ARYA SMAJ MODEL TOWN,DELHI vs. PCIT, CENTRAL -3, NEW DELHI

Order

: 04.06.2025 O R D E R

PER S.RIFAUR RAHMAN,ACCOUNTANT MEMBER :

3. After insertion of clause (AC) in section 12(1) of the Act, the registration of the society was renewed from AY 2022-23 to AY 2026-27 vide registration dated 24-09- 2021 (Refer page no. 102 to 104 of PB). Thus, the assessee society has been granted/renewed registration u/s 12A by the Income Tax department from inception i.e. FY 1994-05 till FY 2025-26.

4. The Ld. PCIT (Central)-3 has passed the impugned order whereby the registration of the assessee u/s 12A has been withdrawn/cancelled. The reasons given by the Ld. PCIT for withdrawal/cancellation of registration are that during the course of search carried in the case of third parties, incriminating documents/evidences were gathered and it was found by the AO that the Assessee society is indulged in non-genuine activities and that there was diversion of funds of the society, hence there is violation of section 13(1)(c) of the Act.

5. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :- “1. On the facts and circumstances of the case and in law, the order 12A r.w.s. 12AA and Section 12AB (4) of the Act passed by Pr. Commissioner of Income Tax, Central -

3. (hereinafter referred as PCIT) is erroneous, bad in law, without jurisdiction and barred by limitation.

2. On the facts and circumstances of the case and in law, the Ld. PCIT has no jurisdiction to cancel the registration u/s 12A r.w.s. 12AA and Section 12AB of the Act.

3. On the facts and circumstances of the case and in law, the PCIT erred in cancellation of registration u/s 12A r.w.s. 12AA and Section 12AB of the Income Tax Act, 1961 4 On the facts and circumstances of the case and in law, the PCIT erred in holding the registration under Section 12A r.w.s. 12AA and Section 12AB is cancelled from the previous year relevant to the Assessment year 2014-15 and subsequent Assessment years. 5 On the facts and circumstances of the case and in law, the PCIT erred in holding the registration under Section 12A r.w.s. 12AA and Section 12AB is cancelled from the previous year relevant to the Assessment year 2018-19 and subsequent Assessment Years. 6 On the facts and circumstances of the case and in law, the PCIT erred in holding the registration under section 12A r.w.s. 12AA and Section 12AB is cancelled from the previous year relevant to the Assessment year 2015-16 and subsequent Assessment Years.

7. On the facts and circumstances of the case and in law, the PCIT erred in withdrawing the registration of the appellant u/s 12A r.w.s. 12AA and Section 12AB of the Act.

8. On the facts and circumstances of the case and in law, the PCIT erred in holding that activities of M/s Arya Smaj Model Town were found to be non-genuine and were not being carried out in accordance with the declared aims & objects and conditions subject to which registration was granted to it u/s 12A r.w.s. 12AA, and section 12AB of the Income Tax Act, 1961.

9. On the facts and circumstances of the case and in law, the reasons given/allegation made/adverse inference drawn by PCIT for cancellation the registration of the appellant u/s 12A r.w.s. 12AA and Section 12AB of the Act are erroneous and not sustainable.”

6. At the time of hearing, ld. AR of the assessee submitted as under :- 1. “The PCIT has no jurisdiction to pass the order of cancellation of registration. The said authority lies with CIT (exemption) Delhi only. The transfer of case u/s 127 by and order dated 04.01.2021 is only for the purpose of coordinated assessment and not for the purpose of exercising jurisdiction for cancellation of registration the assessee has been duly considered by coordinate bench of tribunal in the case of Lakhmi Chand Charitable Society V. PCIT -Central 3 (ITA No. 1803/Del/2024. It is pertinent to point out that the order u/s 127 in the case of the assessee and the case of Lakhmi Chand Charitable society (supra) is common (Refer page no. 105 of PB).The cases of the appellant and Lakhmi Chand Charitable Society (supra) are arising out of same search. The PCIT cancelling the registration u/s 12A in both the cases is same. The Hon’ble Bench in the case of Lakhmi Chand Charitable Society(supra)vide order dated 22/08/2024 has held the order passed by PCIT to be without jurisdiction. Thus the present case of the appellant stands covered in its favour by the decision of Hon’ble ITAT.

2. It is also pertinent to state that the registration of the appellant u/s 12A has been renewed by the competent authority on 24.09.2021 i.e. much after the date of search on the basis on which adverse inference has been drawn in the case of the appellant.

