TaxTMI 
TaxTMI 
2024 (8) TMI 1297
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....es Registration Act, XXI of 1860 on 18.09.1996. The society was registered under Section 12A of the Act by and under the Registration No. DIT/97-98/L327/97/114 dated 22.08.1997. It has also obtained the approval under Section 80G of the Act on 02.06.2008. Further that after insertion of Clause (ac) in Section 12(1) of the Act the registration of the society was renewed under Section 12A(1)(ac)(i) of the Act w.e.f Assessment Year 2022-23 to 2026-27 on 31.08.2021 and further approval was also granted w.e.f Assessment Year 2022-23 to 2026-27 on 31.08.2021. 3. The brief facts leading to the issue are that a search and seizure operation under Section 132 of the Act was conducted on 14.10.2020 in the case of Manoj Kumar Singh and his close associates and few transacting parties with the said Shri Manoj Kumar Singh. The school run by the appellant was also covered in that search. On 04.01.2021 by and under the order issued by the CIT(Exemption), Civic Center, New Delhi under Section 127(2) of the Act, the, appellant's case was transferred from Circle Exemption- 1(1) Delhi to the Central Circle 29, New Delhi for the purpose of coordinated investigation and meaningful assessment pursuant....
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....the Act. 6.1. The Ld. PCIT thereafter, on 16.08.2023 issued a show cause notice which was intimated by and under letter dated 22.08.2023 for cancellation of such registration under Section 12A r.w. Section 12AA and 12AB(4) of the Act for Financial year 2014-15 and subsequent years whereupon the appellant filed a reply dated 07.02.2024. A further show cause notice dated 02.03.2024 was issued by the Ld. PCIT-3 Delhi, in the proceeding for cancellation of registration under Section 12A r.w.s 12AA and 12AB(4) of the Act reply thereto made by appellant was furnished on 06.03.2024. A further show cause dated 15.03.2024 was issued by the PCIT and served upon the assessee whereupon reply was filed on 24.03.2024 by the appellant and finally the Ld. PCIT-3 cancelled the registration of the appellant from Assessment Year 2015-16 to 2021-22 with a further direction to this effect that even if the appellant firm found that specified violation is not in existence then also the consequential cancellation order would continue to operate independently by and under its order dated 31.03.2024 which is impugned before us. 7. The Ld. D.R. relied upon the order passed by the PCIT as challenged bef....
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....counted for in books of accounts of society and rather, diverted to Manoj Kumar Singh which is clear violation of provisions of sec 13(1)(c). (AY involved 2020-21 & 2021-22) (Pg 195- 200) * Unsecured loan entries taken by the society and subsequent conversion of unsecured loans into Corpus Donation, received from 5 different companies from year 2008 to 2013 and converted into corpus donation during FY 2016-17, however status of these companies as per MCA is "Strike Off Case Law relied upon CIT(Exemptions) Vs Batanagar Education and Research Trust (2021) SC 129 taxmann.com 30. (AY involved 2017-18) (Pg 200-208) * Unaccounted cash found from the premise of the school run by the society during search, which has been received as commission from the book vendor and uniform vendor of school (AY involved 2021-22) (Pg 208-211) Ground-wise findings of PCIT(Central) vide order u/s 12A r.w.s 12AA & 12AB(4): Gr. 2: Order passed without jurisdiction since jurisdiction exclusively vests in CIT(Exemption), Delhi (Pg 12 18) * Jurisdiction by PCIT (Central) has been assumed in view of CBDT letter dt. 19.01.2024 bearing F.No. 173/6/2024 ITA-I in respect of cancellati....
