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TMI Blog2024 (3) TMI 876X X X X Extracts X X X X X X X X Extracts X X X X ..... for the previous year 2020-21 covering the assessment year 2021-22. On the other hand, he could cancel the registration from assessment year 2022-23 onwards u/s 12AB(4)(ii) of the Act. In our opinion, if there is any violation in the previous assessment year 2020-21 relating to the assessment year 2021-22, this cannot be reason to cancel the registration granted for the assessment year 2022-23 to 2026-27 as the assumption of jurisdiction u/s 12AB(4)(ii) of the Act is itself wrong on the reasons discussed herein above. The specific violation committed by the assessee in any of these assessment years is to be considered independently and not the violation committed in assessment year 2021-22 for cancelling the registration granted u/s 12AB of the Act for the assessment year 2022-23 to 2026-27. As such, we make it clear that the ld. PCIT at liberty to pass the fresh order of cancellation independently u/s 12AB(4)(ii) of the Act for these assessment years i.e. 2022-23 to 2026-27, if so advised. Accordingly, we allow this ground taken by the assessee. Even otherwise, we are of the opinion that this issue of cancellation of registration for the AY 2021-22 is covered by our earlier decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23 to 2026-27 under the facts and in the circumstances of the appellant's case. 4. Without prejudice to the above, the learned PCIT is not justified in cancelling the registration granted u/s. 12A[1][b] of the Act dated 04/06/1992 and the registration granted u/s. 12AB of the Act, dated 23/09/2021 under the common order passed u/s. 12AB[4] of the Act, dated 21/06/2023 without appreciating that the registration granted u/s. 12A[1][b] and 12AB of the Act were under two separate orders / proceedings, which operated for different assessment years and therefore, separate proceedings ought to have been taken for each order of registration and concluded by a separate order and thus, the common order passed cancelling the registration u/s 12A/12AB of the Act from the FY 2020-21 and all subsequent previous years is a nullity. 5. Without prejudice to the above, the learned PCIT erred in taking up the proceedings for cancellation of registration alleging specified violations when the facts on the basis of which the allegation of specified violations were made have already been examined by the learned A.O. in assessment proceedings for the assessment year 2021-22 taking a particular view, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces and a portion of the amount collected by them has been recovered from them, which proves the bonafides of the appellant under the facts and in the circumstances of the appellant's case. 8.3 The learned PCIT failed to appreciate that the statement of the employees viz. Mr. Mohammed Bava and Mr. Umar Farooq recorded u/s 132[4] of the Act have that has been relied upon by him has since been retracted by these persons vide affidavits filed by them and thus, no reliance can be placed upon such statements recorded at the time of search under the facts and in-the circumstances of the appellant's case. 8.4 The learned PCIT erred in not considering that assessments were concluded by the Department in the case of Mr. Mohammed Bava and Mr. Umar Farooq wherein the cash collected by them has been treated as their undisclosed income establishing their guilt and thus, the adoption of a contrary view by the learned PCIT is bad in law under the facts and in the circumstances of the appellant's case. 9. The learned PCIT erred in holding that the income earned by the appellant was utilized for the benefit of Mr. Mohammed Farhad and thus not applied for the objects of the appellant the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation of registration u/s. 12A of the Act for the financial year 2020-21 relevant to the assessment year 2021-22 is also bad in Law in as much as the provisions of section 12AB(4) of the Act invoked have been substituted by the Finance Act, 2022 with effect from 01/04/2022 and the said provisions being substantive provisions dealing with cancellation of the registration have to be construed prospectively and thus, do not empower cancellation of the registration for the period before 01/04/2022 under the facts and in the circumstances of the appellant's case. 3. The appellant craves leave to add, alter, amend, substitute, change or delete any of the grounds of appeal. 3.1 The assessee has filed a petition for admission of additional g grounds stating as follows: 3.2 The ld. A.R. submitted that the above additional grounds of appeal, which were not urged specifically before this Tribunal in the original grounds of appeal filed at the time of institution of appeal due to inadvertence. These grounds do not involve any investigation of any facts otherwise on the record of the department and are also pure question of law. He prayed before us that the additional grounds may be admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time with regard to the aforesaid materials found in course of search. Even at the time of search itself, it was explained that there was no case of cash collections for admission of students and the entries in the seized materials actually represented concession provided to the students by the Management. 