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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. MADHUMITA ROY & SHRI B.M. BIYANI
These two appeals filed by the assessee are directed against the one and same order dated 26.12.2019 of learned Pr. Commissioner of Income-Tax (Central), Bhopal [“Ld. PCIT (Central)”], by which the approval u/s 10(23C)(vi) as well as registration u/s 12AA of the Act, granted to the assessee, had been withdrawn / cancelled by Ld. PCIT(Central). Since the Ld. PCIT(Central) has made two types of cancellations by one and same order dated 26.12.2019, the assessee has filed two separate appeals so as to get relief in both matters.
Oriental University & 116/Ind/2020
Precisely stated the facts are such that the assessee is a University, which was holding the approval u/s 10(23)(vi) as well as the registration u/s 12AA of the Act, granted by revenue. A search u/s 132 was conducted at the premises of the Oriental Group, Bhopal on 12.01.2018 and all cases of Oriental Group including the assessee were centralized for the purpose of coordinated assessment u/s 153A of the act for assessment years 2012-13 to 2018-19.
During the course of proceeding, the authorities came to know that there were financial irregularities being committed by the assessee and, therefore, the activities of the assessee were neither genuine nor being carried out in accordance with its objects. Hence the Ld. PCIT(Central) issued notices u/s 10(23C)(vi) and u/s 12AA(3) read with section 13(1)(c) of the act on 15.11.2019, followed by another letter dated 02.12.2019, wherein the assessee was given opportunity of being heard on the issues. The assessee responded to the notices and made a detailed submission. However, the Ld. PCIT(Central) did not accept the submission of assessee and concluded that the activities of the assessee were neither genuine nor being carried out in accordance with its objects. With these findings the Ld. PCIT(Central) observed that the approval u/s 10(23C)(vi) and registration u/s 12AA being enjoyed by the assessee were liable to be withdrawn/cancelled. Accordingly, the Ld. PCIT(Central) passed an order on 26.12.2019 by which the approval u/s 10(23C(vi) was withdrawn and the registration u/s 12AA was also cancelled with retrospective effect from 01.04.2011. Being aggrieved by this order of Ld. PCIT(Central), the assessee has filed these two appeals and now before us. 10(23C)(vi) and is challenging the cancellation of registration u/s 12AA. Since both of these appeals are directed against one single order, we have heard both appeals together and disposed of by this common order.
The assessee has raised following grounds in these appeals:
Oriental University & 116/Ind/2020 “(1) That on the facts & in the circumstances of the case and in law, the order passed by the learned PCIT u/s.12AA is bad in law and without jurisdiction and, therefore, the same be kindly cancelled. That on the facts & in the circumstances of the case and (2) in law, the withdrawal of approval u/s 10(23C)(vi) by the learned PCIT vide order dated 26.12.2019 u/s 12AA is unlawful and without jurisdiction and, therefore, the said order of the learned PCIT be kindly quashed/cancelled. That on the facts & in the circumstances of the case and (3) in law, the findings of the learned PCIT and his decision in withdrawing the approval of the assessee u/s 10(23C)(vi) by passing an order u/s 12AA is wholly unjustified, injudicious and unlawful and, therefore, all such findings be quashed and the approval u/s 10(23C)(vi) be kindly granted/restored. (4) That on the facts & in the circumstances of the case and in law, the findings of the learned PCIT and his decision that the activities of the trust are not genuine and are not being carried out in accordance with the objects of the institution are wholly wrong, unlawful and unjustified hence all such findings be quashed and it be held that the activities of the institution are genuine and are being carried out in accordance with the objects of the trust/institution and the order passed u/s 12AA on 26.12.2019 be kindly cancelled. (5) That on the facts & in the circumstances of the case and in law, it be held that the provisions of section 13(l)(c) are not applicable in this case and, therefore, the order passed by the learned PCIT, withdrawing the approval is bad in law and, therefore, be quashed.
