TaxTMI 
TaxTMI 
2025 (6) TMI 486
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.... 132 of the Act on 06.08.2013 in the case of STES and Maruti Nivruti Navale group, Pune. The Ld. PCIT noted that as per the examination of the seized material and post-search enquiries conducted, it was gathered that STES had indulged in activities which were not in accordance with the objects specified in the trust deed and the spirit of charitable activity. Moreover, there were strong evidences gathered during search action leading to the conclusion that STES is not existing solely for the purpose of charitable activity of education but is indulging in activities for the purpose of earning profit since it was found to be accepting cash donations/capitation fees for admitting the students under the management quota in the educational institutions run by it. Further such donations/capitation fees were kept outside the books of accounts of STES. The cash so collected was being siphoned off by the Chairman & Founder Trustee Shri M.N. Navale for his personal enrichment. Accordingly, it was held that the assessee trust was being used for the purpose of earning profit from activities which are beyond the stated objects of the trust and therefore, is not entitled to registration under th....
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....5.2018 was dismissed by the Hon'ble ITAT on 07.02.2023 and accordingly, the cancellation of the registration of the assessee trust was upheld by the Hon'ble ITAT. The assessee has further stated that at the time of filing application i.e. 27.11.2021, cancellation order was still under appeal at that time. In this context, it is pertinent of mention here that by merely filing of appeal before Hon'ble ITAT the assessee does not get entitled to any relief and hence order of Pr.CIT(C), Pune dated 09.05.2018 was in force on 27.11.2021, i.e. date of filling of application in Form 10A before CPC for registration under the new provisions. Thus, as on 27.11.2021 i.e. date of filing of application in Form 10A, the assessee was not having any registration u/s 12A of the Act. Therefore, the contention of the assessee is incorrect and not acceptable and accordingly, the assessee furnished false information while filing application for registration u/s 12A(1)(ac)(i) of the Act. 9.1 The assessee has also contended that the allegation that the Society's application contained false or incorrect information is not true. The assessee further contended that clause (g) of the e....
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....nd the trust's activities since 2021 have been focused solely on its charitable purpose. In addition to above, the assessee submitted that CPC, after due verification, granted registration for the period from A.Y. 2022-23 to A.Y. 2026-27. It is pertinent to mention that the assessee applied for registration u/s 12A(1)(ac)(i) of the Act. It is to be observed that provisions of section 12A(1)(ac)(i) of the Act, are applicable for the assessee, where the trust is already registered u/s section 12A [as it stood immediately before its amendment by the Finance (No. 2) Act, 1996] or under section 12AA (as it stood immediately before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act. 2020]. Section 12A(1)(ac)(i) reads as under: "(ac) notwithstanding anything contained in clauses (a) to (ab), the person in receipt of the income has made an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution- (i) where the trust or institution is registered under section 12A [as it stood immediately before its amendment by the Finance (No. 2) Act, 1996 (3....
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....powers vested in me under sub-section (4) of section 12AB of the Act, hereby cancel the registration granted to assessee by CPC us 12A(1)(ac) of the Act, vide order dated 31.12.2021, for the period from A.Y 2022-23 to 2026-27." 5. Aggrieved with such order of Ld. PCIT, the assessee is in appeal before the Tribunal by raising the following grounds: On facts and in law 1. Violation of principles of natural justice 1.1 The Ld. PCIT has erred in passing the impugned order without properly considering and appreciating the submissions made by the appellant. 1.2 The Ld. PCIT erred in not offering the opportunity to the appellant to rebut the findings and also failed to consider the detailed submissions made by the appellant on 28.01.2025 and 01.02.2025. 1.3 The cancellation order passed u/s 12AB(4) of the Act is passed in an arbitrary manner and without application of independent mind to the facts and circumstances of the case and thereby violating the principle of natural justice. 1.4 The Ld. PCIT has grossly erred in cancelling the appellant trust's registration u/s 12A(1)(ac)(i) of the Act solely on the ground that the appell....
