ADVANTAGE INDIA,NEW DELHI vs. PR.CIT (CENTRAL)-II, NEW DELHI

PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-

Page 1 of 61 Advantage India Vs.PC.I.T 2. The assessee originally filed grounds of appeal in Form

36. Later it filed an additional ground under Rule 11 of ITAT Rules, vide letter dated 24.04.2023. Subsequently, it filed a letter dated 23.01.2024 seeking admittance of substituted grounds of appeal as under:

1. “The Ld. Pr. CIT (Central) grossly erred in law as well as on the facts of the case in initiating proceedings on the basis of a defective notice, not specifying the section being invoked for cancellation of registration, being against the principles of natural justice and hence any order in consequence of such defective notice is void being without proper jurisdiction.

2. Without prejudice to ground 1 above, in view of the facts and legal position, in Sec. 127 power of transfer of jurisdiction is given from one Assessing Officer to other Assessing officer not from CIT to CIT (as CIT is not an assessing officer). Hence in the present case, assumption of jurisdiction by the Pr. CIT(Central)-II U/s 127(2) is bad in law. Consequently, the show cause notice issued as well as the consequent order passed by the Pr. CIT(Central)- II, is void ab-initio, illegal and without jurisdiction and liable to be quashed being unsustainable in the eyes of law. 3. (a) The Ld. Pr. CIT(Central) grossly erred in law as well as on the facts of the case in invoking section 12AA(3) of the Act for cancelling the Registration granted u/s 12A without the requisite preconditions contained therein being fulfilled. The reasoning stated by the Hon'ble commissioner do not give him a valid jurisdiction to invoke section 12AA(3) at that relevant point of time (CBDT circular 21 of 2016 dated 26 May 2016) Consequently order of the Commissioner cancelling registration U/s 12A, devoid of valid jurisdiction, needs to be set aside. (b) Without prejudice to ground 1 above, the Ld. Pr. CIT(Central) grossly erred in law as well as on the facts of the case in cancelling the Registration granted u/s 12A based on considerations which are not relevant for the cancellation of Page 2 of 61 Advantage India Vs.PC.I.T registration under section 12AA(3) of the Act. Issues of incomes are outside the ambit of section 12AA(3) and issues relating of application of funds/income, being matters of assessment are not relevant for invocation of section 12AA(3) (c) Ld. Pr. CIT(Central) grossly erred in law as well as on the facts of the case in invoking the provision of section 12AA(3) of the Act on the basis of his finding that the provisions of section 13(1)(c)(ii) are applicable on the assessee.

4. Without prejudice to grounds above, order of cancellation of registration is a quasi-judicial order, having serious civil consequences, the CIT had no jurisdiction to cancel the registration certificate once granted by him under section 12A with retrospective effect, there being no express provision in the section. Consequently, the commissioner's order cancelling registration from back date/since inception being devoid of valid jurisdiction, is invalid and needs to be set aside.

3. Representatives of both the sides were heard at length. Case records carefully perused.

Page 3 of 61 Advantage India Vs.PC.I.T 5. Before us, the ld. counsel for the assessee vehemently stated that under section 127 of Income Tax Act, the power of transfer of jurisdiction is given from one Assessing Officer to other Assessing officer and not from CIT to CIT (as CIT is not an Assessing Officer). Hence in the present case, assumption of jurisdiction by the Pr. CIT(Central)-II u/s 127(2) is bad in law. It is the say of the ld AR that the transfer of case u/s 127(2) was only with regard to assessment and not for the purpose of cancellation of Registration. Consequently, the show cause notice issued as well as the consequent order passed by the Pr. CIT-II, is void ab-initio, illegal and without jurisdiction and liable to be quashed being unsustainable in the eyes of law.

Page 4 of 61 Advantage India Vs.PC.I.T numbers 88 to 111 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014”, the jurisdiction lies with CIT(Exemption), Delhi-2.

15. Thus, at one end, in the absence of any specific reference of section 12AB in the Notification dated 22.10.2014 or there being subsequent authorisation by any Circular or Notification of the Board, we conclude that at the time of passing the order u/s 127 of the Act on 26.10.2020, CIT(E), Chandigarh did not have powers to as such transfer his jurisdiction u/s 127(2)(a) of the Act, for the purpose of Section 12AB has come into effect from 01.04.2021. Accordingly, under no circumstance while passing order u/s 127 of the Act on 26.10.2020, CIT(E), Chandigarh could have transferred his powers u/s 12AB of the Act to any other authority. Page 5 of 61 Advantage India Vs.PC.I.T

15.1 On the other hand, ld. PCIT, Gurgaon by virtue of the Explanation defining the scope of 'case' for the purpose of section 127, did not have power vested in him to cancel registration u/s 12AB(4). The 'case' refers to assessment initiated as a consequence of search or consequential proceedings to such assessments only and cannot be extended to special powers of ld. CIT(E), Chandigarh. Thus, the assumption of jurisdiction on the basis of the order dated 26.10.2020 of CIT(E), Chandigarh is completely illegal and that makes the whole exercise of Id. PCIT passing the impugned order liable to be quashed.

In effect the ITAT in the above case, held on the basis of Notification no. 52 of 2014 dated 15.11.2014 and Notification no. 53 of 2014 dated 15.11.2014, that the PCIT(C), Gurgaon had passed order without jurisdiction in context to territorial powers and subject matter as well which is not in accordance with law and same is liable to be quashed.

The ld AR further relied on the Jaipur bench of ITAT in the case of M/s Wholesale Cloth Merchant Association in Jhodpur ITAT Bench order in the case of Pacific Academy of Higher Education and Research Society in ITA 04/JODH/2020 and Gyan Sagar Education & Charitable Trust in ITA 6054/Del/2018.The ld AR emphasized that transfer of jurisdiction u/s 127 is made for granting rights to the AO to assess the income of the Trust and it does not grant power to grant/cancel registration to the PCIT(Central). The ld. counsel for the assessee prayed that the order of the PCIT(C) Page 6 of 61 Advantage India Vs.PC.I.T cancelling registration u/s 12A, devoid of valid jurisdiction, needs to be set aside.