3.5 Thereafter, the case of the assessee was centralized by the learned Pr. CIT(Exemption), Bangalore vide order u/s 127 of the Act in Order No. ITBA/COM/F/17/2020-21/1031876262(4)to the DCIT/ACIT, Central Circle-1, Mangaluru from the DCIT(E], Circle-1, Mangaluru. In this order, the learned Pr. CIT(Exemptions) acting as CIT(E) has transferred the case to the learned DCIT/ACIT, Central Circle-1, Mangaluru for purpose of completion of assessment in order to facilitate effective and coordinated investigation. 3.6 He submitted that under the provisions of the Act, section 120 deals with the jurisdiction of Income tax authorities. Section 120(1) of the Act, empowers the Income tax authorities to exercise the powers and perform the functions conferred under the Act in accordance with the directions of the CBDT for exercise of the powers and performance of the functions by those authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer has been given and not the Jurisdiction of Commissioner. 3.9 Lastly, the provisions of section 127 of the Act are also relevant, which empowers the Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner to transfer cases from one Assessing Officer to another Assessing Officer and prescribes the procedure to be followed in such cases. Thus, in terms of section 127 of the Act, the power of transfer of cases has been given from one Assessing Officer to another Assessing officer not from one Commissioner to another Commissioner, 3.10 He submitted that from a combined reading of the aforesaid statutory provisions of the Act and the Notifications issued by the CBDT, it is submitted that the learned PCIT, Central Circle, Bangalore has no jurisdiction to withdraw the exemption u/s. 12AB(4) of the Act. This is because the CBDT in pursuance to Section 120(3) of the Act has assigned territorial jurisdiction vide Notification No. 52/2014 and 53/2014 both dated 22/10/2014 and has given power to the learned CIT (Exemption),Bangalore for the state of Karnataka for all cases of persons claiming exemption under cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Trust dated 13/11/1991 with the charitable object of imparting education. The assessee trust had established the Yenepoya Dental College in the year 1991, the Yenepoya Institute of Nursing Sciences in the year 1992, the Yenepoya Medical College in the year 1998 and the Yenepoya Physiotherapy College in the year 2003. In the year 2007, the assessee trust decided to sponsor the formation of a new trust with the sole purpose of creating a Deemed-to-be University. It is submitted that the Ministry of Human Resource Development, Union of India, on the recommendation of the University Grants Commission granted recognition to Yenepoya University Trust, a Deemed-to-be University status under section 3A of the UGC Act 1956 in the year 2008. Upon formation of the new trust, the Yenepoya Dental College was brought under the ambit of the Yenepoya Deemed-to-be University in terms of the Gazette Notification dated 27/02/2008.Thereafter, in terms of the Gazette Notification dated 09/02/2009, the Central Government on the advice of the University Grants Commission recommended for bringing the following educational institutions under the ambit of the Yenepoya Deemed to be University from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aringana Village, Deralakatte Post Mangalore - 575 018 APPROVALS EXEMPTIONS OF THE ASSESSEE TRUST: 5.3 Soon after formation of the trust, the assessee viz. M/s Islamic Academy of Education was granted registration u/s 12A of the Act, vide No, Accts-718/10A/VOLBII/1-53-92/CIT-III dated 04/06/1992 with effect from the date of formation of the trust by the learned Commissioner of Income-tax, Karnataka - III, Bangalore. This registration was granted the applicable provisions ejection 12A of the Act at that time, which is before the insertion of section 12AA of the Act, w.e.f. 01/04/1997. 5.4 Thereafter, and by virtue of the amendment made by insertion of section 12AB requiring fresh registration with effect from 01/04/2021, the assessee trust applied for and was granted recognition u/s 12AB by the learned CIT, CPC on 23/09/2021 for the assessment years 2022-23 to 2026-27. 