TaxTMI 
TaxTMI 
2025 (6) TMI 486
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 the provisions of section 12A of the Act. 3. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....23 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 explanation to section 12AB(4) of the Act, came into effect fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion, 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 (33 of 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 (38 of 20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 appellant obtained the registration on the basis of false information as registration of the appellant trust was cancelled vide order dated 09.05.2018. 2. Erroneous Application of Section 12AB(4) of the Act 2.1 The Learned PCIT erred in invokin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 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 registration of the appellant under Section 12A(1)(ac)(i). b. Restore the registration granted to the appellant under Section 12A(1)(ac) (i) by the CPC vide order dated 31.12.2021. c. Grant any other relief that the Hon'ble Tribunal may deem just and proper in the interest of justice. 6. The Ld. Counsel for the assessee strongly challenged the order of the Ld.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. Counsel for the assessee referring to the amendment to section 12AB(4) submitted that the said amendment cannot be applied retrospectively. He submitted that the Ld. PCIT invoked clause (g) of section 12AB(4) which was introduced only from 01.04.2023. However, the registration in question was granted on 31.12.2021 which was much before this amendment came into effect. He submitted that a substa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T 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 31.12.2021 granted registration to the trust u/s 12A. We find the Ld. PCIT when noticed that the assessee was not having any registration u/s 12A on the date of filing of application in Form 10A on 27.11.2021 however, has indicated "No" in response to the question "whether any application for registration made by the applicant in the past has been rejected" held that the assessee has given false information that it was registered u/s 12....
X X X X Extracts X X X X
X X X X Extracts X X X X
....titution, 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 arguments of the Ld. Counsel for the assessee that the amendment to section 12AB(4) cannot be applied retrospectively as it has not been provided or seen to have explicitly provided to have retrospective character or intention. 21. We find an identical issue had been decided by the Bangalore Bench of the Tribunal in the case of Akash Education & Development Trust vs. PCIT (supra) holding that provisions of section 12AB(4) has no retrospective application. We find the Tribunal after considering the various decisions has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nstitution 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,-- a) The Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or b) The Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or c) Such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year; The Principal Commissioner or Commissioner shall- (i). call for such documents or information ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ear 2021-22, the ld. PCIT if he is satisfied that activities of the Trust or institution are not genuine or not being carried out in accordance with the objects of the Trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such Trust or institution after affording reasonable opportunity of being heard. As per section 12AB(5) of the Act, when Trust or institution complied wholly or in part of the income of such Trust or institution in violation of section 13(1) of the Act or if they complied with any other law, for the time being in force by the Trust or institution as are material for the purpose of achieving its objectives as mentioned in section 12AB(1)(b)(ii)(B) of the Act. However, in the present case, the ld. PCIT invoked the provisions of section 12AB(4)(a)(ii) of the Act as stood in the assessment year 2022-23. The objection of the ld. A.R. is that for the cancellation of registration for the assessment year 2021-22, he could not invoke the provisions of section 12AB(4)(ii) of the Act which is introduced by Finance Act, 2022 w.e.f. 1.4.2022 and this provisions of section 12AB(4)(ii) of the Act is applicable for the assessme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sment 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 to every assessment year up to and including the assessment year 1939-40. This decision is authority for the proposition that though the subject of the charge is the income of the previous year, the law to be applied is that in force in the assessment yea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tters 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 other words, the exemption cannot be denied to the petitioner for and up to the assessment year 2010-11 on the sole ground of cancellation of the certificate of registration." 5.10 In this case, the ld. PCIT has cancelled the registration under the new provisions of the Act i.e. 12AB(4)(ii) of the Act, which specifically provides that cancellation can be done for such previou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is 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 withdraw the approval retrospectively, then the withdraw of the approval u/s 10(23C)(vi) of the Act can only be prospective. Hence such of approval gentled under section 12A from back date are also not according to the law and facts of the case and at the worst after the year of notice it can be done if any." In the case of Indian Medical Trust V/s PCIT (Central) 2019 (6) TMI 996 (Rajasthan) it has been held that: 28. Indisputably, the order dated 16th Jan, 2018, made by the Commissioner of Income Tax thereby canceling the registration granted under section 12A and withdrawing the approval given under section 10 (23C) (v) & 10 (23A) (via) of the Act of 1961, to the petitioner Trust with retrospective effect from the date of 01st April, 2006, was arbitrary in the face of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(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, is quashed. Consequently, the registration granted to the petitioner's society on 1st April, 1999, stands restored for the assessment years under consideration." Thus, keeping in view the above discussion, we are of the opinion that in the present case the ld. Pr.CIT(Central) has no jurisdiction to pass the impugned order. Accordingly, we quash the same. Even otherwise we are also of the view that no retrospective cancellation could be made as neither in the Sec. 12AA(3) nor in Sec. 12AA(4) it has been provided or is seen to have explicitly provided to have a retrospective character or intend. Therefore, without a specific mention of the amended provisions to operate retrospectively no cancellation for the past years could be ordered. In this regard, the Hon'ble Madras High Court on the question as to whether the can....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-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 violation noticed in the subsequent assessment years only and not on the basis of violation in assessment year 2021-22. As such, we make it clear that ld. PCIT is at liberty to pass fresh order of cancellation independently u/s 12AB(4)(ii) of the Act for the subsequent assessment year 2021-22 onwards, if so advised and not on the basis of violation noticed in the assessment year 2021-22. Accordingly, we allow the additional grounds raised by the assessee, order of ld. PCIT dated 27.9.2023 passed u/s 12AB(4)(ii) of the Act is quashed." 22. Further, we find that on the date of application on 27.11.2021 the appeal of the assessee was pending before the Tribunal. It has been held by the Hon'ble Gujarat High Court in the case of CIT vs. Mayur Foundation (supra) that the assessment does not attain the finality unless the matter has been decided by the Tribunal. The relev....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal / cross-objections before the tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although no....