3. It is further submitted that there is no power/jurisdiction to cancel/withdraw the registration with retrospective effect. This aspect also stands covered in favor of the appellant by ITAT order in case of Lakhmi Chand Charitable Society(supra) 4. Further to above, it is submitted that the PCIT has passed the impugned order on the basis of reference from the assessing officer. In this regard it is submitted that the reference by the assessing officer can only be made prior to the completion of assessment. In this regard, reference is invited to the second proviso to section 143(3) which is as under: - [Provided further that where the Assessing Officer is satisfied that any 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), of clause (23C) of section 10, or any trust or institution referred to in section 11, has committed any specified violation as defined in Explanation 2 to the fifteenth proviso to clause (23C) of section 10 or the Explanation to sub-section (4) of section 12AB, as the case may be, he shall— (a) send a reference to the Principal Commissioner or Commissioner to withdraw the approval or registration, as the case may be; and (b) no order making an assessment of the total income or loss of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall be made by him without giving effect to the order passed by the Principal Commissioner or Commissioner under clause (ii) or clause (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or clause (iii) of sub-section (4) of section 12AB: Therefore, the reference made by the AO after the completion of assessment is contrary to the provisions of law and, therefore, the said reference and the consequent impugned order passed by the PCIT – Central is totally erroneous and without jurisdiction. In view of the above, the order passed by the PCIT – Central is totally erroneous and without jurisdiction. The same is not sustainable in law.

5. In the case of Commissioner of Income-tax, Karnataka (Central) v. Islamic Academy of Education [2015] 54 taxmann.com 255 (Karnataka) High Court of Karnataka it was held as under: - 8) In the instant case, the material on record shows that the Trust has established educational institution and imparting medical education. Every year, students are admitted. Huge investment is made for construction of buildings for housing the college, hostel and to provide other facilities to the students who are studying in the College. The College is recognized by the Medical Council of India, State of Karnataka and all other statutory authorities. Therefore, it cannot be said that the Trust is not genuine. Admittedly, the students are being admitted every year. Students are studying in all courses. Thus the object of the constitution of the Trust namely imparting of education is going on uninterruptedly. Therefore, it cannot be said that the activities of the Trust are not being carried out in accordance with the objects of the Trust. When the aforesaid two conditions are fully satisfied, on the ground that the trustees are misappropriating the funds of the Trust the registration of the Trust cannot be cancelled. If the trustees are misappropriating the funds, if they are maintaining false accounts, it is open to the authorities to deny the benefit under section 11 of the Income Tax Act, but that is not a ground for cancelation of registration itself. That is precisely what the Tribunal has held. Therefore, the substantial question of law is answered in favour of the assessee and against the revenue. There is no merit in this appeal.

6. In the case of Islamic Academy of Education v. Principal Commissioner of Income-tax (Central) [2024] 160 taxmann.com 217 (Bangalore - Trib.)it was held as under: - 3) We have heard the rival submissions and perused the materials available on record. The main argument of the ld. A.R. is that the assessee was granted registration u/s 12A of the Act on 1-6-1992. Thereafter, due to amendment in provisions of section w.e.f. 1-4-2021 requiring registration to be restricted for 5 years, the assessee had filed an application and thereafter order of registration u/s 12AB of the Act was issued to the assessee by CIT-CPC on 23-9-2021 from assessment year 2022-23 to assessment year 2026-27 so as to enable the earlier registration granted on 4-6-1992 to be continued and in this case, the ld. PCIT vide order dated 21- 6-2023 has cancelled the registration granted to the assessee u/s 12A/12AB of the Act w.e.f. previous year 2020-21 u/s 12A of the Act and for all subsequent previous years as per provision of section 12A(4) of the Act. Now the contention of the ld. A.R. is that registration for the previous year 2020-21 relevant to assessment year 2021-22 was u/s 12A of the Act and not u/s 12AB (1) of the Act. So the registration u/s 12A of the Act, which was granted to the assessee on 4-6-1992 cannot be cancelled u/s 12AB (4) of the Act. For understanding this issue, we will go through the section 12AB (4) of the Act, which reads as follows: "12AB(4) Where resignation 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) or clause (b) of sub-section (1) of section 12AA, as the case may be, 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 Commissioner or Commissioner shall — (i) call for such documents or information from the trust or institution, or make such inquiry as he things 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 trust or institution. Explanation - For the purposes of this sub-section, the following shall mean "specified violation",-- (a) Where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or (b) The trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or (c) The trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure 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; [or (g) The application referred to in clause (ac) of sub-section (1) of section 12A is not complete or it contains false or incorrect information.]" 8.1. Now we will go through the importance of these provisions of the Act. 8.1.1 The Finance (No. 2) Act, 2004 had inserted the sub-section to Section 12AA. By virtue of this subsection (3), the Commissioner, with effect from 1st day of October, 2004 had the power to cancel the registration, if she is satisfied that the activities of such trust/institution are not genuine or are not being carried out in accordance with the objects of the trust or institution. 8.1.2 The Finance Act, 201 4 provided additional powers for cancellation under section 12AA(4)(a), which provides cancellation due to the applicability of forfeiture of income under section 13(1). It may be noted, under section 13(1) various violations pertaining to investment, benefit to interested person etc are regulated.