Page 7 of 61 Advantage India Vs.PC.I.T 11. Another argument raised by the ld AR is the invocation of provision of section 12AA(3) of the Act by the Ld. Pr. CIT(Central) on the basis of his finding that the provisions of section 11 and section 13(1)(c)(ii) are applicable on the assessee. The ld AR submitted that a onetime violation due to ignorance and that too for a very short duration cannot be a sole ground for cancellation of Registration, as other consequences in relation to assessments are triggered.

Furthermore, violation of conditions under section 13 does not itself lead to the conclusion that the activities are not in accordance with the objects of the trust. The ld AR relied on the decision of Tamil Nadu Cricket Association 360 ITR 633; Lilavati Kirtilal Mehta Medical Trust Vs CIT 178 ITD 338 (Mumbai ITAT) and Welham Boys School 285 ITR 74 (Uttarkhand HC).

Page 8 of 61 Advantage India Vs.PC.I.T 13. Per contra, the ld DR vehemently argued that the CIT(E), u/s 127(2) of the Act, has the power to transfer the case from assessing officer who is subordinate to him, to another assessing officer who is not subordinate to him i.e., subordinate to another Commissioner, after giving the assessee reasonable opportunity. The ld DR, pointing to the order u/s 127(2) dated 01.12.2016, submitted that the CIT(E), transferred the jurisdiction, over the case of M/s Advantage India having PAN no AAATA3811F, from ACIT(E), Cir 1(1), Delhi, an officer subordinate to CIT(E), to Central Cir-16, Delhi, an officer subordinate to PCIT(Central)-2, Delhi with effect from 01.12.2016 and that the transfer was effected for administrative convenience.

14. The ld DR further stated that once the jurisdiction over the ‘case’ of M/s Advantage India was transferred from ACIT(E), Cir 1(1), Delhi, to Central Cir-16, Delhi, the PCIT(C)-2, Delhi, together with the assessing officer Central Cir-16, Delhi, assumes the jurisdiction over the assessee for all proceedings under the Act, be it assessment or grant/cancellation of registration. The ld DR explained the hierarchical structure of the office of CIT(E) by stating that the CIT(E), in his charge, supervises the functions of Additional Commissioners called Range heads and each Additional Commissioners/Range heads have Page 9 of 61 Advantage India Vs.PC.I.T Assessing Officers. The CIT(E) supervises his charge and is entrusted with function of grant/cancel registration of Trust falling under his jurisdiction. Apart from supervision, the CIT(E) has power to transfer the case from one AO to another, as also AO of another PCIT charge; assume jurisdiction u/s 263; grant approval for issuing refunds and issue of notices u/s 148; to initiate coercive action or stay of demand etc. The Assessing Officer, on the other hand, would carry out the assessment and related functions.

Page 10 of 61 Advantage India Vs.PC.I.T or such persons or classes of persons, assigned to Assessing Officers subordinate to them, under section 127 of the said Act, from the date of publication of this notification”. The ld DR emphasized that once the case is transferred to the Central Charge, the PCIT(C) assumes the powers and functions of CIT(E) in respect of grant/cancellation of registration of Trust while the AO working under him, assumes jurisdiction to carry out assessment and related functions. Thus, the ld DR stated that the objection raised on jurisdiction is not valid and the Notification no 70/2014 dated 13.11.2014 makes it clear that PCIT(C) was having all the powers which have been entrusted to the CIT (Exemption). The ld DR further vehemently submitted that the reliance on the ITAT decision in the case of Agarwal Vidya Pracharni Sabha; M/s Wholesale Cloth Merchant Association; Pacific Academy of Higher Education and Research Society and Gyan Sagar Education & Charitable Trust (supra) are misplaced for the reason that in none of the above decisions of ITAT, the CBDT’s Notification no. 70/2014 (F. No.

187/37/201(ITA-1)/ SO 2915(E) u/s 120(1) and (2) of the Act dated 15.11.2014 was brought to the notice of the hon’ble ITAT.

Page 11 of 61 Advantage India Vs.PC.I.T 16. The ld DR also referred to CBDT Notification dated 19.01.2024 from F.No 173/6/2024-ITA-I which reiterated and explained the Notification no 70/2014 dated 15.11.2014 to say that “a conjoint reading of the Notifications (Notification no 52/2014 and 70/2014) and provisions of the Act makes it clear that the CIT (Exemption) does not exercise any jurisdiction in respect of persons claiming exemption under section 11, section 12 of the Act which have been assigned to the Assessing Officers subordinate to Principal Commissioner of Income-tax (Central), under section 127 of the Act”. Further, “by virtue of provisions of clause (b) of the notification no. 70/2014, S.O.

2915(E) dated 13.11.2014, the PCIT(C) has been empowered to perform/exercise powers and functions stipulated in the Act in respect of such cases or classes of cases or such persons or classes of persons, which were assigned to AO subordinate to him, under section 127 of the Act”.

18. On merits, the ld. DR has furnished a written submission on the subject of cancellation of Registration and cancellation with retrospective effect, as follows:

“The power of cancellation flows from the power of registration and Finance Act 2004 amended section 12AA and sub-section (3) was inserted to grant power to CIT to cancel the registration in case the activities are found to be not genuine. Sub-section (3) was further amended by Finance Act 2010, to clarify that the Commissioner has the authority to cancel the registration subsequently in case he is satisfied that the activities are not genuine. Retrospective applicability can either be expressly provided or can be inferred by necessary implication from the language employed (Zile Sigh v State of Haryana, (2004) 8 SCC

Page 13 of 61 Advantage India Vs.PC.I.T 1.) The presumption against retrospective applicability only arises when a vested right is sought to be impaired. And by statue of 2004 it cannot be disputed that no trust/ society can claim to have a vested right to registration which was in violation of the terms and conditions.” has been used as a tool to receive the liaison income as CSR donation claiming it as exempt from tax and diverting its funds for personal as well as for the business purpose of the other group entities. Ld DR submitted that not all so called donations received by the society entered in its account are evidenced by the email correspondences and other seized documents pointing that these so called CSR donation are actually liaison income. The funds received in the accounts of the society are immediately transferred to various entities unusual for a charitable society. The ld DR further submitted that bogus Expense have been claimed against CSR receipts which is evidenced by the agreement with Accordis Health care Pvt. Ltd. It is submitted that a Survey was conducted on Accordis Health on 25.06.2012 and the ITI did field enquiry on entities from which Accordis made purchases.

