2023 (1) TMI 1283 - AT - Income Tax

Tribunal Quashes Income Tax Registration Cancellation Order

The Tribunal quashed the order of the Principal Commissioner of Income Tax (Central) cancelling the registration and withdrawing the approval under ... Exemption u/s 11 - CIT(Central) jurisdiction to pass the order of cancellation of registration of the assessee Trust u/s 12AA(3) and 12AA(4) - assessment of trust - as per assessee main object of the society is to impart education - whether society solely exists for charitable purposes and not for the purposes of profit? - whether the cancellation will operate from a retrospective date? - HELD THAT:- As there has to be some order in writing from higher authorities i.e. from Chief Commissioner of Income Tax (Exmp.) Delhi or CBDT in writing and an opportunity of being heard is to be given to the assessee before transferring the case whereas all these are absent in the present case and nothing has been demonstrated by the department. Sec. 127 of the Act empower to transfer cases among Assessing Officers but not to Commissioners of Income Tax as CIT is not an Assessing Officer. In our view, to pass an order u/s 12A for registration or cancellation is not within the jurisdiction or power of an Assessing Officer. Hence registration u/s. 12A can be withdrawn only by the ‘Prescribed Authority’ who has been empowered to grant the same and by the Notification dated 22.10.2014 the ld.CIT(Exmp.) has empowered for the same, hence the Pr.CIT (Central) cannot cancel the same. In assessee’s case, the case u/s 127 was transferred to the Central Circle for limited purpose of Co-Ordinate assessment admittedly which do not mean that the Section 12A proceeding has been transferred to the Pr. CIT(Central) automatically, when both the proceedings are separately or independent and also has to be done or conducted by the different rank Authorities. More particularly when for the purpose of Exemption cases or 12A registration a Separate Commissioner of Income Tax has been Authorized for whole of Rajasthan by the CBDT by its Notification dated 22.10.2014. Also Pr.CIT (Central) cancelled such approval from A. Y. 2014-15, though the assessee has already assessed from A.Y. 2014-15 u/s 143(3)/148 of the Act. It is also settled legal position of law that Registration cannot be cancelled from retrospective effects. Thus we are of the opinion that in the present case the ld. Pr.CIT(Central) has no jurisdiction to pass the impugned order. Accordingly, we quash the same. Even otherwise we are also of the view that no retrospective cancellation could be made as neither in the Sec. 12AA(3) nor in Sec. 12AA(4) it has been provided or is seen to have explicitly provided to have a retrospective character or intend. Therefore, without a specific mention of the amended provisions to operate retrospectively no cancellation for the past years could be ordered - Decided in favour of assessee. Issues Involved:1. Cancellation of registration under Section 12AA(3) and 12AA(4) of the Income Tax Act, 1961.2. Withdrawal of approval under Section 10(23C)(vi) of the Income Tax Act, 1961.3. Jurisdiction of Principal Commissioner of Income Tax (Central) to cancel registration and approval.4. Retrospective effect of cancellation of registration and approval.5. Allegation of earning illegal/unaccounted income and its impact on charitable status.Detailed Analysis:1. Cancellation of Registration under Section 12AA(3) and 12AA(4):The Principal Commissioner of Income Tax (PCIT) cancelled the registration of the assessee under Sections 12AA(3) and 12AA(4) with effect from 1st April 2009. The cancellation was based on allegations that the assessee was involved in earning illegal/unaccounted income in the form of capitation fees and that the income was applied for the benefit of specified persons under Section 13(3). The Tribunal noted that the conditions for cancellation under Section 12AA(3) and 12AA(4) were not met as there was no evidence that the activities of the trust were not genuine or not carried out in accordance with its objects. The Tribunal cited various case laws, including CIT vs. Islamic Academy of Education and Tamil Nadu Cricket Association vs. DIT (Exemptions), to support its conclusion that the cancellation was not justified.2. Withdrawal of Approval under Section 10(23C)(vi):The PCIT also withdrew the approval granted under Section 10(23C)(vi) with retrospective effect from 1st April 2009. The Tribunal found that the PCIT did not have the jurisdiction to withdraw the approval and that the withdrawal was based on incorrect appreciation of facts. The Tribunal referred to the decision of the Hon'ble Rajasthan High Court in Indian Medical Trust vs. PCIT, which held that the prescribed authority is not empowered to withdraw the benefit of approval under Section 10(23C)(vi).3. Jurisdiction of Principal Commissioner of Income Tax (Central):The Tribunal addressed the issue of jurisdiction, noting that the power to grant or withdraw registration under Section 12AA lies with the Commissioner of Income Tax (Exemptions) [CIT(E)], Jaipur, as per CBDT notifications. The Tribunal found that the PCIT (Central) did not have the jurisdiction to cancel the registration or approval, as the case fell within the jurisdiction of the CIT(E). The Tribunal cited the decision of the ITAT Jaipur Bench in Wholesale Cloth Merchant Association vs. Pr. CIT (Central), Jaipur, which held that the PCIT (Central) had no jurisdiction to pass orders under Sections 12AA(3) and 12AA(4).4. Retrospective Effect of Cancellation:The Tribunal held that the cancellation of registration and approval cannot be retrospective. It cited the decision of the Hon'ble Supreme Court in State of Rajasthan and others vs. Basant Agrotech India Ltd. and others, which stated that only legislation can make a law retrospective. The Tribunal also referred to the decision of the Hon'ble Rajasthan High Court in Indian Medical Trust vs. PCIT, which held that the provisions of Section 12AA(3) do not suggest or contemplate retrospective cancellation.5. Allegation of Earning Illegal/Unaccounted Income:The Tribunal found that the allegations of earning illegal/unaccounted income in the form of capitation fees were not substantiated. The Tribunal noted that the amounts mentioned in the seized documents were duly recorded in the books of accounts and that the fees received from students were fully accounted for. The Tribunal concluded that the PCIT's allegations were based on incorrect appreciation of facts and that the activities of the trust were genuine and carried out in accordance with its objects.Conclusion:The Tribunal quashed the order of the PCIT (Central) cancelling the registration and withdrawing the approval under Sections 12AA(3), 12AA(4), and 10(23C)(vi) of the Income Tax Act, 1961. The Tribunal held that the PCIT (Central) did not have the jurisdiction to pass the impugned order and that the cancellation could not be retrospective. The Tribunal allowed the appeals of the assessee.