TaxTMI 
TaxTMI 
TaxTMI 
2024 (3) TMI 876
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....order passed deserves to be quashed. 3. The learned PCIT ought to have appreciated that the provisions of section 12AB[4] of the Act does not empower him to either examine "specified violations" for the assessment years covered by registration granted u/s. 12A of the Act or cancel such registration granted u/s. 12A of the Act for such assessment years and that the power to examine and cancel registration u/s. 12AB[4] was limited to registration granted u/s. 12AA[1][b]or u/s. 12AB[1]of the Act and therefore, the impugned order passed cancelling registration u/s. 12A of the Act for the assessment year 2021-22 and as a further consequence thereof, cancelling the registration granted u/s. 12AB of the Act for the subsequent years is bad in law and the same requires to be quashed. 3.1 Without prejudice to the above, the impugned order passed cancelling the registration of the appellant u/s 12AB[1] of the Act obtained by the appellant from the AY 2022-23 to the AY 2026-27 is also bad in law in as much as there are no specified violations that are noticed or found by the learned PCIT for the aforesaid assessment years 2022-23 to 2026-27 under the facts and in the circumstances of the a....
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....tions being run by Yenepoya [Deemed to be University] and not the appellant trust and hence, the entire proceedings taken against the appellant trust is opposed to law and facts of the appellant's case. 8. Without prejudice to the above, the learned PCIT failed to appreciate that there was no case to hold that the appellant had collected cash from students in as much as the appellant had only provided concession to its students under the facts and in the circumstances of the appellant's case. 8.1 The learned PCIT ought to have appreciated that the cash was collected from students allegedly noticed at the time of search were actually cash collected by two of the employees of Yenopoya University viz. Mr Mohammed Bava and Mr Umar Farooq, without the knowledge of the management in lieu of the concession granted by them and thus, it cannot be regarded that the appellant had made cash collection from students under the facts and in the circumstances of the appellant's case. 8.2 The learned PCIT failed to appreciate that the aforesaid 2 employees viz. Mr. Mohammed Bava and Mr, Umar Farooq, have since been terminated from services and a portion of the amount collected by ....
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....appellant was not charitable in nature and thus, there was no specified violation as per Explanation [e] to Section 12AB[4] of the Act under the facts and in the circumstances of the appellant's case. 12. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs." 3. The assessee has raised following additional grounds of appeal: 1. Without prejudice to the grounds raised in the original grounds-of appeal, the impugned order passed u/s. 12AB(4) of the Act by the learned Pr. CIT, Central, Bengaluru, dated 21/06/2023 is bad in Law and void ab-initio in as much as the learned Pr. CIT, Central, Bengaluru, has not been vested with the power to discharge the function of the Income tax authority for purposes of section 12AB(4) of the Act considering the Notification No. 52 & 53 dated 22/10/2014 under the facts and in the circumstances of the appellant's case. 2. Without prejudice to the above, the cancellation of registration u/....
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....uiring fresh registration with effect from 01/04/2021, the assessee trust, applied for and was granted recognition u/s 12AB by the learned CIT, CPC on 23/09/2021 for the assessment years 2022-23 to 2026-27. Thus, the assessee trust was registered u/s. 12A of the Act upto and inclusive of the assessment years 2021-22 and thereafter, the assessee trust had secured the registration u/s. 12AB of the Act for the assessment years 2022-23 to 2026-27. 3.4 He submitted that there was a search conducted in the premises of the assessee trust on 17/02/2021. During the course of the said search, there was no incriminating material in the form of any undisclosed assets or undisclosed income of the assessee trust that was either found or seized, for there existed none. However, during the course of search proceedings certain documents were seized which is suspected to contain details of the alleged cash collection for admissions of students to "Yenepoya Dental College" and "Yenepoya Ayurveda Medical College". In course of search, certain employees of the assessee trust as well as Managing Trustee of the assessee trust were examined and their statements were recorded from time to time with regard....