(6) That on the facts & in the circumstances of the case and in law, the learned PCIT erred in law and on facts in withdrawing the approval of the institution granted u/s. 10(23C)(vi) w.e.f. 01.04.2011, hence the order of the learned PCIT u/s 12AA dated 26.12.2019 be kindly cancelled. That on the facts & in the circumstances of the case and (7) in law, the findings of the learned PCIT that the income of the institution was being applied directly/indirectly for the benefit of trustees are wholly wrong, opposed to facts, injudicious and unlawful, hence such findings be quashed and it be held that no part of the income of the trust/institution have been applied directly or indirectly for the benefit of trustees and the order passed by the learned PCIT U/s.12AA be kindly quashed.” Page 3 of 19 Oriental University & 116/Ind/2020 ITA No. 116/Ind/2020:
(1) That on the facts & in the circumstances of the case and in law, the order passed by the learned PCIT u/s. 12AA is bad in law and without jurisdiction and, therefore, the same be kindly cancelled. That on the facts & in the circumstances of the case and (2) in law, the findings of the learned PCIT and his decision in cancelling the registration of the assessee by invoking section 12AA(3) and 13(1)(c) are wholly unjustified, injudicious and unlawful and, therefore, all such findings be quashed and the registration u/s. 12AA(3) be kindly granted/restored. That on the facts & in the circumstances of the case and (3) in law, the findings of the learned PCIT and his decision that the activities of the trust are not genuine and are not being carried out in accordance with the objects of the institution are wholly wrong, unlawful and unjustified hence all such findings be quashed and it be held that the activities of the institution are genuine and are being carried out in accordance with the objects of the trust/institution and the order passed u/s.l2AA(3) be kindly cancelled. That on the facts & in the circumstances of the case and (4) in law, it be held that the provisions of section 13(l)(c) are not applicable in this case and, therefore, the order passed by the learned PCIT, cancelling the registration is bad in law and, therefore, be quashed. That on the facts & in the circumstances of the case and (5) in law, the learned PCIT erred in law and on facts in cancelling the registration of the trust granted u/s.12AA w.e.f. 01.04.2011, hence the order of the learned PCIT u/s.12AA be kindly cancelled. That on the facts & in the circumstances of the case and (6) in law, the findings of the learned PCIT that the income of the institution was being applied directly/indirectly for the benefit of trustees are wholly wrong, opposed to facts, injudicious and unlawful, hence such findings be quashed and it be held that no part of the income of the trust/institution have been applied directly or indirectly for the benefit of trustees and the order passed by the learned PCIT u/s.12AA be kindly quashed.
Oriental University & 116/Ind/2020
In addition to above grounds raised in Appeal Memo, the assessee has also raised following Additional Grounds through a separate application filed on 03.01.2020:
Additional Ground for 10(23C)(vi): “On the facts and in the circumstances of the case and in law, impugned order dated 26.12.2019 passed by Ld. Pr. CIT(Central), Bhopal and the show cause notice dated 15.11.2019 issued by the Ld. Pr. CIT(Central), Bhopal both are bad in law, invalid, illegal and without jurisdiction. The withdrawl of approval granted u/s 10(23C)(vi) of the Income-tax Act, 1961 is contrary to the provisions of law and facts of the case and the order so passed by quashed.”
Additional Ground for 12AA: “On the facts and in the circumstances of the case and in law, impugned order dated 26.12.2019 passed by Ld. Pr. CIT(Central), Bhopal and the show cause notice dated 15.11.2019 issued by the Ld. Pr. CIT(Central), Bhopal both are bad in law, invalid, illegal and without jurisdiction. The Registration so cancelled u/s 12AA of the Income Tax Act 1961 is contrary to the provisions of law and fact of the case and the order so passed be quashed.
At the start of hearing, the Ld. AR made a request to admit the Additional Grounds. Ld. AR submitted that the Additional Grounds are purely legal grounds and go to the root of the matter. Therefore, these Additional Grounds may be admitted in view of decision of Hon'ble Supreme Court in National Thermal Power Co. Ltd. (1998) 229 ITR 383 (SC). We confronted the Ld. DR on admissibility of the Additional Grounds, whereupon the Ld. DR did not express any objection. Therefore, the Additional Grounds were admitted.
On a careful consideration of various Grounds raised in the original Appeal Memos and the Additional Grounds, it was thought fit to first take-up the Additional Grounds because those Grounds challenge the very illegality of the order passed by the Ld. PCIT(Central).
Oriental University & 116/Ind/2020
8. The grievance of the assessee in the Additional Grounds is such that the show-cause notice dated 15.11.2019 and the order dated 26.12.2019 passed by the Ld. PCIT(Central) are bad in law, illegal, invalid and without jurisdiction.
