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TaxTMI 
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2025 (9) TMI 1442
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....uence of such defective notice is void being without proper jurisdiction. 2. Without prejudice to ground 1 above, in view of the facts and legal position, in Sec. 127 power of transfer of jurisdiction is given from one Assessing Officer to other Assessing officer not from CIT to CIT (as CIT is not an assessing officer). Hence in the present case, assumption of jurisdiction by the Pr. CIT(Central)-II U/s 127(2) is bad in law. Consequently, the show cause notice issued as well as the consequent order passed by the Pr. CIT(Central)- II, is void ab-initio, illegal and without jurisdiction and liable to be quashed being unsustainable in the eyes of law. 3. (a) The Ld. Pr. CIT(Central) grossly erred in law as well as on the facts of the case in invoking section 12AA(3) of the Act for cancelling the Registration granted u/s 12A without the requisite preconditions contained therein being fulfilled. The reasoning stated by the Hon'ble commissioner do not give him a valid jurisdiction to invoke section 12AA(3) at that relevant point of time (CBDT circular 21 of 2016 dated 26 May 2016) Consequently order of the Commissioner cancelling registration U/s 12A, devoid of vali....
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....on. Consequently, the show cause notice issued as well as the consequent order passed by the Pr. CIT-II, is void ab-initio, illegal and without jurisdiction and liable to be quashed being unsustainable in the eyes of law. 6. It is the say of the ld AR that the order of grant/cancellation of registration should be passed by the CIT( E) only as the CIT(E) only has the jurisdiction over Trust cases and cited the Notification of CBDT no. 52 dated 22.10.2014 which states that for the Headquarter at Delhi, for Territorial area of National Capital Territory of Delhi, "All cases of persons in the territorial area specified in column (4) claiming exemption under clauses (21), (22), (22A), (22B), (23), (23A), (23AAA), (23B), (23C), (23F), (23FA), (24), (46) and (47) of section 10, section 11, section 12, section 13A and section 13B of the Income-tax Act, 1961 and assessed ог assessable by an Income-tax authority at serial numbers 88 to 111 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014", the jurisdiction lies with CIT(Exemption), Delhi-2. 7. The ld AR also drew our attention to Notification no 53/2014 dated 22.10.2....
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....he case of Pacific Academy of Higher Education and Research Society in ITA 04/JODH/2020 and Gyan Sagar Education & Charitable Trust in ITA 6054/Del/2018.The ld AR emphasized that transfer of jurisdiction u/s 127 is made for granting rights to the AO to assess the income of the Trust and it does not grant power to grant/cancel registration to the PCIT(Central). The ld. counsel for the assessee prayed that the order of the PCIT(C) cancelling registration u/s 12A, devoid of valid jurisdiction, needs to be set aside. 9. On merits of the case, the ld. counsel for the assessee vehemently contended that the ld. Pr. CIT(C) grossly erred in invoking provisions of section 12AA(3) of the Act for cancelling the Registration granted u/s 12A without the requisite preconditions contained therein being fulfilled. The reasoning stated by the Hon'ble PCIT(C) do not give him a valid jurisdiction to invoke section 12AA(3) at that relevant point of time. The ld AR relied on the CBDT Circular 21 of 2016 dated 26 May 2016; cases of Sarvodya Pannan 348 ITR 300 (Mad HC); Khar Gymkhana 385 ITR 162 (Bom HC) and Maria Social Service Society 408 ITR 462 (Mad HC). 10. The ld AR further argued that the....
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....Delhi with effect from 01.12.2016 and that the transfer was effected for administrative convenience. 14. The ld DR further stated that once the jurisdiction over the 'case' of M/s Advantage India was transferred from ACIT(E), Cir 1(1), Delhi, to Central Cir-16, Delhi, the PCIT(C)-2, Delhi, together with the assessing officer Central Cir-16, Delhi, assumes the jurisdiction over the assessee for all proceedings under the Act, be it assessment or grant/cancellation of registration. The ld DR explained the hierarchical structure of the office of CIT(E) by stating that the CIT(E), in his charge, supervises the functions of Additional Commissioners called Range heads and each Additional Commissioners/Range heads have Assessing Officers. The CIT(E) supervises his charge and is entrusted with function of grant/cancel registration of Trust falling under his jurisdiction. Apart from supervision, the CIT(E) has power to transfer the case from one AO to another, as also AO of another PCIT charge; assume jurisdiction u/s 263; grant approval for issuing refunds and issue of notices u/s 148; to initiate coercive action or stay of demand etc. The Assessing Officer, on the other hand, would carr....