Page 14 of 61 Advantage India Vs.PC.I.T Statement of the director of Accordis Sh. Raman Kapoor was recorded who could not provide satisfactory explanation of the entities from which purchases were made. Physical verification by the ITI revealed that none of the parties found to be existing. Sh. Raman Kapoor in his statement accepted he had taken purchases entries through one Sh.

Sunil Khandelwal. Purchase of Medicine from entities like Aastha Pharma and Hind Pharma were found to be nonexistent at the addresses provided. Report of the field enquiries done by the ITI found that for purchase of exercise note books, there was no due diligence in selecting the supplier. The ld DR pointed out that as regards the Travelling Expenses debited by the Society, it was found that most of the expenses incurred in the travelling of Sh. Deepak Talwar, and booking done through Stone Travels Pvt. Ltd, a company controlled by the Talwars. The ld DR drew our attention towards payment made to consultant Sh. Tarun Kapoor through the accounts of the Society was not for the purposes of the Society but for providing consultancy services to the group concerns of Talwars viz Wave Impex and Wave Hospitality Pvt. Ltd. Sh. Tarun Kapoor admitted the same in Page 15 of 61 Advantage India Vs.PC.I.T his statement. The ld DR further pointed out that the funds of the Society were used for business purpose of Talwars which is evidenced from the fact that the Society gave no objection for giving OD facility to the Talwar group concerns against its own FDRs. The ld DR relied on the following cases: i) CIT (Exemption) vs. Batanagar Educational and Research Trust [SC] 4451 of 2021. ii) CIT (Exemption) vs. Jagannath Gupta Family Trust 102 taxmann.com 34 [SC] iii) Young India V CIT 111 taxmann.com 235 (ITAT-Del) iv) Vellore Institute of Technology V CIT 127 taxmann.com 106(Mad)

Page 16 of 61 Advantage India Vs.PC.I.T u/s. 12AA of the Act by the PCIT(C) with retrospective effect i.e. from 27.09.2019. which was granted Registration u/s. 12AA vide order dated 27.09.1999. The Society is also registered under FCRA. 1.

Advantage India ('society'), the assessee, is a society registered in 1999 under Societies Registration Act, 1860. It has been registered under section 12AA of the Income-tax Act, 1961 ('Act') vide F.No. DIT(E)/99-2000/A-1204/99/423 dated 27.9.1999. It is also registered u/s 80G(5) (vi) of the Income-tax Act, 1961 vide F.No.DIT(E)/2011-12/A1204/5503 dated 23.3.2012. It is registered under the Foreign Contribution (Regulation) Act, 2010 vide registration no. 231660389R for carrying out educational and social activities.

Sh. Deepak Talwar is the promoter and Ex-President of society/ NGO while Ms. Deepa Talwar w/o Sh. Deepak Talwar is the Vice President.

Page 18 of 61 Advantage India Vs.PC.I.T 24. At this juncture it would be apposite to narrate the various Notifications, provisions of law governing the issues at hand. First, the order u/s 127 of the Income Tax dated 01.12.2016 in the case of the assessee, ACIT(E), Cir 1(1), Delhi under the charge of CIT(Exemption), Delhi to Central Cir-16, Delhi under the charge of Pr.CIT (Central)-2, Delhi.

“F.No.CIT(E)/Centralization-127/2016-17/1596 dated 01.12.2016

In exercise of power conferred by Sub-section (2) of Section 127 of the Income Tax Act, 1961 (43 of 1961) and others power enabling me in this behalf, I, The Commissioner of Income Tax (Exemptions), Delhi, hereby, transfer the case, particulars of which are mentioned hereunder in column (1) and (2), from the Assessing Officer mentioned in Column (3) to the Assessing Officer mentioned in column (4) and direct that from the effective date, the powers of the Assessing Officer mentioned column (3) shall be exercised by the Assessing Officer mentioned in column (4), functioning under the CIT(E), Delhi. The transfer is effected for administrative convenience. 1 2 3 4 5 Name of PAN Current New CIT Charge the jurisdiction jurisdictio Assessee n M/s AAATA3811F ACIT(E), Central Pr.CIT(Central) Advantag Cir- 1(1), Cir-16, - 2, Delhi e India Delhi Delhi

Page 19 of 61 Advantage India Vs.PC.I.T This order shall come into force with immediate effect i.e. from 1/12/2016.

Rameshwar Singh Commissioner of Income Tax(Exemption) Civic Centre, New Delhi

"127. (1) The Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner way, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) *** (a) **** (b) **** (3) **** (4) ****

Page 20 of 61 Advantage India Vs.PC.I.T Explanation to section 127 of the Act says that:-

"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 also includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year."

(a) which may be pending on the date of the order or direction; (b) which may have been completed on or before the date of the order or direction; (c) including all proceedings which may be commenced after the date of the order or direction in respect of any year. It was similarly held in the case of CIT v. AAR BEE Industries, (2013) 357 ITR 542 (Del).

Page 21 of 61 Advantage India Vs.PC.I.T The word "case" is thus used in a more comprehensive sense of including (i) pending proceedings as well as (ii) proceedings to be initiated in future as held in CIT v. Bidhu Bhusan Sarkar, (1967) 63 ITR 278, 287 (SC)]. The Kerala High Court also held in P. A. Ahammed v. Chief CIT, (2006) 282 ITR 334 (Ker) that the Explanation to section 127 clarifies that the term 'case' means the entire proceedings under the Act.

