CENTRE FOR DEVELOPMENT COMMUNICATION TRUST,JAIPUR vs. COMMISSIONER OF INCOME TAX EXEMPTION, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No.621/JP/2023 fu/kZkj.k o"kZ@Assessment Years :2017-18 Centre for Development cuke Commissioner of Income Vs. Communication Trust, Tax, Exemption, Jaipur 16, Shree Gopal nagar, Near Mahesh Nagar Police Station, Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.:AAAAC 0873 C vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Sh. Prakul Khurana, Adv. & Sh. Mukesh Soni, Adv. jktLo dh vksj ls@Revenue by : Sh. Ajay Malik, CIT & Sh. D. Bhardwaj, CIT lquokbZ dh rkjh[k@Date of Hearing : 06/03/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 03/06/2024 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M.

This appeal filed by the assessee arising out of the order of the Commissioner of Income Tax, Exemption, Jaipur dated 30/09/2023 [here in after ld. CIT(E)] cancelling the registration of the assessee under section 12AB(4)(b)(i) of the Act.

2. In this appeal, the assessee has raised following grounds: - “

1. Under the facts and circumstances of the case and in law, the Impugned Order Passed u/s 12AB(4)(b)(i) of the Act dated 30.09.2023 passed by Ld. CIT Exemption, Jaipur under Section 12AB(4) of the Act and under erstwhile Section 12AA(3) of the Act canceling the registration of the Assessee granted u/s 12AB is arbitrary, perverse, bad in law and without jurisdiction.

2. Under the facts and circumstances of the case and in law, Ld. CIT Exemption, Jaipur has erred in passing an Impugned Order without providing an adequate and effective opportunity of being heard and has also erred in recording factually incorrect and inconsistent findings against the records.

3. Under the facts and circumstances of the case and in law, the Ld. CIT Exemption, Jaipur has gross erred in law and facts in invoking jurisdiction u/s 12AB (4) of the Act without any reference received as required u/s 12AB(4)(b) as inserted by Finance Act 2022.

4. Under the facts and circumstances of the case and in law, (i) impugned notice u/s 12AB(4)(i) of the Act dated 03.03.2023 is invalid, bad in law and without jurisdiction. (ii) the Ld. CIT Exemption, Jaipur has grossly erred in conducting the enquiry u/s 12AB (4)(b)(i) of the Act without jurisdiction. the Ld. CIT Exemption, Jaipur has grossly erred in referring the matter to departmental valuation officer without authority under the law 5. Under the facts and circumstances of the case and in law, the Ld. CIT Exemption, Jaipur has erred in cancelling the registration granted u/s 12AA/12A and 12AB retrospectively w.e.f. AY 2017-18. 6. Under the facts and circumstances of the case and in law, the Ld. CIT Exemption, Jaipur has grossly erred in invoking Sections 13(1), 13(2)(a) & 13(2)(g) of the Act to allege specified violation in respect of past transactions, which do not fall within the period of registration granted u/s 12A(1)(ac)(i) in Form No. 10AC.

7. Under the facts and circumstances of the case and in law, the Ld. CIT Exemption, Jaipur has grossly erred. (i) in holding that the Assessee is doing business in garb of charitable activities and is doing work beyond its objects. (ii) in holding that because the Assessee has surplus from carrying out work, it is not undertaking charitable activities. (iii) in holding that the Assessee is carrying our non-genuine activities.

8. The appellant craves leave to add, amend and modify all or any ground of appeal on or before the date of hearing.”

3. Succinctly, the fact as culled out from the records is thatin the case of the assessee, a proposal for withdrawal of approval/registration u/s 12AA of the I.T. Act, 1961 has been received from DCIT(E), Circle-Jaipur, vide letter no. DCIT(E)/JPR/2019-20, dated 06.02.2020, which was received by the ld. CIT(E) on 7/3/2020.

3.1 After perusing the proposal of AO and available information, a show cause notice vide no. A/COM/F/17/2020-21/1028202769(1) dated 12.10.2020, was issued to assessee by the ld. CIT(E). Assessee vide it letter dated nil, filed on 20/10/2020, asked for adjournment, and case was adjourned for 09/11/2020 again the assessee sought the adjournment which was granted. In the meanwhile, the then CIT(E), got transferred and there was no regular incumbent, no order was passed for want of assessee's reply.

3.2 In the meantime, vide Finance Act 2020, the provisions of section 12AA were made inoperative from 01.04.2021, and section 12AB was added. Thus, the 4 Centre for Development Communication Trust vs. CIT(E) notice issued to assessee become null and void after the change in the provision of the Act and no order could have been passed.

3.3 Substantial changes were made through the amendment in cancellation and registration proceedings. Thereafter the provisions of section 12AB(4) & (5) again got substituted w.e.f. from 01.04.2022, by finance act, 2022. The ld. CIT(E) noted that there was no time barring for 12AA(3) cancellation cases, as well as 12AB(4) in pre amendment in law i.e. 01.04.2022, however, new provisions under section 12AB, the cancellation proceedings were more streamlined, the definition of specified violation was brought in to Act, and cancellation proceedings were made time barred within 6months from the end of the quarter in which first notice under section 12AB(4) is issued. Language of section 12AB (5), further specified that first notice would be counted only for notices issued after 01.04.2022, as the time barring was first brought in w.e.f. 01.04.2022 only.

3.4 As discussed in earlier para that the proceedings for cancellation of registration of assessee u/s 12AA(3) had already lapsed without passing any order, and in the light of new amendments in the Act, to give effect to the proposal of A.O., fresh notice was to be issued to assessee under the new provisions of the Act.

5 Centre for Development Communication Trust vs. CIT(E) 3.5 Accordingly, notice u/s 12AB(4)(i) was issued to assessee on 03.03.2023 vide which an opportunity was granted to the assessee and thereby the assessee was asked to show cause as to why registration u/s. 12AA should not be cancelled. The date of the compliance was fixed on 15th March 2023. As per Post office consignment, the status for service of the notice is shown as "item delivered confirmed". Assessee submitted its reply on system on 08.03.2023 but chose not to appear. From the details it was seen that most of the information and details called for have not been submitted. In view of part compliance on behalf of the assessee, again a reminder was issued to the assessee vide no. ITBA/COM/F/17/2022- 23/1051053866 (1) dated 21.03.2023 fixing date of compliance on or before 29.03.2023. This notice has also been sent through e mail in which the status for service of notice is shown as "delivered". This time, also assessee just resubmitted its already submitted reply on 28.03.2023. Thereafter another notice was issued to assesseeon 17/08/2023, where in it was clearly informed to the assessee, that it has only submitted part details, and no evidence or proof have been submitted. Thus, assessee was asked specific details to be submitted once again. In response to this letter also, assessee rather than giving proper reply. reiterated its earlier reply. As assessee was not providing the proper details and reply, and one of the major issue was related to various loans and advances by trust to various related persons, for which assessee took the plea that same was for advance against property in its 6 Centre for Development Communication Trust vs. CIT(E) written reply, matter was referred to D.V.O. (departmental valuation officer) on 12.09.2023, and officers of the charge of the ld. CIT(E) charge were deputed to conduct enquiry at the premise of assessee on 15.09.2023. During the verification, the assesseesubmitted that most details called are not readily available, and would submit the soon. There are trustee/secretary Shri Vivek Agrawal, and Ms. Shivangi Sultania CA/CFO attended this office on 20.09.2023, & 22.09.2023 and submitted few details as asked for, and promised to submit all details on 25.09.2023, and also to produce the persons with whom related transactions have been made. However, the assesseeagain chosen not to appear on 25.09.2023 and sent reply. There after assessee was called by the ld. CIT(E) office on 25.09.2023 & again on 26.09.2023 to submit complete reply and produce the persons as called for. The assessee has refused to give any further submission and refused to produce the persons and details. Further the valuation officer appointed as also issued letters to assessee for submission of details and allow to inspection of premise for the purpose of valuation, however, assessee has denied submitting any details to valuation officer and denied him the entry in to the premise. Further, assessee has also filed a writ petition to Rajasthan HighCourt, copy of which was received by this office on 29.09.2023 at about 5 PM, where in it has asked the Hon'ble court to stay these proceedings under section 12AB, and restraining the DVO from valuation. This clearly shows that assessee is in no mood of co-operation and not willing to submit 7 ITA No. 621/JP/2023 Centre for Development Communication Trust vs. CIT(E) any further details and compliance, as the matter is time barred on 30.09.2023, and lots of opportunities have been given to assessee, the matter decided based on material available on record.

3.6 On examination of proposal of the Assessing Officer as well as details available on record, it has been noticed that the trust is registered u/s 12AA of the I.T. Act. 1961 w. e. f. 06.08.2001 vide registration no. 12A(A)/2001- 02/34/7/1327 dated 08.03.2002, and with the change of registration proceedings w.e.f. 01.04.2021, where in all the NPO, which were already registered with department before 31.03.2021, were need to re-apply under 12A(1)(ac)(i) in form 10A. Assessee re-applied in 10A on 12.08.2021, and assessee was given registration in form 10AC on 23.09.2021 by CPC. This registration as per act, was automatic and no enquiry or rejection can be done for that. Thus,the assessee was registered in old regime as well as in new regime.

