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TMI Blog2024 (1) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... elling the registration granted u/s. 12AA/ u/s. 12AB of the act, ignoring the position of law that, the provisions of section 12AB(4)(ii) of the act was introduced by Finance Act 2022 w.e.f 01.04.2022 and therefore not applicable for the A.Y.2021-22. 3. The learned Pr. Commissioner of Income Tax (Central), Bengaluru erred in ignoring the position of law that, without prejudice to the contention of the appellant that, there was no case for cancellation of registration, such order should have been passed under the provisions of section 12AB(4) of the act and not under the provisions of section 12AB(4)(ii) of the act. 4. The learned Pr. Commissioner of Income Tax (Central), Bengaluru erred in ignoring the fact that, there has been no case that the activity of the trust/institution were not genuine and also it was not proved that, the activity was not being carried on in accordance with objects of the trust or institution and therefore the circumstances contemplated u/s. 12AB(4) of the act were not satisfied, eventually there was no case of cancellation of registration u/s. 12AB(4) of the act. 5. The learned Pr. Commissioner of Income Tax (Central), Bengaluru has erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement during the course of cross examination and in the absence to any evidence to prove the contrary, conclusions could not have been drawn on a retracted statement. For AMALA JYOTHI VIDYA KENDRA TRUST 11. The learned Pr.Commissioner of Income Tax (Central), Bengaluru erred in giving a finding on the basis of certain alleged evidences and also retracted statements that, the funds of the trust were not being fully utilized for the objectives of the trust but a part of the same was used for personal benefits of the trustees, ignoring the fact that, all the transactions were recorded in the books which were audited by a chartered Accountant and no portion of the revenue was diverted for purposes other than objectives of the trust and also the Assessing Officer had not brought on record any evidence to prove the contrary.' 12. The learned Pr.Commissioner of Income Tax (Central), Bengaluru erred in ignoring the position of law laid down in Welham Boys' School Society V. Central Board of Direct Taxes (2007) 158 Taxman 199 (Uttaranchal), wherein it is held that, the law prevailing for the specific assessment year are to be invoked and powers vested in post amended provisions c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment of mental, physical and moral uplift of the students and all those connected with the institution so as to make them good citizens. (iv) To establish, maintain and run Hostel or Boarding House and residential institution for the students and those connected with the institution. (v) To invest, dispose or transfer and otherwise deal with the subject-matter of the Trust in such manner as the Trustees should deem fit so as to enable the Trust on the objects of the Trust effectively. (vi) 'To accept donation, grants, presents and other offerings and to deal with the same, for the purpose of the Trust. (vii) To charge moderate tuition fees and otherwise recoup themselves for the out lay and expenses incurred in the upkeep and maintenance of Institutions established or about to be established under this deed. (viii) To train and equip the pupils so as to be self- supporting in an honourable and decent way of life so as to develop them (ix) To promote and inculcate the dignity of labour, the appreciation of intellectual gifts and talents of all kinds. (x) To encourage sportsman and adventurous spirit in the pupils and those connected with the institution or coming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were confronted to Shri Rajeev Kumar Rai, the Trustee and the Chairman of the Trust and Nikita Rai, the Trustee and Secretary of the assessee trust and it is found that they are using the funds of the Trust for personal benefit. Consequently, assessment proceedings for the assessment year 2021-22 were initiated by the ld. AO in these cases by issuing notice u/s 143(2) of the Act on 23.6.2022 in both cases. Notice u/s 142(1) of the Act was also issued by ld. AO on 21.9.2022, 10.10.2022, 25.11.2022, 1.12.2022 in both cases and also one more notice u/s 142(1) of the Act was issued to Adarsh Vidya Kendra Trust no 5.12.2022 calling for various details and confronting the evidence collected during the search. Subsequently, vide letter dated 20.12.2022, the ld. AO sent a reference for assessment year 2021-22 communicating her satisfaction as per second proviso to section 143(3) of the Act in both cases. Accordingly, show cause notice was issued by the predecessor of the present PCIT on 28.12.2022, requiring the assessee to explain as to why the approval granted by the Director Income Tax (E) Bengaluru in both cases should not be cancelled. After considering the reply in both cases, the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y.2021-22. He submitted that prima-facie invoking the provisions which are applicable for the A.Y. 2022-23 and cancel registration for the A.Y.2021-22 is bad in law. Cancellation of registration is penal in nature. The consequences are that, the exemptions enjoyed by the assessee are withdrawn. The capital expenditure which otherwise is not an allowable expenditure would be considered as application in the event of an assessee trust enjoying the benefits of the registration. Under the circumstances, the law that should apply is with reference to the year of default. He submitted that the Pr. Commissioner of Income Tax (Central) should have acted as per the law prevailing for the A.Y.2021-22. The alleged infringement by the assessee occurred during the A.Y.2021-22 and therefore the penalization should also be with reference to the corresponding provisions as they existed for the A.Y.2021-22. 4.4 The ld. A.R. relied on the ratio laid down by the Hon'ble Supreme Court in the case of Commissioner of Income Tax V. Omkar Saran & Sons (1992) 62 Taxman 440 (SC). The Hon'ble Supreme Court has held that, the law applicable for penalizing should be the law for the year of committing the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, holding that such non-compliance has occurred, has either not been disputed or has attained finality. 6.1 Thus, the contention of the ld. A.R. is that these provisions have been inserted by Finance Act, 2022 w.e.f. 1.4.2022 and if there is a violation in previous year 2020-21 relevant to assessment year 2021-22, these provisions cannot be applied to the assessee's case. For clarity, we will go through the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iolation",-- 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 the conditions subject to which it was registered; or f) The trust or institution has not complied with the req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence 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." This decision and various other decisions were considered by the Constitution Bench of this court in the case of Karimtharuvi Tea Estate Ltd. v. State of Kerala (1966) 60 ITR 262 (SC) and the principle were laid down in the following terms (at pages 264-266 of 60 ITR): "Now, it is well-settled that the Income-tax, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw 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 appropriate to place reliance on the judgement of Hon'ble Madras High Court on the question as to whether the cancellation will operate from a retrospective date in the case of Auro Lab Ltd. Vs. ITO (2019)411 ITR 308 (Mad) wherein held as under: "20. On the second question as to whether the cancellation will operate from a retrospective date, it was held that the amendment to section 12AA(3) is prospective and not retrospective in character. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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