TaxTMI 
TaxTMI 
2025 (5) TMI 688
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.... appeal are as under: (i) The assessee is a society engaged in charitable purpose of imparting education. It is registered under Madhya Pradesh Societies Registration Act, 1973 w.e.f. 10.12.2004. It was also granted approval u/s 10(23C)(vi) of the Act by the Chief Commissioner of Income-tax, Indore vide registration F.No. CCIT/IND/TECH/10(23C)(vi)/78/08-09 dated 29.08.2008 from Assessment-Year ["AY"] 2008-09 onwards and such approval was continuing year after year. However, the approval so granted was cancelled vide order dated 14.12.2018 by CIT(Exemption), Bhopal ["CIT(E)"] w.e.f. AY 2014-15 but on appeal by assessee, the ITAT, Indore Bench reinstated approval in ITA No. 62/Ind/2019 order dated 07.08.2019 in pursuance of which the approval was re-stored by CIT(E) through order dated 19.03.2020. This approval/restoration of approval enabled the assessee to claim exemption u/s 10(23C)(vi) of the Act from AY 2008-09 onwards. (ii) A search u/s 132 was conducted by Income-tax Department on 02.02.2023 upon one 'BCM Group' of Indore and also upon assessee- society. All cases of searched entities were centralised in the assessing authorities of Central Circle, Bhopal. Th....
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....placed by the Ld. Pr. CIT, Central, Bhopal on CBDT communication dated 19.01.2024 to justify the jurisdiction is illegal, perverse and contrary to the judicial decisions cited by the Appellant in response to the Show cause notice. 2.2 That the Ld. Pr. CIT, Central, Bhopal has failed to take cognizance that CBDT ex-parte internal 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 cancelled only by the 'Prescribed Authority' who has been empowered to grant the registration as held in several judicial pronouncements including the judgement rendered by Jurisdictional Tribunal in case of Oriental University Indore (ITA Nos. 115 & 116/Ind/2020) and case of Devi Shakuntala Thakaral Charitable Foundation, Bhopal (ITA Nos. 117/Ind/2020). 3.WRONG INTERPRETATION OF ORDER PASSED UNDER SECTION 127(2) BY THE CIT(E) AND IN ASSUMING JURISDICTION 3.1 The Ld. Pr. CIT, Central, Bhopal has failed to take cognizance that the order issued u/s 127 of the Act dated 21/06/2023 by the CIT(E) does not transfer CIT(E) original jurisdictio....
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....anted u/s. 10(23C)(vi) of the Act r/w Rule 2CA of the Act for such assessment years and that the power to examine and cancel registration under fifteenth proviso to clause (23C) of section 10 of the Act 10(23C)(vi) was limited to registration granted as per amended Act w.e.f. 2022 and therefore, the impugned order passed cancelling registrations granted for earlier years u/s. 10(23C)(vi) of the Act for the assessment year 2021-22 or for earlier years is bad in law and the same requires to be quashed. 5.3 That the Ld. Pr. CIT, Central, Bhopal ought to have appreciated that there is no specified violation since reference by AO deals with violation of conditions of sec 11(1)(a), 11(1)(d), 13(1) & 13(3) and that it cannot be ground for cancellation of registration is against specific provisions of explanation 2 to fifteenth proviso to clause (23C) of section 10 of the Act defines "specified violation" which, inter-alia, covers "application of income derived from property held under trust other than the objects of the trust. Diversion of income and giving personal benefits to specified person u/s 13(1) & 13(3) cannot be said to be case of nonapplication for objects of the socie....
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....pellant society has paid excess rent for land and building without appreciating the fact that issue qua Rent paid to M/s Edueestate has already been adjudicated earlier by Hon'ble ITAT in ITA No. 62/IND/2019 and vide order dated 07/08/2019 the Hon'ble Tribunal. 7.4 The Ld. PCIT while cancelling the registration has only relied on statement recorded u/s 132(4) of the Act however no corroborative evidence has been brought on record to substantiate such allegation. 7.5 Without prejudice to above, the Ld. PCIT Central Bhopal failed to appreciate that Section 13 of the Act is not applicable and there is no violation of any of provision of said section and the assessee is entitled to benefits of section 10(23C)(vi) of the Act since any such violations even if they exist (which the appellant categorically denies) which would always be a subject matter of assessment and not a ground for cancellation of registration." 5. For a smooth discussion and proper adjudication, we categories the issues involved in above grounds under three categories as under: (i) Validity of impugned order (Ground No. 4.2, 5 to 6) (ii) PCIT(Central) is not competent to pass im....
