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TMI Blog2025 (5) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... society engaged in charitable purpose of imparting education. It is registered under Madhya Pradesh Societies Registration Act, 1973 w.e.f. 10.12.2004. It was also granted approval u/s 10(23C)(vi) of the Act by the Chief Commissioner of Income-tax, Indore vide registration F.No. CCIT/IND/TECH/10(23C)(vi)/78/08-09 dated 29.08.2008 from Assessment-Year ["AY"] 2008-09 onwards and such approval was continuing year after year. However, the approval so granted was cancelled vide order dated 14.12.2018 by CIT(Exemption), Bhopal ["CIT(E)"] w.e.f. AY 2014-15 but on appeal by assessee, the ITAT, Indore Bench reinstated approval in ITA No. 62/Ind/2019 order dated 07.08.2019 in pursuance of which the approval was re-stored by CIT(E) through order dated 19.03.2020. This approval/restoration of approval enabled the assessee to claim exemption u/s 10(23C)(vi) of the Act from AY 2008-09 onwards. (ii) A search u/s 132 was conducted by Income-tax Department on 02.02.2023 upon one 'BCM Group' of Indore and also upon assessee- society. All cases of searched entities were centralised in the assessing authorities of Central Circle, Bhopal. The case of assessee-society was also transferred from DCIT(Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction is illegal, perverse and contrary to the judicial decisions cited by the Appellant in response to the Show cause notice. 2.2 That the Ld. Pr. CIT, Central, Bhopal has failed to take cognizance that CBDT ex-parte internal communication dated 19.01.2024 has no force 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 cancelled only by the 'Prescribed Authority' who has been empowered to grant the registration as held in several judicial pronouncements including the judgement rendered by Jurisdictional Tribunal in case of Oriental University Indore (ITA Nos. 115 & 116/Ind/2020) and case of Devi Shakuntala Thakaral Charitable Foundation, Bhopal (ITA Nos. 117/Ind/2020). 3.WRONG INTERPRETATION OF ORDER PASSED UNDER SECTION 127(2) BY THE CIT(E) AND IN ASSUMING JURISDICTION 3.1 The Ld. Pr. CIT, Central, Bhopal has failed to take cognizance that the order issued u/s 127 of the Act dated 21/06/2023 by the CIT(E) does not transfer CIT(E) original jurisdiction related to 10(23C) to PCIT(C). That the order u/s 127 clearly says transfer of jurisdiction from DCIT(E) to DCIT Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to clause (23C) of section 10 of the Act 10(23C)(vi) was limited to registration granted as per amended Act w.e.f. 2022 and therefore, the impugned order passed cancelling registrations granted for earlier years u/s. 10(23C)(vi) of the Act for the assessment year 2021-22 or for earlier years is bad in law and the same requires to be quashed. 5.3 That the Ld. Pr. CIT, Central, Bhopal ought to have appreciated that there is no specified violation since reference by AO deals with violation of conditions of sec 11(1)(a), 11(1)(d), 13(1) & 13(3) and that it cannot be ground for cancellation of registration is against specific provisions of explanation 2 to fifteenth proviso to clause (23C) of section 10 of the Act defines "specified violation" which, inter-alia, covers "application of income derived from property held under trust other than the objects of the trust. Diversion of income and giving personal benefits to specified person u/s 13(1) & 13(3) cannot be said to be case of nonapplication for objects of the society. 5.4 The Ld. Pr. CIT, Central, Bhopal erred in ignoring the fact that, there has been no case that the activity of the society was not genuine and also it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 07/08/2019 the Hon'ble Tribunal. 7.4 The Ld. PCIT while cancelling the registration has only relied on statement recorded u/s 132(4) of the Act however no corroborative evidence has been brought on record to substantiate such allegation. 7.5 Without prejudice to above, the Ld. PCIT Central Bhopal failed to appreciate that Section 13 of the Act is not applicable and there is no violation of any of provision of said section and the assessee is entitled to benefits of section 10(23C)(vi) of the Act since any such violations even if they exist (which the appellant categorically denies) which would always be a subject matter of assessment and not a ground for cancellation of registration." 5. For a smooth discussion and proper adjudication, we categories the issues involved in above grounds under three categories as under: (i) Validity of impugned order (Ground No. 4.2, 5 to 6) (ii) PCIT(Central) is not competent to pass impugned order (Ground No. 1 to 3, 4.1) (iii) Impact of alleged violations in assessment of assessee (Ground No. 7) Issue No. (i) - Validity of impugned order (Ground No. 4.2, 5 to 6): 6. This is the first issue raised by assessee. Ld. AR for assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion-2 of the relevant / fifteenth proviso to clause (23C) of section 10 of IT Act, 1961. Hence, in view of the facts of the case, the registration of the trust, Shishukunj Educational Society bearing PAN: AABAS8128B granted u/s 10(23C)(vi) of the I.T. Act on 29.08.2008 and approval of restoration of registration granted u/s 10(23C)(vi) of the I.T. Act on 19.03.2020 are hereby cancelled by invoking provisions of fifteenth proviso to clause (23C) of section 10 of IT Act, 1961." 