27. The ‘case’ referred in the Explanation to section 127, therefore, has to be read conjointly with ‘all proceedings under this Act’ to arrive at a harmonious and workable interpretation of the statute. The ‘case’ and ‘all proceedings under the Act’ can not be restricted to only ‘assessment’ proceedings. Jurisdiction over a case entails not only ‘assessment’ process but there are several functions and powers assigned to the jurisdictional hierarchy over that case. For example, the assessment is made by the ACIT/ITO, but when coercive action for recovery of demand is to made, the ACIT/ITO has to take approval from the Pr.CIT(Central).

Similarly, where the AO denies stay of demand in a case, the Pr.CIT(Central) can review the decision of the ACIT/ITO.

There are numerous such examples where the powers and functions over a ‘case’ has to be exercised in a chain of command in the hierarchy of Pr.CIT(Central).Similarly, a Page 22 of 61 Advantage India Vs.PC.I.T CIT(Exemptions) has powers/functions over Ranges which are manned by the Additional CIT/Joint CITs. There are four/five assessing officers in rank of ACITs/ITOs in a Range and all of them exercise their powers/functions under the CIT(Exemptions). Any jurisdiction over a ‘case’ cannot be segregated between two different PCIT/CIT that is to say that PCIT(C) will conduct ‘assessment’ proceedings and the PCIT(E) will conduct registration/cancellation. Such an interpretation will make the exercise of transfer of jurisdiction over a ‘case’ unworkable.

Page 24 of 61 Advantage India Vs.PC.I.T 29. The above conclusion is fortified by the CBDT’s Notification no 70/2014 dated 13.11.2014 which is as under:

SECTION 120(1) AND (2) OF THE INCOME-TAX ACT, 1961 - INCOME-TAX AUTHORITIES - JURISDICTION OF - SUPERSESSION OF NOTIFICATION NO. SO 822(E), DATED 23-8-2001 NOTIFICATION NO. 70/2014 [F. NO. 187/37/2014 (ITA-I)]/SO 2915(E), DATED 13-11-2014 In exercise of the powers conferred by sub-sections (1) and (2) of section 120 of the Income-tax Act, 1961 (43 of 1961) and in supersession of the notification of the Government of India, Central Board of Direct Taxes number S.O.822(E), dated the 23rd August, 2001 published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii), dated the 23rd August, 2001, except as respects things done or omitted to be done before such supersession, the Central Board of Direct Taxes hereby,— (a) directs that the Director General of Income-tax or the Chief Commissioner of Income-tax specified in column (2) of the Schedule -1 or II annexed to this notification, as the case may be (hereinafter referred to as the "said Schedules") or the Principal Commissioner/Commissioner of Income-tax specified in column (4) of the said Schedules or Joint Commissioners of Income-tax or Assessing Officers, shall continue to exercise powers and perform the functions as stipulated in the said Act, in respect of such persons or classes of persons or such incomes or classes of incomes or such cases or classes of cases in which the said Income-tax authorities have been exercising powers and performing the functions on the basis of jurisdiction assigned by any order passed under the said Act on the date of publication of this notification, till such jurisdiction is revoked; (b) directs that the Director General of Income-tax or the Chief Commissioner of Income-tax specified in column (2) of the said Schedules or the Principal Commissioner/Commissioner of Income-tax specified in column (4) of the said Schedules or Joint Commissioners of Income-tax subordinate to them, shall exercise powers and perform the Page 25 of 61 Advantage India Vs.PC.I.T functions as stipulated in the said Act in respect of such cases or classes of cases or such persons or classes of persons, assigned to Assessing Officers subordinate to them, under section 127 of the said Act, from the date of publication of this notification; (c) authorises the Director General of Income-tax or the Chief Commissioner of Income-tax specified in the said Schedules, or the Principal Commissioner/Commissioner of Income-tax specified in column (4) of the said Schedules, to issue orders in writing, vesting jurisdiction to exercise powers and perform functions of an Assessing Officer as defined under clause (7A) of section 2 of the said Act, to the Deputy Commissioner of Income-tax or Assistant Commissioner of Income-tax or Income-tax Officer who are subordinate to them.

“(b) directs that the Director General of Income-tax or the Chief Commissioner of Income-tax specified in column (2) of the said Schedules or the Principal Commissioner/Commissioner of Income- tax specified in column (4) of the said Schedules or Joint Commissioners of Income-tax subordinate to them, shall exercise powers and perform the functions as stipulated in the said Act in respect of such cases or classes of cases or such persons or classes of persons, assigned to Assessing Officers subordinate to them, under section 127 of the said Act, from the date of publication of this notification;”

Page 28 of 61 Advantage India Vs.PC.I.T for doubt as to the intention of the Legislature as to the jurisdiction to be exercised by the authorities concerned over a class of case once order u/s 127 is issued. In the instant case, once the order u/s 127(2) dated 01.12.2016 was issued by the CIT(Exemptions), Delhi transferring the case of the assessee from ACIT(E), Delhi to Central Cir-16, Delhi under the charge of Pr.CIT(Central), Delhi, by virtue of Explanation to section 127 and Notification no 70/2014, the Pr.CIT(Central), Delhi assumes the jurisdiction over the assessee for all purposes and proceedings whether pending or completed or to be commenced, in respect of any year. In the instant case, the CIT(Exemptions), Delhi has specifically transferred the jurisdiction over the case to the Pr.CIT(Central)-2, Delhi, unlike the jurisdiction order passed u/s 127 in the case of Agarwal Vidya Pracharni Sabha (supra) where the transfer order did not specifically mentioned the transfer of jurisdiction to PCIT, Gurgaon. The explanation to section 127 of the Income Tax Act is reproduced again for abundance clarity:

"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

Page 29 of 61 Advantage India Vs.PC.I.T 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 also includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year."

“2.3 A conjoint reading of the above mentioned Notifications and provisions of the Act makes it clear that the CIT (Exemption) does not exercise any jurisdiction in respect of persons claiming exemption under section 11, section 12 of the Act which have been assigned to the Assessing Officers subordinate to Principal Commissioner of Income-tax (Central), under section 127 of the Act.