8.1.3 With effect from 1st September, 2019 again, additional powers have been provided for cancellation under section 12AA(4)(b), wherein registration can be cancelled if the trust has not complied with the requirement of any other law which are material for the purpose of achieving its object and the order/decree by whatever name called, holding such non-compliance has occurred and has either not been disputed or attained finality. 8.1.4 Finance Act, 2020 had inserted a new Section 12AB. The existing Section 12AA providing for cancellation shall remain effective upto 31-03-2021. The new Section 12AB is applicable from 1-04-2021. It has the enabling provision on the same line as in the existing Section 12AA, empowering the Principal Commissioner or Commissioner to cancel the registration in specified cases, Section 12AB (5) corresponds to Section 12AA (4) and the cancellation powers continue to remain similar except the fact that under section 12AB(1)(b)(ii), the CIT may deny renewal of registration and also initiate cancellation proceedings at the time of renewal proceedings. 8.1.5 The new provision has provided yet another power of cancellation under section 12AB(l)(b)(ii)(B) which can be exercised during the process of renewal under section 12AB. The new provisions also provide powers of cancellation under section 12AB(4) and (5), which are analogous powers prior to enactment of Finance Act, 2020. 8.1.6 The additional power of cancellation during the renewal process empowers the CIT to invoke the powers available under section 12AB(4)and (5) at the time of renewal also; In other words, there is no power for any arbitrary or ex parte order at the time of renewal. However, the CIT may additionally initiate cancellation proceedings. 8.1.7 The Finance Act, 2022 substituted sub-sections (4} and (5) of the Section 12AB w.e.f. 1st April, 2022. This provides provisions regarding cancellation of the registration granted to a trust or institution on specified violations. 8.1.8 Section 12AB(4)/(5) prior to amendment by the Finance Act, 2022 did not cover cases of provisional registration under section 12AB(l)(c). Now, the substituted Section 12AB(4) covers cases of provisional registration as well and hence, registration granted for the first time can also be cancelled. 8.1.9 Before the amendment by the Finance Act, 2022, Section 12AB(4) provided for cancellation of registration in case of any violation under section 13. The amended Section 12AB(4) does not consider a violation of Section 13(l)(c) and Section 13(l)(d) as specified violations. Consequently, the registration cannot be cancelled on the ground that the assessee has violated Section 13(l)(c) or Section 13(1)(d).

8.1.10 The Finance Act 2023 has inserted clause (g) in Explanation to Section 12AB(4) to provide that giving incomplete, false, or inaccurate information in a registration application under section 12A(l)(ac) will be deemed as a "specified violation" that can lead to the cancellation of registration. 8.2 Thus, it means that the following registration could be cancelled: 8.2.1 The PCIT/CIT can cancel the following registrations granted to a trust or institution: (a) Final registration or provisional registration granted under section 12AB(1)(a)/(b)/(c); (b) Final registration granted under section 12AA(1). The erstwhile provision did not cover cases of provisional registration granted under section 12AB(1)(c). Now, the provisional registration granted for the first time can also be cancelled by the authorities. 8.3 As seen from the above, since the assessee has secured the registration u/s 12A of the Act dated 4-6-1992, which was effective till the date of 23-9- 2021 and this registration granted u/s 12A cannot be cancelled u/s 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)(ii) 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 ld. 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.

7. In the head note of the decision in the case of Heart Foundation of India Versus Commissioner Of Income Tax-Central, Pune 2023 (8) TMI 1063 - ITAT Mumbai in the case of : - Exemption u/s 11 - Registration u/s 12AB cancelled with retrospective effect - Assessment of trust - PCIT (central) jurisdiction to cancel the registration - assessee trust as provided freebies to doctors which are in violation of the Indian Medical Council (Professional Conduct & Ethics) Regulations, 2002 - HELD THAT:- We notice that as per serial no.12 of the CBDT notification Nos 52 & 53, the jurisdiction for all cases in Greater Mumbai and Navi Mumbai, claiming exemption under sections 11 and 12 lies with the Commissioner of Income-tax (Exemption) Mumbai. Therefore we see merit in the submissions of the ld AR that the PCIT (Central) does not have jurisdiction to cancel the registration under section 12AB. As decided in Pacific Academy of Higher Education & Research [2023 (1) TMI 1283 - ITAT JODHPUR] CIT(Exemption) who is having the jurisdiction to handle cases claiming exemption under section 11 and 12 cannot transfer or hand over or give his work or power or duties. In case, if it is necessary to do so then there has to be proper proceedings in writing. In assessee's case the facts are identical where the assessment is centralized and there was no proceeding or communication to the assessee that the CIT(Exemptions) has transferred his power to PCIT. Therefore respectfully following the ratio laid down in the above decision by the Jodhpur Bench of the Tribunal and considering the facts of the present case we hold that the PCIT does not have the jurisdiction to cancel the registration u/s 12 AB. Thus the cancellation of registration retrospectively from AY 2016-17 under section 12AB(4) by the PCIT is not valid. Decided in favour of assessee. Para 9 9. In above decision, the Hon'ble Tribunal has also held that the withdrawal of registration cannot be retrospective. In assessee's case, the PCIT has cancelled the registration under the new section 12AB. The clause (ii) to subsection section (4) of section 12AB 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, we hold that even otherwise the cancellation of registration by the PCIT retrospectively from AY 2016-17 is not tenable.

