M/S TRUBA EDUCATION SOCIETY ,BHOPAL vs. PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) BHOPAL, BHOPAL

आदेश/ O R D E R

Per B.M. Biyani, AM:

3. The background facts leading to this appeal are as under:

(i) The assessee is a society engaged in charitable purpose of imparting education u/s 2(15) of the Act. It is registered under Madhya Pradesh

Societies Registration Act, 1973 w.e.f. 13.10.2003. It was also granted registration u/s 12AA(1)(b)(i) of the Act by Commissioner of Income- tax, Bhopal [“CIT(E)”] vide registration F.No. CIT/BPL/12A/105/05-

06 dated 27.09.2006 w.e.f. 01.04.2005 [“original registration”].

Subsequently, due to amended provisions of the Act w.e.f. 01.04.2021 by way of insertion of section 12A(1)(ac) r.w.s. 12AB(1) requiring the assessee to re-apply for continuation of original registration, the assessee filed a newer application to CIT(E) upon which the registration granted u/s 12AA(1)(b)(i) was re-approved u/s 12A(1)(ac)(i) of the Act vide registration No. AABAT0008PE20215 dated

24.09.2021 for AYs 2022-23 to 2026-27 [“re-approval”]. The registration/re-approval u/s 12AA(1)(b)(i)/12A(1)(ac)(i) enabled the assessee to claim exemption u/s 11/12 of the Act for the period from 01.04.2005 till AY 2026-27.

(ii) A search u/s 132 was conducted by Income-tax Department on 08.12.2021 upon one ‘SAGE Group’ of Madhya Pradesh and Bhopal Page 2 of 71 office of assessee-society. Simultaneous survey u/s 133A was also conducted on ‘SAGE University, Indore’ which is identified as a part of ‘SAGE Group’ & run by assessee-society. All cases of the ‘SAGE group’ were centralised in the assessing authorities of Central Circle,

Bhopal. The case of assessee-society was also transferred from ACIT(Exemption), Bhopal to DCIT(Central)-2, Bhopal vide order dated 07.06.2022 u/s 127(2) of the Act, copy filed at Page 21-22 of Paper-Book-1. Thereafter, the DCIT(Central)-2, Bhopal [“AO”] conducted assessment/re-assessment proceedings of assessee-society u/s 147/143(3) for various assessment-years. During pendency of such assessment/re-assessment proceedings, a reference was forwarded by Range Head/AO vide letters dated 06.02.2024/ 2nd 02.02.2024 under proviso to section 143(3) to the Ld.

PCIT(Central) informing that the assessee-society is involved in financial irregularities and has violated terms and conditions required to be fulfilled by a trust/society and therefore its registration u/s 12AA(1)(b)(i)/re-approval u/s 12A(1)(ac)(i) is liable to be cancelled.

Acting upon such reference, the Ld. PCIT(Central) issued Show-Cause

Notice dated 31.03.2024 [“SCN”] to assessee mentioning therein the violations committed by assessee and also calling the assessee to explain as to why its registration u/s 12AA(1)(b)(i)/re-approval u/s 12A(1)(ac)(i) may not be cancelled. The SCN so issued is fully scanned

Page 3 of 71 and re-produced by Ld. PCIT(Central) in impugned order in Para 2/

Pages 3 to 43. In response to SCN, the assessee filed replies from time to time raising several objections, contentions and claims. But the Ld.

PCIT(Central) was not convinced with assessee’s submissions who ultimately, vide impugned order dated 30.09.2024 u/s 12AB(4), cancelled assessee’s registration u/s 12AA(1)(b)(i)/re-approval u/s 12A(1)(ac)(i).

(iii) Aggrieved by impugned order, the assessee has come in present appeal before us.

4. The ground raised by assessee are as under:

2. RELIANCE ON EX PARTE INTERNAL COMMUNICATION DT. 19.01.2024 ISSUED BY CBDT TO ASSUME JURISDICTION IS ILLEGAL AND PERVERSE :--

2.1 That the reliance placed by the Ld. Pr. CIT, Central, Bhopal on CBDT communication dated 19.01.2024 to justify the 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 Page 4 of 71 Section 119 or Section 120 of the Act. The registration can be withdrawn/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 take cognizance that the order issued u/s 127 of the Act dated 07/06/2022 by the CIT(E) does not transfer CIT(E) original jurisdiction related to 12AA/10(23C) to PCIT(C), that the order clearly says transfer of jurisdiction from DCIT(E) to DCIT Central for Coordinated investigation, assessment of the case and for all the other purpose, thus placing reliance on such order and thereon exercising such powers by Ld. Pr. CIT (C) for cancellation of registration granted u/s 12A/12AB of the Act is not in terms of the statutory provision, is bad in law, without jurisdiction and therefore, liable to be quashed.

4. WRONG REFERENCE BY LD. DCIT(C), BHOPAL TO PR. CIT(C) UNDER 2ND PROVISO TO SECTION 143(3) OF THE ACT

4.1 That the Ld. AO i.e. DCIT(C) has made wrong reference to Ld. Pr. CIT, Central, Bhopal as the reference under 2nd Proviso to section 143(3) of the Act could only be made to competent authority thus any proceedings on the basis of defective reference is without jurisdiction. Thus, the very invocation of Section 12AB(4) of the Act is also unlawful, perverse and deserve to dropped.

4.2 The Ld. Pr. CIT, Central, Bhopal has erred in acting on a reference made under the second proviso to the provisions of section 143(2) of the act ignoring the fact that, the proviso invoked was introduced by Finance Act, 2022 w.e.f. 01.04.2022 and therefore was not applicable to assessment years before A.Y 2022-23.

5. NO SPECIFIED VIOLATION AS DEFINED IN SEC 12AB(4) WHICH IS SINE QUA NON FOR WITHDRAWAL OF REGISTRATION

5.1 The Ld. Pr. CIT, Central, Bhopal erred in passing an order u/s. 12AB(4)(i) of the act, for the A.Y. 2021-22 and for earlier years i.e. A.Y 2017- 18, 2018-19, 2019-20, 2020-21 & 2021-22 cancelling the registration granted u/s. 12AA / u/s. 12AB of the act, ignoring the position of law that, the provisions of section 12AB(4)(ii) of the act was introduced by Finance Act, 2022 w.e.f. 01.04.2022 and therefore not applicable for the. AY.2021-22 and for earlier years.

5.2 The Ld. Pr. CIT, Central, Bhopal ought to have appreciated that the provisions of section 12AB[4] of the Act does not empower him to either examine "specified violations" for the assessment years covered by registration granted u/s. 12AA of the Act or cancel such registration granted u/s. 12A of the Act for such assessment years and that the power to examine and cancel registration u/s. 12AB[4] was limited to registration granted u/s. 12AB[1]of the Act and therefore, the impugned order passed cancelling registration u/s. 12A of the Act for the assessment year 2021-22 or for earlier years and as a further consequence thereof, cancelling the registration granted u/s 12AB(4) of the Act for the subsequent 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) and 13(1) and that it cannot be ground for cancellation of registration is against specific provisions of sec 12AB defining 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) cannot be said to be case of application for objects of the trust.

5.4 The Ld. Pr. CIT, Central, Bhopal erred in ignoring the fact that, there has been no case that the activity of the trust/institution were not genuine and also it was not proved that, the activity was not being carried on in accordance with objects of the trust or institution and therefore the circumstances contemplated U/s.12AB(4) of the act were not satisfied, eventually there was no case of cancellation of registration.

5.5 That the Ld. Pr. CIT, Central, Bhopal Registration u/s 12AA can only be cancelled when the Pr. CIT is of the opinion 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. However, no such finding is recorded by the Pr. CIT qua the objectives or the activities.