We are thus of the considered and firm view that a harmonious and constructive interpretation of Notification Page 30 of 61 Advantage India Vs.PC.I.T no. 70/2014 and the CBDT directive dated 19.01.2024 would show that the Pr.CIT(Central) assumes the power and indeed obligated to perform all the functions as stipulated in the Act, over the assessee once an order u/s 127 is issued transferring the jurisdiction to AOs subordinate to him.

In effect the ITAT quashed the Pr.CIT(Central) order in the above case,

Page 31 of 61 Advantage India Vs.PC.I.T holding that the PCIT(C), Gurgaon had passed order without jurisdiction in context to the territorial powers and subject matter and that the transfer of jurisdiction u/s 127 is made for granting rights to the AO to assess the income of the Trust and it does not grant power to grant/cancel registration to the PCIT(Central).

Page 32 of 61 Advantage India Vs.PC.I.T 19.01.2024 which clarified the issue of assumption of jurisdiction by the PrCIT(Central) for the purposes of grant/cancellation of registration in cases of Trust. We therefore hold that the assumption of jurisdiction by the Pr.CIT(Central) over the case for cancelling the registration granted u/s 12AA was valid and legally permissible. The ground no 1 and 2 are dismissed.

9.6. On a careful perusal of the three case laws relied by the assessee, it is seen that the above three case laws have not considered the said Board Notification No.70/2014 dated 13.11.2014. In fact, the Delhi Tribunal in the case of Aggarwal Vidya Pracharni Sabha v PCIT (Central) Gurgaon (supra) para no.14.5 of its order had specifically mentioned that when a query was made to the CIT-DR to produce any further notification by virtue of which the power exercised by the PCIT u/s 12AB(4) of the ACT which had come into effect from 01.04.2021 would also be exercised or that further jurisdiction u/s 12AB of the Act could be transferred to other authorities as per this notification was left unsatisfied and no other Notification or Circular was brought to the notice. The relevant observation of the Tribunal in para 14.5 is reproduced as under:- Page 33 of 61 Advantage India Vs.PC.I.T

"14.5 The Rule 17A, as clarified by Circular dated 3rd June 2022 provides that in addition to the 'specified violations', the power of cancellation has also been granted under sub-rule (5) of rule 17A and sub-rule (5) of rule 2C of the Income tax Rules, 1962 to the Principal Commissioner or Commissioner authorised by the Board. The authorisation u/s 12AB or Rule 17A if have to be construed, by virtue of Board's Notification dated 22.10.2014, then we pointed out during the hearing, to ld. DR that this Notification dated 22.10.2014 does not mention specifically that the powers which can be exercised by ld. PCIT u/s 12AB(4) of the Act and which have come into effect from 01.04.2021 would also be exercised by virtue of this Notification dated 22.10.2014 or that further jurisdiction u/s 12AB of the Act could be transferred to other authorities as per this Notification. The query was left unsatisfied and no other Notification or Circular was brought to our notice."

9.7. In view of the above facts, we are of the view that in absence of consideration of the Board Notification No.70/2014 dated 13.11.2014 in the above three case laws, we cannot hold that the Pr. CIT(Central-2), Delhi lacked jurisdiction to pass the order dated 30.09.2023, cancelling the registration of the assessee trust.

12AA. [Procedure for registration.] (1)*** (1A)*** (2)*** Page 34 of 61 Advantage India Vs.PC.I.T

(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 Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: 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. (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 (a)[the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13; or (b)the trust or institution has not complied with the requirement of any other law, as referred to in sub-clause (ii) of clause (a) 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, then, the Principal Commissioner or the Commissioner may, by an order in writing, cancel the registration of such trust or institution:] Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner. (5)[Nothing contained in this section shall apply on or after the 1st day of April, 2021.] Page 35 of 61 Advantage India Vs.PC.I.T

“42.1 The assessee has mainly received donations from foreign companies which are based abroad like M/s Airbus SAS, Isolux Corsan India Engineering & Construction Private limited ("Corsan") etc. The ld PCIT(C) on the basis of seized material, both in the paper form as well as in the electronic data in the form of accounts, emails, power-point presentations, found

Page 37 of 61 Advantage India Vs.PC.I.T that Mr. Deepak Talwar provided liasoning services to M/s Airbus SAS & Corsan and in return he received back commission in lieu of it. A part, of these funds/commission amounting to Rs 90.71 crore from Airbus and its 2 related companies, MBDA International Ltd and EADS, was routed through M/s Advantage India in the form of CSR donations since 2012 upto 2015-16. Similarly, the PCIT(C) found that assessee also received CSR funds as "voluntary donations” amounting to Rs 30.43 crore from June 2015 to June 2017 from Isolux, a Spain based company. It was found that these CSR funds were actually the commissions/kickbacks received by Mr. Deepak Talwar for consultancy/liasoning services rendered to M/s Airbus SAS and Isolux. 42.2 The nexus between the liasoning services provided by Mr. Deepak Talwar and the donations received by the assessee was established by the fact that M/s Airbus and Corsan, were awarded contracts with Indian agencies and immediately after awarding of the contracts, M/s Advantage India receives so called "voluntary donations" from these companies. The PCIT(C) analyzed the receipts of Advantage India, and found that apart from the so called "donations" from these two companies, M/s Airbus and Corsan, M/s Advantage India has not received any sizable amount from any outside agencies. It was also noted that these

Page 38 of 61 Advantage India Vs.PC.I.T companies, M/s Airbus and Isolux Corsan, never enquired the utilization of CSR funds by the assessee.

42.3 From the perusal of the assessee's bank statements and accounts, it was found that on receipt of donation funds by M/s Advantage India, immediately funds were transferred to other organizations in the garb of professional expenses for maintaining and running Mobile Medical Units (MMUs) etc. The evidences revealed that funds so deposited are ultimately withdrawn in cash after layering through entry operators. Thus, the PCIT(C) established that the entire sequence i.e., incoming of funds and its so called application was nothing but transferring commission/kickbacks to Deepak Talwar through layered structuring.