8. In the case of M/S. AURO LAB VERSUS INCOME TAX OFFICER2019 (1) TMI 1478 - MADRAS HIGH COURT it was 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. The courts reasoned that even when the parliament had plenary powers to enact retrospective legislation in matters of taxation, the amended section is not seen to have explicitly provided to have a retrospective character or intend. Therefore, without a specific mention of the amended provisions to operate retrospectively, the cancellation can not operate from a past date. 21.On the third question of the effective date of operation of the cancellation order, it was held that the cancellation will take effect only from the date of the order/notice of cancellation of registration. Since the act of cancellation of registration has serious civil consequences and the amended provision is held to have only a prospective effect the effect of cancellation, in the event the pending Tax Appeal is decided in favour of the Revenue, will operate only from the date of the cancellation order, that is 30.12.2010. In other words, the exemption cannot be denied to the petitioner for and up to the Assessment Year 2010-11 on the sole ground of cancellation of the certificate of registration.

9. In the case of M.M. PATEL CHARITABLE TRUST VERSUS PCIT (CENTRAL), PUNE2025 (2) TMI 981 - ITAT PUNE it was held as under: - 15c. It is also a settled issue that the registration u/s 12AA cannot be cancelled from retrospective effect. For this view we place reliance on the judgment of Hon'ble Madras High Court in the case of Auro Lab v. ITO (2019) 102 taxmann.com 225 dated 23.01.2019 wherein Hon'ble Court held that “Since the act of cancellation of registration has serious civil consequences and the amended provision is held to have only a prospective effect the effect of cancellation, in the event the pending Tax Appeal is decided in favour of the Revenue, will operate only from the date of the cancellation order, that is 30.12.2010. In other words, the exemption cannot be denied to the petitioner for and up to the Assessment Year 2010-11 on the sole ground of cancellation of the certificate of registration.” [emphasis supplied] 15d. In view of the above discussion with regard to ground no.1 2 & 6 of the assessee’s appeal, in light of the judgments and decisions referred herein above settled and judicial principles, we are of the considered view that firstly, Ld. Pr.CIT erred in cancelling the registration with retrospective effect from 01.04.2008 and secondly, we are also of the view that Ld. Pr. CIT erred in cancelling the registration u/s 12AA(3) and 12AA(4) of the Act without placing any material evidences which could indicate that the assessee society was not running for the charitable objects for which it was established and nor any doubt has been raised about genuineness of the activities carried out by the assessee society with regard to imparting of education and carrying out charitable activities. So far as, the issue arising out of the loose papers is concerned in this case alleging that the fund of the assessee society have been misappropriated by the members of the society or there is any ambiguity in the claim of expenses, it can well be taken care of at the time of assessing the income and if needed the additions can be made to the income of the assessee and the same should be restricted only to the issue involved. However in no case the remaining income of the trust/society should be affected by way of denying the benefit of exemption u/s 11 & 12 of the Act. We accordingly allow ground no.1 2 & 6 of the assessee’s appeal.”

Nos. 5 to 9 raised by the assessee are allowed.

36. To conclude, we are inclined to hold that firstly the assessee deserve to succeed on the legal issues raised in Grounds of appeal No.3 and 4 and we hold that ld. PCIT erred in cancelling the registration granted to the assessee u/s. 12A of the Act on 16.02.2001 and also erred in cancelling the registration granted u/s. 12A r.w.s.12AB of the Act for period 01.04.2021 onwards. Accordingly registration granted u/s. 12A of the Act and u/s. 12A r.w.s.12AB of the Act stands restored. Further we also allow the Grounds of appeal 5, 6, 7, 8 and 9 raised by the assessee observing that since the assessee is carrying out genuine charitable activities as per the objects of the trust the ld. PCIT erred in cancelling the registration u/s. 12A/12AB of the Act based on some statements recorded during the course of search but subsequently retracted and other seized material which were the subject matter of assessment proceedings undergoing at that point of time and therefore even if any addition is made by the AO, the benefits of registration u/s. 12A/12AB of the Act shall continue to be enjoyed by the assessee for the remaining amount of income earned by it. Even the assessee succeeds on Ground of appeal No.10 because the ‘specified violation’ allegedly made by the assessee trust cannot be said to be justified because the word ‘specified violation’ has been brought into the Act from 01.04.2022 and the alleged violation are based on the documents and details for the F.Yrs. 2019-20 to 2021-22 which are prior to 01.04.2022. Accordingly, Grounds of appeal Nos. 1 and 2 raised by the assessee are dismissed and Grounds of appeal

Nos.3 to 10 are allowed. Ground No.11 being general in nature needs no adjudication.

10. In the head note of the decision in the case of Aggarwal Vidya Pracharni Sabha Versus Principal Commissioner of Income Tax, Central Gurgaon 2024 (1) TMI 491 - ITAT Delhi in the case of : - Jurisdiction of PCIT (Central), Gurgaon cancelling registration granted to the assessee u/s. 12AA - assumption of jurisdiction for cancellation of registration u/s. 12AB(4) by virtue of transfer of jurisdiction order u/s. 127 - HELD THAT:- In any case the ‘reference’ by jurisdictional AO was to be made not to the PCIT or Commissioner, to whom this AO was subordinate but one authorised by board for the purpose of Section 12AB. The one who could grant or cancel the registration as per amended provisions which is not PCIT, Gurgaon, but, would be CIT(E), Chandigarh. Thus assumption of jurisdiction for cancellation of registration u/s. 12AB(4) of the Act by virtue of aforesaid transfer of jurisdiction order u/s. 127 of the Act is not conceivable. We observe that reference 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. 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 for to show cause an order of cancellation. In any case, the manner of exercise of jurisdiction without first making conclusive notice of the alleged ‘specified violation’ is not sustainable. Thus we are of the considered view that the impugned order has been passed by Ld. PCIT, Gurgaon, without jurisdiction in context to territorial powers and subject matter as well not in accordance with law and same is liable to be quashed. Accordingly, the additional ground raised by the assessee is allowed. It is, therefore, prayed to your honour to allow the appeal.”