5.6 That the Ld. Pr. CIT, Central, Bhopal while withdrawing the registration has erred in failing to appreciate that since inception appellant is carrying on the activity of providing education which is a charitable activity as per the provisions of section 2(15) of the Act, and there is no change in the aforesaid activity and hence withdrawal of registration u/s. 12AB(4) of the Act on the ground that the activities of the trust are not in accordance with the objects of the trust without pointing any such "specified violations" are wholly erroneous and unsustainable in law.

6. Without prejudice to the above, the impugned order passed withdrawing the registration of the appellant u/s 12AB[1] of the Act obtained by the appellant from the AY 2022-23 to the AY 2026-27 is also bad in law in as much as there are no specified violations that are noticed or found by the Page 6 of 71

learned PCIT for the aforesaid assessment years 2022-23 to 2026-27 under the facts and in the circumstances of the appellant's case. 7. RETROSPECTIVE WITHDRAWAL OF REGISTRATION W.E.F AY 2006-07 IS IN VIOLATION OF PROVISIONS OF THE ACT AND SETTLED LEGAL POSITION

7.1 The Ld. Pr. CIT, Central, Bhopal erred in ignoring the position of law laid down by various Tribunal, holding that, the provisions of section 12AB(4)(ii) of the act introduced from A.Y.2022-23 onwards cannot be invoked retrospectively and hence cannot be applied for the earlier years.

8. WITHOUT PREJUDICE, EVEN ON MERITS THE ALLEGATION LEVELED AGAINST THE APPELLANT FOR WITHDRAWAL OF REGISTRATION GRANTED UNDER SECTION 12AA & 12A(1) IS IN ABSENCE OF EXACT EVIDENCE AND FRAMED ONLY ON THE BASIS OF CONJECTURES AND SURMISES AND PRESUMPTIONS.

8.1 That the Ld. PCIT, Central while adjudicating the impugned SCN has not considered the detailed reply submitted by the Appellant on 23/09/2024 through which the Appellant has refuted all the allegation leveled against the Appellant and even otherwise the allegations mentioned in SCN and in the impugned order are not relevant for withdrawal of registration granted under section 12AA & 12A(1) of the Act.

8.2 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 11 & 12 of the Act which would always be a subject matter of assessment and not a ground for withdrawal 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 7) (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. 8)

Page 7 of 71 Issue No. (i) – Validity of impugned order (Ground No. 4.2, 5 to 7):

6. This is the first issue raised by assessee. Ld. AR for assessee explained the grievance of assessee in simpler and precise terms. He submitted that the impugned order is not valid for the reason that the Ld. PCIT(Central) is wrong in retrospectively invoking the provision of section 12AB(4)(b)(ii) for violations (even if there be) committed before 01.04.2022.

7. At first, we refer the Para 1 of SCN issued by Ld. PCIT(Central) appearing at Page 3 of impugned order, reading as under:

“In this case, a reference has been received from the Range Head vide letter dated 06.02.2024 and AO dated 02.02.2024 made under the second proviso to sub-section (3) of section 143 of the I.T. Act for cancellation of registration granted u/s 12AA(1)(b)(i) of the I.T. Act to the above society.” Further, we re-produce the “CONCLUSION” para noted by Ld. PCIT(Central) at Pages 69-71 of impugned order, reading as under:

“CONCLUSION: 30. In view of above discussion (including as mentioned above including and especially at para 20 to 27 above), it is clear that the activities of the assessee society is not genuine and are not being carried out in accordance with its objects to which it was registered. The assessee society has utilized its fund other than charitable purposes and applied its income for other than its objects in violation of section 12AB(4) of the Act and therefore the registration of the trust granted u/s 12AA(1)(b)(i) and its re-approval of the I.T. Act deserves to be cancelled as per provisions of section 12AB(4)(b)(ii) of the I.T. Act 1961, among other aspects, being the “specified violations” committed by the assessee within meaning of clause (a) and (e) of Explanation of this sub-section.

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;

(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;

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 registration 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 original registration/re-approval as per provision of section 12AB(4)(b)(ii), by alleging violations contemplated in Explanation (a) & (e) in the list of “specified violations” prescribed in Explanation to section 12AB.

9. Ld. AR for assessee submitted that there have been several amendments to the provisions dealing with cancellation of registration Page 9 of 71 granted u/s 12AA(1)(b)(i) and one has to read the provisions of the Act carefully. He submitted that initially the relevant provision for cancellation of registration granted u/s 12AA(1)(b)(i) was prescribed in section 12AA(3)/(4). Thereafter, section 12AA was closed through a sunset clause u/s 12AA(5) w.e.f. 01.04.2021 and a new section 12AB was introduced through Finance Act, 2020 read with Taxation and Other Law (Relaxation and Amendment of Certain Provisions) Act, 2020 w.e.f. 01.04.2021 wherein section 12AB(4) was prescribed for cancellation of registration. Thereafter, once again, the section 12AB(4) was substituted through Finance Act, 2022 w.e.f. 01.04.2022 by a newer version. He submitted that neither section 12AA(3)/(4) existing upto 31.03.2021 nor pre-amended section 12AB(4) existing upto 31.03.2022 contained the concept of “specified violations” and it is only by virtue of substituted section 12AB(4) effective from 01.04.2022 that the concept of “specified violations” came into the statute. For the sake of immediate reference, we re-produce below the comparative text of these provisions:

Section 12AA(3)/(4) Section 12AB(4) from Substituted section 12AB(4) upto 31.03.2021 01.04.2021 upto 31.03.2022 from 01.04.2022

“(3) Where a trust or “(4) Where registration of a “(4) Where registration or institution has been trust or institution has been provisional registration of a granted registration granted under clause (a) or trust or an institution has been under clause (b) of sub- clause (b) sub-section (1) and granted under clause (a) or section (1) or has subsequently, the Principal clause (b) or clause (c) of sub- obtained registration at Commissioner or section (1) or clause (b) of sub- Page 10 of 71 any time under section Commissioner is satisfied that section (1) of section 12AA, as 12A [as it stood before the activities of such trust or the case may be, and its amendment by the institution are not genuine or subsequently,— Finance (No. 2) Act, are not being carried out in (a) the Principal 1996 (33 of 1996)] and accordance with the objects of Commissioner or subsequently, the the trust or institution, as the Commissioner has noticed Principal Commissioner case may be, he shall pass an occurrence of one or more or Commissioner is order in writing cancelling the specified violations during satisfied that the registration of such trust or any previous year; or activities of such trust or institution after affording a (b) the Principal institution are not reasonable opportunity of Commissioner or genuine or are not being being heard. Commissioner has carried out in received a reference accordance with the (5) Without prejudice to the from the Assessing objects of the trust or provisions of sub-section (4), Officer under the institution, as the case second proviso to sub- where registration of a trust or may be, he shall pass an institution has been section (3) of section an order in writing granted under clause (a) or 143 for any previous cancelling the clause (b) of sub-section (1) year; or registration of such trust and subsequently, it is noticed or institution. (c) such case has been that – selected in accordance (a) the activities of such trust with the risk Provided that no order or institution are being carried management strategy, under this sub-section out in a manner that the formulated by the Board shall be passed unless provisions of section 11 and from time to time, for any such trust or institution 12 do not apply to exclude previous year, has been given a either whole or any part of the the Principal Commissioner or reasonable opportunity income of such trust or Commissioner shall,— of being heard. institution due to operation of (i) call for such documents sub-section (1) of section 13; or or information from the (4) Without prejudice to (b) the trust or institution has trust or institution, or the provisions of sub- not complied with the make such inquiry as he section (3), where a requirement of any other law, thinks necessary in trust or an institution as referred to in item (B) of order to satisfy himself has been granted sub-clause (i) of clause (b) of about the occurrence or registration under sub-section (1), and the order, otherwise of any clause (b) of sub-section direction or decree, by specified violation; (1) or has obtained whatever name called, holding (ii) pass an order in writing, registration at any time that such non-compliance has cancelling the under section 12A [as occurred, has either not been registration of such trust it stood before its disputed or has attained or institution, after amendment by the finality, affording a reasonable Finance (No. 2) Act, then, the Principal opportunity of being 1996 (33 of 1996)] and Commissioner or the heard, for such previous subsequently it is Commissioner may, by an year and all subsequent noticed that— order in writing, after affording previous years, if he is (a) the activities of the a reasonable opportunity of satisfied that one or trust or the institution being heard, cancel the more specified violations are being carried out registration of such trust or have taken place; in a manner that the institution.” (iii) pass an order in provisions of sections Page 11 of 71

