V.GOPALA GOWDA, CJ & INDRAJIT MAHANTY, J. W.P. ( C) NO.14886 OF 2009 (Decided on 01.10.2010) M/S. KALINGA INSTITUTE OF INDUSTRIAL TECHNOLOGY ……….. Petitioner. .Vrs. COMMISSIONER OF INCOME TAX, ORISSA,BBSR & ANR. ……….. Opp.Parties. INCOME TAX ACT, 1961 (ACT NO.43 OF 1961) – SEC.12-AA (3) For Petitioner - M/s. R.K.Rath (Sr.Advocate) S.Ray & S.Dey. For Opp.Parties 1 & 2 – Mr. A.K.Mohapatra (ASC, Income Tax Deptt.) V.GOPALA GOWDA, C.J. In this writ petition the petitioner has sought for quashing of purported notice issued under Section 12AA(3) of the Income Tax Act, 1960, annexed as Annexure-1 to the writ application, which is extracted herein below: “GOVERNMENT OF INDIA OFFICE OF THE COMMISSIONER OF INCOME TAX, AAYAKAR BHAWAN, 2ND FLOOR, RAJASWA VIHAR, BHUBANESWAR-751 007. No.Tech./12A-81/95-96/2009-10/4015 Dated, Bhubaneswar the 24th September, 2009. To The Secretary, Kalinga Institute of Industrial Technology (KIIT), Patia, Bhubaneswar. Madam/Sir, Sub: Proceedings U/s.12AA(3) of the I.T.Act-Matter regarding. In consequence to the order of the Ld. ITAT, Cuttack Bench, Cuttack your case is fixed for hearing before the Commissioner of Income Tax, Bhubaneswar U/s.12AA(3) of the I.T. Act on 22.10.2009 at 11.00 AM. You are requested to appear on that date before the Commissioner for hearing. Yours faithfully, Sd/- (M.R.Rath) Income Tax Officer (Tech.) Bhubaneswar.” 2. Mr. R.K.Rath, learned senior counsel appearing for the petitioner submits that, the impugned notice is wholly without jurisdiction, inasmuch as, there is no direction in any order of the Income Tax Appellate Tribunal, Cuttack Bench, Cuttack, authorizing the issue of the impugned notice. The only relevant judgment of the Income Tax Appellate Tribunal, in ITA No.86/CTK 2007 has been appended as Annexure-6, in which the Tribunal while allowing the petitioner’s appeal held as follows: “13. In our considered opinion both the cancellation as well as continuance of registration will have an effect and a bearing on the assessment proceeding. It does not mean that the assessment proceeding being a quashi judicial proceeding should be interfered like the present one. Rather in all fairness the CIT should have taken precaution to complete the assessment expeditiously and then should have arrived at the conclusion of proposed cancellation of registration. The present act of the CIT amounts to interruption in the assessment proceeding. The power u/s.12AA(3) has been enunciated under the Act is an unbridled power in the hands of CIT to safeguard the interest of revenue as and when he is satisfied to do so. It does not mean that this unbridled power given by the act after much deliberation in the Parliament should be utilized without clear cut satisfaction. As per strict judicial discipline we consider that power of punishment is a unbridled power like the present power of cancellation envisaged u/s.12AA(3) But such unbridled power should be utilized quite cautiously and consciously. With the aforesaid findings we are of the considered opinion that the order of the CIT is a premature one which has been utilized at a prematured stage in haste. Accordingly the assessee succeeds in its appeal regarding continuance of registration. Before parting with our order it will not be out of place to mention here that our order has nothing to do with the search and seizure assessment proceedings. The concluding finding in the search and seizure assessment proceeding may be utilized by the revenue or by the assessee in their respective favour accordingly. Again we reiterate that this order is given considering the present facts and circumstances of the case in cancellation of registration only and it has got no bearing to any other activity arising out of said proceedings.” (Emphasis supplied) 2 2.1. Learned counsel for the petitioner asserts that there is no direction given by the Income Tax Appellate Tribunal which can form the foundation for issue of notice dated 24th September, 2009, impugned under Annexure-1 to the present writ application. He further submits that the petitioner’s application for grant of registration under Section 12(a) of the Income Tax Act, 1961 was allowed by the Commissioner of Income Tax, Orissa vide his order dated 7th/9th February, 1996, granting registration to the petitioner-institution w.e.f. 1.4.1995 and the same remains valid and subsisting as on date. From Annexure-5, it appears that an earlier attempt made by the Commissioner of Income Tax, Bhubaneswar vide its order dated 15.12.2006 passed under Section 12AA(3) of the Income Tax Act, 1961 which was challenged by the petitioner before the Income Tax Appellate Tribunal in ITA No.86 CTK 2007. The said appeal came to be allowed by the Full Bench of the Tribunal, vide order dated 5.10.2007 and the conclusion of which has been quoted hereinabove. Therefore, it is submitted that the Tribunal has not only quashed the earlier attempt at cancelling the registration of the petitioner-institute under Section 12(a) of the Income Tax, 1960, yet, the self-same order appears to be relied upon and/or referred to in the impugned notice under Annexure-1. It is further submitted that the Income Tax Department has also sought to challenge this order of the Tribunal before the High Court but is yet to press the said application, for which reason the same remains pending, as on date. 3. Mr. Mohapatra, learned Addl. Standing Counsel appearing for the Income Tax Department, on the other hand, sought to try and justify the impugned notice by stating that, the Commissioner of Income Tax was not denuded of his authority under Section 12 AA(3) of the I.T.Act even though the Tribunal had quashed an earlier order dated 15.12.2006 passed by the Commissioner cancelling the petitioner- institute. 