AO has power to cancel the Trust Registration Certificiate U/s 12A?

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AO has power to cancel the Trust Registration Certificiate U/s 12A?

There are various cases where in the AO wish to cancel the Trust Registration during assessment proceeding for the reason that the trust activities are not charitable in nature or there is a violation of the object of the trust. It may be noted that the Act don’t empower the AO with the power to cancel the registration granted by the CIT. Here is one such case on the power of AO to cancel the trust registration certificate u/s 12A.

The case by ITAT Mumbai is as under:

Daivadnya Samjonnati Parishad Mahajanwadi Mandal

[2022] 136 taxmann.com 262 (Mumbai – Trib.)

Let us have a short overview of the case:

The case was pertaining to Assessment year 2012-13 and was related to Section 12A of the Income-tax Act, 1961for Charitable or religious trust.

Assessee was granted registration under section 12A on 25-4-1975 and in year 1986 assessee made certain modifications and amended objects of trust.

Same were approved by Commissioner of Charities which were placed on record.

During assessment proceedings, Assessing Officer observed that assessee had amended object clause without intimating Commissioner (Exemption) and thus, violated terms of approval granted under section 12A.

With this observation, AO concluded that the  exemption under section 11 could not be allowed to assessee.

However, it was observed from records that Commissioner (Exemption) had initiated proceedings for withdrawal of registration under section 12A and subsequently proceedings were dropped.

This information was brought to notice of Commissioner (Appeals) and Commissioner (Appeals) conveniently omitted to take notice of the same and proceeded to sustain findings of Assessing Officer.

The issue before ITAT was whether Assessing Officer had no authority or right to treat registration granted by higher authority, i.e. Commissioner (Exemption) as not valid?

It was held as yes and in favour of the assessee. It was observed that when Commissioner (Exemption) having approved objects of trust for registration under section 12A meant that he had satisfied himself that objects were within charitable activities.

It was further held that even after amendment to object clause, there was absolutely no change and Commissioner (Exemption) had taken a decision to drop proceedings initiated for cancellation of registration granted under section 12A therefore, assessment order passed was void and was accordingly to be set aside.

Conclusion:

Where Commissioner (Exemption) had approved objects of trust for registration under section 12A, it meant that he had satisfied himself that objects were within charitable activities and since, even after amendment to object clause, there was absolutely no change and Commissioner (Exemption) had taken a decision to drop proceedings initiated for cancellation of registration granted under section 12A, Assessing Officer had no authority or right to treat registration granted by higher authority, i.e. Commissioner (Exemption) as not valid

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