Scope of Enquiry and Jurisdictional Validity in Renewal of Trust Registration

By | May 7, 2026
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Scope of Enquiry and Jurisdictional Validity in Renewal of Trust Registration

Facts

  • Background: The Assessee is an educational society originally registered under Section 12AA. Following a search on the group, its registration was cancelled, but the Tribunal later set aside that cancellation.

  • New Scheme Compliance: Under the revamped registration regime, the Assessee obtained provisional/regular registration (Form 10AC) for AYs 2022-23 to 2026-27.

  • Settlement Commission: For historical search years (AY 2013-14 to 2020-21), the Settlement Commission admitted the Assessee’s plea, noting no conclusive evidence of siphoning or diversion of funds.

  • The Dispute: The Assessee applied for a five-year renewal of registration under Section 12A(1)(ac)(ii).

  • Rejection: The Principal Commissioner (Central) rejected the renewal by relying on search material from AY 2014-15 to 2019-20 and the income disclosed before the Settlement Commission.

  • Jurisdiction Issue: The application was originally filed before the Commissioner (Exemptions) but was transferred to and adjudicated by the Principal Commissioner (Central) due to the “centralization” of the Assessee’s PAN.

Decision

  • Final Verdict: In favour of the Assessee (Registration directed to be renewed).

  • Ratio Decidendi:

    • Limited Scope of Section 12AB: The Court held that the enquiry for renewal is strictly limited to the genuineness of activities and compliance with other laws.

    • Temporal Restriction: Per Rule 17A, the Commissioner’s examination is restricted to the three immediately preceding years. By relying on search material from 2014-15, the Principal Commissioner exceeded his statutory mandate.

    • Improper Linkage: Renewal proceedings cannot be used as a back-door for cancellation proceedings. Since the activities (education) were per se charitable and the AO confirmed their genuineness, renewal could not be denied based on “stale” search material.

    • Lack of Jurisdiction: Following established precedents and Notifications No. 52 and 53 of 2014, the power to adjudicate registration/renewal rests solely with the Commissioner (Exemptions). The Principal Commissioner (Central) lacks subject-matter competence and territorial jurisdiction for Section 12AB orders, even if the PAN is centralized for assessment.

Key Takeaways

  • Jurisdictional Shield: “Centralization” of a case for search assessment does not automatically grant the Central Circle PCIT the power to cancel or refuse 12AB registration. Always verify the designation of the officer passing the order against CBDT notifications; orders by non-Exemption Commissioners are void ab initio.

  • The “Three-Year” Rule: Use Rule 17A to block the Department from digging into old search materials during a renewal cycle. The law explicitly limits their gaze to the three years immediately preceding the application.

  • Genuineness vs. Disclosure: Disclosure of income before a Settlement Commission or during a search does not automatically render a trust’s activities “non-genuine,” especially if the core activity (education) continues to be performed.

  • IT Act 2025 Preparedness: Under the renumbered Sections 332 and 351, the separation of “Assessment Jurisdiction” (Central Circle) and “Registration Jurisdiction” (Exemption Wing) remains a critical compliance check for Chartered Accountants.