5.5 Thus, the assessee trust was registered u/s, 12A of the Act upto and inclusive of the assessment years 2021-22 and thereafter, the assessee trust had secured the registration u/s. 12AB of the Act for the assessment years 2022-23 to 2026-27. SEARCH: 5.6 There was a search conducted in the premises of the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employees and other materials found and seized at the time of search conducted:- [i] Statement of Mohammed Bava, vide his answer to Q 28 of the statement u/s 132[4] of the Act dated 18/02/2021, had stated that cash was handed over by the students to either Mr. Ronald Ivan Soans, Admission Manager or Mr. Y. Mohammed Farhad, Pro Pro- Chancellor/Trustee. [ii] WhatsApp conversation found in the mobile phone of Mr. Umar Farookty, Accounts Superintendent with mobile number 7259751111 saved as Mr. Preethi Adm Office , showed names of the persons who paid the cash along with the amount paid. [iii] Statement of Mr. Umar Farookh, Accounts Superintendent recorded u/s 132[4] of the Act dated 17/02/2021 explaining that the chats indicate the name of the student and the ID No. And the figures mentioned against their name represents cash collected from them which is not recorded in the books of accounts. 5.9 Based on the aforesaid seized materials and statements recorded at the time of search, the learned A.O. arrived at the conclusion that the accounting treatment of this cash receipt is done by recording it as concession in the books of account, and the same is a colourable way to disguise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the students and embezzled the same are nothing but salaried employees of the college and this is nothing but a case where the agents have collected cash from some of the students upon the instructions of their employer, i.e., the trust and hands over the same to college, after deducting their commission for admissions made. 5.13 Thus, the learned A.O. concluded that i t is clear that the trust is also involved in the process of cash collection from some of the students and the same was accepted by Mr. Mohammed Bava, finance officer and Mr. Umar Farookh, Account officer during the search action. Both of them even confirmed that the cash was collected on instruction of Mr. Y. Mohammed Farhad. But in their post search proceedings, Mr. Y. Mohammed Farhad disclosed that the employees only were involved in collection of cash without knowledge of management. It is nothing but the management wants to wash off their hands by shifting the complete blame on their employees and accordingly added a sum of Rs. 1,31,85,0007- as the unaccounted cash receipt from students and brought the same to tax u/s 13[1][c] of the Act. 5.14 Being aggrieved by the order of assessment so passed, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribing the procedure to be followed for grant of registration. He drew our attention to section 12AA(1) 12AA (3) of the Act. He submitted that w.e.f. 1.10.2004, section 12AA(3) of the Act empowers the PCIT to grant registration, which reads as follows: Section 12AA(3) - Where a trust or on institution has been granted registration under clause (b) of sub-section (1) and subsequently the 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 or institution, as the case may be. he s h a l l pass an order in writing cancelling the registration of such trust or institution . 6.2 Thereafter, he submitted that the provisions of Section 12AA[3] of the Act were amended with effect from 01/06/2010 to give power to cancel registration granted under the provisions of section 12A of the Act before 01/04/1997. The provisions of Section 12AA[3] of the Act as amended w.e.f. 01/06/2010, read as under: Section 12AA(3) - Where a trust or an institution has been granted registration under clause (b) of sub-section (1) [or has obtained registration at any time under section 12A [as it sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Principal Commissioner of Commissioner is satisfied that the activities of such trust or institutions are not genuine or are not being carried out in accordance with the objections of the t r u s t or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution after affording a reasonable opportunity of being heard''. 6.7 Thereafter, he submitted that the above provisions of Section 12AB [4] of the Act was substituted by the Finance Act, 2022 with effect from 01/04/2022 to empower the learned PCIT to cancel registration granted u/s 12AA [1] of the Act or u/s 12AB[1] of the Act. 6.8 He submitted that as can be seen from the above, the provisions of section 12AB [4] of the Act introduced with effect from 01/04/2021 before substitution with effect from 01/04/2022 only enabled the cancellation of registration granted under clause [a] or clause [b] of subsection 1 i.e., limiting the power of cancellation to the registrations under section 12AB [1] of the Act. No power to cancel registration granted u/s. 12AA[1][b] of the Act or for that matter under section 12A of the Act was conferred. Thereafter, with effect f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration to be restricted for 5 years, the assessee had filed an application and thereafter order of registration u/s 12AB of the Act was issued to the assessee by CIT-CPC on 23.9.2021 from assessment year 2022-23 to assessment year 2026-27 so as to enable the earlier registration granted on 4.6.1992 