11 and 12 do not writing, refusing to apply to exclude either cancel the registration of whole or any part of such trust or institution, the income of such if he is not satisfied trust or institution due about the occurrence of to operation of sub- one or more specified section (1) of section violations; 13; or (iv) forward a copy of the (b) the trust or order under clause (ii) or institution has not clause (iii), as the case complied with the may be, to the Assessing requirement of any Officer and such trust or other law, as referred institution. to in sub-clause (ii) of Explanation.—For the clause (a) of sub- purposes of this sub-section, section (1), and the the following shall mean order, direction or "specified violation",— decree, by whatever (a) where any income name called, holding derived from property that such non- held under trust, compliance has wholly or in part for occurred, has either charitable or religious not been disputed or purposes, has been has attained finality, applied, other than then, the Principal for the objects of the Commissioner or the trust or institution; or Commissioner may, by (b) the trust or institution an order in writing, has income from profits cancel the registration of and gains of business such trust or institution: which is not incidental to the attainment of its Provided that the objectives or separate registration shall not be books of account are not cancelled under this maintained by such sub-section, if the trust trust or institution in or institution proves that respect of the business there was a reasonable which is incidental to the cause for the activities attainment of its to be carried out in the objectives; or said manner.” (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 Page 12 of 71 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.

Note: The Ld. PCIT (Central) has cancelled assessee’s registration on the basis of reference received from AO under 2nd provisi to section 143(3), by alleging specified violations contemplated in Explanation (a) & (e) as highlighted in bold terms]

Ld. AR also carried us to the 2nd proviso to section 143(3) introduced 10. through Finance Act, 2022 w.e.f. 01.04.2022 which empowers the AO to Page 13 of 71 make a reference to PCIT/CIT for cancellation of registration in the situation of “specified violation”, reading 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:” [Emphasis supplied]

11. Thus, referring to above amendments/developments in the Act, Ld. AR made a straightforward submission that the concept of “specified violations” in section 12AB(4); the 2nd proviso to section 143(3) empowering the AO to make a reference to PCIT(Central) in the case of “specified violations”; Section 12AB(4)(b) empowering the PCIT(Central) to take cognizance of reference made by AO; and Section 12AB(4)(b)(ii) empowering the PCIT(Central) to pass order cancelling the registration of a trust/society; all these provisions have come into statute from 01.04.2022 through Finance Act, 2022. He submitted that the Ld. PCIT(Central) has applied these newer provisions retrospectively for the alleged violations committed before Page 14 of 71 01.04.2022. Ld. AR submitted that this approach of authorities is clearly wrong and illegal and therefore the impugned order passed by Ld. PCIT(Central) is invalid, liable to be quashed.

12. In support of this claim of assessee, Ld. AR relied upon following decisions wherein the cancellation order passed by PCIT(Central) has been quashed categorically holding that the 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 – 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.

Page 13, 14 of impugned order:

Para 5.1(viii) of SCN – During survey operations, a hard disk was impounded. On analysis of impounded data, it is found that the fee received during the financial year 2018-19, 2019-20 and 2020-21 was accounted for in the books of accounts but the outstanding mentioned in “Excel 03.09.2020” is not accounted for in the books of accounts.

The total unaccounted fees is Rs. 27,88,000/- in the FY 2020-21. [Ultimately, Ld. PCIT(Central) has adopted this violation in Para 20-21 / Pages 62-64 of impugned order] Page 29, 30, 31 of impugned order: Page 16 of 71

Para 5.2(v), (vi) of SCN - On analysis of handwritten diary BI-1 impounded during survey, it is found that total unexplained amounts

(fee) collected from students during the FY 2021-22 is Rs.

4,71,53,156/-. This amount was utilised for making payments to various RAs (Remuneration Account Holders) – Rs. 4.16 crore;

Payment to Vice-Chancellor Dr. Ankur Kulkarni – Rs. 5,46,662/-;

Payment to labour – Rs. 28,26,506/-; Cash Payment of Rs.

50,00,000/-. Thus, the receipts and expenses are not correctly recorded in books of account.

Para 5.3 of SCN - The unaccounted fee collected from students is used to pay out of books salary to Vice-Chancellor and to business promoters.

[Ultimately, Ld. PCIT(Central) has adopted this violation in Para 22-23 / Pages 64-66 of impugned order] Page 39 of impugned order:

Para 5.4(iii) of SCN – The assessee has made unaccounted investment in building. The year-wise difference of investment declared by assessee and the value assessed by Departmental Valuation Officer (DVO) is mentioned by AO. [Ultimately, Ld. PCIT(Central) has adopted this violation in Para 24-25 / Pages 66-67 of impugned order] Page 17 of 71 Page 41, 42 of impugned order:

Para 5.5(ii) of SCN – During financial year 2018-19, 2019-20 and 2020-21, Shri Prabhat Kumar was working for other firms of SAGE Group engaged in construction sector but salary was paid by assessee (and other entities of SAGE Group). [Ultimately, Ld. PCIT(Central) has adopted this violation in Para 26-27 / Pages 67-68 of impugned order] Page 41-42 of impugned order:

Para 6 of SCN – Ld. PCIT(Central) has summarised the above violations in Point No. (a) to (e).

Further, in Point No. (f), it is also stated “Thus, the applicability of section 13 of the Income-tax Act, 1961 holds goods in present case.”

[Ultimately, Ld. PCIT(Central) has adopted this violation in Para

28 / Page 69 of impugned order]

14. Then, Ld. AR submitted that since inception the assessee has been carrying the activities of providing education genuinely and according to the objects of trust and the above violations committed prior to 01.04.2022 (even if there be) would be considered for assessment purpose only and cannot attract cancellation of registration. He submitted that there are numerous Page 18 of 71 legal precedents available to hold this proposition. He quoted following para of one such decision Lilavati Kirtilal Mehta Medical Trust Vs. Commissioner of Income-tax (Central)-I, Mum (2019) 108 taxmann.com 272 (Mumbai – Trib) order dated 12.06.2019 which holds the very same proposition:

“11. In the present case, the case sought to be made out by the Commissioner is that the violation carried out by the assessee would lead to denial of exemption u/s. 11 & 13 of the Act and, therefore, the pre-requisite of section 12AA(3) of the Act is satisfied. In para 9 of the impugned order, the Commissioner records that the violation of section 11 & 13 of the Act would result in forfeiture of exemption not only for the year in which such transactions occur but also for the years when such arrangement continues to be in force. In our considered opinion, such an approach of the Commissioner is quiet misdirected and is inconsistent with the legal position on the subject contemplated u/s. 12AA(3) of the Act so as to cancel registration already granted. We may add here 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 Appeal No. 505 of 2015 • Prabodhan Shikshan Prasarak Sanstha vs. Dy. CIT (2014) 44 taxmann.com 33 / (2015) 152 ITD 473 (Pune – Trib)

• Tamil Nadu Cricket Association vs. DIT (Exemption) (2014) 360 ITR 633 / 221 Taxman 275 / (2013) 40 taxmann.com 250 (Mad).”