IN THE ITAT CHANDIGARH BENCH ‘B’
Shri Guru Ram Dass Educational Society
v.
Deputy Commissioner of Income-tax/ACIT, Central-2*
Rajpal Yadav, Vice President
and Manoj Kumar Aggarwal, Accountant Member
IT Appeal No. 224 (CHD.) of 2026
[Assessment year 2026-27]
APRIL  28, 2026
Rohit Kapoor, Adv. and Virsain Aggarwal, ITP for the Appellant. Smt. Kusum Bansal, CIT DR for the Respondent.
ORDER
Rajpal Yadav, Vice President.- The assessee is in appeal before the Tribunal against the order of ld. Pr. Commissioner of Income Tax (Central) Gurgaon [in short ‘the ld. PCIT’] dated 26.12.2025 passed in Form No. 10AD whereby ld. PCIT rejected the renewal of registration claimed u/s 12A(1)(ac)(ii) of the Income Tax Act.
2. Though the grievance of the assessee revolves around two fold of issues, namely,
(a) The ld. PCIT has no jurisdiction to adjudicate application for renewal of registration u/s 12A(1)(ac)(ii) ;
(b) The ld. PCIT has erred in rejecting this application and declining the prayer of assessee for grant of registration.
The other issues pleaded in the grounds are peripheral arguments but we deem it appropriate to take note of the pleadings made by the assessee in the grounds of appeal which read as under :
1. The order rejecting renewal of registration of the assessee society under 12A(1)(ac)(ii) of the Act, dated 26.12.2025, passed by the learned PCIT(Central) is bad in law, contrary to facts, and based on erroneous interpretation of statutory provisions and judicial precedents, and is therefore liable to be set aside.
2. That the jurisdiction assumed by the learned PCIT (Central) Gurgaon in the proceedings under section 12A of the Act is bad in law on account of following:
2.1 That the PCIT (Central), Gurgaon has erred in exercising jurisdiction in a proceedings under section 12A of the Act in the case of the assessee society since, in view of Notification No. 52/2014 [F.No.187/38/2014(ITA.I)], the jurisdiction to take any action regarding registration under section 12A of the Act in the instant case, vested exclusively with the Ld. CIT (Exemptions), Chandigarh.
3. That the learned PCIT (Central), Gurgaon exceeded the jurisdiction vested in law in a proceeding under section 12A of the Act on account of following:
3.1 That the learned PCIT (Central), erred in law by relying on records of A.Ys. 2014-15 to 2019-20 in the Show Cause Notice dated 17-12-2025 and final rejection order dated 26.12.2025, which is in contravention to Rule 17A of the Income-tax Rules, 1962, which permits examination of only three assessment years preceding the year of application. As the application before learned PCIT (Central) pertained to A.Y. 202627, only A.Ys. 2023-24 to 2025-26 could have been examined; hence, the show cause notice based on earlier years is legally untenable.
3.2 That the impugned order of the Ld. PCIT (Central), Gurgaon, founded solely on allegations relating to Assessment Years 2014-15 to 2019-20 (i.e., prior to 01.04.2022), is unsustainable in law, as the appellant trust had already been granted registration on 15.10.2021 for AYs 2022-23 to 2026-27, after the search dated 03.10.2019, and no adverse action could thereafter be taken on the basis of alleged past violations.
4. That the order of learned PCIT (Central), Gurgaon is violative of principles of natural justice since;
4.1 The learned PCIT (Central), Gurgaon, erred in cancelling the registeration of the assessee society on various grounds which were never show caused to the assessee, hence, the order dated 26.12.2025 is bad in law.
5. That the order of the learned PCIT (Central), Gurgaon, is legally flawed and hit by the principle of judicial discipline since;
5.1 That the Ld. PCIT (Central), Gurgaon has erred in law and on facts in cancelling the registration of the appellant trust by completely ignoring the fact that the order passed by the Income-tax Settlement Commission (IBS) under section 245D(4) contains no finding, observation, or direction whatsoever for withdrawal or denial of exemption to the appellant trust on the basis of the allegations made by the Department. That in the absence of any such adverse finding in the order passed under section 245D(4), the impugned cancellation of registration is arbitrary, without jurisdiction, and unsustainable in law.
6. That the learned PCIT (Central) has erred in law and on facts in rejecting the appellant’s application ignoring the actions of the Learned Jurisdictional Assessing Officer;
6.1 The learned PCIT (Central) erred in rejecting the application of the assessee on issues pertaining to Assessment Years 2014-15 to 2019-20, by completely ignoring the fact that no reference was made by the Assessing Officer, as mandated under the second proviso to section 143(3), for the Assessment Years 2014-15 to 2019-20, despite the fact that the order of the Settlement Commission was passed on 30 December 2023.
6.2 The learned PCIT (Central) erred in rejecting the application of the assessee trust while completely ignoring the fact that learned Assessing Officer had duly submitted an inspection report of the assessee trust affirming that it is conferring education to around 40,000 students as per its objectives.
7. That the PCIT(Central) erred in law and on facts in cancelling the registration of the appellant by alleging that the genuineness of activities and compliance with the requirements of other laws had not been complied with. The learned PCIT failed to bring on record any cogent material or documentary evidence to demonstrate which specific provisions of any other law were violated, or how the activities of the trust were not genuine. The cancellation is thus based on vague, unsubstantiated allegations and is arbitrary, unjustified, and liable to be quashed.
8. That the Ld. PCIT (Central), Gurgaon has erred in law and on facts in rejecting the exemption/registration of the appellant society by making various unfounded assertions regarding alleged misutilisation of funds, which are contrary to the material on record and the binding findings of the Settlement Commission.
8.1 That the Ld. PCIT (Central) has erred in law and on facts in rejecting the registration by ignoring the categorical findings of the Settlement Commission that no siphoning, diversion, or misutilisation of funds was established, and that the mere absence of vouchers relating to capital work-in-progress cannot, by itself, justify any adverse inference. The allegation of diversion of funds by the trustees, being wholly unsupported by evidence, is arbitrary and unsustainable in law.
8.2 That the Ld. Pr. CIT(C) has erred in law and on facts in rejecting the application for registration by relying upon seized material which is prior to the introduction of section 12AB and unrelated to the year under consideration, without appreciating that such material partly represented anonymous donations and partly income already offered to tax by the trustee i.e Rashpal Singh Dhiman, and that no funds were siphoned off or used for the personal benefit of the trustee. The rejection of registration on such basis is beyond the scope of enquiry at the registration stage and is unsustainable in law.
9. The appellant craves leave to add, amend or alter any of the grounds of appeal.
3. The brief facts of the case are that assessee Society ‘Shri Guru Ram Dass Educational Society’ came into existence when it was registered under Societies Registration Act, 1860 vide Registration No. 260 of 2000-2001 dated 25.08.2000. The assessee Society was engaged in the field of education since its inception and has been duly approved by the Punjab State Legislative Assembly. It is duly recognized by the University Grant Commission (UGC) u/s 2F of the UGC Act, 1956 and is empowered to confer Degrees in accordance with Section 22(i) of the said Act. The ld. counsel for the assessee has pointed out that assessee has been awarded a prestigious University of A+ Grade by the National Assessment and Accreditation Council (NAAC). Thus, A+ accreditation places the University amongst India’s most distinguished and reputed educational Institution.
4. The ld. counsel for the assessee has filed brief synopsis running into 29 pages wherein he has filed the details in tabular form exhibiting the date of registration granted by the Income Tax Authorities u/s 12A till the present proceedings and which are the documents assessee has placed in the Paper Book. Therefore, in order to appreciate such details in more scientific manner, we deem it appropriate to take note of them from the written submissions filed by the assessee, which read as under :
Sl. No Particulars Section Date Remarks
1 Registration Granted 12AA 31-10-2001 Registration granted under Section 12AA of the Income-tax Act, 1961 (Refer page no. 1 of PB)
2 Search on Chandigarh Group 132 03-10-2019 Search conducted under Section 132 of the Act.
3 Cancellation of Registration 12AA(4) 22-03-2021 Registration cancelled by invoking Section 12AA(4).
4 Appeal before ITAT -Matter Rv. stored 31-08-2021 ITAT set aside cancellation and remanded matter for fresh adjudication (Refer page nos. 92-124 of PB-2)
5 Application before Interim 3oard for Settlement 245C 17-09-2021 Application filed seeking settlement of issues.
6 Application in Form 10AC 12A(l)(ac)(i) 15-10-2021 Application filed for registration under amended provisions post 01-04- 2021 and granted registration from AY 2022-23 to AY 2026-27 (Refer page no. 2-4 of PB)
7 Appeal before Punjab & Haryana High Court 260A 03-02-2022 Department filed appeal; substantial questions of law admitted
8 Order by IBS 245D(4) 30-12-2023 Settlement order passed; binding on the Department (Refer page no. 23-88 of PB)
9 Assessment Order for AY 2022-23 143(3) 29-03-2024 Accepted the activities of the trust as genuine (Refer page nos. 89-91 of PB- 2)
10 Transfer of Exemption application by CIT(E) to PCIT(C) 13-11-2025 (Refer page no. 3 of rejection order)
11 Report of AO in response to PCIT letter dated 04-12-2025 04-12-2025 (Refer page nos.136-138 of PB-2)
12 Application in Form 10AB 12A(1)(ac)(ii) 19.05.2025 Registration rejected by PCIT (Central) (Refer page Nos. 5-13 of PB)

 

