TMI Blog2024 (1) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... and cancellation of the registration as original jurisdiction. In this case, the exercise of power u/s. 12AB(4) of the Act seems to also not have been done in accordance with law. As what comes up further is that, if at all, PCIT, Gurgaon was acting under clause (a) to Section 12AB(4), then, before issuing the notice dated 08.09.2022, itself the ld. PCIT, Gurgaon should have first formed his opinion that the assessee had committed one or more of a specified violation'. However, as we go through the relevant part of the impugned order we find that the ld.PCIT has not mentioned as to which amongst the various specified violations mentioned in Explanation attached to subsection (4) of section 12AB were attracted so as to show cause the assessee under sub-section (4) of section 12AB of the Act and ask for information by notice dated notice dated 08.09.2022. Thus, if it was the case of the PCIT (Central), Gurgaon that he was exercising the powers u/s. 12AB(4)(a) on his own cognizance of the specified violation , then, at first instance as he was not competent authority u/s. 12AB(1) to pass an order of registration of the Trust, then, he had no powers u/s. 12AB(4) to call fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 132(1) of the Act, the case of M/s Aggarwal Vidya Pracharni Sabha was centralized with the ACIT/DCIT, Central Circle-2, Faridabad vide order F. No. CIT(E)/CHD/Tech/2019- 20/133 passed u/s. 127 of the Act dated 26.10.2020 by the CIT(E), Chandigarh. Subsequently, assessment proceedings u/s. 153A of the Act were completed in this case for the block period from A.Y. 2014-15 to 2020- 21. 2.2 As per the impugned order, consequent to the completion of assessment proceedings certain facts were communicated to the office of PCIT(Central) Grugaon by the Assessing Officer pertaining to Assessment Years 2014-15 to 2020-21 vide his office letter dated 23.08.2022. Further, the assessment records for all the relevant A.Y.s were requisitioned by the PCIT(Central), Gurgaon. There after the impugned order was passed by cancelling the registration of the assessee by invoking powers under Section 12AB(4) of the Act. 3. The assessee has raised following grounds of appeal. 1. That PCIT (Central) Gurgaon vide impugned order dated 29.03.2023 has seriously erred in withdrawing registration granted under old law sec. 12AA of 1961 Act with retrospective effect from 01.04.2014 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or cancelling the registration granted u/s. 12AA could only be made during the pendency of assessment proceedings w.e.f. 01.04.2022. However, the basic fact of this case was ignored that assessment proceedings in this case was completed during FY 2021-22. As such, the 2nd proviso to section 143(3) is not applicable to the instant case. 4.2 Third, that in any case cancellation of registration could not have been with retrospective effect. 5. In this context as we appreciate the impugned order it comes up that Ld. PCIT(Central) Gurgaon has found these contention of the assessee trust as not acceptable on merits and also not as per provisions of the Act. He observes in impugned order that as in this case, assessment was completed in September 2021 and it was noted by the AO that the assessee had applied its funds/income other than for the object of the trust. Subsequently, he submitted a proposal for cancellation of the registration of the assessee trust granted u/s. 12AA of the Act vide his later dated 23.08.2022 through his Range Head and the perusal of aforesaid copy of first page reveals that subject of the letter has been written as proposal for cancellation and does mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eby specified violation committed by the assessee trust during any previous year which may be only one previous year or may be more than one previous year. 6.2 Further, Ld. PCIT(Central) Gurgaon relied sub clause (ii) of Section 12AB(4) and held that PCIT, after giving reasonable opportunity of being heard, can cancel the registration of such trust in all subsequent previous years. 