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2021 (1) TMI 876 - AT - Income TaxExemption u/s 11 - cancelling the registration of the assessee Trust U/s 12A - PCIT jurisdiction in cancelling registration - transfer of the cases u/s 127 sent to the assessee for the purpose of Co-ordinate assessment - non-filing of I.T. return and audit report or on account of misdeeds of ex-president - HELD THAT - Sec. 127 of the Act empower to transfer cases among Assessing Officers but not to Commissioners of Income Tax as CIT is not an Assessing Officer. In our view, to pass an order u/s 12A for registration or cancellation is not within the jurisdiction or power of an Assessing Officer. Hence registration u/s. 12A can be withdrawn only by the Prescribed Authority who has been empowered to grant the same and by the Notification dated 22.10.2014 the ld.CIT(Exmp.) has empowered for the same, hence the Pr.CIT (Central) cannot cancelled the same. In assessee s case, the case u/s 127 was transferred to the Central Circle for limited purpose of Co-Ordinate assessment admittedly which do not mean that the Section 12A proceeding has been transferred to the Pr. CIT(Central) Automatically, when both the proceedings are separately or independent and also has to be done or conducted by the different rank Authorities. More particularly when for the purpose of Exemption cases or 12A registration a Separate Commissioner of Income Tax has been Authorized for whole of Rajasthan by the CBDT by its Notification dated 22.10.2014. PCIT had no jurisdiction to pass order U/s 12AA(3) 12AA(4) of the Act and the same is not sustainable in the eyes of law and accordingly stands quashed In the instant case, the ld. Assessing Officer ld. Pr. Commissioner of Income-tax without any independent verification have alleged misappropriation of funds. The assessment of the assessee appellant trust and its ex-president Shri Tejendra Pal Singh was done by the same Assessing Officer and in the assessment orders passed u/s. 153A of the Act dated 20-21.12.2018 for the A.Y. 2014- 2015 to 2016-2017 in the case of Shri Tejendra Pal Singh, no addition has been proposed for so called misappropriated income. Thus, without carrying out any independent verification and on account of mere suspicion, without any proof the said allegation has been levelled against the assessee appellant Trust. Assessee had file the ROI and Audit report in response to the notice u/s 148 of the Act also much prior to issuance of show cause notice for cancellation and therefore, at the time of issuance of Show cause notice u/s 12AA(3)/12AA(4) no return or Audit report were pending - Assessee is trust registered u/s 12A and not a businessman and not doing the business. In our view, Tax Audit u/s 44AB is not applicable in this case. Hence the allegation of the ld. Pr. CIT is wrong and invalid. The Audit of the trust comes u/s 12A(b) in form 10B. Because of the misdeeds of ex-president, the whole trust cannot be allowed to suffer, which is otherwise against the principles of natural justice. Further nowhere it has been proved that the Act of the President was in the knowledge of the assessee and the other members were involved knowingly and were part of that fraud. And if any fraud has been done behind the assessee, then the same cannot be treated as done by the assessee. Therefore, keeping in view our above discussion and observation, we are of the view that registration of the assessee could not be cancelled because of non-filing of I.T. return and audit report or on account of misdeeds of ex-president. 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. CIT(C) has found or made allegation or objection of diversion or mis appropriations of funds and not filling the Audit report and ITR, if any only in A.Y. 2014-15 to 2016-17 not in other years either prior years or later years, then the cancellation of Registration u/s 12A cannot be made for other years. 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. cancellation of registration with retrospective effect is invalid in the present case. See M/S. AURO LAB VERSUS INCOME TAX OFFICER 2019 (1) TMI 1478 - MADRAS HIGH COURT CIT(C) has stated that the activities of the assessee associations are not genuine and are not being carried out in accordance with the stated objects of the assessee. However, the allegation of the ld. Pr. CIT(C) are incorrect. Because there was no change in the activities of the assessee since starting to till date. The ld. PCIT(C) has failed to state that which activities have been done by the assessee in these years which were apart to earlier years and what activities are not according to the aims and objects of the Associations or have not been followed or done. The assessee has not violated any provision of Sec. 12AA(3)/12AA(4) of the Act. Therefore, in view of the above facts and circumstances, case laws discussed and the material placed on record, we found merit in the contention of the ld. AR. The ld. CIT-DR has not filed any contrary material against the assessee Trust, therefore, we set aside the order of the ld. Pr.CIT(Central) and allow the grounds taken by the assessee.