7. On the other hand, ld. DR of the Revenue submitted written submissions which read as under :-

“1. In this case, a search and seizure action under section 132 of the Income-tax Act, 1961 (hereinafter referred to as the 'Act') was carried out on 14.10.2020 in the case of Sh Manoj Kumar Singh. his associates. Sh. Devesh Singh and Sh. Adhir Sachdeva, one of the member of Arya Samaj Model Town Society and other various transacting parties. M/s. Arya Samaj Model Town society runs a school namely GD Goenka Public School (Senior Wing), 3A, Model Town Rd, Institutional Area, Phase 3, Azadpur. New Delhi. A survey under section 133A of Income Tax Act, 1961 was also carried out at GD Goenka Public School (Senior Wing), 3A, Model Town Rd, Institutional Area, Phase 3, Azadpur, New Delhi on 14.10.2020. During the course of search proceedings, it was established that Sh. Manoj Kumar Singh entered into unaccounted cash transactions with Sh. Adhir Sachdeva and GD Goenka Public School (Center Wing) and also with the various persons/entities. Thereafter, the case of Sh. Manoj Kumar Singh, Sh. Devesh Singh, Sh. Adhir Sachdeva. G D Goenka Public School (senior wing) and other various parties were centralized to Central Circle-29. New Delhi vide F.No. CCIT (C)/Del/CD-224/2020-21/557 dated 22.12.2020 from the office of the CCIT (Central), New Delhi. The case of the assessee society was centralized to Central Circle-29, Delhi under this charge vide order dated 04.01.2021 bearing F. No. CIT(E)/u/s-12712020-21/877 of CIT(Exemption), Delhi. Further, the case of the assessee society was centralized with Central Circle-28, Delhi vide this office order u/s 127 dated 04.11.2022. Further, case of the assessee was opened u/s l53C of the Act for the A. Y.20[4-15 to 2021-22 as incriminating seized material belonging to the assessee were found from the premises of Sh. Manoj Kumar Singh and Sh. Devesh Singh. The assessment proceedings u/s 153C of the Act in the case of assessee has been completed. During the course of search and assessment proceedings, evidence/information related to the activities carried on which were not as per the aims and objects of the society.

2. During the course of search proceedings, various incriminating documents including digital and physical evidences were found and seized. During the course of search proceedings, statements of various persons were recorded. On the basis of the appreciation of the incriminating evidences gathered and inquires made during search post search and assessment proceedings, the AO reached on a satisfaction that assessee society is indulged in non-genuine activities and the activities of the society are not being carried out in accordance with its aims and objects including diversion of income derived from the property held under society, hence, the conditions, subject to which registration was granted to assessee society u/s 12A read with sections 12AA & 12AB of the Income-tax Act. 1961 are not complied with.

7. In his order dated 26.09.2024, from Page 1 to 82, the PCIT has extensively dealt with the above issues along with many others including obtaining unsecured loans of Rs. 5.68 Crores from unexplained sources by the assessee trust and violation of the provision of Section 13(1)(c). In his order the PCIT has fully justified his competency to cancel 12A registration of the assessee and the ineligible activities of the trust duly citing evidences gathered and forwarded by the assessing officer while making reference to the PCIT for cancellation of 12A registration of assessee.

8.4. Further, the Hon'ble ITAT, E-Bench, Delhi in the case of Legal Initiative for Forest and Environment (LIFE Trust) (AAATL8409L) in SA No. 129/DEL/2024 (arising out of has dealt with the issue of jurisdiction of PCIT(Central) over cancellation of registration of trust/society. The Hon'ble ITAT while dismissing the appeal of the assessee held in Para 9 & 10 of the order dated 09.08.2024 that CIT(Exemptions) does not exercise jurisdiction in respect of persons claiming exemption under section 11, section 12 of the Act, which have been assigned to the Assessing Officers subordinate to PCIT(Central), under section 12 of the Act and by virtue of clause (b) of the Notification No. 70/2014 dated 13.11.2014, the PCIT (Central) has been empowered to perform/exercise powers and functions stipulated in the Act in respect of such cases or classes or such persons or classes of persons, which were assigned to AO sub- ordinate to him, under section 127 of the Act. The Para 9.7. 9.8 & 10 of the order dated 09.08.2024 of Hon'ble ITAT is reproduced as under: 9.7. In view of the above facts, we are of the view that in absence of consideration of the Board Notification No. 70/2014 dated 13.11.2014 in the above three case laws. we cannot hold that tile Pro CIT(Central-2), Delhi lacked jurisdiction to pass the order dated 30.09.2023, cancelling the registration of the assessee trust. 9.8. Similarly, on the issue of the jurisdiction of the PI'. CIT(Central-2), Delhi to cancel the registration with retrospective effect, it is observed that Delhi Bench of the Tribunal in the case of Young Indian (supra), had considered all the high court judgments relied by the assessee in the following Paras 49 and 88, and proceeded to hold that the PCIT had the power to cancel the registration with retrospective effect as under in Pam 121. The relevant paras are as under: 121. .. Nowhere, the Statute envisages that the cancellation cannot be retrospective or it has to be necessarily prospective. What it provides that the Commissioner has statutory powers to cancel the registration u/s. 12A/12AA if he finds reason to believe that the activities of the assessee are not in line with its objects or the activities carried out by the assessee are not genuine in nature. If from the date when registration has been granted, the assessee has not carried out any activity in line with its objects or the activities carried out are not genuine, then from that date itself. the registration can be cancelled because it is only when the knowledge of such breach come to the notice of the Commissioner, then he has the power to cancel the registration from the date he notices the infringement. ... "

