2010 (12) TMI 218 - AT - Income Tax

Registration u/s 12A - cancellation of registration - powers of DIT(E) - Held that - vide section 12AA(1)(b)(ii) the DIT(E) can refuse the registration application under section 12A; but vide section 12AA(3) he is given powers to deal with a registration granted within this very section 12(1)(b)(i). So the said power of refusal of registration under section 12AA(1)(b)(ii) is restricted to the application moved under section 12A seeking the grant of registration. The necessity of the said introduction was that as per the already existed section 12A there was no specific provision for the refusal of a registration. Whether for the purpose of refusal of a registration granted by section 12A is it to be dealt with in two sub-sections i.e. section 12AA(1)(b)(ii) and 12AA(3) of the Act or not? Because of this variance the assessee has challenged the refusal of a registration granted under section 12A can now be cancelled only by the latest amendment in section 12AA(3) that too w.e.f. 1st June 2010. Since the DIT(E) has passed the order prior to the amendment the same is void ab initio claimed by assessee. The admitted factual position is that the impugned order was passed on 16th Nov. 2009 when no such specific jurisdiction was granted to DIT(E) and the powers of cancellation of registration had come into effect from 1st June 2010 only. Benefit of this ambiguity or because of an abnormal situation the advantage should go in favour of the taxpayer. Review of order - It is a well settled law that the power to review is not an inherent power of judicial or quasi-judicial officer unless specifically conferred on him by the statute if must be delegated by law either specifically or by necessary implication. In the absence of such an authority the action of the DIT(E) prior to the date of insertion of the said clause can be said to be beyond jurisdiction.

Summary

Issues Involved:
1. Jurisdiction of the Director of Income-tax (Exemption) [DIT(E)] to cancel registration under section 12A of the Income-tax Act, 1961.
2. Validity of the cancellation of registration with retrospective effect.
3. Compliance with the principles of natural justice and directions of the Tribunal.

Issue-Wise Detailed Analysis:

1. Jurisdiction of DIT(E) to Cancel Registration under Section 12A:
The core issue was whether the DIT(E) had the authority to cancel the registration granted under section 12A of the Income-tax Act, 1961. The assessee argued that the DIT(E) lacked the jurisdiction to cancel the registration as the power to do so was conferred only from 1-6-2010 by the Finance Act, 2010. The Tribunal agreed with the assessee, noting that the power to cancel registration under section 12AA(3) was introduced by the Finance (No. 2) Act, 2004, effective from 1-10-2004, and further clarified by the Finance Act, 2010, effective from 1-6-2010. The Tribunal cited the Allahabad High Court's decision in Oxford Academy For Career Development, which held that the power to cancel registration was not retrospective and could not apply to registrations granted before the amendment.

2. Validity of the Cancellation with Retrospective Effect:
The DIT(E) cancelled the registration with effect from 1-4-2000, citing misuse of charitable status for undue benefits and bogus earthquake relief operations. The Tribunal found this action invalid because the power to cancel the registration retrospectively was not available to the DIT(E) at the time the order was passed. The Tribunal emphasized that the amendment granting such power was effective only from 1-6-2010, and thus, any cancellation prior to this date was void ab initio.

3. Compliance with Principles of Natural Justice and Tribunal Directions:
The assessee contended that the DIT(E)'s order violated the principles of natural justice as it did not consider the Tribunal's directions to inquire into the activities for the financial year 2003-04. Instead, the DIT(E) relied on activities from the financial year 2000-01. The Tribunal noted that the DIT(E) failed to provide adverse findings for the financial year 2003-04 and instead focused on earlier years, which was beyond the scope of the Tribunal's directions. The Tribunal highlighted that the DIT(E) should have confined its inquiry to the specified period and not extended it to previous years without proper justification.

Conclusion:
The Tribunal concluded that the DIT(E) acted beyond its jurisdiction by cancelling the registration retrospectively and without adhering to the statutory amendments. The order dated 16-11-2009 was quashed as it was passed before the DIT(E) was conferred with the power to cancel the registration under section 12A. Consequently, the Tribunal did not delve into the merits of the case, rendering the issue on merits infructuous. The appeal of the assessee was allowed, and the order of the DIT(E) was set aside.

Order Pronounced:
The appeal of the assessee was allowed, and the order was pronounced on 10th December 2010.