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....d that it has crafted a colourable device to evade taxes and for diverting funds and resources to the three promoter families. Thus, the undersigned has noticed occurrence of "specified violations" committed by the assessee society within the meaning of clause (a), (b) and (c) of Explanation-2 of the relevant / fifteenth proviso to clause (23C) of section 10 of IT Act, 1961. Hence, in view of the facts of the case, the registration of the trust, Shishukunj Educational Society bearing PAN: AABAS8128B granted u/s 10(23C)(vi) of the I.T. Act on 29.08.2008 and approval of restoration of registration granted u/s 10(23C)(vi) of the I.T. Act on 19.03.2020 are hereby cancelled by invoking provisions of fifteenth proviso to clause (23C) of section 10 of IT Act, 1961." 8. From above paras of impugned order, two facts are undisputably clear, viz. (i) the Ld. PCIT(Central) initiated proceeding against assessee for cancellation of approval on the basis of a reference made by AO under 2nd proviso to section 143(3), and (ii) the Ld. PCIT(Central) cancelled assessee's approval on the basis of 15th Proviso to section 10(23C), by alleging violations contemplated in Explanation (a)/(b)/(c) in the ....
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....g that such non-compliance has occurred, has either not been disputed or has attained finality, it may, at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer." "Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) is approved or provisionally approved under the said clause and subsequently- (a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or....
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.... which it is established; or (b) the fund or institution or trust or any university or other educational institution or any hospital or other medical 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 it in respect of the business which is incidental to the attainment of its objectives; or (c) any activity of the fund or institution or trust or any university or other educational institution or any hospital or other medical institution,- (A) is not genuine; or (B) is not being carried out in accordance with all or any of the conditions subject to which it was notified or approved; or (d) the fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not complied with the requirement of any other law for the time being in force, and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality. Note: The Ld. PCIT (Central) has cancelled assessee's approval....
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....inance Act, 2022. He submitted that the Ld. PCIT(Central) has applied these newer provisions retrospectively for the alleged violations committed before 01.04.2022. Ld. AR submitted that this approach of authorities is clearly wrong and illegal and therefore the impugned order passed by Ld. PCIT(Central) is invalid, liable to be quashed. 12. In support of this claim of assessee, Ld. AR relied upon following decisions wherein the cancellation order passed by PCIT(Central) has been quashed categorically holding that the identical amendments inserted in section 12AB(4) w.e.f. 01.04.2022 by Finance Act, 2022 would not apply retrospectively: (i) ITAT, Bangalore in Amala Jyothi Vidya Kendra Trust Vs. PCIT (Central) (2024) 162 taxmann.com 41 (Bangalore - Trib), order dated 16.04.2024 (ii) ITAT, Jaipur in Centre for Development Communication Trust Vs. CIT, Exemption (2024) 168 taxmann.com 90 (Jaipur - Trib.), order dated 03.06.2024 (iii) ITA Delhi in ITA No. 1803/Del/2024 - Lakhmi Chand Charitable Society, New Delhi Vs. Principal Commissioner of Income-tax, New Delhi, (2024) 166 taxmann.com 324 (Delhi - Trib.), order dated 22.08.2024. 13. Ld. AR submitted t....
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....the family members of promoters who were found to be either not involved in any kind of substantive activities or looking after certain areas of work on a part time as per their wish and convenience. Members of promoters family are getting profit/remuneration in the form of highly unjustified salary. Though the legal ownership of the school is shown in the hands of assessee-society, yet it is perfect example of colourable device and the sham arrangement of ownership over the school. [Ultimately, Ld. PCIT(Central) has adopted this violation in Para 16(ii)(a)/(b) - Pages 61-62 of impugned order] Page 44 to 45 of impugned order: Para 8(iv)(c) - The land and building on which the Jhalaria Campus of Shishukunj International School is being urn, are owned by M/s Eduestate and this entity is receiving huge rent from assessee-society. M/s Eduestate is a partnership firm of the governing family having 40% share of Davey family, 30% share of Mehta family and 30% share of Sethia family. From AY 2017-18, the assessee-society has given more than Rs. 40 crores as rent to the firm. The assessee-society has paid such significant amount of rent to the firm but had not att....
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.... the Act and, therefore, the pre-requisite of section 12AA(3) of the Act is satisfied. In para 9 of the impugned order, the Commissioner records that the violation of section 11 & 13 of the Act would result in forfeiture of exemption not only for the year in which such transactions occur but also for the years when such arrangement continues to be in force. In our considered opinion, such an approach of the Commissioner is quiet misdirected and is inconsistent with the legal position on the subject contemplated u/s. 12AA(3) of the Act so as to cancel registration already granted. We may add here that we are not shutting out the case of the Revenue to examine whether or not there has been a violation of section 13 of the Act, but we are only trying to say that the same is not relevant for the purpose of cancellation of registration u/s. 12AA(3) of the Act. Of course, such matters can be dealt with in the course of assessment proceedings and, in our view, the same ought to be dealt with, if the situation so warrants. Presently, we are confining ourselves with examining the efficacy or otherwise of the action of the Commissioner in invoking section 12AA(3) of the Act and we find that ....
