Kerala High Court
The Principal Commissioner Of Income ... vs Believers Eastern Church on 3 March, 2025
Author: A.K.Jayasankaran Nambiar
Bench: A.K.Jayasankaran Nambiar
ITA NOS.20, 23,29 & 34 OF 2023 1 2025:KER:17785
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
&
THE HONOURABLE MR. JUSTICE EASWARAN S.
MONDAY, THE 3RD DAY OF MARCH 2025 / 12TH PHALGUNA, 1946
ITA NO. 20 OF 2023
AGAINST THE ORDER DATED 17.03.2022 IN ITA NO.12/COCH/2021 OF
INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH, COCHIN
APPELLANT:
THE PRINCIPAL COMMISSIONER OF INCOME TAX, (CENTRAL)
KOCHI, KANDOMKULATHY TOWERS, KOCHI-682016 ON BEHALF OF
THE COMMISSIONER OF INCOME TAX (EXEMPTION) KOCHI
BY ADVS.
SRI.JOSE JOSEPH, SC
SRI.P.K.RAVINDRANATHA MENON (SR.)
RESPONDENT:
LAST HOUR MINISTRY
VIII/182 KARIKKAN VILLA, MEENTHALAKKARA, MANJADI P.O
THIRUVALLA , KERALA, PIN - 689101
BY ADVS.
SRI.SIVARAMAN, SR.
SRI.N.KRISHNA PRASAD
SRI.P.SHANES METHAR(K/968/2004)
THIS INCOME TAX APPEAL HAVING COME UP FOR FINAL HEARING ON
03.03.2025, ALONG WITH ITA.23/2023, 29/2023 AND CONNECTED CASES,
THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
ITA NOS.20, 23,29 & 34 OF 2023 2 2025:KER:17785
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
&
THE HONOURABLE MR. JUSTICE EASWARAN S.
MONDAY, THE 3RD DAY OF MARCH 2025 / 12TH PHALGUNA, 1946
ITA NO. 23 OF 2023
AGAINST THE ORDER DATED 17.03.2022 IN ITA NO.14/COCH/2021 OF
INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH, COCHIN
APPELLANT:
THE PRINCIPAL COMMISSIONER OF INCOME TAX, (CENTRAL)
KOCHI, KANDOMKULATHY TOWERS, KOCHI-682016 ON BEHALF OF
THE COMMISSIONER OF INCOME TAX (EXEMPTION) KOCHI
BY SRI. JOSE JOSEPH, SC
RESPONDENT:
AYANA CHARITABLE TRUST, 303/THENGUMTHARAYIL
KUTTAPUZHA P.O.,
THIRUVALLA,KERALA, PIN - 689101
BY ADVS.
SRI.SIVARAMAN,SR.
SRI.N.KRISHNA PRASAD
SRI.P.SHANES METHAR(K/968/2004)
SRI.PUSHPARAJ.K.P(K/1098/2012)
THIS INCOME TAX APPEAL HAVING COME UP FOR FINAL HEARING ON
03.03.2025, ALONG WITH ITA.20/2023 AND CONNECTED CASES, THE COURT
ON THE SAME DAY DELIVERED THE FOLLOWING:
ITA NOS.20, 23,29 & 34 OF 2023 3 2025:KER:17785
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
&
THE HONOURABLE MR. JUSTICE EASWARAN S.
MONDAY, THE 3RD DAY OF MARCH 2025 / 12TH PHALGUNA, 1946
ITA NO. 29 OF 2023
AGAINST THE ORDER DATED 17.03.2022 IN ITA NO.13/COCH/2021 OF
INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH, COCHIN
APPELLANT/RESPONDENT:
THE PRINCIPAL COMMISSIONER OF INCOME TAX, (CENTRAL)
KOCHI, 2ND FLOOR, C.R. BUILDING, I.S.PRESS ROAD,
KOCHI-682018
BY ADVS.
SRI.JOSE JOSEPH
SRI.P.K.RAVINDRANATHA MENON (SR.)