5. It has been pointed out that a search was conducted u/s 132 of the Income Tax Act, 1961 on the premises of appellant alongwith premises of other universities, namely, Chandigarh Educational Trust and Chandigarh Educational Society on 03.10.2019. In order to give a logical end to the proceedings, notice u/s 153A was issued by the AO for assessment years 2014-15 to 2019-20. The assessee had filed an application before Interim Board for settlement which is being presided by three Commissioners of the Income Tax Department. Such application was filed on 17.09.2021 and the Commission has admitted the application for settlement of dispute and ultimately passed order u/s 245D on 30.10.2023 for assessment year 2013-14 to 2020-21. In between, the registration granted to the assessee u/s 12AA dated 31.10.2001 has been cancelled by passing an order u/s 12AA(4) on 22.03.2021.
6. Dissatisfied with the order, assessee carried the matter in appeal before the ITAT and filed an appeal bearing ITA No.98/CHD/2021. The Tribunal has decided three appeals, namely, Chandigarh Educational Trust v. Pr. CIT [IT Appeal Nos. 96 to 98 (CHD) of 2021] in the case of Chandigarh Educational Trust, Chandigarh Educational Society and in the case of the assessee, namely, Shri Guru Ram Dass Educational Society, Chandigarh. The Tribunal has set aside the order of ld. Pr. Commissioner of Income Tax vide order dated 31.08.2021 and restored the issues for fresh adjudication to the file of ld. PCIT. However, Department was not satisfied with the order of the ITAT and carried the matter in appeal before the Hon’ble High Court vide ITA Nos. 51, 94 and 73 of 2022. A Notice of Motion was issued on 23.11.2023 for 14.03.2024. According to the assessee, these appeals are still pending and matter is sub-judice before the Hon’ble High Court.
7. The assessee has filed application for grant of registration u/s 12A of the Income Tax Act after change of the Scheme of Registration vide Finance Act, 2020 w.e.f. 01.04.2021. It was granted registration from assessment year 2022-23 to assessment year 2026-27. The copy of the registration is available on page No. 2 & 4 of the Paper Book. Since the registration was granted for a specific period, therefore, according to the Scheme of the Act, assessee was required to get it renewed u/s 12A(1)(ac)(ii) of the Income Tax Act from the ld. CIT(E), Chandigarh. The assessee has filed an application with the office of ld. CIT (Exemptions) Chandigarh and ld. CIT (E) Chandigarh has transferred the case of the assessee to the office of Pr. CIT, Central, Gurgaon on 26.11.2025 on the ground that PAN of the assessee was centralized under the charge of Pr. Commissioner of Income Tax (Central) Gurgaon. It is also reflected in the impugned order that notice u/s 129 of the Income Tax Act was also issued to the assessee for informing that jurisdiction over it has been transferred to the PCIT, Central, Gurgaon. The PCIT, Central, Gurgaon before issuing a Show Cause Notice to the assessee has called for a report from the AO and copy of such report is available on page No. 136 of the Paper Book which we deem it appropriate to reproduce. The same reads as under :
7.1. The ld. PCIT had issued a notice u/s 12AB sub-section (4) of the Income Tax Act on 17.12.2025 and copy of this notice is available on page No. 19 to 20 of the Paper Book. In response to the notice of ld. PCIT, assessee has filed the details and replied the alleged allegations made by the ld. PCIT in the Show Cause Notice. However, after hearing the assessee, ld. PCIT has rejected the application for grant of renewal u/s 12A(1)(ac)(ii) of the Act vide impugned order dated 26.12.2025. However, at the last page of this order, ld. PCIT has recorded that proceedings u/s 12AB sub-clause (4) would be initiated separately, whether assessee has committed any specified violation as contemplated in explanation appended to Section 12AB (4) of the Act for cancellation of registration.
8. Before we embark upon an enquiry on the facts and circumstances for denial of registration u/s 12A(1)(ac)(ii) in the case of the appellant, we deem it appropriate to take note of the relevant provisions contemplating the procedure required to be followed for grant of registration as well as cancellation of registration.
9. We have duly considered the rival contentions and gone through the record carefully. Section 12A(1)(ac) and Section 12AB(1) have direct bearing on the controversy, therefore, we deem it appropriate to take note of these two provisions, which read as under :
12A(1)
The provision of Section 11 and 12 shall not apply in relation to the income of any Trust or Institution unless the following conditions are fulfilled :
(a) x x x
aa) x x x
ab) x x x
ac) notwithstanding anything contained in clauses (a) to (ab), the person in receipt of the income has made an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution,

—(i) where the trust or institution is registered under section 12A [as it stood immediately before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] or under section 12AA [as it stood immediately before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (38 of 2020)], within three months from the first day of April, 2021;

(ii) where the trust or institution is registered under section 12AB and the period of the said registration is due to expire, at least six months prior to expiry of the said period;

(iii) where the trust or institution has been provisionally registered under section 12AB, at least six months prior to expiry of period of the provisional registration or within six months of commencement of its activities, whichever is earlier;

(iv) where registration of the trust or institution has become inoperative due to the first proviso to sub-section (7) of section 11, at least six months prior to the commencement of the assessment year from which the said registration is sought to be made operative;

(v) where the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, within a period of thirty days from the date of the said adoption or modification;

(vi) in any other case, where activities of the trust or institution have –

(A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought;

(B) commenced and no income or part thereof of the said trustor institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of Section 10, or Section 11 or Section 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities and such trust or institution is registered under Section 12AB;]

x x x

12AB. [Procedure for fresh registration.

12AB. (1)The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,—

(a)where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years;

(b)where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) or item (B) of sub-clause (vi) of the said clause,-

(i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about—

(A) the genuineness of activities of the trust or institution; and

(B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects;

(ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i),—

(A) pass an order in writing registering the trust or institution for a period of five years; or

(B) if he is not so satisfied, pass an order in writing-

(I) in a case referred to in sub-clause (ii) or subclause (iii) or sub-clause (v) of clause (ac) of subsection (1) of Section 12A rejecting such application and also cancelling its registration ;

(II) in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of sub-section (1) of Section 12A, rejecting such application, after affording a reasonable opportunity of being heard;

(c) where the application is made under item (A) of sub-clause (vi) of the said clause or the application is made under sub-clause (vi) of the said clause, as it stood immediately before its amendment vide the Finance Act, 2023, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the trust or institution.

x x x

10. A perusal of the above clauses would indicate that by way of Finance Act, 2020 w.e.f. 01.04.2021, a new Scheme of Registration has been provided. It is evident from reading of Section 12A(1)(ac)(i) to (vi) of the Act that in order to claim benefit of Sections 11 and 12, if any Trust or Institution is in receipt of income, it has to file an application in the prescribed form and manner to the Pr. Commissioner or Commissioner for registration of the Trust or Institution. Sub-clause (i) to (vi) of Section 12A(1)(ac) further provided different conditions on whose fulfilment, application is to be made. In the present case, application has been filed under Section 12A(1)(ac)(ii). It is pertinent to note that if a Trust was in existence prior to this new Scheme of registration, then it has to apply under subclause (1) within three months from the 1st day of April, 2021. If the Trust or Institution has been registered u/s 12AB, then atleast six months prior to the expiry of the said period. Registration u/s 12AB has been contemplated under the new Scheme w.e.f. 01.04.2021. Similarly, a new Trust which has come into existence after 01.04.2021 and has applied for registration, which was granted provisional registration, would require to apply for a regular registration which will be granted u/s 12A(1)(ac)(ii) for a period of five years. There is no dispute in the present case that assessees have applied for grant of regular registration u/s 12A(1)(ac)(ii) of the Act.
11. Section 12AB of the Act further provides the procedure for grant of the fresh registration. A perusal of the above provision would indicate that if an application is being made under sub-clause (1) of Section 12A(1)(ac), then ld. Pr. Commissioner or the Commissioner would pass an order in writing registering the Trust or Institution for a period of five years but where application is being made for grant of registration u/s 12A(1)(ac) sub-clause (ii) to (vi), then ld. Commissioner would call for such documents or information from the Trust or Institution or make such enquiry as he thinks necessary in order to satisfy himself about ;
(a) The genuineness of activities of the Trust or Institution,
(b) The compliance of such requirements of any other law for the time being in force by the Trust or Institution as are material for the purpose of achieving its objectives.
Thus, primary requirement would be to find out whether activities of the Trust are genuine and it has fulfilled the requirements of any other law for the time being in force. In other words, objectives of the assessee Trust should be genuine and that it is not engaged in any unlawful activities or failed to comply with other laws of the country.
11.1 On satisfaction of above conditions, ld. Pr. Commissioner or Commissioner would pass an order in writing registering the Trust or Institution for a period of five years and if not satisfied, then pass an order in writing rejecting such application. Before rejecting the application, a reasonable opportunity of being heard is to be provided.
11.2 At this stage, we deem it appropriate to take note of Section 12AB(4) which empowers the Pr. Commissioner or the Commissioner to cancel any provisional or regular registration. It is salutary upon us to take note of this clause, which reads as under :
“Procedure for fresh registration.
12 AB(1). x x x
x x x x
(4) Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,—

(a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or

(b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or

(c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year,

the Principal Commissioner or Commissioner shall—

(i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation;

(ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place;

(iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations;

(iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such trust or institution.