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....fit to interested person shall be relevant for computation of total income and shall not attract cancellation of approval. While arguing so, Ld. AR also took support from following case-laws, although decided in the context of section 12A/12AA but equally applicable to section 10(23C)(vi), to contend that the violation of section 13(3) prior to 01.04.2022 could be considered only for the purpose of assessment/ computation of total income of trust/society but not for cancellation of approval u/s 10(23C)(vi): (i) ITAT, Ahemdabad in Jito Bhavnagar Chapter Foundation Vs. CIT (Exemption) (2024) 167 taxmann.com 646 (Ahmedabad Trib.) (ii) ITAT, Ahmedabad in Anjuman E Nusratul Muslimin Tankaria Vs. CIT (2024) 162 taxmann.com 42 (Ahmedabad Trib.) 16. With above submissions, Ld. AR contended that the impugned order passed by Ld. PCIT(Central) cancelling the approval held by assessee is invalid and must be quashed. 17. Per contra, Ld. DR for revenue heavily relied upon impugned order of PCIT(Central). He submitted that the PCIT(Central) has passed a vehement order after taking into account various violations made by assessee. He submitted that the Ld. PCIT(Central) can....
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....We find that the assessee raised this very claim before Ld. PCIT(Central) also but the Ld. PCIT(Central) rejected assessee's claim by passing following order in Paras 13-14 of impugned order: "SECOND PROVISO TO SECTION 143(3) OF THE ACT 13. The assessee in its reply dated 23.09.2024 at point 9 has objected to the reference made by the Assessing Officer under 2nd proviso to section 143(3) of the I.T. Act by the DCIT(Central)-2 for cancellation of registration u/s 10(23C)(vi) of the Income-tax Act, 1961 on the following two grounds: (a) The AO has made wrong reference to the Principal Commissioner of Income Tax (Central), Bhopal. The assessee has referred to the detailed discussion made in preceding paras of its letter to claim that only CIT(Exemption), Bhopal holds the jurisdiction relating to cancellation of registration u/s 10(23C)(vi) of the Income Tax Act, 1961 granted to the assessee. (This portion is not relevant to Ground No. 4.2, 5 to 6 - It is relevant to Ground No. 1, 2, 3, 4.1 to be dealt in later part of this order. Hence striken through) (b) Further, it has been claimed that at the time of initiation of cancellation of registration pr....
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....he 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 Commissioner or Commissioner, shall,- (i) call for such documents or information from the fund or institution or trust or any university or other educational institution or any hospital or other medical institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence of any specified violation; (ii) pass an order in writing cancelling the approval of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution, on or before the specified date, 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 violation has taken place; (iii) pass an order in writing refusing to cancel the approval of such fund or institution or trust or any university or other educational institution ....
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.... (iii) Here, it is important to mention that a search under section 132 of the Income Tax Act, 1961 was conducted in the case of the Society on 02.02.2023 wherein occurrence of specific violations in various assessment years was noticed. Further, investigation were also carried out during the course of post search proceedings in the case of the Society which confirmed the findings of the search action. As the assessment proceedings were under progress, a reference under the second proviso to section 143(3) of the Income Tax Act, 1961 was made to the Pr. Commissioner of Income Tax (Central), Bhopal. (iv) Here, it will be important to refer clause (a) and clause (b) of the 15th proviso which clearly states that for initiating a proceeding for cancellation of registration already granted to the assessee u/s 10(23C)(vi) of the Income Tax Act, 1961 is that the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or 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. Here, the words "f....
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....tration u/s. 12AA of the Act invoking the provisions of section 12AB(4)(ii) of the Act alleging violations contemplated in Explanation (a) & Explanation (e) below the provisions of section 12AB(4) of the act. This provision of the Act which is extracted hereunder and invoked by the Pr. Commissioner of Income Tax (Central) for cancellation of registration granted u/s. 12AA of the Act was introduced by Finance Act 2022 w.e.f 01.04.2022. 4.2 He submitted that prior to introduction of this provision, the following provision was in existence which was introduced by Finance Act 2021 w.e.f 01.04.2021. "12AB(4) Where a 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." 4.3 He submitted that the assessment involved in....
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....A/12AB of the Act vide order dated 29.12.2023. As such, provisions of section 12AB(4) of the Act as stood on this date has been applied and there is no error in applying the provisions of section 12AB as substituted by Finance Act, 2022 w.e.f. 1.4.2022. He supported the order of ld. PCIT (Central). 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 cancelled the registration granted to the assessee w.e.f. the previous year i.e. 2017-18 relevant to assessment year 2018-19 by applying the provisions as stood on 29.12.2023, which cannot be applied for the violations of the provisions of section 12AA or 12AB of the Act. According to the ld. A.R., the ld. PCIT has cancelled the registration granted to the assessee since the ld. PCIT was satisfied that one or more specified violations have taken place. The specified violations are mentioned in explanation to section 12AB(4) of the Act as follows: 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 par....
