TaxTMI 
TaxTMI 
2021 (3) TMI 1146
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....e-tax Act, 1961 ('ITA') cancelling the registration of the Appellant is without jurisdiction and, hence, void ab initio. b) The PCIT failed to appreciate that the power of cancellation of registration vests in the authority who has the jurisdiction to grant registration. Admittedly the Commissioner of Income-tax (Exemption) ['CIT(E)'] is the authority who can grant registration, therefore, he is the only authority who can cancel the registration under section 12AA(3)/(4) of the ITA. c) The PCIT failed to appreciate that when the Trust was registered on 15.03.1976, it was merely communicated that the name of the Trust was entered at TR/10925 in the Register of Trusts. There was no formal order granting registration to start with. Hence there is no requirement in law for passing of an order acknowledging the surrender when the Trust chose to surrender such registration. 2. a) The PCIT erred in holding that the surrender of registration by the Appellant vide its letter dated 11.03.2015 filed on 12.03.2015 is not valid and cannot be given effect to as there is no provision under law for acceptance of such surrender. The PCIT erred in not....
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....cording to the PCIT, specified date in section 115TD of the ITA is on date of conversion which in turn has been defined as the date of the order cancelling the registration. c) The PCIT failed to appreciate that multiple SCNs were issued to the Appellant on various dates by the CIT(E) (13.03.2015 and 07.06.2017 referring to the Appellants' surrender letter filed, for violation of section 13(l)(d) of the ITA) as well as the PCIT (dated 08.03.2018 stating violation under section 13(l)(d) and 13(2)(h) of the ITA and 16.08.2019 stating that the activities of the Appellant are not carried out in accordance with the objects of the trust deed in addition to violation under section 13(l)(d) and 13(2)(h) of the ITA) each without disposal of the earlier ones (SCNs) and expanding the scope of the earlier ones. d) The PCIT failed to dispose the SCN dated 13.03.2015 issued by the CIT(E) and failed to appreciate that a change in incumbent who initiated a proceeding cannot abate the proceedings initiated by the erstwhile incumbent. e) The PCIT ought to have held that the impugned order passed under section 12AA(3)/(4) of the ITA, cancelling the registration of the A....
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....of trust deed to hold that the Appellant and Trustees have not carried out activities in strict adherence to the object clause in the trust deed. In doing so, the PCIT erred in not appreciating that - i) by reinvesting the sale proceeds of shares the trustees did not violate the trust deed and was in accordance with the provisions of The Maharashtra Public Trust Act, 1950 ii) the Appellant had applied its entire income for charitable purposes. iii) the trust deed does not mandate the registration or surrender of registration under section 12A of the ITA. iv) the trust deed provides that the Appellant is to expend monies for the various charitable objects as specified in the trust deed so long as those are objects which the ITA permits to enable a trust to qualify for exemption. v) the Appellant did not hold any equity shares in Tata Sons Limited as per the extracts of audited financial statement of Tata Sons Limited provided by the PCIT and hence the PCIT's conclusion that the Appellant was controlling a large business group through Tata Sons Limited was erroneous. 3. The assessee has also filed an additional ground of appeal, on ....
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....der section 12-A(a) maintained in this office. Seal for Commissioner of Income Tax Bombay City- IV, Bombay 6. On 11th March 2015, the assessee trust wrote a letter to the Commissioner of Income Tax concerned indicating that the assessee does not "desire to continue to avail the benefits of the registration made by the trustees in 1975". This communication reads as follows: March 11, 2015 Commissioner of Income Tax (Exemptions) Piramal Chambers, Parel, Mumbai 400 012 Dear Sir, Navajibai Ratan Tata Trust is a public charitable trust created by the trust deed dated 23rd December 1974. The trust, on 1st August 1975, had filed the prescribed form no. 10A for registering itself as required under section 12A(a) of the Income Tax Act. We were informed by the communication dated 15th March 1976 that the said application has been entered at Serial No. TR/10925 in the Register of applications under section 12A(a) of the Act maintained by the Income Tax Department. We now refer to Section 12AA(4) of the Act, inserted with effect from 1st October 2014, by the Finance Act (No. 2) Act, 2014, and submit that some of the activitie....
