COMMISSIONER OF INCOME TAX vs. M/S SHINE EDUCATIONAL AND

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TCA/1181/2015HC Madras03 August 2021Bench: Hon`ble Mr Justice T. S. SIVAGNANAM5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court set aside the order of the ITAT dated 27.02.2015 and remanded the matter to the Commissioner of Income Tax-I, Tiruchirappalli, for fresh consideration. The Court found that the ITAT had not adequately tested the conduct and bonafides of the assessee before deciding the substantial questions of law. The CIT was directed to issue notice to the assessee, hear them in detail, and pass a fresh order on merits, uninfluenced by the ITAT's observations or the Commissioner's earlier reasons for cancellation. The substantial questions of law were left open, and the appeal was disposed of. The principle established is that an assessee's conduct and bonafides must be examined before adjudicating on the legal grounds for cancellation of registration under Section 12AA, especially when the assessee has failed to appear and provide necessary documentation.

What were the facts?

The Revenue, Commissioner of Income Tax, Trichy, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT's order, dated 27.02.2015, was in favour of the assessee, M/s. Shine Educational and Social Welfare Trust. The appeal was admitted on 05.01.2016, raising substantial questions of law concerning the cancellation of the assessee's registration under Section 12AA of the Act. The assessee had not appeared before the Commissioner of Income Tax (CIT) despite notices to produce returns for four previous years. The High Court noted that the ITAT had not tested the assessee's conduct or bonafides before deciding the questions of law.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the registration granted under Section 12AA cannot be withdrawn/cancelled on the ground that the assessee had not filed the return of income? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the registration under section 12AA cannot be cancelled on the ground of non-genuineness when the assessee had not filed the return of income for four years and had not intimated the address for communication? Assessee's Contentions: The judgment does not record any specific contentions made by the assessee before the High Court. However, the ITAT had held in favour of the assessee on the sole ground that non-filing of the return cannot be a ground for cancellation of registration under Section 12AA. Revenue's Contentions: The Revenue argued that the assessee did not appear before the CIT despite several notices calling for the copies of the return of income for four previous years. The Revenue contended that the Tribunal should have first tested the conduct and bonafides of the assessee before addressing the questions of law.

Which sections of the Income-tax Act were involved?

Section 260A,Section 12AA

AI-generated summary — verify with the full judgment below

T.C.A.No.1181 of 2015 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 03.08.2021 CORAM The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mr.Justice SATHI KUMAR SUKUMARA KURUP T.C.A.No.1181 of 2015 Commissioner of Income Tax, Trichy. .. Appellant

-vs- M/s.Shine Educational and Social Welfare Trust, Aadhavan Arts and Science College Campus, Alanthur, Manaparai-621 307. .. Respondent Appeal under Section 260A of the Income Tax Act, 1961 against the order dated 27.02.2015 made in I.T.A.No.2778/Mds/2014 on the file of the Income Tax Appellate Tribunal 'A' Bench, Chennai. For Appellant : Mr.J.Narayanasamy For Respondent : Mr.Ashok Pathy, for M/s.Pass Associates ****** Page 1 of 5 https://www.mhc.tn.gov.in/judis/ T.C.A.No.1181 of 2015 JUDGMENT (Delivered by T.S.Sivagnanam, J.) This appeal, by the appellant/Revenue, filed under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), is directed against the order dated 27.02.2015 made in I.T.A.No.2778/Mds/2014 on the file of the Income Tax Appellate Tribunal 'A' Bench, Chennai (for brevity, “the Tribunal”). 2.The appeal was admitted on 05.01.2016, on the following substantial questions of law:- “1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the registration granted under Section 12AA cannot be withdrawn/cancelled on the ground that the assessee had not filed the return of income? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the registration under section 12AA cannot be cancelled on the ground of non-genuineness when the assessee had not filed the return of income for four years and had not intimated the address for communication?” Page 2 of 5 https://www.mhc.tn.gov.in/judis/ T.C.A.No.1181 of 2015 3.Heard Mr.J.Narayanasamy, learned Senior Standing Counsel for the appellant/Revenue and Mr.Ashok Pathy, learned counsel, for M/s.Pass Associates, for the respondent. 4.The Tribunal has held in favour of the assessee on the sole ground that non-filing of the return cannot be a ground for cancellation of the registration under Section 12AA of the Act. However, we find that before the Commissioner of Income Tax-I, Tiruchirappalli, (for brevity, “the CIT”) the assessee did not appear, in spite of several notices calling upon them to produce the copies of the return of income for the four previous years. Therefore, in our view, the Tribunal should have first tested the conduct of the assessee and thereafter, the bonafides and thereafter, the questions of law. Since such an exercise has not been done, we are of the view that the matter should be re-agitated before the CIT. 5.Accordingly, the order dated 27.02.2015, passed by the Tribunal is set aside and the matter is remanded to the Commissioner of Income Tax-I, Page 3 of 5 https://www.mhc.tn.gov.in/judis/ T.C.A.No.1181 of 2015 No.44, Williams Road, Cantonment, Tiruchirappali, for fresh consideration. The Commissioner shall issue notice to the respondent-assessee, hear them in detail and pass fresh orders on merits in accordance with law uninfluenced by any other observations made in the order passed by the Tribunal, impugned before us, nor the reasons assigned by the Commissioner for cancellation of the registration. It is needles to state that the decision should be a fresh decision on merits and in accordance with law. Consequently, the substantial questions of law are left open and the appeal stands disposed of. No costs.

(T.S.S., J.) (S.S.K., J.) 03.08.2021 Index: Yes/ No Speaking Order : Yes/ No abr To The Income Tax Appellate Tribunal 'A' Bench, Chennai. Page 4 of 5 https://www.mhc.tn.gov.in/judis/ T.C.A.No.1181 of 2015 T.S.Sivagnanam, J. and Sathi Kumar Sukumara Kurup, J. (abr) T.C.A.No.1181 of 2015 03.08.2021

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