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.... apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then the Pr. Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institutions. Provided, that the registration shall not be cancelled under this subsection if the trust or institution proves that, there was reasonable cause for the activity to be carried out in the said manner." 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 sub- section (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 M/s. Amala Jyothi Vidya Kendra Trust, Bangalore M/s. Adarsh Vidya Kendra Trust, Bangalore b) The Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to....
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.... f) The trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of subsection (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality. 6.3 As per section 12AB(4) of the Act as applicable to assessment year 2017- 18, 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 pr....
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....s it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force...... The High Court has, however, relied upon a decision of 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 t....
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....td. Vs. ITO (2019)411 ITR 308 (Mad) wherein held as under: "20. On the second question as to whether the cancellation will operate from a retrospective date, it was held that the amendment to section 12AA(3) is prospective and not retrospective in character. The courts reasoned that even when Parliament had plenary powers to enact retrospective legislation in matters of taxation, the amended section is not seen to have explicitly provided to have a retrospective character or intend. Therefore, without a specific mention of the amended 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 ot....
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....to operate retrospectively, the cancellation cannot operate from a past date and in this case from A. Y. 2017-18. Now the only limited question remained to be decided as to whether the payment made to specified persons warrants the cancellation of registration of the assessee trust or not. The Finance Act, 2021 and Taxation and Other Law (Relaxation and Amendment of Certain Provision) Act, 2020, one of key changes was that every trust or instigation registered under section 12AA of the Act required to reregister itself before the specified dates provided u/s 12A(1)(ac) of the Act and sunset clause has been inserted under section 12AA(5) w.e.f. 01.04.2021 and new section 12AB has been inserted. Thereafter vide Finance Act, 2022 new section for taxing the benefits provided to related persons treated as "specified income" and will be subjected to be taxed at the rate of 30% without any deduction under the newly inserted section 115BBI and will also be liable for penalty u/s. 271AAE.Further, the provision of making reference by Assessing Officer to the Principal Commissioner or Commissioner to withdraw the registration of trust or institution referred u/s 11 of the Act, if any specifie....
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....mes wholly vitiated. Thus, it is but essential a party should be put on notice of the case before any adverse order is passed against him. "As we note at the Id. CIT(E), Jaipur has issued first show cause notice in which it has been show cause registration u's 12AA/12AB should be withdrawn due to violation of section 2(15) of the Act (para 5 on page no. 94 of PB) and due to trust money being allegedly mis utilized by specified person as mentioned u/s 13(3) of the Act (Para 6 on page no. 96 of PB). However, in the impugned order, Ld. CIT(E), Jaipur has invoked clauses (0). (b) and (e) of specified violation as defined under explanation to section 12AB(4) of the Act (which applies prospectively). Therefore, we note that the action of the Id. CIT(E) cancelling the registration of the trust we.f. A. Y. 2017-18 is beyond the scope of the show cause notice as the conditions for cancellation of registration on account of specified violation, which were not specified earlier in the law, have been inserted under section 12AB(4) of the Act w.e.f. 01.04.2022 and would accordingly apply prospectively being penal provision and having very harsh consequences. Thus, the action of the id. CIT(....
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....ent to examination by the Principal Commissioner or Commissioner of Income-tax, 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 subrule (5) of rule 17A and sub-rule (5) of rule 2C of the Income-tax Rules, 1962 (the Rules) to the Principal Commissioner or Commissioner authorised by the Board. This Circular only relates to cancellation of registration/approval or provisional registration/approval in the case of "specified violation". The relevant extracts of memorandum explaining the budget prop....
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....AB(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(1)(c) and Section 13(1)(d) as specified violations. Consequently, the registration cannot be cancelled on the ground that the assessee has violated Section 13(1)(c) or Section 13(1)(d). 8.1.10 The Finance Act 2023 has inserted clause (g) in Explanation to Section 12AB(4) to provide that giving incomplete, false, or inaccurate information in a registration application under Section 12A(7)(ac) will be deemed as a "specified violation" that can lead to the cancellation of registration. 8.2 Thus, it means that the following registration could be cancelled: 8.2.1 The PCIT/CII can cancel the following registrations granted to a trust or institution: (a) Final registration or provisional registration granted under section 12AB(1)(a)/(b)/(c); (b) Final registration granted under section 12AA(1). The erstwhile provision did not cover cases of provisional registration granted under section 12AB(1)(c). Now, the provisional registration granted for the first time can also be cancelled by t....