RESPONDENT/APPELLANT:
BELIEVERS EASTERN CHURCH, THOMAS NAGAR
KUTTAPPUZHA P.O, THIRUVALLA, KERALA., PIN - 689101
BY ADVS.
SRI.SIVARAMAN, SR.
SRI.N.KRISHNA PRASAD
SRI.P.SHANES METHAR(K/968/2004)
SRI.PUSHPARAJ.K.P(K/1098/2012)
THIS INCOME TAX APPEAL HAVING COME UP FOR FINAL HEARING ON
03.03.2025, ALONG WITH ITA.20/2023 AND CONNECTED CASES, THE COURT
ON THE SAME DAY DELIVERED THE FOLLOWING:
ITA NOS.20, 23,29 & 34 OF 2023 4 2025:KER:17785
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
&
THE HONOURABLE MR. JUSTICE EASWARAN S.
MONDAY, THE 3RD DAY OF MARCH 2025 / 12TH PHALGUNA, 1946
ITA NO. 34 OF 2023
AGAINST THE ORDER DATED 17.03.2022 IN ITA NO.15/COCH/2021 OF
INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH, COCHIN
APPELLANT/RESPONDENT:
THE PRINCIPAL COMMISSIONER OF INCOME TAX, (CENTRAL)
KOCHI, KANDOMKULATHY TOWERS, KOCHI-682016 ON BEHALF OF
THE COMMISSIONER OF INCOME TAX (EXEMPTION) KOCHI
BY ADVS.
SRI.JOSE JOSEPH, SC
SRI.NAVANEETH.N.NATH
SRI.SUSIE B VARGHESE(K/1300/2019)
RESPONDENT/APPELLANT:
BELIEVERS EASTERN CHURCH
THOMAS NAGAR, KUTTAPPUZHA P O,THIRUVALLA, KERALA,
PIN - 689101
BY ADVS.
SRI.SIVARAMAN, SR
SRI.N.KRISHNA PRASAD
SRI.P.SHANES METHAR(K/968/2004)
SRI.PUSHPARAJ.K.P(K/1098/2012)
THIS INCOME TAX APPEAL HAVING COME UP FOR FINAL HEARING ON
03.03.2025, ALONG WITH ITA.20/2023 AND CONNECTED CASES, THE COURT
ON THE SAME DAY DELIVERED THE FOLLOWING:
ITA NOS.20, 23,29 & 34 OF 2023 5 2025:KER:17785
JUDGMENT
DR. A.K.Jayasankaran Nambiar, J.
The revenue is in appeal before us in these I.T. Appeals aggrieved by
a common order dated 17.03.2022 in I.T.A.No.12/Coch/2021,
I.T.A.No.13/Coch/2021, I.T.A.No.14/Coch/2021, and I.T.A.No.15/Coch/2021,
preferred by the respondent-assessee against an order of the Principal
Commissioner of Income Tax under Section 12AA of the Income Tax Act, 1961,
cancelling the registration granted to the assessee under Section 12A of the
Income Tax Act.
2. The brief facts necessary for the disposal of these I.T. Appeals are
as follows:
Pursuant to a survey conducted in relation to the activities of the
respondent-assessee on 26.02.2020 and a search conducted in the premises of
the assessee on 05.11.2020, show-cause notices were issued under Section
12AA(3) /(4) of the Income Tax Act to the assessee proposing to cancel the
registration granted to them under Section 12A of the Income Tax Act.
Although the assessee preferred a detailed reply to the show-cause notices on
15.12.2020, by an order dated 31.12.2020, the Principal Commissioner of
Income Tax rejected the contention raised by the assessee and confirmed the
proposal for cancellation of the registration. The order of the Principal
Commissioner contained detailed reasons as to why, in the opinion of the
Principal Commissioner, the registration granted to the assessee under Section
12A of the Income Tax Act had to be cancelled.
