TaxTMI 
TaxTMI 
2025 (7) TMI 31
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....dated 24-09-2021 (Refer page no. 102 to 104 of PB). Thus, the assessee society has been granted/renewed registration u/s 12A by the Income Tax department from inception i.e. FY 1994-05 till FY 2025-26. 4. The Ld. PCIT (Central)-3 has passed the impugned order whereby the registration of the assessee u/s 12A has been withdrawn/cancelled. The reasons given by the Ld. PCIT for withdrawal/cancellation of registration are that during the course of search carried in the case of third parties, incriminating documents/evidences were gathered and it was found by the AO that the Assessee society is indulged in non-genuine activities and that there was diversion of funds of the society, hence there is violation of section 13(1)(c) of the Act. 5. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :- "1. On the facts and circumstances of the case and in law, the order 12A r.w.s. 12AA and Section 12AB (4) of the Act passed by Pr. Commissioner of Income Tax, Central - 3 (hereinafter referred as PCIT) is erroneous, bad in law, without jurisdiction and barred by limitation. 2. On the facts and circumstances of the case and in ....
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.... the case of Lakhmi Chand Charitable Society V. PCIT -Central 3 (ITA No. 1803/Del/2024. It is pertinent to point out that the order u/s 127 in the case of the assessee and the case of Lakhmi Chand Charitable society (supra) is common (Refer page no. 105 of PB). The cases of the appellant and Lakhmi Chand Charitable Society (supra) are arising out of same search. The PCIT cancelling the registration u/s 12A in both the cases is same. The Hon'ble Bench in the case of Lakhmi Chand Charitable Society(supra)vide order dated 22/08/2024 has held the order passed by PCIT to be without jurisdiction. Thus the present case of the appellant stands covered in its favour by the decision of Hon'ble ITAT. 2. It is also pertinent to state that the registration of the appellant u/s 12A has been renewed by the competent authority on 24.09.2021 i.e. much after the date of search on the basis on which adverse inference has been drawn in the case of the appellant. 3. It is further submitted that there is no power/jurisdiction to cancel/withdraw the registration with retrospective effect. This aspect also stands covered in favor of the appellant by ITAT order in case of Lakhmi Chand Cha....
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....cation. Every year, students are admitted. Huge investment is made for construction of buildings for housing the college, hostel and to provide other facilities to the students who are studying in the College. The College is recognized by the Medical Council of India, State of Karnataka and all other statutory authorities. Therefore, it cannot be said that the Trust is not genuine. Admittedly, the students are being admitted every year. Students are studying in all courses. Thus the object of the constitution of the Trust namely imparting of education is going on uninterruptedly. Therefore, it cannot be said that the activities of the Trust are not being carried out in accordance with the objects of the Trust. When the aforesaid two conditions are fully satisfied, on the ground that the trustees are misappropriating the funds of the Trust the registration of the Trust cannot be cancelled. If the trustees are misappropriating the funds, if they are maintaining false accounts, it is open to the authorities to deny the benefit under section 11 of the Income Tax Act, but that is not a ground for cancelation of registration itself. That is precisely what the Tribunal has held. Therefore....
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....shall - (i) call for such documents or information from the trust or institution, or make such inquiry as he things 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) Where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or (b) The trust ....
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....rein registration can be cancelled if the trust has not complied with the requirement of any other law which are material for the purpose of achieving its object and the order/decree by whatever name called, holding such non-compliance has occurred and has either not been disputed or attained finality. 8.1.4 Finance Act, 2020 had inserted a new Section 12AB. The existing Section 12AA providing for cancellation shall remain effective upto 31-03-2021. The new Section 12AB is applicable from 1-04-2021. It has the enabling provision on the same line as in the existing Section 12AA, empowering the Principal Commissioner or Commissioner to cancel the registration in specified cases, Section 12AB (5) corresponds to Section 12AA (4) and the cancellation powers continue to remain similar except the fact that under section 12AB(1)(b)(ii), the CIT may deny renewal of registration and also initiate cancellation proceedings at the time of renewal proceedings. 8.1.5 The new provision has provided yet another power of cancellation under section 12AB(1)(b)(ii)(B) which can be exercised during the process of renewal under section 12AB. The new provisions also provide powers of can....