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....posing cancellation of registration alleging specified violation occurred prior to 01.04.2022 Le. for Assessment Year 2015-16 to 2021-22 and the final order passed by the Ld. PCIT cancelling registration of the appellant society for Assessment Year 2015-16 to 2021-22 by wrongly invoking the provision of Section 12A r.w.s. 12AA and 12AB(4) of the Act is found to be erroneous, bad in law, whimsical, in non-application of mind and thus, unsustainable. 23. Before parting we would like to note that the further direction given by the Ld. PCIT to this effect that even if the appellant society is found that specified violation is not in existence then also the consequential cancellation order would continue to operate independently by and under the impugned order dated 31.03.2024 is nothing but colourable exercise of power, not only arbitrary or erroneous but establishes the biasness on the part of the authorities below; by hook or crook the authority was bent upon to cancel the registration of the appellant trust which is evident from such observation and/or decision made by the Ld. PCIT. In fact, on that score alone the order passed by the Ld. PCIT is also found to be bad in law....
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....el approval of assessee and Ld. PCIT(Central) had no authority at all in the matter of cancellation of approval. Ld. AR submitted that it is true that the assessee's case was transferred from DCIT(Exemption), Bhopal to DCIT(Central)-2, Bhopal [DCIT(Central)-2, Bhopal is falling within the charge of Ld. PCIT(Central)] vide order u/s 127(2) but such transfer was for a limited purpose of co-ordinated assessments with all entities of 'BCGM Group' due to search proceedings and not for cancellation of approval held by assessee u/s 10(23C)(vi). Therefore, the Ld. PCIT(Central) has illegally acquired/extended his jurisdiction to pass the impugned order under 15th Proviso to section 10(23C) for cancellation of approval held by assessee. 24. Ld. AR submitted that this claim of assessee is already accepted by various decisions of ITAT Benches. He quoted a few decisions as under: (i) ITAT, Indore in ITA No. 117/Ind/2020 - Devi Shakuntala Thkaral Charitable Foundation, Bhopal Vs. Pr. CIT(Central), Bhopal, order dated 29.07.2022 (ii) ITAT, Indore in ITA No. 115 & 116/Ind/2020 - Oriental University, Indore Vs. Pr. CIT(Central), Bhopal, order dated 29.07.2022 (iii) IT....
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....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 - (a) directs that the Commissioners of Income-tax specified in column (2) of the Schedule annexed hereto having their headquarters at the places specified in the corresponding entries in column (3) of the said Schedule shall exercise the powers and perform all the functions in respect of such cases or classes of cases as specified in column (5), in such territorial areas specified in the corresponding entries in column (4) of the said Schedule; (b) authorises the Commissioners of Income-tax referred to in this notification to issue orders in writing for the exercise of the powers and performance of the functions by the Additional Commissioners of Income-tax or Joint Commissioners of Income-tax and Tax Recovery Officers, who ar....
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....AR submitted that the Ld. PCIT(Central) did not have any authority to perform powers and functions in the case of assessee. 11. Ld. AR further submitted that it was so in the present case that due to a search conducted on the Orient Group, the case of assessee was also centralized in the office of Ld. PCIT(Central) for the limited purpose of coordinated assessment, which again may or may not be legal but irrespective of that, the exclusive authority for granting registration or cancellation of registration in the matter of section 12AA of the act vested in the Commissioner of Income-tax (Exemption), Bhopal only. Going further, Ld. AR referred to Para No. (b) of the Notification and upon reading the same, submitted that the CBDT has further notified that the Commissioner of Income-tax (Exemption), Bhopal can delegate or assign authority only and only to the Additional CIT or Joint CIT or Tax Recovery Officers who are subordinate to him. Ld. AR submitted that the Ld. PCIT(Central) does not fall within any of these authorities and therefore the delegation or assignment to Ld. PCIT(Central) is also not possible. 12. Ld. AR heavily relied upon the decision of Hon'ble I....
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....nt a proposal u/s 127 to the Pr. DIT(Inv.) Raj. Jaipur on 19.08.2016 to transfer the case for limited purpose i.e for the Assessment proceedings vide letter dated 19.08.2016, which is placed at page No. 292 and 293 of the paper book and the reason for centralize in the case of assessee was given for Co-Ordinate Assessment with the cases of SPS Bajaj Group. The Pr. DIT has sent the same to the Pr. CIT(Central) vide letter dated 29.09.2016, which have already been placed at page No. 295 and 296 of the paper book. Thereafter the Pr. CIT(C) has written letter to transfer the case from ITO(E) Kota to ACIT, Central Kota. Thereafter the CIT(E) has transferred the case from ITO(E) Kota to ACIT, Central Kota vide letter dated 05/06.12.2016, which is placed at page No. 299 of the paper book. In all these there is no any copy or notice or information have been sent to the assessee. 13. We also observe that, thereafter the ld. DCIT(CC) Kota, has sent a proposal to the Pr. CIT(C), Jaipur to cancel the 12A registration of the assessee vide letter dated 31.12.2018. On the basis of proposal from DCIT(CC) Kota, the ld. Pr. CIT has issued the show cause notice to the assessee u/s 12AA(3)/(4....
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.... 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 opportunity of being heard in the matter, wherever it is ....