6.3 Next with regard to the contention of the assessee that cancelation of the registration under section 12AB cannot be made with retrospective effect, provisions of sections 12AB(4) were relied and Ld. PCIT(Central) Gurgaon concluded that power has been envisaged to the PCIT under the said statute to cancel the registration of the trust wherein even registration was granted as per clause (b) of sub-section (1) of section 12AA. Ld. PCIT(Central) Gurgaon further relied sub-section 5 of section 12AA, as per which nothing contained in this section shall apply on or after the first day of April 2021 and held that it means that registration under the section i.e. section 12AA must have been granted prior to 01.04.2021 and such registration can be cancelled by invoking the provisions of section 12AB(4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2022 from 1.04.2014 for alleged violation much prior to 1.04.2022 is itself against the clear legislative intent. He submitted that registration cancellation being draconian/punitive act cannot be given such retrospective effect. Ld. Counsel also submitted that even otherwise there is no specific/implied power given u/s. 12AB for retrospective cancellation of registration as usurped by respondent/PCIT. 8. Ld. DR heavily relied the Explanation of word case in section 127 of the Act to submit that the transfer of jurisdiction u/s. 127 brings into effect the transfer of all the pending and prospective cases of the assessee and no distinction can be made on any basis. He submitted there is no error in the impugned order and no irregular exercise of jurisdiction and Ld. PCIT, Gurgaon has exercised powers by virtue of his own knowledge of the issue and not on reference by Ld. AO. 9. After giving thoughtful consideration to the facts and circumstances of the case and to the submissions, it comes up that the admitted case of the Revenue is that there was no specific order under any provisions of the Act other than the order dated 26.10.2020 passed u/s. 127 of the Act centralizing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioners to whom such Assessing Officers are subordinate are in agreement, then the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner from whose jurisdiction the case is to be transferred 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, pass the order; (b) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o cancelling its registration after affording a reasonable opportunity of being heard; (c) where the application is made under sub-clause (vi) of the said clause, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the trust or institution. (2) All applications, pending before the Principal Commissioner or Commissioner on which no order has been passed under clause (b) of sub-section (1) of section 12AA before the date on which this section has come into force, shall be deemed to be an application made under sub-clause (vi) of clause (ac) of sub-section (1) of section 12A on that date. (3) The order under clause (a), sub-clause (ii) of clause (b) and clause (c), of sub-section (1) shall be passed, in such form and manner as may be prescribed, before expiry of the period of three months, six months and one month, respectively, calculated from the end of the month in which the application was received. (4) Where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RN), issued under sub-rule (5), and such registration or such Unique Registration Number (URN) shall be deemed to have never been granted or issued. (7) In case of an application made under sub-clause (vi) of clause (ac) of sub-section (1) of 4 [section 12A as it stood immediately before its amendment vide the Finance Act, 2023,] during previous year beginning on 1st day of April, 2021, the provisional registration shall be effective from the assessment year beginning on 1st day of April, 2022. (8) In case of an application made in Form No. 10AB under clause (ii) of the sub-rule (1), the order of registration or rejection or cancellation of registration under sub-clause (ii) of clause (b) of sub-section (1) of section 12AB shall be in Form No. 10AD and in case if the registration is granted, sixteen digit alphanumeric number Unique Registration Number (URN) shall be issued by the Principal Commissioner or Commissioner referred to in of sub-section (1) of section 12AB. (9) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall: (i) lay down the form, data structure, standards and procedur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ATION 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 (43 of 1961) and in supersession of the notification of the Government of India, Central Board of Direct Taxes number S.O.880(E), dated the 14th September, 2001, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub section (ii), dated the 14th September, 2001, except as respects things done or omitted to be done before such supersession, the Central Board of Direct Taxes hereby - SCHEDULE S. No. Designation Headquarters Territorial Area Cases or classes of cases (1) (2) (3) (4) (5) 1. Commissioner of Income-tax (Exemption), Ahmedabad Ahmedabad State of Gujarat, Union Territory of Daman and Diu, Union Territory of Dadra and Nagar Haveli All cases of persons in the territorial area specified in colum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (1) of section 12AB or subsection (1) of section 12AA. Subsequent to examination by the Principal Commissioner or Commissioner of Incometax, 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 (23C) of section 10 of the Act 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 addition to the specified violations referred above, the power of cancellation has also been granted under sub-rule (5) of rule 17A and subrule (5) of rule 2C of the Income-tax Rules, 1962 ( the Rules) to the Principal Commissioner or Commissioner authorised by the Board. This Circular only relates to cancellation of registration/approval or provisional registration/approval in the case of specified violation . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rform 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/s. s 10,11,12, 13A and section 13B 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 13B of the Act and clause (b), to issue orders in writing for the exercise of their powers and perform all their functions by Additional Commissioners of Incometax or Joint Commissioners of Income-tax and Tax Recovery Officers who are subordinate to them and that signifies that again this delegation of powers by CIT(E), Chandigarh could have been qua officers subordinate to CIT(E), Chandigarh only and not, in any way, gave powers to CIT(E), Chandigarh to pass an order u/s. 127(2)(b) of the Act to transfer powers vested by Board to any other Tax Authority. 14.3 Next, as we refer to Section 12 AB and Rule 17A which have come into effect from 01.04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , ld. 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 ld. 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 ld. PCIT passing the impugned order liable to be quashed. 16. Furthermore, if examine the legality of the procedure followed by ld.PCIT, Gurgaon to pass order u/s. 12AB(4), by recourse to exercise of powers by virtue of clause (a) of sub-section (4) of section 12AB, it comes up that ld.PCIT, Gurgaon admits that a proposal for cancellation of the registration of the assessee trust granted u/s. 12AA of the Act was forwarded vide letter dated 23.08.2022 by the AO through the Range head. In this context, if we refer to second proviso to subsection (3) of section 143 of the Act, the same provides that if the AO is satisfied about any specified violation provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference in section 12AB is not to PCIT or Commissioner to whom the said Assessing Officer would be subordinate, but, the CIT(E) who has been given special power for grant and cancellation of the registration as original jurisdiction. 17.1 Furthermore, here in this case, the exercise of power u/s. 12AB(4) of the Act seems to also not have been done in accordance with law. As what comes up further is that, if at all, PCIT, Gurgaon was acting under clause (a) to Section 12AB(4), then, before issuing the notice dated 08.09.2022, itself the ld. PCIT, Gurgaon should have first formed his opinion that the assessee had committed one or more of a specified violation'. However, as we go through the relevant part of the impugned order we find that the ld.PCIT has not mentioned as to which amongst the various specified violations mentioned in Explanation attached to subsection (4) of section 12AB were attracted so as to show cause the assessee under sub-section (4) of section 12AB of the Act and ask for information by notice dated notice dated 08.09.2022. 17.2 Rather, in the opening paragraph at page 34 of the impugned order, the ld. PCIT mentions, it was noticed that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the nature and purpose of transactions undertaken with the said entities including advance given for the purpose of construction along with supporting evidences in order to substantiate the genuineness of the same. Relationship of the Aggarwal Vidya Pracharni Sabha and its members with the directors of M/s Tirupati Realbuild Pvt. Ltd. And M/s Radhey Krishna Infratech Pvt. Ltd. 17.4 Then in para 4.1.2 sub-clause (d), the ld. PCIT mentions of the earlier letter dated 08.09.2022 that: d) Further, vide this office letter dated 08.09.2022, the assessee was requested to furnish details of capital and revenue expenditure incurred for various assessment years. In response, the assessee only submitted copy of Form 10B which is not supported with the details of capital expenditure and copy of accounts and documentary evidence. Further, no activity was specified for which accumulated funds were utilized. 18. Thus it appears that by this notice dated 14.03.2023, only the assessee for the first time was asked to show cause about the specified violation of the nature reproduced below:- (a) where any income derived from property held under trust, wholly or in part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the Addl.CIT to issue order in writing for the exercise of the powers by the Assessing Officer who are the subordinate to them. In section 124 of the Act, the jurisdiction of Assessing Officer has been given and not 'Jurisdiction of Commissioner'. 