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TMI Blog2024 (8) TMI 1297X X X X Extracts X X X X X X X X Extracts X X X X ..... ce granted u/s 12AA of the Act is permissible to be made only during the pendency of the assessment proceeding. However, in the case in hand the assessment proceeding has already been concluded on 29.03.2022. In fact, the reference could be made only during the course of assessment proceedings so as to enable the AO to give effect of the order passed on reference in the Assessment Order itself. Moreso, the said proviso has been inserted w.e.f 01.04.2022 in the statute to make reference to the PCIT by the AO u/s 12AA, 12AB of the Act. In that view of the matter application of a particular provision of law which was not in existence during the material point of time cannot be said to have been rightly invoked. So far as the provision of Section 12AB(4) of the Act as exercised by the PCIT is concerned the Ld. A.R relied upon a judgment passed in the case of M/s Islamic Academy of Education, Manglore [ 2024 (3) TMI 876 - ITAT BANGALORE] As in view of the provision of Section 12AA(5) of the Act as the provision of Section 12AA cannot be applied on order after 01.04.2021 the show cause notices issued by the PCIT to the appellant dated 05.07.2023 and 16.08.2023 are, thus, found to be erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23 to 2026-27 on 31.08.2021 and further approval was also granted w.e.f Assessment Year 2022-23 to 2026-27 on 31.08.2021. 3. The brief facts leading to the issue are that a search and seizure operation under Section 132 of the Act was conducted on 14.10.2020 in the case of Manoj Kumar Singh and his close associates and few transacting parties with the said Shri Manoj Kumar Singh. The school run by the appellant was also covered in that search. On 04.01.2021 by and under the order issued by the CIT(Exemption), Civic Center, New Delhi under Section 127(2) of the Act, the, appellant s case was transferred from Circle Exemption- 1(1) Delhi to the Central Circle 29, New Delhi for the purpose of coordinated investigation and meaningful assessment pursuant to search conducted under Section 132 of the Act on 14.10.2020. On 29.03.2022 the DCIT, Central Circle-29, New Delhi, concluded the assessment proceedings for Assessment Year 2015-16 to 2021-22 noting that the same is a fit case for withdrawal of registration under Section 12A of the Act as per sub-Sections 3 and 4 of Section 12A of the Act. The appellant challenged the said assessment orders by filing appeal before the First Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stration under Section 12A r.w.s 12AA and 12AB(4) of the Act reply thereto made by appellant was furnished on 06.03.2024. A further show cause dated 15.03.2024 was issued by the PCIT and served upon the assessee whereupon reply was filed on 24.03.2024 by the appellant and finally the Ld. PCIT-3 cancelled the registration of the appellant from Assessment Year 2015-16 to 2021-22 with a further direction to this effect that even if the appellant firm found that specified violation is not in existence then also the consequential cancellation order would continue to operate independently by and under its order dated 31.03.2024 which is impugned before us. 7. The Ld. D.R. relied upon the order passed by the PCIT as challenged before us. A written submission has been filed by the Ld. D.R at the time of hearing of the matter too, the contents whereof is as follows: Facts of the case: Assessee is a society running a school in the name of GD Goenka Public School situated at Elephanta Lane, Near Golak Dham, Sector-10, Dwarka, New Delhi It was registered under Societies Registration Act on 18.09.1996 and under sec 12A of the act on 22.08.1997 It is also having approval u/s 80G of the act dt. 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed cash found from the premise of the school run by the society during search, which has been received as commission from the book vendor and uniform vendor of school (AY involved 2021-22) (Pg 208-211) Ground-wise findings of PCIT(Central) vide order u/s 12A r.w.s 12AA 12AB(4): Gr. 2: Order passed without jurisdiction since jurisdiction exclusively vests in CIT(Exemption), Delhi (Pg 12 18) Jurisdiction by PCIT (Central) has been assumed in view of CBDT letter dt. 19.01.2024 bearing F.No. 173/6/2024 ITA-I in respect of cancellation of registration u/s 12AA/10(23C) in trust cases by PCIT other than CIT(Exemption). As per order of registration (Form 10AC) dt.31.08.2021, it is clear that registration of society can be withdrawn by prescribed authority. Case of assessee society is currently assigned vide order u/s 127 with DCIT, Central Circle 28, Delhi who is sub-ordinate to PCIT (Central) 3, Delhi Thus, in view of para 2.3 and para 3 of CBDT letter dt. 19.01 2024, prescribed authority for cancellation of registration in this case is PCIT (Central)-3. Gr. 2.1. Reliance on ex parte internal communication dt. 19.01.2024 issued by CBDT 10 assume jurisdiction, without appreciating