Explanation.—For the purposes of this sub-section, the following shall mean “specified violation “,—

(a) where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or

(b) the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or

(c) the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public; or

(d) the trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste; or

(e) any activity being carried out by the trust or institution—

(i) is not genuine; or

(ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered; or

(f) the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such noncompliance has occurred, has either not been disputed or has attained finality; or

(g) the apo referred to in clause (ac) of sub-section (1) of Section 12A is not complete or it contains false or incorrect information.

(5)The order under clause (ii) or clause (iii) of sub-section (4), as the case may be, shall be passed before the expiry of a period of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, on or after the 1st day of April, 2022, calling for any document or information, or for making any inquiry, under clause (i) of sub-section (4).]]
12. A perusal of above provision would indicate that it empowers the Pr. Commissioner or Commissioner to call for such document or information from the Trust or Institution or make such enquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation. If there is any specified violation, then he would pass an order in writing, cancelling the registration of such Trust, granted under sub-clause (a) clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of Section 12AA. The Explanation appended to this Section further provides the meaning of expression ‘specified violations’. These violations are contemplated in clause (a) to (g) of the Explanation extracted supra.
12.1 ‘Specified violation’ is that if a Trust has been drawing income from the property held under a Trust, wholly or partly, which is charitable or religious in nature and such income has been applied other than for the objects of the Trust, meaning thereby, if income is not being applied for the objects of the Trust, then it would be construed a ‘specified violation’ on whose fulfilment, registration can be cancelled. The second condition is, the Trust or Institution has income from profits and gains of a business which is not incidental to attainment of its objects but separate books are not being maintained. For example, Hon’ble Gujrat High Court in the case of Sabarmati Gaushala has held that object of the Society was to develop the breed but any income earned by the Society from sale of semen was only incidental qua the main object of developing the breeds of the milking cows. If there is no incidental income, then assessee is required to maintain separate books of account and if assessee failed in maintaining such books then this would be a ‘specified violation’.
12.2. The next ‘specified violation’ under clause (c) is that if any part of income is applied from the property, held under a Trust for profit on religious purpose which does not exist for the benefit of public at large, then such a situation would be a ‘specified violation’ for cancelling the registration. Similarly, if any other income is applied for particular religious entity or cause, then it would fall within the ambit of a specified violation contemplated in clause (d). Under (e), it has been provided that any activity carried out by the institution or the Trust is not genuine or is not being carried out in accordance with all or any of the conditions subject to which it was registered. Meaning thereby, assessee has to fulfil the conditions of registration as well as its activities should be genuine in accordance with objects. If there is any shortcoming in this area, then it would be considered as ‘specified violation’. The Trust has failed to comply with requirement of any other allied law as contemplated in subclause (i) or clause (b) of sub-section (1) of Section 12AB. In other words, if any specified law being violated, then it would fall within specified violation for cancellation of registration. The last violation provided in this Explanation is that if Registration Certificate is being obtained by submitting false or incorrect information, then registration could be cancelled. It is pertinent to note that after the search action, registration of the assessee was cancelled by the ld. PCIT vide order dated 22.03.2021 and the assessee has challenged the order of the ld. PCIT before ITAT vide ITA No.98/CHD/2021. The Tribunal has decided three appeals, namely, ITA 96 to 98/CHD/2021 for three assessees, namely, Chandigarh Educational Trust, Chandigarh Educational Society and the assessee. The Tribunal has allowed all these appeals of the assessees and set aside the cancellation order. However, an opportunity has been given to the ld. PCIT to adjudicate the cancellation of registration afresh.
12.3. As observed earlier, the Department was not satisfied with the order of the ITAT and appeals have been filed before the Hon’ble High Court bearing ITA No. 51, 94 and 73 of 2022. The Hon’ble High Court has issued Notice of Motion on 23.11.2023. According to the assessee, the appeals are still pending. Thus, as far as the issue regarding cancellation of registration, which was earlier granted to the assessee and cancelled by the Pr. CIT is sub-judice before the Hon’ble High Court, though Department is at liberty to re-adjudicate the issue but that has not been taken up by the ld. PCIT, Central, Gurgaon. He has only observed that such proceeding would be initiated.
13. The issue before us is, whether assessee deserves to be granted registration u/s 12A(ac)(ii) of the Income Tax Act or not ? In other words, it is just renewal of registration already granted to the assessee by the Department from assessment years 2022-23 to 2026-27. The copy of the registration granted by the Income Tax Department is available on page Nos.2 to 4 of the Paper Book. As observed, while construing Section 12A(1)(ac) for grant of registration, it has been contemplated in the Act that ld. PCIT or the Commissioner would pass an order in writing registering the Trust or Institution for a period of 5 years on conducting an enquiry as he thinks necessary in order to satisfy himself about :
(a) The genuineness of activities of the Trust or Institution;
(b) The compliance of such requirements of any other law for the time being in force by the Trust or Institution as are material for the purpose of achieving its objectives.
13.1 It is further observed that in order to conduct an enquiry on these aspects, ld. PCIT has called for a report from the AO and copy of such report is available on the record, we have extracted in the upper part of the order.
14. The ld. counsel for the assessee has filed synopsis running into 29 pages. He took us through the submissions as well as the case laws relied upon by him. On the other hand, ld. CIT DR took us through the impugned order and emphasized that ld. PCIT has made reference to the material discovered during the course of search. They would demonstrate that assessee has not carried out its activities according to its objectives and thus, case of the assessee duly falls within the first limb of ‘enquiry’ i.e. its activities are not genuine.
15. We have duly considered the rival contentions and gone through the record carefully. It is pertinent to note that the assessee was originally granted registration u/s 12AA on 31.10.2001. W.e.f. Finance Act, 2020, the Scheme to grant registration to ‘Charitable Institution’ has been changed and assessee has applied for grant of registration in Form No. 10AC on 15.10.2021. This claim was made after the search carried out upon the assessee on 03.10.2019. This was processed by the Department and registration has been granted from assessment year 2022-23 to assessment year 2026-27. Copy of the order is available on page No. 2 to 4 of the Paper Book. When this registration was going to expire, then assessee has applied for grant of renewal u/s 12A(1)(ac)(ii) on 19.05.2025. It is an application for renewal of registration already granted to the assessee. The ld. PCIT had called for report of the AO which we have extracted above and thereafter he had issued notices on 17.12.2025 u/s 12AB(4) of the Income Tax Act. Copies of these notices are available on the record in the Paper Book. The ld. PCIT, thereafter, made an analysis of the material discovered during the course of search and devoted lots of energy in pointing out as to why this renewal is not to be granted. The ld. counsel for the assessee has filed two Paper Books running into 726 pages wherein it has placed on record large number of case laws. Identical case laws have been cited before us in a similarly situated appeals bearing ITA No.225 and 226/CHD/2026 in the case of Chandigarh Educational Trust and Chandigarh Educational Society. The Index of Case-law’s Paper Book reads as under :
Sr no. Name of the Case Citation Tribunal/Court
CASE LAWS REGARDING NO CANCELLATION OF REGISTRATION ON ABSENCE OF BILLS OR VOUCHERS
1. Kunhitharuvai Memorial Charitable Trust v. CIT (Central) [IT Appeal No. 246 (Coch.) of 2014, dated 16-1-2018]/2017 (1)TMI 1671 ITAT COCHIN
2. Kosuke Sports Foundation v. Dy. CIT [IT Appeal Nos. 1194 and 1195 (PUN) of 2025, dated 29-08-2025]/2025 (II)TMI 452 ITAT PUNE
3. Saraswati Educational & Welfare Society v. CIT, Exmp [IT Appeal No. 157 (Asr.) of 2020, dated 16-8-2021]/2021 (9) TMI 840 ITAT AMRITSAR
4. CIT v. B.K.K. Memorial Trust Punjab & Haryana
5. CIT v. Baba Deep Singh Educational Society Punjab & Haryana
6. DIT v. Garden City Educational Trust Karnataka
7. CIT v. Surya Educational & Charitable Trust  53/[2013] 355 ITR 280 (Punjab & Haryana) Punjab & Haryana
8. CIT v. Red Rose School   (Allahabad) HIGH COURT OF ALLAHABAD
9. Ajit Education Trust v. CIT [2010] 42 SOT 415 (Ahmedabad – ITAT) ITAT AHMEDABAD
10. Mata Parvati Educational & Innovative Society v. CIT (E) [IT Appeal No. 2296 (DEL) of 2018, dated 29.03.2019]/2019 (4) TMI 213 ITAT DELHI
11. Vidyadayani Shiksha Samiti v. CIT (Exemption) [IT Appeal No. 309 (Delhi) of 2016, dated 14-12-2017]/2017(12] TMI1251 ITAT DELHI
12. Bhartiya Kisan Sangh Sewa Niketan v. CIT (Exemptions) (Delhi – Trib.)/ 2017(8] TMI 1065 ITAT DELHI
CASE LAWS REGARDING PROSPECTIVE APPLICATION OF SECTION 12AB
13. Ram Saran Das Kishori Lal Charitable Trust v. CIT (Exemption)  (Delhi – Trib.) ITAT DELHI
14. Islamic Academy of Education v. Pr. CIT (Central)  (Bangalore – Trib.) ITAT BANGALORE
15. CIT v. Apeejay Education Society   (Punjab & Haryana)/2015 (4) TMI 303 PUNJAB & HARYANA HIGH COURT
16. CIT(Central) v. Islamic Academy of Education (Karnataka)/2015(9] TMI 450 KARNATAKA HIGH COURT
17. M.M. Patel Charitable Trust v. Pr. CIT (Central) PUNE TRIBUNAL
18. Seth PannaLal Charitable Trust v. CIT (Exemptions) DELHI TRIBUNAL
19. Raya Naik Memorial Gowshala Trust v. CIT (Exemptions)   (Bangalore – Trib.) BANGALORE TRIBUNAL
20. Vishwayatan Yogasharam v. CIT (Exemption) [IT Appeal No. 428 (Asr) of 2016, dated 13-12-2017]/2017 (21) TMI 1546 ITAT AMRITSAR
21. Prabhat (A House of Hope for Special Children) v. CIT (Exemptions) Chandigarh, And Vice-Versa [IT Appeal Nos. 687 & 688/Chd/2015, dated 9-2-2016]/2016(21 TMI ITAT
1097 CHANDIGARH
22. Gopsai Avinandan Sangha v. CIT (Exemption), Kolkata reported in [IT Appeal Nos. 232 & 233 (KOL) of 2020, dated 12-04-2021]/2021 (4) TMI 731 ITAT KOLKATA