Ld. AR submitted that the aforesaid notice dated 15.11.2019 was issued and the order dated 26.12.2019 was passed by the Ld. PCIT(Central), who was not a competent authority in the matters. Ld. AR submitted that it was Commissioner of Income-tax (Exemption), Bhopal who was a competent authority to exercise jurisdiction over the persons claiming exemption u/s 10(23C)(vi) and 12AA of the Act and located in the State of Madhya Pradesh. To show this, the Ld. AR carried us to the following Notification dated 22.10.2014 issued by the CBDT in terms of section 120(1)/(2):
NOTIFICATION S.O. 2754 (E) [NO. 52/2014/F.NO. 187/38/2014 (ITA.I)] DATED 22- 10-2014 AS AMENDED BY NOTIFICATION NO. 89/2019 [S.O. 3999(E) (F.NO. 187/9/2019-ITA-I] DATED 5-11-2019:
In exercise of the powers conferred by sub-section (1) and (2) of section 120 of the Income-Tax Act, 1961 (43 of 1961) and in supersession of the notification of the Government of India, Central Board of Direct Taxes number S.O. 880(E), dated the 14th September,2001, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub section (ii), dated the 14th September, 2001, except as respects things done or omitted to be done before such supersession, the Central Board of Direct Taxes hereby – (a) directs that the Commissioners of Income-tax specified in column (2) of the Schedule annexed hereto having their headquarters at the places specified in the corresponding entries in column (3) of the said Schedule shall exercise the powers and perform all the functions in respect of such cases or classes of cases as specified in column (5), in such territorial areas specified in the corresponding entries in column (4) of the said Schedule; (b) authorises the Commissioners of Income-tax referred to in this notification to issue orders in writing for the exercise of the Page 6 of 19 Oriental University & 116/Ind/2020 powers and performance of the functions by the Additional Commissioners of Income-tax or Joint Commissioners of Income- tax and Tax Recovery Officers, who are subordinate to them, in respect of cases or classes of cases specified in column (5) in such territorial areas specified in the corresponding entries in column (4) of the said Schedule in accordance with the orders issued by the respective Commissioners of Income-tax; (c) authorises the Additional Commissioners of Income-tax or Joint Commissioners of Income-tax referred to in clause (b) above, to issue orders in writing for the exercise of the powers and performance of the functions by the Assessing Officers, who are subordinate to the said Additional Commissioners of Income-tax or Joint Commissioners of Income-tax in respect of cases or classes of cases, in respect of which such Additional Commissioners of Income-tax or Joint Commissioners of Income- tax are authorised by the Commissioners of Income-tax under clause (b) above.
SCHEDULE (Relevant portion reproduced) S.NO. Designation Headquarters Territorial Cases or classes of Area cases (1) (2) (3) (4) (5) 3. Commissioner Bhopal States of All cases of persons of Income-tax Madhya in the territorial (Exemption), Pradesh and area specified in Bhopal Chhattisgarh column (4) claiming exemption under clauses (21), (22), (22A), (22B), (23), (23A), (23AAA), (23B), (23C), (23F), (23FA), (24), (46) and (47) of section 10, section 11, section 12, section 13A and section 13B of the Income-tax Act, 1961 and assessed or assessable by an Income-tax authority at serial numbers 35 to 45 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014.
Oriental University & 116/Ind/2020
10. Analyzing the impact of Para No. (a) and the Schedule of this Notification, Ld. AR submitted that the CBDT has notified that the Commissioner of Income-tax (Exemption), Bhopal shall exercise the powers and perform all the functions in the cases of persons located in the State of Madhya Pradesh & Chhattisgarh and claiming exemption u/s 10(23C), 11 or 12 of the act. Ld. AR submitted that the present assessee is located at Indore which falls within the State of Madhya Pradesh and the assessee is also claiming exemption u/s 10(23C), 11 or 12 on the basis of approval / registration granted to it u/s 10(23C)(vi) / 12AA and, therefore, the jurisdiction to exercise powers and perform all functions in the case of assessee vested only and only in the Commissioner of Income-tax (Exemption), Bhopal. Ld. AR submitted that the Ld. PCIT(Central) did not have any authority to perform powers and functions in the case of assessee.
Ld. AR further submitted that it was so in the present case that due to a search conducted on the Orient Group, the case of assessee was also centralized in the office of Ld. PCIT(Central) for the limited purpose of co- ordinated assessment, which again may or may not be legal but irrespective of that, the exclusive authority for granting registration or cancellation of registration in the matter of section 10(23C)(vi) or 12AA of the act vested in the Commissioner of Income-tax (Exemption), Bhopal only. Going further, Ld. AR referred to Para No. (b) of the Notification and upon reading the same, submitted that the CBDT has further notified that the Commissioner of Income-tax (Exemption), Bhopal can delegate or assign authority only and only to the Additional CIT or Joint CIT or Tax Recovery Officers who are subordinate to him. Ld. AR submitted that the Ld. PCIT(Central) does not fall within any of these authorities and therefore the delegation or assignment to Ld. PCIT(Central) is also not possible.