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....me Tax Department. We now refer to Section 12AA(4) of the Act, inserted with effect from 1st October 2014, by the Finance Act (No. 2) Act, 2014, and submit that some of the activities of the Trust are not in compliance with the provisions of Section 13(1) of the Act. We understand that the said non-compliance would be construed as an activity of the trust which is being carried out in a manner that the provisions of Section 11 and 12 of the Act donot apply to exclude either whole or any part of the income of the Trust resulting in withdrawal of registration obtained by us under section 12A(a) of the Act. Accordingly, the assessee does not desire to continue to avail the benefits of registration made by the Trustees in 1975. Hence, you are hereby informed that the Trust would not be claiming exemption under section 11 of the Act, since, upon withdrawal of the registration or in any event cancellation of the registration under section 12A of the Act, it would not comply with the requirements of Section 12A(1)(a) read with 12AA(4) of the Act. 3. In view of the above, it is proposed to withdraw registration under section 12A of the Income....
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....ould not be claiming exemption under section 11 of the Act i.e. in effect, surrender the registration obtained by the Trust. Pursuant to our letter, we received a Notice dated March 13, 2015, wherein you had proposed to withdraw registration under section 12A of the Act, granted to the Trust vide registration no. TR/10925 and asked us to appear before you on March 20, 2015. Accordingly, on March 20, 2015, the Authorized Representatives of the Trust appeared before you and confirmed their agreement to the action you had proposed to take and stated that the Trust had no objection to your proposal, as the Trust itself had sought the deregistration. As there was no dispute that our request would not be acceded to we proceeded to file our Return of Income for Assessment Year 2015-16, by not availing the benefits under sections 11 to 13 of the Act. The Return of Income was filed on the basis of the normal provisions of the Act. As over fourteen months have elapsed after our meeting on 20th March, 2015, we presume our request has been noted and accepted. We have however, not received a formal communication from you. We therefore, request you to confirm that our ....
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....lia, "we dispose of each of these writ petitions with the liberty to raise all the contentions at an appropriate stage before the appellate forum/authority" and that "the petitions are disposed of with the liberty, as prayed". 13. Once again, proceedings resumed before the respondent Principal Commissioner of Income Tax. It was, inter alia, explained by the assessee that this exercise is an exercise in futility inasmuch as the registration under section 12A has already been surrendered by the assessee and it stood cancelled/ withdrawn with effect from March 2015, for the reasons as follows: (i) The Trust was constituted by trust deed dated 23.12.1974 and obtained registration as public charitable trust in August 1975 under section 12A(a) of the ITA. In August 1975 it had filed prescribed Form 10A as required under section 12A(a) of the ITA. Vide communication dated 15.03.1976 the Trust was informed that the said application had been entered at Sr No TR/10925 in the Register of Applications under section 12A(a) of the ITA. (ii) In March 2015, referring to section 12AA(4) of the ITA inserted with effect from 1 October 2014 by Finance Act, 2014 the Trust sub....
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....before the date of this order, and the dispute of the assessee is confined to the date from which such cancellation has to be effective. Rival submissions: 15. Shri P J Pardiwalla, learned Senior Advocate, painstakingly took us through the facts of the case in detail and submitted that this entire exercise of cancellation of registration is a nullity in law inasmuch as by virtue of letter dated 11th March 2015, the registration under section 12 A is no longer in existence. He submits that what is provided by Section 12 A is a registration which is the nature of benefit as it is a foundational requirement for the exemption under section 11. It is thus meant to be a beneficial scheme for the taxation of trusts. A benefit cannot be thrust upon an unwilling person, particularly when what is perceived and claimed to be a benefit turns out to be a liability. Learned counsel submits that a benefit, right or privilege cannot be thrust upon anyone, and it can only be retained by a beneficiary on his own choosing. Our attention is then invited to John W Salmond's very respected and authoritative commentary "The Theory Of Law", which at page 642, states as follows: ....