8. From above paras of impugned order, two facts are undisputably clear, viz. (i) the Ld. PCIT(Central) initiated proceeding against assessee for cancellation of approval on the basis of a reference made by AO under 2nd proviso to section 143(3), and (ii) the Ld. PCIT(Central) cancelled assessee's approval on the basis of 15th Proviso to section 10(23C), by alleging violations contemplated in Explanation (a)/(b)/(c) in the list of "specified violations" prescribed in Explanation-2 to 15th Proviso to section 10(23C). 9. Ld. AR for assessee submitted that the Finance Act, 2022 has brought a substantial amendment w.e.f. 01.04.2022 in the 15th Proviso to section 10(23C) dealing with cancellation of approval gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer." "Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) is approved or provisionally approved under the said clause and subsequently- (a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or (b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or (c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any activity of the fund or institution or trust or any university or other educational institution or any hospital or other medical institution,- (A) is not genuine; or (B) is not being carried out in accordance with all or any of the conditions subject to which it was notified or approved; or (d) the fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not complied with the requirement of any other law for the time being in force, 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. Note: The Ld. PCIT (Central) has cancelled assessee's approval on the basis of reference received from AO under 2nd proviso to section 143(3), by alleging specified violations contemplated in clause (a)/(b)/(c) of Explanation-2 as highlighted in bold terms] 10. Ld. AR also carried us to the 2nd proviso to section 143(3) introduced through Finance Act, 2022 w.e.f. 01.04.2022 which empowers the AO to make a reference to PCIT/CIT for cancellation of approval in the situations of "specified violation", reading as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een quashed categorically holding that the identical amendments inserted in section 12AB(4) w.e.f. 01.04.2022 by Finance Act, 2022 would not apply retrospectively: (i) ITAT, Bangalore in Amala Jyothi Vidya Kendra Trust Vs. PCIT (Central) (2024) 162 taxmann.com 41 (Bangalore - Trib), order dated 16.04.2024 (ii) ITAT, Jaipur in Centre for Development Communication Trust Vs. CIT, Exemption (2024) 168 taxmann.com 90 (Jaipur - Trib.), order dated 03.06.2024 (iii) ITA Delhi in ITA No. 1803/Del/2024 - Lakhmi Chand Charitable Society, New Delhi Vs. Principal Commissioner of Income-tax, New Delhi, (2024) 166 taxmann.com 324 (Delhi - Trib.), order dated 22.08.2024. 13. Ld. AR submitted that the facts of the present case and legal precedents noted above would be sufficient enough to quash the impugned order but still, for the sake of completeness, he would also like to brief this Bench about the violations alleged by Ld. PCIT(Central) and the impact of those violations upon assessee as per the legal position prevailing before 01.04.2022 i.e. at the relevant time of occurrence of those violations. For this purpose, Ld. AR firstly drew us to the relevant portion of impugned order to show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has adopted this violation in Para 16(ii)(a)/(b) - Pages 61-62 of impugned order] Page 44 to 45 of impugned order: Para 8(iv)(c) - The land and building on which the Jhalaria Campus of Shishukunj International School is being urn, are owned by M/s Eduestate and this entity is receiving huge rent from assessee-society. M/s Eduestate is a partnership firm of the governing family having 40% share of Davey family, 30% share of Mehta family and 30% share of Sethia family. From AY 2017-18, the assessee-society has given more than Rs. 40 crores as rent to the firm. The assessee-society has paid such significant amount of rent to the firm but had not attempted to own infrastructure of itself whereas the school is paying Rs. 33,00,000/- salary for keeping a director (finance) i.e. Shri Prem Sethia. Thus, there is a diversion of assessee's funds for payment of rent. [Ultimately, Ld. PCIT(Central) has adopted this violation in Para 16(ii)(c) - Pages 62-63 of impugned order] Page 45 of impugned order: Para 8(iv)(d) - The assessee-society has made payments of security guards kept at the residence of members of promoter families. Petrol expenses of these persons are also borne by asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re that we are not shutting out the case of the Revenue to examine whether or not there has been a violation of section 13 of the Act, but we are only trying to say that the same is not relevant for the purpose of cancellation of registration u/s. 12AA(3) of the Act. Of course, such matters can be dealt with in the course of assessment proceedings and, in our view, the same ought to be dealt with, if the situation so warrants. Presently, we are confining ourselves with