TaxTMI 
TaxTMI 
2024 (1) TMI 491
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....d order that the society has been created for charitable purposes especially to promote the cause of education specially Commercial and Industrial education by establishing school and colleges etc. Further, the assessee trust is not registered u/s. 80G(5)(vi) of the Act. 2.1 A search and seizure operation u/s. 132 of the Act was carried out on 19.02.2020 at various entities of Dev Wine Group including the assessee trust and as a part of this search, its key trustee/members and other related persons were also covered. During the course of search and post search proceedings, various incriminating documents/evidences regarding diversion of funds of M/s Aggarwal Vidya Pracharni Sabha to other entities controlled and managed by Sh. Devender Kumar Gupta were allegedly found and seized. It is also alleged by Revenue that funds of the assessee trust was misappropriated by Sh. Devender Kumar Gupta for his personal benefit. Consequent to the search and seizure action under section 132(1) of the Act, the case of "M/s Aggarwal Vidya Pracharni Sabha" was centralized with the ACIT/DCIT, Central Circle-2, Faridabad vide order F. No. CIT(E)/CHD/Tech/2019- 20/133 passed u/s. 127 of the Act dated....
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....on on total non applicability of subject provision of sec. 12AB(4) to instant case. 5. That the appellant craves leave to add/ alter any/all grounds of appeal before or at the time of hearing of the appeal. 3.1 Assessee has also raised following additional ground of appeal: "That impugned order passed by PCIT-Central Gurgaon u/s. 12AB(4) dated 29.03.2023 is void ab initio and is jurisdictionally flawed as said PCIT (Central) did not have valid jurisdiction under 1961 Act, to pass subject registration cancellation order, which power is only available with concerned CIT(Exemption) only here CIT-Exemption (Chandigarh)" 4. Heard and perused the record. The Ld. AR has argued on three legal issues and we consider it appropriate to deal with the same at first instance. The first ground contended is that the transfer of case u/s. 127 of the Act was only with regard to the assessments and not for the purpose of cancellation of registration. 4.1. Secondly, that reference for cancelling the registration granted u/s. 12AA could only be made during the pendency of assessment proceedings w.e.f. 01.04.2022. However, the basic fact of this case was ignored that assessmen....
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....as well as proposal of the AO, it was 'noticed' that the assessee trust has committed one or more specified violation. Thereafter, information was called for, from the assessee trust vide letter dated 08.09.2022. Thus Ld. PCIT(Central) Gurgaon concluded that as such, the contention of the assessee trust that the information was called for as per clause (b)of section 12AB, on reference of AO, is totally based upon the surmise and conjecture and is without any basis and the Ld. PCIT(Central) Gurgaon had exercised powers under clause (a) of section 12AB. Therefore, Ld. PCIT(Central) Gurgaon, held it had jurisdiction to proceed further. 6.1 As far as the contention by the assessee trust was concerned that jurisdiction cannot be assumed by relying/analyzing assessment records for previous years which was not the mandate of Finance Act 2022. The Ld. PCIT(Central) Gurgaon observed that at first, it can be seen that in the section 12AB(4) the word any previous year has been written meaning thereby specified violation committed by the assessee trust during any previous year which may be only one previous year or may be more than one previous year. 6.2 Further, Ld. PCIT(Central) Gurgao....
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....ch is concerned CIT(E) Chandigarh only and not PClT (Central) Gurgaon. 7.2 It was further submitted that it is settled law by Hon'ble Supreme Court that presumption is against retrospectivity and 367 ITR 466 Vatika Township case was relied. 7.3 It was contended that concept of "specified violation" and withdrawal of registration as "substituted' was introduced vide Finance Act 2022 and as per explanatory CBDT circular 23/2022 dated 15.11.2022 para 9.3.3, the same is applicable from 1.04.2022 and has to be only applicable from FY 22-23 and AY 23-24 and not prior to that so admittedly without any specified violation being there after 1.04.2022, entire impugned proceedings u/s. 12AB cancelling registration w.e.f 1.4.2014 is totally unlawful and ultra vires to sec. 12AB of 1961 Act. 7.4 It was submitted that when impugned action is taken u/s. 12AB (4) made effective from 1.04.2022 by legislature as per explanatory CBDT circular then invoking specified violation u/s. 12AB(4) before 1.04.2022 from 1.04.2014 for alleged violation much prior to 1.04.2022 is itself against the clear legislative intent. He submitted that registration cancellation being draconian/punitive act cannot ....