3. At any rate, aggrieved by the order of the Principal
ITA NOS.20, 23,29 & 34 OF 2023 6 2025:KER:17785
Commissioner, the respondent-assessee preferred appeals before the Appellate
Tribunal. The Appellate Tribunal, on a consideration of the appeals, passed the
order impugned before us by the revenue in these appeals, finding that the
order cancelling the registration granted to the assessee was passed
prematurely by the Principal Commissioner of Income Tax. The reasons that
weighed with the Appellate Tribunal to allow the appeals preferred by the
respondent-assessee are contained in paragraph 5 of the impugned order,
which reads as follows:
"5. We have considered the rival submissions. A perusal of
the order cancelling registration wherein various reasons have been
given as mentioned earlier apparently show that these reasons
would at best give rise to violations u/s.13(1)(c) and 13(1)(d) of the
Act which would result in additions in the assessment and
reassessment. Such violations, if any to be assessed as income
taxable at the marginal rate.
A perusal of the provisions of Section 12AA(4) shows that
the cancellation of registration is permissible in respect of
trust/institution which has been granted registration if the activities
of the trust or the institution are being carried out in a manner that
the provisions of Section 11 and 12 do not apply to exclude either
the whole or any part of the income of such trust or institution due
to the operation of sub-section(1) of Section 13 or the trust or the
institution has not complied with the requirements of any other law.
Reading of the provisions of Section 12AA(4) shows that
there has to be primarily an order saying that the activities of the
trust or the institution are being carried out in the manner that the
provisions of Section 11 and 12 do not apply. That order primarily
has to be done by the AO, who is a quasi-judicial authority. This is
because it is the AO, who makes the assessment after examining all
ITA NOS.20, 23,29 & 34 OF 2023 7 2025:KER:17785
the evidences after putting the assessee to show cause and it is
that assessment order itself which becomes the subject matter of
appeal at various stages which could result in the confirmation of
the assessment, reduction or modifications of the additions made.
The cancellation of registration without such an order is
effectively precluding the AO to do the assessment in a free and
fair manner. Admittedly, the Ld.CIT(E) is an Administrative
Commissioner and once he gives a specific direction as he has
made in the order cancelling the registration, the hands of the
assessing authority gets tied down. The independence of the
assessing authority gets infringed. This is not permissible. In fact
reading of the provisions of Section 12AA(4) clearly shows that it is
only after the quasi-judicial authority has completed its part, the
violations can be even claimed to be there. In regard to the
violation of any other law, the provisions of Section 12AA(4) clearly
and categorically says that such violation or recording of such
violation should have attained finality. Allegations per se cannot be
the ground for the cancellation of registration. On this ground
itself, the order passed by the Ld.CIT(E) is liable to be quashed and
we do so.
Even otherwise, reading of proviso to Section 12AA(4) shows
that there is liberty available with the assessee to show that there
was reasonable cause for the activities to be carried out in the said
manner. This proviso clearly shows that the assessee could reply or
show reasonable cause only after the quasi-judicial authority being
the assessing authority questions the assessee during the course of
assessment. Further, the reading of 2 nd proviso to Section 153A
clearly shows that assessments/re-assessments which are pending
for a period of six assessment years abates. This clearly shows that
even assuming proceedings had been initiated for the purpose of
completing an assessment or re-assessment as a consequence of
the survey, even those proceedings would stand abated as on the
date of search. Thus clearly there is no assessment order nor any
evidence specifically conclusively found or established against the
ITA NOS.20, 23,29 & 34 OF 2023 8 2025:KER:17785
assessee on the issues raised by the Ld.CIT(E) by an order of any
quasi-judicial authority nor has the violation of any other law
reached finality. On this ground also the cancellation of exemption
by the Ld.CIT(E) is liable to be quashed as the same is premature
and we do so."
4. It is aggrieved by the said findings of the Appellate Tribunal that
the revenue is before us in these I.T. Appeals raising the following substantial
questions of law:-
1. Whether on the facts and in the circumstances of the
case and on an interpretation of the relevant provision of the
lT Act is not the order of the Commissioner in accordance with
law and within jurisdiction?
