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TMI Blog2021 (1) TMI 876X X X X Extracts X X X X X X X X Extracts X X X X ..... red 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 aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - ITA No. 688/JP/2019 - - - Dated:- 6-1-2021 - SHRI SANDEEP GOSAIN, JM And SHRI VIKRAM SINGH YADAV, AM Assessee by : Shri Siddarth Ranka Shri Shravan Kr. Gupta (Advs) Revenue by : Shri Amb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd as per settled law and legal position that the legal grounds of appeal may be taken at any stage. Therefore in the interest of justice your honours are humbly requested to kindly admit the above additional grounds of appeal and oblige. 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. In this appeal, the assessee has also raised additional grounds of appeal. The grounds taken are legal in nature and connected with main grounds of appeal, therefore, for the sake of convenience, we admit additional grounds raised by the assessee for adjudication. 4. The brief facts of the case are that the assessee is a Trust and is registered under the Non-Trading Companies Act, Rajasthan vide Reg. Certificate No. 215/1976 dated 09.03.1976 and the Trust having main objects to develop the cloth business in Kota for the benefit of the general public or businessmen under the name of Wholesale Cloth Merchant Association, Kota. The Trust is also registered u/s 12A of the Income Tax Act, 1961 (in short, the Act) vide registration certificate No. 8/93-94/2609 dated 10.08.1994. The ld. Pr. CIT in its order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contrary to the provisions of law and facts of the case. The ld AR also submitted that ld. Pr.CIT(Central) had grossly erred in law as well as on the facts of the case in cancelling the registration on the basis of issue relating to assessment, which has no bearing with the registration U/s 12A of the Act i.e. fraud done by Ex-President, non-filing the return and audit report invoking provisions U/s 12AA(3) and 12AA(4) vide show cause notice dated 22/03/2019 and order dated 22/03/2019 with retrospective effect from A.Y. 2013-14 onwards. The ld AR also relied upon the written submissions as well as additional written submissions filed before us and the same is reproduced hereinbelow: 1. Show cause notice as well as order is without jurisdiction: 1.1 At the very outset it is submitted that the show cause notice issued by the ld. Pr. CIT(Central) as well as the consequent order passed by him is illegal and is without jurisdiction. Because as admittedly the assessee is a trust registered u/s 12A of the IT Act and this class of assessee or case come in the Jurisdiction of CIT(Exemption), Jaipur w.e.f. 22.10.2014. 1.2. As in Sec. 120 of the IT Act the criteria of Jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been sent to the assessee. 1.6 Thereafter the ld. DCIT(CC) Kota, has sent a proposal to the Pr. CIT(C), Jaipur to cancel the 12A registration of the assessee vide letter dt. 31.12.2018 has been received in the office of Pr. CIT(C) on dt. 23.01.2019 vide order sheet (PB300). On the basis of proposal form DCIT(CC) Kota, the ld. Pr. CIT has issued the show cause notice to the assessee u/s 12AA(3)/(4) on dt. 22.02.2019. Thereafter the assessee has appeared and filed the details and submissions before the Pr. CIT(Jaipur) on dt. 18.03.2019 and the ld. Pr. CIT(C) has passed the impugned order on dt.22.03.2019 u/s 12AA(3) and 12AA(4). 1.7 Thus on perusal of the above facts and proceedings of 127 was only for a limited purpose of Co-Ordinate Assessment. And as there was neither any search in Seizure nor any notice u/s 153A or 153C or assessment u/s 153A or 153C in the case of assessee and there was only a survey u/s 133A. And the assessment has also been completed u/s 148/143(3) on dt. 19.12.2018. As the assessment has been completed the purpose of transfer u/s 127A has also been completed. Although No any notices regarding the transfer of the cases u/s 127 have been sent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, 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 or 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 or Principal Commissioner or Commissioner,- (a) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed by an Additional Commissioner or an Additional Director or a Joint Commissioner or a Joint Director, and, where any order is made under this clause, references in any other provision of this Act, or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such Additional Commissioner or Additional Director or Joint Commissioner or Joint Director by whom the powers and functions are to be exercised or performed under such order, and any provision of this Act requiring approval or sanction of the Joint Commissioner shall not apply. (5) The directions and orders referred to in sub-sections (1) and (2) may, wherever considered necessary or appropriate for the proper management of the work, require two or more Assessing Officers (whether or not of the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) Delhi or CBDT in writing and an opportunity of being heard is to be given to the assessee before transferring the case and all these are absent in the present case as we have come to know on the inspection of the 12A cancellation proceeding records in the office of Pr. CIT(Central) Jaipur as an official inspection has been done by the undersigned Counsel on 04.03.2020. 