdrawn, allowing the assessee to file an appeal to the Tribunal. Considering the delay was due to seeking alternate remedy, the delay in filing the appeal was condoned.3. Non-availability of Document Identification Number (DIN) in the Order:The assessee argued that the order passed under Section 12AB(4) on 20.6.2023 did not contain a Document Identification Number (DIN), rendering the order non-est as per CBDT Circular No.19/2019. The Tribunal acknowledged that the circular is binding on the authorities and noted that the order without a DIN is non-est and liable to be quashed. However, this finding is suspended pending the Supreme Court's decision in a related case (CIT vs. Brandix Mauritius Holdings Ltd.).4. Merits of the Cancellation of Registration under Section 12AA:- Original Registration and Re-registration: The assessee was initially granted registration under Section 12A and 80G, and subsequently re-registered under the new regime under Section 12AA.- Show Cause Notices and Replies: The CIT(Exemptions) issued a show cause notice on 6.10.2022, raising seven grounds for cancellation, including issues of corpus donations and the nature of activities being commercial rather than charitable.- Assessment and Appellate Decisions: The Tribunal noted that the issues raised had already been settled in favor of the assessee by various appellate authorities, including the ITAT and the Hon'ble High Court. Specifically, the microfinance activities were deemed charitable, and the donation to Aids Awareness Trust of Orissa was validated by assessment orders.- Finality of Issues: The Tribunal emphasized that the CIT(E) cannot unsettle issues already decided by appellate authorities. As such, the order canceling the registration under Section 12AA was quashed on merits.5. Retrospective Cancellation of Registration:The Tribunal did not delve deeply into the issue of retrospective cancellation but noted that canceling the registration retrospectively from 1.4.2014 was erroneous. Given that the cancellation itself was quashed, the issue of retrospective application was rendered moot.Conclusion:The appeal filed by the assessee was allowed, and the order canceling the registration under Section 12AA was quashed on merits. The stay petition was dismissed as withdrawn. The Tribunal's decision was dictated and pronounced in the open court on 22/04/2024.