Issues Involved:
1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) (Central) to cancel the registration under Section 12A. 2. Validity of the cancellation of registration under Section 12A due to non-filing of Income Tax Returns (ITR) and audit reports. 3. Impact of alleged misappropriation of funds by the ex-president on the registration status. 4. Retrospective effect of the cancellation of registration. 5. Whether the activities of the trust were genuine and in accordance with its stated objectives. Detailed Analysis: 1. Jurisdiction of the Pr. CIT (Central): The assessee challenged the jurisdiction of the Pr. CIT (Central) to issue the show cause notice and cancel the registration under Section 12A. According to the assessee, the jurisdiction for such matters lies with the CIT (Exemption) Jaipur as per CBDT Notification Nos. 52/2014 and 53/2014 dated 22.10.2014. The Tribunal found that the case was transferred to the Central Circle for the limited purpose of coordinated assessment following a search and seizure operation in another group. The Tribunal held that the power to cancel registration under Section 12A rests with the CIT (Exemption) and not the Pr. CIT (Central). The Tribunal cited several judicial precedents, including the case of Dilip Tanaji Kashid vs. M.l. Karmakar PR. CIT & ANR., to support its decision that the Pr. CIT (Central) had no jurisdiction to cancel the registration. 2. Validity of Cancellation Due to Non-filing of ITR and Audit Reports: The Pr. CIT (Central) cancelled the registration on the grounds that the assessee had not filed its ITR and audit reports for the assessment years 2014-15 to 2016-17. The Tribunal noted that clause (ba) was inserted by the Finance Act, 2017, to Section 12A(1) effective from 01.04.2018, which requires the filing of returns within the time allowed under Section 139. The Tribunal held that this amendment is prospective and applies from the assessment year 2018-19 onwards. The Tribunal also referred to the decision in United Educational Society v. JCIT, which held that the filing of the audit report along with the return filed in response to notice under Section 148 entitles the assessee to the benefit of Section 11. Therefore, the Tribunal concluded that the cancellation of registration on these grounds was not justified. 3. Impact of Alleged Misappropriation of Funds: The Tribunal examined the allegation that the ex-president misappropriated funds for personal benefit. The Tribunal noted that the assessee had filed an FIR against the ex-president and that the police, after investigation, proposed a final report not finding any case for misappropriation. The Tribunal held that the misdeeds of the ex-president should not lead to the suffering of the entire trust. It cited the case of ACIT v. Sri Koundinya Educational Society, which held that allegations of misappropriation without independent verification cannot be used to deny benefits under Sections 11 and 12. 4. Retrospective Effect of Cancellation: The Tribunal held that the cancellation of registration cannot have retrospective effect. It referred to the decision in State of Rajasthan and others vs Basant Agrotech India Ltd. and other, which held that subordinate legislation cannot be given retrospective effect unless explicitly provided. The Tribunal also cited Indian Medical Trust V/s PCIT (Central), which held that cancellation of registration with retrospective effect is invalid. Therefore, the Tribunal concluded that the cancellation could only be prospective. 5. Genuineness of Activities: The Pr. CIT (Central) alleged that the activities of the trust were not genuine and were not being carried out in accordance with its stated objectives. The Tribunal found no evidence of any change in the activities of the trust since its inception. It observed that the Pr. CIT (Central) failed to specify which activities were not in accordance with the trust's objectives. The Tribunal concluded that the trust had not violated any provisions of Sections 12AA(3) and 12AA(4) and set aside the order of the Pr. CIT (Central). Conclusion: The Tribunal quashed the order of the Pr. CIT (Central) cancelling the registration of the assessee trust under Section 12A and allowed the appeal of the assessee. The Tribunal emphasized that the jurisdiction for such cancellation lies with the CIT (Exemption) and that the cancellation cannot be based on procedural defaults or retrospective in nature.
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