Whether costs can be awarded when the action of CIT in canceling registration u/s 12AA(3) is illegal and whether such action of CIT is considered as discharge of duty or malafide?

Last updated: 25 August 2014

Court :
ITAT Pune

Brief :
The assessee is a trust registered u/s 12A of the IT Act, 1961, engaged in providing medical facility/aid. CIT noted that the assessee trust was carrying on Medical Profession, in the form of a Multi-speciality Hospital, on commercial basis wherein fixed amount of fees was charged for treatment given and facilities provided from all patients and discount given to the patients were claimed as charity. The surplus was diverted towards the trustees under guise of Salary, Rent, Professional Fees, etc. and was subsequently utilized for personal benefits of trustees. CIT issued a show-cause notice to the assessee u/s.12AA(1)(b)(ii) of the I.T. Act, pointing out major fraudulent discrepancies and cancelling the registration. The assessee filed an appeal challenging the order of the CIT u/s 12AA(3) canceling the registration granted to the assessee trust and pleaded for award of costs u/s 254(2B) on the ground that the action of the department of canceling registration was illegal and was an abuse of powers and that it had caused serious prejudice and injustice to the assessee. On the basis of facts, judgment held in favour of the appellant. No costs were awarded as CIT passed the order during the course of discharge of duty as CIT.

Citation :
Parkar Medical Foundation – Appellant – Versus – Deputy Commissioner of Income Tax - Respondent