3.7 The ld. AO has reported in the proposal that during assessment proceedings for A.Y. 2017-18 it was noticed that the assessee trust is not involved in any charitable activity but is carrying out contract work for various municipal corporations and other Govt, organizations. Major part of the total receipts come from Nagar Nigam/Nagar Palika/Boards/Councils and other institutions contracts for hiring of 8 Centre for Development Communication Trust vs. CIT(E) vehicles and garbage collection and its transportation. On that income, received by the assessee trust from these activities, TDS was also deducted as per provisions of section 194C of the Income Tax Act, 1961. Further, as a matter of fact, for carrying out contract work the trust further gave subcontract to others. During the F.Y. 2016-17, the trust has received an amount of Rs.29,30,57,661/-.

3.8 During the course of assessment proceedings, the assessee claimed its activity under the category of preservation and protection of environment whereas it is in receipt of contractual payment from various payers which forms integral and substantial part of its income in Income and Expenditure Accounts for different F.Ys. After considering the arguments of the applicant, the ld. AO held that payers had made payment owing to the conditions laid down in the MOUs/Agreements/Tender. Further, as mentioned herein above, the payers have also deducted TDS on such payments under section 194C of the Income Tax Act, 1961. Since, the work performed/done by the applicant trust are at the instance of conditions laid down in MOU/Agreement only and not out of the violation of the trust activities. The activities of the Trust are in the nature of trade and commerce and cater solely to the profit motive of trust. Further, it has been noted by A.O. that during the course of assessment proceedings that the assessee trust has advanced Rs.2.25 crore to the persons covered u/s 13(3) of the I.T. Act.

9 Centre for Development Communication Trust vs. CIT(E) 3.9 During the course of assessment proceedings the assessee claimed that these advances are against the sale of property which is in the name of Shri Vivek Agarwal and his family members. As per copy of agreement filed the said property situated at 16, Shree Gopal Nagar Near Mahesh Nagar Police Station, Gopalpura Bye Pass, Jaipur in the name of Shri Vivek Agarwal and his family members. The AO has held that no evidence was filed to support that the property is in the names of above mentioned 5 persons including one company. In the agreement, any amount of advance given or not hasnot been mentioned. Further as per copy of ledger account of Shri Vivek Agarwal in the books of the Trust it had seen that it is a current account, and many transactions took place during the year with the closing balance of Rs. 1,27,29,774/-. Apparently, this is diversion of funds for the benefits of trustees which comes under purview of provisions of section 13(2)(a) and 13(2)(g) of the I.T. Act, 1961. The ld. AO has further observed in its proposal, that assessee has also made some more payments to the persons referred u/s 13(3) of the Act. Thus, after recording these facts in the order the ld. CIT(E), hecancelled the registration of the trust by observing as under : 7.10 Now the question arises that whether the activities of assessee for taking money from government that too through contracts with specific conditions can be considered charitable activity, or it is just a business activity. Assessee claim it’s a charitable activity, but if we see entirety of matrix, it is just a business activity. And if assessee claim that doing work on contract from taking the money from government is charitable activity, than I fear that all the tenders floated by government would fall in the ambit of charitable activity. Infact, assessee being claiming section 11/12 benefit also creating issues in government tender policy as all other agencies who are doing the same work are paying normal taxes, and assessee being tax exempt entities can always quote lower rate 10 Centre for Development Communication Trust vs. CIT(E) than all other parties. This will be a great setback even to the fair bidding process which require people to be at par, but assessee claiming tax emeption would disrupt that bidding process. Thus, assessee's act is damaging to fair process of bidding too. 7.11 It is important to mention here that having section 11(1) which makes the income of trust exempt only on two ground, (i) clause (a), (b), (c) make exempt only the income from property held under trusts income from voluntary contribution. And business is not allowed for trusts except in cases as given in act under section 11(4) & 11(4A). 11(4) is applicable only if there is business undertaking which is settled as property under the trusts, and 11(4A), if it incidental to attainment of its objectives. Both of these terms have exclusively defined by various hon'ble courts, including the apex courts in various judgements, including the most recent one in case of Ahmedabad developmental authority 143 taxman 278 by Hon'bel Apex Court has clarified that 11(4) is applicable only if business is received by assessee as trust property by settler. New Nobel Education has clearly defined the incidental activities under 1(4A) and held that only the activities which are necessary for carrying out assesses objects. Para 59, 72, 73, 74 of that order is reproduced as under:- x x x x The above logic and reasoning though given in context of education, clearly provide the light on case of assesse, that if assesse would have been selling the products produced during the garbage collection, same may be considered incidental, but is assesse is taking contract and doing work of an vendor for government or any other organisation, same can never be consider its incidental activity, it is its main activity. Further, as clear from the word incidental, it is clear that magnitude of resources devoted by assesse to incidental activity cant be even higher than devoted toward its main objects. It is important to mention here that Hon'ble supreme court in above case hasn't considered even selling books to other that's its students as incidental activity. Even otherwise for anything being incidental, there has to be some charitable activity. However, in case of assessee, there is no incidental activity but it is the main activity. Thus it is clear that assessee business donot fall in any of these. It is also important to mention here that having profits and gain from business or profession, is part of specified violation defined by clause (b) of explanation below section 12AB(4). Which makes assessee liable for cancellation of registration. 7.12 Now the more important question comes that whether assessee is doing this activity as per its objects, or this entire process is beyond the objects of assessee. For this purpose, lets go through the objects of its trust deeds and powers of trustees. In the para 4 of trust deed assessee has given as many as 21 objects, which includes, whole lot of objects, including the preservation of environment, contrition of roads, providing medical relief, education, etc. Further para 7, gives power to trustees that what they can do. However, we would concentrate here only the preservation of environment, as assessee has claimed that it doing this object. The important paras of assessee are as under:- x x x x 11 Centre for Development Communication Trust vs. CIT(E) The above objects and powers makes it clear that objects of assessee are doing activities related to waste management in rural areas with participation of community, and for that purpose can take accepting donation, contribution, grants or subscription. Thus, in object assessee though have activities of waste management, but only though community participation, not on the business basis where be hiring the people and employing them for fulling of contract. Further, in entire deed, assessee nowhere stated that assessee or its trustee have authority to take contract from government, it only allows them to accept, donation, contribution, grants and subscription. Infact, object 4(1) says that assessee can give financial assistance to local authorities, municipalities, Urban improvement trusts and such other bodies, while assessee rather than giving is charging them heavily. Thus it is clear that:-

1. 1. Activity of taking tender and its receipts, neither fall in donation, contribution, grants or subscription. Thus these receipts are beyond the objects of assessee, thus one hand forming part of income of trust, by violating the trust deed, and on other is not exempt under section 11, which only allows income from trust property and voluntary contribution as exempt.

2. Further hiring of people on job basis is also against the mandate given in trust deep, which requires only through community participation. I am afraid that if giving job to people is construed as community participation, would make every trust deed shattered. Thus, in light of above discussion it is clear that assessee is not only doing the business but also carrying out these activities beyond the objects of trusts, and authority of trustee. This make the trust as non-genuine too. 7.13 The similar issue as taking contract from government or taking subcontract from other person who have taken contract from government can be considered as charitable activities has been dealt in case CIT vs Annadan trust (2018) 258 Taxman 54 (kerala), the Hon'ble High Court of Kerala, where assessee was supplying mid day meal on contract. While dealing this case, Hon'ble Court has clearly held that such activities are purely business and cannot be considered charitable. Infact, Hon'ble Court has also stated that as assessee was getting the tender receipts, which was also the beyond objects of trusts.: x x x x Similar issue is also involved before Hon’ble ITAT, Jaipur in the case of M/s Eternal Foundation vs. CIT(Exemption), Jaipur in ITA No. 1504 & 1505/JP/2018 wherein the Hon’ble Tribunal has observed as under:- x x x x It is clear that the tribunal has held that the activities which have been performed by the applicant society wherein the payments have been received at the instance of fulfilment of the conditions as laid down in MOUS & Agreement are business activities only and cannot be stated as charitable activity.

12 Centre for Development Communication Trust vs. CIT(E) 7.14 Thus, it is clear that as assessee is doing business in garb of charitable activities by taking money from government on contract is clearly an act of business and not charity and is also beyond the objects of trusts, thus this act of assessee makes him liable for cancellation of registration.