that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch was conducted on 14.10.2020 and on the basis of various incriminating evidences, assessment was completed for AY 2015 16 to AY 2021-22. Gr.5 Reliance on ex-parte material without confronting it to society and without providing opportunity to cross-examine various persons whose statements relied upon (Pg 31-36, 50-66, 145-154) Gr. 5.2 Reliance on retracted statements and various inadmissible electronic data/evidence, excel sheets, etc which cannot constitute valid evidence as per Indian Evidence Act, 1872 (Pg 31 36, 93-145) A.O, during assessment proceedings, provided to assessee details of seized documents/evidences pertaining to society, as mentioned in assessment order for AY 2018-19 (Pg 31) A.O. again provided copies of relevant material to the assessee vide letter dt. 14. 12. 2023 and 15.03.2024, however certain documents/digital data was not provided as it was seized/impounded from the premise of other Persons and did not pertain to assessee and also were not used in the SCN issued to assessee (Pg 32) AO has also provided the certificate u/s 65B of the Evidence Act in respect of electronic data used against assessee. (Pg 34) Further, strict rules of Evidence Act are not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat bogus expenditure bills are arranged by Deepak Narang and he used to hand over the bills to Pancham Ray after collecting the same from Deepak Narang (Pg 67). Deepak Narang in his statement accepted that bogus bills are arranged by him and the same is handed over to leto management through Devesh Singh. On receipt of said bills, payments are made by school through proper banking channels. Against said payment, cash is received. (Pg 67) Statements of some of the vendors (like Suresh Kumar Goyal and Vijay Kumar Gupta) who provided bogus billing were also recorded. (Pg 68) An excel sheet by the name DN xlsx was found from Laptop of Devesh Singh which contains details of transactions from the parties which are arranged by Deepak Narang and the same is recorded in books of school. Details of cash paid by Deepak Narang to Manoj Kumar Singh is also mentioned. (Pg 68) Similar excel filed named My Data xlsx was also found from premise of Devesh Singh. (Pg 69) Similarly, bogus bills were also arranged by Naveen Narang Adhir Sachdeva as evident from excel files found from premise of Devesh Singh. (Pg 69-73) On perusal of bills issued by 90 vendors, it is seen that these bills were merely h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y' who has granted it. 35. The amended Section 12AB (4) of the Act, does not consider a violation of Section 13(1)(c) of the Act as specified violations . No allegations of specified violation have been averred against the Appellant in the Show Cause Notices. Consequently, the registration cannot be cancelled on the grounds that the Assessee has allegedly violated Section 13(1)(c) or section 11(1)(a) or section 13(1) of the Act. It is held in islamic Academy of Education (supra) that the amended Section 12AB (4) of the Act does not consider a violation of Section 13(1) of the Act (para 8.1.9 @pg 44-45 of the judgement compilation). Further, reliance placed to Section 12AB (4) of the Act for the alleged violations occurred during AY 2015-16 to AY 2021-22 is without any substance as Section 12AB(4) of the Act is made applicable w.e.f 01.04.2022. 36. As held in Islamic Education (supra), if there is any violation in the previous year 2020-21 relating to AY 2021-22, this cannot be a reason to cancel the registration granted for AY 2022-23 to AY 2026-27 as the assumption of jurisdiction under Section 12AB(4)(ii) of the Act is wrong (relevant para 8.3 @ pg 45 of judgement compilation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be made with retrospective effect and therefore, revocation of registration in the case in hand, w.e.f Assessment Year 2015-16 is also beyond jurisdiction, bad in law as was the crux of the argument advanced by the Ld. A.R. 10. We have heard the rival submissions made by the respective parties, we have further perused the relevant materials available on record including the orders passed by the authorities below. 11. The case of the assessee is this that the reference dated 04.05.2022 and also dated 31.07.2023 made by the Assessing Officer on the basis of 2nd Proviso to Section 143(3) of the Act is not applicable in the case in hand. The said reference granted under Section 12AA can only be made during the pendency of the assessment proceedings which admittedly has been concluded on 29.03.2022 for the appellant before us. According to the appellant s counsel such reference could have been made only during the course of assessment proceedings so that the effect of such order passed by the PCIT can be considered while passing final order of assessment by the Assessing Officer. In the case in hand as the assessment proceedings has already been concluded on 29.03.2022 the effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h specified violation, if