12. Ld. AR heavily relied upon the decision of Hon’ble ITAT, Jaipur Bench, in the case of M/s Wholesale Cloth Merchant Association, New Cloth Oriental University & 116/Ind/2020 Market, Kota Vs. PCIT(Central), Jaipur, ITA No. 688/JP/2019 dated 06.01.2021, the relevant paras are reproduced below:
“11. First of all, we would like to deal with legal objection raised by the assessee with regard to the jurisdiction of Pr.CIT(Central) in issuance of show cause notice and in passing of consequent order. In this respect, our attention was drawn towards Section 120(3) and CBDT Circular No. 52/2014 and 53/2014 both dated 22/10/2014. As per provisions of Section 120(3) of the Act, the criteria of Jurisdictions of Income Tax Authorities has been provided by the CBDT and as per provisions of Sec.120(3) of the Act, there are four criteria for deciding the jurisdiction and the same are reproduced below: (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income-tax authority authorised by it may have regard to any one or more of the following criteria, namely: -- (a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (d) cases or classes of cases. Therefore, in furtherance of the said provisions, the CBDT vide notification Nos. 52/2014 and 53/2014 both dated 22/10/2014 had given powers to ld. CIT(Exemption) Jaipur for the State of Rajasthan for all cases of persons in the territorial area specified in column (4), claiming exemption under clauses (21), (22), (22A), (22B), (23), (23A), (23AAA), (23B), (23C), (23F), (23FA), (24), (46) and (47) of section 10, section 11, section 12, section 13A and section 13B of the Act and assessed or assessable by an Income-tax authority at serial numbers 131 to 140 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014. Thus, in this way from Oct. 2014 ld.CIT(Exemption) has been constituted separately for these class or type of cases. Hence, the case of the assessee admittedly falls in the jurisdiction with the ld. CIT(Exemption).
We found from perusal of the record that a search and Seizure operation has been carried out in the case of SPS (Bajaj Group) Kota on 30.06.2016. In consequent thereof a survey u/s 133A has also been carried out on the assessee in 19th July 2016. Thereafter the ld. ADIT(Inv.) Kota has sent a proposal u/s 127 to the Pr. DIT(Inv.) Raj. Jaipur on 19.08.2016 to transfer the case for limited purpose i.e for the Assessment proceedings vide letter dated 19.08.2016, which is placed at page No. 292 and 293 of the paper book and the reason for centralize in the case of assessee was given for Co-Ordinate Assessment with the cases of SPS Bajaj Group. The Pr.DIT has sent the same to the Pr. CIT(Central) vide letter dated 29.09.2016, which have already been placed at page No. 295 and 296 of the paper book. Thereafter the Pr. Page 9 of 19 Oriental University & 116/Ind/2020 CIT(C) has written letter to transfer the case from ITO(E) Kota to ACIT, Central Kota. Thereafter the CIT(E) has transferred the case from ITO(E) Kota to ACIT, Central Kota vide letter dated 05/06.12.2016, which is placed at page No. 299 of the paper book. In all these there is no any copy or notice or information have been sent to the assessee.
We also observe that, thereafter the ld. DCIT(CC) Kota, has sent a proposal to the Pr. CIT(C), Jaipur to cancel the 12A registration of the assessee vide letter dated 31.12.2018. On the basis of proposal from DCIT(CC) Kota, the ld. Pr. CIT has issued the show cause notice to the assessee u/s 12AA(3)/(4) dated 22.02.2019. In response, the assessee appeared and filed details and submissions before the Pr. CIT(Jaipur) on 18.03.2019 and the ld. Pr. CIT(C) has passed the impugned order on 22.03.2019 u/s 12AA(3) and 12AA(4) of the Act.
14. We found that the above facts and proceedings of power of transfer U/s 127 was only for a limited purpose of Co-Ordinate Assessment. Neither any search & Seizure action nor any notice u/s 153A or 153C of the Act or assessment u/s 153A or 153C of the Act in the case of assessee were initiated and there was only a survey u/s 133A of the Act in the case of assessee. The assessment has been completed u/s 148/143(3) of the act vide order dated 19.12.2018. As the assessment has been completed, the purpose of transfer u/s 127A has also been completed. Although No notices regarding the transfer of the cases u/s 127 have been sent to the assessee for the purpose of Co-ordinate assessment and the purpose of transfer was only Co-Ordinate Assessment as clearly mentioned in the transfer letter 19.08.2016. The assessment was completed u/s 148 r.w.s 143(3) 19.12.2018 and the proposal was sent to the Pr. CIT(C) which has been received on 31.12.2018 in the office of Pr. CIT(C) on 23.01.2019 after a lapse of more than one month.