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.... numbers 21 to 34 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014. The said notification bearing S.O. 2752 dated 22nd October, 2014 is a notification issued u/s. 120(1) & (2) of the Act under which the Pr. Commissioner or Commissioner of Income tax are given jurisdiction over cases based on territorial area, class of persons and class of cases. Sl. No. 21 to 34 of the said notification relates to state of Karnataka and includes all cases and classes of persons except cases and classes of persons who are claiming exemption u/s. 11 of the Act and other similar provisions. 3.8 He submitted that the provisions of section 124 of the Act are relevant, which confers jurisdiction on the Assessing Officers by virtue of the directions issued u/s. 120(1) or 120(2) of the Act. It states that the Assessing Officer shall be vested with the jurisdiction over any area, then such Assessing Officer shall have jurisdiction over any person who carries on business or profession within that area and in respect of any other person who is residing within that area. It has to be noted that under section 124 of the Act, the Jurisdiction of Assessin....
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....ized the Add. CIT to issue order in writing for the exercise of the powers by the Assessing Officer who are subordinate to him. 3.12. Hence, he submitted that the registration u / s 12A cannot be withdrawn by the learned Pr. CIT (Central), Bangalore, who is not the income tax authority empowered to grant the same in first place and therefore, the learned Pr. CIT (Central) has no power to cancel and withdraw the same. Thus, he submitted that the impugned order passed by him cancelling the registration is without jurisdiction and not sustainable in law. 4. We have heard the both the parties on admission of additional grounds. In our opinion, all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of adjudication of above ground. Accordingly, by placing reliance on the judgement of Hon'ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC) we inclined to admit the additional grounds for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and the action of the assessee is bonafide. 5. Facts of the issue are that the assessee trust was constituted under the Deed of declarati....
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....Kollarakodi Naringana Village, Deralakatte Post Mangalore 575 018 05 Yenepoya Pharmacy College & Research Centre Kollaakodi Naringana Village, Deralakatte Post Mangalore 575 018 06 Yenepoya Institute of Arts, Science Commerce and Management Balmatta road, Mangalore 575002 07 Yenepoya School of Allied Health Professional Mudipu Campus, Near Soorya Tech Park, Kayargoli, Kurnad Post, Bantwal taluk 574 153 08 Yenepoya Ayurveda Medical College Kollarakodi Naringana Village, Deralakatte Post Mangalore 575 018 09 Yenepoya Homeopathy Medical College Kollarakodi Naringana Village, Deralakatte Post Mangalore 575 018 10 Yenepoya Naturopathy & Yogic Science College Kollarakodi Naringana Village, Deralakatte Post Mangalore 575 018 5.2 Furthermore, as a result of the above arrangement, only the following educational institutions continue to be run and administered under the banner of M/s Islamic Academy of Education, the assessee before this Tribunal: SI No. Name of the Institute Address 01. Yenepoya Institute of Technology N.H.13, Thodar, Vidyanagar, Moodabidri, Mangaluru, Karnataka 574225 02. The Yenepoya College N.H.13, Thodar, Vidyanagar, Moodabidri, Mangaluru, Ka....
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....22, wherein the learned A.O. has made an addition of Rs. 1,31,85,000/- for the alleged violation of the provisions of section 13[1][c] of the Act. In the assessment order so passed, it has been held that the assessee had collected certain amounts in cash from students of BAMS & BDS courses, which has not been accounted in the regular books of accounts. It has been held that the said cash receipts from students were collected by the trustees and hence, constitutes benefit provided to the trustees that is hit by the provisions of section 13[1][c] of the Act. The following are the pertinent observations / findings of the learned A.O. in the assessment order passed:- [a] In course of search conducted, digital evidence was found in the computer operated by Mr. Umar Farook, Accounts Superintendent, YENOPOYA [DEEMED TO BE UNIVERSITY] along with hard copy of certain excel sheets containing the list of students admitted and the amounts collected from them and the same was seized and inventoried as A/BC01 /06; [b] In these the seized excel sheet, there were certain amounts recorded under the column 'concession', which actually represents the cash receipt for providing admissions ....
