The Income Tax Appellate Tribunal (ITAT), Jaipur Bench while quashing the order cancelling the registration held that the registration can not be cancelled for mere failure to get accounts books audited from CA.
The assessee, M/s Wholesale Cloth Merchant Association is a Trust and is registered under the Non-Trading Companies Act, Rajasthan, having main objects to develop the cloth business in Kota for the benefit of the general public or businessmen under the name of Wholesale Cloth Merchant Association, Kota.
The Pr. CIT in its order noted that the registration was granted so as to enable the assessee to fulfil all the objectives enumerated in the deed/ Memorandum of Association.
However, it was observed by the ld. Pr. CIT that the assessee is not working as per the objective of the Trust and case falls under section 12AA(3) and 12AA(4) of the Act on the reason that a search and seizure action was conducted in the case of “Bajaj Group”, Kota and consequent survey under section 133A of the Act was also conducted at the assessee.
During the course of the survey statement of the President of the assessee Trust was recorded on oath, who admitted that the assessee had filled the return of the income only up to AY 2013-14 and had not filed the ITR for AY 2014-15 to 2016-17 and also not filed the Tax Audit Report and assessee has continuously been claiming exemption under section 11 and 12 of the Act.
The Pr. CIT (Central) has held that the activities of the assessee association are not ‘genuine’ and are not being carried out in accordance with the stated objects of the assessee. Therefore, the Registration of the assessee under section 12A was cancelled by invoking the provisions of Section 12AA(3) and 12AA(4)from the financial year in which the irregularities came to notice.
The Pr. CIT stated that if a person fails to get audited his books of accounts from a chartered accountant, then he will not be able to get benefit of section 11, 12 and 12A.
The assessee challenged the order of the Pr. CIT (Central), Rajasthan for cancelling the registration of the assessee Trust.
The coram consisting of Vikram Singh Yadav and Sandeep Gosain while setting aside the order of the Pr. CIT held that the provisions in respect of auditing of accounts books from a chartered accountant are in the nature of ‘procedural compliance’ hence even if that kind of provision is not satisfied even then assessee would not be punished for cancellation of registration under section 12A of the Act.
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