examining the efficacy or otherwise of the action of the Commissioner in invoking section 12AA(3) of the Act and we find that the reasons advanced by the Commissioner are not germane. On this point, the learned representative for the assessee has relied on the following decisions to say that section 12AA(3) cannot be invoked by Commissioner for cancellation of registration merely for violation of provisions of section 11 and 13 of the Act by the assessee :- * CIT vs. Apeejay Education Society (2015) 59 taxmann.com 102 (Punj. & Har.) * Cancer Aid & Research Foundation vs. DIT (Exemption) (2014) 66 SOT 86 / 49 taxmann.com 537 (Mumb - Trib) * CIT (Exemptions) vs. The Cancer Aid & Research Foundation Income Tax App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT, Ahmedabad in Anjuman E Nusratul Muslimin Tankaria Vs. CIT (2024) 162 taxmann.com 42 (Ahmedabad Trib.) 16. With above submissions, Ld. AR contended that the impugned order passed by Ld. PCIT(Central) cancelling the approval held by assessee is invalid and must be quashed. 17. Per contra, Ld. DR for revenue heavily relied upon impugned order of PCIT(Central). He submitted that the PCIT(Central) has passed a vehement order after taking into account various violations made by assessee. He submitted that the Ld. PCIT(Central) cancelled assessee's approval vide order dated 30.09.2024 by applying the provision of 15th Proviso to section 10(23C) existing as on that date and there is no error in applying the provisions of 15th proviso as substituted by Finance Act, 2022. He supported the impugned order of Ld. PCIT(Central) and prayed to preserve the same. 18. We have considered rival submissions of both sides and carefully perused the impugned order passed by Ld. PCIT(Central). We have also perused the facts of present case in the light of legal precedents cited before us. Admittedly, in present case, a search u/s 132 was conducted upon assessee on 02.02.2023. The revenue authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the detailed discussion made in preceding paras of its letter to claim that only CIT(Exemption), Bhopal holds the jurisdiction relating to cancellation of registration u/s 10(23C)(vi) of the Income Tax Act, 1961 granted to the assessee. (This portion is not relevant to Ground No. 4.2, 5 to 6 - It is relevant to Ground No. 1, 2, 3, 4.1 to be dealt in later part of this order. Hence striken through) (b) Further, it has been claimed that at the time of initiation of cancellation of registration proceedings, the prevalent law on the statute was the one as amended by the 15th proviso inserted w.e.f. 01/04/2022. The Society has further claimed that the amendment is prospective in application but retrospective in effect in as much as it will govern the cancellation proceedings starting from the cut-off date of 01/04/2022. However, according to the assessee, it will not cover the violation done before 01/04/2022. Reliance has been placed on case of M/s Islamic Academy of Education, Nithyananda Nagar, Mangalore v. The PCIT (Central), Bengaluru (ITA No. 610/Bang/2023 order dated 28/02/2024) passed by Hon'ble ITAT Bangalore. It has been further stated that the entire SCN mention violatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution or any hospital or other medical institution, on or before the specified date, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violation has taken place; (iii) pass an order in writing refusing to cancel the approval of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution, on or before the specified date, 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 fund or institution or trust or any university or other educational institution or any hospital or other medical institution. Explanation 1.-For the purposes of this proviso, "specified date" shall mean the day on which the period of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, on or after the 1st day of April, 2022, calling for any document or information, or for making any inquiry, under claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961 is that the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year. Here, the words "for any previous year" has significant importance as use of these words differentiates the proceedings for cancelation of registration already granted u/s 10(23C)(vi) of the Income Tax Act, 1961 with any other proceeding under the provisions of the Income Tax Act, 1961 which relate to any particular assessment year. Here, in the case of the assessee occurrence of specific violations have been noticed during the course of search for various assessment years which have been discussed in detail preceding pages. As, the pre-condition for initiation of proceedings for cancelation of registration already granted to the assessee u/s 10(23C)(vi) of the Income Tax Act, 1961 is occurrence of specific violations for any previous year, the claim of the assessee that 15th proviso inserted w.e.f. 01.04.2022 can be applied only with regard to the proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution after affording a reasonable opportunity of being heard." 