Tribunal rules in favor of trust, quashing cancellation of registration under Section 12A

The Tribunal quashed the order of the Pr. CIT (Central) cancelling the registration of the assessee trust under Section 12A. It held that the Pr. CIT (Central) lacked jurisdiction to cancel the registration, emphasizing that such authority rests with the CIT (Exemption). The Tribunal ruled that the cancellation could not be based on procedural defaults or have a retrospective effect. Additionally, it found no evidence to support the allegations of misappropriation or that the trust's activities were not genuine, setting aside the Pr. CIT (Central)'s order.

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Issues Involved:
1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) (Central) to cancel the registration under Section 12A.
2. Validity of the cancellation of registration under Section 12A due to non-filing of Income Tax Returns (ITR) and audit reports.
3. Impact of alleged misappropriation of funds by the ex-president on the registration status.
4. Retrospective effect of the cancellation of registration.
5. Whether the activities of the trust were genuine and in accordance with its stated objectives.

Detailed Analysis:

1. Jurisdiction of the Pr. CIT (Central):
The assessee challenged the jurisdiction of the Pr. CIT (Central) to issue the show cause notice and cancel the registration under Section 12A. According to the assessee, the jurisdiction for such matters lies with the CIT (Exemption) Jaipur as per CBDT Notification Nos. 52/2014 and 53/2014 dated 22.10.2014. The Tribunal found that the case was transferred to the Central Circle for the limited purpose of coordinated assessment following a search and seizure operation in another group. The Tribunal held that the power to cancel registration under Section 12A rests with the CIT (Exemption) and not the Pr. CIT (Central). The Tribunal cited several judicial precedents, including the case of Dilip Tanaji Kashid vs. M.l. Karmakar PR. CIT & ANR., to support its decision that the Pr. CIT (Central) had no jurisdiction to cancel the registration.

2. Validity of Cancellation Due to Non-filing of ITR and Audit Reports:
The Pr. CIT (Central) cancelled the registration on the grounds that the assessee had not filed its ITR and audit reports for the assessment years 2014-15 to 2016-17. The Tribunal noted that clause (ba) was inserted by the Finance Act, 2017, to Section 12A(1) effective from 01.04.2018, which requires the filing of returns within the time allowed under Section 139. The Tribunal held that this amendment is prospective and applies from the assessment year 2018-19 onwards. The Tribunal also referred to the decision in United Educational Society v. JCIT, which held that the filing of the audit report along with the return filed in response to notice under Section 148 entitles the assessee to the benefit of Section 11. Therefore, the Tribunal concluded that the cancellation of registration on these grounds was not justified.

3. Impact of Alleged Misappropriation of Funds:
The Tribunal examined the allegation that the ex-president misappropriated funds for personal benefit. The Tribunal noted that the assessee had filed an FIR against the ex-president and that the police, after investigation, proposed a final report not finding any case for misappropriation. The Tribunal held that the misdeeds of the ex-president should not lead to the suffering of the entire trust. It cited the case of ACIT v. Sri Koundinya Educational Society, which held that allegations of misappropriation without independent verification cannot be used to deny benefits under Sections 11 and 12.

4. Retrospective Effect of Cancellation:
The Tribunal held that the cancellation of registration cannot have retrospective effect. It referred to the decision in State of Rajasthan and others vs Basant Agrotech India Ltd. and other, which held that subordinate legislation cannot be given retrospective effect unless explicitly provided. The Tribunal also cited Indian Medical Trust V/s PCIT (Central), which held that cancellation of registration with retrospective effect is invalid. Therefore, the Tribunal concluded that the cancellation could only be prospective.

5. Genuineness of Activities:
The Pr. CIT (Central) alleged that the activities of the trust were not genuine and were not being carried out in accordance with its stated objectives. The Tribunal found no evidence of any change in the activities of the trust since its inception. It observed that the Pr. CIT (Central) failed to specify which activities were not in accordance with the trust's objectives. The Tribunal concluded that the trust had not violated any provisions of Sections 12AA(3) and 12AA(4) and set aside the order of the Pr. CIT (Central).

Conclusion:
The Tribunal quashed the order of the Pr. CIT (Central) cancelling the registration of the assessee trust under Section 12A and allowed the appeal of the assessee. The Tribunal emphasized that the jurisdiction for such cancellation lies with the CIT (Exemption) and that the cancellation cannot be based on procedural defaults or retrospective in nature.

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