Case summary, Income Tax

Retrospective cancellation of registration of trust

Case: Gian Sagar Educational & Charitable Trust vs Addl. CIT, Delhi ITAT

Case Outcome: Remand

Facts

  • The Assessee was a charitable trust and was established in the year 2003. The Assessee Trust was running medical college i.e. educational institutions. Besides the educational institutions, the Assessee Trust was also running a hospital at Banur, Punjab. Since, the objects of the Assessee Trust being charitable within the meaning of section 2(15) of the Income Tax Act, 1961 and hence, the Assessee Trust was granted registration under section 12AA of the Act on 02.04.2005 by the Commissioner of Income Tax. The Principal Commissioner of Income Tax had withdrawn the registration granted to the Assessee under section 12AA of the Act by invoking section 12AA(3) of the Act with retrospective effect since inception.

Key Points

  • Clearly, the act of cancellation of registration has serious civil consequences. In absence of any legislative intent expressed to suggest that the legislature had empowered the Commissioner to cancel the Assessee’s registration under Section 12A of the Act with retrospective effect, such power could not be deemed to exist or arise or be exercised to unsettle closed/ part transactions especially because in this case the ground for cancellation had not arisen out of allegation of fraud, collusion or misrepresentation.
  • Hence, it was inferred that the cancellation of the Assessee’s registration under Section 12A of the Act, if at all, could be done only prospectively and not retrospectively as had been done by the Commissioner in the said case.

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