15. Even otherwise, in the said notification, there is no mention where CIT(E) can transfer to other CIT or Pr.CIT. The said notification of CBDT has authorized the CIT(E) to issue order in writing for the exercise of the powers and functions by the Addl.CIT or JCT or TRO who are "subordinate" to them and has authorised the Addl.CIT to issue order in writing for the exercise of the powers by the Assessing Officer who are the subordinate to them. In section 124 of the Act, the jurisdiction of Assessing Officer has been given and not 'Jurisdiction of Commissioner'.
16. Further in Sec. 127 of the Act, the power of transfer of cases is given from one Assessing Officer to another Assessing officer not from CIT to CIT. For ready reference, we reproduce Sec. 127 of the Act, which provides as under: 127. (1) The Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent Page 10 of 19 Oriental University & 116/Ind/2020
jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,-- (a) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order; (b) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation.--In section 120 and this section, the word "case", in relation to any person whose name is specified in any order or direction issued there under, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Page 11 of 19 Oriental University & 116/Ind/2020 Act which may be commenced after the date of such order or direction in respect of any year.
Sec. 120(4) to 120(6) also provide the work assigned to the subordinate officers which is reproduced below: (4) Without prejudice to the provisions of sub-sections (1) and (2), the Board may, by general or special order, and subject to such conditions, restrictions or limitations as may be specified therein,-- (a) authorise any Principal Director General or Director General or Principal Director or Director to perform such functions of any other income-tax authority as may be assigned to him by the Board; (b) empower the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed by an Additional 33 ITA 688/JP/2019_ M/s Wholesale Cloth Merchant Association Vs Pr.CIT Commissioner or an Additional Director or a Joint Commissioner or a Joint Director, and, where any order is made under this clause, references in any other provision of this Act, or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such Additional Commissioner or Additional Director or Joint Commissioner or Joint Director by whom the powers and functions are to be exercised or performed under such order, and any provision of this Act requiring approval or sanction of the Joint Commissioner shall not apply. (5) The directions and orders referred to in sub-sections (1) and (2) may, wherever considered necessary or appropriate for the proper management of the work, require two or more Assessing Officers (whether or not of the same class) to exercise and perform, concurrently, the powers and functions in respect of any area or persons or classes of persons or incomes or classes of income or cases or classes of cases; and, where such powers and functions are exercised and performed concurrently by the Assessing Officers of different classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply.
Oriental University & 116/Ind/2020 (6) Notwithstanding anything contained in any direction or order issued under this section, or in section 124, the Board may, by notification in the Official Gazette, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income-tax authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as may be specified in the notification.
18. We also observe that as per Sec. 120(6) of the Act, the CBDT by its Notification No. 52/2014 and 53/2014 dated 22.10.2014 has given power to CIT(Exemption) Jaipur for the State of Rajasthan for all cases of persons in the territorial area specified in column (4) claiming exemption under clauses (21), (22), (22A), (22B), (23), (23A), (23AAA), (23B), (23C), (23F), (23FA), (24), (46) and (47) of section 10, section 11, section 12, section 13A and section 13B of the Act and assessed or assessable by an Income-tax authority at serial numbers 131 to 140 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014. Thus firstly as per above notification and provisions of Sec. 120 and 127 the ld. CIT(Exmp.) cannot transfer or hand over or given his work or power or duties to the other same rank of CIT at all to cancel the Registration u/s 12AA. However, in case, if it is necessary to do so then there has to be proper proceedings in writing. As there has to be some order in writing from higher authorities i.e. from Chief Commissioner of Income Tax (Exmp.) Delhi or CBDT in writing and an opportunity of being heard is to be given to the assessee before transferring the case whereas all these are absent in the present case and nothing has been demonstrated by the department.
We further observe that Sec. 127 of the Act empower to transfer cases among Assessing Officers but not to Commissioners of Income Tax as CIT is not an Assessing Officer. In our view, to pass an order u/s 12A for registration or cancellation is not within the jurisdiction or power of an Assessing Officer. Hence registration u/s. 12A can be withdrawn only by the 'Prescribed Authority' who has been empowered to grant the same and by the Notification dated 22.10.2014 the ld. CIT(Exmp.) has empowered for the same, hence the Pr.CIT (Central) cannot cancelled the same.