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....ief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,- (a) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Principal Director General or Director General or Principal Chief Commissioner or Chief C....
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....(i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; (b) where the application is made under sub-clause (ii) or sub-clause (iii) or subclause (iv) or sub-clause (v) of the said clause,- (i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about- (A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; and (ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A), and compliance of the requirements under item (B), of sub-clause (i),- (A) pass an order in writing registering the trust or institution for a period of five years; (B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its registration after affording a reasonable opportunity of being heard; (c) where the....
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....ioner may, by an order in writing, after affording a reasonable opportunity of being heard, cancel the registration of such trust or institution.". Rule 17A "(5) On receipt of an application in Form No. 10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting registration under clause (a), or clause (c), of sub-section (1) of section 12AB read with sub-section (3) of the said section in Form No. 10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (i) of the sub-rule (1). (6) If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub-rule (1) or (2) or by not complying with the requirements of sub-rule (3) or (4), the Principal Commissioner or Commissioner, as referred to in subrule (5), after giving an opportunity of being heard, may cancel the registration in Form No. 10AC and Unique Registration Number (URN), issued under sub-rule (5), and such registration or such Uniqu....
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....I, the Commissioner of Income Tax(Exemptions), Chandigarh hereby transfer the following case(s), particulars of which are mentioned hereunder in Columns (2) and (3) from the Assessing Officer mentioned in Column (4) therein, to the of the Assessing Officer mentioned in Column (5) - SCHEDULE Sr. No. Name and Address of the Assessee PAN From To (1) (2) (3) (4) (5) 1. M/s Aggarwal vidhya Pracharni Sabha (Aggarwal College, Ballabhgarh) AABTA3409Q Circle-2(E), Chandigarh DCIT, Central Circle-2, Faridabad DLC-CC-136-4 This order shall take effect from 26.10.2020." 12. We also consider it appropriate to reproduce the relevant part of the Notification dated 22.10.2014 providing for the territorial jurisdiction of CIT(E) in furtherance of powers given to the Board u/s. 120 (1) and (2) of the Act, made available at pages 2 to 5 of the paper book:- "NOTIFICATION New Delhi, the 22nd October, 2014 (Income-Tax) S.O. 2754 (E).-In exercise of the powers conferred by sub-section (1) and (2) of section 120 of the Income-Tax Act, 1961 (43 of 1961) and in supersession of the notification of the Government of India, Central B....
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....Ld. AR about the circular no 11 of 2022 dated 3rd June 2022, giving clarification regarding Form no 10 AC till the date of this circular and it will be relevant to reproduce para 1 of this circular here-below; "Circular No. 11 of 2022 F. No.370142/4/2021-TPL Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes (TPL Division) Dated: 3rd June, 2022 Sub: Clarification regarding Form No 10AC issued till the date of this Circular - reg. Finance Act, 2022 has inserted sub-section (4) in section 12AB of the Income-tax Act, 1961 (the Act) allowing the Principal Commissioner or Commissioner of Income-tax to examine if there is any "specified violation" by the trust or institution registered or provisionally registered under the relevant clauses of sub-section (1) of section 12AB or subsection (1) of section 12AA. Subsequent to examination by the Principal Commissioner or Commissioner of Incometax, an order is required to be passed for either cancellation of the registration or refusal to cancel the registration. Similar provisions have also been introduced in clause (23C) of section 10 of the Act by substitutin....
