Pr Commissioner of Income Tax has Authority to Cancel Registration of Assessee even without Decision from Assessing Authority: Kerala HC [Read Order]

The Kerala High Court declared the principal commissioner’s power to terminate an assessee’s registration without awaiting the assessing authority’s action.  Judges A.K. Jayasankaran Nambiar and Easwaran S., who made up the Division Bench, noted that Section 12AA’s provisions give the Principal Commissioner the authority to decide whether the conditions listed in Sections 12AA(3) and 12AA(4) of the Income Tax Act are necessary to order the cancellation of the registration that was given to the Trust under Section 12A of the Income Tax Act, 1961.

Last Hour Ministry, the assessee wishing to revoke the registration given to them under Section 12A of the Income Tax Act, was served with a show-cause notice under Section 12AA(3) and (4) of the Income Tax Act. Despite the assessee’s desire for a thorough response to the show-cause notices, the Principal Commissioner of Income Tax dismissed the assessee’s argument and approved the registration cancellation petition.

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Dissatisfied by the Principal Commissioner’s decision, the assessee filed appeals with the Appellate Tribunal. The Principal Commissioner of Income Tax issued an order prematurely canceling the assessee’s registration, according to the Appellate Tribunal. The Appellate Tribunal’s ruling has been contested by the department.

The bench noted that the Appellate Tribunal had incorrectly concluded that the Principal Commissioner’s authority under Section 12AA of the Income Tax Act could not be used without first determining whether the assessee had violated the purposes of the Trust in question or caused a breach of the statutory provisions.

The bench held that the Principal Commissioner is not required by the legislative provisions to wait for the Assessing Authority’s conclusion before issuing an order terminating an assessee’s registration under Section 12A of the Income Tax Act. The bench overturned the Appellate Tribunal’s ruling and granted the appeal.

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