8. Non-Genuine Expenses incurred in Cash: 8.1 During proceedings, on going through financial statements of the F.Y. 2016-17 it was observed that the assessee has debited Pocket Allowance expenses in its Income & Expenditure Account details of which is produced below: S. No. Nature of Expense Amount 1 Pocket Allowance to Ordinary Volunteers 2,71,66,296/- 2 Pocket Allowance to Special Volunteers 2,56,24,542/- 3 Total Rs. 5,27,90,838/- The assessee trust was asked to submit details with regard to these expenses. On going through assessee’s submission it was noticed that most of these Pocket allowance expenses were incurred in cash. In support, the assessee trust submitted copies of signed payment sheet (salary slip). Copy of sample sheet is produced below: x x x x On closer verification of these sheets, it was observed that thumb impressions seem to be forged and it appears as if there is repetition of thumbs after every few counts. Similarly signature of stamps too appear to be dubious as if it has been signed by few individuals on repetition after every few counts. 8.2 In order to substantiate its claim, the assessee trust was required to produce original copy of payment sheets for verification. However the assessee failed to produce the same. The assessee made conscious decision of not producing original payment sheet as the same would have established the non-genuineness of the evidence as these are self-made vouchers made by the assessee trust to account for non-genuine expenses. 8.3 It may further be noted that no other evidence such as ID of volunteers. justification for number of volunteers appointed for each project or employment agreement signed by volunteers were furnished by the assessee. In absence of such supporting documents it is not established that these expenses were incurred in execution of contract work. Mere filing copy of payment sheet which has no authenticity does not discharge the assessee's onus of establishing the genuineness of these expenses. 8.4 Further the assessee was executing work in metropolitan cities having easy access to banking sector. There is no valid reason for making such huge payments in cash to these volunteers. Even if the argument is taken that these volunteers usually belong to lower economic strata of society having no access to banks, considering that the assessee trust 13 Centre for Development Communication Trust vs. CIT(E) is claiming to be involved in charitable activities it ought to have opened bank accounts of these staff members for their benefit in the long run. 8.5 However no such steps were taken by the assessee trust since its intention was to siphon off the funds under the garb of Pocket Expenses for volunteers. Thus, these cash expenses without documentary evidence remains unexplained and are non-genuine in nature. Further this infringement tantamount to income of the trust been applied by the assessee trust other than for the objects of the trust and thus is in violation of objects of the trust. 8.6 During proceedings, on going through financial statements of the F.Y. 2016-17 it was also observed that the assessee has debited Management salary amounting to Rs 2.69,52,000/- in its Income & Expenditure Account. 8.7 The assessee trust was asked to submit details with regard to this expense vide Notice dated 17.08.2023. The assessee submitted part details vide letter dated 25.09.2023. On going through assessee's submission it was noticed that out of total amount, Rs 2,26,32,000/- was paid in cash and just Rs 43,20,000/- was paid through banking channel. In support, the assessee trust submitted city wise list of employees with salary along with month wise payment details which is produced below: x x x x Another peculiar observation was made with regard to these expenses. It is seen that the assessee trust has paid salary of just below 20,000/- (in the range of 19,000/- to 20,000/-) to all of its management staff. Further most of the payments have been made in cash. The assessee has consciously decided to fabricate these evidences as salary was debited in cash at the end of each month. Further to avoid contravention of Section 40A(3) of the Act, salary has been kept at just less than 20,000/- since the same would have been liable to be disallowed if salary payment was greater than 20,000/- in cash. This shows that it is a pre meditated action on the part of the assessee trust with the motive of siphoning off funds for personal benefit of the trust secretary. 8.8 It may further be noted that no other evidence such as ID of employees. PAN, Address or employment agreement was furnished by the assessee. In absence of such supporting documents it is not established that these expenses were actually incurred in execution of contract work. Mere filing list of employees which has no authenticity does not discharge the assessee's onus of establishing the genuineness of these expenses. 8.9 Based on the above facts, it is concluded that the assessee has booked non genuine expenses in its Income & Expenditure account. Therefore registration of the assessee trust u/s 12AA of the Act deserves to be cancelled since activities of the trust are not being carried out in accordance with the objects of the trust.

9. It is further important to mention here that various Courts and tribunal at various stages has defined what constitute the non-genuineness of activities. And in most cases, it has been held by various courts, that doing any illegal activity and violating any law always, 14 Centre for Development Communication Trust vs. CIT(E) doing business, making use of money of trust for personal purpose, not maintain proper accounts comer under the purview of non-genuineness of activities. Hon'ble ITAT Jaipur bench in case of NIMS University in ITA no. 736/JP/2017 & ITA No. 545/JP/2018 has taken following activities as non-genuine:-  activities are not legal as it has caused some infringement of law.  accounts are not properly maintained or the receipts are not accounted for in the books of accounts.  the trust/society is not registered with competent authority.  it has caused some misrepresentation of facts before any authority.  it has given undue benefits to the trustees or office bearers.  it is selling education. Thus, all the above issues as discussed in earlier paras are also part of non- genuineness of activities.

10. Another general point raised by assessee in its various replies is that, assessee is a charitable institution, registered under Rajasthan public trust act, thus any income even coming from business should not be treated otherwise, as assessee cannot use the same for purpose other than objects of trusts. Though it has been proved that assessee is siphoning of income for benefit of trustees, by booking various bogus expenses and by using the money of trust by taking the various advances. However, it is further cleared that Honble Apex Court in three recent decision namely Ahmedabad developmental authority 143 taxman 278, New Nobel Education 143 taxman 246, and Baba Banda Bahadur Civil Appeal No. 10511 of 2013, had made remarkable change, where the theory of dominant objects and if profits are ploughed back than charitable has done away. Hon'ble Apex Court has overturned its earlier decision of queens education society, and surat art silk, and now held that, if any institution is doing activities at margin and earning income, just because profits are ploughed back, would not be considered charitable. Now the assessee in its activities even from main limbs of 2(15), like education or preservation of environment is earning huge money. same would not be considered charitable any more.

11. In view of the above facts, it is evident that the trust is not doing its activities as per its objects, and doing business and profession at par with other entities, and also applying the properties and income of trust for the benefit of trustees and its related parties, and also siphoning off money by booking non genuine expenditure, it is clear that assessee has done specified violation namely clause (a), (b) (e), of explanation to section 12AB(4), as well as violation of 12AA(3) (the earlier clause), thus ils registration is liable to be cancelled.

12. Though assessee is doing the activities beyond its objects since 2009, when it undertook the first contract, and applied money of trust for personal benefits of trustees atleast from F.Y. 2015-16, however, as these proceedings were initiated in response to proposal from A.O. for A.Y. 2017-18, thus registration of trust is being cancelled w.e.fA.Y 2017-18 and subsequent years. As assessee has received registration in new regime under section 12A(1)(ac)(i), based on earlier certificate. As same has been 15 Centre for Development Communication Trust vs. CIT(E) cancelled thus assessee’s new registration dated 23.09.2021 is also being cancelled. URN number issued to assessee AAAAC0873CE20217 is also being cancelled.”

4. Feeling dissatisfied and aggrieved from the finding of the ld. CIT(Exemption), the assessee has preferred this appeal on the grounds as reiterated here in above. To support the various grounds so raised by the assessee the ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below; 1. With reference to the hearing held on 21.11.2023 where Hon’ble members asked to submit the written submission on the legal issue involved in the captioned case. In this regard, Appellant hereby submits as under: Key Prospective Amendments in the Law by Finance Act 2021 2. It is important to note that key changes were made in 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 institution 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. A. Key Prospective Amendments in the Law by Finance Act 2022 3. Finance Act, 2022 introduced new section for taxing the benefits provided to related persons will be treated as “specified income” and will be subjected to following consequences:  Such income will be taxed at the rate of 30% without any deduction under the newly inserted section 115BBI.  Such specified income will be liable to penalty u/s. 271AAE. 4. As Finance Act 2021 and TOLA 2020 inserted section 12AB under the law and Finance Act 2022 substituted sub-section (4) of section 12AB w.e.f. 01.04.2022. As per newly amended Section 12AB(4) of the Act (which applies prospectively), where registration has been granted u/s 12AB (1) or 12AA(1)(b) of the Act, the said registration can be cancelled only if subsequent to the registration, any of the following event occurs: o Principal Commissioner or Commissioner notices occurrence of one or more specified violations during any previous year; or 16 Centre for Development Communication Trust vs. CIT(E) o Principal Commissioner or Commissioner receives a reference from the Assessing officer under proviso to Section 143(3) of the Act for any previous year; or o The said case has been selected in accordance with risk management strategy, formulated by the Board.

5. The relevant extract of the said section is reproduced hereinunder for your ready reference: (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 in order to satisfy himself about the occurrence or otherwise of any specified violation; (ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place; (iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations; (iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such trust or institution. Explanation.—For the purposes of this sub-section, the following shall mean "specified violation",— (a) where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or (b) the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or (c) the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public; or 17 Centre for Development Communication Trust vs. CIT(E) (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. Earlier there was no law of specified violations, the provision of cancellation of registration of any trust or institution can be invoked only in case where activities of such trust or institutions are not genuine or not being carried out in accordance with objects of trusts or institutions. However, from Finance Act, 2022, the earlier provision was substituted by the new provision of law where registration can be cancelled if any specified violations occurs. Further amendment was made under Section 12AA of the Act, by which power of cancellation of registration was given sunset clause under earlier law w.e.f. 01.04.2021. Thus, no power u/s 12AA(3) is available on or after 01.04.2021 in view of specific Section 12AA(5) of the Act.

7. 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 to make any reference to PCIT or CIT for withdrawal of registration for the trusts or institution referred u/s 11 of the Act. The relevant extract of the Section 143(3) of the Act as amended by FA 2022 is reproduced hereinunder: … 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 18 Centre for Development Communication Trust vs. CIT(E) 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: B. Impugned order is invalid and bad in law.

8. It is humbly submitted that the impugned order of cancellation of registration is invalid and is bad in law on various grounds, which grounds are raised without prejudice to each other grounds, the said grounds are as follows: a. Assumption of jurisdiction on the basis of reference of the AO u/s 143(3) of the Act is bad in law.

9. In the present case, Ld. CIT(E), Jaipur has initiated the impugned proceedings of cancellation of registration based on the reference received from Ld. 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.

10. Admittedly, the said reference received is dated 06.02.2020 as evident from the first paragraph of the impugned Order.

11. As per Section 12AB(4) of the Act, reference has to be after granting of the registration u/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 of registration on 23.09.2021. In this context, the relevant portion of the said Section is reproduced herein for ready reference: (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 12. Even the provision for sending reference was inserted in law w.e.f. 01.04.2022. 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 Ld. CIT(E), Jaipur clearly acted without jurisdiction by initiating the impugned proceedings based on the alleged reference. b. Allegations in the impugned reference not attained finality and thus impugned order based on such reference premature.