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....y the sureties of the lessee (d). A passenger may waive the benefit of an enactment which entitles him to carry so many pounds of luggage with him; and he does so, it may be added, by taking a ticket with the express condition that he shall carry no luggage (a). The only person intended to be benefitted by such an enactment is obviously, the passenger himself; and no consideration of public policy is involed in it (b). A company authorised by the statute to levy tolls within a specified maximum is not bound to exact uniform tolls from all persons alike; but is entitled, in the absence of an express provision requiring equality, to remit any part of the tolls to particular persons, at its discretion (c)." (page 474) 17. Learned senior counsel submits that these principles have been reiterated time and again by the Hon'ble Courts above. Our attention is then invited to Hon'ble Supreme Court's judgment in the case of CIT Vs Mahendra Mills [(2000) 243 ITR 56 (SC)] wherein Their Lordships have, inter alia, observed as follows: ............The Officer is required to do no more than to advise the assessee. It does not place any mandatory duty on the officer to allow depreciati....
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....e void." 19. Learned counsel further relies, in support of the same proposition, upon the judicial precedents in the cases of Shri Poosaji Magnilal Vs The South Indian Humanitarian League [(2009) 2 CTC 25 (Mad)], Commissioner of Customs Vs Virgo Steels [(2002) 4 SCC 316)], Vellayan Chettiar Vs Province of Madras [(1947) 49 BOMLR 794], Jain Ram Vs Union of India [(1954) AIR SC 584 (SC)] as also several precedents on the same lines. For the sake of brevity, however, we may not deal with these precedents. 20. It is then contended that unlike Section 18 of the Bombay Public Trust Act, 1950, which mandates every public trust to make an application for registration under the Income Tax Act, there is no such requirement under the Income Tax Act. Registration is mandatory only when exemption under section 11 is claimed. Thus, when the assessee files the registration application on his own will, it is a natural corollary thereto that the assessee may, in his own right, surrender the registration as well. Learned counsel then invites contrast of this situation with the situation under section 115BAA wherein the assessee, once applying for the lower rate of taxation subject ....
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....the violation, that satisfies the requirement of Section 12AA(4) inasmuch as the Commissioner cannot say that he has not noticed the violation, and no further satisfaction by the Commissioner is necessary. It is thus contended that the requirements of Section 12AA(4) were clearly satisfied in the present case. It is then pointed out that while under section passing of an order is mandatory under section 12AA(3) inasmuch as it provides that the Commissioner "shall" pass the order, the word used in section 12AA(4) is "may", and, by implication therefore, passing of the order is not mandatory at all. It is further pointed out that while section 12AA(3) provides for an opportunity of hearing to the assessee, no such provision exists in section 12AA(4). This too, according to the learned counsel, indicate that it is not necessary that a formal order be passed under section 12AA(4). 23. It is then contended that, as held by Hon'ble Supreme Court in the case of Moti Ram Vs Param Dev [(1993) 2 SCC 725 (SC)], doctrine of unilateral relinquishment permits a person to give up its rights and privileges, and having done so, it is not necessary for anyone to recognize ....
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....d to Hon'ble Madras high Court's judgment in the case of New Life in Christ Evangelistic Association Vs CIT [(2001) 246 ITR 532 (Mad)] wherein it is said to have been held that the only purpose of registration under section 12 A was to establish identity of the Trust. Our attention was then invited to the CBDT circular 762 of 1998 which, inter alia, has, referring to the scheme of section 12 A as it then stood, observed that "One of the conditions is that the person in receipt of income shall make an application for registration of trust or institution in the prescribed form and in the prescribed manner to the Chief Commissioner or the Commissioner in the specified time. However, there was no provision in the income tax law for processing of such an application and granting or refusal of registration to the concerned trust or institution". It is then contended that so far as registrations under section 12 A are concerned, these were no granted by the Commissioner as there was admittedly no legal process for grant of or refusal of such registrations in the first place. It was obtained by a unilateral act, though confirmed by a communication by the Commissioner, and, therefore,....