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....ourse of the post search appraisal operations from the following persons:- [i] Affidavit of Mr. Mohammed Bava dated 26/02/2024 and letter containing the affidavit dated 24/03/2021 filed on 26/03/2021 before the Investigation Wing confessing to have collected cash in lieu of concession and misappropriating the same; [ii] Letter containing the affidavit of Mr. Umar Farookh dated 24/03/2021 filed on 26/03/2021 before the Investigation Wing confessing to have collected cash in lieu of concession and misappropriating the same; [iii] Statement of Preethi recorded on 05/07/2021 in which she has explained that the Whatsapp chats with Umar Farookh as relating to cash collected by agents; [iv] Statement recorded from Umar Farookh on 12/07/2021 in which he has explained that the cash was collected by the agents and it was not known to the management; [v] Statement recorded from the agents Tobin Joseph, Suja Mohammed and Alex Alexander who have all admitted to have collected cash from students instead of passing on the concession provided by the assessee. 5.12 However, the learned A.O. did not accept the truthful explanation tendered by Mr. Mohammed Farhad right from the date of sea....
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..... Mr. Mohammed Bava and Mr. Umar Farooq had collected cash in lieu of passing on the concession to the students and had misappropriated the cash so collected, which came to the knowledge of the assessee only during the course of search conducted. The assessee trust submitted that action was taken against the said employees, who were removed from service. In short, there was no violation committed by the assessee. 5.17 After considering the objections raised by the assessee, the learned PCIT, Central Circle, Bangalore has passed the impugned order dated 21/06/2023 cancelling the registration of the assessee as granted under section 12A/12AB of the Act, from the previous year 2020-21 relevant to the assessment year 2021-22 onwards, holding that there were specified violations^ as per Explanation [a], [b] and [e] of the Act. 6. First, we will consider the additional ground Nos.1 & 2 along with main ground Nos.2, 3 & 4. 6.1 The ld. A.R. submitted that in this case, registration u/s 12A of the Act was granted vide Certificate dated 4.6.1992 and registration u/s 12AB of the Act was granted vide Certificate dated 23.9.2021. According to the ld. A.R., the assessee was granted registrati....
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..../04/2021, subsection [5] to Section 12AA of the Act was inserted stating that "Nothing contained in this section shall apply on or after 01/04/2021". In other words, the power to cancel registration granted u/s. 12A and the registration granted u/s. 12AA[1][4] of the Act can no longer be done in terms of section 12AA[3] of the Act after 01/04/2021. 6.5 He submitted that several amendments were carried out by the Finance Act, 2021 to the provisions relating to the assessment of charitable institutions. Firstly, section 12A was amended by inserting clause [ac] to sub-section 1 which required all trusts that were enjoying registration under the erstwhile provisions of section 12A or under section 12AA of the Act to compulsorily apply for a fresh registration u/s 12AB[1] of the Act. Secondly, the procedure for grant of registration was specified under the new provisions of section 12AB of the Act. The said provisions of Section 12AB contained sub-section [4] whereunder the power to cancel registration granted was conferred. 6.6 He drew our attention to the provisions of Section 12AB[4] of the Act, as introduced by the Finance Act, 2021 with effect from 01 /04/2021, which reads as und....
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....e and cancel registration u/s. 12AB [4] of the Act is limited to registration granted u/s.12AA [1] and 12AB [1] of the Act. 6.11 Furthermore, he submitted that when the aforesaid provisions of section 12AB[4] of the Act are viewed in light of the erstwhile provisions of section 12AA[3] of the Act, it is clear that there was a power to cancel registration u/s. 12A in the provisions contained in 12AA [3], which is absent in the present provisions of section 12AB [4] of the Act. 6.12 He submitted that in as much as the registration secured by the assessee u/s 12A of the Act was in force for the AY 2021-22 it is submitted that the impugned order passed cancelling registration u/s. 12A of the Act for the assessment year 2021-22 and as a result thereof cancelling the registration granted u/s. 12AB of the Act for the subsequent years is bad in law being ultra vires the provisions of Section 12AB [4] of the Act. Off this ground, the impugned order passed requires to be quashed. It is prayed accordingly. 7. The ld. D.R. relied on the order of lower authorities. 8. We have heard the rival submissions and perused the materials available on record. The main argument of the ld. A.R. is that....
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....s have taken place; iii pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations. iv Forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing officer and such trust or institution. Explanation - For the purposes of this sub-section, the following shall mean "specified violation",-- a) Where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or b) The trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or c) The trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public; or d) The trust or institution established for charitable purpose crea....