15. In the case of Biecco Lawrie Ltd v. State of West Bengal [2009] 10 SCC 32, the Supreme Court observed as under: “One of the essential ingredients of fair hearing is that a person should be served with a proper notice, i.e. a person has a right to notice. Notice should be clear and precise so as to meet and make an effective defence. Denial of notice and opportunity to respond result in making the administrative decision as vitiated. The adequacy of notice is a relative term and must be decided with reference to each case. But generally a notice to be adequate must contain the following: (a) time, place and nature of hearing; (b) legal authority under which hearing is to be held; (c) statement of specific charges which a person has to meet.”

20 Centre for Development Communication Trust vs. CIT(E) 17. It is further submitted that while passing Impugned Order, the Ld. CIT(E), Jaipur has also travelled beyond the impugned reference also, which alleges only violation of Section 13(2)(g) and alleged benefit to specified person. d. Prospective law 18. 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. However, the Ld. CIT(E) in the Impugned Order has cancelled the registration of the Assessee retrospectively w.e.f. AY 2017-18 without any basis and without authority of law. 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.

21 Centre for Development Communication Trust vs. CIT(E) 21. It is also well settled law that unless the terms of statute expressly so provide or necessarily imply, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure [CED v. Merchant (MA) [1989] 44 Taxman 274 (SC); CWT v. Hira Lal Mehra [1993] 71 Taxman 471 (Punj. & Har.); A fiscal statute will not therefore be regarded as retrospective by implication, particularly a penal provision therein [CWT v. Ram Narain Agarwal, 1976 TLR 1074 (All.); Thangalakshmi v. ITO [1994] 205 ITR 176 (Mad.)].

23 Centre for Development Communication Trust vs. CIT(E) Even otherwise, for the sake of argument, if it is considered to be an accidental omission in the law, then also, being the penal law, the said law requires to be interpreted strictly.

29. Even otherwise, new registration granted on 23.09.2021 as per new provisions applies for AY 2022-23 onwards and for the said AYs there is no case made out of any specified violation, without prejudice to fact that said specified violations has to be established in accordance with conditions precedent in the law and as per due procedure of law.

24 Centre for Development Communication Trust vs. CIT(E) 35. In view of the foregoing submission as explained herein above, it is humbly submitted that Impugned Order passed by Ld. CIT(E), Jaipur is without jurisdiction, arbitrary, perverse, without authority of law, bad in law and thus deserves to be quashed.

6. In addition to the above written submission, the ld. AR appearing on behalf of the assessee submitted a supplementary submission on legal issues: “SUPPLEMENTARY SUBMISSION ON LEGAL ISSUES INVOLVED IN THE APPEAL The humble Appellant prays for placing on records, it’s further submission on legal issued involved in appeal in continuation of the submission filed earlier on 08.12.2023. It is prayed that the same may be read along with the written submission on legal issue involved in captioned case already submitted. i. Non-Applicability of provision of Section 292B and 292BB 1. The Ld. CIT(E) has contended the legal objections raised by the Appellant are not tenable on account of protection provided u/s 292B and 292BB of the Act. In this respect it is humbly submitted that both the Sections 292B and 292BB of the Act are not applicable in the cases where the proceedings are per se without jurisdiction. The legal defect of jurisdiction is not cured by the provisions of the Section 292B as well as 292BB of the Act, because it is settled judicial principle that consent of the parties cannot confer the jurisdiction which is not conferred upon the authority in accordance with the law.

2. We may refer the provision of Section 292B of the Act, which cures only the invalidity of assessment return or other proceedings on the ground of any mistake, defect or omission in such return, assessment or other proceedings. The relevant portion of the said provisions are reproduced herein for ready reference: Return of income, etc., not to be invalid on certain grounds. 292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.

3. From bare reading of the said section, it is evident that jurisdictional defect is not cured by the said provisions of the Act.

25 Centre for Development Communication Trust vs. CIT(E) 4. Similarly, from bare reading of the Section 292BB of the Act, it is evident that the said provision cures the defect of non-service or improper service of the notice/summon during the proceedings of assessment or reassessment, if the assessee has appeared in the proceeding or cooperated in any inquiry relating to assessment or reassessment. The relevant portion of the said Section is reproduced herein for ready reference: Notice deemed to be valid in certain circumstances. 292BB. Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was— (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.

5. The said section is not applicable in the present as the contentions raised are relating to illegality of the Impugned Order as well as exercising power without authority of law and without jurisdiction.

6. In view of the above, the Ld. CIT(E) has wrongly contended that Appellant has participated in the proceedings therefore, it is precluded from raising objections as to the jurisdiction as well as power of the Ld. CIT(E). The Appellant has always raised its objection during the proceedings and even otherwise its participation through authorized representative was under protest only. Nonetheless it is to be noted that Ld. CIT(E) in its Impugned Order has alleged that Appellant has been non-cooperative and/or failed to produce the details/information as sought, therefore, two contrary stands being taken by the authorities should not be allowed.

Principal Commissioner Of Income TaxII Lucknow vs. Mohd. Rizwan Prop. M/S M.R. Garments Moulviganj Lucknow Income Tax appeal No. 100 of 2015 order dated 30.03.2017 52. It is well settled that a jurisdiction can neither be waived nor created even by consent and even by submitting to jurisdiction, an Assessee cannot confer upon any jurisdictional authority, something which he lacked inherently 53. Even if, it can be said that Assessee submitted to jurisdiction of A.O., law is that Assessee cannot confer jurisdiction on an authority who did not have the same and we find support from Commissioner of Income Tax Vs. Hari Raj Swarup and sons (1982) 138 ITR 462 (Alld.).

8. In view of the above, it is evident that the order passed without authority of law and beyond the power conferred under the law is no rescued by the provisions of Section 292B/292BB of the Act. Accordingly, the legal objections raised by the Appellant are valid and justified.”

3. Appellant hereby submits that cancellation of registration is being penal Appellant hereby submits that cancellation of registration is being penal Appellant hereby submits that cancellation of registration is being penal provisions, then law has to specifically provi provisions, then law has to specifically provide for the same. Cancellation being the harsh de for the same. Cancellation being the harsh provision, specific provision is required, and Ld. CIT(E) could not have assumed the provision, specific provision is required, and Ld. CIT(E) could not have assumed the provision, specific provision is required, and Ld. CIT(E) could not have assumed the power not conferred by the law. power not conferred by the law.

4. As already submitted in the earlier submission of Appellant that the activities of As already submitted in the earlier submission of Appellant that the activities of As already submitted in the earlier submission of Appellant that the activities of Appellant Trust are per se charitable and not involved in any kind of business activities. It lant Trust are per se charitable and not involved in any kind of business activities. It lant Trust are per se charitable and not involved in any kind of business activities. It is also submitted that the provisions of section 12AB(4) of the Act are prospective in is also submitted that the provisions of section 12AB(4) of the Act are prospective in is also submitted that the provisions of section 12AB(4) of the Act are prospective in nature and there is no power of retrospective cancellation in the law. nature and there is no power of retrospective cancellation in the law. nature and there is no power of retrospective cancellation in the law. 5. Appellant has been granted fresh registration from AY 2022 llant has been granted fresh registration from AY 2022 llant has been granted fresh registration from AY 2022-23 to AY 2026-27 vide Form no. 10AC with date of registration is 23.09.2021. The earlier registration of vide Form no. 10AC with date of registration is 23.09.2021. The earlier registration of vide Form no. 10AC with date of registration is 23.09.2021. The earlier registration of Appellant is no more effective as on date of cancellation of registration as fresh Appellant is no more effective as on date of cancellation of registration as fresh Appellant is no more effective as on date of cancellation of registration as fresh registration has been granted to Appellant. Furthermore, the sunset clause u/s 12AA(5) of has been granted to Appellant. Furthermore, the sunset clause u/s 12AA(5) of has been granted to Appellant. Furthermore, the sunset clause u/s 12AA(5) of the Act has been inserted w.e.f. 01.04.2021, which provides that provisions of Section the Act has been inserted w.e.f. 01.04.2021, which provides that provisions of Section the Act has been inserted w.e.f. 01.04.2021, which provides that provisions of Section 12AA are not effective. 12AA are not effective. 6. In view of the above, it is prayed before your honors to quash t In view of the above, it is prayed before your honors to quash t In view of the above, it is prayed before your honors to quash the order passed by the Ld. CIT(E) for cancelling the registration with retrospective effect, being without the Ld. CIT(E) for cancelling the registration with retrospective effect, being without the Ld. CIT(E) for cancelling the registration with retrospective effect, being without jurisdiction and without authority of law. jurisdiction and without authority of law. 7. The Appellant places further reliance on argument taken during the hearing and The Appellant places further reliance on argument taken during the hearing and The Appellant places further reliance on argument taken during the hearing and written submission alre written submission already placed on record.”

6. To support the contention contention so raised in the written submission reliance was placed on the reliance was placed on the following evidence / records : :

S.No. Particulars Page No.

1. Copy of registration certificate u/s 12A(1)(a) and DevsthanVibhag Copy of registration certificate u/s 12A(1)(a) and DevsthanVibhag Copy of registration certificate u/s 12A(1)(a) and DevsthanVibhag 1-2 2. Copy of Trust deed Trust deed 3-12 28 Centre for Development Communication Trust vs. CIT(E) 3. Copy of ITR acknowledgement and Computation of Income 13-15 4. Copy of Audited Financial Statements 16-28 5. Copy of accolades of the Appellant 29-30 6. Copy of order of Hon’ble Bench for AY 2009-10 dated 22.08.2013 31-34 7. Copy of order of Hon’ble High Court for AY 2009-10 35-39 8. Copy of notice issued u/s 142(1) dated 29.01.2019 of AY 2017-18 40-42 9. Copy of reply submitted on 13.02.2019 in response to notice issued u/s 43-45 142(1) of the Act.

