- (1.) We have heard Mr Shambhu Chopra, the learned counsel for the appellants and Mr Siddharth Pathak, the learned counsel for the assessee.
(2.) The present appeal has been filed under Section 260-A of the Income-Tax Act. It transpires that the assessee's application for grant of exemption under Section 10 (23-C)(vi) of the Income Tax Act was rejected by the Chief Commissioner of Income Tax, Allahabad for the assessment years 2004-05 to 2006-07 and 2007-08 to 2010-11 by an order dated 25th March, 2008. Based on this order, a notice dated 9th February, 2009 was issued under Section 12-AA(3) of the Act to the assessee to show cause as to why the registration granted under Section 12-AA of the Act be not cancelled, since the activities of the Society had ceased to remain charitable in nature as defined under Section 2(15) read with Sections 11 and 13 of the Income Tax Act. The Commissioner of Income Tax, Varanasi after considering the matter, cancelled the registration on the ground that the activities of the Society are not entirely charitable in nature and that the same was not in accordance with the aim and objects of the Society. The Society, being aggrieved, filed an appeal before the Income Tax Tribunal, who by its order, set aside the order of the Commissioner and held that the assessee was entitled for grant of registration under Section 12-AA of the Act. The department, being aggrieved, has filed the present appeal under Section 260-A of the Income Tax Act.
(3.) Section 12-AA(3) of the Act provided a procedure for cancelling of the registration under certain contingencies. For facility, the said provision is extracted hereunder: "12AA. (1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (1)] of section 12A, shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- (i) shall pas an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant : Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. [(1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day. (2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) [or clause (aa) of sub-section (1)] of section 12A.] [(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) [or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996)]] and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.]";