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TMI Blog2019 (1) TMI 1478X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts. According to the petitioner firm, the income earned from the aforesaid activities was being fully utilised for the attainment of the objects of the Trust and this position was accepted by the first respondent Assessing Officer in the income tax assessments of the petitioner firm for many years. 2.2.It is further averred that the petitioner firm filed income tax returns in respect of the assessment years 2004-2005, 2005-2006, 2006-2007 and 2007-2008 on 25.10.2004, 25.10.2005, 31.10.2006 and 31.10.2007 respectively and after due verification, it was accepted by the Department. When that being the factual position, the Commissioner of Income Tax, Madurai, initiated action under Section 12AA(3) of the Income Tax Act and cancelled its registration vide his Order dated 30.12.2010 by holding that the petitioner firm is not doing charitable activities or 'medical relief' as claimed by them. Subsequently, the respondent took action against the petitioner firm with retrospective effect and issued notices for the assessment years 2004-2005, 2005-2006, 2006-2007 and 2007-2008 and thereupon, the respondent has passed the impugned orders for the aforesaid years which is under cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejoinder to W.P(MD)Nos.12067 to 12070 of 2011, wherein, it is stated that the registration under Section 12(A) of the Income Tax Act was granted after due application of mind by the Commissioner of Income Tax and after verification of all the materials produced by the petitioner. Further, the respondent extracts the statutory provision inserted by the Finance Act No.2 of 2004 with effect from 01.10.2004. This provision is not relevant or material in the instant case insofar as it deals with registration granted under Clause (b) of Sub-Section 1 of Section 12AA. The material clause would be Section 12AA(3) subsequent to amendment by the Finance Act 2010 with effect from 01.06.2010. 4.2.The specific submission of the petitioner is that the operation of the provision, Section 12AA(3) as amended with effect from 01.06.2010 is prospective and would not affect assessments in respect of earlier assessment years. Accordingly, the order of the Commissioner of Income Tax dated 31.12.2010 will take effect only from the date of order and cannot apply to completed assessments of earlier assessment years. This submission has neither been addressed nor met by the respondent herein. 4.3.They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed no charitable activity the respondent had denied an opportunity of hearing specifically sought by the petitioner in this regard. 6.1. Learned counsel for the respondent through their counter in W.P(MD)No.1104 of 2012 has contended that the petitioner's firm has advertised itself in the website that Aurolab is manufacturing division of Aravind Eye Hospital, supplies high quality ophthalmic consumables at affordable prices to developing countries. Therefore, the petitioner Trust is carrying out manufacturing and trading of certain identified products related to eye surgery. It is also contended in the course of scrutiny assessment that the assessee's Trust was involved in the manufacture and sale of intra colour lenses and other eye care products and has created huge surplus from their business operations but has applied very little amount of it for charitable activities. Further, the assessee records for the assessment year 2010-2011 exhibits gross receipts exceeds Rs. 5 crores, therefore, notice under Section 143(2) was issued. 6.2. During the course of personal hearing, it was found that the income and expenditure account for the assessment year 2010-2011 reveals t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aph No.11 of their counter affidavit regarding the amount of Rs. 10 crores given to M/s.Aravind Medical Research Foundation as a donation. 6.4. According to them, the documents put forth by the assessee- Trust is not based upon the actual facts, figures and circumstances existing in their case. It was alleged that the petitioner shifted their stands in hindsight based on the options available to them. The Tribunal after perusing voluminous records has eventually found that the petitioner is not eligible for exemption under Section 11 of the Act. The petitioner has also preferred a tax appeal before the Hon'ble High Court, Madras and the same is pending. Pendency of tax appeal cannot be a ground to grant exemption under Section 11 of the Act and prayed for dismissal of the Writ Petition. 7. The petitioner in the rejoinder filed in W.P.