4.3 He submitted that the assessment involved in appeal is A.Y.2018-19. The law relating to cancellation of registration has under gone changes in as much as the said provisions were different for the A.Y.2018-19 and for A.Y.2022-23. It is submitted that the Pr. Commissioner of Income Tax (Central) invoked the provisions which were applicable from A.Y.2022-23 for a default alleged to have been occurred in A.Y.2018-19. He submitted that prima-facie invoking the provisions which are applicable for the A.Y.2022-23 and cancel registration for the A.Y.2018-19 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned in explanation to section 12AB(4) of the Act as follows: 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 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 M/s. Amala Jyothi Vidya Kendra Trust, Bangalore M/s. Adarsh Vidya Kendra Trust, Bangalore e) Any activity being carried ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trust, Bangalore b) The Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or c) Such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year; The Principal Commissioner or Commissioner shall- i. call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation; ii. pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place; iii. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the ld. PCIT invoked the provisions of section 12AB(4)(a)(ii) of the Act as stood in the assessment year 2022-23. The objection of the ld. A.R. is that for the cancellation of registration for the assessment year 2021-22, he could not invoke the provisions of section 12AB(4)(ii) of the Act which is introduced by Finance Act, 2022 w.e.f. 1.4.2022 and applicable for the assessment year 2022-23 onwards. 6.4 In the case of Isthmian Steamship Lines reported in 20 ITR 572 (SC) wherein the Hon'ble Supreme Court held that "it is a cardinal principle of the tax law that law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication". 6.5 In the case of Karimtharuvi Tea Estate Ltd. Vs. State of Kerala reported in 51 ITR 129 (SC) the same view was taken by the Hon'ble Supreme Court. 6.6 Further, the Hon'ble Supreme Court in the case of Shree Chowdhary Transport Company Vs. ITO reported in 426 ITR 289 (SC) 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up to and including the assessment year 1939-40.' This decision is authority for the proposition that though the subject of the charge is the income of the previous year, M/s. Amala Jyothi Vidya Kendra Trust, BangaloreM/s. Adarsh Vidya Kendra Trust, Bangalore the law to be applied is that in force in the assessment year, unless otherwise stated or implied. The facts of the said decision are different and distinguishable and the High Court was clearly in error in applying that decision to the facts of the present case." (emphasis supplied) 17.6 We need not multiply on the case law on the subject as the principles aforesaid remain settled and unquestionable. Applying these principles to the case at hand, we are clearly of the view that the provision in question, having come into effect from April 1, 2005, would apply from and for the assessment year 2005-06 and would be applicable for the assessment in question. Putting it differently, the 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 expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd up to the assessment year 2010-11 on the sole ground of cancellation of the certificate of registration." 6.9 In this case, the ld. PCIT has cancelled the registration under the new provisions of the Act i.e. 12AB(4)(ii) of the Act, which specifically provides that cancellation can be done for such previous year and all subsequent previous years, which makes it clear that the cancellation cannot be retrospective, therefore, in view of the above discussion, we are of the opinion that cancellation of registration with retrospective effect is invalid in these cases. Since the ld. PCIT invoked the provisions of section 12AB(4)(ii) of the Act, which has been introduced by the Finance Act, 2022 w.e.f. 1.4.2022 so as to cancel the registration with retrospective effect from assessment year 2018-19, which is bad in law. 6.10 It is noted that coordinate bench of this Tribunal in both assessee's case for AY 2021-22 has taken similar view and as quashed the retrospective applicability of the new amended provision u/s 12AB(4)(ii) of the Act. We also note that same view has been taken by Coordinate bench of Mumbai in the case of Heart Foundation of India in ITA No.1524/Mum/2023 vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been inserted by substituting the 2nd proviso to section 143(3) of the Act w.e.f. 01.04.2022. Earlier, there was no power under the law to make any reference to PCIT or CIT for withdrawal of registration for the trusts or institution referred u/s 11 of the Act. As it is clear from the facts recorded that the Id. CIT(E), Jaipur has initiated the impugned proceedings of cancellation of registration based on the reference received from Id. DCIT(E), Jaipur dated 06.02.2020 as evident from the Impugned Order itself i.e passed u/s 12AB(4)(b)(i) of the Act. As per the amended provision of section 12AB(4) of the Act, reference has to be after granting of the registration w/s 12AB(1)(a) as evident from the bare reading of the provision itself which states subsequently, if there is reference by