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....he Act dated 4-6-1992, which was effective till the date of 23-9-2021 and this registration granted u/s 12A cannot be cancelled u/s 12AB(4)(ii) of the Act for the previous year 2020-21 covering the assessment year 2021-22. On the other hand, he could cancel the registration from assessment year 2022-23 onwards u/s 12AB(4)(ii) of the Act. In our opinion, if there is any violation in the previous assessment year 2020-21 relating to the assessment year 2021-22, this cannot be reason to cancel the registration granted for the assessment year 2022-23 to 2026-27 as the assumption of jurisdiction u/s 12AB(4)(ii) of the Act is itself wrong on the reasons discussed herein above. The specific violation committed by the assessee in any of these assessment years is to be considered independently and not the violation committed in assessment year 2021-22 for cancelling the registration granted u/s 12AB of the Act for the assessment year 2022-23 to 2026-27. As such, we make it clear that the ld. PCIT at liberty to pass the fresh order of cancellation independently u/s 12AB(4)(ii) of the Act for these assessment years i.e. 2022-23 to 2026-27, if so advised. Accordingly, we allow this ground taken....
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....ospective. Therefore, we hold that even otherwise the cancellation of registration by the PCIT retrospectively from AY 2016-17 is not tenable. 8. In the case of M/S. AURO LAB VERSUS INCOME TAX OFFICER 2019 (1) TMI 1478 - MADRAS HIGH COURT it was 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 the 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 can not 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 ....
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....e taken care of at the time of assessing the income and if needed the additions can be made to the income of the assessee and the same should be restricted only to the issue involved. However in no case the remaining income of the trust/society should be affected by way of denying the benefit of exemption u/s 11 & 12 of the Act. We accordingly allow ground no.1 2 & 6 of the assessee's appeal." 34. Now going through the above finding of the Coordinate Bench, the crux of the issue is that if it is established that the assessee trust/societies is carrying out genuine activities as per the objects for which they have been established, then the issue arising out of any loose paper/documents/ incriminating material alleging that the funds of the society have been misappropriated or there is ambiguity in the claim of expenses, the same can be taken care of at the time of assessing the income and the additions involving such issues can be made but for the remaining income of the society, benefit of exemption u/s. 11 of the Act cannot be denied. 35. As far as the decisions relied on by the ld. Departmental Representative are concerned, we have gone through all those decisi....
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....ssessee is carrying out genuine charitable activities as per the objects of the trust the ld. PCIT erred in cancelling the registration u/s. 12A/12AB of the Act based on some statements recorded during the course of search but subsequently retracted and other seized material which were the subject matter of assessment proceedings undergoing at that point of time and therefore even if any addition is made by the AO, the benefits of registration u/s. 12A/12AB of the Act shall continue to be enjoyed by the assessee for the remaining amount of income earned by it. Even the assessee succeeds on Ground of appeal No.10 because the 'specified violation' allegedly made by the assessee trust cannot be said to be justified because the word 'specified violation' has been brought into the Act from 01.04.2022 and the alleged violation are based on the documents and details for the F.Yrs. 2019-20 to 2021-22 which are prior to 01.04.2022. Accordingly, Grounds of appeal Nos. 1 and 2 raised by the assessee are dismissed and Grounds of appeal Nos.3 to 10 are allowed. Ground No.11 being general in nature needs no adjudication. 10. In the head note of the decision in the case of Aggarwal Vidya....
