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TMI Blog2024 (1) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... n the argument of ld. A.R. that in income-tax matters, law to be applied is the law in force in the assessment year unless otherwise stated or implied. In the present case, ld. PCIT is cancelling the registration granted u/s 12AA/12AB of the Act w.e.f. previous year 2020-21 relevant to assessment year 2021-22. In our opinion, the law as stated in the assessment year 2021-22 is to be applied and not the law as stood in the assessment year 2022-23. Thus we are of the view that no retrospective cancellation could be made u/s 12AB(4)(ii) of the Act as it has been provided or is seen to have explicitly provided to have a retrospective character or intended. Therefore, without a specific mention of the amended provisions to operate retrospectively, no cancellation for the earlier years could be made. PCIT has cancelled the registration under the new provisions of the Act i.e. 12AB(4)(ii) of the Act, which specifically provides that cancellation can be done for such previous year and all subsequent previous years, which makes it clear that the cancellation cannot be retrospective, therefore, in view of the above discussion, we are of the opinion that cancellation of registration wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) of the act and not under the provisions of section 12AB(4)(ii) of the act. 4. The learned Pr. Commissioner of Income Tax (Central), Bengaluru erred in ignoring the fact that, there has been no case that the activity of the trust/institution were not genuine and also it was not proved that, the activity was not being carried on in accordance with objects of the trust or institution and therefore the circumstances contemplated u/s. 12AB(4) of the act were not satisfied, eventually there was no case of cancellation of registration u/s. 12AB(4) of the act. 5. The learned Pr. Commissioner of Income Tax (Central), Bengaluru has erred in acting on a reference made under the third proviso to the provisions of section 143(2) of the act ignoring the fact that, the proviso invoked was introduced by Finance Act 2022 w.e.f. 01.04.2022 and therefore was not applicable for the A. Y .2021-22. 6. The learned Pr. Commissioner of Income Tax (Central), Bengaluru has erred in availing the extended the time limit for conclusion of assessment as provided for under explanation 1 (xiii) below the provisions of section 153(9) of the act which was introduced by Finance Act, 2022 w.e.f 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stees, ignoring the fact that, all the transactions were recorded in the books which were audited by a chartered Accountant and no portion of the revenue was diverted for purposes other than objectives of the trust and also the Assessing Officer had not brought on record any evidence to prove the contrary. 12. The learned Pr.Commissioner of Income Tax (Central), Bengaluru erred in ignoring the position of law laid down in Welham Boys' School Society V. Central Board of Direct Taxes (2007) 158 Taxman 199 (Uttaranchal), wherein it is held that, the law prevailing for the specific assessment year are to be invoked and powers vested in post amended provisions cannot Re invoked, implying that, for the A. Y.2021-22 the provisions of 12AB(4) are to be invoked and not the provisions of 12AB(4)(ii) of the act. 13. The learned Pr. Commissioner of Income Tax (Central), Bengaluru erred in not following the ratio laid down by High Court of Gujarath in the case of Commissioner of Income Tax, Gandhinagar Vs. Gujarath Maritime Board (2021) 123 Taxmann.com 35 (Guj) confirmed by SC in (2022) 143 Taxmann.com 278 (SC) (and also Director of Income Tax (Exemption) North Indian Associati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;To accept donation, grants, presents and other offerings and to deal with the same, for the purpose of the Trust. (vii) To charge moderate tuition fees and otherwise recoup themselves for the out lay and expenses incurred in the upkeep and maintenance of Institutions established or about to be established under this deed. (viii) To train and equip the pupils so as to be self- supporting in an honourable and decent way of life so as to develop them (ix) To promote and inculcate the dignity of labour, the appreciation of intellectual gifts and talents of all kinds. (x) To encourage sportsman and adventurous spirit in the pupils and those connected with the institution or coming in contact with them and to participate in games of skill and prowess. (xi) To develop disciplinary conduct and a habit to observe the rule of law and self-restraint. (xii) To bring out, encourage and develop the inventive and research faculties of the pupils and teachers and to afford opportunity for research work in art, science and industrial undertakings. (xiii) To encourage, assist, support and facilitate students to continue their education by giving scholarships, financial aid, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.11.2022, 1.12.2022 in both cases and also one more notice u/s 142(1) of the Act was issued to Adarsh Vidya Kendra Trust no 5.12.2022 calling for various details and confronting the evidence collected during the search. Subsequently, vide letter dated 20.12.2022, the ld. AO sent a reference for assessment year 2021-22 communicating her satisfaction as per second proviso to section 143(3) of the Act in both cases. Accordingly, show cause notice was issued by the predecessor of the present PCIT on 28.12.2022, requiring the assessee to explain as to why the approval granted by the Director Income Tax (E) Bengaluru in both cases should not be cancelled. After considering the reply in both cases, the ld. PCIT cancelled the registration granted to these assessees u/s 12AA/12AB of the Act w.e.f. previous assessment year 2020-21 and that of subsequent years as per provisions u/s 12AB(4) of the Act. Against this, both the assessee are in appeal before us. 3. The first ground is general in nature, which do not require any adjudication. 