10. In view of the above facts, we are of the view that we cannot hold that the Pr. CIT(Central-2), Delhi had no jurisdiction to cancel the registration with retrospective effect vide its order dated 30. 09.2023. " 8.5. Here is pertinent to mention that the assessment order u/s IS3C in the case of assessee society was passed on 06.10.2022 i.e. prior to substitution of second proviso to sub-section (3) of section 143(3) by the Finance Act, 2022. As such, this provision is not applicable in the case of the assessee. Hence, there is no requirement of giving effect to the order passed by the Principal Commissioner or Commissioner under clause (ii) or clause (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or clause (iii) of sub-section (4) of section 12AB before completion of assessment proceedings.

11.1 Moreso, this particular 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.

12. In addition to that, it was submitted by the Ld. A.R. that the reference in terms of 2nd proviso to Section 143(3) of the Act is to be made to the CIT(E) and not to the PCIT or Commissioner to whom the assessing officer would be subordinate. In the case in hand, it appears from the impugned order dated 31.03.2024 that the PCIT has acted on the reference made by the Assessing Officer. In that view of matter the impugned order issued by the Ld. PCIT cancelling the registration passed on the reference of the Assessing Officer purportedly under 2nd proviso to Section 143(3) is without jurisdiction and therefore liable to be quashed.

13. The further case made out by the appellant is this that the PCIT invokes Section 12AA of the Act, while issuing show cause notices dated 05.07.2023 and 16.08.2023 whereas Section 12AA(5) of the Act provides that the provision of Section 12AA are not to be applied on or after 01.04.2021. In that view of the matter the show cause notices mentioned hereinafter issued by the Ld. PCIT are flawed and not maintainable in view of the provision of Section 12AA (5) of the Act. The power to cancel registration granted under Section 12A r.w.s 12AB of the Act can no longer be exercised under Section 12AA(3) after 01.04.2021.

14. Section 12AB(4) was substituted by the Finance Act 2022 w.e.f 01.04.2022 vesting jurisdiction to the Ld. 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 Ld. PCIT by invoking Section 12AB(4) of the Act.

16. As per the contentions made by the Ld. Counsel appearing for the assessee before us that the jurisdiction to grant and/or withdrawing exemption vest with the Ld. CIT(Exemption). The transfer to case under Section 127 of the Act by and under the order dated 04.01.2021 is only for the purpose of coordinated assessment and not for the purpose of exercising jurisdiction for cancellation of registration. In that view of the matter it cannot be assumed that with the transfer of case of the appellant under Section 127 of the Act for coordinated assessment by the CIT(Exemption) Delhi by and under the order dated 04.01.2021 also transfers the proceedings for cancellation of registration. The order under Section 127 dated 04.01.2021 does not speak that Section 12A registration has also been transferred to the jurisdiction of Ld. PCIT, Central Delhi and thus exercising such powers by the said PCIT-3 for cancellation of registration is not in terms of the statutory provision rather bad in law and therefore, liable to be quashed.

