Madras High Court
M/S. Sri Lakshmi Ammal Educational ... vs Principal Commissioner Of Income Tax on 12 June, 2024
Author: Mohammed Shaffiq
Bench: R.Mahadevan, Mohammed Shaffiq
WA Nos. 855 & 963 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 12.06.2024
CORAM :
THE HONOURABLE MR.R.MAHADEVAN, ACTING CHIEF JUSTICE
and
THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ
Writ Appeal Nos. 855 and 963 of 2023
and
CMP Nos. 8339 and 9596 of 2023
---
WA No. 855 of 2023
M/s. Sri Lakshmi Ammal Educational Trust
Rep by its Managing Trustee
Mr. Sundeep Aanand
No.29, Tilak Street, T.Nagar
Chennai - 600 017 .. Appellant
Versus
Principal Commissioner of Income Tax
Central-2, Chennai – 600 034. .. Respondent
WA No. 963 of 2023
Principal Commissioner of Income Tax
Central-2, Chennai – 600 034 .. Appellant
Versus
M/s. Sri Lakshmi Ammal Educational Trust
Rep by its Managing Trustee
Mr. Sundeep Aanand
No.29, Tilak Street, T.Nagar
Chennai - 600 017 .. Respondent
Writ Appeals filed under Clause 15 of the Letters Patent to set aside the
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WA Nos. 855 & 963 of 2023
order dated 18.11.2022 passed in W.P. No. 7116 of 2020 on the file of this
Court.
For the Appellant in : Mr. A.P. Srinivas
W.A.No.963 of 2023 and Senior Standing Counsel
the respondent in
W.A.No.855 of 2023
For the Respondent in : Mr. R. Sivaraman
W.A.No.963 of 2023 and
the Appellant in
W.A.No.855 of 2023
COMMON JUDGMENT
(Delivered by the Hon'ble Acting Chief Justice) These writ appeals are preferred as against the order dated 18.11.2022 passed by the learned Judge in WP No. 7116 of 2020.
2. Among the two appeals, Writ Appeal No. 855 of 2023 has been filed by the Assessee questioning the correctness of the order dated 18.11.2022 passed in WP No. 7116 of 2020.
3. As against the very same order dated 18.11.2022 passed in WP No. 7116 of 2020, the Revenue has filed Writ Appeal No. 963 of 2023 insofar as it relates to the observations made by the learned Judge in para No.11 of the order to the effect that retrospective cancellation of the exemption granted to the Assessee, with effect from 01.04.2010, cannot be countenanced and the https://www.mhc.tn.gov.in/judis 2/11 WA Nos. 855 & 963 of 2023 cancellation ought to have been done with effect from 01.04.2017 from the commencement of Assessment year 2017-2018 onwards.
4. For the purpose of disposal of these appeals, certain facts, which are germane and absolutely necessary are referred to hereunder.
5.(i) The Assessee is a Charitable Trust established in the year 1984. It administers educational institutions in the field of Medicine, Dentistry, Para- medical studies, Management Studies, Computer Applications, Arts and Science for a period of three decades. The Assessee is assessed to tax on the file of the Assistant Commissioner of Income Tax, Central Circle 2 (3), Chennai.
(ii) According to the Assessee, on 13.07.2016, a search was conducted in their trust premises in terms of the provisions of the Income Tax Act, 1961 (in short 'The Act'). Subsequent to such search, assessment proceedings were initiated by issuing a notice under Section 153A of The Act for the Assessment years from 2011-2012 to 2017-2018. On receipt of the notice, the assessee filed their return of income under Section 139 of The Act on 31.03.2018 declaring a total income of Rs.1,45,81,63,010/- Simultaneously, the assessee also approached the Income Tax Settlement Commission (in short, 'the Commission') on 04.02.2019 with an application bearing TN/CN 52/2018-19/ https://www.mhc.tn.gov.in/judis 3/11 WA Nos. 855 & 963 of 2023 76/IT. It is further stated that such application filed by them was rejected by the Commission on 28.03.2019, without adverting to the various grounds raised by them. Therefore, the assessee filed Writ Petition No. 10707 of 2019 and it was disposed of on 11.10.2022 by restoring the Settlement Application. However, during the pendency of the writ petition No. 10707 of 2019, the Department has issued a notice dated 22.10.2019 seeking to cancel the registration granted under Section 12AA (3) of the Act for the assessment years from 2011-2012 to 2017-2018. Objecting to the notice dated 22.10.2019, the assessee preferred an objection dated 12.12.2019. However, without considering the same, the Department proceeded to pass the order dated 14.03.2020 under Section 12AA (3) of the Act cancelling the registration of the Trust with retrospective effect from 01.04.2010. Challenging the same, the assessee has filed the instant WP No. 7116 of 2020.
