Registration under section 12A granted in 1992 cannot be retrospectively cancelled under section 12AB(4) for AY 2021-22

ITAT BANGALORE - AT held that the registration granted u/s 12A on 4.6.1992 could not be cancelled retrospectively u/s 12AB(4) for PY 2020-21 (AY 2021-22); cancellation u/s 12AB(4)(ii) is permissible only from AY 2022-23 onwards. The Tribunal set aside the PCIT's retrospective cancellation for AY 2021-22, finding reliance on s.12AB(4) (introduced w.e.f. 1.4.2022) to be legally impermissible, but permitted the PCIT to independently examine and, if justified, pass fresh cancellation orders for AYs 2022-23 to 2026-27. Decision for assessee.

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Issues Involved:

1. Jurisdiction of PCIT to cancel registration under Section 12AB(4) of the Income Tax Act.
2. Validity of cancellation of registration under Section 12A and 12AB.
3. Alleged cash collections and utilization of income for the benefit of trustees.
4. Applicability of specified violations under Section 12AB(4) for different assessment years.

Summary of Judgment:

Issue 1: Jurisdiction of PCIT to cancel registration under Section 12AB(4) of the Act

The appellant argued that the Principal Commissioner of Income Tax (PCIT), Central Circle, Bangalore, has no jurisdiction to cancel the registration under Section 12AB(4) of the Income Tax Act, as the power to grant and cancel such registration lies with the Commissioner of Income Tax (Exemptions), Bangalore, as per Notifications No. 52/2014 and 53/2014. The Tribunal admitted additional grounds of appeal and agreed with the appellant, stating that the PCIT, Central Circle, Bangalore, is not the authorized authority to cancel the registration granted under Section 12A of the Act.

Issue 2: Validity of cancellation of registration under Section 12A and 12AB

The Tribunal held that the registration granted under Section 12A of the Act on 04/06/1992, which was effective till the date of 23/09/2021, cannot be canceled under Section 12AB(4) of the Act for the previous year 2020-21 covering the assessment year 2021-22. The Tribunal noted that the provisions of Section 12AB(4) introduced with effect from 01/04/2021, before substitution with effect from 01/04/2022, only enabled the cancellation of registration granted under Section 12AB(1) of the Act. Therefore, the cancellation of registration for the assessment year 2021-22 was held to be invalid.

Issue 3: Alleged cash collections and utilization of income for the benefit of trustees

The Tribunal found that the appellant had provided sufficient evidence to show that the alleged cash collections were misappropriated by two employees without the knowledge of the management. The Tribunal noted that the employees involved had been terminated, and the cash collected had been assessed in their hands. The Tribunal concluded that there was no specified violation by the appellant to justify the cancellation of registration.

Issue 4: Applicability of specified violations under Section 12AB(4) for different assessment years

The Tribunal held that the specified violations committed in the assessment year 2021-22 could not be the reason to cancel the registration granted for the assessment years 2022-23 to 2026-27. The Tribunal emphasized that the violations for each assessment year should be considered independently. The Tribunal allowed the appeal on this ground and quashed the order of the PCIT canceling the registration for the assessment years 2022-23 to 2026-27.

Conclusion:

The Tribunal partly allowed the appeal filed by the appellant, quashing the order of the PCIT canceling the registration under Section 12A and 12AB of the Act. The Tribunal held that the PCIT, Central Circle, Bangalore, had no jurisdiction to cancel the registration and that the specified violations for the assessment year 2021-22 could not be the basis for canceling the registration for subsequent years.

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