(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 direction in respect of any year. 10.1 Further, we consider it appropriate to reproduce relevant portion of Section 12AB and relevant part Rule 17A as under:- "Section 12AB, 12AB Procedure for fresh registration (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub section (1) of section 12A, shall, (a) where the application is made under sub clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years, (b) where the application is made under sub-clause (11) or sub-clause (iii) or sub clause (iv) or sub clause (v) of the said clause,-- (1) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about (A) the genuineness of activities of the trust or institution, and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects, and (ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under Item (A), and compliance of the requirements under item (B), of sub-clause (1), (A) pass an order in writing registering the trust or institution for a period of five years; (B) if he is not so satisfied, pass an order in writing rejecting such application and also 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) and subsequently, the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried 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. (5) Without prejudice to the provisions of sub-section (4), where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub section (1) and subsequently, it is noticed that- (a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, or (b) 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 subsection (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, then, the Principal Commissioner of the Commissioner may, by an order in writing, after affording a reasonable opportunity of being heard, cancel the registration of such trust or institution." Rule 17A "(5) On receipt of an application in Form No. 10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting registration under clause (a), or clause (c), of sub-section (1) of section 12AB read with sub-section (3) of the said section in Form No. 10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (1) of the sub-rule (1). (6) If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub rule (1) or (2) ог by not complying with the requirements of sub-rule (3) or (4), the Principal Commissioner or Commissioner, as referred to in sub- rule (5), after giving an opportunity of being heard, may cancel the registration in Form No. 10AC and Unique Registration Number (URN), 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 procedure of, (a) furnishing and verification of Form No. 10A or 10AB, as the case may be, (b) passing the order under clause (a), sub clause (11) of clause (b) and clause (c) of sub-section (1) of section 12AB. (ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said application made or order so passed as the case may be.] 11. Further, it will be appropriate to reproduce the order u/s 127(2) dated 26.10.2020 available at page No. 1 of the paper book:- “Order u/s 127 (2) of the Income Tax Act, 1961 Consequent to the search & seizure operations u/s 132 of the I.T. Act, 1961 in Dev Wines Group (D.OS 19.02.2020), the Pr. Commissioner of Income Tax (Central), Gurugram vide letter F.No. Pr.CIT(C)/GGM/Cent./Dev Wines/2020- 21/969 dated 24.08.2020 has been given concurrence and requested for centralization of the following cases related M/s. Dev Wines Group to DC11, Central Circle 2, Faridabad for coordinated post search investigation & meaningful assessment Accordingly, in exercise of power conferred by sub-section (2) of Section 127 of the Income Tax Act, 1961 and under all other powers enabling me in this behalf, 1, the Commissioner of Income Tax (Exemptions), Chandigarh hereby transfer the following case(s), particulars of which are mentioned hereunder in Columns (2) and (3) from the Assessing Officer mentioned in Column (4) therein, to the of the Assessing Officer mentioned in Column (5) – Sr. Name and address PAN From To No. of the assessee 1) (2) (3) (4) (5) 1. M/s. Aggarwal AABTA3490Q Circle – 2(E), DCIT, Central Vidhya Pracharni Chandigarh Circle – 2, Sabha (Aggarwal Faridabad. College, DLC-CC-136- Ballabhgarh) 4 This order shall take effect from 26.10.2020."

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.0.880(F), dated the 14th September, 2001, published in the Gazette of India, Extraordinary, Part 11, Section3, 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 – Sr. Designation Headquarters Territorial Cases or classes of No. Area cases (1) (2) (3) (4) (5) 1. Commissioner State of Union All cases of persons in of Income-tax Gujarat, Territory of the territorial area (Exemption), Daman and specified in column (4) Ahmedabad. Diu, Union claiming exemption Territory of under clauses (21), Dadra and (22), (22A), Nagar (22B),(23), (23A), Haveli (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 Number 1 to 20 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014.

………… ………… 4. Commissioner Chandigarh States of All cases of persons in of Income-tax Jammu and the territorial area (Exemption), Kashmir, specified in column (4) Chandigarh. Himachal claiming exemption Pradesh, under Clauses (21), Punjab (22), (22A), (22B) (23), Haryana (23A) (23AAA), (23B), and Union (23C), (23F), (23FA), Territory of (24), (46) and (47) of Chandigarh 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 Number 50 to 68 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014.

2. This notification shall come into force with effect from the 15th day of November, 2014. [Notification No. 52/2014/F No. 187/38/2014(ITA. I)] DEEPSHIKHA SHARMA Director” 12.1 A reference was made by Ld. AR about the circular no 11 of 2022 MANU/DTCR/0011/2022 dated 3rd June 2022, giving clarification regarding Form No.10 AC till the date of the circular and it will be relevant to reproduce para 1 of this circular herebelow; “Circular No. 11 of 2022: MANU/DTCR/0011/2022 F. No.370142/4/2021-TPL Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes (TPL Division) Dated: 3rd June, 2022 Sub: Clarification regarding Form No 10AC issued till the date of this Circular - reg. Finance Act, 2022 has inserted sub-section (4) in section 12AB of the Income- tax Act, 1961 (the Act) allowing the Principal Commissioner or Commissioner of Income-tax to examine if there is any "specified violation" by the trust or institution registered or provisionally registered under the relevant clauses of sub-section (1) of section 12AB or subsection (1) of section 12AA. Subsequent to examination by the Principal Commissioner or Commissioner of Income-tax, 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 (230) of section 10 of the Art 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 sub rule (5) of rule 20 of the Income-tax Rules, 1962 (the Rules) to the Principal Commissioner authorised by the Board. This Circular only relates to cancellation of registration/approval or provisional registration/approval in the case of "specified violation".

