Madhya Pradesh Madhyam vs Commissioner of Income Tax and Another

Arun Mishra, J.

Petitioner is assailing the issuance of show-cause notice as to why registration be not cancelled under the provisions of section 12A read with section 12AA of Income Tax Act. Petitioner was granted registration as charitable institution. Petitioner is an undertaking of State of M.P. According to the petitioner, it is undertaking the charitable, activities in the very nature which are defined in section 2(15) of Income Tax Act, 1961.

Petitioner submits that this question was adjudicated by the Income Tax Department whether petitioner can avail such an exemption considering the nature of activities while passing the assessment order for the year 1994-95, an order was passed by the Tribunal, Indore Bench, Indore (Annexure P/5) in which the view was taken that till registration stands, authorities are bound by it and cannot take a different view as to nature of activities. On facts also examination appears to have been made of the expression "any other object of the general public utility and it was found that it is difficult to hold that the object of assessee/institution was not for general public utility. Petitioner submits that once this finding was recorded by Tribunal, it was not open to issue a show-cause notice Annexure P/4 which was issued on 23-1-2002 by the Government of India, Ministry of Finance (Department of Revenue) office of the Commissioner, Bhopal it is quoted below :

"Sub: Show-cause notice for cancellation/withdrawal of registration u/s 12A read with u/s 12AA of the Income Tax Act, 1961-reg.

You had applied for registration u/s 12A of the Income Tax Act, 1961, vide your, application, dated 27-3-1985. This application was entered at Serial No Regn./BPL/3/85-86 in the Register of Applications u/s 12A(a). The certificate of registration was forwarded to you vide this office endorsement F No. Regn./BPL/3/85-86, dated 29-1-1986.

From the material on record it emerges that you are engaged in the following activities :

(i) publication and sale of weekly magazine "Rozgar and Nirman".

(ii) production of documentary films, TV reports, etc., for the State Government Departments and public sector undertakings.

(iii) acting as advertising agency for the State Government Department and public sector undertakings for publication of their advertisement''s in the newspapers.

The State Government Departments and public sector undertakings pay commission to you besides reimbursing the actual expenditure incurred by you for providing the above services as per bills raised by you.

The above activities are clearly in the nature of commercial activities intended to earn profit and, therefore, you were/are not entitled for registration u/s 12A of the Income Tax Act, 1961. Your claim before the authorities below that you are like a State Government Department is also not correct because you ale registered as a society under the Madhya Pradesh Societies Registration Act, 1973 and, therefore, you are an independent entity covered within the definition of "person" in terms of provisions of section 2(31) of the Income Tax Act, 1961, In the circumstances, I propose to cancel the registration u/s 12A of the Income Tax Act, 1961, granted to you on 29-1-1986.

In case, you have any objection to the proposed action, you may kindly file such objections before me at 3 P.M. on 31-1-2002, either personally or through a duly authorised representative. In case, no objections are received on the aforesaid date, its shall be presumed that you have nothing to say in this matter and the decision in this regard will be taken on merits."

Learned counsel for petitioner Shri B.L. Nema streneously submits that for the last 16 years benefit has been enjoyed and once the Tribunal has found that the activities are of general public utility, no show-cause notice could be issued by the Commissioner, Bhopal.

After hearing learned counsel and perusing the documents on record, I am of the opinion that scope of the proceedings of registration and its cancellation is different than the assessment proceedings. Income Tax authorities are bound registration once they have registered an institution as charitable one they cannot go behind registration in assessment proceedings. They are prima facie bound by such a registration which was also the view taken by the Tribunal The right to conduct the proceedings of cancellation in accordance with law cannot be denied to the respondent/department.

It is simply a case of issuance of show-cause notice. It is open to the petitioner to file reply to the show-cause against proposed action before the Commissioner, Bhopal. It cannot be said that issuance of show-cause notice is without jurisdiction as such I am not inclined to interfere at this stage of proceedings in the writ jurisdiction of this court.

The writ petition is dismissed with the aforesaid observations.

OPEN