42.4 The balance sheet of the assessee for the period 01.4.2016 to 6.6.2016 showed that the assessee has received a total receipt of Rs 99.93 crore including foreign donation of Rs 90.72 crore. Of the total receipts, Rs 31.97 crore was capitalized and Rs 67.95 crore is expended in books as follows: i) Payment to Accordis Healthcare towards Mobile Medical Units(MMU) Rs 20.39 crore and Professional service charges Rs 17.33 crore. ii)Purchase of medicine from Astha Pharma and Hind Pharma worth Rs 26.97 crore. Page 39 of 61 Advantage India Vs.PC.I.T iii) payments for professional fees.

42.5 The Income Tax Department has also searched and surveyed the M/s Accordis Healthcare Private Limited ("M/s Accordis"). M/s Accordis is one entity to whom M/s Advantage India, the assessee, had transferred funds of Rs 20.39 crore for purchase of several Mobile Medical Units and also, given other works for so called charitable purposes. From the documents seized during search & seizure as well as from the investigation/enquiries conducted by the Investigation Wing and the assessment unit, it was established that the so called payment of funds to M/s Accordis was nothing but the arrangement of booking bogus expenses. This bogus booking of expense was corroborated, when the statements of Shri Raman Kapoor i.e. Managing Director of M/s. Accordis Healthcare Private Limited was recorded on oath during the time of search and seizure operation at his premises. Mr. Raman Kapoor had clearly admitted in his statement that entities which have been used for booking purchases/other expenses by M/s Accordis are the entities which existed only on the paper and are being controlled by one entry operator Mr. Sunil Khandelwal. Mr. Raman Kapoor has also accepted the fact that he had taken purchase entry through the entry operator and he uses this model so that he can raise fake MMU bills to M/s Advantage

Page 40 of 61 Advantage India Vs.PC.I.T

India. On independent enquiry, the various entities which were used by Mr. Raman Kapoor for booking expense were found to be bogus entities which existed only on paper, and on physical inspection most of the addresses given did not even exist. Further, the AO had also issued notices u/s 133(6) to various entities mentioned by Raman Kapoor and most of them had returned back with the narration "no address found" against those entities. These evidences clearly established the fact that M/s Accordis was booking bogus purchases from various paper entities and providing entry of bogus expenses to M/s Advantage India. Thereby, the assessee was used for further routing the unaccounted commission of Deepak Talwar by receiving the CSR "donations".

42.6 The bank statement of M/s Accordis was also analyzed and it is seen that the funds which have been received from M/s Advantage India have been transferred to the account of various entities which are not doing any business and are merely paper entities/companies. It was seen that almost all the amounts credited in the bank account of these parties are transferred to the bank account of some other party and many a times amounts are withdrawn in cash. When Mr. Raman Kapoor was confronted with these facts, he not only admitted that he has taken entries of "bogus expenses” to inflate the purchases but also voluntary surrendered Rs. 14.24 Crore on account of inflating

Page 41 of 61 Advantage India Vs.PC.I.T purchases/bogus expenses, which in turn is nothing but the evidence of the fact that the "donation receipt" by the assessee in the first place represents unaccounted commission/kickback of Deepak Talwar. Hence, on the basis of the transactions recorded by M/s Accordis and the statement made by Mr. Raman Kapoor u/s 132(4) of the IT Act, it was established that the so called charitable works claimed by M/s Advantage India through M/s Accordis was nothing but the arrangement to book bogus expenses and to get back the amounts/donations which it had got from M/s Airbus as well as M/s Isolux Corsan India Engineering & Construction Pvt. Ltd.

42.7 Further, it is seen that even the travel expenses of Mr. Deepak Talwar were booked in the account of M/s Advantage India and it was shown as expenses incurred by Mr. Deepak Talwar for bringing donations to M/s Advantage India. The PCIT(C) found that in fact Mr. Deepak Talwar went on business/personal trips to meet his clients abroad to whom he was providing liaison services. Accordingly, the accounts of Advantage India were used for booking those expenses while no charitable activity was being done by M/s Advantage India.

42.8 Besides above, it is seen that M/s Advantage India has paid an amount of Rs. 1.03 crore from FY 2013-14 to FY 2015-16 to one Tarun Kapoor as Page 42 of 61 Advantage India Vs.PC.I.T salary. However, from the documents seized during the course of search and seizure operations, it is seen that Mr. Tarun Kapoor was looking after the financial works of M/s Wave Impex Private Limited (M/s Wave) i.e. a company controlled and managed by Mr. Deepak Talwar and his family. It was found that Mr. Tarun Kapoor had nothing to do with the activities of M/s Advantage India. In fact, in his statement u/s 132(4) of the IT Act, Mr. Tarun Kapoor clearly mentioned that he was working for M/s Wave Hospitality Pvt. Ltd. and M/s Wave Impex Pvt. Ltd., however his salary of approx. Rs. 4 lakh per month was drawn from M/s Advantage India. In fact, Mr. Traun Kapoor has clearly stated that he was personally hired by Sh. Deepak Talwar to look after the project of Hotel Holiday Inn and he gets the salary on directions of Sh. Deepak Talwar. Thus, from the statement of Sh. Tarun Kapoor, it is clearly established that bogus expense or the expenses related to other companies are booked in the books of M/s Advantage India with a clear direction of Mr. Deepak Talwar and it also establishes the intent of Mr. Deepak Talwar to use the receipts of the assessee society for his own business purposes. In fact, the statements of Mr. Tarun Kapoor was confronted to Shri Deepak Talwar, who did not deny the facts, rather it was stated that "he will go through the books and will reimburse the NGO, the assessee, the amount which has Page 43 of 61 Advantage India Vs.PC.I.T been provided to Mr. Tarun Kapoor and company”. Thus, the statement of Shri Deepak Kapoor is more of admission of the fact that he was using the funds of NGO for his business purpose.

