Prospective operation of statutory amendments: new cancellation grounds cannot be applied retrospectively; registration reinstated accordingly.

The note addresses temporal applicability of Finance Act, 2022 amendments introducing 'specified violation' in Section 12AB(4): it clarifies that a legislative amendment creating a new ground for cancellation and a new procedural regime operates prospectively from its effective date unless express retrospective effect is provided, and therefore cannot validly be invoked to cancel registration for prior years. Where show-cause notices and orders rely on the post amendment regime for periods before it operated, those proceedings are vitiated; the operative effect is restoration of registration and quashing of retrospective cancellation.

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Issues: (i) Whether the Principal Commissioner of Income-tax (PCIT) could validly cancel the assessee's registration retrospectively from earlier financial years by invoking Section 12AB(4) of the Income-tax Act, 1961 when the amendment introducing "specified violation" in Section 12AB(4) became effective only from 01.04.2022.

Analysis: The question turns on the temporal applicability of the Finance Act, 2022 amendments introducing the concept of "specified violation" in Section 12AB(4) and related procedural provisions, and whether those provisions justify retrospective cancellation of registration for previous years prior to their effective date. The Tribunal examined the registration history, the show cause notices issued under the post-amendment regime, and coordinate-bench precedents addressing identical facts and legal issues. The Tribunal applied the principle that a statute provision that creates a new ground for cancellation or a new procedural code (here, Section 12AB(4) as amended by Finance Act, 2022) operates prospectively from its effective date unless the statute clearly indicates retrospective effect. The Tribunal also considered authorities and administrative clarifications holding that the concept of "specified violation" and consequent withdrawal of registration under the amended provision are operative only from the date specified by the statute and related circulars, and that invocation of the amended provision to cancel registration with retrospective effect for years prior to AY 2023-24 is not permissible. The Tribunal further found that the show cause notices and the impugned order relied upon a legal regime not in force for the years in question, rendering the proceedings founded on those notices vitiated.

Conclusion: The retrospective cancellation of registration under Section 12AB(4) for years prior to the provision's effective operation is not sustainable; the impugned order cancelling the Society's registration retrospectively is quashed and the registration is restored. The appeal is allowed in favour of the assessee.

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