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....nbsp; registration of a Trust as a charitable or religious entity permits it, inter alia, to claim exemptions on its total income. These exemptions are permitted and provided for, as a quid pro quo for the fact that these bodies are involved in carrying out philanthropic activities. The legislature in its wisdom has deemed it fit to permit entities which seek to help society by performing charitable acts to be entitled to certain benefits from the taxation schemes of the Government. It is further submitted that these benefits however, are not standalone benefits available to any and all trusts but only to trusts that perform charitable activities and meet the criterions mentioned in the statute for this purpose. He submits that the registration is granted only when the activities and objects of the Trust are in conformity with the Act. The Act lays down a welfare scheme whereby it seeks to permit certain exemptions to Trusts but only such Trusts or entities as are involved in charitable activities. Thus, to assert that registration is merely a benefit with no obligation is clearly contrary to the express language, intent and purport of the Act. It is contended that the concep....
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....essee to have or not to have the registration. Once the registration is granted, and unless it is lawfully cancelled, the assessee is bound by the same. Learned ASG then takes pain to clarify that claiming of benefit under Section 11 may be option of the trust, however, not claiming benefits under section 11 and surrendering the registration granted under section 12A are, two entirely different concepts. It is legally tenable for a Trust to be registered under section 12A of the Act and still opt for not claiming benefits of section 11 of the Act. Reliance is also placed on the registration certificate of one of the group Trusts wherein it is specifically mentioned that registration in itself does not entitle the Trust for claiming exemption under section 11 of the Act. It is submitted that this would even stand to reason since, otherwise every Trust once registered would need to do nothing further to claim exemption but would be deemed automatically to be entitled to an exemption. This is, according to the learned ASG, clearly not the prevailing law. The distinction between claiming an exemption and the registration as a trust has even been admitted by the Trust also- as is ....
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....t free having abused and violated the law. It is submitted that this could never be the intent or purpose of the law. Even the plain language of the provisions suggests contrary to the assertions of the Trust on this aspect. 31. Learned ASG thus submits that the question of a unilateral surrender cannot and would not arise. In fact, there is no power or provision under the Act whereby a party can unilaterally effect a surrender of the registration. Section 12AA(3) and (4) expressly provide for an Order in Writing for cancelling the registration. Necessity of passing an order is a statutory requirement without which the registration of a Trust cannot be cancelled, meaning thereby that the registration under section 12A of the Act continues till the Commissioner of Income tax/Principal Commissioner of Income Tax cancels the registration by an order in writing. 32. Learned ASG then submits that the appellant has sought to urge that the power to unilaterally surrender must be read into Section 12AA(4). This submission is made on the basis of distinguishing the language between Section 12AA(3) and Section 12AA(4) more particular the distinction between the use of the words 'sh....
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....d 11th March, 2015. The letter dated 11/03/2015 sent by the Trust to Commissioner of Income-tax (Exemptions), Mumbai also bears out that even the Trust contrary to its present assertion, understood the statute in the same sense. The letter admits that there has been a violation and hence, states that they would no longer seek exemption. The letter expressly records that, "Accordingly, the Trustees do not desire to continue to avail the benefits of the registration made by the Trustees in 1975. Hence, you are hereby informed that the Trust would not be claiming exemption under Section 11 of the Act, since upon withdrawal of the registration or in any event cancellation of the registration under Section 12A of the Act, it would not comply with the requirements of Section 12A(1)(a) read with 12AA(4) of the Act". The clear language of the letter suggests that the Trust understood it was only "upon" withdrawal of registration or cancellation that it would not comply. Hence, the own understanding of the Trust was that such effect takes place only "upon" withdrawal and/or cancellation and not by the mere submission of the letter as is being urged. It is further submitted that it is trite ....