10. Copy of notice issued u/s 142(1) dated 13.09.2019 46-48 11. Copy of reply submitted on 30.09.2019 in response to notice issued u/s 49-50 142(1) of the Act.

12. Copy of notice issued u/s 142(1) dated 08.11.2019 51-56 13. Copy of reply submitted on 15.11.2019 in response to notice issued u/s 57-63 142(1) of the Act.

14. Copy of assessment order dated 29.11.2019 for AY 2017-18 64-76 15. Copy of appeal memo against the order dated 29.11.2019 77-79 16. Copy of notice issued u/s 12AA(3) of the Act dated 12.10.2020 80-83 17. Copy of form no. 10A submitted on 12.08.2021 84-87 18. Copy of registration certificate in form no. 10AC dated 23.09.2021 u/s 88-90 12A(1)(ac)(i) of the Act 19. Copy of registration certificate in form no. 10AC dated 28.02.2023 u/s 91-92 80G(5) of the Act 20. Copy of notice issued u/s 12AB(4)(b)(i) of the Act dated 03.03.2023 93-98 21. Copy of reply submitted on 08.03.2023 in response to notice dated 99-112 03.03.2023 22. Copy of notice issued u/s 12AB(4)(b)(i) of the Act dated 21.03.2023 113-114 23. Copy of reply submitted on 28.03.2023 in response to notice dated 115-132 21.03.2023 24. Copy of notice issued u/s 12AB(4)(b)(i) of the Act dated 17.08.2023 133-136 25. Copy of reply submitted on 25.08.2023 in response to notice dated 137-153 17.08.2023 29 Centre for Development Communication Trust vs. CIT(E) 26. Copy of notice issued u/s 12AB(4)(b)(i) of the Act dated 11.09.2023 154-158 issued in case of Shri Vivek Agarwal 27. Copy of reply submitted on 12.09.2023 and 18.09.2023 in response to 159-165 notice dated 11.09.2023 by Shri Vivek Agarwal 28. Copy of order passed for appointment of officer for conducting enquiry 166-167 dated 15.09.2023.

7. The ld. AR of the assessee in support of the contention has also placed reliance on the following judicial decision and filed the compilation of case law and the details of the same reads as under :

CASE COMPILATION S. CASE GIST PG. NO. No.

36 Centre for Development Communication Trust vs. CIT(E) [2015] 54 Hugeinvestment is made for construction of buildings for taxmann.com 255 housing the college, hostel and to provide other facilities to (Karnataka) the students who are studying in the college. The college is recognized by the Medical Council of India, State of Karnataka and all other statutory authorities. Therefore, it cannot be said that the trust is not genuine. Admittedly, the students are being admitted every year. Students are studying in all courses. Thus the object of the constitution of the trust namely imparting of education is going on uninterruptedly. Therefore, it cannot be said that the activities of the trust are not being carried out in accordance with the objects of the trust. When the aforesaid two conditions are fully satisfied, on the ground that the trustees are misappropriating the funds of the trust the registration of the trust cannot be cancelled. If the trustees are misappropriating the funds, if they are maintaining false accounts, it is open to the authorities to deny the benefit under section 11, but that is not a ground for cancellation of registration itself. That is precisely what the Tribunal has held. Therefore, the substantial question of law is answered in favour of the assessee and against the revenue. [Para 8] CONDITIONAL REGISTRATION IS NOT VALID 16. Bai Navajbai Tata Learned Commissioner‟s guidance about the conduct of 179-185 Zoroastrian Girls the assessee- which is what in substance, the conditions School v. CIT, attached to the registration, signify, cannot be treated, no Mumbai [ITA no. matter how well intended is it, as a condition attached to 2177/Mum/2021, the registration, nor this fact per se will govern, or limit, Mumbai Trib., dated the consequences of lapses in this regard. While the 29.07.2022] assessee will be well advised to bear in mind and carefully examine his conduct vis-à-vis the points made by the learned Commissioner, these observations cannot be construed as legally binding in the sense that non- compliance with such guidance will not have any consequence, unless and beyond what is specifically envisaged by the statute- such as in Section 12AB(4) and (5) as indeed elsewhere, nor the implications of not doing what is set out in the conditions will remain confined to the cancellation of registration when the law stipulates much harsher consequences. To this extent, and in these terms, the legal effect of these conditions, as visualized in the conditional grant of registration dated 24th September 1991, stands vacated.

8. The ld. AR of the assessee in addition to the voluminous submissions and decisions so filed has also argued thatthe present cancellation proceeding is based on the earlier reference made by the ld. AO. The same hasbeen not operational the consequential process undertaken on that basis and the law being not retrospective the action of the ld. CIT(E) lacs jurisdiction and therefore, the order passed is required to be quashed.To support this view the ld. AR of the assessee relied on the decision of the co-ordinate bench of ITAT Bangalore bench in the case of Amala Jyothi Vidya Kendra Trust Vs. PCIT(Central). In that case it has been held that the action of the PCIT cancelling the registration with retrospective effect is invalid as the change in the law came in the statue by the Finance Act, 2022 only. The ld. AR of the assessee also submitted that the present order is based on the notice issued dated 03.03.2023 (APB-93-98) wherein the allegation was in two part first is that the assessee is in receipt of the money on which TDS u/s. 194C of the act werereceived as contract receipts for removal of solid waste and the same was considered as violative of provision of section 2(15) of the Act. The second part of the notice was that the assessee has advanced a sum of Rs. 2,25,68,932/- to the 38 Centre for Development Communication Trust vs. CIT(E) person covered u/s. 13(3) of the Act and the same was considered as diversion of funds for the benefit of the trustees. Thus, the notice no where suggested that the action of the PCIT is proposed to cancel the registration of the trust in a new law and that too retrospectively. He also pointed out that the preamble of the notice mentioned the section 12AB(4)(b)(i) of the Act but the same does not deal in the body of the notice issued to the assessee of any such violation which has been mentioned in the order of the cancellation and moreover, the show cause notice does not deal it to cancel it from retrospectively.Even the ld. CIT(E), through the ld. DR vide submission dated 29.01.2024 vide para 10 submitted “Though specific clause have not been mentioned in these notices, however all the specified violation were enumerated with the facts and figure. Now coming to the law, law do not prescribeissuing of show cause notice in this regard. 12AB(4), only prescribe to call for detail from the assessee or conduct inquiry as deem fit and then pass order either cancelling the registration if the specified violation is found or denying the cancellation if specified violation are not found.”This facts confirm that there is a clear violation of principles of nature justice.

