TMI Blog2019 (7) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... and valid. Cancellation of registration u/s 12AA with retrospective effect - withdrawal of approval granted u/s 10(23C)(vi) with retrospective effect - order of cancellation was passed based on recommendation made by AO while making assessment of AY 2010-2011 - HELD THAT:- Admittedly, the business premises of the assessee was subjected to search during the assessment year 2010-2011. The AO while completing the assessment found large scale diversion of funds and several improper actions on the part of the assessee in direct conflict to the terms of the Deed of Trust and conditions of registration/exemption. Therefore, it was recommended to the competent authority to initiate proceedings for cancellation of the exemption/registration. The matter was decided after due opportunity to the assessee and speaking orders have been passed and obviously these orders will take effect from the assessment year 2010-2011 and it is a mis-nomer to state that the orders are retrospective or retroactive. The lis which was the subject matter is for the assessment year 2010-2011 and though the orders of cancellation of the exemption/registration was passed on 18.11.2014 and 07.12.2016 they woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T.A.Nos.637 and 638/CHNY/2017 are appeals filed challenging the common order passed by the Commissioner of Income Tax (Appeals) (CIT(A)) dated 12.01.2017 who had confirmed the assessment order passed by the Assistant Commissioner of Income Tax, Central Circle-II(3), Chennai dated 28.03.2013 for both the assessment years. I.T.A.No.370/CHNY/2017 was filed challenging the order passed by the Principal Commissioner of Income Tax, Central-II, Chennai dated 07.12.2016 under Section 12AA(3) of the Act, whereby the registration granted to the assessee Trust under Section 12AA vide order dated 22.10.2002 passed by the Director of Income Tax (Exemption), Chennai was cancelled with effect from 01.04.2009, i.e. from the assessment year 2010-2011 onwards. To be noted that an order dated 18.11.2014 passed by the Director General of Income Tax (Investigation), Tamil Nadu Puducherry withdrawing the exemption under Section 10(23C)(vi) from the assessment year 2010-2011 onwards had not been challenged by the appellant assessee by way of any independent proceedings. 3.These appeals have been filed raising the following substantial questions of law: 1. Whether asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was granted to the assessee under Section 10(23C)(vi) of the Act; benefit available under Section 11 of the Act was denied on the ground that the assessee was an Association of Persons (AOP) and not a Trust. Disallowance was made under various heads on the ground that they were unaccounted expenses/investments consequently demands were raised for both the assessment years under consideration. The assessee preferred appeals before the CIT(A) primarily contending that the mandatory pre-condition prescribed under Section 143(3) of the Act was not adhered to by the Assessing Officer thereby rendering the assessment untenable in law. During the pendency of the appeals before the CIT(A), the Director General of Income Tax (Instigation) issued show cause notice dated 16.07.2013 calling upon the assessee to explain as to why approval granted under Section 10(23C)(vi) should not be withdrawn. The assessee submitted their reply. The reply was not accepted and the approval granted under Section 10(23C)(vi) was withdrawn by order dated 18.11.2014 with effect from the assessment year 2010-2011. The assessee filed a petition for rectification under Section 154 of the Act. The Department ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds which according to the assessee were not adjudicated by the Tribunal in its order dated 19.06.2018. The miscellaneous petitions were allowed by order dated 13.03.2019 and the assessee was heard and the Tribunal passed orders on issues other than those which were decided by it in its common order dated 19.06.2018 and passed final orders on 27.05.2019. Thus, aggrieved by the common order passed by the Tribunal the assessee is before us by way of these tax case appeals. 5.Mr.Anirudh Krishnan, learned counsel appearing for the appellant/assessee assisted by Mr.Adith Narayan and Mr.Adarsh Subramanian, elaborately referred to the factual position, much of which has been set out by us in the preceding paragraphs. The learned counsel prefaced his submission by contending that it may be true that the assessee has not laid a separate challenge to the order dated 18.11.2014 withdrawing the approval granted under Section 10(23C)(vi) of the Act, the same can be challenged in a collateral proceedings i.e. while challenging the order cancelling the registration under Section 12AA of the Act and while challenging the correctness of the assessment orders dated 28.03.2013 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the judgment of the Division Bench of this Court in the case of Assistant Commissioner of Income Tax, Media Circle-11, Chennai vs. Vijay Television (P) Ltd. ([2018] 407 ITR 642 (Madras)) . 7.With regard to the effect of corrigendum as to how the best judgment assessment can be made under Section 144 of the Act, reliance was placed on the decision of the High Court of Calcutta in Maya Debi Bansal vs. Commissioner of Income Tax ([1979] 117 ITR 125 (cal)) . To support his contention that the orders cancelling the registration under Section 12AA of the Act having been done with retrospective effect is illegal, reliance was placed on the decision of the High Court of Allahabad in Assistant Commissioner of Income Tax-I vs. Agra Development Authority ([2018] 407 ITR 562 (Allahabad)) . Further with regard to the procedure to be followed by the Assessing Officer while passing an order withdrawing the exemption under Section 10(23C)(vi) of the Act, reliance was placed on the decision of the High Court of Karnataka in the case of Commissioner of Income Tax, Central Circle, Bangalore vs. Peoples Education