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....ation of the registration under Section 12A of the Act, it would not comply with the requirements of Section 12A(1)(a) read with 12AA(4) of the Act". The clear language of the letter suggests that the Trust was not seeking to surrender the registration. In fact, no words to the effect "surrender" or "relinquish" even found in the said letter. A bare perusal of the portion quoted above, would evince that what was urged by the Trust is that they would not claim the benefits of registration i.e. the exemption and not that they were surrendering the same. As explained above, there is a difference and distinction between registration and claiming the exemption. It is contended that the letter only suggested that no exemption would be claimed and nothing beyond that. 38. Learned ASG submits that the reliance on the noting dated 20th March, 2015 is misconceived, as it is an admitted position that no formal order thereon was ever passed and hence, the requirement of an order in writing was never completed. Hence, it is incorrect to urge that the cancellation of registration took place by way of surrender or acquiescence to the show cause notice in March, 2015. Such an interpretation wou....
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....r past wrongdoings and as such a letter addressed for collateral and/or oblique purposes. It is claimed that the trustees knew that they had violated the provisions of section 13(1)(d) of the Act, and they would not be able to avail of the benefits of exemption under sections 11 and 12 of the Act. This fact had been affirmed by the Hon'ble ITAT, Mumbai in 2014 in the case of Jamshetji Tata Trust. Therefore, once the final fact-finding authority, had confirmed the Trust's violation of the aforesaid provisions, this Trust (being a group concern of Jamsetji Tata Trust) was left with no other alternative but to give up the benefits of registration. Therefore, it is submitted that this act on the part of the Trust was not a voluntary act but was a fait accompli. There is nothing on record to show that, but for this, the Trust would have suo moto surrendered the benefits of exemption under sections 11 and 12 of the Act. The entire argument on the basis of an option being available to the Trust in light of Section 10(34) of the Act, is not to be found on the record anywhere nor does the letter dated 11th March, 2015 refer to Section 10(34) of the Act. It may be noted that as early....
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....l question which cannot be agitated at this stage. In any case, such an investigation would require a reference to a large number of factual aspects which is not possible at this stage. He finally submits that if this aspect is to be adjudicated, the matter is required to be adjourned as hearing on that aspect, given the present limited facts, is not possible. 39. Learned counsel for the assessee, in his rejoinder, points out that the short question before us is the date from which the cancellation has to be effective- the date on which the assessee wrote to the Commissioner that the assessee is no longer eligible for the benefit of exemption under section 11 and, therefore, there is no point in his continuing with the registration, the date on which the first show cause notice in this regard, the date on which the hearing for cancellation was concluded, a date within reasonable time frame of concluding the hearing on cancellation, or a date on the whims and fancies of the tax administration. Our attention is once again invited to the significance of the date of cancellation and tax implications flowing from the same. There is no dispute that the assessee is not elig....
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....lysis: 41. It is only elementary that the registration under section 12A of the Income Tax Act, 1961 is a foundational requirement for tax-exemption of charitable institutions under section 11, and the usual litigation before us, therefore, is the litigation wherein a trust seeks the aforesaid registration, when it is not granted, or seeks it with effect from a date prior to the date on which it is granted, when it is granted, so that a trust can avail more of the tax-exemption, if admissible, under section 11. In this case, however, while the assessee claims that the registration was surrendered on 10th February 2015, and, therefore, the trust should not be treated as registered charitable trust, for the application of Section 11 tax exemption, with effect from the assessment year 2015-16, the case of the revenue authorities is that since registration is cancelled vide respondent Principal Commissioner's formal order dated 31st October 2019, such cancellation will only have a prospective effect, and, accordingly, the trust is required to be treated as a registered trust, for the application of section 11 tax exemption, for the assessment years 2015-16, 2....
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....n 10(23C)(1), under section 10 of the Act. That is how this provision has been construed by the income tax authorities. Without going into the validity of that approach, which is not the subject matter of adjudication by us anyway, let us see the corollaries of this approach. Going by this logic, so far as dividend from Indian companies is concerned, the assessee, for the reason of registration as a charitable institution under section 12A, is deprived of exemption under section 10(34). To this extent, the registration under section 12A acts as a disability for the assessee, and, by thus ensuring that the registration under section 12A continues to remain in existence, the assessee is denied exemption under section 10(34). Effectively thus, the continuance of registration under section 12A, even when the assessee does not want exemption under section 11, may result in higher tax liability for a trust which has earned, as this Trust has earned, income by way of dividends from domestic companies eligible for exemption under section 10(34). 46. While on this subject, it is perhaps appropriate to look at the way the income tax department itself has understood the related legal....