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.... are valid as long as jurisdiction exists. Gr.4. Retrospective withdrawal of registration w.e.f AY 2015-16 is in violation of provisions of the act and settled legal position (Pg 25 28) * Section 12AB was inserted w.ef. 01.04.2021, however, prior registrations u/s 12AA were also brought under the ambit of this section. * Wordings used in sec 12AB(4) "has noticed occurrence of one or more specified violations during any previous year" make legislative intent very clear about covering years prior to 01.04.2021 * Hon'ble ITAT, Delhi in Young Indian Vs CIT(Exemption) (ITA No.7751/Del/2017) has held that order of cancellation of registration even passed on subsequent date would take effect from the year when cause of action arose. In the present case, search was conducted on 14.10.2020 and on the basis of various incriminating evidences, assessment was completed for AY 2015 16 to AY 2021-22. Gr.5 Reliance on ex-parte material without confronting it to society and without providing opportunity to cross-examine various persons whose statements relied upon (Pg 31-36, 50-66, 145-154) Gr. 5.2 Reliance on retracted statements and various inadmissible....
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....s are yet to reach finality, being pending before CIT(A) is not acceptable as present proceedings are separate proceedings Noticing of specified violation may happen in the assessment proceedings or may be independent of it also. Gr. 6.1: Wrong allegation that society has diverted income by recording non-genuine expenses securing bogus bills, and thus applying property of the trust for other than charitable objects (Pg 66-93) * The assessee society diverted the income generated from the property held under society by booking bogus expenses (both revenue and capital) from AY 2015-16 to 2021-22 through Manoj Kumar Singh (de facto controlling and managing affairs of society) and his close associates Naveen Narang. Deepak Narang. Adhir Sachdeva and his trusted &key employee Devesh Singh. * Devesh Singh(employee of Singh & Associates, prop. Manoj Kumar Singh) in his statement on oath stated that bogus expenditure bills are arranged by Deepak Narang and he used to hand over the bills to Pancham Ray after collecting the same from Deepak Narang (Pg 67). * Deepak Narang in his statement accepted that bogus bills are arranged by him and the same is handed over t....
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....ooking bogus bills/expenses are without any credible evidence and independent enquiry by the Ld PCIT-3 The impugned order has based its finding entirely on the Assessment Orders which are under challenge in statutory appeals 34. In view of the submissions stated at Page No. 14 of the impugned order (@pg no. 18 of Appeal), it is evident that assumption of jurisdiction by Ld. PCIT, Central-3 is bad in law. It is reiterated that CBDT communication dated 19.01.2024 has no force of law as it is an internal communication of the department with no sanctity under Section 119 or Section 120 of the Act. The registration can be withdrawn/cancelled only by the 'Prescribed Authority' who has been empowered to grant the registration as held in several judicial pronouncements including the case title Pacific Academy of Higher Education and Research Society, Udaipur Vs PCIT (Central), Jaipur (@ para 6.7 @ page 126 of judgment compilation) It is squarely covered in cited judgment that the registration can be cancelled only by the 'prescribed authority' who has granted it. 35. The amended Section 12AB (4) of the Act, does not consider a violation of Section 13(1)(c)....
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....nciple of natural justice In view of the above, the Hon'ble Tribunal may be pleased to set aside the impugned order dated 31.03.2024 in full and the Appeal be allowed." 9. At the time of hearing of the instant appeal the Ld. Senior Counsel appearing for the assessee mainly raised his objections on the maintainability of the order issued by the Ld. PCIT dated 31.03.2024 cancelling the registration of the appellant's society for Assessment Year 2015-16 to 2021-22 as without jurisdiction, bad in law and therefore, liable to be quashed. The order impugned suffers from jurisdictional error as the same has been passed by the non jurisdictional officer. He has further proceeded with the case of revocation/withdrawal of registration under Section 12AB(4) as also being beyond jurisdiction inasmuch as there is no "specified violation' as defined in the said section which is sine qua non for withdrawal of such registration. Moreso, the provision of Section 12AA has been wrongly referred by the Ld. PCIT as the same is not applicable after 01.04.2021. Further that the cancellation of registration of the trust cannot be made with retrospective effect and therefore, revocation of regi....
