TaxTMI 
TaxTMI 
2025 (4) TMI 1128
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....al) has erred in passing the order u/s. 12AB of the Act based on the reference made by the A.O. under second proviso to S.143(3) of the Act, which reference itself is illegal, beyond jurisdiction and without issuing the prior show cause notice. 3. The PCIT (Central) has erred in invoking the provisions of S. 12AB(4) of the Act, which came into effect from A.Y. 2022-23, in respect of the year under consideration i.e. A.Y. 2021-22 and thereby retrospectively applying the provisions of the Act. 4. The PCIT (Central) has erred in passing the order in gross violation of the principles of natural justice. 5. The appellant craves leave to add to, amend, alter or delete the foregoing grounds of appeal." 3. The assessee vide letter dated 14th December 2024 filed Additional Ground of appeal challenging the jurisdiction of PCIT (Central) for passing the order cancelling the registration of assessee trust. 4. At the outset, we note that the learned AR for the assessee at the time of hearing submitted that he has been instructed by the assessee not to press the issue raised in additional ground of appeal. Accordingly, the additional ground of appeal of the asses....
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.... Establish the genuineness of the substantial cash expenditure under "Building construction" and "Covid-related expenses." • Explain the allegations related to the utilization of the assessee's funds for the renovation of hotels, bars, and a marriage hall owned by the trustees. • Provide an explanation regarding the capitation fee received in cash but not recorded in the books of accounts. 11. In response to the show cause notice, the assessee submitted its reply. However, the learned PCIT found that the assessee failed to substantiate its claims with documentary evidence. After considering the assessee's reply, the materials seized during the search, and the statements of various individuals recorded during the search, the learned PCIT concluded that the assessee had incurred expenditures that were not in line with the objectives of the trust. Additionally, the assessee trust had diverted funds for the personal benefit of the trustees. Accordingly, the assessee was found to have committed specified violations under clauses (a), (d), (e), and (f) of the Explanation to section 12AB(4) of the Act. Consequently, the learned PCIT cancelled the registrat....
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....te, i.e., A.Y. 2021-22, for the withdrawal of registration under sections 12AA/12AB of the Act, when such a provision was not applicable at that time. In support of his argument, the learned AR relied on decisions of the coordinate bench of this Tribunal and other Tribunal rulings, which are on record. 16. On the other hand, the learned DR before us submitted that the provisions pre amendment and post amendment relating to the cancellation of the registration certificate under section 12AA/12AB of the Act are the same in substance. As such, under the pre amendment and post amendment provisions, the registration certificate stands withdrawn when the activities of the Trust are not genuine as well as when there is diversion of fund for the purposes other than the purposes for which the trust was established. The learned DR vehemently supported the order of the authority below. 17. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, the issues which require adjudication are detailed as under: i. Whether the reference made by the AO to the learned PCIT in accordance with the second proviso ....
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.... reported in 166 taxmann.com 324. The relevant question raised by the assessee and the finding of the Tribunal is extracted as under: Assessee argument: 11.1 Moreso, this particular 2nd proviso to Section 143(3) of the Act was substituted and made effective from 01.04.2022 whereby and whereunder the Assessing Officer has been vested with the power to make reference to the PCIT for institutions granted registration under Section 12AA/12AB of the Act. In that view of the mater as there was no provision existing in the statute prior to 01.04.2022 vesting jurisdiction upon the Assessing officer to make reference for alleged violation under Section 12AB(4) of the Act as amendment to Section 12AB(4) and 2nd proviso to Section 143(3) were made w.e.f 01.04.2022. The reference has, thus, no basis and is liable to be quashed. Tribunal finding: 19. Apart from that after considering the 2nd proviso of Section 143(3) of the Act, we find that the reference granted under Section 12AA of the Act is permissible to be made only during the pendency of the assessment proceeding. However, in the case in hand the assessment proceeding has already been concluded on 29.03.2022. In ....
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....ion, 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 ensure for the benefit of the public; or (d) The trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste; or (e) Any activity being carried out by the trust or institution- (i) is not genuine, or (ii) is not being carried out in accordance with all or any of the conditions subject to....
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....rrence or otherwise of any specified violation; ii. pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations 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 trsut 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 ins....
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....orted in 20 ITR 572 (SC) wherein the Hon'ble Supreme Court held that "it is a cardinal principle of the tax law that law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication". 6.5 In the case of Karimtharuvi Tea Estate Ltd. v. State of Kerala [1964] 51 ITR 129 (SC) the same view was taken by the Hon'ble Supreme Court. 6.6 Further, the Hon'ble Supreme Court in the case of Shree Choudhary Transport Corpn. v. ITO [2020] 118 taxmann.com 47/272 Taxman 472/426 ITR 289 wherein held as under: 17.4 It needs hardly any detailed discussion that in income-tax matters, the law to be applied is that in force in the assessment year in question, unless stated otherwise by express intendment or by necessary implication. As per section 4 of the Act of 1961, the charge of income-tax is with reference to any assessment year, at such rate or rates as provided in any central enactment for the purpose, in respect of the total income of the previous year of any person. The expression "previous year" is defined in section 3 of the Act to mean "the financial year immediately preceding the assessment year"....
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....plying that decision to the facts of the present case." (Emphasis Supplied) 17.6 We need not multiply on the case law on the subject as the principles aforesaid remain settled and unquestionable. Applying these principles to the case at hand, we are clearly of the view that the provision in question, having come into effect from April 1, 2005, would apply from and for the assessment year 2005-06 and would be applicable for the assessment in question. Putting it differently, the Legislature consciously made the said sub-clause (ia) of section 40(a) of the Act effective from April 1, 20056, meaning thereby that the same was to be applicable from and for the assessment year 2005-06; and neither there had been express intendment nor any implication that it would apply only from the financial year 2005-06." 6.7 Being so, we find force in the argument of ld. A.R. that in income-tax matters, law to be applied is the law in force in the assessment year unless otherwise stated or implied. In the present case, ld. PCIT is cancelling the registration granted u/s 12AA/12AB of the Act w.e.f. previous year 2020-21 relevant to assessment year 2021-22. In our opinion, the law as ....
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....not be retrospective, therefore, in view of the above discussion, we are of the opinion that cancellation of registration with retrospective effect is invalid in these cases. Since the ld. PCIT invoked the provisions of section 12AB(4)(ii) of the Act, which has been introduced by the Finance Act, 2022 w.e.f. 1-4-2022 so as to cancel the registration with retrospective effect from assessment year 2021-22, which is bad in law. We also note that same view has been taken by Coordinate bench of Mumbai in the case of Heart Foundation of India v. CIT [IT Appeal No. 1524 (Mum.) of 2023, of vide order dated 27-7-2023], wherein held that registration granted u/s 12A of the Act dated 21-7- 1989 cannot be cancelled by ld. PCIT (Central) vide order dated 6-3-2023 w.e.f. assessment year 2016-17, by invoking the provisions of section 12AB(4)(ii) of the Act. Accordingly, we allow the primary ground nos.2, 3, 5 & 12 and order of ld. PCIT passed u/s 12AB(4)(ii) of the Act is quashed. 17.5 We also note that the above finding of the coordinate bench of this Tribunal was further followed in the case of M/s Islamic Academy of Education vs. PCIT in ITA No. 610/Bang/2023. Likewise, we note that note id....