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....al or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed by an Additional 33 ITA 688/JP/2019_ M/s Wholesale Cloth Merchant Association Vs Pr.CIT Commissioner or an Additional Director or a Joint Commissioner or a Joint Director, and, where any order is made under this clause, references in any other provision of this Act, or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such Additional Commissioner or Additional Director or Joint Commissioner or Joint Director by whom the powers and functions are to be exercised or performed under such order, and any provision of this Act requiring approval or sanction of the Joint Commissioner shall not apply. (5) The directions and orders referred to in sub-sections (1) and (2) may, wherever considered necessary or appropriate for the proper manageme....
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....der in writing from higher authorities i.e. from Chief Commissioner of Income Tax (Exmp.) Delhi or CBDT in writing and an opportunity of being heard is to be given to the assessee before transferring the case whereas all these are absent in the present case and nothing has been demonstrated by the department. 19. We further observe that Sec. 127 of the Act empower to transfer cases among Assessing Officers but not to Commissioners of Income Tax as CIT is not an Assessing Officer. In our view, to pass an order u/s 12A for registration or cancellation is not within the jurisdiction or power of an Assessing Officer. Hence registration u/s. 12A can be withdrawn only by the 'Prescribed Authority' who has been empowered to grant the same and by the Notification dated 22.10.2014, the ld. CIT(Exmp.) has empowered for the same, hence the Pr. CIT (Central) cannot cancelled the same. 20. In assessee's case, the case u/s 127 was transferred to the Central Circle for limited purpose of Co-Ordinate assessment admittedly which do not mean that the Section 12A proceeding has been transferred to the Pr. CIT(Central) automatically, when both the proceedings are separate....
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....after 30 days of the search. In this respect, the ld AR has relied upon the decision in the case of Rentworks India (P) Ltd. vs. Pr. CIT & ANR. (2017) 100 CCH 0258 Mum HC wherein it has been held that: Income tax authorities -- Power to transfer cases -- Jurisdiction--CIT, issued notice to assessee taking recourse to subsection 2 of Section 127 -- Assessee was put to notice that there was proposal to transfer case of assessee to DCIT, for proper co-ordinated investigation -- Impugned order was made by Principal CIT under sub-section 2 of section 127 by which case of assessee was transferred to DCIT -- Held, in Noorul Islam Educational Trust it was held that as Income-tax/ assessment file of assessee had been transferred from one AO in Tamil Nadu to another AO in Kerala and two AO were not subordinate to same Director General or Chief Commissioner or Commissioner of Income Tax u/s 127(2) (a) agreement between Director General, Chief Commissioner or Commissioner, as case might be, of two jurisdictions was necessary-- Counter affidavit filed on behalf of Revenue did not disclose that there was any such agreement -- In fact, it had been consistently and repeatedly sta....
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....implication. This stand is completely contrary to paragraph 5 of the decision of the Apex Court in the case of Noorul Islam Educational Trust (supra). The decision in the case of Ramswaroop (supra) will also bind this Court for the reasons stated above. 10. Coming to the decision in the case of Jharkhand Mukti Morcha, relevant facts are in paragraph 12. In the said case, specific reliance was placed on a document dated 27th November 2016. It is on the basis of the written document that a finding was recorded that there was an agreement between the Jurisdictional Commissioners of Ranchi and Delhi. In the present case, even going by the case made out by the respondent, no such agreement is spelt out. In absence of any such agreement, the first respondent had no jurisdiction to pass the order of transfer. 11. As the impugned order cannot be sustained on above ground, it is not necessary to into other challenges. 12. Accordingly, for the reasons quoted above, we pass following order: Impugned order dated 25th May 2017 (Exhibit-H to the petition) is hereby quashed and set aside. Rule is made absolute on above terms with no order as to costs. The Hon&#....
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.... has been transferred from one Assessing Officer in Tamil Nadu to another Assessing Officer in Kerala and two Assessing Officers are not subordinate to same Director General or Chief Commissioner or Commissioner of Income Tax, u/s 127(2) (a) an agreement between Director General, Chief Commissioner or 40 ITA 688/JP/2019_ M/s Wholesale Cloth Merchant Association Vs Pr. CIT Commissioner, as the case may be, of two jurisdictions is necessary-- Absence of disagreement cannot tantamount to agreement as visualized under Section 127(2)(a) which contemplates a positive state of mind of two jurisdictional Commissioners of Income Tax which is conspicuously absent -- Transfer of Income-tax/assessment file of assessee from Assessing Officer, Tamil Nadu to Assessing Officer, Kerala is not justified -- High Court order set aside -- Special appeal allowed. Although, the ld DR has relied upon the decision of Hon'ble Rajasthan High Court in the case of Lalit Hans Vs PCIT DP Special Appeal (Writ) 249/2015 but the facts of the above case are entirely different. Hence, the said judgment is of no help to the Revenue on the facts of the present case. Thus, keeping in view our above discussi....