(MD).No.1104 of 2012 stoutly denied the opportunities allegedly provided to them. They claim that vide their submission dated 16.12.2011 they had specifically sought an opportunity of hearing on the merits of the claim. There was no opportunity granted to the petitioner and this constitutes a gross violation of the principles of natural justice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered under the 1st and 2nd limbs of Section 2(15) dealing with 'relief of the poor' and 'medical relief'. He also submits that Section 12A of the Income Tax Act which provides for grant of registration for seeking exemption under Section 11 of the Act did not originally contain a provision for cancellation of registration. It was only with effect from 01.06.2010 that the Parliament has inserted Section 12AA(3) of the Income Tax Act granting the power to cancel registrations granted Section 12A as it stood prior to amendment in 1996. The averment of the respondent that the amendment was made only to provide clarity in this regard is unacceptable, apart from being contrary to law. The amendment to Section 12 AA(3) with effect from 01.06.2010 affects the substantial rights of the parties and it is for this reason that the Parliament has specifically rendered the amendment operative with effect from 01.06.2010 only. 8.3. He would further state that the Supreme Court has on several occasions reaffirmed the position that any amendment that affects the substantial rights of an assesseee would operate only prospectively. He also points out that the Division Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appellate Tribunal against the cancellation order dated 30.12.2010, the learned Tribunal had after concurring with the findings of the commissioner upheld the said cancellation order of the Commissioner. The petitioner had filed a TAX Appeal before this Court against the ITAT Order confirming the cancellation which is pending adjudication. 12. While so, the respondent had proceeded to reopen the assessment for the assessment years 2004-2005, 2005-2006, 2006-2007, 2007-2008 vide the impugned orders dated 12.08.2011 after rejecting the objections filed by the petitioners. The petitioner avers that there is no allegation of escapement of income on account of any act of commission or ommission on the part of the petitioner. It is the contention of the petitioner that reopening of the completed assessment is not permissible under the law on a mere change of opinion of the assessing officer. They argued that completed assessment can be reopened only when there is material on record to show that the declarations made by the assessee for the relevant assessment years are fraudulent or not truthful. They further submitted that each of the assessment year is a separate unit and shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erformance/activities of the petitioner fulfilled the conditions of grant of registration. Whereas, the matters agitated in these Writ Petitions are pure questions of law. The question whether the order cancelling the certificate of registration dated 30.12.2010 is correct and legal is the subject of the outcome of the tax appeal. Therefore, the correctness of the order dated 30.12.2010 is outside the purview of the present Writ petitions. Only the effect of the cancellation order dated 30.12.2010 on the petitioner which is purely a question of law is the subject of the present writ petitions. The threshold limit introduced vide provisos to the amended Sec 2(15) is also not a subject of these Writ Petitions as the grant of registration and the object of the petitioner Trust is not covered under this particular limb of the definition. Needless to mention that these Writ petitions are redundant in the event the pending Tax Appeal is decided in favour of the petitioner. 16.The questions raised in these writ petitions are broadly summarised as under:- i.Whether the commissioner had the power to cancel the certificate of registration before he was specifically empowered to do so by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislative and nor executive and essentially quasi judicial in nature and therefore went on to hold that Section 21 of the General Clauses Act is not applicable to the order passed by the commissioner under Sec 12 AA. 20.On the second question as to whether the cancellation will operate from a retrospective date, it was held that the amendment to Section 12AA(3) is prospective and not retrospective in character. The courts reasoned that even when the parliament had plenary powers to enact retrospective legislation in matters of taxation, the amended section is not seen to have explicitly provided to have a retrospective character or intend. Therefore, without a specific mention of the amended provisions to operate retrospectively, the cancellation can not operate from a past date. 21.On the third question of the effective date of operation of the cancellation order, it was held that the cancellation will take effect only from the date of the order/notice of cancellation of registration. Since the act of cancellation of registration has serious civil consequences and the ammended provision is held to have only a prospective effect the effect of cancellation, in the event the pendin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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