In assessee's case, the case u/s 127 was transferred to the Central Circle for limited purpose of Co-Ordinate assessment admittedly which do not mean that the Section 12A proceeding has been transferred to the Pr.CIT(Central) Automatically, when both the proceedings are separately or independent and also has to be done or conducted by the different rank Authorities. More particularly when for the purpose of Exemption cases or 12A registration a Separate Commissioner of Income Tax has been Authorized for whole of Rajasthan by the CBDT by its Notification dated 22.10.2014. In support of the above contention, the ld AR has relied on the decision in the case of Dilip Tanaji Kashid vs. M.l. Karmakar PR. CIT& ANR. (2018) 304 CTR 0436 (Bom) wherein it has been held: Page 13 of 19 Oriental University & 116/Ind/2020 Transfer of jurisdiction--Power of competent officers-- Centralization of case--Dissenting note--Assessee was issued notice enshrining proposal for transfer of his case from Kolhapur to Mumbai, so as to centralise cases relating to D.Y. Patil Group-- Assessee objected that such notice did not referred to any agreement being reached by officers of equal rank at Mumbai and Kolhapur--These objections were however overruled and assessee's case was transferred--High Court quashed purported transfer u/s 127--Held, "Centralisation Committee" which took decision for transfer of jurisdiction, is not authority envisaged u/s 127(2)--Counter-affidavit filed on behalf of Revenue does not disclose that there was any agreement 36 ITA 688/JP/2019_ M/s Wholesale Cloth Merchant Association Vs Pr.CIT between authorities of equal rank,as a pre-condition for invoking powers u/s 127--"Absence of dissenting note" from officer of equal rank who has to agree to proposed transfer would not constitute agreement, envisaged u/s 123(2)(a)--Assessee's petition allowed.
It was also been brought to our notice that the AR had inspected the records of the case but there was no agreement between both the CIT's regarding initiation of proceedings U/s 12A of the Act. The entire communication on record is with regard to limited purpose of Co- Ordinate assessments only. Even the Instruction No. F.No.286/88/2008IT(Inv-II) dated 17.09.2008 has relied upon by the Revenue also relates to "search assessment" and was not with regard to proceedings U/s 12A or other proceedings. Even no agreement for initiation proceedings U/s 12AA of the Act has been found out on record. Even, the proposal for centralization was not sent within the statutory time of 30 days from the date of search as admittedly the search was conducted on 30.06.2016 and the proposal was sent on 19.08.2016 i.e. after 30 days of the search. In this respect, the ld AR has relied upon the decision in the case of Rentworks India (P) Ltd. vs. Pr.CIT & ANR.(2017) 100 CCH 0258 Mum HC wherein it has been held that: Income tax authorities--Power to transfer cases--Jurisdiction--CIT, issued notice to assessee taking recourse to subsection 2 of Section 127--Assessee was put to notice that there was proposal to transfer case of assessee to DCIT, for proper co-ordinated investigation--Impugned order was made by Principal CIT under sub-section 2 of section 127 by 37 ITA 688/JP/2019_ M/s Wholesale Cloth Merchant Association Vs Pr.CIT which case of assessee was transferred to DCIT--Held, in Noorul Islam Educational Trust it was held that as Income-tax/assessment file of assessee had been transferred from one AO in Tamil Nadu to another AO in Kerala and two AO were not subordinate to same Director General or Chief Commissioner or Commissioner of Income Tax u/s 127(2) (a) agreement between Director General, Chief Commissioner or Commissioner, as case might be, of two jurisdictions was necessary-- Counter affidavit filed on behalf of Revenue did not disclose that there was any such agreement--In fact, it had been consistently and repeatedly stated in said Page 14 of 19 Oriental University & 116/Ind/2020 counter affidavit that there was no disagreement between two Commissioners--Existence of agreement between two jurisdictional Commissioners was condition precedent for passing order of transfer--Clause (b) of sub-section (2) of section 127 provides for consequences when there was no such agreement--When jurisdiction to pass order of transfer under clause (a) of sub-section (2) of Section 127 could be exercised only when there was such agreement, fact that such agreement exists ought to had been stated in show cause notice as same was jurisdictional fact--It was on basis of written document that finding was recorded that there was agreement between Jurisdictional Commissioners of Ranchi and Delhi--Even going by case made out by revenue, no such agreement was spelt out.