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....ng conclusive notice of the alleged 'specified violation' is not sustainable. Thus we are of the considered view that the impugned order has been passed by Ld. PCIT, Gurgaon, without jurisdiction in context to territorial powers and subject matter as well not in accordance with law and same is liable to be quashed. Accordingly, the additional ground raised by the assessee is allowed. It is, therefore, prayed to your honour to allow the appeal." 7. On the other hand, ld. DR of the Revenue submitted written submissions which read as under :- "1. In this case, a search and seizure action under section 132 of the Income-tax Act, 1961 (hereinafter referred to as the 'Act') was carried out on 14.10.2020 in the case of Sh Manoj Kumar Singh. his associates. Sh. Devesh Singh and Sh. Adhir Sachdeva, one of the member of Arya Samaj Model Town Society and other various transacting parties. M/s. Arya Samaj Model Town society runs a school namely GD Goenka Public School (Senior Wing), 3A, Model Town Rd, Institutional Area, Phase 3, Azadpur. New Delhi. A survey under section 133A of Income Tax Act, 1961 was also carried out at GD Goenka Public School (Senior ....
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....is of the proposal and going through the search and assessment records, a show cause notice regarding cancellation of registration of the Society u/s 12AB(4) r.w.s 12A and 12AA of the Act was issued on 16.01.2024 vide DIN no. ITBA/COM/F/17/2023-24/1059775517(1). The said notice was duly served upon the assessee through the declared e-mail as well as postal speed post system requiring the assessee to furnish the relevant details along with supporting documentary evidences, with this office on 15.02.2024. Thereafter sufficient opportunities were afforded to the assessee before cancellation of 12A registration. 4. Cancellation of registration under Section 12A r.w.s 12AA and 12AB (4) of the Income Tax Act, 1961 in the case of Arya Samaj Model Town Trust has been effected by the Principal Commissioner of Income Tax (PC IT Central 3, New Delhi) vide order dated 26.09.2024 in consequence of Search Action under Section 132 of Income Tax Act, 1961 conducted on the premises of Sh. Adhir Sachdeva (Member of Trust/Trustee) and G.D Goenka Public School (Running under Arya Samaj Trust) and others on 14.11.2020. 5. During the course of search various incriminating documents wer....
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.... out of ITA No.3241/DELl2023). Relevant paras of 12AA and 12AB(4) have been reproduced below: 8.1. Section 12AA (3) "Where a trust or an institution has been granted registration under clause (b) of sub-section (1) [or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)]] 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 tile case may be, lie shall pass an order in writing cancelling tile registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.] 8.2. 12AB(4) (c) (inserted w.e.f.01.04.2022) the Principal Commissioner or Commissioner shall,- (i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified vi....
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....d 09.08.2024 of Hon'ble ITAT is reproduced as under: 9.7. In view of the above facts, we are of the view that in absence of consideration of the Board Notification No. 70/2014 dated 13.11.2014 in the above three case laws. we cannot hold that tile Pro CIT(Central-2), Delhi lacked jurisdiction to pass the order dated 30.09.2023, cancelling the registration of the assessee trust. 9.8. Similarly, on the issue of the jurisdiction of the PI'. CIT(Central-2), Delhi to cancel the registration with retrospective effect, it is observed that Delhi Bench of the Tribunal in the case of Young Indian (supra), had considered all the high court judgments relied by the assessee in the following Paras 49 and 88, and proceeded to hold that the PCIT had the power to cancel the registration with retrospective effect as under in Pam 121. The relevant paras are as under: 121. Nowhere, the Statute envisages that the cancellation cannot be retrospective or it has to be necessarily prospective. What it provides that the Commissioner has statutory powers to cancel the registration u/s. 12A/12AA if he finds reason to believe that the activities of the assessee are not in lin....
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....he authorities below. 11. The case of the assessee is this that the reference dated 04.05.2022 and also dated 31.07.2023 made by the Assessing Officer on the basis of 2nd Proviso to Section 143(3) of the Act is not applicable in the case in hand. The said reference granted under Section 12AA can only be made during the pendency of the assessment proceedings which admittedly has been concluded on 29.03.2022 for the appellant before us. According to the appellant's counsel such reference could have been made only during the course of assessment proceedings so that the effect of such order passed by the PCIT can be considered while passing final order of assessment by the Assessing Officer. In the case in hand as the assessment proceedings has already been concluded on 29.03.2022 the effect of such alleged violation cannot be made in the assessment order itself as was the main argument advanced by the Ld. Counsel appearing for the assessee before us. 11.1 Moreso, this particular 2nd proviso to Section 143(3) of the Act was substituted and made effective from 01.04.2022 whereby and whereunder the Assessing Officer has been vested with the power to make reference to th....
