Retrospective cancellation under amended section 12AB(4)(ii) invalid; registration cannot be cancelled for earlier assessment year 2021-22

ITAT BANGALORE - AT allowed the appeals and quashed the PCIT's order cancelling registration under section 12AB(4)(ii) insofar as it was applied retrospectively to the previous year 2020-21 (AY 2021-22). The Tribunal held the law applicable is that in force in the relevant assessment year and the 12AB(4)(ii) amendment (Finance Act, 2022 w.e.f. 1.4.2022) cannot be used to retrospectively cancel registrations for earlier years; retrospective cancellation under the amended provision is invalid.

---

---

Issues Involved:

1. Applicability of Section 12AB(4)(ii) for A.Y. 2021-22.
2. Retrospective cancellation of registration under Section 12AA/12AB.
3. Validity of actions based on retracted statements.
4. Compliance with procedural and legal requirements for cancellation.

Summary:

1. Applicability of Section 12AB(4)(ii) for A.Y. 2021-22:
The appellants argued that the provisions of Section 12AB(4)(ii) introduced by Finance Act 2022 w.e.f. 01.04.2022 should not apply retrospectively to A.Y. 2021-22. The Tribunal noted that the law applicable for penalizing should be the law for the year of committing the offense. The Tribunal cited the Supreme Court's principle that "the law to be applied is the law in force in the assessment year unless otherwise stated or implied." Consequently, the provisions of Section 12AB(4)(ii) could not be applied retrospectively to A.Y. 2021-22.

2. Retrospective Cancellation of Registration under Section 12AA/12AB:
The Tribunal held that the cancellation of registration with retrospective effect is invalid. It emphasized that the amended provisions of Section 12AB(4)(ii), introduced by Finance Act, 2022, should not be applied retrospectively. The Tribunal referred to various judgments, including the Hon'ble Madras High Court's ruling that without specific mention of retrospective operation, cancellation cannot be applied to past years. Therefore, the cancellation of registration for A.Y. 2021-22 was deemed invalid.

3. Validity of Actions Based on Retracted Statements:
The appellants contended that the statements recorded under Section 132(4) from the trust's chairman and other officials, which were later retracted, should not be relied upon without independent evidence. The Tribunal did not specifically address this issue as the primary grounds for cancellation were already quashed.

4. Compliance with Procedural and Legal Requirements for Cancellation:
The Tribunal found that the Principal Commissioner of Income Tax (PCIT) had erred in applying the provisions of Section 12AB(4)(ii) retrospectively. The Tribunal quashed the PCIT's order, stating that the cancellation of registration for A.Y. 2021-22 based on provisions applicable from A.Y. 2022-23 was bad in law. Consequently, other grounds related to procedural and legal compliance became infructuous.

Conclusion:
The appeals were allowed, and the order of the PCIT canceling the registration under Section 12AB(4)(ii) was quashed. The Tribunal emphasized that the law applicable to the assessment year should be applied, and retrospective application of amendments without explicit provision is invalid.

---