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....e CIT (Exemption) does not exercise any jurisdiction in respect of persons claiming exemption under section 11, section 12 of the Act which have been assigned to the Assessing Officers subordinate to Principal Commissioner of Income-tax (Central), under section 127 of the Act". Further, "by virtue of provisions of clause (b) of the notification no. 70/2014, S.O. 2915(E) dated 13.11.2014, the PCIT(C) has been empowered to perform/exercise powers and functions stipulated in the Act in respect of such cases or classes of cases or such persons or classes of persons, which were assigned to AO subordinate to him, under section 127 of the Act". 17. The ld DR forcefully submitted that from above notification 70/2014, it is clear that, once the case is transferred to PCIT(C) u/s 127 of the Act, the PCIT(C) was having all powers which have been entrusted to the CIT(Exemption) vide notification dated 22.10.2014. The present AO ie. DC/ACIT, Central Circle was subordinate to the PCIT(C)-2, Delhi and by virtue of provisions of clause (b) of the above notification, the PCIT(C) was empowered to perform/exercise powers and functions stipulated in the Act in respect of such cases which were assig....
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....on of the entities from which purchases were made. Physical verification by the ITI revealed that none of the parties found to be existing. Sh. Raman Kapoor in his statement accepted he had taken purchases entries through one Sh. Sunil Khandelwal. Purchase of Medicine from entities like Aastha Pharma and Hind Pharma were found to be nonexistent at the addresses provided. Report of the field enquiries done by the ITI found that for purchase of exercise note books, there was no due diligence in selecting the supplier. The ld DR pointed out that as regards the Travelling Expenses debited by the Society, it was found that most of the expenses incurred in the travelling of Sh. Deepak Talwar, and booking done through Stone Travels Pvt. Ltd, a company controlled by the Talwars. The ld DR drew our attention towards payment made to consultant Sh. Tarun Kapoor through the accounts of the Society was not for the purposes of the Society but for providing consultancy services to the group concerns of Talwars viz Wave Impex and Wave Hospitality Pvt. Ltd. Sh. Tarun Kapoor admitted the same in his statement. The ld DR further pointed out that the funds of the Society were used for business purpose....
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..... Deepak Talwar. 23. On the basis of search, the case of the society was transferred by the CIT(E) to the AO Central Cir-16, Delhi under the charge of Pr.CIT(Central)-2, Delhi. The AO Central Cir-16, on the basis of the findings in the search on the Talwar Group and the survey on the Society, completed the assessment for A.Υ. 2010-11 & 2011-12, brought to tax the receipts of the society and denied the exemption u/s 11 of the Act. The AO forwarded a proposal for cancellation of 12AA to the PCIT(C) vide letter dated 27.11.2017 along with a copy of Inspection Report by the FCRA Wing of Ministry of Home Affairs dated 04/8/2017 which observed violation of FCRA. The PCIT(C) issued a show cause notice (SCN) leading to cancellation of Registration granted u/s 12AA of the Act. 24. At this juncture it would be apposite to narrate the various Notifications, provisions of law governing the issues at hand. First, the order u/s 127 of the Income Tax dated 01.12.2016 in the case of the assessee, ACIT(E), Cir 1(1), Delhi under the charge of CIT(Exemption), Delhi to Central Cir-16, Delhi under the charge of Pr.CIT (Central)-2, Delhi. "F.No.CIT(E)/Centralization-127/2016-17/15....
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....ve been completed on or before such date, and also includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year." 26. At this juncture, we note that the Hon'ble Delhi High Court in the case of CIT v. Sahara India Financial Corporation Ltd., (2007) 294 ITR 363 (Del) has explained what the Explanation to section 127 says and what the term 'case' means in relation to any person whose name is specified in any order or direction issued under section 127. In the said Explanation, 'case' means all proceedings under the Act in respect of any year: (a) which may be pending on the date of the order or direction; (b) which may have been completed on or before the date of the order or direction; (c) including all proceedings which may be commenced after the date of the order or direction in respect of any year. It was similarly held in the case of CIT v. AAR BEE Industries, (2013) 357 ITR 542 (Del). The word "case" is thus used in a more comprehensive sense of including (i) pending proceedings as well as (ii) proceedings to be initiated in future as held in CIT v. Bidh....