The Apex Court has categorically held that the absence of disagreement will not be tantamount to an agreement as visualized under section 127(2)(a) which contemplates positive state of mind of the two jurisdictional Principal Commissioners of Income Tax. The agreement contemplated by clause (a) of sub- section (2) of section 12 7 may not be a drawn up agreement. What is necessary is that there has to be an agreement which will involve positive state of mind of the two jurisdictional Principal Commissioners. Both of them must consent to the transfer after application of mind.
9. In the present case, it is not even the case made out in the show cause notice that the agreement as contemplated by the first part of clause (a) of sub-section (2) of section 127 exists. The existence of such agreement between two jurisdictional Commissioners is a condition precedent for passing the order of transfer. Except for the request which came from the investigation office, Chennai of transferring the case, there is no reference whatsoever to any such agreement. Clause (b) of sub- section (2) of section 127 provides for consequences when there is no such agreement. When the jurisdiction to pass an order of transfer under clause (a) of sub-section (2) of Section 127 can be exercised only when there is such an agreement, the fact that such an agreement exists ought to have been stated in the show cause notice as the same is a jurisdictional fact. Apart from the failure to mention the same in the show cause notice, the only stand of the revenue is that there is an agreement by implication. This stand is completely contrary to paragraph 5 of the decision of the Apex Court in the case of Noorul Islam Educational Trust (supra). The decision in the case of Ramswaroop (supra) will also bind this Court for the reasons stated above.
Coming to the decision in the case of Jharkhand Mukti Morcha, relevant facts are in paragraph 12. In the said case, specific reliance was placed on a document dated 2 7th November 2016. It is on the basis of the written document that a finding was recorded that there was an agreement between the Jurisdictional Commissioners of Ranchi and Delhi. In the present Page 15 of 19 Oriental University & 116/Ind/2020 case, even going by the case made out by the respondent, no such agreement is spelt out. In absence of any such agreement, the first respondent had no jurisdiction to pass the order of transfer.
11. As the impugned order cannot be sustained on above ground, it is not necessary to into other challenges.
12. Accordingly, for the reasons quoted above, we pass following order: Impugned order dated 25th May 2017 (Exhibit-H to the petition) is hereby quashed and set aside. Rule is made absolute on above terms with no order as to costs. The Hon'ble Supreme Court in the case of Ajantha Industries & Ors. vs. Central Board of Direct Taxes & Ors. (1976) 102 ITR 0281 has been held that: "The CBDT sent a notice to the appellants under s. 127 proposing to transfer their case files "for facility of investigation" from the respective at Nellore to the ITO, B Ward, Special Circle II, Hyderabad. By this notice they were also asked to submit in writing if they had any objection to the proposed transfer within 15 days of receipt of the notice. The appellants made their representation objecting to the transfer and on 26th July, 1973, the Central Board passed the impugned order transferring the cases from Nellore to Hyderabad. The short question that arises for consideration is whether failure to record the reasons in the order which was communicated to the appellants is violative of the principles of natural justice for which the order should be held to be invalid. Held: The requirement of recording reasons under s. 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee. When law requires reasons to be recorded in a particular order affecting prejudicially the interests of any person, who can challenge the order in Court, it ceases to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons is not expiated. Non- communication of the reasons in the order passed under s. 127(1) is a serious infirmity in the order for which the same is invalid.--Kashiram Aggarwalla vs. Union of India (1965) 56 ITR 14 (SC) : TC69R.660 and S. Narayanappa vs. CIT (1972) 86 ITR 741 (All) : TC51R.651 distinguished; Sunanda Rani Jain vs. Union of India 1975 CTR (Del) 135 : (1975) 99 ITR 391 (Del) : TC69R.693 overruled; Judgment and order dt. 12th Sept., 1974, of the Andhra Pradesh High Court in Writ Appeal No. 626 of 1974 set aside. The Hon'ble Supreme Court in the case of Noorul Islam Educational Trust vs. CIT AND Ors (2016) 388 ITR 0489 (SC) held Page 16 of 19 Oriental University & 116/Ind/2020 that Special Leave Petition--Transfer of case--Validity--High Court of Madras, Madurai Bench, upheld order of C.I.T.1, Madurai, Tamil Nadu, transferring file of assessee from Tamil Nadu to Kerala--Held, as Income-tax/assessment file of assessee has been transferred from one Assessing Officer in Tamil Nadu to another Assessing Officer in Kerala and two Assessing Officers are not subordinate to same Director General or Chief Commissioner or Commissioner of Income Tax, u/s 127(2) (a) an agreement between Director General, Chief Commissioner or 40 ITA 688/JP/2019_ M/s Wholesale Cloth Merchant Association Vs Pr.CIT Commissioner, as the case may be, of two jurisdictions is necessary-- Absence of disagreement cannot tantamount to agreement as visualized under Section 127(2) (a) which contemplates a positive state of mind of two jurisdictional Commissioners of Income Tax which is conspicuously absent--Transfer of Income-tax/assessment file of assessee from Assessing Officer, Tamil Nadu to Assessing Officer, Kerala is not justified--High Court order set aside--Special appeal allowed. Although, the ld DR has relied upon the decision of Hon'ble Rajasthan High Court in the case of Lalit Hans Vs PCIT DP Special Appeal (Writ) 249/2015 but the facts of the above case are entirely different. Hence, the said judgment is of no help to the Revenue on the facts of the present case. Thus, keeping in view our above discussions, we are of the view that the ld. PCIT had no jurisdiction to pass order U/s 12AA(3) & 12AA(4) of the Act and the same is not sustainable in the eyes of law and accordingly stands quashed.”