 

CASE LAWS REGARDING ALLEGED VIOLATIONS OF EARLIER YEARS CANNOT BE RELIED UPON FOR INVOKING SECTION 12AB(4) IN THE CURRENT YEAR.
23. Punjab Heritage & Tourism Promotion Board v. CIT (Exemptions) ITAT CHANDIGARH
24. Dera Sacha Sauda v. Pr. CIT (Central) [IT Appeal No. 21 (CHD) of 2024, dated 25-04-2025]/2025 (4) TMI 1736 ITAT CHANDIGARH
25. Aryans Educational & Charitable Trust v. CIT(Exemptions) ITAT CHANDIGARH
26. Ram Saran Das Kishori Lal Charitable Trust (supra)
27. Rukmini Educational Charitable Trust v. Pr. CIT (Central) ITAT BANGALORE
28. Sushila Devi Centre for Professional Studies and Research v. Pr. CIT (Central) ITAT DEHRADUN
29. Lakhmi Chand Charitable Society v. Pr. CIT, Central ITAT Delhi
30. Sushila Devi Centre for Professional Studies and Research (supra)
CASE LAWS REGARDING LACK OF JURISDICTION WITH PCIT
31. Aggarwal Vidya Pracharni Sabha v. Pr. CIT [IT Appeal No. 1308 (Delhi) of 2023, dated 8-1 2024] ITAT Delhi
32. Pacific Academy of Higher Education and Research Society v. Pr. CIT (Central) [IT Appeal No. 4 (Jodh) of 2020, dated 25-1-2023]/2023 (l)TMI ITAT
1283 JODHPUR
33. Lala Sher Singh Memorial Jeevan Vigyan Trust Society v. Pr. CIT (Central) DELHI TRIBUNAL
34. Meenakshi foundation v. Pr. CIT DELHI TRIBUNAL
35. Hemkunt Foundations v. Pr. CIT, Central  DELHI TRIBUNAL
36. Dera Sacha Sauda (supra)
37. ITAT DEHRADUN
38. Wholesale Cloth Merchant Association v. Pr. CIT (Central) [IT Appeal No.688 (JP) of 2019, dated 6-1-2021]/2021 (1) TMI 876 ITAT JAIPUR
39. Devi Shakuntala Thkaral Charitable Foundation v. Pr. CIT (Central) [IT Appeal Nos.117 (Ind) of 2020, dated 29-7-2022]/2022 (7) TMI 1591 ITAT INDORE
40. Oriental University Indore v. Pr. CIT (Central) [IT Appeal Nos.115 & 116 (Ind) of 2020, dated 29-7-2022]/2022 (7) TMI 1609 ITAT INDORE
41. Arya Smaj Model Town v. Pr. CIT, Central (Delhi – Trib.)/2025 (7) TMI 31 ITAT DELHI

 

UNSIGNED CANCELLATION ORDER
42. Ambernath City Hospital (P.) Ltd. v. UOI [  (Bombay) HIGH COURT OF BOMBAY
43. Reuters Asia Pacific Ltd. v. Dy. CIT, International Taxation ITAT MUMBAI
44. Vijay Corporation v. ITO ITAT MUMBAI

 