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.... authority to pass order. During hearing, the Ld. DR could not distinguish the applicability of the decision of M/s Wholesale Cloth Merchant Association, New Cloth Market (Supra) on facts or in law. We also do not find any merit in the submission of Ld. DR that the assessee should not be given any benefit in the matter of this grievance at this stage just because the issue has been raised for the first time. We observe that the grievance of assessee is assailing the very jurisdiction of Ld. PCIT. We observe that under the legal system of country, only a designated authority can take a legal action or conduct proceedings. If the legal actions are permitted to any officer, even if the concerned officer does not have legal authority, it would be fatal and destroy the whole set up. Needless to mention that the actions undertaken by officers not vested with necessary legal authority are void-ab-initio and such actions can be challenged at any stage. Therefore there is nothing wrong in the claim of assessee even if the same is raised before us for the first time. Respectfully following the decision of Hon'ble Co-ordinate Bench, the applicability of which could not be disputed or distingu....
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....n of objection raised by the assessee on 15.04.2024. Government of India Ministry of Finance Income Tax Department PCIT(Central), Bhopal To Shisukunj Education Society India PAN: AABAS8128B Date :17.09.2024 DIN & Letter No: ITBA/Com/F/17/2024-25/1068749249(1) Sir/Madam/ M/s. Subject. Online service of Orders - Letter Sub:- Objections raised against Show Cause Notice dated 31.03.2024 for cancellation of registration under section 12AB(4) of the I.T. Act 1961- reg. - Vide your communication dated 15.04.2024 received in this office through ITBA on 15.04.2024, you have raised certain objections against Show Cause Notice dated 31.03.2024 issued in your case for cancellation of registration under section 10(23C)(vi) of the I.T. Act. 2. In the above regard, it is stated that the Notification No. 70/2014 dated 13.11.2014 issued by the CBDT (copy enclosed) clearly provides for the jurisdiction of Principal Commissioner of Income-tax (Central), Bhopal in the matter Further, without prejudice to the aforesaid, the CBDT vide its letter issued through F.No. 173/6/2024-ITA-1 dated 19.01.2024 (copy enclosed) h....
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....(Investigation), Gujarat Ahmedabad 1. Principal Commissioner/Commissioner of Income-tax (Central), Ahmedabad 2. Principal Commissioner/Commissioner of income-tax (Central), Surat Ahmedabad Surat 2. Director General of Income-tax(investigation), Bengaluru Bengaluru 1. Principal Commissioner/Commissioner of Income-tax (Central), Bengaluru (iiia) Principal Commissioner/Commissioner of income-tax (Central), Panaji Bengaluru Panaji 3. Director General of Income-tax (Investigation), Madhya Pradesh and Chhattisgarh Bhopal 1. Principal Commissioner/Commissioner of income-tax (Central), Bhopal Bhopal (i) As per clause (b) and above schedule of the Notification 70 / 2014, the Principal Commissioners (Central) shall exercise powers and perform the functions as stipulated in the Income-tax Act, 1961 in respect of such cases or classes of cases or such persons or classes of persons, assigned to Assessing Officers subordinate to them, under section 127 of the said Act, from the date of publication of the notification. Explanation to section 127 of the Act reads as under: "In section 120 and this section, the word "case", in relation to any....
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....ect Taxes dated 19.01.2024 is in the nature of an internal communication and hence cannot override the provisions of law or decisions of Tribunals. 12. The claim of the assessee is not correct: (a) The said letter dated 19.01.2024 has been only issued as a direction to the field authorities for defending the appeals filed by the department wherein the issue under consideration is that whether cancellation of an order under section 10(23C)(vi) of the Income Tax Act, 1961 is to be done by the CIT (Exemption) or by the concerned PCIT(Central) having a subordinate Assessing Officer to whom the case of the assessee has been assigned under the provisions of section 127 of the Income Tax Act, 1961. (b) In view of the above facts as well as Notification No. 70/2014 dated 13.11.2014, it is absolutely clear that the Principal Commissioner of Income Tax (Central), Bhopal holds jurisdiction over the case for any proceedings under the provisions of Income Tax Act, 1961 including the cancellation of registration granted to the assessee Society u/s 10(23C)(vi) of the Income Tax Act, 1961. (c) It is indeed notable that objection raised by the assessee, vide its ....
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....on u/s 10(23C)(vi) of the Income-tax Act, 1961 on the following two grounds: (a) The AO has made wrong reference to the Principal Commissioner of Income-tax (Central), Bhopal. The assessee has referred to the detailed discussion made in preceding paras of its letter to claim that only CIT(Exemption), Bhopal holds the jurisdiction relating to cancellation of registration u/s 10(23C)(vi) of the Income-tax Act, 1961 granted to the assessee. (b) XXX (not relevant to this issue) 14. However, the assessee's reply is not correct / tenable for the reasons as discussed below: (i) Objection of the assessee relating to jurisdiction has been discussed in detail including at Para 7-10 above. The same may be referred. In view of detailed discussion in these paras and above, the reference under 2nd proviso to section 143(3) of the I.T. Act to the Principal Commissioner of Income-tax (Central), Bhopal for cancellation of registration u/s 10(23C)(vi) of the Income-tax Act, 1961 has been correctly made by the AO. (ii) XXX (not relevant to this issue) 27. Ld. AR submitted that in passing above order against assessee, Ld. PCIT(Central) has taken into....