any, existed prior to 01.04.2022 cannot be touched by the Ld. PCIT by invoking Section 12AB(4) of the Act. 15. Otherwise also the alleged violation specified in the show cause notices pertained to the period prior to search dated i.e. 14.10.2020 and therefore proceeding emanating under Section 12AB(4) of Act proposing cancellation of Registration for Assessment Year 2015-16 to 2021-22 is totally unlawful and ultravires to the provisions of Section 12AB(4) of the Act. 16. As per the contentions made by the Ld. Counsel appearing for the assessee before us that the jurisdiction to grant and/or withdrawing exemption vest with the Ld. CIT(Exemption). The transfer to case under Section 127 of the Act by and under the order dated 04.01.2021 is only for the purpose of coordinated assessment and not for the purpose of exercising jurisdiction for cancellation of registration. In that view of the matter it cannot be assumed that with the transfer of case of the appellant under Section 127 of the Act for coordinated assessment by the CIT(Exemption) Delhi by and under the order dated 04.01.2021 also transfers the proceedings for cancellation of registration. The order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the order u/s 127 of 26.10.2020, it was submitted that the order specifically mentions the transfer of case for carrying out post search investigation and meaningful assessment and not for any other purpose like cancellation of the registration. 10. Now to decide the question of valid exercise of jurisdiction by Ld. PCIT, Gurgaon, will be first relevant to reproduce the section 127 of the Act as follows- Power to transfer cases. 127. (1) The Principal Director General or Director General or Principal Chief Commissioner Of Chief Commissioner 01 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 of 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 sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such order or direction in respect of any year. 10.1 Further, we consider it appropriate to reproduce relevant portion of Section 12AB and relevant part Rule 17A as under:- Section 12AB, 12AB Procedure for fresh registration (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub section (1) of section 12A, shall, -- (a) where the application is made under sub clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years, (b) where the application is made under sub-clause (11) or sub-clause (iii) or sub clause (iv) or sub clause (v) of the said clause,-- (1) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about (A) the genuineness of activities of the trust or institution, and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects, and (ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under Item (A), an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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, then, the Principal Commissioner of the Commissioner may, by an order in writing, after affording a reasonable opportunity of being heard, cancel the registration of such trust or institution. Rule 17A (5) On receipt of an application in Form No. 10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting registration under clause (a), or clause (c), of sub-section (1) of section 12AB read with sub-section (3) of the said section in Form No. 10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (1) of the sub-rule (1). (6) If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under subrule (1) or (2) ог by not complying with the requirements of sub-rule (3) or ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment Accordingly, in exercise of power conferred by sub-section (2) of Section 127 of the Income Tax Act, 1961 and under all other powers enabling me in this behalf, 1, the Commissioner of Income Tax (Exemptions), Chandigarh hereby transfer the following case(s), particulars of which are mentioned hereunder in Columns (2) and (3) from the Assessing Officer mentioned in Column (4) therein, to the of the Assessing Officer mentioned in Column (5) SCHEDULE Sr. No. Name and address of the assessee PAN From To 1) (2) (3) (4) (5) 1. M/s Aggarwal Vidhya Pracharni Sabha (Aggarwal College, Ballabhgarh) AABTA3490Q Circle -2(E) Chandigarh DCIT, Central Circle-2, Faridabad DLC-CC-136-4 This order shall take effect from 26.10.2020. 12. We also consider it appropriate to reproduce the relevant part of the Notification dated 22.10 2014 providing for the territorial jurisdiction of CIT(E) in furtherance of powers given to the Board u/s 120 (1) and (2) of the Act, made available at pages 2 to 5 of the paper book:- NOTIFICATION New Delhi, the 22nd October, 2014 (Income Tax) S.O. 2754 (E).