15.1 The ld. counsel for the assessee has also apprised us with Rule 17A sub-rule (e) which contemplates as under :
“Where the Trust or Institution has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the Annual Accounts of the Trust or Institution relating to such prior year or years (not being more than three years immediately preceding in the year in which the said application is made for which such accounts have been made up. “
15.2 There is no dispute with regard to the fact that assessee is existing for the purpose of imparting education. This fact is discernable from the record of the AO as well as the observations made by the Settlement Commission. It is catering the needs of 12000 students. It is pertinent to take note of Section 2(15) which provides the definition of expression ‘Charitable Purpose’. This Section contemplates ‘Charitable Purpose’ which includes relief to the poor, education, yoga, medical relief, preservation of environment including watersheds, forests, wild life and preservation of monuments or places or objects of artistic of historic interest. It further contemplates advancement of any other object of general public utility. Thus, this definition contemplates two folds of activities :
(a) Activities which are per-se charitable, namely education, yoga, medical relief, relief to poor, etc.
(b) The advancement of any other object of general public utility.
15.3 In the present case, assessee is imparting education. Thus, its activities fall within the first limb of the definition of ‘Charitable Purpose’ provided in Section 2(15), hence, its activities are per-se charitable.
16. The ld. PCIT has committed an error by inter-linking two aspects which are independent with each other, namely:
“For grant of registration/renewal of registration u/s 12A(ac)(ii) vis-a-vis cancellation of such registration as contemplated in clause 12AB subclause (4).”
16.1 We have discussed both the procedures in the upper part of this order. As far as grant of registration u/s 12A(1)(ac)(ii) is concerned, only two circumstances are to be looked into, namely;
(a) Activities of the assessee Trust are genuine,
(b) It has not violated any other allied laws
16.2 For cancellation of registration, there should be fulfilment of specified violations contemplated in Explanation appended to Section 12AB(4). This aspect is sub-judice before the Hon’ble High Court and the ld. PCIT has not adjudicated these aspects because at the end of the order, ld. PCIT reserved the rights of the Revenue to initiate cancellation of registration contemplated u/s 12AB(4) of the Act. The AO has given a report that assessee is imparting education and its activities are genuine. He has not flagged that assessee has violated any allied laws. Thus, ld. PCIT has misdirected himself for taking cognizance of the material which was not meant for adjudicating this application.
16.3 As observed earlier, the ld. PCIT was required to look into annual accounts of three immediately preceding years in which the said application is being made. If those years are to be looked into, then it would reveal that assessee is already having registration upto assessment year 2026-27. The ld. PCIT has committed an error by looking to the accounts for the period under the search which pertains to assessment year 2014-15 to 2019-20.
16.4 A perusal of the impugned order would indicate that much emphasis has been given by the ld. PCIT to as to why assessee has approached the Settlement Commission and offered additional income for taxation. At this stage, we would like to take note of some of the paragraphs of the order of the Settlement Commission wherein ld. Settlement Commission has rejected the contention of the Department that assessee has siphoned all the funds towards its Trustees. We take note of the findings of the Settlement Commission from page 29 of the order, which read as under:
“We have heard the arguments on both the sides and the facts involved. We have considered the submissions made in the Report under Rule 9 and 9A, the Joint verification report as well as the rejoinder filed by the applicant. The issue to be decided is whether the cash of Rs 179,66,78,050/- was used for construction of its building as claimed by the applicant or was diverted to the trustees for their personal benefit as alleged by the Department We find argument of the Department is based on the statements of recorded during the search These statements have been retracted by filing affidavits stating that that the statements given by them during the search were under duress and pressure. The said affidavit is filed on 31/08/2021, i.e. almost two years after the original statements. We are of the view that if these gentlemen were under any kind of distress or coercion while recording the statements during search, they could have retracted the statements immediately. There are number of judicial pronouncements holding that any such reaction should be made as soon as possible. This also brings into focus the role of the Shri Rampaul Dhiman. who is the CA and the auditor of the group. If he was aware that the expenses booked by the applicant were bogus, then why was the issue not flagged in the audit report? And the same auditor s now distancing himself from me statement given under oath during the Search proceedings We therefore do not take cognizance of the statement of retraction relied upon by the applicant.
Next issue is whether the statements relied upon by the Department provide sufficient ground & reason to hold that there has been siphoning of the funds by the applicant group? Department has argued that the statement is corroborated by the absence of bills and vouchers of the cash expenses of Rs 179,86,73.050/-. Other than this. Department has not put forth any other positive evidence to establish a clear trail of the said siphoned amount to the trustees. It is noted that the cash and other valuable assets found and seized during the scorch action are not commensurate with the amount of Rs. 179.86,78,050/- allegedly siphoned out by the trustees. Department has not been able to dearly establish that the money was not spent on construction but was diverted to the trustees Absence Of bills and vouchers cannot be the only ground for establishing the siphoning of funds. Therefore, it is difficult to accept the argument of the Department that entire amount of Rs. 179,86,78.050/-was bogus and was siphoned out by the applicant. Considering the facts put forth before us, we are of the view that the Department’s case of siphoning of funds has not been clearly established and therefore the provisions of section 13(1) (c) cannot be invoked on this issue.
Regarding the applicants claim of the inflation of receipts, we find that this issue has been examined in the Joint verification, where it is seen that lumpsum entries of cash receipts are made without narration and without routing the same through the students account. Prima facie, the contention of the applicant that the fee was inflated appears to be acceptable Applicant has shown the capital expenditure of Rs. 2,77,54,13,832/-. On reducing the component of inflated fee of Rs 1.01.24,61,6707- the balance capital expenditure comes to Rs 176,29,52,162/- Applicant has argued that it has spent Rs 176,29,52,162/- for building construction and has submitted a valuation report of a government approved valuer, who has confirmed the value of investment shown by the applicant.”
16.5 The Settlement Commission has further rejected the contention of the Department that activities of the assessee are not charitable. The Settlement Commission has recorded the finding that assessee is existing for education and it is imparting education. The observations of the Settlement Commission recorded on page 54 are worth to note which read as under :
“Second issue is whether the withdrawal of exemption should be limited to the extent of violation or for the entire income We are of the view that if it is conclusively proven that the applicant has not carried any activity as per the object of the trust, then the complete withdrawal of exemption is warranted. In the present case, we find that the applicant group has set up number of educational institutes with a huge infrastructure Many students have passed out of the institutes set up by the applicant group and thousands of students are presently enrolled in the same. Therefore, it cannot be said that the applicant group is not carrying out any activity as per its primary objects, i.e. Education. In fact, it is seen that the applicant group is a well-known name in the education sector, especially in North India Therefore, we are unable to agree with the Department that the activities of the Trust are not genuine. There have been instances of violations as pointed out by the Department. But we are of the considered opinion that the Trust cannot not be punished for the deeds of the Trustees Wherever the violations have been found, the same has been brought to tax under the appropriate provisions of the Act, The Department has not conclusively established that the affairs of the trust are not in accordance with the objects of the Trust – imparting of education. These could have been minor irregularities or violations of the objects of the trust here and there but they will not constitute a good reason to hold that the trust has not carried out its activities in accordance with the objects of the trust
Considering the above, we are of the view that benefit of the exemption u/s11 can be withdrawn only to the extent of any violation and not entirely. We do not agree with the proposal of the Department of bringing entire surplus of Rs 211,66,91,459/- to tax.