14.1 Further, what is material is that by the Notification dated 22.10.2014 the Board, exercising powers under sub-section (1) and sub-section (2) of section 120 vested powers to perform 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/ss 10,11,12, 13A and section 138 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 138 of the Art and clause (b), to issue orders in writing for the exercise of 'their powers and perform all 'their functions by Additional Commissioners of Income tax 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 Art to transfer powers vested by Board to any other Tax Authority. 14.3 Next, as we refer to Section 12AB and Rule 17A which have come into effect from 01.04.2021, and read it with the Circular no. 11 MANU/DTCR/0011/2022 dated 3rd June 2022, it comes up that section 12AB(2) of the Act provides that the pending td applications under clause (b) of sub-section (1) of section 12AA before the date on which section 12AB came into force shall be deemed to be applications made under sub-clause (4) of clause (ac) of sub-section (1) of section 12A on that date for grant of at registration. 14.4 However, as far as provision of cancellation of the registration provided by sub- section (4) of section 12AA is concerned, sub-section (4) of section 12AB brings into place a completely new self-contained procedural code for conducting inquiry about specified violations', cancelling registration or refusing to cancel registration. 14.5 The Rule 17A, as clarified by Circular dated 3rd June 2022 provides that is addition to the 'specified violations', the power of cancellation has also been granted under sub rule (5) of rule 17A and sub-rule (5) of rule 2C of the Income tax Rules, 1962 to the Principal Commissioner or Commissioner authorised by the Board. The authorization u/s 12AB or Rule 17A if have to be construed, by virtue of Board Notification dated 22.10.2014, then we pointed out during the hearing, to Id. D.R that this Notification dated 22.10.2014 does not mention specifically that the powers which can be exercised by Id. PCIT u/s 12AB(4) of the Act and which have come into effect from 01.04.2021 would also be exercised by virtue of this Notification dated 22.10.2014 or that further jurisdiction u/s 12AB of the Act could be transferred to other authorities as per this Notification. The query was left unsatisfied and no other Notification a Circular was brought to our notice.”

15. Thus, at one end, in the absence of any specific reference of section 12AB in the Notification dated 22.10.2014 or there being subsequent authorisation by any Circular or Notification of the Board, we conclude that at the time of passing the order u/s 127 of the Act on 26.10.2020, CIT(E), Chandigarh did not have powers to as such transfer his jurisdiction u/s 127(2)(a) of the Act, for the purpose of Section 12AB has come into effect from 01.04.2021 Accordingly, under no circumstance while passing order u/s 127 of the Act on 26.10.2020, CIT(E), Chandigarh could have transferred his powers u/s 12AB of the Act to any other authority. 15.1 On the other hand, Id. 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 Id. 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 Id. PCIT passing the impugned order liable to be quashed.

by the assessee is allowed. Since the relief is granted to assessee by allowing additional ground itself, the adjudication of other grounds raised by the assessee become academic in nature and are left open. Resultantly, the appeal of the assessee is allowed and the impugned order is quashed.”

18. Having regard to the judgment as relied upon by the Ld. A.R we are of the considered opinion 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 Notification Nos. 52/2014 and 53/2014 both dated 22.10.s2014 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. In that view of the matter 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.

19. Apart from that after considering the 2nd proviso of Section 143(3) of the Act, we find that the reference granted under Section 12AA of the Act is permissible to be made only during the pendency of the assessment proceeding. However, in the case in hand the assessment proceeding has already been concluded on 29.03.2022. In fact, the reference could be made only during the course of assessment proceedings so as to enable the Ld. AO to give effect of the order passed on reference in the Assessment Order itself. Moreso, the said proviso has been inserted w.e.f 01.04.2022 in the statute to make reference to the PCIT by the AO under Section12AA, 12AB of the Act. In that view of the matter application of a particular provision of law which was not in existence during the material point of time cannot be said to have been rightly invoked.

20. So far as the provision of Section 12AB(4) of the Act as exercised by the PCIT is concerned the Ld. A.R relied upon a judgment passed by the Bangalore Bench in the case of M/s Islamic Academy of Education, Manglore in for Assessment Year 2021-22, a copy whereof has also been annexed to the paper book filed before us by the appellant. While dealing with this particular aspect of the matter the Bench has been pleased to observe as follows:

“8.1.9 registration Before the amendment by the Finance Act, 2022, Section 12AB(4) provided for cancellation of registration in case of any violation under Section 13. The amended Section 12AB(4) does not consider a violation of Section 13(l)(c) and Section 13(l)(d) as specified violations. Consequently, the registration cannot be cancelled on the ground that the assessee has violated Section 13(l)(c) or Section 13(1)(d). 8.1.10 The Finance Act 2023 has inserted clause (g) in Explanation to Section 12AB(4) to provide that giving incomplete, false, or inaccurate information in a registration application under Section 12A(l)(ac) will be deemed as a “specified violation" that can lead to the cancellation of registration. 8.2 Thus, it means that the following registration could be cancelled: 8.2.1 The PCIT/CIT can cancel the following registrations granted to a trust or institution: (a) Final registration or provisional registration granted under section 12AB(1)(a)/(b)/(c); (b) Final registration granted under section 12AA(1). The erstwhile provision did not cover cases of provisional registration granted under section 12AB(1)(c). Now, the provisional registration granted for the first time can also be cancelled by the authorities. 8.3 As seen from the above, since the assessee has secured the registration u/s 12A of the Act dated 4.6.1992, which was effective till the date of 23.9.2021 and this registration granted u/s 12A cannot be cancelled u/s 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 year2021- 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)(ii) 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 ld. 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.”

by the assessee in this case and accordingly, we quash the impugned order passed by the ld. PCIT cancelling 12A registration granted to the assessee.