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....llation of Registration for Assessment Year 2015-16 to 2021-22 is totally unlawful and ultravires to the provisions of Section 12AB(4) of the Act. 16. As per the contentions made by the Ld. Counsel appearing for the assessee before us that the jurisdiction to grant and/or withdrawing exemption vest with the Ld. CIT(Exemption). The transfer to case under Section 127 of the Act by and under the order dated 04.01.2021 is only for the purpose of coordinated assessment and not for the purpose of exercising jurisdiction for cancellation of registration. In that view of the matter it cannot be assumed that with the transfer of case of the appellant under Section 127 of the Act for coordinated assessment by the CIT(Exemption) Delhi by and under the order dated 04.01.2021 also transfers the proceedings for cancellation of registration. The order under Section 127 dated 04.01.2021 does not speak that Section 12A registration has also been transferred to the jurisdiction of Ld. PCIT, Central Delhi and thus exercising such powers by the said PCIT-3 for cancellation of registration is not in terms of the statutory provision rather bad in law and therefore, liable to be quashed. ....
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....diction by Ld. PCIT, Gurgaon, will be first relevant to reproduce the section 127 of the Act as follows- "Power to transfer cases. 127. (1) The Principal Director General or Director General or Principal Chief Commissioner Of Chief Commissioner 01 Principal Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after 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 of 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 of Principal Commissioner or Commissioner, (a) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissi....
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....h registration (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub section (1) of section 12A, shall, (a) where the application is made under sub clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years, (b) where the application is made under sub-clause (11) or sub-clause (iii) or sub clause (iv) or sub clause (v) of the said clause,-- (1) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about (A) the genuineness of activities of the trust or institution, and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects, and (ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under Item (A), and compliance of the requirements under item (B), of sub-clause (1), (A) pass an order in writing registering the trust or institution for a period of fiv....
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....d 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, then, the Principal Commissioner of the Commissioner may, by an order in writing, after affording a reasonable opportunity of being heard, cancel the registration of such trust or institution." Rule 17A "(5) On receipt of an application in Form No. 10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting registration under clause (a), or clause (c), of sub-section (1) of section 12AB read with sub-section (3) of the said section in Form No. 10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (1) of the sub-rule (1). (6) If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub rule (1) or (2) ог by not complying with the requirements of sub-rule (3) or (4), the Principal Commissioner or Commissioner, a....
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....d post search investigation & meaningful assessment Accordingly, in exercise of power conferred by sub-section (2) of Section 127 of the Income Tax Act, 1961 and under all other powers enabling me in this behalf, 1, the Commissioner of Income Tax (Exemptions), Chandigarh hereby transfer the following case(s), particulars of which are mentioned hereunder in Columns (2) and (3) from the Assessing Officer mentioned in Column (4) therein, to the of the Assessing Officer mentioned in Column (5) - Sr. No. Name and address of the assessee PAN From To (1) (2) (3) (4) (5) 1. M/s. Aggarwal Vidhya Pracharni Sabha (Aggarwal College, Ballabhgarh) AABTA3490Q Circle - 2(E), Chandigarh DCIT, Central Circle - 2, Faridabad. DLC CC-136-4 This order shall take effect from 26.10.2020." 12. We also consider it appropriate to reproduce the relevant part of the Notification dated 22.10 2014 providing for the territorial jurisdiction of CIT(E) in furtherance of powers given to the Board u/s 120 (1) and (2) of the Act, made available at pages 2 to 5 of the paper book:- "NOTIFICATION New Delhi, the 22nd October, 2014 (Income Tax....