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....gned order issued by the Ld. PCIT cancelling the registration passed on the reference of the Assessing Officer purportedly under 2nd proviso to Section 143(3) is without jurisdiction and therefore liable to be quashed. 13. The further case made out by the appellant is this that the PCIT invokes Section 12AA of the Act, while issuing show cause notices dated 05.07.2023 and 16.08.2023 whereas Section 12AA(5) of the Act provides that the provision of Section 12AA are not to be applied on or after 01.04.2021. In that view of the matter the show cause notices mentioned hereinafter issued by the Ld. PCIT are flawed and not maintainable in view of the provision of Section 12AA (5) of the Act. The power to cancel registration granted under Section 12A r.w.s 12AB of the Act can no longer be exercised under Section 12AA(3) after 01.04.2021. 14. Section 12AB(4) was substituted by the Finance Act 2022 w.e.f 01.04.2022 vesting jurisdiction to the Ld. PCIT to cancel registration granted under Section 12AA(1) of the Act or under Section 12AB(1) of the Act. As Section 12AB(4) was not in existence in the statute prior to 01.04.2022 such specified violation, if any, existed prior to 01.04.2022....
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.... "9. After giving thoughtful consideration to the facts and circumstances of the case and to the submissions, it comes up that the admitted case of the Revenue is that there was no specific order under any provisions of the Act other than the order dated 26.10.2020 passed u/s 127 of the Act centralizing the case of M/s Aggarwal Vidya Pracharni Sabha consequent to a search and seizure action u/s 132(1) of the Act to vest Id. PCT, Gurgaon the powers to pass the impugned order. The Id. DR has relied on the Explanation attached to section 127 of the Act to submit that the word, 'case' has been defined for the purpose of section 127 and consequent to the centralization of the assessment, the Id. PCIT, Gurgaon had got powers to commence proceedings u/s 12AB(4) of the Act for cancellation of registration of the assessee. 9.1 In this context, the Id counsel for the assessee has heavily relied on the CBDT Notification No 52/2014 made available at page 2 to 6 of the paper book submitting that in regard to powers u/ss 11 and 12 of the Act, the CIT (Exemptions), Chandigarh specific jurisdiction and which could not have been transferred. Relying on the order u/s 127 of 26.10....
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....Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer of Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation.--In section 120 and this section, the word "case", in relation to any person whose name is specified in any order or direction issued there under, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings....
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....er clause (a), sub-clause (ii) of clause (b) and clause (c), of sub-section (1) shall be passed, in such form and manner as may be prescribed, before expiry of the period of three months, six months and one month, respectively, calculated from the end of the month in which the application was received (4) Where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1) and subsequently, the Principal Commissioner 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. (5) Without prejudice to the provisions of sub-section (4), where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub section (1) and subsequently, it is noticed that- (a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to....
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....) of section 12AB shall be in Form No. 10AD and in case if the registration is granted, sixteen digit alphanumeric number Unique Registration Number (URN) shall be issued by the Principal Commissioner or Commissioner referred to in of sub-section (1) of section 12AB. (9) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall: (i) lay down the form, data structure, standards and procedure of, (a) furnishing and verification of Form No. 10A or 10AB, as the case may be, (b) passing the order under clause (a), sub clause (11) of clause (b) and clause (c) of sub-section (1) of section 12AB. (ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said application made or order so passed as the case may be.] 11. Further, it will be appropriate to reproduce the order u/s 127(2) dated 26.10.2020 available at page No. 1 of the paper book:- Order u/s 127 (2) of the Income Tax Act, 1961 Consequent to the search & seizure operations u/s 132 of the 1.T. Act, 1961 in Dev Wines Group ....
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....pecified 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 Income tax Act, 1961 and assessed or assessable by an Income-tax authority at Serial Number 1 to 20 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014. ............................. ............................. 4. Commissioner of Income-tax (Exemption), Chandigarh Chandigarh States of Jammu and Kashmir, Himachal Pradesh, Punjab Haryana and Union Territory of Chandigarh 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 Income tax Act, 1961 and assessed or assessable by an Income-tax authority at Serial Number 50 to 68 specified in the notification of Government of India bearing number S.O. 2752 dated the 22^nd October, 2014. 2. This notification s....