17. The ld. PCIT in the impugned order on page No. 72 to 75 observed that assessee has approached the Settlement Commission and made disclosure of additional income which in itself suggests that it has not acted according to its objectives. With regard to the above finding of the ld. PCIT, we are of the view that firstly Rule 17A sub-rule (e) provides that accounts of three years are to be looked into. This aspect was brought to the notice of ld. PCIT but he brushed aside this objection by observing that Rule 17A only provides filing of documents. It cannot restrain the competent authority to look into other circumstances beyond the period of three years. However, we are of the view that if a cumulative setting of all the facts are to be taken into consideration, then approach to the Settlement Commission is a procedure vide which determination of income is being provided where details are mixed up in such a manner that it is not practically possible to deduce the true income, then such income has been left for the Board to determine after hearing both the sides and it is an internal part of the Revenue Department presided by three Commissioners.
17.1 We have extracted some of the observations of the Settlement Commission where they say that it is not appropriate to withdraw exemptions granted to the assessee u/s 11 on the total amount of additional income offered by the assessee. The Department took this objection before the Settlement Commission also but this objection was rejected by the Settlement Commission and assessee has been given benefit of Section 11 on the additional income offered by it. It is an adjudicatory platform provided by the Legislature. The ld. PCIT ought to have not attributed anything qua the Institution as if approach to the Settlement Commission would be an offence in itself. It is not the right course for looking to the objects of the assessee Trust imparting education to roughly 12000 students. In brief, we are of the view that Settlement Commission did not doubt genuineness of the activities of the assessee. The AO did not doubt genuineness of its activities. It has been carrying out these activities according to its objectives. If any minor violation unearthed in incurring expenditure or otherwise, then Section 13(3) of the Act would take care. Those amounts would suffer taxation as observed by the Settlement Commission also but simply registration cannot be denied to such Institutions. The Settlement Commission has observed that the allegation of siphoning of funds is not at all sustainable.
18. At the cost of repetition, we would observe that ld. PCIT has mixed up two proceedings, namely, cancellation of registration vis-a-vis renewal of registration wherein scope of enquiry is separate in each proceeding. The ld. Commissioner has taken up issues which were considered earlier while cancelling the registration but denied the renewal. Such issues did not meet the concurrence of ITAT in the earlier proceedings also and issue of cancellation is sub-judice before the Hon’ble High Court. The Department itself approved the registration for assessment year 202223 to 2026-27. Therefore, ld. PCIT is not justified in rejecting the renewal application while considering those very materials which were considered in the first round of litigation. The ld. PCIT has not made out that assessee has violated any laws. He has made some reference about user of land without getting approval. We have been apprised that CLU has been granted by the Competent Authority for its Campus.
19. The ld. counsel for the assessee, at the time of hearing raised one more fold of grievance vide which it was submitted that ld. PCIT has no jurisdiction to adjudicate this issue. It was to be adjudicated by ld. CIT (E), Chandigarh. He relied upon a large number of decisions and one of the decision was of Chandigarh Bench wherein we have discussed all these aspects. Therefore, we deem it appropriate to take note of our finding recorded in the case of Dera Sacha Sauda (supra). It was rendered in ITA No. 21/CHD/2024. We have held that ld. PCIT has no jurisdiction to adjudicate the issue of renewal of registration u/s 12A(1)(ac)(ii). The discussion made by us read as under :
3. Since both the additional grounds of appeal are jurisdictional grounds of appeal, which goes to the root of cause of action, the adjudication of these grounds would affect ultimate taxability of the assessee, we have heard both the parties on these preliminary issues. We are of the opinion that the assessee’s stand to agitate under these additional grounds of appeal are such which goes to basic issues vide which it is to be decided whether ld. PCIT, Central Circle was having jurisdiction to pass the impugned order or not. Similarly, whether the ld. PCIT, Central Circle could have invoked Section 12AB(4) with retrospective effect or not ? Considering their cumulative effect over sustainability of the impugned order, we deem it appropriate to admit both these additional grounds of appeal for decision on merit. The Hon ‘ble Supreme Court in the case of NTPC Ltd. v. CIT reported in 229 ITR 383 has propounded that if no discovery of new facts is required and issues taken up for the first time before an Appellate Authority goes to the root of the cause which will ultimately affect the taxability of an assessee, then assessee could be permitted to raise additional ground of appeal. Respectfully following the judgements relied upon by the assessee, we allow the application and permit the assessee to raise additional grounds of appeal.
3.1 It is pertinent to observe that in both the additional grounds of appeal, jurisdictional issues have been raised by the assessee therefore, before adverting to other issues pleaded in original grounds of appeal, we deem it appropriate to take these two grounds of appeal first for adjudication.
4. The ld. Counsel for the assessee, at the very out submitted that assessee is a charitable Trust/Society. It was registered under Section 12AA of the Income Tax Act vide order dated 13.12.2004. The ld. Counsel for the assessee has basically raised two fold of submissions on these additional grounds of appeal. In his first fold of submission, it was contended that Section 120 of the Income Tax Act empowers the CBDT to authorize the authority for exercising the powers and perform all or any of the functions conferred on an assignment to such authorities. In other words, Board will notify which authority will perform which work. He took us through Section 120 of the Income Tax Act and thereafter submitted that grant of registration as well as cancellation has been assigned by the Board to CIT (Exemptions). He drew our attention towards Notification No. 52 and 53 of 2014 issued on 22. 10.2014. We will be taking cognizance of these Notifications while taking note of the order of ITAT, Delhi in the case of Aggarwal Vidhya Pracharni Sabha v. PCIT (ITA No. 1308/Del/2023) decided on 08.01.2024 whose copy has been made available in the Paper Book on page No. 1 to 40. The Co-ordinate Bench of the Tribunal took note of these Notifications and we will be referring these Notifications. On the strength of Section 120 coupled with the Notification issued by the Board, ld. Counsel for the assessee emphasized that CIT (Exemptions) was the competent authority to cancel the registration granted under Section 12A. The powers exercised by the PCIT in the present case is beyond his jurisdiction and therefore, impugned order is not sustainable. For buttressing his contention, he relied upon following orders of the ITAT whose copies have been placed on the record :
1. Aggarwal Vidya Pracharni Sabha v. PCIT, ITA No. 1308 /DEL/2023 dated 08.01.2024 (ITAT Del.)
2. Heart Foundation of India v. CIT (Central), ITA 1524/Mum/2023 dated 27.07.2023 (ITAT Mum.)
3. Pacific Academy of Higher Education and Research Society v. PCIT (Central) ITA 04-05/Jodh/2020 dated 25.01.2023, (ITAT Jodh.)
4. Wholesale Cloth Merchants Association v. PCIT (Central), ITA 688/JP/2019 dated 06.01.2021 (ITAT Jaipur)
5. M/s. Amala Jyothi Vidya Kendra Trust, Bangalore v. PCIT(Central), ITA No.l41/Bang/2024 dated 16.04.2024 (ITAT Bang.)
6. Laskhmi Chand Charitable Society v. PCIT (Central- 3) ITA 1803/Del/2024 dated 22.08.2024.
5. In his next fold of contentions, he submitted that ld. PCIT has cancelled the registration with the aid of Section 12AB(4) whereby new grounds have been assigned for empowering the authority to cancel the registration. If those contentions are present in a particular case, whether on the basis of these reasoning, a registration could be cancelled w.e.f. 01.04.2016. In other words, the additional reasoning provided under Section 12AB was brought on the Statute Book w.e.f. 01.04.2022. Can with the help of these reasoning, registration be cancelled w.e.f. 01.04.2016. In other words, whether this provision is applicable with retrospective effect or not. He submitted that ITAT, Bangalore and Cuttack has considered this aspect and unanimously held that the provision is not applicable with retrospective effect. He further relied upon the judgement of Hon’ble Supreme Court in the case of Isthmian Steamship Lines (1951) 20 ITR 572(S.C.)and CIT v. Vatika Township 367 ITR 466 (S.C.) dated 14.09.2014. He submitted that at different places, PCIT has exercised the powers for withdrawing registration granted to an assessee and all the Benches of ITAT are unanimous on that point that PCIT is not the competent authority to withdraw such registration. It can only be by CIT (Exemptions) as contemplated in the Notification issued by the CBDT under Section 120 of the Income Tax Act. He placed on record copies of the ITAT orders, Delhi, Mumbai, Jodhpur, Jaipur, Bangalore Benches. Similarly, ITAT Bangalore and Cuttack has held that provision of Section 12AB sub-section (4) is not applicable with retrospective effect. Thus, according to the ld. Counsel for the assessee, the issue in dispute is squarely covered in favour of the assessee on these preliminary issues.
6. On the other hand, ld. CIT DR drew our attention towards Section 143 subsection (3) of the Income Tax Act. On the strength of this, it has been contended by the ld. CIT DR that second proviso to Section 143(3) empowers the AO to make a reference to the PCIT. Since in the hierarchy of the authorities, AO is subordinate to PCIT while assessing the income of the assessee. Therefore, it is but natural that reference would be made to PCIT as provided in the second proviso to Section 143(3) of the Income Tax Act. Apart from his oral submission, he has filed a written note after conclusion of the hearing and such note read as under :