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....issioner to cancel the registration in specified cases, Section 12AB (5) corresponds to Section 12AA (4) and the cancellation powers continue to remain similar except the fact that under Section 12AB(1)(b)(ii), the CIT may deny renewal of registration and also initiate cancellation proceedings at the time of renewal proceedings. 8.1.5 The new provision has provided yet another power of cancellation under Section 12AB(l)(b)(ii)(B) which can be exercised during the process of renewal under Section 12AB. The new provisions also provide powers of cancellation under Section 12AB(4) and (5), which are analogous powers prior to enactment of Finance Act, 2020. 8.1.6. The additional power of cancellation during the renewal process empowers the CIT to invoke the powers available under Section 12AB(4)and (5) at the time of renewal also; In other words, there is no power for any arbitrary or ex parte order at the time of renewal. However, the CIT may additionally initiate cancellation proceedings. 8.1.7 The Finance Act, 2022 substituted sub-sections (4} and (5) of the Section 12AB w.e.f. 1st April, 2022. This provides provisions regarding cancellation of the registration granted to a trust ....
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....ssee in any of these assessment years is to be considered independently and not the violation committed in assessment year 2021-22 for cancelling the registration granted u/s 12AB of the Act for the assessment year 2022-23 to 2026-27. As such, we make it clear that the ld. PCIT at liberty to pass the fresh order of cancellation independently u/s 12AB(4)(ii) of the Act for these assessment years i.e. 2022-23 to 2026-27, if so advised. Accordingly, we allow this ground taken by the assessee. Ordered accordingly. 8.4. Even otherwise, we are of the opinion that this issue of cancellation of registration for the AY 2021-22 is covered by our earlier decision in the case of Amala Jyothi Vidya Kendra Trust in ITA No.458/Bang/2023 dated 1.12.2023, wherein held as under: "6. We have heard the rival submissions and perused the materials available on record. The main contention of the ld. A.R. is that the ld. PCIT has cancelled the registration granted to the assessee w.e.f. the previous year i.e. 2020-21 relevant to assessment year 2021-22 by applying the provisions as stood on 12.5.2023, which cannot be applied for the violations of the provisions of section 12AA or 12AB of the Act. Accor....
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....ommissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution after affording a reasonable opportunity of being heard." 6.2 This section has been amended by Finance Act, 2022 w.e.f. 1.4.2022 as follows: 12AB(4): Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of subsection (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,-- a) The Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or b) The Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or c) Such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year; The Principal Commissio....
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.... per section 12AB(4) of the Act as applicable to assessment year 2021- 22, the ld. PCIT if he is satisfied that activities of the Trust or institution are not genuine or not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution after affording reasonable opportunity of being heard. As per section 12AB(5) of the Act, when trust or institution complied wholly or in part of the income of such trust or institution in violation of section 13(1) of the Act or if they complied with any other law, for the time being in force by the trust or institution as are material for the purpose of achieving its objectives as mentioned in section 12AB(1)(b)(ii)(B) of the Act. However, in the present case, the ld. PCIT invoked the provisions of section 12AB(4)(a)(ii) of the Act as stood in the assessment year 2022-23. The objection of the ld. A.R. is that for the cancellation of registration for the assessment year 2021-22, he could not invoke the provisions of section 12AB(4)(ii) of the Act which is introduced by Finance Act, 2022 w.e.f. 1.4.2022 and applicable for the....
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....f this court in CIT v. Isthmian Steamship Lines, where it was held as follows: 'It will be observed that we are here concerned with two datum lines: (1) the 1st of April, 1940, when the Act came into force, and (2) the 1st of April, 1939, which is the date mentioned in the amended proviso. The first question to be answered is whether these dates are to apply to the accounting year or the year of assessment. They must be held to apply to the assessment year, because in income-tax matters the law to be applied is the law in force in the assessment year unless otherwise stated or implied. The first datum line therefore, affected only the assessment year of 1940-41, because the amendment did not come into force till the 1st of April, 1940. That means that the old law applied to every assessment year up to and including the assessment year 1939-40.' This decision is authority for the proposition that though the subject of the charge is the income of the previous year, the law to be applied is that in force in the assessment year, unless otherwise stated or implied. The facts of the said decision are different and distinguishable and the High Court was clearly in error in applying th....