8.1 As it is clear and undisputed that the order is based on the earlier proposal which was on the old provision of the Act. Whereas in the new provision of the law no such default as stated in the amended provision is applied without conducting or 39 Centre for Development Communication Trust vs. CIT(E) issuing a separate notice specifying the defaults, thusthe order passed cancelling the registration is bad in law as well as on facts. The ld. AR of the assessee without prejudice to that two observation which is made basis for cancellation of registration submitted that the contention regarding the commercial activities of the trust there is decision of the tribunal in the case of the assessee in ITA no. 163/JP/2012(APB-31-34). In that decision it has been held that “The proviso below section 2(15) of the Act is relevant for the purpose of assessment whereby the assessing officer upon finding that the assessee’s activities are in the nature of business or trade, could deny application of such income u/s 11(1)(a)/12 of the Act from year to year basis.” Therefore in that decision the co-ordinate bench held that there is no justification in the cancellation of registration by the ld. CIT and that was set aside by the bench vide order dated 22.08.2013.Even after the judgment of the apex court in the case of AUDA if the trust is carrying out the commercial activity and the margin are below 20 % the same cannot be considered as commercial activity as held by the court. As regards the alleged benefit given to the trustees, the ld. AR of the assessee referred the provision of section 115BBI and provision of section 271AAE of the Act which deal this situation of specified income as alleged by the ld. CIT(E). Thus, on the aspect of the matter the reasons advanced for cancellation of the registration is not favoring to the revenue. But in fact,favors to the assessee that in such situation the registration of the trust does not 40 Centre for Development Communication Trust vs. CIT(E) warrant the cancellation of the same, but may warrant the penalty or higher rate of tax on such income. The ld. AR of the assessee also vehemently and repeatedly argued that the reference was made by the ld. AO which is based on the old law, this fact is undisputed by recorded in the order of the ld. CIT(E). Again making those objections, making the basis to invoke the cancellation for which the action has already favored to the assessee vide ITAT order in ITA no. 163/JP/2012. As regards the impugned and alleged show cause notice deals the provision of section 12AA of the Act and not 12AB of the Act in the first part of the show cause notice and in the second part for violation of section 13(2)/13(3) there is no reference to invoke the provision of section 12AB and when this defaults already deal with the higher tax and penalty in the separate provision of the law the same cannot be made basis for rejection of the registration of the trust and that is for the second time. Thus, the entire order of the ld. CIT(E) is based on the reference made by the ld. AO in the old regime of the provision which has been subsequently amended. The provision of section 12AB(4) which is made basis for violation is operative from 01.04.2022 and there is no provision to made it applicable to the advance given in earlier years where the provision does not operate and if at all the same to be applied it does not made applicable to the retrospective and to made the basis of cancellation of registration. Thus, the show cause notice issued being only two point of business and violation of payment to specified person does not warrant the 41 Centre for Development Communication Trust vs. CIT(E) cancellation of the registration in the new provision of the law. As regards the business activities the apex court held that it does not violate the provisions of law and for the violation of payment to specified person the law take care for charging the higher tax and penalty, so both the reasons made basis for rejection has in fact no force and the order thus is passed without considering the provision of the law required to be quashed. Even the show cause notice deals with the violation of the provision of section 12AB of the Act and if so that law does not apply retrospectively. The assessment in the case of the assessee for A. Y.2020-21 selected to verify the business income and transactions of trust with the specified persons. The case was completed accepting the claim of the assessee under section 11 & 12 and there is no adverse observation on the business income of the assessee and transactions with the specified persons. The assessment is completed under the faceless regime (APB-190-199) and all the issues have been verified in detailed and all the claim of the assessee accepted. This itself suggests that the allegation made by the ld. CIT(E) has already been accepted in a faceless regime having conducted a detailed enquiry and investigation and then the claim of the assessee was completed. The law subsequent to the reference has changed and the ld. CIT(E) already accepted this facts and presently no reference from the ld.AO on any of the issue assuming jurisdiction is under question and the reasoning advanced for passing the order is under old provision and even subsequently on both the issue 42 Centre for Development Communication Trust vs. CIT(E) after reference order is passed accepting the issues raised in the subsequent assessment proceeding in A. Y. 2020-21 (APB-190-199). The issue of advances given to the related parties aregiven earlier. The question of charging interest can be looked into at this stage based on the provision of section 115BBI & 271AAE, in fact same has already been considered in the subsequent assessment year for A. Y. 2020-21. In that assessment year the benefit of the registration was given even though the case was selected under CASS for those two aspect which the ld. CIT(E) had undertaken. The transaction with the related parties has thus been given again a detailed investigation the same cannot be considered to deny the registration to the assessee trust. There is no finding in the order that the activities of the trust are not as per the trust deed which warrants rejection of the registration. The apex court has allowed that the if the activities are done at reasonable profit rate the same cannot violate the provision of section 11 & 12 of the Act. The registration of the trust was again granted to the trust under new regime vide registration dated 23.09.2021 (APB-88-90), that registration being in new law. The subsequent observation on business activities and benefit to the specified person also covered under the new law which does not warrant the rejection of the registration of the trust, as there is no reference by the ld. AO in the new regime. The jurisdiction to the ld. CIT(E) thus covered by the amendment effective from 01.04.2022 and thus as held by Amala Jyothi Vidya Kendra Trust [ 157 43 ITA No. 621/JP/2023 Centre for Development Communication Trust vs. CIT(E) taxmann.com 235(Bangalore-Trib.)] squarely applies wherein the co-ordinate bench held that section 12AB(4)(ii) of the Act, specifically provide that cancellation can be done for such previous year and all the subsequent previous years, which makes it clear that the cancellation cannot be retrospective. The object of the trust is deal the solid waste management and environmental protection which not a business as per the amendment in the law and the judgment of the AUDA. Thus, the preservation of environment is a charitable object and not a general purpose utility for the benefit at large. The agreement with the Thane and Surat Municipality are for the purpose of binding nature of modalities of the operation and not of the business purposes. Based on this argument the ld. AR of the assessee challenged the order under dispute.

9. Per contra, the ld. DR representing the revenue stated that the assessee is engaged in the business under the guise of charitable activities. There is no object in the trust deed to undertake the charitable activity by applying the tenders and the participation by way of tender is nothing but a business activity of the trust. The object permits the assessee mainly to undertake the waste management in urban and rural areas with the participation of community and to do promotional of academic activities in area of environment. Thus, the participation of the assessee by applying the waste collection tender is nothing but the business of the assessee 44 Centre for Development Communication Trust vs. CIT(E) and therefore, the assessee is not covered as charitable organization. The assessee has given a substantial amount of fund as an advance to the specified persons / related parties which are lying as interest free and the alleged transaction of the land is yet not executed. Thus, there is clear violation of the provision of section 13(3) of the Act. The assessee has not rendered any charitable activity but by way participation in tender they are doing the business activity. Referring to the Municipal Solid Wastes (Management and Handling) Rules, 2000 submitted by the ld. AR of the assessee, the ld. DR invited attention to page 16 of that rules which provide the standard for doing the waste management thus, this process is nothing but the commercial activity and not the business activity undertaken by the assessee. The activity is thus a business activity and not a charitable activity of the trust as the same is done with a motive of earning profit and there is no element of the charitable activity. The assessee as participated in the tender has to qualify for technical bidding and financial bidding. Not only that they are participating with the other parties enjoying the benefit of business and thereby not paying taxes under the guys of the trust activity. The ld. CIT(E) has categorically pointed out that the assessee is doing the business activity. The ld. CIT(E) also finds that there is irregularity in the cash payment to not identified person. The assessee failed to give the name of the person to whom the payment is made by the assessee. This analysis of the fact is detailed done and recorded in the order of cancellation 45 Centre for Development Communication Trust vs. CIT(E) registration by the ld. CIT(E). As observation from the payment sheet that thumb impressions seem to be forged and it was observed by him that there is repetition of thumb after every few counts. The assessee was called upon to produce the original payment sheet but were not produced by them. Thus, it is clear that the assessee claims expenditure which are based on the self-made vouchers to account for non- genuine expenses. The ld. CIT(E) also noted that there is no evidence such as ID of volunteers, justification for number of volunteers appointed for each project or employment agreement signed by volunteers were furnished by the assessee. Thus, it has been noted by the ld. CIT(E) that the assessee is doing business of contract work. There is no reason as to why the huge cash payments were made by the assessee even though they operatein metropolitan cities. All these activities for the receipt and payment of booking non-genuine expenditure clearly prove that the assessee is doing business under the guise of charitable activity. In the trust deed there is no power to the trustees to accept the contract amount or that of the tender participation amount as per clause 7 of the trust deed reproduced at page 41 of the impugned order of ld. CIT(E). The ld. DR in support of the contention supported the order of the ld. CIT(E) wherein he relied upon the decision of Kerala High Court in the case of CIT Vs. Annadan Trust [ 258 Taxman 54]. In that case Hon’ble High Court held that “when a particular institution, as in the above case, is involved in implementation of welfare schemes of the Government, we cannot 46 Centre for Development Communication Trust vs. CIT(E) find any charity in that. The mere assertion that there is no profit motive will not suffice especially when for implementing the schemes the assessee takes money from the state Government or the intermediary.”Thus, the finding squarely applies as the assessee is merely participating tender and does the business. Charitable and business activity needs to be seen based on the overall perspective. Here in this case the assessee do not undertake any charitable activity. The object clause of the trust do not provide to participate in tender by paying fees. Even the payment of fees for tender is not the expenditure for the object of the trust. The ld. CIT(E) has while arriving at the conclusion has also relied on the decision of the Jaipur bench in the case of Eternal Foundation Vs. CIT(E) wherein that decision of Annadan Trust (Supra) followed. The assessee has mispresented the facts and there is no property held under trust and the condition precedent prescribed u/s. 11(1) are not complied. Section 11(1)(a) say that thereincome derived from the property held under trust, (b) says coming from the accumulated part of the property held in trust & (c) says income from the property held expended for the welfare of the society. Thus, in the activity done by the assessee none of the condition is prescribed being satisfied the benefit cannot be given to the trust as all the activities of the trust are coming under the heard of profit and gains of business or profession. The assessee while doing the business activity has made the transaction of capital expenditure and that of the revenue with the specified persons itself are in volume suggest the 47 Centre for Development Communication Trust vs. CIT(E) assessee is doing business under the guise of the charitable activities. In the written submission vide para F the revenue has also argued as to the specified violation post 2022 whether there was an authority in the earlier regime or not. Based on that ld. DR supported the order of the ld. CIT(E). Since there was a specific reference from the ld. AO and the ld. AO has power to reference and not rejection based on that after passing the detailed order the ld. CIT(E) cancelled the registration of the assessee trust. The ld. DR referring the submission in para 7 submitted that the order under dispute is well speaking order as the assessee is doing business, activities of the trust does not fall within the provision of section 2(15) of the Act, trust is applying the property under trust for the benefit of the specified persons and siphoning of fund by booking non genuine expenditure and there is no other activity except undertaking the contract work obtained from the tender. The provision of section 12AA and 12AB as discussed in the written submission are similar it does not violate the provision of the Act. The provision of section 12AB(4)(b) provides power to the ld. CIT(E) to cancel the registration for any previous year either from the reference of the AO or from the record. The assessment order referred to u/s. 143(3) of the Act is not under reference and thus, cannot be relied upon. The ld. DR also submitted that section 12AB empower to cancel the registration if the case is selected in accordance with the risk management strategy, formulated by the board. Thus, both the section 12AA(4) and 48 Centre for Development Communication Trust vs. CIT(E) 12AB(4) are being similar in nature the registration has rightly been cancelled. Since, there is complete satisfaction of the provision of section 12AB(4) the registration has rightly been cancelled. There is specific information from the AO that there is siphoning of funds by way of payment to specified person the invocation of jurisdiction by the ld. CIT(E) is correct and to be sustained. The payment made by the assessee for the alleged land transaction has not been justified by the assessee. In addition, ld. DR also relied on the written submission and the same is reproduce herein below:- “1. With Reference to hearing held on 21.11.2023, and the submission of assesece dated Nil and dated 11.12.2023, defendant hereby submitting rebuttal of assessee's arguments as under:- 2. No comments on para 2 to 5, as they are matter of fact.