2. Whether on the facts and circumstances of the case, the
Hon'ble Tribunal was right in quashing the order of
Commissioner of Income Tax (Exemption) cancelling the
registration of Trusts u/s.12AA of the Income Tax Act in the
backdrop of violation of statutory provisions, accounting
principles and registered objectives as detected during Survey
action and enquiries conducted by the Commissioner of
Income Tax u/s.135 of the Act ?
3. Whether on the facts and circumstances of the case, the
Hon'ble Tribunal was right in holding that Assessing Officer's
(AO's) order is required before the cancellation of Registration
of Trusts by the Commissioner of Income Tax when the
provisions u/s.12AA of Income Tax Act make no mention of the
same?
4. Whether on the facts and circumstances of the case, the
Hon'ble Tribunal was right in holding that in absence of
ITA NOS.20, 23,29 & 34 OF 2023 9 2025:KER:17785
assessment order or any order of any quasi-judicial authority
the cancellation of registration by Commissioner of Income
Tax (Exemption) is liable to be quashed whereas as per the
specific provisions of Section 12AA(1) of the Act the
Commissioner of Income Tax is the authority for granting
registration to the Trusts and as per Section l2AA(4) the
Commissioner only is the authority for cancellation of
registration so granted?
5. Whether on the facts and circumstances of the case, the
Hon'ble Tribunal was right in holding that the 2 nd proviso to
Section 153A will assume cancellation of registration of Trust
proceedings as well requiring even such proceedings to abate
whereas the 2nd proviso is specific to assessment or
reassessment only and not to the proceedings before
Commissioner of Income Tax for granting or cancelling
registration to Trusts u/s.12AA of Income Tax Act?
6. Whether on the facts and in the circumstances of the
case the Income Tax Appellate Tribunal is right in law in
holding that "these reasons would at best give rise to
violations under Sec. 13(1)(c) and 13(1) (d) of the Act which
would result in additions in the assessment and
reassessment . Such violations, if any to be assessed as
income tax above at the marginal rate" and are not the
findings wrong and reliance on the same irrelevant, arbitrary
extraneous and besides the issue and hence perverse?
7. Whether on the facts and in the circumstances of the
case are not the reasons relied on and the conclusion arrived
at by the lTAT perverse and quixotic?
5. We have heard Sri. Jose Joseph, the learned Standing counsel for
ITA NOS.20, 23,29 & 34 OF 2023 10 2025:KER:17785
the Income Tax Department, and Sri.Sivaraman, the learned Senior counsel for
the respondent-assessee, who appears before us through video conference.
6. On a consideration of the rival submissions and without going into
the merits of the issue that was to be considered by the Appellate Tribunal,
namely, the legality of the order passed by the Principal Commissioner
cancelling the registration granted to the respondent-assessee under Section
12A of the Income Tax Act, we find that the Appellate Tribunal in the impugned
order, proceeded on a mistaken assumption with regard to the order passed by
the Principal Commissioner. The Appellate Tribunal erroneously found that the
powers of the Principal Commissioner under Section 12AA of the Income Tax
Act could not be exercised without a prior determination by the Assessing
Authority as to whether or not the assessee had occasioned a breach of the
statutory provisions or conducted themselves in violation of the objects of the
Trust concerned. In our view, the provisions of Section 12AA independently
empower the Principal Commissioner to consider whether or not the
circumstances mentioned in Section 12AA(3) and 12AA(4) of the Income Tax
Act exist as a pre-condition for directing a cancellation of the registration that
was granted to the Trust under Section 12A of the Income Tax Act. The
statutory provisions do not require the Principal Commissioner to await a
decision of the Assessing Authority concerned before passing an order
cancelling the registration granted to an assessee under Section 12A of the
Income Tax Act. The assumption by the Appellate Tribunal that the
determination of relevant facts by an Assessing Officer was a pre-condition to
the Principal Commissioner exercising his powers under Section 12AA, or that
the exercise of power by the Principal Commissioner under Section 12AA
ITA NOS.20, 23,29 & 34 OF 2023 11 2025:KER:17785
would preclude an independent assessment by the Assessing Officer, as he
would be bound by the determination by the Principal Commissioner under
Section 12AA, is in our view flawed since the statutory provisions do not admit
of any such interpretation.
