9911796707
TMI Blog2025 (4) TMI 1128X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the reference made by the A.O. under second proviso to S.143(3) of the Act, which reference itself is illegal, beyond jurisdiction and without issuing the prior show cause notice. 3. The PCIT (Central) has erred in invoking the provisions of S. 12AB(4) of the Act, which came into effect from A.Y. 2022-23, in respect of the year under consideration i.e. A.Y. 2021-22 and thereby retrospectively applying the provisions of the Act. 4. The PCIT (Central) has erred in passing the order in gross violation of the principles of natural justice. 5. The appellant craves leave to add to, amend, alter or delete the foregoing grounds of appeal." 3. The assessee vide letter dated 14th December 2024 filed Additional Ground of appeal challenging the jurisdiction of PCIT (Central) for passing the order cancelling the registration of assessee trust. 4. At the outset, we note that the learned AR for the assessee at the time of hearing submitted that he has been instructed by the assessee not to press the issue raised in additional ground of appeal. Accordingly, the additional ground of appeal of the assessee is hereby dismissed as not pressed. 5. The effective issue raised by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted expenses." * Explain the allegations related to the utilization of the assessee's funds for the renovation of hotels, bars, and a marriage hall owned by the trustees. * Provide an explanation regarding the capitation fee received in cash but not recorded in the books of accounts. 11. In response to the show cause notice, the assessee submitted its reply. However, the learned PCIT found that the assessee failed to substantiate its claims with documentary evidence. After considering the assessee's reply, the materials seized during the search, and the statements of various individuals recorded during the search, the learned PCIT concluded that the assessee had incurred expenditures that were not in line with the objectives of the trust. Additionally, the assessee trust had diverted funds for the personal benefit of the trustees. Accordingly, the assessee was found to have committed specified violations under clauses (a), (d), (e), and (f) of the Explanation to section 12AB(4) of the Act. Consequently, the learned PCIT cancelled the registration granted under section 12AB of the Act with effect from F.Y. 2020-21, relevant to A.Y. 2021-22 and subsequent assessment years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that time. In support of his argument, the learned AR relied on decisions of the coordinate bench of this Tribunal and other Tribunal rulings, which are on record. 16. On the other hand, the learned DR before us submitted that the provisions pre amendment and post amendment relating to the cancellation of the registration certificate under section 12AA/12AB of the Act are the same in substance. As such, under the pre amendment and post amendment provisions, the registration certificate stands withdrawn when the activities of the Trust are not genuine as well as when there is diversion of fund for the purposes other than the purposes for which the trust was established. The learned DR vehemently supported the order of the authority below. 17. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, the issues which require adjudication are detailed as under: i. Whether the reference made by the AO to the learned PCIT in accordance with the second proviso to section 143(3) of the Act is without jurisdiction and invalid. ii. Whether the learned PCIT erred in applying the amended provision of section 12A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icular 2nd proviso to Section 143(3) of the Act was substituted and made effective from 01.04.2022 whereby and whereunder the Assessing Officer has been vested with the power to make reference to the PCIT for institutions granted registration under Section 12AA/12AB of the Act. In that view of the mater as there was no provision existing in the statute prior to 01.04.2022 vesting jurisdiction upon the Assessing officer to make reference for alleged violation under Section 12AB(4) of the Act as amendment to Section 12AB(4) and 2nd proviso to Section 143(3) were made w.e.f 01.04.2022. The reference has, thus, no basis and is liable to be quashed. Tribunal finding: 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 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 Ld. AO to give effect of the order passed on reference in the Assessment Order itself. Moreso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjects 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 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, holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii. 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 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 establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in the case of Shree Choudhary Transport Corpn. v. ITO [2020] 118 taxmann.com 47/272 Taxman 472/426 ITR 289 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 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." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 mention of the amended provisions to operate retrospectively, no cancellation for the earlier years could be made. In this regard, it is app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation of India v. CIT [IT Appeal No. 1524 (Mum.) of 2023, of 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. 17.5 We also note that the above finding of the coordinate bench of this Tribunal was further followed in the case of M/s Islamic Academy of Education vs. PCIT in ITA No. 610/Bang/2023. Likewise, we note that note identical view was also taken by the Pune Bench (Tribunal) in the case of N.M. Patel Charitable Trust vs. PCIT in ITA No. 1130/Pun/2024. 17.6 Now coming to third question and without prejudice to above, we find merit in the argument of the ld. AR that the AO's satisfaction regarding the assessee's alleged violations was formed without independent inquiry or verification of the materials seized during the search proceedings. The AO appears to have solely relied on the seized documents and statements recorded during the se ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