15. Ld. AR next submitted that he would also like to address one more point adopted by Ld. PCIT(Central) for cancellation of registration. He submitted that the Ld. PCIT(Central) has alleged violation of section 13(3) by assessee [on account of payments made to or for the benefit of interested persons] and noted that the violation of section 13 also attracts cancellation of registration. But this understanding of Ld. PCIT(Central) is quite wrong.

Ld. AR pointed out that as per decided case-laws, the violation of section 13(3) prior to 01.04.2022 could be considered only for the purpose of assessment/computation of total income of trust/society but not for cancellation of registration. In support, he relied upon following decisions:

(i) ITAT, Ahemdabad in Jito Bhavnagar Chapter Foundation Vs. CIT (Exemption) (2024) 167 taxmann.com 646 (Ahmedabad Trib.) (ii) ITAT, 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 registrations 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

Page 20 of 71 order after taking into account various violations made by assessee. He submitted that the Ld. PCIT(Central) cancelled assessee’s registration vide order dated 30.09.2024 by applying the provisions of section 12AB(4) existing as on that date and there is no error in applying the provisions of section 12AB(4) as substituted by Finance Act, 2022. He supported the impugned order of Ld. PCIT(Central) and prayed to preserve the same.

19. We find that the assessee raised this very claim before Ld. PCIT(Central) also but the Ld. PCIT(Central) rejected assessee’s claim by passing following order in Paras 17-19 of impugned order:

“OBJECTION TO THE REFERENCE MADE BY THE ASSESSING OFFICER AND APPLICATION OF SECTION 12AB(4) BEING SUBSTITUTED w.e.f. 01.04.2022

17. The assessee in its reply dated 25.09.2024 at point 12 to 13 has objected to the reference made by the Assessing Officer under 2nd proviso to section 143(3) of the I.T. Act to the Principal Commissioner of Income Tax (Central), Bhopal for cancellation of registration invoking provisions of section 12AB(4) of the I.T. Act being introduced by Finance Act, 2022 w.e.f. 01.04.2022 mainly on the following grounds:

(a) The AO has made wrong reference to the Principal Commissioner of Income Tax (Central), Bhopal. The assessee has, inter alia, claimed that only CIT(Exemption), Bhopal holds the jurisdiction relating to cancellation of registration u/s 12AB(4) of the Income Tax Act, 1961 granted to the assessee. (This portion is not relevant to Ground No. 4.2, 5 & 7 – 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 section 12AB(4) amended 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 violation (if any not admitted) before 01/04/2022 and hence such violation cannot be taken into consideration and objected applicability of section 12AB(4) in the matter.

18. However, the assessee’s reply is not correct / tenable for the reasons as discussed below:

(i) Objection relating to jurisdiction of the Principal Commissioner of Income Tax (Central), Bhopal made by the assessee ignoring the fact that 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 matter has already discussed in detail at para no. 7 and 8 above, the same may be referred.

In view of detailed discussion in these paras, it is submitted that reference under 2nd proviso to section 143(3) of the I.T. Act to the Principal Commissioner of Income Tax (Central), Bhopal for cancellation of registration u/s 12AB(4) of the Income Tax Act, 1961 has been correctly made. (This portion is not relevant to Ground No. 4.2, 5 & 7 – It is relevant to Ground No. 1, 2, 3, 4.1 to be dealt in later part of this order. Hence striken through)

(ii) Claim of the assessee society at point (b) above is not acceptable in view of the provisions of section 12AB(4) of the Income Tax Act, 1961. For the sake of clarity and proper understanding of the facts relevant portion of the same is reproduced hereunder:-

As per section 12AB(4) of the Act; Page 23 of 71

(4) 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) 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 thinks necessary -----

(ii) pass an order in writing, cancelling the registration of such trust or institution

19. Here, it is important to mention that a search under section 132 of the Income Tax Act, 1961 was conducted in the case of the Society wherein occurrence of specific violations in various assessment years was noticed. Further, investigation were also carried out during the course of post search proceedings in the case of the Society which confirmed the findings of the search action. As the assessment proceedings were under progress, a reference under the second proviso to section 143(3) of the Income Tax Act, 1961 was made to the Pr. Commissioner of Income Tax (Central), Bhopal.

Here, it will be important to refer clause (a) and clause (b) of the section 12AB(4) which clearly states that for initiating a proceeding for cancellation of registration already granted to the assessee u/s 12AA(1)(b) of the Income Tax Act, 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 word any previous year has significant importance as use of these words differentiates the proceedings for cancelation of registration already granted u/s 12AA(1)(b) of the Income Tax Act, 1961 Page 24 of 71 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 in the show cause notice pasted in this order and also in different paras of this order. As, the pre-condition for initiation of proceedings for cancelation of registration already granted to the assessee u/s 12AA(1)(b) of the Income Tax Act, 1961 is occurrence of specific violations for any previous year, the claim of the assessee that section 12AB(4) inserted w.e.f. 01.04.2022 can be applied only with regard to the proceedings related to AY 2023-24 and onwards is not acceptable. Further, it is not the case that the section 12AB(4) have been brought in Law from 01.04.2022. Rather, the section 12AB(4) of the Income Tax Act, 1961 were in force prior to 01.04.2022 and only certain amendments were made to it w.e.f. 01.04.2022. Thus, the claim of the assessee Society that provisions of section 12AB(4) of the Income Tax Act, 1961 cannot be invoked during the course of pending assessment proceedings upto AY 2021-22 has no merit and deserves to be rejected.”

20. However, this very issue has already been decided in favour of assessee by various benches of ITAT in the decisions quoted by Ld. AR as narrated in earlier para. We re-produce the relevant portion of those decisions quoted by Ld. AR for an immediate reference:

(i) ITAT, Bangalore in Amala Jyothi Vidya Kendra Trust Vs. PCIT

(Central) (2024) 162 taxmann.com 41 (Bangalore – Trib), order dated 16.04.2024:

“4. Next grounds for our consideration in ground Nos.2, 3, 5 & 12 are with regard to cancelling registration granted u/s 12AA/12AB of the Act by invoking the provisions of section 12AB(4)(ii) of the Act with retrospective effect though this section was introduced by Finance Act, 2022 w.e.f. 1.4.2022.

4.1 The ld. A.R. submitted that there has been various amendments to the provisions dealing with cancellation of registration granted U/s.12AA of the Act. The Pr. Commissioner of Income Tax (Central) has cancelled registration U/s.12AA of the Act invoking the provisions of section 12AB(4)(ii) of the Act alleging violations contemplated in Explanation (a) & Explanation (e) below the provisions of section 12AB(4) of the act. This provision of the Act which is Page 25 of 71 extracted hereunder and invoked by the Pr. Commissioner of Income Tax (Central) for cancellation of registration granted U/s.12AA of the Act was introduced by Finance Act 2022 w.e.f 01.04.2022.

4.2 He submitted that prior to introduction of this provision, the following provision was in existence which was introduced by Finance Act 2021 w.e.f 01.04.2021.

"12AB(4) Where a 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."

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 the year of default. He submitted that the Pr. Commissioner of Income Tax (Central) should have acted as per the law prevailing for the A.Y.2018-19. The alleged infringement by the assessee occurred during the A.Y.2018-19 and therefore the penalization should also be with reference to the corresponding provisions as they existed for the A.Y.2018-19.