1.14. In the Act in s. 127 the transfer of cases has been given to the Assessing Officers not to Commissioners of Income Tax and CIT is not an Assessing Officer. To pass an order for 12A registration or cancellation is not in the jurisdiction or power with an Assessing Officer. Thus, how the case for the purpose of 12AA proceedings can be transferred from the CIT (Exmp.) Jaipur to Pr. CIT(Central) Jaipur. Hence the registration u/s. 12A can be withdrawn only by the Prescribed Authority who has empowered to grant the same and by the Notification dt. 22.10.2014 the CIT(Exmp.) has empowered for the same, hence the Pr.CIT (Exmp.) cannot cancelled the same, this is not the matter of assessment. 1.15 As in the present case being a search on the third party and consequent the survey carried out in assessee s ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the misappropriation of fund by other persons: Further it is submitted that the ld. Pr. CIT has cancelled the 12A registration on the misappropriation of fund by other persons, which is also incorrect. He has relied upon the following decision: CIT V/s State Urban Development Agency (Suda) (2013) 85 CCH 0179 All HC. CIT vs. A.S. Kupparaju Brothers Charitable Foundation Trust (2012) 205 TAXMAN 0009 Kunhitharuvai Memorial Charitable Trust vs. CIT(Central) (2017) (1) TMI 1671 (Cochin) 3. No denial or cancellation of registration for the reason not filling the ITR and Audit Report: 3.1 Further it is submitted that ld. Pr. CIT has cancelled the registration on the ground that the assessee has not filed its ROI and Audit report. The reason of not filing of the same are that as the assessee is trust and was depended on the accountant and the president and the other members were under impression that the act of return filling, Audit report and books are being care take by them. As there was on default since its registration from 1976 to 2013. And the fraud done by the president and books not completed by the accountant was not in the knowledge of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anywhere that if an assessee has not filed ITR and Audit report the registration shall be cancelled. The ld AR has also relied on the following decisions: CIT vs. Raj State Seed Organic Production Certification (2018) 98 CCH 0466 Raj HC Cotton Textiles Export Promotion Council v/s ITO (Exemption) 117 ITD 90 (Mum) Additional Director of Income Tax (Exemption) v/s Manav Bharati Child Institute Child Psychology 20 SOT 517(Del) Haryana Welfare Board v/s CIT 83 CCH 268(P H) Association of Corporation Apex Societies of Handlooms v/s ADIT 351 ITR 287(Del) Raghavan Nair vs. ACIT 402 ITR 0400 (Ker) (2018) 3.6. The ld. Pr. CIT stated that if a person fails to get audited his books of accounts from a chartered accountant, then he will not able to get benefit of section 11, 12 and 12A. But many provisions are in the nature of procedural compliance hence if that kind of provision are not satisfied even though assessee would not be punished for cancellation of registration u/s 12A. In this regard, he has relied on the following decisions: M/s Sir Kika Bai Prem Chand Trust Vs. ITO Mumbai ITAT CIT v/s Hardeodas Agarwalla Trust 198 ITR 511(Cal) CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the name of other parties name and later on came to know that these parties have not received amount and when management went to bank to trace out the truth all disputed entries were bearer cheques, but at that time books of accounts have been finalized and audited, so assessee was not able to change the account name. Hence at the time of filing FIR they include all the amount. This amount not given by the trust to the president but the same was misappropriated, pinched, embezzled and cheated by the ex-president therefore FIR filed by the trust against the ex-president (i.e. Tejendra Pal Singh). Copy of FIR is enclosed (PB28-34). And for the cheating or fraud by the Ex- President, if any, the whole trust cannot be suffered, which is against the principal 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 was part of that fraud. And if any fraud has been done behind the assessee cannot be treated as done by the assessee. Assessee has not itself given any benefit to the assessee. 