Society ([2014] 42 taxmann.com 353 (Karnataka)) . On th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded for cancellation of exemption under Section 10(23C)(vi) of the Act and cancellation of registration under Section 12AA of the Act. To support the stand of the revenue that the assessment order is in fact a best judgment assessment, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Kachwala Gems vs. Joint Commissioner of Income Tax, Jaipur ([2007] 288 ITR 10) . The learned Senior Standing Counsel also referred to the decision of the Hon'ble Supreme Court in the case of Visveswaraya Technological University vs. Assistant Commissioner of Income Tax ([2016] 384 ITR 37) . To sustain the finding regarding the cancellation of the exemption granted under Section 10(23C)(vi) of the Act, reliance was placed on the decision of the High Court of Karnataka in Navodaya Education Trust vs. Union of India ([2018] 405 ITR 30) . 9.We have heard the learned counsels for the parties. 10.The first issue to be decided is with regard to the effect of corrigendum dated 22.01.2015. The assessee's contention is that the assessment having been completed under Section 143(3) r/w. 153(A) of the Act by way of a belated cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Kachwala Gems, pointed out that in a best judgment assessment there is always a certain degree of guess work. However, the authorities concerned should try to make an honest and fair estimate of the income even in a best judgment assessment and shall not act totally arbitrarily, there is necessarily some amount of guess work involved in a best judgment assessment and the assessee himself who is to be blamed as he did not submit proper accounts. 13.Mr.Anirudh Krishnan, learned counsel for the petitioner would contend that the assessment cannot be treated as a best judgment assessment under Section 144 of the Act as the mandatory provision under the Proviso to Section 144(1) of the Act has not been complied with. 14.We have noted the averments set out in paragraph 4 of the assessment order dated 28.03.2013, from which, it is seen that notice under Section 142(1) of the Act was issued as early as on 12.02.2013, wherein details were called for from the assessee, the assessee did not respond, summons under Section 131 of the Act was issued directing the Chairman of the assessee Trust to be present, the Chairman did not honour the summons n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel for the assessee relied on the decision in the case of Vijay Television (P) Ltd . The said decision is clearly distinguishable on facts and the Court in the said case on appreciation of the factual matrix held that the mandatory requirement under Section 144C of the Act was not complied with and therefore, held that it is an incurable defect. No such contingency arises in the instant case. 18.The decision in the case of Maya Debi Bansal of the High Court of Calcutta also will not be of assistance to the case of the assessee as in the said case the assessee had not filed return of income in the usual course under the provisions of the Act. In the said factual background, the Court held that the provision of Sections 143 and 144 of the Act cannot be said to be in parimateria. Section 144 of the Act provides for circumstances under which in the absence of a return, a best judgment assessment can be made and the duties of the ITO in making such best judgment assessment are well known and there is no question of any reliance or reference to any return in that case. However, in an assessment under Section 143(3) of the Act as was done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-2011 during which year the cause of action arose. This being the factual position, the decision in the case of Agra Development Authority is not applicable to the facts of the present case. 20.Mr.T.R.Senthil Kumar, learned Senior Standing Counsel appearing for the respondent revenue had pointed out that the order withdrawing the approval granted under Section 10(23C)(vi) of the Act dated 18.11.2014 was not challenged by the assessee. 21.Mr.Anirudh Krishnan, learned counsel for the appellant assessee in reply to this preliminary objection submitted that an order which is void can be challenged in collateral proceedings which is what the assessee had precisely done by challenging the same before the Tribunal when the assessee challenged the cancellation of the assessee's registration under Section 12AA of the Act. Two submissions were made to state that the order of withdrawal of approval under Section 10(23C)(vi) of the Act is a void order. Firstly on the ground that such order with retrospective effect is bad in law and void. The second argument is that there was no basis for withdrawal of the approval under Section 10(23C)(vi) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the approval granted to the assessee needs to be withdrawn or the registration granted under Section 12AA of the Act needs to be cancelled. In an appeal under Section 260A of the Act, we are not required to go into the facts nor or we are entitled to re-adjudicate the factual details in the absence of any perversity or illegality. Yet since the learned counsels had advanced arguments on those lines, we perused the orders dated 18.11.2014 and 07.12.2016, from which we find that there are substantial documentary evidence and other details which clearly show that the assessee Trust has violated all the conditions and they are not entitled for any approval under Section 10(23C)(vi) of the Act or a registration under Section 12AA of the Act. Hence, both the grounds raised by the learned counsel for the assessee has to necessarily fail. 23.The decision in the case of Sri Belimatha was rendered considering the fact that there were no materials which was available on record and the Court found that based on presumption the Assessing Officer cannot conclude that the Trust has received donations merely because it was running a professional courses. In the case of Bal ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