6. The Department filed a Counter affidavit in WP No. 7116 of 2020 justifying the cancellation of registration with retrospective effect. In order to buttress such submission, reliance was placed on the decision of the Allahabad High Court in the case of ACIT-I vs. Agra Development Authority reported in 407 ITR 562 as well as the decision of this Court in Tax Case Appeal No. 674 of 2013 dated 02.12.2023 (Sri Vidya Mandir Trust case) wherein it was held that cancellation of registration with retrospective effect is legally permissible. https://www.mhc.tn.gov.in/judis 4/11 WA Nos. 855 & 963 of 2023 Accordingly, the respondent-Revenue prayed for dismissal of the writ petition.
7. The learned Judge, on appreciation of the rival contentions, held that the retrospective cancellation of certificate of registration with effect from 01.04.2010 cannot be countenanced and the appropriate date of cancellation would be 01.04.2017 onwards i.e. AY 2017-18 onwards. The relevant portion of the order passed by the learned Judge is as follows:-
"7.As a consequence of the aforesaid fact, the reversal of registration under Section 12A, is also justified in light of the incriminating materials found and conceded to. The legal issue that arises in this writ petition is as to the effective date from which the registration under Section 12A could have been cancelled. In this connection, the rival contentions are as follows:
(i) According to the petitioner, the cancellation of registration must be from date of issuance of show cause notice being 22.10.2019. In this context, the petitioner relies on a decision of the Allahabad High Court in the case of ACIT-I vs. Agra Development Authority [(2018) 90 taxmann.com 282 (Allahabad)].
(ii) In that case, the Hon'ble Allahabad High Court has answered the question of retrospectivity from 2010 onwards, being the year of insertion of Section 12AA(3), against the revenue. However, the Bench has concluded that the Commissioner had the authority to cancel registration from date of issuance of show cause notice.
(iii) The issue has attained a finality at the stage of the High Court and neither of the parties have carried the matter in further appeal, though appeals have been filed by the Department as against other findings of the High Court.
(iv) The petitioner also relies on a decision of this Court in the case of Thathi Trust vs. Director of Income Tax (Exemptions) [(2020) 121 taxmann.com 119 (Madras)]. In that case, this High Court has held that withdrawal of the registration https://www.mhc.tn.gov.in/judis 5/11 WA Nos. 855 & 963 of 2023 from 2010 is contrary to law.
(v) However, there is no specific finding as to what would constitute the appropriate date for reversal of registration, whether date of cause of action, or date of show cause notice. So too in the case of Auro Lab vs. Income Tax Officer, Ward II (4), Range-II, Madurai [(2019) 102 taxmann.com 225 (Madras), decided by learned Judge of this Court and the case of Indian Medical Trust v. PCIT, Jaipur [(2019) 108 taxmann.com 93 (Rajasthan)] decided by the Rajasthan High Court.
8.Per contra, revenue places reliance upon a decision of this Court in the case of Prathyusha Educational Trust v. Principal Commissioner of Income-tax Central-2 [(2019) 108 taxmann.com 385 (Madras)] wherein the substantial question of law related specifically to cancellation of registration under Section 12AA, with retrospective effect.
9.The search in that case was on 02.07.2010 and the cancellation was effected with effect from 01.04.2009 i.e. from AY 2010-11 onwards. This Court, after considering the rival contentions held that the cancellation must be from date of search, which is 02.07.2010 i.e. with effect from 2010-11. Paragraph 19 of the decision reads as follows:
'19.The next contention of Mr.Anirudh Krishnan is that the cancellation of the exemption under Section 10(23C)(vi) of the Act and cancellation of the registration under Section 12AA of the Act with retrospective effect is illegal. At the first blush, the Court assumed that the argument of Mr.Anirudh krishnan is to the effect that the cancellation/withdrawal was with effect from the date of grant of exemption/registration. However, on a perusal of the order dated 18.11.2014 withdrawing the approval granted under Section 10(23C)(vi) of the Act, it is seen that it has been given effect to from the assessment year 2010-2011. Likewise the order cancelling the assessee's registration under Section 12AA of the Act is from the assessment year 2010-2011. Can it be said that these orders of cancellation are with retrospective effect. The definite answer for this question is an emphatic 'No'. Admittedly, the business premises of the assessee https://www.mhc.tn.gov.in/judis was subjected to search during the assessment year 6/11 WA Nos. 855 & 963 of 2023 2010-2011. The Assessing Officer 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 would take effect from the assessment year 2010-2011 during which year the cause of action arose. This being the factual position, the decision in the case of Agra Development Authority (supra) is not applicable to the facts of the present case.'