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....nded provisions to operate retrospectively, the cancellation cannot operate from a past date. 21 On the third question of the effective date of operation of the cancellation order, it was held that the cancellation will take effect only from the date of the order/notice of cancellation of registration. Since the act of cancellation of registration has serious civil consequences and the amended provision is held to have only a prospective effect the effect of cancellation, in' the event the pending tax appeal is decided in favour of the Revenue, will operate only from the date of the cancellation order, that is December 30, 2010. In other words, the exemption cannot be denied to the petitioner for and up to the assessment year 2010-11 on the sole ground of cancellation of the certificate of registration." 6.9 In this case, the ld. PCIT has cancelled the registration under the new provisions of the Act i.e. 12AB(4)(ii) of the Act, which specifically provides that cancellation can be done for such previous year and all subsequent previous years, which makes it clear that the cancellation cannot be retrospective, therefore, in view of the above discussion, we are of the opinion....
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....oceedings for the assessment year 2021-22 taking a particular view, which had not yet reached finality due to the pending appellate proceedings, thereby transgressing the jurisdiction of the first appellate authority to render a factual findings on the issues raised in the assessment proceedings and therefore, the power to cancel registration u/s. 12AB [4] of the Act in terms of clause [a] thereof, would only be available where the assessment proceedings had not yet commenced or completed and not after the completion of the assessment; 12.1 He submitted that the learned PCIT has firstly held that the pendency of appellate proceedings, does not bar him from invoking the provisions of Section 12AB [4] of the Act since the CIT [A] is an independent authority and does not report to the PCIT and thus there is no transgression of the jurisdiction of the first appellate authority. 12.2 In this regard, he submitted that the withdrawal of recognition u/s 12A/12AB of the Act by the learned PCIT has far reaching consequences as the appellant will not be entitled to exemption u/s. 11 of the Act. It is worth mentioning here that the learned A.O. has allowed the exemption u/s. 11 of the Act in....
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....9;ble ITAT, which is final fact-finding authority in second appeal, if any. 12.5 Thus, he submitted that the parallel action taken for cancellation of the registration when a view has already been taken on the facts found is unwarranted at this stage and thus, the power so exercised to cancel the registration during the pendency of the appeal requires to be vacated. 12.6 Further, he submitted that the circumstances for the invocation of Section 12A [4] did not exist since the condition mentioned in Section 12AB [4][a] of the Act would apply only to such situations where the assessment proceedings had not yet commenced or completed. It was further contended that once the assessment proceedings had commenced and was pending, the power to cancel registration would be in terms of Section 12AB(4)(b) of the Act based on reference by the learned AO. However, the learned PCI has held that he only has to notice the occurrence of specified violations in terms of Clause[a] and there is no specific manner provided in the Act for noticing the same and that the source of the information was inconsequential. 12.7 The ld. A.R. has reproduced the relevant provisions of section 12AB[4] of the Act....
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.... documents forming part of the paper book were submitted and referred to: 8 No cash collection, only concession Sample letters for concession 407-412 Excel showing fees collected, concession provided 413-414 8.1 Misappropriation by employees in lieu of concession granted by mgmt. Initial Enquiry report 339-357 Final report - Enquiry 380-399 Course Fee recovery ledger 404-405 Bava recovery cheque 406 8.2 Termination of Bava and Farooq Suspension Order 377,379 Termination letters 400-403 8.3 Statement of Bava and Farooq has been retracted vide affidavits Affidavits 328-338 8.4 Assessments concluded in the case of Bava and Farooq Assessment orders AY 2020-21 & 2021-22 202-284 9 No specified violation as per 12AB explanation (a) - No utilization of income for the benefit of Mr. Farhad Assessment orders of Farhad - AY 2020-21 & AY 2021-22 285-293 10 No specified violation as per 12AB explanation (b) - cannot be income from business 11 No specified violation as per 12AB explanation (e) - higher fees does not imply activities is not charitable 15.1 He submitted that the learned PCIT has cancelled the registration on th....