42.9 It is also observed that M/s Advantage India has made FDs of several amounts received from donor entities in the various banks. Nothing wrong with that. The non-genuineness of the activities of the Society is brought to light when the utilization of these FDs are examined. The seized documents shows that the society i.e., Advantage India has given NoC to the Indian Overseas Bank with a collateral security of its own FD of Rs 7 crore for giving OD facilities of Rs 6.30 crore to M/s Wave Impex Pvt. Ltd vide its NoC dated 29.08.2012. Thus, it is amply clear that the funds of the M/s Advantage India were used by Mr. Deepak Talwar for providing OD facilities to his various companies which clearly is in violation of sec. 11 of the IT Act which prohibits the use of the funds of the charitable for any other entity which is indulging in business activities. The ex-President of the assessee society, Sh. Deepak Talwar when confronted with these facts has admitted u/s 132(4) of the Act that the funds of the society have been used for purposes other than the charitable purposes and other than the objectives of the assessee society.

Page 44 of 61 Advantage India Vs.PC.I.T 43. The above findings of the PrCIT(Central), and the assessing officer, have not been controverted by the assessee. In fact, we find that the assessee’s sole focus is on the technical ground regarding assumption of jurisdiction by the PCIT(C) and the other facts emanating out of search and survey has been argued as conditions not relevant for the purpose of cancellation of registration.

Page 45 of 61 Advantage India Vs.PC.I.T was using the Society for his own benefits and no worthwhile charitable activities are being carried out in the Society. Mr.

Deepak Talwar has brought the commission/kickbacks (which he received for providing lobbying services to the MNCs) in the account of Advantage India so as to siphon off the funds by booking bogus expenses in the Society’s hand in the grab of carrying on charitable activities. In fact, M/s Advantage India, i.e., the Society registered u/s 12AA of the IT Act, was letting itself be used by Mr. Deepak Talwar as the conduit for laundering money in the grab of the charitable activities.

Thus the assessee’s contention that the PCIT(C) has invoked section 12AA(3) of the Act only on the basis of AO’s finding that the provisions of section 13(1)(c)(ii) is violated, is not justified. We find that the PCIT(C) has arrived at his decision to withdraw the registration after finding that the twin conditions, for cancellation of registration u/s 12AA(3), i.e., non-genuineness of activities of the Trust as well as its activities being not carried out in accordance of the objects of the Trust, is proved and established. We are therefore of the considered view that that the cancellation of registration by invoking section 12AA(3) is valid and legally permissible.

Page 46 of 61 Advantage India Vs.PC.I.T

“11. The answers given to the questionnaire by the Managing Trustee of the Trust show the extent of misuse of the status enjoyed by the Trust by virtue of registration under Section 12AA of the Act.

These answers also show that donations were received by way of cheques out of which substantial money was ploughed back or returned to the donors in cash. The facts thus clearly show that those were bogus donations and that the registration conferred upon it under Sections 12AA and 80G of the Act was completely

Page 47 of 61 Advantage India Vs.PC.I.T being misused by the Trust. An entity which is misusing the status conferred upon it by Section 12AA of the Act is not entitled to retain and enjoy said status. The authorities were therefore, right and justified in cancelling the registration under Sections 12AA and 80G of the Act”.

In view of the decisions of CIT (Exemption) vs. Batanagar Educational and Research Trust and CIT (Exemption) vs. Jagannath Gupta Family Trust (supra), we are of the considered view

Page 48 of 61 Advantage India Vs.PC.I.T that the PCIT(C)’s order to withdraw the Registration granted u/s 12AA is based on violation of the twin conditions of non- genuineness of activities of the Trust as well as its activities being not carried out in accordance of the objects of the Trust. We are therefore of the considered view that that the cancellation of registration by invoking section 12AA(3) is valid and legally permissible. The ground no 3 and its sub-ground are dismissed.

48. On the issue of the jurisdiction of the Pr. CIT(Central-2), Delhi to cancel the registration with retrospective effect, we find that the express power of cancellation were duly incorporated by the Parliament into the Income Tax Act, 1961 by way of Finance Act, 2004 vide which a specific section 12AA(3) was incorporated in the statute. Further, vide Finance Act, 2010, Section 12AA(3) was amended to include cancellation of registration granted u/s 12A. The legal dictum is that the retrospective applicability can either be expressly provided for or can be inferred by necessary implication from the language employed. The Hon'ble Supreme Court in the case of Zile Singh v. State of Haryana, (2004) 8 SCC 1 at Para 15, held as follows:

Page 49 of 61 Advantage India Vs.PC.I.T "It is not necessary that an express provision be made to make a statute retrospective and the presumption against retrospectivity may be rebutted by necessary implication especially in a case where the new law is made to cure an acknowledged evil for the benefit of the community as a whole (ibid., p. 440).This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answer the question whether the legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant: (1) general scope and purview of the statute; (in) the remedy sought to be applied; (i) the former state of the law, and (iv) what it was the legislature contemplated. (p. 388)."

“ 49. Without prejudice, the Ld. Counsel submitted that registration cannot be cancelled retrospectively without giving specific opportunity to the assessee and further, registration cannot be cancelled with retrospective date. Reliance in this regard was placed on the judgment of Allahabad High Court in the case of Agra Development Authority (2018) 90 taxmann.com 282 and of Madras High Court in the case of Auro Lab v. ITO (2019) 102 taxmann.com 225 (Madras). ****