4.4 The ld. A.R. relied on the ratio laid down by the Hon'ble Supreme Court in the case of Commissioner of Income Tax V. Omkar Saran & Sons (1992) 62 Taxman 440. The Hon'ble Supreme Court has held that, the law applicable for penalizing should be the law for the year of committing the offence. This decision is in the context of penalty leviable under the provisions of section 271(1)(c) of the Act. However, the principle is applicable with reference to the other provisions also which are penal in nature. Cancellation of registration deprives the assessee of the various benefits which otherwise accrue and hence the provisions are to be considered as in the nature of punishment.

4.5 The ld. A.R. submitted that, the order passed by the Pr. Commissioner of Income Tax, invoking provisions of section M/s. Amala Jyothi Vidya Kendra

Trust, Bangalore M/s. Adarsh Vidya Kendra Trust, Bangalore 12AB(4)(ii) of the Act dated 29.12.2023 is bad in law and deserves to be annulled.

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 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. Page 27 of 71

6.1 The contention of the ld. A.R. is that, these provisions have been inserted by Finance Act, 2022 w.e.f. 1.4.2022 and if there is a violation in previous year 2017-18 relevant to assessment year 2018- 19, these provisions cannot be applied to the assessee’s case. For clarity, we will go through the relevant provisions applicable to previous year 2017-18 relevant to assessment year 2018-19 as follows:

“12AA(4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the finance (No.2) Act, 1996 (33 of 1996)] and subsequently it is noticed that, the activities of the trust or the institution are being carried out in a manner that the provisions of section 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, then the Pr. Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institutions.

Provided, that the registration shall not be cancelled under this subsection if the trust or institution proves that, there was reasonable cause for the activity to be carried out in the said manner."

6.2 This section has been amended by Finance Act, 2022 w.e.f. 1.4.2022 as follows:

12AB(4): 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) 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 M/s. Amala Jyothi Vidya Kendra Trust, Bangalore M/s. Adarsh Vidya Kendra 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;

Page 28 of 71 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 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 ensure for the benefit of the public; or d) The trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste; or e) Any activity being carried out by the trust or institution--

(i) is not genuine, or (ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered; or f) The trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub- section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality.

6.3 As per section 12AB(4) of the Act as applicable to assessment year 2017- 18, the ld. PCIT if he is satisfied that activities of the Trust or institution are not Page 29 of 71 genuine or 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 reasonable opportunity of being heard. As per section 12AB(5) of the Act, when trust or institution complied wholly or in part of the income of such trust or institution in violation of section 13(1) of the Act or if they complied with any other law, for the time being in force by the trust or institution as are material for the purpose of achieving its objectives as mentioned in section 12AB(1)(b)(ii)(B) of the Act. However, in the present 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 intendment or by necessary implication. As per section 4 of the Act of 1961, the charge of income-tax is with reference to any assessment year, at such rate or rates as provided in any central enactment for the purpose, in respect of the total income of the previous year of any person. The expression "previous year" is defined in section 3 of the Act to mean "the financial year immediately preceding the assessment year"; and the expression "assessment year" is defined in clause (9) of section 2 of the Act to mean "the period of twelve months commencing on the 1st day of April every year".

17.5 In the case of CIT v. Isthmian Steamship Lines (1951) 20 ITR 572 (SC), a 3-judge Bench of this court exposited on the fundamental principle that "in income-tax matters the law to be applied is the law in force in the assessment year unless otherwise stated or implied." This decision and various other decisions were considered by the Constitution Bench of this court in the case of Karimtharuvi Tea Estate Ltd. v. State of Kerala (1966) 60 ITR 262 (SC) and the principle were laid down in the following terms (at pages 264-266 of 60 ITR):

"Now, it is well-settled that the Income-tax, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force...... The High Court has, however, relied upon a decision of this court in CIT v. Isthmian Steamship Lines, where it was held as follows: 'It will be observed that we are here concerned with two datum lines: (1) the 1st of April, 1940, when the Act came into force, and (2) the 1st of April, 1939, which is the date mentioned in the amended proviso. The first question to be answered is whether these dates are to apply to the accounting year or the year of assessment. They must be held to apply to the assessment year, because in income-tax matters the law to be applied is the law in force in the assessment year unless otherwise stated or implied. The first datum line therefore, affected only the assessment year of 1940-41, because the amendment did not come into force till the 1st of April, 1940. That means that the old law applied to every assessment year 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, Bangalore M/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 express intendment nor any implication that it would apply only from the financial year 2005-06."

6.7 Being so, we find force in the argument of ld. A.R. that in income-tax matters, law to be applied is the law in force in the assessment year unless otherwise stated or implied. In the present case, ld. PCIT is cancelling the registration granted u/s 12AA/12AB of the Act w.e.f. previous year 2020-21 relevant to assessment year 2021-22. In our opinion, the law as stated in the assessment year 2021-22 is to be applied and not the law as stood in the assessment year 2022-23. Page 31 of 71

6.8 Thus, we are of the view that no retrospective cancellation could be made u/s 12AB(4)(ii) of the Act as it has been provided or is seen to have explicitly provided to have a retrospective character or intended. Therefore, without a specific mention of the amended provisions to operate retrospectively, no cancellation for the earlier years could be made. In this regard, it is appropriate to place reliance on the judgement of Hon'ble Madras High Court on the question as to whether the cancellation will operate from a retrospective date in the case of Auro Lab Ltd. Vs. ITO (2019)411 ITR 308 (Mad) wherein held as under:

"20. On the second question as to whether the cancellation will operate from a retrospective date, it was held that the amendment to section 12AA(3) is prospective and not retrospective in character. The courts reasoned that even when 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 cannot 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 December 30, 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."

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 Page 32 of 71 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 vide order dated M/s. Amala Jyothi Vidya Kendra Trust, Bangalore M/s. Adarsh Vidya Kendra Trust, Bangalore 27.7.2023, wherein held that registration granted u/s 12A of the Act dated 21.7.1989 cannot be cancelled by ld. PCIT (Central) vide order dated 6.3.2023 w.e.f. assessment year 2016-17, by invoking the provisions of section 12AB(4)(ii) of the Act. Accordingly, we allow the primary ground nos.2, 3, 5 & 12 and order of ld. PCIT passed u/s 12AB(4)(ii) of the Act is quashed.

[emphasis supplied] (ii) ITAT, Jaipur in Centre for Development Communication Trust Vs.

CIT, Exemption (2024) 168 taxmann.com 90 (Jaipur – Trib.), order dated 03.06.2024:

“12.3 Thus, on the second question as to whether the cancellation will operate from a retrospective date or prospective date. This issue is decided in the case of Auro Lab. (supra) holding that in the absence of specific mention of the amended provisions to operate retrospectively, the cancellation cannot operate from a past date and in this case from A. Y. 2017-18. Now the only limited question remained to be decided as to whether the payment made to specified persons warrants the cancellation of registration of the assessee trust or not. The Finance Act, 2021 and Taxation and Other Law (Relaxation and Amendment of Certain Provision) Act, 2020, one of key changes was that every trust or instigation registered under section 12AA of the Act required to re- register itself before the specified dates provided u/s 12A(1)(ac) of the Act and sunset clause has been inserted under section 12AA(5) w.e.f. 01.04.2021 and new section 12AB has been inserted. Thereafter vide Finance Act, 2022 new section for taxing the benefits provided to related persons treated as "specified income" and will be subjected to be taxed at the rate of 30% without any deduction under the newly inserted section 115BBI and will also be liable for penalty u/s. 271AAE.Further, the provision of making reference by Assessing Officer to the Principal Commissioner or Commissioner to withdraw the registration of trust or institution referred u/s 11 of the Act, if any specified violation has been done by these trusts or institutions, were inserted recently. The said power has 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 Page 33 of 71 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 trusts and institution referred under section 11 of the Act. Therefore, the reference itself is without the authority of any statutory provisions and there was no fresh reference by the Id. AO. Further the bench noted that the impugned reference upon which the addition was made and that order is pending for adjudication before ld. CIT(A) and there is no final finding on that aspect of the matter. The bench further noted that there was no intimation to the assessee that the Id. CIT(E) intend to proceeded with retrospective effect. Even nowhere in any of the communication to the assessee was allowed to defend their case and the importance of show cause notice has been emphasized by the Apex Court in case of Uma Nath Pandey v. State of UP [2009] 12 SCC 40 that "Notice is the first limb of this principle. It must be precise and unambiguous. It should appraise the party determinatively the case he has to meet. Time given the purpose should be adequate so as to enable him to make his representation. In the absence of a noti50 the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential a party should be put on notice of the case before any adverse order is passed against him. "As we note at the Id. CIT(E), Jaipur has issued first show cause notice in which it has been show cause registration u's 12AA/12AB should be withdrawn due to violation of section 2(15) of the Act (para 5 on page no. 94 of PB) and due to trust money being allegedly mis utilized by specified person as mentioned u/s 13(3) of the Act (Para 6 on page no. 96 of PB). However, in the impugned order, Ld. CIT(E), Jaipur has invoked clauses (0). (b) and (e) of specified violation as defined under explanation to section 12AB(4) of the Act (which applies prospectively). Therefore, we note that the action of the Id. CIT(E) cancelling the registration of the trust we.f. A. Y. 2017-18 is beyond the scope of the show cause notice as the conditions for cancellation of registration on account of specified violation, which were not specified earlier in the law, have been inserted under section 12AB(4) of the Act w.e.f. 01.04.2022 and would accordingly apply prospectively being penal provision and having very harsh consequences. Thus, the action of the id. CIT(E) in the Impugned Order cancelling the registration of the Assessee retrospectively w.e.f. AY 2017-18 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 Page 34 of 71 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 legislation had no intention of giving the said provision, a retrospective effect. For in such a situation, the same would have been clearly specified in the said provision. Interpretation of the said provision has to be harmonious rather than being prejudicial to the institutions as it would instigate and create a fear of the Income Tax Department. I find support in my opinion from the following cases with reference to the issue of cancellation or withdrawal of registration with retrospective effect: The fact that the law of Section 12AB(4) is prospective in nature is evident from CBDT circular no. 11/2022 dated 03rd June 2022. The said circular while explaining the amendments, clarifies that; 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 (23C) of section 10 of the Act 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 subrule (5) of rule 17A and sub-rule (5) of rule 2C of the Income-tax Rules, 1962 (the Rules) to the Principal Commissioner or Commissioner authorised by the Board. This Circular only relates to cancellation of registration/approval or provisional registration/approval in the case of "specified violation". Page 35 of 71

The relevant extracts of memorandum explaining the budget proposal are reproduced hereinunder: (1) Sub-section (4) of section 12AB of the Act is proposed to be substituted with a new 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 restore the registration already granted to the assessee. Accordingly, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed.” [emphasis supplied] (iii) ITA Delhi in – 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: Page 36 of 71

“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 Banglore Bench in the case of Islamic Academy of Education v. Pr. CIT (Central) in [2024] 160 taxmann.com 217 (Bangalore - Trib.) 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(1)(c) and Section 13(1)(d) as specified violations. Consequently, the registration cannot be cancelled on the ground that the assessee has violated Section 13(1)(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(7)(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/CII 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)(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 Page 37 of 71 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 judgment and observe 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 dated 05.07.2023 and 16.08.2023 are, thus, found to be erroneous and therefore liable to be quashed. 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. 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 in hand.

22. Thus, having regard to these particular facts and circumstances of the case the issuance of show cause notices proposing cancellation of registration alleging specified violation occurred prior to 01.04.2022 Le. for Assessment Year 2015-16 to 2021-22 and the final order passed by the Ld. PCIT cancelling registration of the appellant society for Assessment Year 2015-16 to 2021-22 by wrongly invoking the provision of Section 12A r.w.s. 12AA and 12AB(4) of the Act is found to be erroneous, bad in law, whimsical, in non-application of mind and thus, unsustainable.

23. Before parting we would like to note that the further direction given by the Ld. PCIT to this effect that even if the appellant society is found that specified violation is not in existence then also the consequential cancellation order would continue to operate independently by and under the impugned order dated 31.03.2024 is nothing but colourable exercise of power, not only arbitrary or erroneous but establishes the biasness on the part of the authorities below; by hook or crook the authority was bent upon to cancel the registration of the appellant trust which is evident from such observation and/or decision made by the Ld. PCIT. In fact, on that score alone the order passed by the Ld. PCIT is also found to be bad in law and liable to be quashed. With the aforesaid observations we thus, quash the impugned order passed by the Ld. PCIT.

24. The assessee's appeal is, therefore, allowed.”

21. Thus, the Bangalore, Jaipur and Delhi Bench of ITAT have clearly held that the impugned amendments in section 12AB(4) through Finance Act,

Page 38 of 71 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. In present case, the search u/s 132 and survey u/s 133A were conducted upon assessee on 08.12.2021 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. 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. PCIT(Central) in Paras 17-19 of impugned order (re-produced above) against assessee. In final conclusion, we respectfully carry the view taken by ITAT, Benches and accordingly quash the impugned order passed by Ld. PCIT and restore the registration held by assessee.

Issue No. (ii) – PCIT(Central) is not competent to pass impugned order (Ground No. 1 to 3, 4.1):

Page 40 of 71 – Devi Shakuntala Thkaral

Charitable Foundation, Bhopal Vs. Pr. CIT(Central), Bhopal, order dated 29.07.2022 & 116/Ind/2020 – Oriental University,

Indore Vs. Pr. CIT(Central), Bhopal, order dated 29.07.2022 (iii) ITAT, Jaipur in - M/s Wholesale Cloth Merchant

Association, New Cloth Market, Kota Vs. PCIT(Central), Jaipur, order dated 06.01.2021 (iv) ITAT, Jodhpur in – Pacific Academy of Higher Education and Research Society, Udaipur Vs. The Principal Commissioner of Income-tax, order dated 25.01.2023 – Aggarwal Vidya Pracharni Sabha Vs. Principal Commissioner of Income-tax, order dated 08.01.2024 – 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.

– Devi Shakuntala Page 41 of 71 Thkaral Charitable Foundation, Bhopal Vs. Pr. CIT(Central), Bhopal & 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 favour of assessee. 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, invalid and without jurisdiction.

NOTIFICATION

S.O. 2754 (E) [NO. 52/2014/F.NO. 187/38/2014 (ITA.I)] DATED 22-10- 2014 AS AMENDED BY NOTIFICATION NO. 89/2019 [S.O. 3999(E) (F.NO. 187/9/2019-ITA-I] DATED 5-11-2019:

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.O. 880(E), dated the 14th September,2001, published in the Gazette of India, Extraordinary, Part II, Section 3, 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 –

(a) directs that the Commissioners of Income-tax specified in column (2) of the Schedule annexed hereto having their headquarters at the places specified in the corresponding entries in column (3) of the said Schedule shall exercise the powers and perform all the functions in respect of such cases or classes of cases as specified in column (5), in such territorial areas specified in the corresponding entries in column (4) of the said Schedule;

(b) authorises the Commissioners of Income-tax referred to in this notification to issue orders in writing for the exercise of the powers and performance of the functions by the Additional Commissioners of Income-tax or Joint Commissioners of Income-tax and Tax Recovery Officers, who are subordinate to them, in respect of cases or classes of cases specified in column (5) in such territorial areas specified in the corresponding entries in column (4) of the said Schedule in accordance with the orders issued by the respective Commissioners of Income-tax;

(c) authorises the Additional Commissioners of Income-tax or Joint Commissioners of Income-tax referred 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 Bhopal States of All cases of of Income-tax Madhya persons in the (Exemption), Pradesh and territorial area Bhopal Chhattisgarh 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 Page 43 of 71

India bearing number S.O. 2752 dated the 22nd October, 2014.