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....ties at the same time. In such a scheme of things, the PAN of an assessee can not lie with one CIT for some proceedings under the Act and the same PAN will simultaneously lie with another CIT for some other proceedings under the Act. The system does not allow the AO under the PCIT(C) to make only the assessment of the Trust and at the same time allow the CIT(E) to carry out functions of granting/cancelling registration of the same Trust. When the PAN is transferred from CIT(Exemptions) charge to the Pr.CIT(Central) charge, the entire 'case' and the associated 'proceedings' will be transferred to the PrCIT(Central). In such a situation, the CIT(Exemptions) can not 'see' the case/assessee in his jurisdiction to take action for registration/cancellation u/s 12AA. The CIT(Exemptions) will be incapacitated to issues any communications to the assessee nor will he be able to generate any DIN in respect to the said assessee. We are therefore of the considered view that once the PAN of the assessee was transferred from the ACIT(E), Cir 1(1), Delhi to Central Cir-16, Delhi, all the functionality and proceedings, pending or completed or to be taken in future, is also transferred from CIT(E) a....
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....f this notification; (c) authorises the Director General of Income-tax or the Chief Commissioner of Income-tax specified in the said Schedules, or the Principal Commissioner/Commissioner of Income-tax specified in column (4) of the said Schedules, to issue orders in writing, vesting jurisdiction to exercise powers and perform functions of an Assessing Officer as defined under clause (7A) of section 2 of the said Act, to the Deputy Commissioner of Income-tax or Assistant Commissioner of Income-tax or Income-tax Officer who are subordinate to them. 2. This notification shall come into force with effect from the 15th day of November, 2014 SCHEDULE - II Sl. No Chief Commissioner of Income-tax (Central) Headquarters Principal Commissioner/Commissioner of Income-tax (Central) Headquarters (1) (2) (3) (4) (5) 1. Chief Commissioner of Income-tax (Central), Delhi Delhi (i) Principal Commissioner /Commissioner of Income-tax (Central), Delhi -1 Delhi (ii) Principal Commissioner/ Commissioner of Income-tax (Central), Delhi - 2 Delhi (iii) Principal Commissioner /Commissioner of Income-tax (Central), Delhi - 3 Delhi ....
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....es or Joint Commissioners of Income-tax subordinate to them, shall exercise powers and perform the functions as stipulated in the said Act 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 this notification;" 33. A reading of clause(b) of the Notification 70/2014(supra) conjointly with the Explanation of section 127 leaves no room for doubt as to the intention of the Legislature as to the jurisdiction to be exercised by the authorities concerned over a class of case once order u/s 127 is issued. In the instant case, once the order u/s 127(2) dated 01.12.2016 was issued by the CIT(Exemptions), Delhi transferring the case of the assessee from ACIT(E), Delhi to Central Cir-16, Delhi under the charge of Pr.CIT(Central), Delhi, by virtue of Explanation to section 127 and Notification no 70/2014, the Pr.CIT(Central), Delhi assumes the jurisdiction over the assessee for all purposes and proceedings whether pending or completed or to be commenced, in respect of any year. In the instant case, the CIT(Exemptions), Delhi has specifically t....
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....m. 35. Now that the issue of assumption of jurisdiction by the Pr.CIT(Central) is out of the way, we dwell on the decision relied upon by the assessee on this issue. The assessee has heavily relied on the decision of coordinate Bench of ITAT in the case of Agarwal Vidya Pracharni Sabha (supra) which in turn relied on the Jaipur bench of ITAT in the case of M/s Wholesale Cloth Merchant Association (supra); Jhodpur ITAT Bench order in the case of Pacific Academy of Higher Education and Research Society (supra) and Gyan Sagar Education & Charitable Trust (supra). We find that the Coordinate Bench of ITAT has arrived at its conclusion, in the case of Agarwal Vidya Pracharni Sabha (supra), on the basis of Notification no 52/2014 and 53/2014 dated 22.10.2014 which provided territorial and subject jurisdiction to CIT(Exemptions) over cases claiming exemption u/s 10, 11,12,13A and 13B of the Income Tax Act. In effect the ITAT quashed the Pr.CIT(Central) order in the above case, holding that the PCIT(C), Gurgaon had passed order without jurisdiction in context to the territorial powers and subject matter and that the transfer of jurisdiction u/s 127 is made for granting rights to the AO ....
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....y further notification by virtue of which the power exercised by the PCIT u/s 12AB(4) of the ACT which had come into effect from 01.04.2021 would also be exercised or that further jurisdiction u/s 12AB of the Act could be transferred to other authorities as per this notification was left unsatisfied and no other Notification or Circular was brought to the notice. The relevant observation of the Tribunal in para 14.5 is reproduced as under:- "14.5 The Rule 17A, as clarified by Circular dated 3rd June 2022 provides that in addition to the 'specified violations', the power of cancellation has also been granted under sub-rule (5) of rule 17A and sub-rule (5) of rule 2C of the Income tax Rules, 1962 to the Principal Commissioner or Commissioner authorised by the Board. The authorisation u/s 12AB or Rule 17A if have to be construed, by virtue of Board's Notification dated 22.10.2014, then we pointed out during the hearing, to ld. DR that this Notification dated 22.10.2014 does not mention specifically that the powers which can be exercised by ld. PCIT u/s 12AB(4) of the Act and which have come into effect from 01.04.2021 would also be exercised by virtue of this Noti....