3.1. Learned counsel for the Department further submits that a search and seizure had been conducted against the petitioner-institute on 9.8.2005 and based on documents seized and information re-covered in course of such search and seizure without awaiting for the conclusion of the congenital assessment proceeding, the earlier order dated 15.12.2006 had been passed by the Commissioner of Income Tax under Section 12 AA(3) of the Income Tax Act, 1961 directing cancellation of the registration of the petitioner-institution. This order had came to be quashed by the Income Tax Appellate Tribunal vide judgment dated 5th October, 2007 in ITA No.86/CTK/2007 on the ground that such notice was premature. Accordingly, he submits that the power under Section 12 AA(3) of the I.T.Act continuous to be vested in the Commissioner of Income Tax and merely because an earlier order under Section 12 AA of the I.T.Act had been quashed by the Income Tax Appellate Tribunal, it did not mean that the Income Tax Commissioner was denuded of his authority, to initiate another proceeding under Section 12 AA(3) of the Income Tax Act. 4. In response to the contention made by the learned counsel for the Department, learned counsel for the petitioner-institute submits that, while there had been a search and seizure operation carried out against the petitioner-institute on 9.8.2005, 3 an assessment proceeding followed the same and was completed and no adverse finding had been recorded against the petitioner-institution to form any fresh ground for issue of notice. 4.1. Learned counsel for the petitioner further asserts that in the impugned notice, there is no reference to any subsequent fact, event, information or order to form the foundation of the notice under Section 12 AA (3) of the Income Tax Act and impugned as Annexure-1 herein. The only basis referred in the impugned notice was, “in consequence to the order of the learned ITAT, Cuttack Bench, Cuttack”. This reason was wholly without any foundation and, therefore, the impugned notice ought to be quashed. 4.2. Learned counsel for the petitioner also asserts that although the impugned notice claims to be a notice under Section 12 AA of the Income Tax Act, the same has been issued by the Income Tax Officer (Tech), Bhubaneswar and the counter affidavit in the present case has also been filed by the self-same Income Tax Officer (Tech.). In other words, neither the impugned notice nor the counter affidavit has in fact been issued by the Commissioner of Income Tax. 4.3. Learned counsel for the petitioner, therefore, prays for quashing of Annexure-1 since the same has not been issued by the Commissioner of Income Tax as well as for rejection of the counter affidavit, since the power and authority under Section 12AA of the Act is only vested with the Commissioner of Income Tax Act and not with any Income Tax Officer (Tech.), who had issued such notice. 5. On a consideration of the submissions of the learned counsel for the parties as noted hereinabove and on perusal of the impugned notice under Annexure-1 as well as the order of the Income Tax Appellate Tribunal under Annexure-6, it is clear there from that the Tribunal has held that though power has been vested under Section 12 AA(3) of the Income Tax Act in the Commissioner of Income Tax to safeguard the interest of the revenue, but such power vested in him can only to be exercised by him on a clear-cut satisfaction of the circumstances for exercise of such power. Although, the Tribunal’s order quashed an earlier order of Commissioner dated 15th December, 2006 under Section 12 AA(3) of the Act, the same order also clarified that such power “should be utilized quite cautiously and consciously”. Therefore, we have no hesitation to direct quashing of the impugned notice dated 24th September, 2009 issued under Section 12 AA(3) of the Income Tax Act vide Annexure-1 to the writ petition and we order accordingly. 6. We make it clear that the power under Section 12 AA(3) of the Income Tax Act may be exercisable by the Commissioner only on recording his satisfaction of the circumstances that may warrant the exercise of such power and to record in the notice and the basis, if at all for the initiation of such proceeding. 7. Accordingly, the writ application is allowed in terms of the directions as noted hereinabove. Writ petition allowed. 4