10. Analyzing the impact of Para No. (a) and the Schedule of this Notification, Ld. AR submitted that the CBDT has notified that the Commissioner of Income-tax (Exemption), Bhopal shall exercise the powers and perform all the functions in the cases of persons located in the State of Madhya Pradesh & Chhattisgarh and claiming exemption u/s 11 or 12 of the act. Ld. AR submitted that the present assessee is located at Indore which falls within the State of Madhya Pradesh and the assessee is also claiming exemption u/s 11 or 12 on the basis of approval / registration granted to it u/s 12AA and, therefore, the jurisdiction to exercise powers and perform all functions in the case of assessee vested only and only in the Commissioner of Income-tax (Exemption), Bhopal. Ld. AR submitted that the Ld. PCIT(Central) did not have any authority to perform powers and functions in the case of assessee.

12. Ld. AR heavily relied upon the decision of Hon’ble ITAT, Jaipur Bench, in the case of M/s Wholesale Cloth Merchant Association, New Cloth Market, Kota Vs. PCIT(Central), Jaipur, dated 06.01.2021, the relevant paras are reproduced below: “11. First of all, we would like to deal with legal objection raised by the assessee with regard to the jurisdiction of Pr. CIT (Central) in issuance of show cause notice and in passing of consequent order. In this respect, 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 Page 44 of 71 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 13B of the Act and assessed or assessable by an Income-tax authority at serial numbers 131 to 140 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014. Thus, in this way from Oct. 2014 ld. CIT(Exemption) has been constituted separately for these class or type of cases. Hence, the case of the assessee admittedly falls in the jurisdiction with the ld. CIT (Exemption).

13. We also observe that, thereafter the ld. DCIT(CC) Kota, has sent a proposal to the Pr. CIT(C), Jaipur to cancel the 12A registration of the assessee vide letter dated 31.12.2018. On the basis of proposal from DCIT(CC) Kota, the ld. Pr. CIT has issued the show cause notice to the assessee u/s 12AA(3)/(4) dated 22.02.2019. In response, the assessee appeared and filed details and submissions before the Pr. CIT(Jaipur) on 18.03.2019 and the ld. Pr. CIT(C) has passed the impugned order on 22.03.2019 u/s 12AA(3) and 12AA(4) of the Act.

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 are the subordinate to them. In section 124 of the Act, the jurisdiction of Assessing Officer has been given and not 'Jurisdiction of Commissioner'. 16. Further in Sec. 127 of the Act, the power of transfer of cases is given from one Assessing Officer to another Assessing officer not from CIT to CIT. For ready reference, we reproduce Sec. 127 of the Act, which provides as under: “127. (1) The Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. Page 46 of 71

(2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,-- (a) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order; (b) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as the Board may, by notification 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 direction in respect of any year.” Page 47 of 71

17. Sec. 120(4) to 120(6) also provide the work assigned to the subordinate officers which is reproduced below: “(4) Without prejudice to the provisions of sub-sections (1) and (2), the Board may, by general or special order, and subject to such conditions, restrictions or limitations as may be specified therein,-- (a) authorise any Principal Director General or Director General or Principal Director or Director to perform such functions of any other income-tax authority as may be assigned to him by the Board; (b) empower the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed by an Additional 33 ITA 688/JP/2019_ M/s Wholesale Cloth Merchant Association Vs Pr.CIT Commissioner or an Additional Director or a Joint Commissioner or a Joint Director, and, where any order is made under this clause, references in any other provision of this Act, or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such Additional Commissioner or Additional Director or Joint Commissioner or Joint Director by whom the powers and functions are to be exercised or performed under such order, and any provision of this Act requiring approval or sanction of the Joint Commissioner shall not apply. (5) The directions and orders referred to in sub-sections (1) and (2) may, wherever considered necessary or appropriate for the proper management of the work, require two or more Assessing Officers (whether or not of the same class) to exercise and perform, concurrently, the powers and functions in respect of any area or persons or classes of persons or incomes or classes of income or cases or classes of cases; and, where such powers and functions are exercised and performed concurrently by the Assessing Officers of different classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this 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 Page 48 of 71 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, section 13A and section 13B of the Act and assessed or assessable by an Income-tax authority at serial numbers 131 to 140 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014. Thus, firstly as per above notification and provisions of Sec. 120 and 127 the ld. CIT (Exmp.) cannot transfer or hand over or given his work or power or duties to the other same rank of CIT at all to cancel the Registration u/s 12AA. However, in case, if it is necessary to do so then there has to be proper proceedings in writing. As there has to be some order in writing from higher authorities i.e. from Chief Commissioner of Income Tax (Exmp.) Delhi or CBDT in writing and an opportunity of being heard is to be given to the assessee before transferring the case whereas all these are absent in the present case and nothing has been demonstrated by the department.

Page 49 of 71 Transfer of jurisdiction--Power of competent officers--Centralization of case--Dissenting note--Assessee was issued notice enshrining 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.

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 such agreement. Clause (b) of sub-section (2) of section 127 provides for consequences when there is no such agreement. When the jurisdiction to pass an order of transfer under clause (a) of sub- section (2) of Section 127 can be exercised only when there is such an agreement, the fact that such an agreement exists ought to have been stated in the show cause notice as the same is a jurisdictional fact. Apart from the failure to mention the same in the show cause notice, the only stand of the revenue is that there is an agreement by implication. This stand is completely contrary to paragraph 5 of the decision of the Apex Court in the case of Noorul Islam Educational Trust (supra). The decision in the case of Ramswaroop (supra) will also bind this Court for the reasons stated above.

11. As the impugned order cannot be sustained on above ground, it is not necessary to into other challenges.

12. Accordingly, for the reasons quoted above, we pass following order: Impugned order dated 25th May 2017 (Exhibit-H to the petition) is hereby quashed and set aside. Rule is made absolute on above terms with no order as to costs. The Hon'ble Supreme Court in the case of Ajantha Industries & Ors. vs. Central Board of Direct Taxes & Ors. (1976) 102 ITR 0281 has been held that: "The CBDT sent a notice to the appellants under s. 127 proposing to transfer their case files "for facility of investigation" from the respective at Nellore to the ITO, B Ward, Special Circle II, Hyderabad. By this notice they were also asked to submit in writing if they had any objection to the proposed transfer within 15 days of receipt of the notice. The appellants made their representation objecting to the transfer and on 26th July, 1973, the Central Board passed the impugned order transferring the cases from Nellore to Hyderabad. The short 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 Page 52 of 71 overruled; Judgment and order dt. 12th Sept., 1974, of the Andhra Pradesh High Court in Writ Appeal No. 626 of 1974 set aside. The Hon'ble Supreme Court in the case of Noorul Islam Educational Trust vs. CIT AND Ors (2016) 388 ITR 0489 (SC) held that Special Leave Petition--Transfer of case--Validity--High Court of Madras, Madurai Bench, upheld order of C.I.T.1, Madurai, Tamil Nadu, transferring file of assessee from Tamil Nadu to Kerala--Held, as Income-tax/assessment file of assessee has been transferred from one Assessing Officer in Tamil Nadu to another Assessing Officer in Kerala and two Assessing Officers are not subordinate to same Director General or Chief Commissioner or Commissioner of Income Tax, u/s 127(2) (a) an agreement between Director General, Chief Commissioner or 40 ITA 688/JP/2019_ M/s Wholesale Cloth Merchant Association Vs Pr. CIT Commissioner, as the case may be, of two jurisdictions is necessary-- Absence of disagreement cannot tantamount to agreement as visualized under Section 127(2)(a) which contemplates a positive state of mind of two jurisdictional Commissioners of Income Tax which is conspicuously absent -- Transfer of Income-tax/assessment file of assessee from Assessing Officer, Tamil Nadu to Assessing Officer, Kerala is not justified -- High Court order set aside -- Special appeal allowed. Although, the ld DR has relied upon the decision of Hon'ble Rajasthan High Court in the case of Lalit Hans Vs PCIT DP Special Appeal (Writ) 249/2015 but the facts of the above case are entirely different. Hence, the said judgment is of no help to the Revenue on the facts of the present case. Thus, keeping in view our above discussions, we are of the view that the ld. PCIT had no jurisdiction to pass order U/s 12AA(3) & 12AA(4) of the Act and the same is not sustainable in the eyes of law and accordingly stands quashed.”