5. No retrospective effects should be given: Further the ld. Pr.CIT (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding 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). An allegation remains only allegation unless not proved. The ld AR has also filed additional written submissions and the contents of the same are reproduced below: 1. No denial or cancellation of registration for the reason not filling the ITR and Audit Report for the A.Y. 2014-15 to 2016-2017: 1.1 That clause (ba) was inserted by Finance Act, 2017 to section 12A(1) of the Act, w.e.f. 01.04.2018 (ba) the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section. 1.2 In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under: as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter thorough investigation not finding any case for misappropriation of funds has proposed FR (Final Report) in the instant FIR vide its report dated 31.01.2019. 1.6 That 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. In this regard he has relied upon the decision in the case of ACIT v. Sri Koundinya Educational Society (2019) 1 TMI 266 (ITAT Visakhapatnam) 8. On the other hand, the ld CIT-DR has relied upon the order passed by the ld. Pr.CIT(Central), Rajasthan and also submitted that there were various evidences in possession of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee-trust. 5. It was also observed that the then president of the assessee trust Shri Tejendra Pal Singh Sahni has withdrawn huge amounts from the assessee's account and utilized these monies for personal benefit, which is also evident from the submission of the Authorized Representative before the Assessing Officer, which is reproduced as under:- Details of account withdrawn by the past president of the association:- As per records of the association and FIR filed by the association against the then president of the association total amounting ₹ 2,52,00,000/- withdrawn by the then president, out of this an amount of ₹ 1,08,00,000/- transferred in the account of Sh. Rajendra Gupta and remaining amount was withdrawn from bank through bearer Cheques and vouchers made in the name of some contractors of the association but out of these contractors some contractors denied the receipt of cheques from the Association. After that episode, Association tried to know the truth, therefore Association went to bank and got all the copies of disputed cheques and found all the cheques were bearer cheques. List of Disputed cheques for the year under consideration are her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 22.01.2015 982788 Self 700000 Past President 15 22.01,2015 982793 Self 800000 Past President 16 19.03.2015 982842 Self 500000 Past President All of above mentioned details of cheques has already been conveyed to all the members of the association by its management through circulating a letter among its members and copy of the letter is enclosed with this letter for your kind perusal and ready reference. 6. It is also observed that, the specified person was allowed to use fund of the assessee for his personal benefit. On going through the above discrepancies, it is noticed that, during the F.Y.13-14, Shri Tejendra Pal Singh, president has taken loan advances of 231,50,000/- from the assessee and violated the provisions of section 13(2) of the Act. Further no proper books of accounts were maintained by the assessee. TDS provisions have not been complied properly. Therefore, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such claim by the assessee was illegal in view of provision of Sec.12A(1)(b) of the Act. As per facts, it was also noticed by the department that the ex-president of the assessee Trust Sh. Tejendra Pal Singh had withdrawn huge amount from the assessee s account and utilized these monies for personal benefit and the details of those have already been mentioned in para No. 6 of the impugned order. It was further observed that the specified person was allowed to use the funds of the assessee for his personal benefit, thus there was violation of provisions of Sec. 13(2) of the Act as no proper books of account were maintained by the assessee. Therefore, the assessee was found to be not entitled for claiming u/s 11 to 13 of the Act. The assessee had also filed its detailed reply with the Ld. Pr.CIT (Central) wherein it has been submitted that on receipt of notice U/s 148 of the Act from the A.O., the assessee had filed its income tax returns and audit reports. It was further contended that since the compliance was made by the assessee by filing income tax returns in response to notice issued U/s 148 of the Act, therefore, the assessee was not hit by provisions of Section 12AA(4) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee admittedly falls in the jurisdiction with the ld. CIT(Exemption). 