20.1 The Jaipur Bench has dealt with this issue further in paras 18 to 21 as under:- 18. We also observe that as per Sec. 120(6) of the Act, the CBDT by its Notification No. 52/2014 and 53/2014 dated 22.10.2014 has given power to CIT(Exemption) Jaipur for the State of Rajasthan for all cases of persons in the territorial area specified in column (4) claiming exemption under clauses (21), (22), (22A), (22B), (23), (23A), (23AAA), (23B), (23C), (23F), (23FA), (24), (46) and (47) of section 10, section 11, section 12, section 13A and section 13B of the Act and assessed or assessable by an Income-tax authority at serial numbers 131 to 140 specified in the notification of Government of India bearing number S.O.2752 dated the 22nd October, 2014. Thus firstly as per above notification and provisions of Sec. 120 and 127 the ld. CIT(Exmp.) cannot transfer or hand over or given his work or power or duties to the other same ran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Committee which took decision for transfer of jurisdiction, is not authority envisaged u/s. 127(2)-- Counter-affidavit filed on behalf of Revenue does not disclose that there was any agreement between authorities of equal rank,as a pre-condition for invoking powers u/s. 127-- Absence of dissenting note from officer of equal rank who has to agree to proposed transfer would not constitute agreement, envisaged u/s. 123(2)(a)--Assessee's petition allowed. 21. It was also been brought to our notice that the AR had inspected the records of the case but there was no agreement between both the CIT's regarding initiation of proceedings u/s. 12A of the Act. The entire communication on record is with regard to limited purpose of Co- Ordinate assessments only. Even the Instruction No. F.No.286/88/2008IT(Inv-II) dated 17.09.2008 has relied upon by the Revenue also relates to search assessment and was not with regard to proceedings u/s. 12A or other proceedings. Even no agreement for initiation proceedings u/s. 12AA of the Act has been found out on record. Even, the proposal for centralization was not sent within the statutory time of 30 days from the date of search as admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may not be a drawn up agreement. What is necessary is that there has to be an agreement which will involve positive state of mind of the two jurisdictional Principal Commissioners. Both of them must consent to the transfer after application of mind. 9. In the present case, it is not even the case made out in the show cause notice that the agreement as contemplated by the first part of clause (a) of sub-section (2) of section 127 exists. The existence of such agreement between two jurisdictional Commissioners is a condition precedent for passing the order of transfer. Except for the request which came from the investigation office, Chennai of transferring the case, 38 ITA 688/JP/2019_ M/s Wholesale Cloth Merchant Association Vs Pr.CIT there is no reference whatsoever to any such agreement. Clause (b) of subsection (2) of section 127 provides for consequences when there is no such agreement. When the jurisdiction to pass an order of transfer under clause (a) of sub-section (2) of Section 127 can be exercised only when there is such an agreement, the fact that such an agreement exists ought to have been stated in the show cause notice as the same is a jurisdictional fact. Apart f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by showing that the reasons exist in the file although not communicated to the assessee. When law requires reasons to be recorded in a particular order affecting prejudicially the interests of any person, who can challenge the order in Court, it ceases to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons is not expiated. Non- communication of the reasons in the order passed under s. 127(1) is a serious infirmity in the order for which the same is invalid.--Kashiram Aggarwalla vs. Union of India (1965) 56 ITR 14 (SC) : TC69R.660 and S. Narayanappa vs. CIT (1972) 86 ITR 741 (All) : TC51R.651 distinguished; Sunanda Rani Jain vs. Union of India 1975 CTR (Del) 135 : (1975) 99 ITR 391 (Del) : TC69R.693 overruled; Judgment and order dt. 12th Sept., 1974, of the Andhra Pradesh High Court in Writ Appeal No. 626 of 1974 set aside. The Hon'ble Supreme Court in the case of Noorul Islam Educational Trust vs. CIT AND Ors (2016) 388 ITR 0489 (SC) held that Special Leave Petition--Transfer of case--Validity--High Court of Madras, Madurai Bench, upheld order of C.I.T.1, Madurai, Tamil Nad ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