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....ssioner or Chief Commissioner or Principal Commissioner or Commissioner. Thus when we consider the definition of "Assessing officer" u/s. 2(7A) of the Act, certainly PCIT, Gurgaon, who has passed the impugned order is not an 'assessing officer', and order passed dated 26.10.2020, under sub-clause (a) to sub-section (2) of section 127 of the Act only referred to transfer of jurisdiction of 'assessing officer' subordinate to CIT(E) Chandigarh to DCIT, Central Circle-2, Faridabad DLC-CC- 136-4 as assessing officer and not original jurisdiction of CIT(E) Chandigarh with regard to the subject matter as stands vested by order of CBDT dated 22/10/2014. 14.1 Further, what is material is that by the Notification dated 22.10.2014 the Board, exercising powers under sub-section (1) and sub-section (2) of section 120 vested powers to perform all the functions in respect of class of cases referred in the column No.5 of the Schedule of this Notification and had created a specific jurisdiction on territorial basis in regard to the provisions generally dealing with claim of exemptions u/s. s 10,11,12, 13A and section 13B of the Act. 14.2 Thus as we refer to the Notification dated 22.10.2014, ....
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....uld be transferred to other authorities as per this Notification. The query was left unsatisfied and no other Notification or Circular was brought to our notice. 15. Thus, at one end, in the absence of any specific reference of section 12AB in the Notification dated 22.10.2014 or there being subsequent authorisation by any Circular or Notification of the Board, we conclude that at the time of passing the order u/s. 127 of the Act on 26.10.2020, CIT(E), Chandigarh did not have powers to as such transfer his jurisdiction u/s. 127(2)(a) of the Act, for the purpose of Section 12AB has come into effect from 01.04.2021. Accordingly, under no circumstance while passing order u/s. 127 of the Act on 26.10.2020, CIT(E), Chandigarh could have transferred his powers u/s. 12AB of the Act to any other authority. 15.1 On the other hand, ld. PCIT, Gurgaon by virtue of the Explanation defining the scope of 'case' for the purpose of section 127, did not have power vested in him to cancel registration u/s. 12AB(4). The 'case' refers to assessment initiated as a consequence of search or consequential proceedings to such assessments only and cannot be extended to special powers of ld. CIT(E), Cha....
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....e assessment by said assessing officer was completed in September, 2021, thus, there was no occasion for concerned AO to invoke 'reference' powers under second proviso to sub-section (3) of section 143 of the Act. It appears that when confronted with the situation that the second proviso of section 143(3) having come into effect from 01.04.2022 is not applicable to the assessment initiated consequent to search and seizure operations u/s. 132 of the Act carried out on 19.02.2020, the ld. PCIT, Gurgaon improved his case by claiming that he had exercised his powers by virtue of clause (a) of sub-section (4) of section 12AB, which entitles a Principal Commissioner or Commissioner to take cognizance on the basis of a 'specified violation' coming into his notice during any previous year. At the cost of repetition, we observe that reference in section 12AB is not to PCIT or Commissioner to whom the said Assessing Officer would be subordinate, but, the CIT(E) who has been given special power for grant and cancellation of the registration as original jurisdiction. 17.1 Furthermore, here in this case, the exercise of power u/s. 12AB(4) of the Act seems to also not have been done in accord....
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....f the Act. Details of information called for the relevant period i.e. AY 2014-15 to 2020-21 is as under: * Copy of registration u/s. 12AA/12AB(1) of the Act. * Coy of memorandum of association containing the objects for which the Aggarwal Vidya Pracharni Sabha was set up along with copy of registration with the relevant authorities. * Details of capital expenditure and revenue expenditure incurred for various A.Ys. as mentioned above. * Copies of Form 10 and Form 10B in respect of funds accumulated u/s. 11(1)(a), 11(2) of the Act and year wise utilization of the same. * Specify the activities of which the accumulated funds have been utilized. * Copy of account of the Aggarwal Vidya Pracharni Sabha with M/s Tirupati Realbuild Pvt. Ltd. And M/s Radhey Krishna Infratech Pvt. Ltd. For the above AYs explaining the nature and purpose of transactions undertaken with the said entities including advance given for the purpose of construction along with supporting evidences in order to substantiate the genuineness of the same. * Relationship of the Aggarwal Vidya Pracharni Sabha and its members with the directors of M/s Tirupati R....
