The Income Tax Appellate Tribunal, Delhi, observed that the Income Tax department tried to cancel the trust registration by hook or crook.
The bench noted that the case of the assessee is that the reference made by the Assessing Officer on the basis of 2nd Proviso to Section 143(3) of the Act is not applicable in the case.
The bench said that the said reference granted under Section 12AA can only be made during the pendency of the assessment proceedings which admittedly has been concluded for the appellant.
The tribunal observed that the 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”, the tribunal stated.
It was observed that Section 12AB(4) was substituted by the Finance Act 2022 w.e.f 01.04.2022 vesting jurisdiction to the PCIT to cancel registration granted under Section 12AA(1) of the Act or under Section 12AB(1) of the Act. As Section 12AB(4) was not in existence in the statute prior to 01.04.2022 such specified violation, if any, existed prior to 01.04.2022 cannot be touched by the PCIT by invoking Section 12AB(4) of the Act.
The bench added that otherwise also the alleged violation specified in the show cause notices pertained to the period prior to search dated i.e. 14.10.2020 and therefore proceeding emanating under Section 12AB(4) of Act proposing cancellation of Registration for Assessment Year 2015-16 to 2021-22 is totally unlawful and ultravires to the provisions of Section 12AB(4) of the Act.
The tribunal opined that the reference made in terms of 2nd proviso of Section 143(3) of the Act to the PCIT to whom the AO was subordinate is not permissible rather it is the CIT(E) Delhi, having territorial jurisdiction specified in Column 4 of the Notifications from whom exemption inter/alia under Section 12A of the Act is being claimed is the appropriate authority. In fact by and under the said notification the CIT(Exemption) has been constituted separately for the purposes mentioned therein.
The bench held that the order passed by the PCIT cancelling registration of the appellant society on the reference made by the Assessing Officer is found to be flawed and without jurisdiction.
Facts
The appellant, a charitable society, is running a school in the name of G.D. Goenka Public School situated at Elephanta Lane, Near Golak Dham, Sector-10, Dwarka New Delhi, registered under Societies Registration Act, XXI of 1860 on 18.09.1996.
The society was registered under Section 12A of the Act. It has also obtained the approval under Section 80G of the Act on 02.06.2008. Further that after insertion of Clause (ac) in Section 12(1) of the Act the registration of the society was renewed under Section 12A(1)(ac)(i) of the Act w.e.f Assessment Year 2022-23 to 2026-27 on 31.08.2021 and further approval was also granted w.e.f Assessment Year 2022-23 to 2026-27 on 31.08.2021.
a search and seizure operation under Section 132 of the Act was conducted on 14.10.2020 in the case of Manoj Kumar Singh and his close associates and few transacting parties with the said Shri Manoj Kumar Singh. The school run by the appellant was also covered in that search. On 04.01.2021 by and under the order issued by the CIT(Exemption), Civic Center, New Delhi under Section 127(2) of the Act, the, appellant’s case was transferred from Circle Exemption1(1) Delhi to the Central Circle 29, New Delhi for the purpose of coordinated investigation and meaningful assessment pursuant to search conducted under Section 132 of the Act on 14.10.2020. On 29.03.2022 the DCIT, Central Circle-29, New Delhi, concluded the assessment proceedings for Assessment Year 2015-16 to 2021-22 noting that the same is a fit case for withdrawal of registration under Section 12A of the Act as per sub-Sections 3 and 4 of Section 12A of the Act. The appellant challenged the said assessment orders by filing appeal before the First Appellate Authority, New Delhi under Section 246A of the Act pending before the CIT(A)-30, New Delhi.
Surprisingly, after finalizing the assessment proceedings on 29.03.2022 the Ld. AO sent a proposal for cancellation of registration on 04.05.2022 whereupon Ld. PCIT, Central-3, New Delhi issued show cause notice dated 05.07.2023 to the appellant but the same was withdrawn and thus proceeding for cancellation of registration was dropped. Thereafter, by and under a further letter dated 31.07.2023 the said AO made a corrected reference to the Ld. PCIT, Central -3, New Delhi for cancellation and/or withdrawal of registration of the appellant society under Section 12AB(4) of the Act. The said reference was served upon the appellant only on request made by the appellant.
Conclusion
The tribunal observed that in view of the provision of Section 12AA(5) of the Act as the provision of Section 12AA cannot be applied on order after 01.04.2021 the show cause notices issued by the PCIT to the appellant are, thus, found to be erroneous and therefore liable to be quashed.
The bench said that once the show cause is found to be non est in the eyes of law, the entire proceeding is naturally found to be on a wrong foundation of law and thus, liable to be set aside.
The bench added that similarly, invoking the provision of Section 12AB(4) of the Act by the PCIT to cancel registration for specified violation is also not permissible at the same has not seen the light of day prior to 01.04.2022; the same is therefore, not applicable to Assessment Years 2015-16 to 2021-22 as wrongly has been applied in the case.
Case Details
Case Name: Lakhmi Chand Charitable Society V/S Principal Commissioner Of income Tax
Citation: ITA No. 1803/Del/2024
Tribunal: ITAT, Delhi
Coram: Shri S. Rifaur Rahman, Accountant Member and Ms.Madhumita Roy, Judicial Member
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