M/S SHISHUKUNJ EDUCATIONAL SOCIETY,THE SHISHUKUNJ INTERNATIONAL SCHOOL, GRAM JHALARIA vs. PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), DIRECTOR GENERAL OF INCOME TAX. AAYKAR BHAWAN,

ITA 806/IND/2024Status: DisposedITAT Indore28 April 2025AY 2024-2573 pages
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What did the Tribunal hold?

The Tribunal decided the issues as follows: Issue No. (i) (Jurisdiction): The Tribunal held that the PCIT(Central) did not have the jurisdiction to cancel the approval granted under Section 10(23C)(vi). The judicial view consistently supports this, and the revenue's reliance on a CBDT letter dated 19.01.2024 was not sufficient to establish jurisdiction. The Tribunal noted that a similar issue was pending before the Hon'ble High Court of Madhya Pradesh. Consequently, the Tribunal quashed the impugned order passed by the PCIT(Central) on this ground. The Tribunal accepted the assessee's alternative proposal to keep this issue open undecided, directing the AO to take up the matter after the High Court's decision, if warranted, and in conformity with it. Issue No. (ii) (Reference under Section 143(3)): The Tribunal decided this issue in favour of the assessee, quashing the impugned order. The reasoning is implicitly linked to the jurisdictional issue, as a defective reference would render subsequent proceedings without jurisdiction. Issue No. (iii) (Applicability of 15th Proviso): The Tribunal decided this issue in favour of the assessee, quashing the impugned order. The reasoning is that the 15th Proviso to Section 10(23C) was introduced by the Finance Act, 2022, effective from 01.04.2022, and therefore, it was not applicable to the assessment years prior to AY 2022-23 for which the approval was cancelled. Issue No. (iv) (Impact of alleged violations): The Tribunal agreed with the assessee's submission that the issues raised regarding alleged violations (rent and salary payments) would be considerable for assessment purposes but were not required for the adjudication of the present appeal concerning the cancellation of approval. Therefore, the Tribunal refrained from making any adjudication on this ground in the present appeal. Operative Directions: The Tribunal quashed the impugned order on grounds of jurisdiction and applicability of the 15th Proviso. The issue of jurisdiction was left open to be decided after the Hon'ble High Court's decision. The alleged violations were not adjudicated in the present appeal.

What were the facts?

The assessee, M/s. Shishukunj Education Society, Bhopal, is challenging an order dated 30.09.2024 passed by the Principal Commissioner of Income-tax (Central), Bhopal (PCIT). This order cancelled the assessee's approval granted under Section 10(23C)(vi) of the Income-tax Act, 1961. The assessee had initially received approval on 29.08.2008, which was later cancelled by the CIT(Exemption) on 14.12.2018. However, the ITAT Indore restored the approval on 07.08.2019, leading to its re-storation by the CIT(Exemption) on 19.03.2020. Following a search operation on 02.02.2023, the assessee's case was transferred to the Central Circle, Bhopal. The DCIT(Central)-2, Bhopal, referred the matter to the PCIT(Central) under the 15th Proviso to Section 10(23C) alleging violations of the approval conditions. The PCIT(Central) issued a show-cause notice, and after considering the assessee's replies, passed the impugned order cancelling the approval.

What were the issues?

1. Whether the Principal Commissioner (Central), Bhopal, had the jurisdiction to cancel the approval granted under Section 10(23C)(vi) of the Income-tax Act, 1961, or if such power exclusively vests with the CIT (Exemption), Bhopal, as per CBDT Notifications No. 52 & 53 dated 22.10.2014. - Assessee's contention: The PCIT(Central) lacked jurisdiction, relying on CBDT Notifications and judicial pronouncements in cases like Oriental University Indore and Devi Shakuntala Thakaral Charitable Foundation. The order under Section 127(2) transferring the case was for investigation and assessment, not for cancelling registration. Reliance on an internal CBDT communication dated 19.01.2024 was also challenged as having no force of law. - Revenue's contention: Relied solely on the impugned order of the PCIT(Central). 2. Whether the reference made by the DCIT(Central) to the PCIT(Central) under the 2nd Proviso to Section 143(3) of the Act was legally valid, particularly concerning its applicability to assessment years prior to AY 2022-23. - Assessee's contention: The reference was wrong as it should have been made to the competent authority. The proviso was introduced by the Finance Act, 2022, and thus not applicable to prior assessment years. - Revenue's contention: Not recorded. 3. Whether the 15th Proviso to Section 10(23C) of the Act, which deals with specified violations, was applicable for cancelling approval for Assessment Years 2021-22 and prior years, given its introduction by the Finance Act, 2022. - Assessee's contention: The 15th Proviso was introduced w.e.f. 01.04.2022 and therefore not applicable to AY 2021-22 and prior years. The PCIT(Central) was not empowered to examine or cancel registrations for these years under this proviso. - Revenue's contention: Not recorded. 4. Whether the alleged violations, specifically excessive rent and salary payments to interested persons, were valid grounds for cancellation, considering previous ITAT and CIT(A) decisions. - Assessee's contention: The issue of excessive rent was previously adjudicated by the ITAT and CIT(A) in favour of the assessee. Similarly, salary payments to family members were accepted during scrutiny assessments for AY 2016-17 and 2017-18. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 10(23C)(vi),Section 143(3),Section 127(2),Section 13(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI B.M. BIYANI

For Appellant: Shri Sumit Nema, Sr. Adv. with Gagan Tiwari, Arun, Ms. Priyal Jain Advocates; ARs
For Respondent: Shri Ram Kumar Yadav, CIT-DR
Pronounced: 28.04.2025

Per B.M. Biyani, AM:

Feeling aggrieved by order bearing DIN: ITBA/COM/F/17/2024-25/ 1069282841(1) and dated 30.09.2024 passed by learned PCIT (Central), Bhopal [“PCIT (Central)”] under 15” Proviso to section 10(23C) of the Income-tax Act, 1961 [“the Act”] by which the approval of assessee granted u/s 10(23C)(vi) vide order dated 29.08.2008 and restoration of same

granted vide order dated 19.03.2020 have been cancelled/revoked, the M/s Shishukunj Education Society assessee has filed this appeal. The said order passed by Ld. PCIT(Central)

shall h

The order continues below.

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