4. Next grounds for our consideration in ground Nos. 2, 3, 5 12 are with regard to cancelling registration granted u/s 12AA/12AB of the Act by invok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Under the circumstances, the law that should apply is with reference to the year of default. He submitted that the Pr. Commissioner of Income Tax (Central) should have acted as per the law prevailing for the A.Y.2021-22. The alleged infringement by the assessee occurred during the A.Y.2021-22 and therefore the penalization should also be with reference to the corresponding provisions as they existed for the A.Y.2021-22. 4.4 The ld. A.R. relied on the ratio laid down by the Hon ble Supreme Court in the case of Commissioner of Income Tax V. Omkar Saran Sons (1992) 62 Taxman 440 (SC). The Hon ble Supreme Court has held that, the law applicable for penalizing should be the law for the year of committing the offence. This decision is in the context of penalty leviable under the provisions of section 271(1)(c) of the Act. However, the principle is applicable with reference to the other provisions also which are penal in nature. Cancellation of registration deprives the assessee of the various benefits which otherwise accrue and hence the provisions are to be considered as in the nature of punishment. 4.5 The ld. A.R. submitted that, the order passed by the Pr. Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not being carried out in accordance with all or any of the conditions subject to which it was registered; or f) The trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) 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. 6.1 Thus, the contention of the ld. A.R. is that these provisions have been inserted by Finance Act, 2022 w.e.f. 1.4.2022 and if there is a violation in previous year 2020-21 relevant to assessment year 2021-22, these provisions cannot be applied to the assessee s case. For clarity, we will go through the relevant provisions applicable to previous year 2020-21 relevant to assessment year 2021-22 as follows: 12AB(4): Where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1) 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust or institution in respect of the business which is incidental to the attainment of its objectives; or c) The trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not ensure for the benefit of the public; or d) The trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste; or e) Any activity being carried out by the trust or institution (i) is not genuine, or (ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered; or f) The trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) 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. 6.3 As per section 12AB(4) of the Act as applicable to assessment year 2021-22, the ld. PCIT if he is satisfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 2 of the Act to mean the period of twelve months commencing on the 1st day of April every year . 17.5 In the case of CIT v. Isthmian Steamship Lines (1951) 20 ITR 572 (SC), a 3-judge Bench of this court exposited on the fundamental principle that in income-tax matters the law to be applied is the law in force in the assessment year unless otherwise stated or implied. This decision and various other decisions were considered by the Constitution Bench of this court in the case of Karimtharuvi Tea Estate Ltd. v. State of Kerala (1966) 60 ITR 262 (SC) and the principle were laid down in the following terms (at pages 264-266 of 60 ITR): Now, it is well-settled that the Income-tax, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force The High Court has, however, relied upon a decision of this court in CIT v. Isthmian Steamship Lines, where it was held as follows: It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2022-23. 6.8 Thus, we are of the view that no retrospective cancellation could be made u/s 12AB(4)(ii) of the Act as it has been provided or is seen to have explicitly provided to have a retrospective character or intended. Therefore, without a specific mention of the amended provisions to operate retrospectively, no cancellation for the earlier years could be made. In this regard, it is appropriate to place reliance on the judgement of Hon ble Madras High Court on the question as to whether the cancellation will operate from a retrospective date in the case of Auro Lab Ltd. Vs. ITO (2019)411 ITR 308 (Mad) wherein 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 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 cann ..... X X X X Extracts X X X X X X X X Extracts X X X X
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