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....a) 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, then, the Principal Commissioner or the Commissioner may, by an order in writing, cancel the registration of such trust or institution:] Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner. (5)[Nothing contained in this section shall apply on or after the 1st day of April, 2021.] 39. We thus find that the section 12AA(3) of the Income Tax Act expressly provides for cancellation of registration granted to an institution by virtue of Finance Act 2004, w.e.f 01.10.2004. The conditions prescribed for the said cancellation is the satisfaction of the PCIT/CIT 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. Further, before cancelling the registration the PCIT/CIT has to grant a reasonable opportunity of being heard. 40. In the instant case, w....
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....x, a Spain based company. It was found that these CSR funds were actually the commissions/kickbacks received by Mr. Deepak Talwar for consultancy/l iasoning services rendered to M/s Airbus SAS and Isolux. 42.2 The nexus between the liasoning services provided by Mr. Deepak Talwar and the donations received by the assessee was established by the fact that M/s Airbus and Corsan, were awarded contracts with Indian agencies and immediately after awarding of the contracts, M/s Advantage India receives so called "voluntary donations" from these companies. The PCIT(C) analyzed the receipts of Advantage India, and found that apart from the so called "donations" from these two companies, M/s Airbus and Corsan, M/s Advantage India has not received any sizable amount from any outside agencies. It was also noted that these companies, M/s Airbus and Isolux Corsan, never enquired the utilization of CSR funds by the assessee. 42.3 From the perusal of the assessee's bank statements and accounts, it was found that on receipt of donation funds by M/s Advantage India, immediately funds were transferred to other organizations in the garb of professional expenses for maintaining a....
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....ogus entities which existed only on paper, and on physical inspection most of the addresses given did not even exist. Further, the AO had also issued notices u/s 133(6) to various entities mentioned by Raman Kapoor and most of them had returned back with the narration "no address found" against those entities. These evidences clearly established the fact that M/s Accordis was booking bogus purchases from various paper entities and providing entry of bogus expenses to M/s Advantage India. Thereby, the assessee was used for further routing the unaccounted commission of Deepak Talwar by receiving the CSR "donations". 42.6 The bank statement of M/s Accordis was also analyzed and it is seen that the funds which have been received from M/s Advantage India have been transferred to the account of various entities which are not doing any business and are merely paper entities/companies. It was seen that almost al l the amounts credited in the bank account of these parties are transferred to the bank account of some other party and many a times amounts are withdrawn in cash. When Mr. Raman Kapoor was confronted with these facts, he not only admitted that he has taken entries of "bog....
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....elated to other companies are booked in the books of M/s Advantage India with a clear direction of Mr. Deepak Talwar and it also establishes the intent of Mr. Deepak Talwar to use the receipts of the assessee society for his own business purposes. In fact, the statements of Mr. Tarun Kapoor was confronted to Shri Deepak Talwar, who did not deny the facts, rather it was stated that "he will go through the books and will reimburse the NGO, the assessee, the amount which has been provided to Mr. Tarun Kapoor and company". Thus, the statement of Shri Deepak Kapoor is more of admission of the fact that he was using the funds of NGO for his business purpose. 42.9 It is also observed that M/s Advantage India has made FDs of several amounts received from donor entities in the various banks. Nothing wrong with that. The non-genuineness of the activities of the Society is brought to light when the utilization of these FDs are examined. The seized documents shows that the society i.e., Advantage India has given NoC to the Indian Overseas Bank with a collateral security of its own FD of Rs 7 crore for giving OD facilities of Rs 6.30 crore to M/s Wave Impex Pvt. Ltd vide its NoC dated ....
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....tion that the PCIT(C) has invoked section 12AA(3) of the Act only on the basis of AO's finding that the provisions of section 13(1)(c)(ii) is violated, is not justified. We find that the PCIT(C) has arrived at his decision to withdraw the registration after finding that the twin conditions, for cancellation of registration u/s 12AA(3), i.e., non-genuineness of activities of the Trust as well as its activities being not carried out in accordance of the objects of the Trust, is proved and established. We are therefore of the considered view that that the cancellation of registration by invoking section 12AA(3) is valid and legally permissible. 46. The assessee reliance on the decision of Tamil Nadu Cricket Association 360 ITR 633; Lilavati Kirtilal Mehta Medical Trust Vs CIT 178 ITD 338 (Mumbai ITAT) and Welham Boys School 285 ITR 74 (Uttarkhand HC) is not applicable in the facts and circumstances of the case. We have seen that the PCIT(C) has arrived at his conclusion of non-genuine activities by the assessee and its activities not being carried out in accordance of the objects of the Trust, on the basis of nature of receipts and application of funds by the assessee. We also draw....