13. Ld. AR submitted that the both on the facts and in law, the case of assessee is squarely covered by this decision of Hon’ble Jaipur Bench of ITAT.

14. With these submissions, Ld. AR strongly contended that the Ld. PCIT(Circle) had no authority to cancel the registration u/s 12AA of the assessee. Hence the order dated 23.12.2019 passed by Ld. PCIT(Circle) is bad, illegal, without jurisdiction and must be quashed.

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.

[Emphasis supplied] 26. Ld. AR, however, pointed out that the Ld. PCIT(Central) has rejected assessee’s claim by passing following order:

Para 7 to 11 of impugned order:

JURISDICTION OF PCIT(C), BHOPAL IN THE MATTER 7. The assessee mainly in its reply dated 18.04.2024 (as also replies dated 17.09.2024 and 22.09.2024) has raised objection challenging the jurisdiction w.r.t. show cause notice dated 31.03.2024 that cancellation of registration u/s 12AB(4) of the I.T.Act falls in jurisdiction of the CIT(Exemption) and such cancellation does not fall in the jurisdiction of PCIT(Central). However, the assessee's reply is not correct / tenable for the reasons as discussed below: (i) The objection raised by the assessee was disposed of vide this office letter dated 17.09.2024 (copy pasted below) having DIN & Letter No. ITBA/COM/F/17/2024-25/1068749032(1) in view of Notification No. 70/2014 dated 13.11.2014 issued by the CBDT and after due consideration of objection raised by the assessee.

The assessee has, while objecting, completely ignored that 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.

Without prejudice to the above referred categorical Notification No. 70/2014 dated 13.11.2014, which provides for jurisdiction of the PCIT(C) Bhopal in the matter, the issue has been reiterated by the CBDT vide F. No. 173.6.2024-ITA-I dated 19.01.2024 (copy pasted below).

Government of India Ministry of Finance Income Tax Department PCIT(Central), Bhopal To Truba Education Society 250, Sagar Plaza M.P. Nagar Zone II Bhopal PAN: AABAT000BP Date DIN & Letter No: 17.09.2024 ITBA/Com/F/17/2024- 25/1068749032(1)

Sir/Madam/ M/s

Subject. Online service of Orders - Letter

Sub:- Objections raised against Show Cause Notice dated 31.03.2024 for cancellation of registration under section 12AB(4) of the I.T. Act 1961- reg. -

Vide your letter dated 18.04.2024 received in this office on 19.04.2024, you have raised certain objections against Show Cause Notice dated 31.03.2024 issued in your case for cancellation of registration of the I.T. Act.

2. In the above regard, it is stated that the Notification No. 70/2014 dated 13.11.2014 issued by the CBDT (copy enclosed) clearly provides for the jurisdiction of Principal Commissioner of Income-tax (Central), Bhopal in the matter

Further, without prejudice to the aforesaid, the CBDT vide its letter issued through F.No. 173/6/2024-ITA-1 dated 19.01.2024 (copy enclosed) has once again clarified the matter comprehensively.

3. Accordingly, in view of the Notification No. 70/2014 dated 13.11.2014, objections raised by you have been considered and disposed of.

4. Considering the above, you are hereby given a final opportunity of being heard to present your case in person or through an authorized representative on 19.09.2024 at 11 AM (or preferably file submission through online mode before the said time/date) before the undersigned Pr. Commissioner of Income Tax (Central), Bhopal to explain as to why the registration of the trust granted u/s 12AA(1) of the I.T.Act dated 27.09.2006 and re-approval therewith granted on 24.09.2021 not be cancelled, there being "specified violations" committed 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 Page 56 of 71

F.No.173/6/2024-ITA-1 Government of India / भारतसरकार Ministry of Finance / िव�मं�ालय Department of Revenue / राज�िवभाग Central Board of Direct Taxes / क�ीय���करबोड�

Date: 19.01.2024

To,

All Principal Chief Commissioner of Income-tax (CCA) All Chief Commissioner of Income-tax (Central) All Director General of Income-tax (Investigation)

Sub:- Matter pertaining to cancellation of registration u/s 12AA/10(23C) of the Income- tax Act, 1961 in Trust cases by Pr.CIT other than CIT(Exemption)- Regarding.

Madam/Sir, In this connection, I am directed to state that various ITATs have decided issue of cancellation/ revocation of registration by the Pr.CIT(C) granted u/s 12A/12AA of the Act by invoking provisions of section 12AA(3) and 12AA(4) of the Act, against the Department holding that only CIT(E) has jurisdiction to withdraw registration.

2. In this regard, I am directed to say that as per the Notification No.52/2014, S.O. 2754(E) dated 22.10.2014, Commissioner of Income-tax (Exemption), exercise jurisdiction over all cases of persons in the territorial area assigned to him claiming exemption under section 11, section 12 of the income-tax, 1961 and assessed or assessable by an Income-tax authority specified in the Notification No. 50/2014, S.O. 2752(E) dated 22nd October, 2014. 2.1 The income-tax authorities specified in the Notification No.50/2014, S.O 2752(E) dated 22nd October, 2014 are Principal Commissioners of Income-tax. 2.2 Further, the Board has issued Notification No. 70/2014, S.O. 2915(E) dated 13.11.2014 in exercise of power conferred by sub-section (1) and (2) of section 120 of the Income-tax Act, 1961. Vide para (b) of this notification, it has been ordered, inter alia, that:- In exercise of the powers conferred by sub-sections (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.O. 822(E), dated the 23rd August, 2001 published in the Gazette of India, Extraordinary, Part II, section 3. sub-section (ii) dated the 23rd August, 2001, except as respects things done or omitted to be done before such supersession, the Central Board of Direct Taxes hereby- Page 57 of 71 (a) directs that the Director General of Income-tax or the Chief Commissioner of Income- tax specified in column (2) of the Schedule -1 or 11 annexed to this notification, as the case may be (hereinafter referred to as 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 or Assessing Officers. shall continue to exercise powers and perform the functions as stipulated in the said Act, in respect of such persons or classes of persons or such incomes or classes of incomes or such cases or classes of cases in which the said Income-tax authorities have been exercising powers and performing the functions on the basis of jurisdiction assigned by any order passed under the said Act on the date of publication of this notification, till such jurisdiction is revoked; (b) directs that the Director General of Income-tax or the Chief Commissioner of Income- tax specified in the 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 of publication of this notification: ©.… 2.3 A conjoint reading of the above mentioned Notifications and provisions of the Act makes it clear that the CIT (Exemption) does not exercise any 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 Principal Commissioner of Income-tax (Central), under section 127 of the Act.