4. For the sake of brevity and clarity, it is being cleared that though section 12AB has been introduced in 1. T. Act we.f. 01.04.2021, and cancellation section namely 12AB(4) in present form has been introduced w.e.f from 01.4.2022, power of cancellation of 12A once granted was available with department atleast from 2004, though the scope of same and applicability of section has varied over the period of time. I am roughly covering the evolution of cancellation provisions over the period of time for better understanding of the issue, A. In pre 2004, there were no specific section/express provisions for withdrawal of 12A. B. Indian Parliament first time, by finance Aut, 2004 has inserted sub section 12AA(3) w.ef 01.10.2004, by which express power for withdrawal of registration were provided, if the activities of such trust/institution are not genuine or are not being carried out in accordance with the objects of trusts or institution So at least w.e.101.10.2004, CIT is empowered to carry out cancellation if:-

49 Centre for Development Communication Trust vs. CIT(E) I. The activities of such trust/institution are not genuine. Or II. Activities are not in accordance with the objects of trust or institution. C. Thereafter, by finance act, 2014, without prejudice to powers available in 12AA(3), CIT was further given powers to cancel the registration of trust due to the operation of applicability of forfeiture of Income under section 13(1). The said provisions were added in form of 12AA(4). Before coming further. I am here by reproducing the section 12AA(4) as inserted by finance act 2014. "(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 Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution So by this amendment conditions inbuilt in section 13(1), which were though made for pre- condition only for assessment, were made built in for cancellation. To understand its impact correctly, it is also important to read section 13(1) of Income Tax act as stood in 2014 (though there is no change in this section till 01.04.23, where in some extra words were added, which have not been used as the period in this case precedes that part). Same is reproduced as under:

“13. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof— (a) any part of the income from the property held under a trust for private religious purposes which does not enure for the benefit of the public; (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste; (bb) [***] (c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof— (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or (ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3) 72[, such part of income as referred to in sub-clauses (i) and (ii)] :

50 Centre for Development Communication Trust vs. CIT(E) Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution : Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3) in so far as such use or application relates to any period before the 1st day of June, 1970; (d) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year— (i) any funds of the trust or institution are invested or deposited after the 28th day of February, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11; or (ii) any funds of the trust or institution invested or deposited before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983; or (iii) any shares in a company, other than— (A) shares in a public sector company; (B) shares prescribed as a form or mode of investment under clause (xii) of sub- section (5) of section 11, are held by the trust or institution after the 30th day of November, 1983 73[, to the extent of such deposits or investments referred to in sub-clauses (i), (ii) and (iii)]: Provided that nothing in this clause shall apply in relation to— (i) any assets held by the trust or institution where such assets form part of the corpus of the trust or institution as on the 1st day of June, 1973; (ia) any accretion to the shares, forming part of the corpus mentioned in clause (i), by way of bonus shares allotted to the trust or institution; (ii) any assets (being debentures issued by, or on behalf of, any company or corporation) acquired by the trust or institution before the 1st day of March, 1983; (iia) any asset, not being an investment or deposit in any of the forms or modes specified in sub-section (5) of section 11, where such asset is not held by the trust or 51 Centre for Development Communication Trust vs. CIT(E) institution, otherwise than in any of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1993, whichever is later; (iii) any funds representing the profits and gains of business, being profits and gains of any previous year relevant to the assessment year commencing on the 1st day of April, 1984 or any subsequent assessment year. Explanation.—Where the trust or institution has any other income in addition to profits and gains of business, the provisions of clause (iii) of this proviso shall not apply unless the trust or institution maintains separate books of account in respect of such business. Explanation.—For the purposes of sub-clause (ii) of clause (c), in determining whether any part of the income or any property of any trust or institution is during the previous year used or applied, directly or indirectly, for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of July, 1972, no regard shall be had to the amendments made to this section by section 7 [other than sub-clause (ii) of clause (a) thereof] of the Finance Act, 1972. In short. 13(1) is applicable broadly on four conditions:- a) Any part of income or property held for private religious purpose. b) Any income of property is applied for benefit of religious caste or community. c) Any part of trust or property is misused or applied for direct or indirect benefit of management or their relatives as specified in section 13(3) d) If funds of trusts or income were invested for modes other than 11(5). Thus we read 12AA(4) and 13(1) together it is clear that apart from two earlier conditions of cancellation as given in 12AA0), it also included four conditions us given in section 13(1). So from 01.10.2014 CIT was empowered to carry out cancellation if:- I. The activities of such trust/institution are not genuine. Or II. Activities are not in accordance with the objects of trust or institution. Or III. Any part of income or property held for private religious purpose. Or V. Any part of trust or property is misused or applied for direct or indirect benefit of management or their relatives as specified in section 13(3). Or VI. If funds of trusts or income were invested for modes other than 11(5). D. Thereafter by finance act 2019, w.e.f 01.09.2019 conditions of 13(1) were made as 12AA(4)(a) and additional power has been provided for cancellation under section 12AA(4)(b), where in registration of trust can be cancelled if the trust has not complied with the requirement 52 Centre for Development Communication Trust vs. CIT(E) of any other law which is material for the purpose of achieving its objects and the order/ decree by whatever name called holding such non-compliance has occurred and has either not been disputed or attained finality. So from 01.04.2019 onward, CIT can cancel/withdraw the registration on any of the 7 grounds:- So from 01.10.2019 CIT was empowered to carry out cancellation if I. The activities of such trust/institution are not genuine. II. Activities are not in accordance with the objects of trust or institution. III. Any part of income or property held for private religious purpose. IV Any income of property is applied for benefit of religious caste or community. V. Any part of trust or property is misused or applied for direct or indirect benefit of management or their relatives as specified in section 13(3) VI. If funds of trusts or income were invested for modes other than 11(5). VII. Non-compliance of any other law attained finality. E. Than by Finance Act, 2020, w.e.f from 01.04.2021, 12AA(5) was added by which provisions of 12AA including 12AA(3) & (4) were made inoperative and new provisions were enacted in name of 12AB. Where in 12AB(4) 12AB(5) has dealt with cancellation. 12AB(4), was analogous to section 12AA(3), and 12AB(5) was analogous to 12AA(4). So in this period also the conditions of cancellation remain same, except the change of section. F. By finance Act, 2022, w.e.f 01.04.2022, 12AB(4) & (5) were again amended and section comes in present form and procedure for cancellation was streamlined. It is the first time that time barring date is brings in statute for cancellation cases, and procedure for reference from AO was also brought in statue during the assessment stage, and specified violation were defined. However, if we see closely, all of the specified violation were already part of 12AA(3) & (4) and later on 12AB(4) & (5), except clause (b), which was added newly in cancellation provisions expressly, however, same was always there in view of definition of charitable objects in section 2(15). Thus for better under standing I would like to compare each part of specified violation in new regime vis-à-vis their position in pre 2022. Specified Violation post 2022 Whether such authority was in earlier regime. (a) where any income derived from property This part is cumulative of conditions given in held under trust, wholly or in part for charitable earlier D part for V & VI application of income or religious purposes, has been applied, other or property for benefit of 13(3) persons and than for the objects of the trust or institution; or violation of 11(5), both were available as earlier by virtue of section 12AA(4) r.w.s. 13(1)© & 13(1)(d). (b) the trust or institution has income from This power was expressly not available but was profits and gains of business which is not built in by definition of charitable objects under incidental to the attainment of its objectives or 2(15) and section 11(4) and 11(4A), which separate books of account are not maintained prohibits and business for trusts. by such trust or institution in respect of the business which is incidental to the attainment of c) the trust or institution has applied any part of Verbatim Language 12AA(4) r.w.s 13(1)(a) its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public: d) the trust or institution established for Verbatim Language 12AA(4) r.w.s 13(1)(b) 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 Verbatim Language of 12AA(3) 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 Verbatim Language of 12AA(4)(b) the requirement of any other law, as referred to in item (B) of sub-clause (1) 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 Thus if we see, that vide finance act 2022, though there are substantial changes in language of act, and the procedure, the conditions and powers of CIT regarding cancellation remain same. This fact that these changes are procedural and mainly for rationalisation of provisions also clear from the circular number 23 of 2022, explaining the changes made by finance act 2022.

5. Thus, the argument of assesse in para 6 is invalid and based on wrong interpretation, and prior to 12A8 too, by virtue of section 12AA(3) and 12AA(4) CIT was empower to cancel registration on seven different types of violation as given in para 4.(D) above.

12. In para 24 to 26, assesse has stated that it hasn't made any specified violation from 01.04 2022 onward is not to be commented, as same has not been examined 13. n para 27 to 30, AR has submitted that it was granted registration under 12A(a) w.e.f from 06.08.2001 thus can't be cancelled. This fact is factually incorrect, as section 12A(1)(a) only only about the applications to be made, and in year 2001 also, registration were granted in 12AA only, which is in statue from 01.04.1997 itself. It seems like that 12AA has been typed as 12A(a).

1. 1. Annexure 'A-Proposal received from A.O.