Page 51 of 61 Advantage India Vs.PC.I.T 88. As regards reliance placed on the judgment of Madras High Court in the case of Prathyusha Educational Trust (supra) on retrospective cancellation of registration u/s. 12A/12AA, the ld. counsel submitted Hon'ble Allahabad High Court in the case of Agra Development Authority (supra) has clearly held that CIT (Exemption) is not empowered to cancel registration with retrospective effect, i.e., prior to the date of issuance of order/notice. To the same effect, there is another judgment of Hon'ble Rajasthan High Court in the case of Indian Medical Trust vs. PCIT, 414 ITR 296. **** 121. One of the key contentions raised by the ld. counsel before us is that the ld. CIT(E) does not have the power to cancel the registration from retrospective date and any such cancellation can only be prospective, i.e., from the date of passing of the order and in support of which certain decisions have also been relied upon. From a bare reading of Section 12AA (3) it is seen that, section provides that where a trust or an institution has been granted registration and if subsequently, Pr. CIT or CIT is satisfied that the activities of the trust are not genuine or are not carried out in accordance with the objects of the trust, he may cancel the registration by way of an order in writing. Consequently, if there is violation of any such conditions, then the registration so granted can be cancelled by the CIT. Nowhere, the Statute envisages that the cancellation cannot be retrospective or it has to be necessarily prospective. What it provides that the Commissioner has statutory powers to cancel the registration u/s. 12A/12AA if he finds reason to believe that the activities of the assessee are not in line with its objects or the activities carried out by the assessee are not genuine in nature. If from the date when registration has been granted, the assessee has not carried out any activity in line with its objects or the activities carried out are not genuine, then from that date itself, the registration can be cancelled because it is only when the knowledge of such breach come to the notice of the Commissioner, then he has the power to cancel the registration Page 52 of 61 Advantage India Vs.PC.I.T from the date he notices the infringement. The cancellation of registration, whether with retrospective effect or prospective, depends upon the facts and circumstances of the case and the Commissioner has power to cancel the registration from the time when such breach has occurred. Suppose, if the assessee after grant of registration carries out its activities in accordance with its objects and the activities are also genuine then the assessee is entitled for benefits of section 12AA; and if from a particular period or year, the activities are found to be either non-genuine or not carried out in accordance with its stated objects, then the Commissioner can cancel the registration from the date or period when such non genuineness is found. Hon'ble Madras High Court in the case of Prathyusha Educational Trust (supra) have clearly reiterated this proposition, relevant text of which has been already incorporated above, wherein their Lordships have held that it a misnomer to state that the order is retrospective or retroactive and the order of the cancellation of registration even passed on subsequent date would take effect from the year when cause of action arose.

"At the first blush, the Court assumed that the argument of Mr. Anirudh Krishnan is to the effect that the cancellation/withdrawal was with effect from the date of grant of exemption/registration. However, on a perusal of the order dated 18.11.2014 withdrawing the approval granted under Section 10(23C)(vi) of the Act, it is seen that it has been given effect to from the assessment year 2010-2011. Likewise the order

Page 53 of 61 Advantage India Vs.PC.I.T cancelling the assessee's registration under Section 12AA of the Act is from the assessment year 2010- 2011. Can it be said that these orders of cancellation are with retrospective effect. The definite answer for this question is an emphatic 'No'. Admittedly, the business premises of the assessee was subjected to search during the assessment year 2010-2011. The Assessing Officer while completing the assessment found large scale diversion of funds and several improper actions on the part of the assessee in direct conflict to the terms of the Deed of Trust and conditions of registration/exemption. Therefore, it was recommended to the competent authority to initiate proceedings for cancellation of the exemption/registration. The matter was decided after due opportunity to the assessee and speaking orders have been passed and obviously these orders will take effect from the assessment year 2010- 2011 and it is a misnomer to state that the orders are retrospective or retroactive. The lis which was the subject matter is for the assessment year 2010-2011 and though the orders of cancellation of the exemption/registration was passed on 18.11.2014 and 07.12.2016 they would take effect from the assessment year 2010-2011 during which year the cause of action arose. This being the factual position, the decision in the case of Aura Development Authority is not applicable to the facts of the present case.

52. In Mumbai Cricket Association vs. DIT, (2012) 24 taxmann.com 99 (Mum), the Tribunal held that registration of a charitable institution could be cancelled u/s. 12AA(3) with retrospective effect. In such a scenario, we are of the Page 54 of 61 Advantage India Vs.PC.I.T considered view that the PrCIT(Central) had the necessary authority to cancel the registration with retrospective effect, since the activities of the trust are not found to be

The evidences found during the search/survey show that the assessee’s indulgence in non-genuine activities commenced from June 2012 and continued till 2016. The fact of violation of conditions under section 11 and 13 of the Act are not the sole ground by itself which has led the PCIT(C) to the conclude that the activities are not in accordance with the objects the trust. At this juncture it would be apt to recall the 5 judge bench decision of the hon’ble Supreme Court in the case of Commissioner Of Customs (Import), Mumbai vs M/S. Dilip Kumar And Company dated 30 July, 2018 reported in AIR 2018 SUPREME COURT 3606, reversing the decision of 3 judge bench of Supreme Court in the case of Sun Export Corporation, Bombay v.

Collector of Customs, Bombay, (1997) 6 SCC 564 and held that an ambiguity in a tax exemption provision or notification must be Page 57 of 61 Advantage India Vs.PC.I.T interpreted so as to favour the Revenue claiming the benefit of such exemption, had laid down the law as follows:

Page 58 of 61 Advantage India Vs.PC.I.T 56. In conclusion, we hold that the Society was in cohorts with its ex-president in acting as a conduit for bringing commission/liasoning fees and converting them into cash by taking bogus bills/entries since June 2012. The assessee Society has failed to discharge its onus to strictly demonstrate that its activities were genuine and it was conducting its activities to further its objectives. Since the evidence show that the Society commenced its non-genuine activities that do not align with its objectives, from the year June 2012, the PCIT(C)’s cancellation of Registration order retrospectively w.e.f 27.09.1999, needs some modification as the registration cannot be cancelled from a period prior to 01.10.2004 when the express power to cancel was granted to the competent authority. We therefore, modify the PCIT(C) order withdrawing the registration granted to the extent that it be effective from the June 2012 in FY 2012-13, instead of 27.09.1999, till the date of order of cancellation. The ground No 4 of appeal is partly allowed.

Page 59 of 61 Advantage India Vs.PC.I.T 57. In conclusion, the grounds of appeal no 1 to 3 and its sub-ground are dismissed and ground no 4 is partly allowed.

The order is pronounced in the open court on 18.09.2025.