--In exercise of the powers conferred by sub-section (1) and (2) of section 120 of the Income-Tax Act, 1961 (4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne, 2022 Sub: Clarification regarding Form No 10AC issued till the date of this Circular - reg. Finance Act, 2022 has inserted sub-section (4) in section 12AB of the Income- tax Act, 1961 (the Act) allowing the Principal Commissioner or Commissioner of Income-tax to examine if there is any specified violation by the trust or institution registered or provisionally registered under the relevant clauses of sub-section (1) of section 12AB or subsection (1) of section 12AA. Subsequent to examination by the Principal Commissioner or Commissioner of Income-tax, an order is required to be passed for either cancellation of the registration or refusal to cancel the registration. Similar provisions have also been introduced in clause (230) of section 10 of the Art by substituting the fifteenth proviso of the said clause with respect to fund or institution trust or institution or any university or other educational institution or any hospital or other medical institution referred under sub clauses (iv), (v), (vi), (via) of this clause and which have been approved or provisionally approved under the second proviso to the said clause These amendments are effective from 1st April, 2022. In addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rh to DCIT, Central Circle-2, Faridabad DLC-CC-136-4 as assessing officer and not original jurisdiction of CIT(E) Chandigarh with regard to the subject matter as stands vested by order of CBDT dated 22/10/2014. 14.1 Further, what is material is that by the Notification dated 22.10.2014 the Board, exercising powers under sub-section (1) and sub-section (2) of section 120 vested powers to perform all the functions in respect of class of cases referred in the column No.5 of the Schedule of this Notification and had created a specific jurisdiction on territorial basis in regard to the provisions generally dealing with claim of exemptions u/ss 10,11,12, 13A and section 138 of the Act. 14.2 Thus as we refer to the Notification dated 22.10.2014, the clause (a) vested powers with Commissioners of Income-tax (Exemptions), for class or class of cases pertaining to section 10, section 11, section 12, section 13A and section 138 of the Art and clause (b), to issue orders in writing for the exercise of 'their powers and perform all 'their functions by Additional Commissioners of Income tax or Joint Commissioners of Income tax and Tax Recovery Officers who are subordinate to them and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act on 26.10.2020, CIT(E), Chandigarh did not have powers to as such transfer his jurisdiction u/s 127(2)(a) of the Act, for the purpose of Section 12AB has come into effect from 01.04.2021 Accordingly, under no circumstance while passing order u/s 127 of the Act on 26.10.2020, CIT(E), Chandigarh could have transferred his powers u/s 12AB of the Act to any other authority. 15.1 On the other hand, Id. PCIT, Gurgaon by virtue of the Explanation defining the scope of 'case' for the purpose of section 127, did not have power vested in him to cancel registration u/s 12AB(4) The 'case' refers to assessment initiated as a consequence of search or consequential proceedings to such assessments only and cannot be extended to special powers of Id. CIT(E), Chandigarh, Thus, the assumption of jurisdiction on the basis of the order dated 26.10.2020 of CIT(E), Chandigarh is completely illegal and that makes the whole exercise of Id. PCIT passing the impugned order liable to be quashed. 16. Furthermore, if examine the legality of the procedure followed by Id. PCIT, Gurgaon to pass order u/s 12AB(4), by recourse to exercise of powers by virtue of clause (a) of sub-section (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round itself, the adjudication of other grounds raised by the assessee become academic in nature and are left open. Resultantly, the appeal of the assessee is allowed and the impugned order is quashed. 18. Having regard to the judgment as relied upon by the Ld. A.R we are of the considered opinion that the reference made in terms of 2nd proviso of Section 143(3) of the Act to the PCIT to whom the AO was subordinate is not permissible rather it is the CIT(E) Delhi, having territorial jurisdiction specified in Column 4 of the Notification Nos. 52/2014 and 53/2014 both dated 22.10.2014 from whom exemption inter/alia under Section 12A of the Act is being claimed is the appropriate authority. In fact by and under the said notification the CIT(Exemption) has been constituted separately for the purposes mentioned therein. In that view of the matter the order passed by the PCIT cancelling registration of the appellant society on the reference made by the Assessing Officer is found to be flawed and without jurisdiction. 19. Apart from that after considering the 2nd proviso of Section 143(3) of the Act, we find that the reference granted under Section 12AA of the Act is permissible to be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the above, since the assessee has secured the registration u/s 12A of the Act dated 4.6.1992, which was effective till the date of 23.9.2021 and this registration granted u/s 12A cannot be cancelled u/s 12AB(4)(ii) of the Act 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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