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.... (supra), we are of the considered view that the PCIT(C)'s order to withdraw the Registration granted u/s 12AA is based on violation of the twin conditions of non-genuineness of activities of the Trust as well as its activities being not carried out in accordance of the objects of the Trust. We are therefore of the considered view that that the cancellation of registration by invoking section 12AA(3) is valid and legally permissible. The ground no 3 and its sub-ground are dismissed. 48. On the issue of the jurisdiction of the Pr. CIT(Central-2), Delhi to cancel the registration with retrospective effect, we find that the express power of cancellation were duly incorporated by the Parliament into the Income Tax Act, 1961 by way of Finance Act, 2004 vide which a specific section 12AA(3) was incorporated in the statute. Further, vide Finance Act, 2010, Section 12AA(3) was amended to include cancellation of registration granted u/s 12A. The legal dictum is that the retrospective applicability can either be expressly provided for or can be inferred by necessary implication from the language employed. The Hon'ble Supreme Court in the case of Zile Singh v. State of Haryana, (2004) ....
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....n cannot be cancelled retrospectively without giving specific opportunity to the assessee and further, registration cannot be cancelled with retrospective date. Reliance in this regard was placed on the judgment of Allahabad High Court in the case of Agra Development Authority (2018) 90 taxmann.com 282 and of Madras High Court in the case of Auro Lab v. ITO (2019) 102 taxmann.com 225 (Madras). **** 88. As regards reliance placed on the judgment of Madras High Court in the case of Prathyusha Educational Trust (supra) on retrospective cancellation of registration u/s. 12A/12AA, the ld. counsel submitted Hon'ble Allahabad High Court in the case of Agra Development Authority (supra) has clearly held that CIT (Exemption) is not empowered to cancel registration with retrospective effect, i.e., prior to the date of issuance of order/notice. To the same effect, there is another judgment of Hon'ble Rajasthan High Court in the case of Indian Medical Trust vs. PCIT, 414 ITR 296. **** 121. One of the key contentions raised by the ld. counsel before us is that the ld. CIT(E) does not have the power to cancel the registration from retrospective date an....
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.... it a misnomer to state that the order is retrospective or retroactive and the order of the cancellation of registration even passed on subsequent date would take effect from the year when cause of action arose. 51. The Delhi ITAT in the case of Young Indian (supra) drew its strength from the decision of hon'ble Madras High Court Pratushyusha Educational Trust v. Pr. CIT [2019] 108 taxmann.com 385 which observed as follows: "At the first blush, the Court assumed that the argument of Mr. Anirudh Krishnan is to the effect that the cancellation/withdrawal was with effect from the date of grant of exemption/registration. However, on a perusal of the order dated 18.11.2014 withdrawing the approval granted under Section 10(23C) (vi) of the Act, it is seen that it has been given effect to from the assessment year 2010-2011. Likewise the order cancelling the assessee's registration under Section 12AA of the Act is from the assessment year 2010- 2011. Can it be said that these orders of cancellation are with retrospective effect. The definite answer for this question is an emphatic 'No'. Admittedly, the business premises of the assessee was subjected to search during....
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....Court in Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. vs. Commissioner of Income-tax, Gwalior has held as under: 27. It is not in dispute that an express power was conferred on the CIT to cancel the registration for the first time by enacting sub-Section (3) in Section 12AA only with effect from 01.10.2004 by the Finance (No.2) Act 2004 (23 of 2004) and hence such power could be exercised by the CIT only on and after 01.10.2004, i.e., (assessment year 2004- 2005) because the amendment in question was not retrospective but was prospective in nature 54. The reliance on the CBDT Circular No. 21/2016 dated 27.05.2016 and Sarvodya Pannan 348 ITR 300 (Mad HC); Khar Gymkhana 385 ITR 162 (Bom HC) and Maria Social Service Society 408 ITR 462 (Mad HC) does not come to the rescue of the assessee. The CBDT's circular only clarifies that it shall not be mandatory to cancel the registration already granted u/s 11 to a charitable institution merely on the ground that the cut-off specified in the proviso to section 2(15) of the Act is exceeded in a particular year without there being any change in the nature of activities of the institution. The case laws relie....