In the result, we set aside the impugned order of the Appellate Tribunal
and remand these appeals back to the Appellate Tribunal for a fresh
consideration on the merits of the appeals preferred by the assessee against
the order of the Principal Commissioner. We make it clear that in the hearing
of the appeals before the Appellate Tribunal, it would be open to the
respondent-assessee to raise all contentions, and also bring to the notice of the
Appellate Tribunal the subsequent developments in the case, such as the
approach made by the assessee to settle the matter through the Settlement
Commission. The Appellate Tribunal shall endeavor to pass fresh orders in the
matter, consequent to the remand from this Court, within an outer time limit of
six months from the date of receipt of a copy of this judgment. These I.T.
Appeals are therefore allowed by way of remand by answering the questions of
law raised in favour of the department and against the respondent-assessee.
Sd/-
DR. A.K.JAYASANKARAN NAMBIAR
JUDGE
Sd/-
EASWARAN S.
JUDGE
mns
ITA NOS.20, 23,29 & 34 OF 2023 12 2025:KER:17785
PETITIONER ANNEXURES
Annexure A TRUE COPY OF THE COMMISSIONER OF INCOME TAX
UNDER SEC.12AA OF THE INCOME TAX ACT.
Annexure B CERTIFIED COPY OF THE ORDER OF THE INCOME TAX
APPELLATE TRIBUNAL IN ITA .14/COCH/2021 DATED
17-03-2022
Annexure C TRUE COPY OF THE ADDENDUM TO ANNEXURE B.
DATED 5-01-2021
Annexure D TRUE COPY OF THE CORRIGENDUM TO ANNEXURE B
DATED 5-01-2021
ITA NOS.20, 23,29 & 34 OF 2023 13 2025:KER:17785
PETITIONER ANNEXURES
Annexure A TRUE COPY OF THE ORDER OF THE COMMISSIONER OF
INCOME TAX UNDER SEE.12AA OF THE INCOME TAX
ACT DATED 01-01-2021
Annexure B CERTIFIED COPY OF THE ORDER OF THE LNCOME TAX
APPELLATE TRIBUNAL DATED 17-03-2022 IN LTA.
NO.13/COCH/2021.
Annexure C TRUE COPY OF THE ADDENDUM, TO ANNEXURE B
DATED 05-01-2021
ITA NOS.20, 23,29 & 34 OF 2023 14 2025:KER:17785
PETITIONER ANNEXURES
Annexure A TRUE COPY OF THE ORDER OF THE COMMISSIONER OF
INCOME TAX UNDER SEC.12AA OF THE INCOME TAX
ACT DATED 01 -01 -2021.
Annexure B CERTIFIED COPY OF THE ORDER OF THE INCOME TAX
APPELLATE TRIBUNAL. DATED 17-03-2022
Annexure C TRUE COPY OF THE ADDENDUM OF ANNEXURE B DATED
05-01-2021 DATED 05-01-2021.
Annexure D TRUE COPY OF THE CORRIGENDUM OF ANNEXURE B
DATED 05-01-2021.
ITA NOS.20, 23,29 & 34 OF 2023 15 2025:KER:17785
PETITIONER ANNEXURES
Annexure A TRUE COPY OF THE ORDER OF THE COMMISSIONER OF
INCOME TAX UNDER SEC. 12AA OF THE INCOME TAX
ACT. DATED 01.01.2021
Annexure B CERTIFIED COPY OF THE ORDER OF THE INCOME TAX
APPELLATE TRIBUNAL DATED 17-03-2022.
Annexure C TRUE COPY OF THE ADDENDUM TO ANNEXURE B.
DATED 5-01-2021
Annexure D TRUE COPY OF THE CORRIGENDUM TO ANNEXURE B.
DATED 5-01 -2021
