TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 491
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.... 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 26.10.2020 by the CIT(E), Chandigarh. Subseque....
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....ase. 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 assessment proceedings in this case was completed during FY 2021-22. As such, the 2nd proviso to section 143....
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.... 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) Gurgaon relied sub clause (ii) of Section 12AB(4) and held that PCIT, after giving reasonable opportunity of being he....
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.... 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 be given such retrospective effect. Ld. Counsel also submitted that even otherwise there is no specific/implied power given u....
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....eard 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 Commissioner or Principal Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportuni....
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.... 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 application is made under sub-clause (vi) of the said clause, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the ....
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....ng 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 Unique Registration Number (URN) shall be deemed to have never been granted or issued. (7) In case of an application made under sub-clause (vi) of clause (ac) of sub-section (1) of 4[section 12A as it stood immediately before its amendment vide the Finance Act, 2023,] during previous year beginning on 1st day of April, 2021, the provisiona....
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.... 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 Board of Direct Taxes number S.O.880(E), dated the 14th September, 2001, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub section (ii), dated the 14th September, 2001, except as respects things done or omitted to be done before such supersession, the Central Board of Direct Taxes hereby - SCHEDULE S. No. Designation Headquarters Territorial Area Cases or classes of cases (1) (2) (3) (4) (5) 1. Commissioner of Income-tax....
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....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 substituting the fifteenth proviso of the said clause with respect to fund or institution trust or institution or any university or other educational institution or any hospital or other medical institution referred under sub-clauses (iv), (v), (vi), (via) of this clause and which have been approved or provisionally approved under the second proviso to the said clause. These amendments are effective from 1st April, 2022. In addition to the specified violations referred above, the power of cancellation has also been granted under sub-rule (5) of rule 17A....
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....digarh 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, the clause (a) vested powers with Commissioners of Income-tax (Exemptions), for class or class of cases pertaining to section 10, section 11, section 12, section 13A and section 13B of the Act and clause (b), to issue orders in writing for the exercise of 'their' powers and perform all 'their' functions by Additional Commissioners of Incometax or Joint Commissioners of Income-tax and Tax Recovery Officers who are subordinate to them and that signifies that again this delegation of powers by CIT(E), Chandigarh could have been qua officers subordinate to CIT(E)....
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.... 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), Chandigarh. Thus, the assumption of jurisdiction on the basis of the order dated 26.10.2020 of CIT(E), Chandigarh is completely illegal and that makes the whole exercise of ld. PCIT passing the impugned order liable to be quashed. 16. Furthermore, if examine the legality of the procedure followed by ld.PCIT, Gurgaon to pass order u/s. 12AB(4), by recourse to exercise of powers by virtue of clause (a) of sub-section (4) of section 12AB, it comes up that ld.PCIT, Gurgaon admits that a 'proposal' for cancellation of the registration of the assessee trust granted u/s. 12AA o....
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.... 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 accordance with law. As what comes up further is that, if at all, PCIT, Gurgaon was acting under clause (a) to Section 12AB(4), then, before issuing the notice dated 08.09.2022, itself the ld. PCIT, Gurgaon should have first formed his opinion that the assessee had committed one or more of a 'specified violation'. However, as we go through the relevant part of the impugned order we find that the ld.PCIT has not mentioned as to which amongst the various specified violations mentioned in Explanation attached to subsection (4) of section 12AB were attracted so as to show cause the ....
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.... 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 Realbuild Pvt. Ltd. And M/s Radhey Krishna Infratech Pvt. Ltd." 17.4 Then in para 4.1.2 sub-clause (d), the ld. PCIT mentions of the earlier letter dated 08.09.2022 that: "d) Further, vide this office letter dated 08.09.2022, the assessee was requested to furnish details of capital and revenue expenditure incurred for various assessment years. In response, the assessee only submitted copy of Form 10B which is not supported with the details of capital expenditure and copy of accounts and documentary evidence. Further, no activity was specified for which accumulated funds were utilized." 18. Thus it appears that by this notice dated 1....
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.....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 further in paras 18 to 21 as under:- "18. We also observe that as per Sec. 120(6) of the Act, the CBDT by its Notification No. 52/2014 and 53/2014 dated 22.10.2014 has given power to CIT(Exemption) Jaipur for the State of Rajasthan for all cases of persons in the territorial area specified in column (4) claiming exemption under clauses (21), (22), (22A), (22B), (23), (23A), (23AAA), (23B), (23C), (23F), (23FA), (24), (46) and (47) of section 10, section 11, section 12, section 13A and section 13B of the Act and assessed or assessable by an Income-tax authority at serial numbers 131 to 140 specified in the notification of Government of India bearing number S.O.2752 dated t....
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....icers 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 dissenting note" from officer of equal rank who has to agree to proposed transfer would not constitute agreement, envisaged u/s. 123(2)(a)--Assessee's petition allowed." 21. It was also been brought to our notice that the AR had inspected the records of the case but there was no agreement between both the CIT's regarding initiation of proceedings u/s. 12A of the Act. The entire communication on record is with regard to limited purpose of Co- Ordinate assessments only. Even the Instruction No. F.No.286/88/2008IT(Inv-II) dated 17.09.2008 has relied upon by the Revenue also relates to "search assessment" and was not with regard to proceedings u/s. 12A or other proceedings. Even no agreement for init....
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....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, it is not even the case made out in the show cause notice that the agreement as contemplated by the first part of clause (a) of sub-section (2) of section 127 exists. The existence of such agreement between two jurisdictional Commissioners is a condition precedent for passing the order of transfer. Except for the request which came from the investigation office, Chennai of transferring the case, 38 ITA 688/JP/2019_ M/s Wholesale Cloth Merchant Association Vs Pr.CIT there is no reference whatsoever to any such agreement. Clause (b) of subsection (2) of section 127 provides for consequences when there is no such agreement. When the jurisdiction to pass an order of transfer under clause (a) of sub-section (2) of Section 127 can be exer....
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.... 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, it ceases to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons is not expiated. Non- communication of the reasons in the order passed under s. 127(1) is a serious infirmity in the order for which the same is invalid.--Kashiram Aggarwalla vs. Union of India (1965) 56 ITR 14 (SC) : TC69R.660 and S. Narayanappa vs. CIT (1972) 86 ITR 741 (All) : TC51R.651 distinguished; Sunanda Rani Jain vs. Union of India 1975 CTR (Del) 135 : (1975) 99 ITR 391 (Del) : TC69R.693 overruled; Judgment and order dt. 12th Sept., 1974, of the Andhra Pradesh High Court in Writ Appeal No. 626 of 1974 set aside. The Hon'ble Supreme Court in the case of Noorul Islam Educational Trust vs. CIT AND Ors (2016) 388 ITR 0489 ....