12. We found from perusal of the record that a search and Seizure operation has been carried out in the case of SPS (Bajaj Group) Kota on 30.06.2016.In consequent thereof a survey u/s133A has also been carried out on the assessee in 19th July 2016. Thereafter the ld. ADIT(Inv.) Kota has sent a proposal u/s 127 to the Pr. DIT(Inv.) Raj. Jaipur on 19.08.2016 to transfer the case for limited purpose i.e for the Assessment proceedings vide letter dated 19.08.2016, which is placed at page No. 292 and 293 of the paper book and the reason for centralize in the case of assessee was given for Co-Ordinate Assessment with the cases of SPS Bajaj Group. The Pr.DIT has sent the same to the Pr. CIT(Central) vide letter dated 29.09.2016, which have already been placed at page No. 295 and 296 of the paper book. Thereafter the Pr. CIT(C) has written letter to Pr.CIT(E) dated 28.09/03.10.2016 to transfer the case from ITO(E) Kota to ACIT, Central Kota. Thereafter the CIT(E) has transferred the case from ITO(E) Kota to ACIT, Central Kota vide letter dated 05/06.12.2016, which is placed at page No. 299 of the paper boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For ready reference, we reproduce Sec. 127 of the Act, which provides as under: 127. (1) The Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or 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 or 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 or Principal Commissioner or Commissioner,- (a) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners to whom such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trictions or limitations as may be specified therein,- (a) authorise any Principal Director General or Director General or Principal Director or Director to perform such functions of any other income-tax authority as may be assigned to him by the Board; (b) empower the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed by an Additional Commissioner or an Additional Director or a Joint Commissioner or a Joint Director, and, where any order is made under this clause, references in any other provision of this Act, or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such Additional Commissioner or Additional Director or Joint Commissioner or Joint Director by whom the powers and functions are to be exercised or performed under such order, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or given his work or power or duties to the other same rank of CIT at all to cancel the Registration u/s 12AA. However, in case, if it is necessary to do so then there has to be proper proceedings in writing. As there has to be some order in writing from higher authorities i.e. from Chief Commissioner of Income Tax (Exmp.) Delhi or CBDT in writing and an opportunity of being heard is to be given to the assessee before transferring the case whereas all these are absent in the present case and nothing has been demonstrated by the department. 19. We further observe 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. 20. In assessee s case, the case u/s 127 was transferred to the Central Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittedly the search was conducted on 30.06.2016 and the proposal was sent on 19.08.2016 i.e. after 30 days of the search. In this respect, the ld AR has relied upon the decision in the case of Rentworks India (P) Ltd. vs. Pr.CIT ANR.(2017) 100 CCH 0258 Mum HC wherein it has been held that Income tax authorities-Power to transfer cases-Jurisdiction-CIT, issued notice to assessee taking recourse to subsection 2 of Section 127-Assessee was put to notice that there was proposal to transfer case of assessee to DCIT, for proper co-ordinated investigation-Impugned order was made by Principal CIT under sub-section 2 of section 127 by which case of assessee was transferred to DCIT-Held, in Noorul Islam Educational Trust it was held that as Income-tax/assessment file of assessee had been transferred from one AO in Tamil Nadu to another AO in Kerala and two AO were not subordinate to same Director General or Chief Commissioner or Commissioner of Income Tax u/s 127(2) (a) agreement between Director General, Chief Commissioner or Commissioner, as case might be, of two jurisdictions was necessary- Counter affidavit filed on behalf of Revenue did not disclose that there was any such agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that there is an agreement by implication. This stand is completely contrary to paragraph 5 of the decision of the Apex Court in the case of Noorul Islam Educational Trust (supra). The decision in the case of Ramswaroop (supra) will also bind this Court for the reasons stated above. 10. Coming to the decision in the case of Jharkhand Mukti Morcha, relevant facts are in paragraph 12. In the said case, specific reliance was placed on a document dated 2 7th November 2016. It is on the basis of the written document that a finding was recorded that there was an agreement between the Jurisdictional Commissioners of Ranchi and Delhi. In the present case, even going by the case made out by the respondent, no such agreement is spelt out. In absence of any such agreement, the first respondent had no jurisdiction to pass the order of transfer. 