Income Tax Act | Principal Commissioner Has Authority To Cancel Registration Of Assessee Without Waiting For Decision From Assessing Authority: Kerala HC

The Division Bench of Justices A.K. Jayasankaran Nambiar and Easwaran S. observed that “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.”

In this case, a 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, the Principal Commissioner of Income Tax rejected the contention raised by the assessee and confirmed the proposal for cancellation of the registration.

Aggrieved by the order of the Principal Commissioner, the assessee preferred appeals before the Appellate Tribunal. The Appellate Tribunal found that the order cancelling the registration granted to the assessee was passed prematurely by the Principal Commissioner of Income Tax.

The department has challenged the order passed by the Appellate Tribunal.

The bench observed that 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.

The bench opined that 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 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 flawed since the statutory provisions do not admit of any such interpretation,” stated the bench.

In view of the above, the bench allowed the appeal and set aside the order passed by the Appellate Tribunal.

Case Title: The Principal Commissioner of Income Tax v. Last Hour Ministry

Citation: 2025 LiveLaw (Ker) 170

Case Number: ITA NO. 20 OF 2023

Counsel for Appellant/ Department: Jose Joseph

Counsel for Respondent/ Assessee: Sivaraman

Click Here To Read/Download The Order