Ld. AO, then only the Ld. PCIT/CIT can proceed further. Admittedly in the present case, there is no such reference after granting registration on 23.09.2021. Thus, when the provision for making the reference was inserted in law w.e.f. 01.04.2022 and when at the time of impugned reference, there was even no provision for making such reference under the 2nd proviso to section 143(3) of the Act for the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without any basis and without authority of the law as in AY 2017-18, there were no such conditions of specified violations in the law, therefore, Assessee cannot be penalized by reason of the amendment to the law effected subsequently. We derive support to reach to this conclusion from the decision of the Hon'ble Rajasthan High Court in the case of Indian Medical Trust v. Pr. CIT [2019] 108 taxmann.com 93/265 Taxman 473/414 ITR 296 (Rajasthan) where it has been held that: "Indisputably, the order dated 16th Jan, 2018, made by the Commissioner of Income Tax thereby canceling the registration granted under section 12A and withdrawing the approval given under section 10 (230) (v) & 10 (23A) (via) of the Act of 1961, to the petitioner Trust with retrospective effect from the date of 01st April, 2006, was arbitrary in the face of the provisions of the Act of 1961; and therefore, cannot be deemed to be in consonance with any possible interpretation to be valid or legal. This court is of the opinion that the provisions of section 12AA (3) of the Act of 1961, empowers the Commissioner of Income Tax to initiate steps for cancellation of the registration of a Trust, but, the legislati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (4) to provide that where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) of section 12AB or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently, ******** (II) The term "specified violation" is proposed to be defined by inserting an Explanation to sub-section (4) of section 12AB of the Act to mean the following violation (a) ******* (*****) These amendments will take effect from 1st April, 2022." 12.4 In view of the above, provision of law, binding precedent of the jurisdictional high court and the CBDT circular the law of specified violation has been inserted w.e.f. 01.04.2022 and hence would not apply retrospectively based on the specified violations (which was defined by Finance Act 2022) based on the transactions occurred in AY 2009-10 or AY 2017-18 or earlier. Therefore, taking into consideration all the above facts, case laws, judicial precedents and the circular of CBDT, we hold that cancellation of registration u/s 12AA(3)/12AB(4) by the Id. CIT(E) is bad in law, hence, we set aside the order of the Id.CIT(E) and rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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)(if) 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 Id. PCIT at liberty to pass the fresh order of cancellation independently u/s 12AB(4)(ii) of the Act for these assessment years i.e. 2022-23 to 2026-27, if so advised. Accordingly, we allow this ground taken by the assessee. Ordered accordingly." 21. We find inspiration from the essence of the ratio laid down in the above judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts in section 12AB(4) through Finance Act, 2022 are prospectively applicable from 01.04.2022 and they do not have retrospective application for the violations committed, if any, before 01.04.2022 and accordingly, the Benches of ITAT have decided this issue in favour of assessee, quashed the orders passed by PCIT and restored the registration of assessee u/s 12A/12AA. In present case, the search u/s 132 was conducted upon assessee on 02.02.2023 and the violations, if any, were during the period prior to 01.04.2022. Therefore, the assessee's case is fully covered by those decisions and following them, the impugned order passed by Ld. PCIT(Central) is liable to be quashed. We may, however, make it clear that the decisions quoted above are though qua the cancellation of registration u/s 12A/12AA but they are equally applicable to the cancellation of approval u/s 10(23C)(vi) since the crux of the issue (i.e. whether the amendment brought in statute through Finance Act, 2022 w.e.f. 01.04.2022 has prospective or retrospective application) is same. Ld. DR for revenue has not brought any decision holding against assessee. In that view of matter, we are not agreeing to the view taken by Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax, order dated 25.01.2023 (v) ITAT, Delhi in ITA No. 1308/DEL/2023 - Aggarwal Vidya Pracharni Sabha Vs. Principal Commissioner of Income-tax, order dated 08.01.2024 (vi) ITA Delhi in ITA No. 1803/Del/2024 - Lakhmi Chand Charitable Society, New Delhi Vs. Principal Commissioner of Income-tax, New Delhi, (2024) 166 taxmann.com 324 (Delhi - Trib.), order dated 22.08.2024. 