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....and it will be relevant to reproduce para 1 of this circular here below; "Circular No. 11 of 2022: MANU/DTCR/0011/2022 F. No.370142/4/2021-TPL Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes (TPL Division) Dated: 3rd June, 2022 Sub: Clarification regarding Form No 10AC issued till the date of this Circular - reg. Finance Act, 2022 has inserted sub-section (4) in section 12AB of the Income-tax Act, 1961 (the Act) allowing the Principal Commissioner or Commissioner of Income-tax to examine if there is any "specified violation" by the trust or institution registered or provisionally registered under the relevant clauses of sub-section (1) of section 12AB or subsection (1) of section 12AA. Subsequent 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 (230) of section 10 of the Art by substituting the fifteenth proviso of the said clause with respect to fund or institution trust or institution or any universi....
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....f "Assessing officer" u/s 2(7A) of the Act, certainly PCIT, Gurgaon, who has passed the Impugned order is not an 'assessing officer, and order passed dated 26.10.2020, under sub clause (a) to sub-section (2) of section 127 of the Act only referred to transfer of Jurisdiction of 'assessing officer subordinate to CIT(E) Chandigarh to DCIT, Central Circle-2, Faridabad DLC-CC-136-4 as assessing officer and not original jurisdiction of CIT(E) Chandigarh with regard to the subject matter as stands vested by order of CBDT dated 22/10/2014. 14.1 Further, what is material is that by the Notification dated 22.10.2014 the Board, exercising powers under sub-section (1) and sub-section (2) of section 120 vested powers to perform all the functions in respect of class of cases referred in the column No.5 of the Schedule of this Notification and had created a specific jurisdiction on territorial basis in regard to the provisions generally dealing with claim of exemptions u/s 10,11,12, 13A and section 138 of the Act. 14.2 Thus as we refer to the Notification dated 22.10.2014, the clause (a) vested powers with Commissioners of Income-tax (Exemptions), for class or class of ....
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.... per this Notification. The query was left unsatisfied and no other Notification a Circular was brought to our notice." 15. Thus, at one end, in the absence of any specific reference of section 12AB in the Notification dated 22.10.2014 or there being subsequent authorisation by any Circular or Notification of the Board, we conclude that at the time of passing the order u/s 127 of the Act on 26.10.2020, CIT(E), Chandigarh did not have powers to as such transfer his jurisdiction u/s 127(2)(a) of the Act, for the purpose of Section 12AB has come into effect from 01.04.2021 Accordingly, under no circumstance while passing order u/s 127 of the Act on 26.10.2020, CIT(E), Chandigarh could have transferred his powers u/s 12AB of the Act to any other authority. 15.1 On the other hand, Id. PCIT, Gurgaon by virtue of the Explanation defining the scope of 'case' for the purpose of section 127, did not have power vested in him to cancel registration u/s 12AB(4) The 'case' refers to assessment initiated as a consequence of search or consequential proceedings to such assessments only and cannot be extended to special powers of Id. CIT(E), Chandigarh, Thus, the as....
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....1. In the light of the aforesaid discussion and the law cited before us, we are of the considered view that the impugned order has been passed by Ld. PCIT, Gurgaon, without jurisdiction in context to territorial powers and subject matter as well not in accordance with law and same is liable to be quashed. Accordingly, the additional ground raised by the assessee is allowed. Since the relief is granted to assessee by allowing additional ground itself, the adjudication of other grounds raised by the assessee become academic in nature and are left open. Resultantly, the appeal of the assessee is allowed and the impugned order is quashed." 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(E....
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....lowing registration could be cancelled: 8.2.1 The PCIT/CIT 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 the authorities. 8.3 As seen from the above, since the assessee has secured the registration u/s 12A of the Act dated 4.6.1992, which was effective till the date of 23.9.2021 and this registration granted u/s 12A cannot be cancelled u/s 12AB(4)(ii) of the Act for the previous year 2020-21 covering the assessment year 2021-22. On the other hand, he could cancel the registration from assessment year 2022-23 onwards u/s 12AB(4)(ii) of the Act. In our opinion, if there is any violation in the previous assessment year 2020-21 relating to the assessment year 2021-22, this cannot be reason to cancel the registration granted for the assessment year 2022-23 to 2026-27 as the assumption of jur....