to be continued and in this case, the ld. PCIT vide order dated 21.6.2023 has cancelled the registration granted to the assessee u/s 12A/12AB of the Act w.e.f. previous year 2020-21 u/s 12A of the Act and for all subsequent previous years as per provision of section 12A(4) of the Act. Now the contention of the ld. A.R. is that registration for the previous year 2020-21 relevant to assessment year 2021-22 was u/s 12A of the Act and not u/s 12AB (1) of the Act. So the registration u/s 12A of the Act, which was granted to the assessee on 4.6.1992 cannot be cancelled u/s 12AB (4) of the Act. For understanding this issue, we will go through the section 12AB (4) of the Act, which reads as follows: 12AB(4) Where resignation or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of subsection (1) or clause (b) of sub-section (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 subsection (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; [or g) The application referred to in clause (ac) of sub-section (1) of section 12A is not complete or it contains false or incorrect information.] 8.1 Now we will go through the importance of these provisions of the Act. 8.1.1 The Finance (No. 2) Act, 2004 had inserted the subsection to Section 12AA. By virtue of this sub-section (3), th Commissioner, with effect from 1st day of October, 2004 had the power to cancel the registration, if she is satisfied that the activities of such trust/institution are not genuine or are not being carried out in accordance -wi1h Ihe objects of the trust or institution. 8.1.2 The Finance Act, 201 4 provided additional powers for cancellation under Section 12AA(4)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 12AB(4) covers cases of provisional registration as well and hence, registration granted for the first time can also be cancelled. 8.1.9 Before the amendment by the Finance Act, 2022, Section 12AB(4) provided for cancellation of registration in case of any violation under Section 13. The amended Section 12AB(4) does not consider a violation of Section 13(l)(c) and Section 13(l)(d) as specified violations. Consequently, the registration cannot be cancelled on the ground that the assessee has violated Section 13(l)(c) or Section 13(1)(d). 8.1.10 The Finance Act 2023 has inserted clause (g) in Explanation to Section 12AB(4) to provide that giving incomplete, false, or inaccurate information in a registration application under Section 12A(l)(ac) will be deemed as a specified violation that can lead to the cancellation of registration. 8.2 Thus, it means that the following registration could be cancelled: 8.2.1 The PCIT/CIT can cancel the following registrations granted to a trust or institution: (a) Final registration or provisional registration granted under section 12AB(1)(a)/(b)/(c); (b) Final registration granted under section 12AA(1). The erstwhile provision did not cover cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation to section 12AB(4) of the Act as follows: Explanation: For the purposes of this sub-section, the following shall mean specified violation ,-- a) Where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or b) The trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place; iii. pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations; iv. forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such trsut or institution. Explanation: For the purposes of this sub-section, the following shall mean specified violation ,-- a) Where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or b) The trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by necessary implication . 6.5 In the case of Karimtharuvi Tea Estate Ltd. Vs. State of Kerala reported in 51 ITR 129 (SC) the same view was taken by the Hon ble Supreme Court. 6.6 Further, the Hon ble Supreme Court in the case of Shree Chowdhary Transport Company Vs. ITO reported in 426 ITR 289 (SC) wherein held as under: 17.4 It needs hardly any detailed discussion that in income-tax matters, the law to be applied is that in force in the assessment year in question, unless stated otherwise by express intendment or by necessary implication. As per section 4 of the Act of 1961, the charge of income-tax is with reference to any assessment year, at such rate or rates as provided in any central enactment for the purpose, in respect of the total income of the previous year of any person. The expression previous year is defined in section 3 of the Act to mean the financial year immediately preceding the assessment year ; and the expression assessment year is defined in clause (9) 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005, would apply from and for the assessment year 2005-06 and would be applicable for the assessment in question. Putting it differently, the Legislature consciously made the said sub-clause (ia) of section 40(a) of the Act effective from April 1, 20056, meaning thereby that the same was to be applicable from and for the assessment year 2005-06; and neither there had been express intendment nor any implication that it would apply only from the financial year 2005-06. 