10.This matter was carried in appeal by the petitioner and the decision of this Court stands confirmed by the Hon'ble Supreme Court in SLP(C)Nos.16360 to 16362 of 2019 vide judgment dated 19.07.2019. Review Petition (Diary)No.8263 of 2022 has also been dismissed by the Hon'ble Supreme Court on 10.05.2022.
11. With the attaining of finality on the aforesaid position of law, there is no doubt that the retrospective cancellation with effect from 01.04.2010 cannot be countenanced. Applying the ratio of the above judgment to the sequence of dates in this case, the appropriate date of cancellation would be 01.04.2017 onwards i.e. AY 2017-18 onwards. The impugned order is quashed to this extent and this writ petition stands disposed in terms of the above order. No costs. Connected miscellaneous petitions are closed.”
8. The learned counsel appearing for the assessee/appellant in W.A. https://www.mhc.tn.gov.in/judis 7/11 WA Nos. 855 & 963 of 2023 No. 855 of 2023 contended that the learned Judge, having held that the retrospective cancellation of the certificate of registration is not sustainable, did not take note of the fact that the assessment of the appellant are pending before the Interim Board for Settlement and therefore, the revenue could not have the right to decide on the cancellation of registration under Section 12AA of the Act. Notwithstanding the aforesaid submissions, the learned counsel for the assessee submitted that the issues involved in these appeals can be considered by the Interim Board for Settlement and therefore, he prayed this Court to grant liberty to the assessee to raise all the grounds raised in the present appeal before the Settlement Commission.
9. On the other hand, the learned Senior Standing Counsel appearing for the revenue would contend that the issue as to whether the cancellation of registration certificate with retrospective effect is legally permissible or not, has been decided by the Division Bench of this Court in the Order dated 31.10.2022 made in T.C.A. No. 302 of 2021 etc., batch in the case of Commissioner of Income Tax, Chennai vs. MAC Public Charitable Trust reported in 2022-5-Law Weekly 301 wherein it was held that there is no embargo for the Revenue to cancel the certificate of registration with retrospective effect by taking note of the fact in that case that the donations received by the Trust was a quid pro quo transaction for admission of the https://www.mhc.tn.gov.in/judis 8/11 WA Nos. 855 & 963 of 2023 student in the educational institutions run by them. Therefore, by placing reliance on the aforesaid decision of this Court, the learned Senior Standing Counsel appearing for the Revenue submitted that the observation of the learned Judge to the effect that the Revenue has no right or power to cancel the registration certificate with retrospective effect is contrary to the decision of the Division Bench of this Court. Stating so, he prayed for allowing Writ Appeal No. 963 of 2023 filed by the Revenue and to dismiss Writ Appeal No. 855 of 2023 filed by the assessee.
10. Considering the facts and circumstances of the case and having regard to the submissions made by the learned counsel for the assessee that the assessee is willing to go before the Settlement Commission by raising all the grounds which are raised herein, we refrain from dealing with the merits or otherwise of the contentions raised by the counsel on either side in these appeals. Therefore, granting liberty to the assessee / appellant in W.A. No. 855 of 2023 to approach the Settlement Commission and raise all the grounds raised in these appeals, we dispose of these Writ Appeals. No costs. Consequently, connected Miscellaneous Petitions are closed.
(R.M.D., ACJ) (M.S.Q., J)
12.06.2024
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WA Nos. 855 & 963 of 2023
Index : Yes/No
NC : Yes/No
sasi
To:
The Principal Commissioner of Income Tax
Central-2, Chennai – 600 034.
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WA Nos. 855 & 963 of 2023
THE HON'BLE ACTING CHIEF JUSTICE
and
MOHAMMED SHAFFIQ, J
(sasi)/rsh
WA Nos. 855 & 963/2023
12.06.2024
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