11. As the impugned order cannot be sustained on above ground, it is not necessary to into other challenges. 12. Accordingly, for the reasons quoted above, we pass following order: Impugned order dated 25th May 2 017 (Exhibit-H to the petition) is hereby quashed and set aside. Rule is made absolute on above terms with no order as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been transferred from one Assessing Officer in Tamil Nadu to another Assessing Officer in Kerala and two Assessing Officers are not subordinate to same Director General or Chief Commissioner or Commissioner of Income Tax, u/s 127(2) (a) an agreement between Director General, Chief Commissioner or Commissioner, as the case may be, of two jurisdictions is necessary- Absence of disagreement cannot tantamount to agreement as visualized under Section 127(2) (a) which contemplates a positive state of mind of two jurisdictional Commissioners of Income Tax which is conspicuously absent-Transfer of Income-tax/assessment file of assessee from Assessing Officer, Tamil Nadu to Assessing Officer, Kerala is not justified-High Court order set aside-Special appeal allowed. Although, the ld DR has relied upon the decision of Hon ble Rajasthan High Court in the case of Lalit Hans Vs PCIT DP Special Appeal (Writ) 249/2015 but the facts of the above case are entirely different. Hence, the said judgment is of no help to the Revenue on the facts of the present case. Thus, keeping in view our above discussions, we are of the view that the ld. PCIT had no jurisdiction to pass order U/s 12AA(3) 12A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh the return of income within the time allowed under section 139 of the Income-tax Act. Thus, for a trust registered u/s 12AA of the Act to avail the benefit of exemption u/s 11 shall inter-alia file its return of income within the time allowed u/s 139 of the Act. Accordingly, orders u/s 143(1)(a) in those cases in which demand has been raised on this issue may please be rectified. Hence, the Assessing Officer can deny the grant of exemption u/s. 11 of the Act for belatedly filing of return from the assessment year 2018-19 onwards. The Coordinate Bench of ITAT, Delhi Bench in the case of United Educational Society v. JCIT (2019) 7 TMI 738 (ITAT Delhi) has held as under: Reopening of assessment u/s 147 - exemption u/s 11 denied - assessee has not filed the return u/s 139 (4A) reads with section 12A (b) - assessee society was carrying out educational activities which fell within charitable activities u/s 2(15) , it was granted registration u/s 12A - whether, the filing of audit report alongwith the return filed in response to notice u/s 148 will entitle the assessee for benefit of computation of section 11 ? - HELD THAT:- We are of the view that, whether it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t AO was not justified in denying the benefit of the exemption u/s 11 of the Act and we direct the AO to compute the income in accordance with the provision of section 11. Ground no.6 is accordingly allowed. 23. Another submission of the assessee in order to counter the allegation of the department that the application of funds deemed to have been made for the benefit of specified person has been countered by submitting that Due to internal differences between the office bearers a FIR came to be filed for misappropriation of funds by the new management against the previous management. Subsequently, the Police after thorough investigation not finding any case for misappropriation of funds has proposed FR (Final Report) in the instant FIR vide its report dated 31.01.2019. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is also settled legal position of law that if an assessee has not filed his ROI and filed ROI and not shown any claim or deduction in the ROI filed and claim the same during the course of assessment proceedings even though during the course of appellate proceedings. The Hon ble courts have allowed the same by stating that if the assessee is entitled for any claim as per law, then the same cannot be denied for the reason that he has not claimed in the ROI. In this regard, the ld AR has relied on the decision in the case of Amina Ismil Rangari vs. ITO (2017) 51 CCH 0595 Mum Trib wherein it has been held that: Capital gains-Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house-Rejection of claim of exemption-Case of assessee was re-opened and notice u/s 148 was issued-Assessee filed her return of income declaring taxable income after claiming exemption u/s 54F against Long-term capital gains arising from sale of shares-AO held that