25. Ld. AR particularly relied upon first two orders which are given by ITAT, Indore itself, namely (i) ITA No. 117/Ind/2020 - Devi Shakuntala Thkaral Charitable Foundation, Bhopal Vs. Pr. CIT(Central), Bhopal and (ii) ITA No. 115 & 116/Ind/2020 - Oriental University, Indore Vs. Pr. CIT(Central), Bhopal. Both of these orders are dated 29.07.2022 and have settled identical controversy in the matter of cancellation of registration u/s 12A/12AA in favour of assessee's. We re-produce below the relevant portion of ITAT's order in Devi Shakuntala Thkaral Charitable Foundation, Bhopal (supra) for an immediate reference: "8. The grievance of assessee in the Additional Grounds is such that the show-cause notice dated 13.11.2019 and the order dated 23.12.2019 passed by the Ld. PCIT(Central) are bad in law, illegal, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to in clause (b) above, to issue orders in writing for the exercise of the powers and performance of the functions by the Assessing Officers, who are subordinate to the said Additional Commissioners of Income-tax or Joint Commissioners of Income-tax in respect of cases or classes of cases, in respect of which such Additional Commissioners of Income-tax or Joint Commissioners of Income-tax are authorised by the Commissioners of Income-tax under clause (b) above. SCHEDULE (Relevant portion reproduced) S.NO. Designation Headquarters Territorial Area Cases or classes of cases (1) (2) (3) (4) (5) 3. Commissioner of Income-tax (Exemption), Bhopal Bhopal States of Madhya Pradesh and Chhattisgarh 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 Income-tax Act, 1961 and assessed or assessable by an Income-tax authority at serial numbers 35 to 45 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd Octobe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, our attention was drawn towards Section 120(3) and CBDT Circular No. 52/2014 and 53/2014 both dated 22/10/2014. As per provisions of Section 120(3) of the Act, the criteria of Jurisdictions of Income Tax Authorities has been provided by the CBDT and as per provisions of Sec.120(3) of the Act, there are four criteria for deciding the jurisdiction and the same are reproduced below: (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income-tax authority authorised by it may have regard to any one or more of the following criteria, namely: -- (a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (d) cases or classes of cases. Therefore, in furtherance of the said provisions, the CBDT vide notification Nos. 52/2014 and 53/2014 both dated 22/10/2014 had given powers to ld. 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 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of assessee were initiated and there was only a survey u/s 133A of the Act in the case of assessee. The assessment has been completed u/s 148/143(3) of the act vide order dated 19.12.2018. As the assessment has been completed, the purpose of transfer u/s 127A has also been completed. Although no notices regarding the transfer of the cases u/s 127 have been sent to the assessee for the purpose of Co-ordinate assessment and the purpose of transfer was only Co-ordinate Assessment as clearly mentioned in the transfer letter 19.08.2016. The assessment was completed u/s 148 r.w.s 143(3) 19.12.2018 and the proposal was sent to the Pr. CIT(C) which has been received on 31.12.2018 in the office of Pr. CIT(C) on 23.01.2019 after a lapse of more than one month. 15. Even otherwise, in the said notification, there is no mention where CIT(E) can transfer to other CIT or Pr. CIT. The said notification of CBDT has authorized the CIT(E) to issue order in writing for the exercise of the powers and functions by the Addl. CIT or JCT or TRO who are "subordinate" to them and has authorised the Addl. CIT to issue order in writing for the exercise of the powers by the Assessing Officer who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub-section (1) or sub-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 directio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply. (6) Notwithstanding anything contained in any direction or order issued under this section, or in section 124, the Board may, by notification in the Official Gazette, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income-tax authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as may be specified in the notification." 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng proposal for transfer of his case from Kolhapur to Mumbai, so as to centralise cases relating to D.Y. Patil Group -- Assessee objected that such notice did not referred to any agreement being reached by officers of equal rank at Mumbai and Kolhapur -- These objections were however overruled and assessee's case was transferred -- High Court quashed purported transfer u/s 127 -- Held, "Centralisation 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 36 ITA 688/JP/2019_ M/s Wholesale Cloth Merchant Association Vs Pr. CIT 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was agreement between Jurisdictional Commissioners of Ranchi and Delhi -- Even going by case made out by revenue, no such agreement was spelt out. 8. The Apex Court has categorically held that the absence of disagreement will not be tantamount to an agreement as visualized under section 127(2)(a) which contemplates positive state of mind of the two jurisdictional Principal Commissioners of Income Tax. The agreement contemplated by clause (a) of sub-section (2) of section 12 7 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, there is no reference whatsoever to