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....t has been completed, the purpose of transfer u/s. 127A has also been completed. Although No notices regarding the transfer of the cases u/s. 127 have been sent to the assessee for the purpose of Co-ordinate assessment and the purpose of transfer was only Co-Ordinate Assessment as clearly mentioned in the transfer letter 19.08.2016. The assessment was completed u/s. 148 r.w.s 143(3) 19.12.2018 and the proposal was sent to the Pr. CIT(C ) which has been received on 31.12.2018 in the office of Pr. CIT(C) on 23.01.2019 after a lapse of more than one month. 15. Even otherwise, in the said notification, there is no mention where CIT(E) can transfer to other CIT or Pr.CIT. The said notification of CBDT has authorized the CIT(E) to issue order in writing for the exercise of the powers and functions by the Addl.CIT or JCT or TRO who are "subordinate" to them and has authorised the Addl.CIT to issue order in writing for the exercise of the powers by the Assessing Officer who are the subordinate to them. In section 124 of the Act, the jurisdiction of Assessing Officer has been given and not 'Jurisdiction of Commissioner'." 20.1 The Jaipur Bench has dealt with this issue f....
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.... Exemption cases or 12A registration a Separate Commissioner of Income Tax has been Authorized for whole of Rajasthan by the CBDT by its Notification dated 22.10.2014. In support of the above contention, the ld AR has relied on the decision in the case of Dilip Tanaji Kashid vs. M.I. Karmakar PR. CIT& ANR. (2018) 304 CTR 0436 (Bom) wherein It has been held: "Transfer of jurisdiction--Power of competent officers-- Centralization of case--Dissenting note--Assessee was issued notice enshrining proposal for transfer of his case from Kolhapur to Mumbai, so as to centralise cases relating to D.Y. Patil Group--Assessee objected that such notice did not referred to any agreement being reached by officers of equal rank at Mumbai and Kolhapur--These objections were however overruled and assessee's case was transferred--High Court quashed purported transfer u/s. 127--Held, "Centralisation Committee" which took decision for transfer of jurisdiction, is not authority envisaged u/s. 127(2)-- Counter-affidavit filed on behalf of Revenue does not disclose that there was any agreement between authorities of equal rank,as a pre-condition for invoking powers u/s. 127-- "Absence of dissen....
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....b-section (2) of section 127 provides for consequences when there was no such agreement--When jurisdiction to pass order of transfer under clause (a) of subsection (2) of Section 127 could be exercised only when there was such agreement, fact that such agreement exists ought to had been stated in show cause notice as same was jurisdictional fact- -It was on basis of written document that finding was recorded that there was agreement between Jurisdictional Commissioners of Ranchi and Delhi--Even going by case made out by revenue, no such agreement was spelt out. 8. The Apex Court has categorically held that the absence of disagreement will not be tantamount to an agreement as visualized under section 127(2)(a) which contemplates positive state of mind of the two jurisdictional Principal Commissioners of Income Tax. The agreement contemplated by clause (a) of subsection (2) of section 12 7 may not be a drawn up agreement. What is necessary is that there has to be an agreement which will involve positive state of mind of the two jurisdictional Principal Commissioners. Both of them must consent to the transfer after application of mind. 9. In the present case....
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.... "The CBDT sent a notice to the appellants under s. 127 proposing to transfer their case files "for facility of investigation" from the respective ITO at Nellore to the ITO, B Ward, Special Circle II, Hyderabad. By this notice they were also asked to submit in writing if they had any objection to the proposed transfer within 15 days of receipt of the notice. The appellants made their representation objecting to the transfer and on 26th July, 1973, the Central Board passed the impugned order transferring the cases from Nellore to Hyderabad. The short question that arises for consideration is whether failure to record the reasons in the order which was communicated to the appellants is violative of the principles of natural justice for which the order should be held to be invalid. Held : The requirement of recording reasons under s. 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee. When law requires reasons to be recorded in a particular order affecting prejudicially the interests of any person, who can challenge the order in Court....