13. Ld. AR submitted that the both on the facts and in law, the case of assessee is squarely covered by this decision of Hon’ble Jaipur Bench of ITAT.
With these submissions, Ld. AR strongly contended that the Ld. PCIT(Circle) had no authority to withdraw the approval u/s 10(23C)(vi) / cancel the registration u/s 12AA of the assessee. Hence the order dated 26.12.2019 passed by Ld. PCIT(Circle) is bad, illegal, without jurisdiction and must be quashed.
Ld. DR appearing on behalf of revenue could not controvert these submissions of the assessee. However, Ld. DR made some submissions which we would like to address. Ld. DR submitted that the Income-Tax Department is having different authorities and the cases are transferred from one authority to another authority because of necessity or in the special circumstances like search u/s 132. According to Ld. DR, the case of present Page 17 of 19 Oriental University & 116/Ind/2020 assessee was also centralized in the office of Ld. PCIT(Central) due to search- proceeding. Therefore, the Ld. PCIT(Central) was holding charge over the assessee and the impugned order passed by him must be upheld. Ld. DR also submitted that the assessee could have raised this grievance much earlier before the lower authorities but the same was not done and therefore no benefit should be given to the assessee on this issue at this stage.
We have considered submission of both sides and also perused the material produced before us. On a careful consideration, we observe that the assessee is a person claiming exemption u/s 10(23C)(vi) and 12AA and also located in the State of Madhy Pradesh. Therefore, as notified by the CBDT, the Commissioner of Income-tax (Exemption), Bhopal was having jurisdiction over the assessee and not the Ld. PCIT(Central). During the course of hearing, the Ld. DR could not demonstrate under which provision or authority, the Ld. PCIT had authority to pass the impugned order dated 26.12.2019. We have also perused the decision of Hon’ble Jaipur Bench of ITAT in M/s Wholesale Cloth Merchant Association, New Cloth Market (Supra) and observe that the Hon’ble Co-ordinate Bench has dealt this issue at length and came to the conclusion, in similar circumstances, that the Ld. PCIT did not have authority to pass order. During hearing, the Ld. DR could not distinguish the applicability of the decision of M/s Wholesale Cloth Merchant Association, New Cloth Market (Supra) on facts or in law. We also do not find any merit in the submission of Ld. DR that the assessee should not be given any benefit in the matter of this grievance at this stage just because the issue has been raised for the first time. We observe that the grievance of assessee is assailing the very jurisdiction of Ld. PCIT. We observe that under the legal system of country, only a designated authority can take a legal action or conduct proceedings. If the legal actions are permitted to any officer, even if the concerned officer does not have legal authority, it would be fatal and destroy the whole set up. Needless to mention that the actions undertaken by officers not vested with necessary legal authority are void-ab-initio and such actions can be challenged at any stage. Page 18 of 19 Oriental University & 116/Ind/2020 Therefore there is nothing wrong in the claim of assessee even if the same is raised before us for the first time. Respectfully following the decision of Hon’ble Co-ordinate Bench, the applicability of which could not be disputed or distinguished by Ld. AR on facts or in law, we are persuaded to hold that the Ld. PCIT(Central) was not having authority to pass the impugned order dated 26.12.2019. Therefore, the said order is liable to be quashed. We, accordingly, quash the said order and direct the revenue authorities to restore the approval u/s 10(23C)(vi) and the registration u/s 12AA granted to the assessee.
17. As we have quashed the order passed by Ld. PCIT(Central) itself, other grounds raised in the appeal do not require any adjudication at this stage.
In the result, these appeals of assessee are allowed.
Order pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 29.07.2022.