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..... No Finding on Charitable Activities Conducted Post-Registration 5.1 The Ld. PCIT failed to examine or make any adverse finding on the actual charitable activities carried out by the appellant post-registration in 2021. 5.2 Even if there were prior alleged violations, the activities of the appellant post-registration were in full compliance with the provisions of the Act, making cancellation unwarranted. 5.3 In absence of any adverse finding on the nature and genuineness of the activities, the cancellation of registration is arbitrary and unjustified. 6. Reliance on Alleged Past Violations Without Any New Findings 6.1 The cancellation of registration has been based entirely on past allegations that led to the cancellation of registration in 2018, which has already been adjudicated upon. 6.2 No fresh violations or contraventions have been established post-registration in 2021, and hence, the cancellation order is based on irrelevant and extraneous considerations. 7. The Appellant prays that the Hon'ble Tribunal may: a. Quash and set aside the order passed by the Ld. PCIT under Section 12AB(4) cancelling the....
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....application the assessee was justified in applying for new registration. 9. Referring to the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Mayur Foundation (2005) 274 ITR 562 (Guj), he submitted that the Hon'ble High Court in the said decision has held that Assessment proceedings remain pending until the Tribunal disposes of the appeal and its order is given effect by the assessing authority. Hence, a proceeding cannot be considered complete until the appeal process is exhausted. 10. Referring to the decision of the Hon'ble Patna High Court in the case of CIT vs. Jhaberbhai Biharilal & Co. (1988) 171 ITR 362 (Pat), he submitted that the Hon'ble High Court in the said decision has held that If the quantum appeal is pending, penalty proceedings cannot be concluded. If the appeal results in deletion, there can be no penalty. The assessment attains finality only after the appeal process is complete. He accordingly submitted that by applying this principle the assessee's registration could not have been considered final at the time of fresh application on 27.11.2021 since the 2018 cancellation order was still under appeal before the Tribunal. 11. The Ld.....
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....f Inclusive Recycling Foundation v. Commissioner of Income-tax, Exemption (2025) 171 taxmann.com 386 (Pune - Trib.), he submitted that the registration cannot be rejected on the basis of error in application form without giving adverse finding on merits. He accordingly submitted that the cancellation of registration u/s 12AB(4) by the Ld. PCIT be set aside. 16. The Ld. DR on the other hand heavily relied on the order of the Ld. PCIT cancelling the registration u/s 12AB of the Act. 17. We have heard the rival arguments made by both the sides, perused the order of the Ld. PCIT and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case the registration granted to the assessee u/s 12A of the Act was cancelled by the PCIT vide order dated 09.05.2018 effective from financial year 2007-08. The assessee filed an appeal against the order dated 09.05.2018 of the PCIT which was dismissed by the Tribunal on 07.02.2023. In the meantime, in view of the amended provisions of the Income Tax Act, 1961 the assessee applied for fresh registration in Form 10A on 27.11.2021 and the Ld. PCIT / CPC vide order dated ....
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.... as he thinks necessary in order to satisfy himself about the occurrence 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 trust or institution. Explanation.-For the purposes of this sub-section, the following shall mean "specified violation",- (a) ...... (g) the application referred to in clause (ac) of sub-section (1) of section 12A is not complete or it contains false or incorrect information." 20. A perusal of clause (g) of Explanation to section 12AB(4) shows that the same was inserted by the Finance Act, 2023 w.e.f. 01.04.2023. We, therefore, find force in the....
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....el the registration u/s 12AA/12AB of the Act granted to the assessee in AY 2021-22 and onwards as this section 12AB(4)(ii) of the Act have no retrospective application. For clarity, we will go through the relevant provisions applicable to previous year 2020-21 relevant to assessment year 2021-22 as follows: "12AB(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." 5.3 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,-- ....
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....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 which it was registered; or 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 sub-section (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. 5.4 As 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....
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....le that ―in income-tax matters the law to be applied is the law in force in the assessment year unless otherwise stated or implied." This decision and various other decisions were considered by the Constitution Bench of this court in the case of Karimtharuvi Tea Estate Ltd. v. State of Kerala (1966) 60 ITR 262 (SC) and the principle were laid down in the following terms (at pages 264-266 of 60 ITR): "Now, it is well-settled that the Income-tax, as 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 answere....
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....er or intended. Therefore, without a specific mention of the amended provisions to operate retrospectively, no cancellation for the earlier years could be made. In this regard, it is appropriate to place reliance on the judgement of Hon'ble Madras High Court on the question as to whether the cancellation will operate from a retrospective date in the case of Auro Lab Ltd. 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 c....