6.7 Being so, we find force in 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. 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 me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o note that same view has been taken by Coordinate bench of Mumbai in the case of Heart Foundation of India in ITA No.1524/Mum/2023 vide order dated 27.7.2023, wherein held that registration granted u/s 12A of the Act dated 21.7.1989 cannot be cancelled by ld. PCIT (Central) vide order dated 6.3.2023 w.e.f. assessment year 2016-17, by invoking the provisions of section 12AB(4)(ii) of the Act. Accordingly, we allow the primary ground nos.2, 3, 5 12 and order of ld. PCIT passed u/s 12AB(4)(ii) of the Act is quashed. 8.5 In view of the above, this ground of appeal of the assessee is allowed. 9. Now we will adjudicate ground Nos.3.1 and 5 to 11 of the assessee s appeal with regard to which the ld. A.R. has submitted as follows: Ground No. 3. 1 : 10. The ld. A.R. submitted that no specified violation noticed or found by PCIT for the assessment year 2022-23 to 2026-27 and since 12A cannot be cancelled, it follows that the registration granted u/s. 12AB cannot be cancelled in the absence of any specified violations for the assessment years 2022-23 to 2026-27. 10.1 This ground is allowed in view of our findings in ground No.2 of this order as discussed above. Ground No. 4: 11. The ld. A.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hdrawal of the registration u/s. 12A of the Act that is available until assessment year 2021-22 and registration u/s. 12AB of the Act that is applicable for the assessment years 2022-23 to 2026-27. 12.3 He submitted that the impugned order passed by the learned PCIT, Central Circle, Bangalore is to set at naught the appeal filed by the appellant before the learned CIT [A], who would be unable to consider the merits of the argument put forth before with regard to the materials found in course of search and render a finding as to whether the appellant had in fact accepted cash from students and diverted the same to the trustees as held by the learned A.O, Thus, the view taken by the learned PCIT that the learned CIT [A] would not be bound by the views of the learned PCIT since he does not report to the learned PCI T is of little consequence since the CIT [A] would not be able to decide the addition that has been made by the learned A.O. in the assessment order on merits of the submissions made by the appellant and the materials on record. It is submitted that the existence of registration is a precondition for allowance of exemption u/s. 11 of the Act and thus, the learned CIT [A] wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iolations during any previous year; or (b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or (c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall, 12.8 He submitted that as can be seen from the above, there are 3 circumstances mentioned which are mutually exclusive of each other. Under either of the conditions, the PCIT can act to cancel the registration. The first condition is when he notices the violations by himself, which could be at a stage before the completion of the assessment and not thereafter. This is because both the other conditions in [b] [c] also talk of the proceedings being taken up before completion of the assessment and not thereafter. Once the assessment is completed, the cancelation of the registration could not be done when the matter is before the appellate authorities. Thus, section 12AB[4][a] also has to be construed in a manner that is harmonious with the other 2 clauses. 13. The ld. D.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he discounts provided. 15.2 He submitted that these 2 persons have also been terminated from the services and this shows the bonafides of the explanation tendered. The cash which was collected by Sri Umar Farooq and Sri Mohammed Bawa in lieu of the discounts provided to the students has also been assessed in their hands. Furthermore, the Pro Vice Chanc or of Yenepoya University viz. Sri Mohammed Farhad has denied any collection of cash by the appellant right from the date of search. In fact, there is no case at all to hold that any cash was collected by the appellant and diverted to the trustees, which is buttressed by the fact that the assessment for the AY 2020-21 and AY 2021-22 was concluded in the case of Sri Mohammed Farhad by accepting the returned income. Thus, there is no specified violations by the appellant at all to justify the cancellation of registration. 16. On the other hand, the ld. D.R. relied on the order of lower authorities. 17. This ground is infructuous in view of our findings in ground No.2 of this order as discussed above. 18. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open court on 28th Feb, 2024 - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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