any su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t question that arises for consideration is whether failure to record the reasons in the order which was communicated to the appellants is violative of the principles of natural justice for which the order should be held to be invalid. Held: The requirement of recording reasons under s. 127(1) is a mandatory direction under the law and non-communication thereof is not saved 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; Judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR made some submissions which we would like to address. Ld. DR submitted that the Income-Tax Department is having different authorities and the cases are transferred from one authority to another authority because of necessity or in the special circumstances like search u/s 132. According to Ld. DR, the case of present assessee was also centralized in the office of Ld. PCIT(Central) due to search-proceeding. Therefore, the Ld. PCIT(Central) was holding charge over the assessee and the impugned order passed by him must be upheld. Ld. DR also submitted that the assessee could have raised this grievance much earlier before the lower authorities but the same was not done and therefore no benefit should be given to the assessee on this issue at this stage. 16. We have considered submission of both sides and also perused the material produced before us. On a careful consideration, we observe that the assessee is a person claiming exemption u/s 11 or 12 and also located in the State of Madhya Pradesh. Therefore, as notified by the CBDT, the Commissioner of Income-tax (Exemption), Bhopal was having jurisdiction over the assessee and not the Ld. PCIT(Central). During the course of heari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , BHOPAL IN THE MATTER 9. The assessee mainly in its reply dated 23.09.2024 at point 8 has again challenged (earlier objection filed on 15.04.2024) the jurisdiction of the Pr. Commissioner of Income-tax (Central), Bhopal with regard to the proposed action of cancellation of registration u/s 10(23C)(vi) of the Income-tax Act, 1961 saying mainly that the notification No. 52/2014 and 53/2014 dated 22.10.2014 issued by the CBDT has delegated the powers of granting and cancellation of registration u/s 10(23C)(vi) of the Act to the CIT(Exemption), Bhopal, for matters pertaining to the state of Madhya Pradesh & Chattisgarh. The assessee also submitted that in terms of section 127 of the I.T. Act, the powers of transfer of cases has been given from one Assessing Officer to another Assessing Officer and not from one Commissioner to another Commissioner. The assessee has also objected reliance on letter dated 19.01.2024 issued by the CBDT while disposing objection vide this office letter dated 17.09.2024 by saying that "whether the said ex-parte internal communication dated 19.01.2024 is valid or not". 10. However, the assessee's reply is not correct / tenable for the reasons as disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as detailed in show cause notice dated 31.03.2024. In case, no reply is received by stipulated date/time, it will be presumed that you have nothing to say in the matter and a decision will be taken on the basis of records available in this office. Enclosed: As above ANUJ ARORA PCIT (Central), Bhopal (ii) the provisions of the Notification No. 70/2014 dated 13.11.2014 issued by the CBDT clearly provides for the jurisdiction of Principal Commissioner of Income-tax (Central), Bhopal in the matter. The clause (b) and relevant portion of Schedule-1 of the Notification no. 70/2014 dated 13.11.2014 is reproduced hereunder :- "(b) directs that the Director General of Income-tax or the Chief Commissioner of Income-tax specified in column (2) of the said Schedules or the Principal Commissioner/Commissioner of Income-tax specified in column (4) of the said Schedules or Joint Commissioners of Income-tax subordinate to them, shall exercise powers and perform the functions as stipulated in the said Act in respect of such cases or classes of cases or such persons or classes of persons, assigned to Assessing Officers subordinate to them, under section 127 of the said Act, from the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 21.06.2023 (in consequence of search conducted in its various premises on 02.02.2023) passed by the CIT(Exemption), Bhopal. Without prejudice to the above, even though it is implicit and not a requirement placed by the said Notification 70/2014, it may be mentioned in passing that in the said order u/s 127 it is clearly mentioned that the transfer of the case is for proper and coordinated investigation, assessment of the case and for all other purposes. (iv) Further, the objection raised by the assessee vide its letter dated 15.04.2024 was disposed of vide this office letter dated 17.09.2024 in view of the Notification No. 70/2014 dated 13.11.2024 issued by the CBDT. (V) Useful reference may also be made to the letter issued by the Central Board of Direct Taxes dated 19.01.2024. The matter has been clarified once again through above referred letter of CBDT. In para 2.2 of the above referred letter, CBDT has clearly stated that Notification No. 70/2014 dated 13.11.2014 makes it very clear