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.... wherein held as under: "6.9 We further observe that the ld. Pr.CIT (Central) cancelled such approval from A. Y. 2014-15, though the assessee has already assessed from A.Y. 2014-15 under section 143(3)/148 of the Act. It is also settled legal position of law that Registration cannot be cancelled from retrospective effects. In this regard, the ld AR has relied on the decision of the Hon'ble Supreme Court in case of State of Rajasthan and others vs Basant Agrotech India Ltd. and other 388 ITR 81(SC) wherein it has been decided that "only a legislation can make a low retrospective and prospectively subject justifiability and acceptability within the constitutional parameters. The subordinate legislation can be given with retrospective effect if a power in this behalf is contained in the principle Act. In the absence of such conferment of power the Government the delegated authority has no power to issue a notification with retrospective effect. Therefore, in the absence of any provision contained in legislative Act the delegatee cannot make a delegated legislation with retrospective effect. When no power has been conferred by the act on the competent authority to....
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....ged. The profit margin embodied in the charges taken from the students are so huge and it proves the profit motive of the petitioner. The funds were misused by the president and his family members of the petitioner. 20. The expression "charitable purpose" is defined in Section 2(15) of the IT Act, 1961. It is of inclusive nature as revealed in the language. Earlier the words "the advancement of any other object of general public utility" in this definition were succeeded by the words "not involving the carrying on of any activity for profit". These words were omitted by the Finance Act, 1983, w.e.f. 1st April, 1984. 26. In the light of the above discussion and by considering the totality of the facts and circumstances of the case, we hold that the order dt. 9th March, 2004, passed by the CIT (Annex. No. 15 to the writ petition) as per the then law is without power and jurisdiction and therefore, it is liable to be set quashed. 27. Accordingly, the impugned order dt. 9th March, 2004, passed by opposite party No. 2 withdrawing/rescinding the order granting registration on 1st April, 1999, to the petitioner's society under Section 12A of the Act....
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.... we are also of the view that cancellation of registration with retrospective effect is invalid in the present case. 6.10 We also noticed that the ld. Pr. CIT (Central) has stated that the assessee trustees involved in earning of illegal/unaccounted income in the garb of capitation fees which is against public policy and income of the trust has been applied for the benefit of the persons referred to in section 13(3) of the IT Act which cannot be covered within the meaning of charitable activities. Since we have quashed the order of the Ld. PCIT (Central), there is no necessity to adjudicate these issues." 5.14. Further, in the present case, ld. PCIT has 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 AY 2021-22 and onwards, which is bad in law. As such, assumption of jurisdiction for cancelling the registration of subsequent to AYs 2021-22 is also bad in law. If there is any specified violation in subsequent assessment years from AY 2021-22 and onwards, which could be cancelled by the ld. PCIT on pointing out the specified vi....
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....nded on behalf of the revenue that the assessment proceedings come to an end when the assessment order is framed. The contention on behalf of the revenue to equate the assessment order with assessment proceeding is based on a fallacious premise. 12. The aforesaid view that this Court is taking finds support from the decision of the Apex Court in case of National Thermal Power Co. Ltd. v. Commissioner of Income Tax, [1998] 229 ITR 383. The Apex Court held that the Tribunal has jurisdiction to examine a question of law which arose from the facts as found by the income tax authorities and having a bearing on the tax liability of the assessee. The powers of the Tribunal under Section 254 of the Act and the discretion that the Tribunal has to entertain or not entertain a new ground have been explained in the following words, in the aforesaid decision : "Under Section 254 of the Income Tax Act, 1961, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The powers of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment....
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....noticed hereinbefore, the Tribunal has categorically found that "the additional ground involves the question relating to interpretation of Section 11(2) and the facts on the basis of which such a decision is to be given regarding interpretation of Section 11(2) are not at all in dispute". In the circumstances, there is no infirmity in the order of the Tribunal, holding that the assessee is entitled to benefits allowable under Section 11(2) of the Act. 15. The question referred to the Court is accordingly answered in light of the opinion expressed hereinbefore in favour of the assessee and against the revenue. There shall be no order as to costs." 23. Since the assessee in the instant case has applied for registration in Form 10A on 27.11.2021 on which date the order cancelling the registration granted earlier was pending before the Tribunal for adjudication, therefore, the assessment has not attained finality and since the provisions of clause (g) to Explanation to section 12AB(4) of the Act were inserted by the Finance Act, 2023 w.e.f. 01.04.2023, therefore, we are of the considered opinion that the Ld. PCIT should not have cancelled the registration merely on the grou....