2. B-1,B-2 & B-3-Letter Notices sent to assessee.”

10. In the rejoinder the ld. AR of the assessee submitted that the change being the substantive and penal provision for cancellation it cannot apply retrospective. The basis made for cancellation is also covered by the legislative intention to be charged at higher tax and prescribed the levy of penalty and when there is specific provision to deal with particular situation no general provision be applied in the case of the assessee thus the provision applied by the revenue is not applied after 01.04.2021. Even the fresh registration has been given by the revenue to the assessee in the new regime. The object of the new regime to be seen and the observation of the old regime cannot applied in the present facts and circumstances 60 Centre for Development Communication Trust vs. CIT(E) of the case. In the order of the assessment passed no such violation as alleged has been examined by the ld. AO. The previous year’s alleged violation of A. Y. 17-18 cannot be applied in the new regime. If at all the argument of the revenue is accepted for the contravention of payment to specified person, the same can be charged to tax as per provisions of section 115BBI and 271AAE and it does not warrant cancellation of the registration of the trust. For the allegation made in the order, it does referred in the show cause notice and the same is not binding. Section 2(15) specifically covers the activities of the trust being related to environment. All the issues that raised and dealt by the ld. CIT(E) is already discussed in the order of the assessment for A. Y. 2017-18, wherein also the benefit of section 11 & 12 has not been denied but the disallowance was made. Thus, the observation is not for the cancellation of the registration of the trust. The transaction with the related parties were reported and therefore, is not fault on the part of the assessee. On the same very issue the registration was cancelled and the ITAT has restored the registration and therefore, the same again cannot be cancelled by the ld. CIT(E).

62 Centre for Development Communication Trust vs. CIT(E) The bench noted that for the issue of doing the business in the grab of charitable activities the same has been disputed by the revenue and in that case the decision of the co-ordinate bench in ITA no. 163/JP/2012 wherein the bench held that- “5. Heard parties with reference to material on record. The provisions of section 12AA(3) of the IT Act, which are relevant to the issue are reproduced as under :-

"(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 the 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 canceling the registration of such trust or institution:

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard."

The perusal of the aforesaid legal provisions reveals only two circumstances under which the Ld. CIT is empowered to cancel the registration granted under section 12AA(1) of the Act. These conditions are (1) the activities of 63 Centre for Development Communication Trust vs. CIT(E) such trust or institution are not genuine; (2) the activities are not being carried out in accordance with the objects of the institution. In the present case in appeal, the Ld. CIT, however, by application of proviso below section 2(15) took decision in canceling the registration granted to the assessee and did not restrict the scope of his jurisdiction as contained under section 12AA(3) of the Act. The proviso below section 2(15) of the Act is relevant for the purpose of assessment whereby the assessing Officer upon finding that the assessee’s activities are in the nature of business or trade, could deny application of such income under section 11(1)(a)/12 of the Act, from year to year basis. We, therefore, do not find any justification in the cancelation of registration by the Ld. CIT which we hereby set aside and allow the ground raised in appeal.”

We further note that the appeal filed by the revenue against the order of the tribunal in respect of cancellation of registration u/s. 12AA has been dismissed by the Hon’ble Jurisdictional High Court and the copy of the order is placed in the paper book filed by the assessee. Thus, the rule of consistency should follow in favor of the assessee. Even the circular of board no. 21/2016 direct the revenue officer “The cancellation of registration without justifiable reasons may, therefore, cause additional hardship to an assessee institution due to attraction of tax liability on accreted income. The field authorities are, therefore, advised not to cancel the 64 Centre for Development Communication Trust vs. CIT(E) registration of a charitable trust granted under section 12AA just because the provision of section 2(15) comes into play. The process of cancellation of registration is to be initiated strictly in accordance with the section 12AA(3) and 12AA(4) after carefully examining the applicability of these provisions.”Thus, on the issue of the doing business by the assessee the finding is already recorded by the bench in the case of the assessee and the same reached finality. The apex court on such repeated issue noted in the case of Parashuram Pottery Works Co. Ltd Vs ITO [ 1977] 106 ITR 1 at page 10 “At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity”.Even the apex court also held on the rule of consistencyin the case ofRadha Soami Satsang v. CIT (1991) 11 TMI 2 observed that; We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings,in the absence of any material change justifying the Revenue to take a different view of the matter and, if there was no change, it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier 65 Centre for Development Communication Trust vs. CIT(E) proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12 of the Income-tax Act of 1961. Thus, in the case of the assessee when it is held that doing business or not does not warrant the cancellation of registration the revenue should not raise the issue again and there must be some finality on the issue. Thus, whatever observation or reasons discussed in the order of the ld. CIT(E) has no validity as the said issue is already becomes final.

12. As regards the other two violation whether the violation observed by the ld. CIT(E) is sufficient to cancel the registration of the trust which has already been granted and the issue raised were also part of the proceeding in past based on the reference made by the ld.AO. As the arguments raised by both parties are duly recorded the same are considered and may not be repeated but will be discussed to the extent same is relevant to deal. We note that the grounds raised by the assessee are related to the cancellation of registration to the assessee trust and finding recorded in the order of ld. CIT(E) is challenged on all the facets by the assessee. As all the grounds are interconnected and related challenging the order of the ld. CIT(E) for cancellation of registration the same are dealt with in common. Before we proceed to deal with the dispute it would be necessary to reproduce the reasons advanced for cancellation of registration by the ld. CIT(E) here in below:

66 Centre for Development Communication Trust vs. CIT(E) 11. In view of the above facts, it is evident that the trust is not doing its activities as per its objects, and doing business and profession at par with other entities, and also applying the properties and income of trust for the benefit of trustees and its related parties, and also siphoning off money by booking non genuine expenditure, it is clear that assessee has done specified violation namely clause (a), (b) (e), of explanation to section 12AB(4), as well as violation of 12AA(3) (the earlier clause), thus ils registration is liable to be cancelled.

(a) the activities of a trust or institution are not genuine, or; (b) the activities are not being carried out in accordance with the objects of the trust or institution.

Only if either or both the above conditions are met, then the Commissioner is empowered to cancel the registration, and not otherwise. Thus, the powers of the Commissioner to cancel registration are severely restricted. There have been cases 67 Centre for Development Communication Trust vs. CIT(E) where trusts, particularly in the year in which they have substantial income claimed to be exempt under other provisions of the Act, deliberately violate provisions of section 13 by investing in prohibited mode etc. Similarly, there have been cases where the income is not properly applied for charitable purposes or has been diverted for the benefit of certain interested persons / specified person. Due to restrictive interpretation of the powers of the Commissioner under section 12AA, registration of such trusts or institutions continues to be in force and these institutions continue to enjoy the beneficial regime of exemption.

Whereas under section 10(23C), which also allows similar benefits of exemption to a fund, Institution, University etc, the power of withdrawal of approval is vested with the prescribed authority if such authority is satisfied that such entity has not applied income or made investment in accordance with provisions of section 10(23C) or the activities of such entity are not genuine or are not being carried out in accordance with all or any of the conditions subject to which it was approved.

Therefore, in order to rationalize the provisions relating to cancellation of registration of a trust, it was proposed to amend section 12AA of the Act to provide that where a trust or an institution has been granted registration, and subsequently it is noticed that its activities are being carried out in such a manner that, 68 Centre for Development Communication Trust vs. CIT(E) (i) its income does not ensure for the benefit of general public; (ii) it is for benefit of any particular religious community or caste (in case it is established after commencement of the Act); (iii) any income or property of the trust is applied for benefit of specified persons like author of trust, trustees etc.; or (iv) its funds are invested in prohibited modes, then the Principal Commissioner or the Commissioner may cancel the registration if such trust or institution does not prove that there was a reasonable cause for the activities to be carried out in the above manner.

This amendment will take effect from 1st October 2014.

12.2 The ld. CIT(E) has already noted that though the reference of the ld. AO was in that section 12AA of the Act, but that provision of the Act becomes inoperative before any order was passed by the ld. CIT(E) and that proceedings becomes null and void. There after the provision of section 12AB becomes operative w.e.f. 01.04.2022 and ld. CIT(E) noted that there was no time barring for 12AA(3) proceedings for cancellation of registration but the amended provision of section 12AB made time barred such proceeding upon 6 months from the end of the quarter in which first notice u/s. 12AB(4) is issued. Since the proceeding in the case of the assessee u/s. 12AA(3) already lapsed without passing any order and 69 Centre for Development Communication Trust vs. CIT(E) considering the new provision of law a fresh notice was issued to the assessee on 03.03.2023 on the same allegation which has been discussed here in above. On the first issue we have held that the action is not correct by the ld. CIT(E) vide para 10 above so now the rest two issue left to decide whether the same warrant the cancellation of registration of the trust or not. Now the left over issue that transferring money to related parties as advance or personal benefits and the assessee transferring money to related parties in garb of salary, rent and subcontracts can be reasons to cancel the registration of the trust after the amendment in the law after 01.04.2022 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. Vs. ITO [ 102 taxmann.com 225(Madras)] 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 institution 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 70 Centre for Development Communication Trust vs. CIT(E) 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 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 ld.CIT(E), Jaipur has initiated the impugned proceedings of cancellation of registration based on the reference received from ld. 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 u/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 71 Centre for Development Communication Trust vs. CIT(E) 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 ld. 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 ld. 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 Umanath Pandey v. State of UP [2009] 12 SCC 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 for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him.”As we note that the ld. CIT(E), Jaipur has issued first show cause notice in which it has been show cause 72 Centre for Development Communication Trust vs. CIT(E) 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 (a), (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 ld. CIT(E) cancelling the registration of the trust w.e.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 ld. 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 to reach to this conclusion from the decision of the Hon’ble Rajasthan High Court in the case of Indian Medical Trust v. PCIT [2019] 108 taxmann.com 93 (Rajasthan) where it has been held that:

73 Centre for Development Communication Trust vs. CIT(E) 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 (23C) (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 sub- rule (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”. The relevant extracts of memorandum explaining the budget proposal are reproduced hereinunder:

74 Centre for Development Communication Trust vs. CIT(E) (I) 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 ld. CIT(E) is bad in law, hence, we set aside the order of the ld.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. Order pronounced in the open court on 03/06/2024.