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.... of assessment proceedings, ce facts were communicated to his office by the AO pertaining to AY 2014-15 to 2020 vide his letter dated 23.08.2022. This letter dated 23.08.2022 has been reproduced at page No.32 of the impugned order and it shows that this letter was issued in supersession of earlier letter dated 11.04.2022. Further, the subject of the letter is as follows:- "Sub. Proposal for cancellation of registration granted u/s 12AA/12AB of the Act as per provisions of Section 12AB(4) of the Act in the case of 'Aggarwal Vidya Pracharni Sabha' " - Reg. 13.1 Then what comes up is that the Id. PCIT has made out a case that the powers he had exercised u/s 12AB(4) are by virtue of clause (a) to sub-section (4) of section 12AB on the basis of 'noticing' occurrence of specified violation. The Id. PCIT has considered himself to be empowered by virtue of Explanation attached to section 127, defining 'case', to commence proceedings under this Act u/s 12AB(4) after the order dated u/s 127 dated 16.10.2020. 14. Having considered the aforesaid, it comes up that the order of transfer u/s 127 dated 26.10.2020 is shown to be passed under sub-clause....
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.... it comes up that section 12AB(2) of the Act provides that the pending td applications under clause (b) of sub-section (1) of section 12AA before the date on which section 12AB came into force shall be deemed to be applications made under sub-clause (4) of clause (ac) of sub-section (1) of section 12A on that date for grant of at registration. 14.4 However, as far as provision of cancellation of the registration provided by sub- section (4) of section 12AA is concerned, sub-section (4) of section 12AB brings into place a completely new self-contained procedural code for conducting inquiry about specified violations', cancelling registration or refusing to cancel registration. 14.5 The Rule 17A, as clarified by Circular dated 3rd June 2022 provides that is addition to the 'specified violations', the power of cancellation has also been granted under sub rule (5) of rule 17A and sub-rule (5) of rule 2C of the Income tax Rules, 1962 to the Principal Commissioner or Commissioner authorised by the Board. The authorization u/s 12AB or Rule 17A if have to be construed, by virtue of Board Notification dated 22.10.2014, then we pointed out during the hearing, to....
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....-section (4) of section 12AB, the AO shall send a 'reference' to the PCIT or Commissioner to withdraw the approval or registration, as the case may be, and clause (b) to this proviso provides that no order making an assessment of total income or loss of such institution or trust shall be made without giving effect to the order passed by PCIT or Commissioner. In the case in hand, the Ld.PCIT, Gurgaon has reproduced the part of letter dated 23.08.2022 which has observed about a 'proposal' of cancellation of registration u/s 12AB(4) and based upon the same, the Id. PCIT had initiated action. The assessment by said assessing officer was completed in September, 2021, so, before the letter dated 23.08.2022 the assessment proceedings stood culminated. 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. To that extent Ld. PCIT observations are correct. 16.1 However, what is relevant here is that in any case the 'reference' by jurisdictional AO was to be made not to the PCIT or Commissioner, to whom this AO was subordinate but one authorised by board for the purp....
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....ted w.e.f 01.04.2022 in the statute to make reference to the PCIT by the AO under Section 12AA, 12AB of the Act. In that view of the matter application of a particular provision of law which was not in existence during the material point of time cannot be said to have been rightly invoked. 20. So far as the provision of Section 12AB(4) of the Act as exercised by the PCIT is concerned the Ld. A.R relied upon a judgment passed by the Banglore Bench in the case of M/s Islamic Academy of Education, Manglore in ITA No. 610/Bang/2023 for Assessment Year 2021-22, a copy whereof has also been annexed to the paper book filed before us by the appellant. While dealing with this particular aspect of the matter the Bench has been pleased to observe as follows: "8.1.9 registration Before the amendment by the Finance Act, 2022, Section 12AB(4) provided for cancellation of registration in case of any violation under Section 13. The amended Section 12AB(4) does not consider a violation of Section 13(l)(c) and Section 13(l)(d) as specified violations. Consequently, the registration cannot be cancelled on the ground that the assessee has violated Section 13(l)(c) or Section 13(1)(d). ....