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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 ..... 12A of the Act by and under the Registration No. DIT/97-98/L327/97/114 dated 22.08.1997. It has also obtained the approval under Section 80G of the Act on 02.06.2008. Further that after insertion of Clause (ac) in Section 12(1) of the Act the registration of the society was renewed under Section 12A(1)(ac)(i) of the Act w.e.f Assessment Year 2022-23 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, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and under letter dated 22.08.2023 for cancellation of such registration under Section 12A r.w. Section 12AA and 12AB(4) of the Act for Financial year 2014-15 and subsequent years whereupon the appellant filed a reply dated 07.02.2024. A further show cause notice dated 02.03.2024 was issued by the Ld. PCIT-3 Delhi, in the proceeding for cancellation of registration 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries taken by the society and subsequent conversion of unsecured loans into Corpus Donation, received from 5 different companies from year 2008 to 2013 and converted into corpus donation during FY 2016-17, however status of these companies as per MCA is "Strike Off Case Law relied upon CIT(Exemptions) Vs Batanagar Education and Research Trust (2021) SC 129 taxmann.com 30. (AY involved 2017-18) (Pg 200-208) * Unaccounted 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. * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght under the ambit of this section. * Wordings used in sec 12AB(4) "has noticed occurrence of one or more specified violations during any previous year" make legislative intent very clear about covering years prior to 01.04.2021 * Hon'ble ITAT, Delhi in Young Indian Vs CIT(Exemption) (ITA No.7751/Del/2017) has held that order of cancellation of registration even passed on subsequent date would take effect from the year when cause of action arose. In the present case, search 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the trust for other than charitable objects (Pg 66-93) * The assessee society diverted the income generated from the property held under society by booking bogus expenses (both revenue and capital) from AY 2015-16 to 2021-22 through Manoj Kumar Singh (de facto controlling and managing affairs of society) and his close associates Naveen Narang. Deepak Narang. Adhir Sachdeva and his trusted &key employee Devesh Singh. * Devesh Singh(employee of Singh & Associates, prop. Manoj Kumar Singh) in his statement on oath stated that 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orce of law as it is an internal communication of the department with no sanctity under Section 119 or Section 120 of the Act. The registration can be withdrawn/cancelled only by the 'Prescribed Authority' who has been empowered to grant the registration as held in several judicial pronouncements including the case title Pacific Academy of Higher Education and Research Society, Udaipur Vs PCIT (Central), Jaipur (@ para 6.7 @ page 126 of judgment compilation) It is squarely covered in cited judgment that the registration can be cancelled only by the 'prescribed authority' 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 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, liable to be quashed. The order impugned suffers from jurisdictional error as the same has been passed by the non jurisdictional officer. He has further proceeded with the case of revocation/withdrawal of registration under Section 12AB(4) as also being beyond jurisdiction inasmuch as there is no "specified violation' as defined in the said section which is sine qua non for withdrawal of such registration. Moreso, the provision of Section 12AA has been wrongly referred by the Ld. PCIT as the same is not applicable after 01.04.2021. Further that the cancellation of registration of the trust 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter the show cause notices mentioned hereinafter issued by the Ld. PCIT are flawed and not maintainable in view of the provision of Section 12AA (5) of the Act. The power to cancel registration granted under Section 12A r.w.s 12AB of the Act can no longer be exercised under Section 12AA(3) after 01.04.2021. 14. Section 12AB(4) was substituted by the Finance Act 2022 w.e.f 01.04.2022 vesting jurisdiction to the Ld. PCIT to cancel registration granted under Section 12AA(1) of the Act or under Section 12AB(1) of the Act. As Section 12AB(4) was not in existence in the statute prior to 01.04.2022 such 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 of the Act to submit that the word, 'case' has been defined for the purpose of section 127 and consequent to the centralization of the assessment, the Id. PCIT, Gurgaon had got powers to commence proceedings u/s 12AB(4) of the Act for cancellation of registration of the assessee. 9.1 In this context, the Id counsel for the assessee has heavily relied on the CBDT Notification No 52/2014 made available at page 2 to 6 of the paper book submitting that in regard to powers u/ss 11 and 12 of the Act, the CIT (Exemptions), Chandigarh specific jurisdiction and which could not have been transferred. Relying 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 Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (2) may be made at any stage of the proceedings, and shall not render necessary the re issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation.--In section 120 and this section, the word "case", in relation to any person whose name is specified in any order or direction issued there under, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration of such trust or institution after affording a reasonable opportunity of being heard. (5) Without prejudice to the provisions of sub-section (4), where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub section (1) and subsequently, it is noticed that- (a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, or (b) 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, 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 Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to the said application made or order so passed as the case may be.] 11. Further, it will be appropriate to reproduce the order u/s 127(2) dated 26.10.2020 available at page No. 1 of the paper book:- Order u/s 127 (2) of the Income Tax Act, 1961 Consequent to the search & seizure operations u/s 132 of the 1.T. Act, 1961 in Dev Wines Group (D.OS 19.02.2020), the Pr. Commissioner of Income Tax (Central), Gurugram vide letter F.No. Pr.CIT(C)/GGM/Cent./Dev Wines/2020- 21/969 dated 24.08.2020 has been given concurrence and requested for centralization of the following cases related M/s. Dev Wines Group to DC11, Central Circle 2, Faridabad for coordinated post search investigation & meaningful assessment 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 add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1961 and assessed or assessable by an Income-tax authority at Serial Number 50 to 68 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014. 2. This notification shall come into force with effect from the 15th day of November, 2014. [Notification No. 52/2014/F No. 187/38/2014(ITA. I)] DEEPSHIKHA SHARMA Director 12.1 A reference was made by Ld. AR about the circular no 11 of 2022 MANU/DTCR/0011/2022 dated 3rd June 2022, giving clarification regarding Form No.10 AC till the date of the circular and it will be relevant to reproduce para 1 of this circular herebelow; "Circular No. 11 of 2022: MANU/DTCR/0011/2022 F. No.370142/4/2021-TPL Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes (TPL Division) Dated: 3rd June, 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 provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 16.10.2020. 14. Having considered the aforesaid, it comes up that the order of transfer u/s 127 dated 26.10.2020 is shown to be passed under sub-clause (a) to subsection (2) of section 127 of the Act which gave powers to CIT(E) Chandigarh to pass order of transfer qua such 'Assessing Officers' who are subordinate to other the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner Thus when we consider the definition of "Assessing officer" u/s 2(7A) of the Act, certainly PCIT, Gurgaon, who has passed the Impugned order is not an 'assessing officer, and order passed dated 26.10.2020, under subclause (a) to sub-section (2) of section 127 of the Act only referred to transfer of Jurisdiction of 'assessing officer subordinate to CIT(E) Chandigarh 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) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17A if have to be construed, by virtue of Board Notification dated 22.10.2014, then we pointed out during the hearing, to Id. D.R that this Notification dated 22.10.2014 does not mention specifically that the powers which can be exercised by Id. PCIT u/s 12AB(4) of the Act and which have come into effect from 01.04.2021 would also be exercised by virtue of this Notification dated 22.10.2014 or that further jurisdiction u/s 12AB of the Act could be transferred to other authorities as per this Notification. The query was left unsatisfied and no other Notification a Circular was brought to our notice." 15. Thus, at one end, in the absence of any specific reference of section 12AB in the Notification dated 22.10.2014 or there being subsequent authorisation by any Circular or Notification of the Board, we conclude that at the time of passing the order u/s 127 of 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 hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCIT or Commissioner, to whom this AO was subordinate but one authorised by board for the purpose of Section 12AB. The one who could grant or cancel the registration as per amended provisions which is not PCIT, Gurgaon, but, would be CIT(E), Chandigarh. Thus assumption of jurisdiction for cancellation of registration u/s 12AB(4) of the Act by virtue of aforesaid transfer of jurisdiction order u/s 127 of the Act is not conceivable." ... "21. In the light of the aforesaid discussion and the law cited before us, we are of the considered view that the impugned order has been passed by Ld. PCIT, Gurgaon, without jurisdiction in context to territorial powers and subject matter as well not in accordance with law and same is liable to be quashed. Accordingly, the additional ground raised by the assessee is allowed. Since the relief is granted to assessee by allowing additional ground 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 ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 cases of provisional registration granted under section 12AB(1)(c). Now, the provisional registration granted for the first time can also be cancelled by the authorities. 8.3 As seen 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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