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....ice between the general exemption and the specific exemption. However, the way this provision is being interpreted by the income tax authorities is that once an assessee is a registered charitable institution, irrespective of admissibility or even claim for exemption under section 11, the exemption under section 10(34) is inadmissible. That is how admittedly this provision has been construed by the revenue authorities, and that approach, coupled with the facts set out earlier, puts the assessee to a clear tax disadvantage. Effectively thus, as a result of the trust being held to be a charitable trust registered under section 12A, the trust is declined the exemption of dividends received by the trust from the domestic companies- an exemption which is available to every taxpayer. To this extent, the scheme of "Sections 11, 12 and 13 of the Income-tax Act are special provisions governing institutions which are being given benefit of tax exemption", which was intended to be an optional benefit to the charitable institutions, inasmuch as the assessee could voluntarily opt for the special dispensation, has become source of an additional tax burden for the trusts in question. 48. The o....
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....f Income Tax, i.e. 20th March 2015, or even when it is taken as within a reasonable period from the date of conclusion of this hearing, say within 365 days from the date of closing the hearing i.e. 20th March 2016. Therefore, the date of cancellation of registration has an important bearing on this tax liability as well. 51. It would thus indeed seem that the actual trigger, and proximate reason for this unwelcome generosity of extending the benefit of registration under section 12 A, is the possible denial of exemption of dividends from domestic companies, under section 10(34) as also the fact that there may be certain adverse tax implications under section 115 TD on account of the effect of cancellation being after 1st April 2016, which result in more tax revenues to the exchequer. That is, in our humble understanding, the reason for canvassing the path followed by the revenue authorities to the correct by them, and the revenue authorities are thus seeking to benefit from their own inertia. Of course, revenue authorities have made out a case that the cancellation can have only prospective effect and it is purely the compulsion of law, rather than any temptation for....
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....positio is a well-established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous". Quite clearly, therefore, the CBDT circulars, as an aid for interpretation of the law as also as a binding authority on the field authorities employed in the execution of the Income Tax Act, provide a legitimate basis for understanding the provisions of the Income Tax Act. 54. In this light, let us once again take a look at the CBDT circular no 1/ 2015 (supra). This circular, relevant extracts from which we have reproduced earlier as well, specifically notes that "Sections 11, 12 and 13 of the Income-tax Act are special provisions governing institutions which are being given the benefit of tax exemption" and that it is for the assessee to "voluntarily opt for the special dispensation". In our considered view, therefore, for this short reason alone, it cannot be open to the income tax authorities to suggest that the provisions of Section 12A are not in the nature of a benefit or to suggest that it is not voluntary for the assessees to op....
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....a condition precedent for availing section 11 exemption. An exemption is clearly in the nature of a benefit, and, therefore, meeting a precondition for exemption is also a benefit. The registration under section 12A did not put the assessee under any obligation to do, or refrain from doing, anything. It was so for the reason that even if someone has registration under section 12A, and yet it does not perform any charitable activities or meet the requirements under the scheme of, as CBDT terms it, "special dispensation" of "Sections 11, 12 and 13 of the Income-tax Act...... special provisions governing institutions which are being given the benefit of tax exemption", all that happens to the assessee is that the assessee does not get the said exemption. It was exemption under section 11, which was given as quid pro quo for the assessee doing the charitable activities. There was no quid pro quo for the registration inasmuch as a registration under section 12A did not, at that point of time, result in any obligations on the assessee or disadvantage to the assessee- in tax or otherwise. The disadvantageous tax implications on the assessee are only as a result of a much later legis....