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....that the ITAT, Delhi has relied upon several judicial precedents and held that in terms of Notification No. 52/2014 and 53/2014 dated 22.10.2014, the CIT(E), Delhi was the appropriate authority and not the PCIT(Central). The relevant paras of ITAT's order are re-produced below: "18. Having regard to the judgment as relied upon by the Ld. A.R we are of the considered opinion that the reference made in terms of 2nd proviso of Section 143(3) of the Act to the PCIT to whom the AO was subordinate is not permissible rather it is the CIT(E) Delhi, having territorial jurisdiction specified in Column 4 of the Notification Nos. 52/2014 and 53/2014 both dated 22.10.2014 from whom exemption inter/alia under Section 12A of the Act is being claimed is the appropriate authority. In fact by and under the said notification the CIT(Exemption) has been constituted separately for the purposes mentioned therein. In that view of the matter the order passed by the PCIT cancelling registration of the appellant society on the reference made by the Assessing Officer is found to be flawed and without jurisdiction." 29. Ld. AR pointed that in the case before Delhi Bench of ITAT, the aforesaid Lett....
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....d No. 4.2, 5 to 6) in favour of assessee. 31. Ld. DR for revenue only relied upon impugned order of Ld. PCIT(Central). 32. We have considered rival submissions of both sides and perused the impugned order passed by Ld. PCIT(Central) on this issue and the legal precedents to which our attention has been drawn. We find that the judicial view is consistently in favour of assessee i.e. the PCIT(Central) had no jurisdiction to deal with cancellation of approval/registration. However, the revenue is relying upon CBDT's letter dated 19.01.2024 to contest that the PCIT(Central) was having jurisdiction. In Para 4 of the letter, the CBDT has also directed the authorities to file M/As before ITAT, Benches or contest before High Court. Further, as informed by Ld. AR and also asserted by Ld. DR, the very same issue decided by co-ordinate bench of ITAT, Indore in Devi Shakuntala Thkaral Charitable Foundation (supra) is also pending before Hon'ble High Court of Madhya Pradesh in department appeal. That apart, we have already quashed the impugned order passed by Ld. PCIT(Central) while adjudicating the first issue (i.e. Ground No. 4.2, 5 to 6) in foregoing para. Therefore, in this situation,....
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....sessee. But in first-appeal, the CIT(A) vide para 5 of his order dated 19.05.2023 (copy of order is filed at Pages 209-221 of Paper-Book-1) deleted the addition and thereafter the department has not filed any further appeal against the order of first appeal passed by CIT(A). Same is the case of AY 2017-18 of assessee, copies of relevant orders are filed at Pages 222-261 of Paper-Book-1. Therefore, according to Ld. AR, the issue of excessive payment of rent to interested person, taken up by Ld. PCIT(Central) as basis for cancellation of approval is not tenable. (ii) So far as the salary payment to interested persons is concerned, Ld. AR submitted a chart giving year-wise details of salaries paid to family members of promoters. Ld. AR contended that the assessee-society had been subjected to scrutiny-assessments for AY 2016-17 and 2017-18 and the assessment-orders passed by AO u/s 143(3) are filed in Paper-Book. Ld. AR submitted that the assessing authority, while carrying out scrutiny assessments, did not raise any objection qua the payment of salaries which shows that the payments have been accepted as genuine. Therefore, according to Ld. AR, the issue of excessive payment....
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....10/2014, S.O. 2915(E) dated 13.11.2014 in exercise af power conferred by sub Section (1) and (2) of section 120 of the Income tax Act, 1961. Vide para (b) of this notification, it has been ordered, Inter alia, that :- "In exercice of the powers conferred by sub-sections (1) and (2) of section 120 of the Income-fix Act, 1961 (43 of 1961) and in supersession of thee notification of the , Government of India, Central Board of Direct Taxes mmmber S.O. 822(E), dated the 2514 August, 2001 published in the Gazelle of India, Extraordinary, Part II, section 3. sub-section (1) dated the 23"" Augue, 2001, except as respects things done or omilied to be done before such, supersession, the Central Board of Direct Taxes hereby :- Page 2 of2 (a) directs thet the Director General of Income-tax or the Chief Commissioner of Income tax specified in column (2) of the Schedule -1 or If awvered to ffus notification, as the case may be (hereinafter referred to as the "said Schedules") or the Principal Commissioner/Commissioner of Income-tax specified in column (4) of the said Schedules ar Joint Commissioners of Income-tax or Assessing Officers, shall continue to exercise powers and perform the f....