2024 (1) TMI 491 - AT - Income Tax

Jurisdiction of PCIT (Central), Gurgaon cancelling registration granted to the assessee u/s. 12AA - assumption of jurisdiction for cancellation of registration u/s. 12AB(4) by virtue of transfer of jurisdiction order u/s. 127 - HELD THAT - In any case the reference by jurisdictional AO was to be made not to the PCIT or Commissioner, to whom this AO was subordinate but one authorised by board for the purpose of Section 12AB. The one who could grant or cancel the registration as per amended provisions which is not PCIT, Gurgaon, but, would be CIT(E), Chandigarh. Thus assumption of jurisdiction for cancellation of registration u/s. 12AB(4) of the Act by virtue of aforesaid transfer of jurisdiction order u/s. 127 of the Act is not conceivable. We observe that reference in section 12AB is not to PCIT or Commissioner to whom the said Assessing Officer would be subordinate, but, the CIT(E) who has been given special power for grant and cancellation of the registration as original jurisdiction. In this case, the exercise of power u/s. 12AB(4) of the Act seems to also not have been done in accordance with law. As what comes up further is that, if at all, PCIT, Gurgaon was acting under clause (a) to Section 12AB(4), then, before issuing the notice dated 08.09.2022, itself the ld. PCIT, Gurgaon should have first formed his opinion that the assessee had committed one or more of a specified violation'. However, as we go through the relevant part of the impugned order we find that the ld.PCIT has not mentioned as to which amongst the various specified violations mentioned in Explanation attached to subsection (4) of section 12AB were attracted so as to show cause the assessee under sub-section (4) of section 12AB of the Act and ask for information by notice dated notice dated 08.09.2022. Thus, if it was the case of the PCIT (Central), Gurgaon that he was exercising the powers u/s. 12AB(4)(a) on his own cognizance of the specified violation , then, at first instance as he was not competent authority u/s. 12AB(1) to pass an order of registration of the Trust, then, he had no powers u/s. 12AB(4) to call for to show cause an order of cancellation. In any case, the manner of exercise of jurisdiction without first making 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.

Summary

Issues Involved:
1. Jurisdiction of PCIT (Central) Gurgaon to cancel the registration under Section 12AB(4).
2. Retrospective cancellation of registration under Section 12AB(4).
3. Validity of the procedure followed for cancellation of registration under Section 12AB(4).

Summary:

Jurisdiction of PCIT (Central) Gurgaon:
The assessee argued that the PCIT (Central) Gurgaon lacked jurisdiction to cancel the registration under Section 12AB(4) of the Income Tax Act, 1961, as the power to grant and cancel registration under Section 12AA/12AB lies with the CIT (Exemptions), Chandigarh. The Tribunal noted that the order dated 26.10.2020 under Section 127 of the Act transferred the case for assessment purposes only and did not transfer the jurisdiction for cancellation of registration. The Tribunal concluded that the PCIT (Central) Gurgaon did not have the jurisdiction to cancel the registration as the power vested in CIT (Exemptions), Chandigarh, could not be transferred to another authority without specific authorization by the Board.

Retrospective Cancellation of Registration:
The Tribunal examined whether the cancellation of registration with retrospective effect from 01.04.2014 was valid. The assessee contended that the provisions of Section 12AB(4) introduced by the Finance Act, 2022, effective from 01.04.2022, could not be applied retrospectively. The Tribunal agreed with the assessee, stating that the legislative intent and CBDT Circular No. 23/2022 clarified that the provisions of Section 12AB(4) are applicable from FY 2022-23 and AY 2023-24 onwards. Therefore, the retrospective cancellation of registration from 01.04.2014 was held to be unlawful.

Validity of Procedure Followed:
The Tribunal scrutinized the procedure followed by the PCIT (Central) Gurgaon for the cancellation of registration. It was noted that the PCIT initiated the cancellation proceedings based on a proposal from the Assessing Officer dated 23.08.2022, which was after the completion of assessment proceedings for the relevant years. The Tribunal observed that the PCIT did not conclusively identify the specific violations before issuing the notice dated 08.09.2022, calling for information. The Tribunal held that the procedure followed was not in accordance with the law, as the PCIT failed to notify the assessee of the specific violations before calling for information.

Conclusion:
The Tribunal quashed the impugned order passed by the PCIT (Central) Gurgaon under Section 12AB(4) of the Act, canceling the registration of the assessee with retrospective effect from 01.04.2014. The Tribunal held that the PCIT (Central) Gurgaon lacked jurisdiction, and the procedure followed for cancellation was not in accordance with the law. The appeal of the assessee was allowed, and the impugned order was quashed.