CIT(E) can’t cancel trust registration stating that ITR is incorrect & incomplete if AO is yet to complete assessment: ITAT

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CIT(E) can’t cancel trust registration stating that ITR is incorrect & incomplete if AO is yet to complete assessment: ITAT

Here is an interesting case under section 12AA read with sections 12A and 13, of the Income-tax Act, 1961 pertaining to a Charitable or religious trust vis a vis  Registration procedure

In this case there was a cancellation of registration of trust in case of four assessees (Charitable trusts) were granted registration under section 12A.

 Assessing Officer conducted survey on premises of assessees on 26-2-2020.

 Subsequently Authorized Officer conducted search under section 132 upon assessees on 5-11-2020.

 As a consequence of survey conducted on 26-2-2020 Commissioner (Exemption) issued show cause notices to assessees.

 Assessees responded to show cause notices with a detailed reply on all the issues.

 Thereafter Commissioner (Exemption) cancelled registration of assessees for reasons, inter alia, that returns of income filed by trusts/entities were incorrect and incomplete, amounts set apart for specific purposes were found to have been indiscriminately and improperly used, inflation of expenses and misuse of trust properties.

 Aforesaid reasons would at best give rise to violations under section 13(1)(c) and 13(1)(d) which would result in additions in assessment and reassessment.

 In instant case, in terms of provisions of section 12AA(4) there was no assessment order nor any evidence found or established against assessees on issues raised by Commissioner (Exemption) by an order of any quasi-judicial authority nor had violation of any other law reached finality.

The issue before ITAT was whether order of cancellation of registration was liable to be quashed as same was premature.

ITAT Cochin held it in affirmative and in favour of the Assessee.

The case detail is as under:

Last Hour Ministry

[2022] 139 taxmann.com 235 (Cochin – Trib.)

Conclusion:

Where assessees-trusts were granted registration under section 12A and Commissioner (Exemption) cancelled registration for reasons, inter alia, returns of income were incorrect and incomplete, amounts set apart for specific purposes were found to have been indiscriminately and improperly used, as in instant case in terms of provisions of section 12AA(4) there was no assessment order nor any evidence found or established against assessees on issues raised by Commissioner (Exemption) by an order of quasi judicial Authority, order of cancellation of registration was premature

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