that the CIT(Exemption) does not exercise any jurisdiction in respect of persons which have been assigned to the Assessing Officers subordinate to the Principal Commissioner of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dice to the above, the issue raised by the assessee ignores the fact that the letter dated 19.01.2024 issued by the CBDT is based on plain reading of Notification No. 70/2014 dated 13.11.2024. (e) In view of above discussion, it is clear that once an order u/s 127 of the Act is passed transferring the jurisdiction of the person for all purposes, the power of cancellation of registration is to be exercised by the concerned PCIT(Central) having a subordinate Assessing Officer to whom the case of the assessee has been assigned under the provisions of section 127 of the Income Tax Act, 1961 and perform the functions as stipulated in the Act in respect of all the proceedings which may be commenced after the date of such order u/s 127 in respect of any year. Accordingly, the objection of the assessee challenging the jurisdiction of Principal Commissioner of Income Tax (Central), Bhopal for the purposes of cancellation of registration u/s 10(23C)(vi) of the Income Tax Act, 1961 deserves to be rejected. Para 13 to 14 of impugned order - Relevant portion only: 13. The assessee in its reply dated 23.09.2024 at point 9 has objected to the reference made under 2nd proviso to section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... understanding in Para No. 2.3 and 3 of the Letter dated 19.01.2024 is such that the PCIT(Central) would have jurisdiction for cancellation of approval/registration of assessee. Ld. AR submitted that the PCIT(Central) has adopted this understanding expressed by CBDT in aforesaid Letter. The Letter dated 19.01.2024 on which the Ld. PCIT(Central) has placed reliance, is re-produced below for an immediate reference: 28. Ld. AR, however, contended that the Letter dated 19.01.2024 explaining CBDT's understanding is a recent letter after the decisions of various benches of ITAT including ITAT, Indore in ITA No. 117/Ind/2020 - Devi Shakuntala Thkaral Charitable Foundation, Bhopal Vs. Pr. CIT(Central), Bhopal and ITA No. 115 & 116/Ind/2020 - Oriental University, Indore Vs. Pr. CIT(Central), Bhopal. He submitted that he has made his best effort to find legal precedents, if any, available wherein the aforesaid Letter dated 19.01.2024 issued by CBDT had been considered and he has come across only one order of ITAT, Delhi "E" Bench in ITA No. 1803/Del/2024 - Lakhmi Chand Charitable Society, New Delhi Vs. Principal Commissioner of Income-tax, New Delhi (2024) 166 taxmann.com 324 (Delhi - Trib.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014 has been issued by CBDT) giving power to PCIT(Central) is general whereas the Notification No. 52/2014 dated 22.10.2014 giving power to CIT(E) is specific. According to Ld. AR, the specific Notification shall prevail over the general Notification. (iii) That the transfer of case to DCIT(Central) was for limited purpose of co-ordinated assessment of all entities of BCGM Group including assessee due to conduct of search and not for performing other functions like cancellation of approval. 30. With these submissions, Ld. AR prayed the Bench to take a favourable view in the light of legal decisions quoted and to hold that the PCIT(Central) was not a competent authority to pass impugned order. Ld. AR, however, conceded that even if the Bench want to keep this issue open undecided, particularly because of the reason that the department has already filed appeal to Hon'ble High Court of Madhya Pradesh in ITA No. 19 of 2023 against the order of ITAT, Indore in Devi Shakuntala Thkaral Charitable Foundation, Bhopal (supra) and the departmental appeal stands admitted and pending before Hon'ble High Court. He agrees to this alternative proposal only if this Bench decides the first issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee' approval u/s 10(23C)(vi) was cancelled by then CIT(Exemption) on the allegation of excessive payment of rent but on appeal, the ITAT vide Para 8 of its order, dissolved the allegation and also directed the CIT(Exemption) to decide the issue afresh in accordance with law. Thereafter, the CIT(Exemption), Bhopal passed order dated 19.03.2020, copy of CIT(Exemption)'s order is filed at Pages 188-191 of Paper-Book-1. In Para No. II thereof, the CIT(Exemption) restored assessee's approval in following words: "II........ Respectfully following the directions of Hon'ble ITAT, Indore and considering the application of the applicant and documents submitted by the applicant and the material available on record, the approval under section 10(23C)(vi) of the Income-tax Act, 1961 dated 28.03.2008 is restored, subject to the conditions mentioned in paragraph (V)." Further, during the intervening period, the AO passed assessment order of assessee u/s 143(3) for AY 2016-17, copy filed at Pages 192- 208 of Paper-Book-1. In Para 7.5 of order, the AO quantified the excessive rent at Rs. 1,90,50,000/- and made addition by reducing from total revenue expenses claimed by assessee. But in first ..... X X X X Extracts X X X X X X X X Extracts X X X X
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