2024 (11) TMI 1029 - AT - Income Tax

Reassessment notices under section 148 quashed as time-barred, withdrawal of section 10(23C)(vi) approval invalid due to jurisdictional issues

G.D. Mother Educational Society Versus Principal Commissioner of Income Tax (Central), Patna

G.D. Mother Educational Society Versus Principal Commissioner of Income Tax (Central), Patna - [2025] 122 ITR (Trib) 231 Issues Involved:1. Validity of withdrawal of approval under section 10(23C)(vi) of the Income Tax Act for Assessment Years 2018-19 to 2021-22.2. Applicability of the second proviso to section 143(3) of the Income Tax Act.3. Validity of reassessment notices issued under section 148 of the Income Tax Act.4. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) in withdrawing approval.Issue-wise Detailed Analysis:1. Validity of Withdrawal of Approval under Section 10(23C)(vi):The appeals contested the withdrawal of approval granted to the assessee-society under section 10(23C)(vi) of the Income Tax Act for the assessment years 2018-19 to 2021-22. The PCIT (Central), Patna withdrew this approval based on findings from a survey and search operations that indicated the society's funds were being siphoned off for personal use by its founder. The assessee argued that the withdrawal was arbitrary and not in accordance with the provisions of the Act, asserting that all receipts were duly recorded in the books of account. The Tribunal found that the withdrawal was not justified as the reassessment notices, upon which the withdrawal was based, were time-barred and thus invalid.2. Applicability of the Second Proviso to Section 143(3):The second proviso to section 143(3) of the Income Tax Act, effective from April 1, 2022, was cited by the PCIT as the basis for withdrawing the approval. The assessee argued that this proviso was not applicable to the assessment years in question, which were prior to its effective date. The Tribunal agreed, noting that the proviso could not be applied retrospectively to the assessment years 2018-19 to 2021-22. Consequently, the reference made by the Assessing Officer under this proviso was deemed invalid, rendering the withdrawal of approval by the PCIT unsustainable.3. Validity of Reassessment Notices under Section 148:The reassessment notices issued under section 148 of the Act were challenged as being time-barred. Following the Supreme Court's decision in the case of Union of India vs. Ashish Agarwal, it was established that the notices issued under the old regime were deemed invalid, and fresh notices under the amended provisions were required. The Tribunal found that the new notices were issued beyond the permissible time limit, as clarified in the Supreme Court's subsequent judgment in Rajeev Bansal and Others. This delay rendered the reassessment notices invalid, and thus, no valid proceedings were pending before the Assessing Officer to justify the reference to the PCIT.4. Jurisdiction of the PCIT in Withdrawing Approval:The Tribunal examined whether the PCIT (Central), Patna had the jurisdiction to withdraw the approval under section 10(23C)(vi). It was concluded that the appropriate authority for such matters was the Commissioner (Exemption) as per the notifications specifying territorial jurisdiction. The reference to the PCIT (Central) was therefore deemed impermissible and invalid. This lack of jurisdiction further invalidated the orders passed by the PCIT withdrawing the approval.Conclusion:The Tribunal quashed the orders passed by the PCIT, Patna, withdrawing the approval under section 10(23C)(vi) of the Income Tax Act, as the actions were not in consonance with the legal provisions. The appeals were allowed, emphasizing the necessity of adhering to statutory timelines and jurisdictional mandates.