share transaction entered into by assessee resulting in long term capital gains were not genuine-Since long-term capital gains were not treated to be genuine, AO also rejected claim of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport, then it is nowhere provided that registration shall be cancelled. In this regard, the ld AR has relied on the decision in the case CIT vs. Raj State Seed Organic Production Certification (2018) 98 CCH 0466 Raj HC wherein it has been held that Charitable Trust-Charitable purposes-Denial of registration- Application for registration sought by assessee society u/s 12A came to be rejected on ground that its activities were not charitable within meaning of s. 2(15) and audit report was not filed in Form 10B- However, ITAT directed CIT(E) to grant registration-Held, Madras High Court in Director of Income Tax (Exemptions) vs. Spic Educational Foundation, observed that non-filing of audit report in Form No. 10B would not defeat claim of assessee for exemption under Ss 11 12-Activities of assessee were for advancement of object of general public utility, hence charitable within meaning of s. 2(15)-If an institution was having surplus, then after considering application and accumulation prescribed u/s 11, remaining amount was chargeable to tax-But that in itself does not lead to a conclusion that institution was not meant for charitable purpose-Delay in moving registration ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10B affirms the statements contained in the balance sheet and income-expenditure statement and is intended to enable the AO to allow the exemption by relying on the audit report and without having to ask the assessee to furnish supporting documents in support of the claim. Such a procedural provision cannot be construed as mandatory because the defect can be cured at a subsequent stage. It is not the intention of the Legislature that the exemption u/s 11 should be denied merely because the audit report was not filed with the return. Aggrieved by the order of the Assessing Officer the assessee preferred an appeal before CIT(A). Before CIT(A) the assessee reiterated the stand as taken before the AO. The assessee further contended that in the event of Form No.10B not having been field along with return of income, the return of income ought to have been considered as defective and a notice u/s. 139(9) of the Act ought to have been issued to the assessee to rectify the defect. The asses see further relied on certain judicial pronouncements and submitted that the requirement of filing Form No.1 0B along with return of income is not a mandatory requirement and that the said form e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be denial of exemption to the trust although the income has been spent for charitable or religious purposes. This was not intended by the legislators. If an assessee fails to obtain the audit report in the prescribed form before the assessment is completed, he may not, ordinarily, be entitled to get the benefit of exemption. In this case, however, the assessee was not given an opportunity to file audit report in the prescribed form which was available with assessee before assessment was completed. In such a case, appeal being a continuation of the original proceedings, the appellate authority has the power to accept the audit report and direct the Assessing Officer to re-do the assessment 28. We further observe that due to the negligence or cheating of past executive members and bad intention of misappropriation of funds by ex- president, they had not maintained the books of accounts and get their accounts audited by a chartered accountant. But after change of management and involvement of new committee, books of accounts have been prepared and audit has also been done. During the A.Y. from 2014- 15 to 2016-17 heavy amount was withdrawn by the ex-president, out of total am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 the provisions of the Act of 1961; and therefore, cannot be deemed to be in consonance with any possible interpretation to be valid or legal. This court is of the opinion that the provisions of section 12AA (3) of the Act of 1961, empowers the Commissioner of Income Tax to initiate steps for cancellation of the registration of a Trust, but, the legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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. 30. Thus, keeping In view of about above discussion we are of the opinion that in the present case the ld. Pr. 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. In this regard, the Hon ble Madras High Court on the question as to whether the cancellation will operate from a retrospective date has dealt in the case of Auro Lab vs. ITO (2019) 411 ITR 0308 (Mad) 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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