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.... exemption under section 11, and, in such a situation, all these provisions relied upon by the learned ASG do not come into play. The registration under section 12A does not, therefore, put any such obligations on the assessee. It is an exemption under section 11, which puts these obligations on the assessee, but that is not the issue before us. Right now, we are only concerned about the implications of Section 12A. 58. Learned ASG has repeatedly stated that "registration is not granted for the asking but is dependent upon the applicant being otherwise in conformity of the provisions of the statute and in a sense, undertaking to comply with the statute and the purpose of rendering charitable services" and that "registration is not a benefit available to all but a benefit which can be claimed by the Trusts which meet the criterions specified by the Act and which are willing to comply with it". Undoubtedly, that position could be correct for the period after insertion of Section 12AA with effect from 1st April 1997, but, so far as the relevant point of time is concerned, the registration was not "granted" but was simply "obtained" by the mere filing of an application i....
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....ntinuance of registration under Section 12A. Once the learned Commissioner "noticed" this position admitted by the assessee, it was his duty to pass an order in writing withdrawing the registration. For ready reference, the relevant legal provision, i.e. section 12AA(4), is being reproduced once again as below: (4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A, as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996), and subsequently it is noticed that (a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13; or (b) the trust or institution has not complied with the requirement of any other law, as referred to in sub-clause (ii) of clause (a) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compl....
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....did not exercise his powers of cancellation. The Commissioner does not have a choice about taking or not taking a call in these proceedings. He had to take a call one way or the other in this matter. Such inaction on the part of the Commissioner simply cannot meet any judicial approval. What is done next is to ignore these proceedings without bringing them to a logical conclusion and start fresh proceedings, after a long gap, on a standalone basis, dehors the pending proceedings. That is equally impermissible. When the proceedings for cancellation of registration are pending for disposal, there cannot be another initiation of proceedings for the same purpose. What makes these proceedings even more unsustainable in law is the fact the delay in cancellation of registration has tax implications to the disadvantage of the assessee, and, to that extent, one will have to be really naïve, or at least pretend to be so naïve, to miss the obvious, or, to put it mildly, apparent motives. In any case, it is incorrect to say that the cancellation of registration cannot take effect from a date prior to the date of the order of cancellation. In the case of Agra Development A....
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.... thrust upon an unwilling assessee. Be that as it may, this aspect of the matter is not really decisive, even if quite relevant, because as we have in the preceding discussion, once the Commissioner notices the admitted violation of Section 13(1), it was his duty, not only power, to cancel the registration granted under section 12A, and this has to relate back, at the minimum, to the date on which hearing in this matter was concluded. The inordinate delay in cancellation of registration, which is wholly attributed to the revenue authorities, cannot be placed to the disadvantage of the assessee. 63. As learned ASG rightly puts it, an order in writing for cancellation is a statutory requirement to bring an end to the registration. There can be no dispute with this proposition. The question, however, is the date from which such an order has to be effective, and on that aspect, we have already given our findings against the stand of the revenue authorities. In our considered view, the inordinate delay in passing the order in writing, cancelling registration granted under section 12A, must not put assessee to a disadvantage- particularly when the effect of the cance....
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.... can deal with that those aspects of the matter. The trouble, however, is that given the complex web of legal developments, the cancellation is made effective from a later date the assessee is being put to a disadvantageous legal position and tax implications. If the assessee does not comply with the permissible mode of investment, for trusts what follows is the denial of exemption under section 11, but such a non-compliance cannot justify or legitimize the cancellation of registration being effected from a later date, than the date on which cancellation ought to have been effected, so as to put the assessee in a disadvantageous legal position with tax implications other than the legal, including penal, consequences for the non-compliance in question by the assessee. We cannot approve the approach adopted by the revenue authorities. 66. The question of whether the assessee had the powers, under the trust deed, to seek cancellation or withdrawal of registration under section 12A or not is wholly irrelevant because once the assessee informs the Commissioner of the assessee becoming ineligible for exemption under section 11, it is power, as indeed duty, of the Commissioner to....