“The aforementioned case came up for hearing before the Hon’ble Bench on 05.03.2025.

2. The appellant assessee has taken an additional ground of appeal challenging the jurisdiction of the Ld. PCIT in cancelling the registration u/s 12AA. The appellant has contended that it is the Commissioner of Income Tax (Exemptions)- CIT(E) – and not the Principal Commissioner of Income Tax -(PCIT), who was the competent authority to cancel the registration. The appellant also submitted copies of few judgments of the Hon’ble ITAT Benches in support of his contentions, including the judgment of the Hon’ble ITAT Bench, Delhi in the case of Lakhmi Chand Charitable Society v. PCIT, Cen- 3, New Delhi in ITA No. 1803/Del/2024 pronounced on 22.08.2024.

3. In this regard, it is submitted that from the plain reading of the text of sections 12AB(4) and second Proviso to section 143(3), it is abundantly clear that the intent of the legislature was to provide the powers of cancellation of registration u/s 12AA to both the CIT(E) as well as the PCIT. This is because the words ‘Principal Commissioner of Income Tax’ have been used in marked distinction to the words ‘Commissioner of Income Tax (Exemptions)’ in both the sections. It is pertinent to mention here that the scheme of the Income Tax Act, 1961 provides for only the Commissioner rank officers to hold the charge of Exemptions. The Income Tax Act, 1961 nowhere provides for a Principal Commissioner rank officer to hold the charge of Exemptions. This would evidently imply that other than the Commissioner of Income Tax (Exemptions), the legislature in its wisdom has decided to endow other officers also – viz Principal Commissioners of Income Tax, who are higher in rank to the Commissioner (Exemptions) and are not holding the charge of Exemptions with the authority to cancel the registration under Section 12AA of the Act.

4. In support of the above contentions, the undersigned is relying on the judgment of the Hon’ble ITAT Pune Bench in the case of Sinhgad Technical Education Society v. PCIT – (copy enclosed) . The registration cancelled by the Ld. PCIT has been upheld by the Hon’ble Bench in the said case.

5. In the latest judgment dated 02.04.2025 of the Hon’ble ITAT Dehradun Bench, New Delhi rendered in the case of M/s Sri Krishan Educational Trust v. DGIT (Inv) – ITA No. 4092/DDN/2015 (copy enclosed), the Hon’ble Bench has categorically observed vide para 4 of the judgment that the prescribed authority for granting the approval or cancelling the approval u/s 10(23C)(vi) of the Act is the Principal Commissioner of Income Tax or the Commissioner of Income Tax (Exemptions). It shall be pertinent to mention here that although the said judgment has been rendered in the context of section 10(23C)(vi), but by drawing a parallel analogy, the intention of the Hon’ble ITAT Bench is extendable to the provisions of the registration u/s 12AA as well. This is because the schemes of sections 10(23C)(vi) and 12AA are the same and the words used in section 10(23C)(vi) are the same as in section 12AB(4), i.e. both the Principal Commissioner of Income Tax and the Commissioner of Income Tax (Exemptions) are competent to cancel the registration under both the respective sections when a reference is received from the assessing officer under second Proviso to section 143(3) of the Act. The text and the content of the 15th proviso to section 10(23C) is the same as that of section 12 AB(4). To augment my contention, the relevant 15th Proviso of section 10(23C)(vi) is reproduced below:

“Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) is approved or provisionally approved under the said clause and subsequently –

(a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year’; or

(b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or..”

6. Furthermore, the judgment rendered in the case of Sri Krishan Educational Trust (supra) is the latest judgment of the Hon’ble ITAT, New Delhi and shall prevail over the earlier judgments rendered by the coordinate Benches of ITAT, Delhi which have been relied upon by the appellant assessee. It will also not be out of place to state that the judgment of the Hon’ble ITAT, Delhi Bench in the case of Lakhmi Chand Charitable Society v. .PCIT, Cen-3, New Delhi, so heavily relied upon by the assessee, has been challenged by the Department before the Hon’ble Delhi High Court (screenshot attached as evidence).

7. Thus, when there are contradictory decisions of the coordinate Benches of the Hon’ble ITAT on the impugned issue, it shall be prudent to await the orders of the Hon’ble Delhi High Court.Even otherwise, the latter decision of the Hon’ble ITAT, Delhi shall prevail over the earlier decisions rendered by the coordinate Benches of Hon’ble ITAT, Delhi as already argued above.

8. It is therefore, humbly submitted that the additional ground raised by the assessee challenging the jurisdiction of the PCIT in cancelling the registration u/s 12 AA, is without any basis and therefore, deserves to be dismissed.”

6.1 He made reliance upon two orders of the ITAT namely, Sinhgad Technical Education Society v. PCIT and M/s Sri Krishan Educational Trust v. DG of Income Tax (Investigation) Lucknow (ITA 4092/DDN/2015). Copies of both these decisions have been placed on record by the ld. CIT DR.
7. We have duly considered rival contentions and gone through the record carefully. Section 120 has a direct bearing on the controversy, therefore, we deem it appropriate to take note of this Section which read as under :

“Jurisdiction of income-tax authorities.

120. (1) Income-tax authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities.

Explanation.—For the removal of doubts, it is hereby declared that any income-tax authority, being an authority higher in rank, may, if so directed by the Board, exercise the powers and perform the functions of the income-tax authority lower in rank and any such direction issued by the Board shall be deemed to be a direction issued under sub-section (1).

(2) The directions of the Board under sub-section (1) may authorise any other income-tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other income-tax authorities who are subordinate to it.

(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.

(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 471 of 801 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 Commissioner or an Additional Director or a Joint Commissioner or a Joint Director, and, where any order is made under this clause, references in any other provision of this Act, or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such Additional Commissioner or Additional Director or Joint Commissioner or Joint Director by whom the powers and functions are to be exercised or performed under such order, and any provision of this Act requiring approval or sanction of the Joint Commissioner shall not apply.

(5) The directions and orders referred to in sub-sections (1) and (2) may, wherever considered necessary or appropriate for the proper management of the work, require two or more Assessing Officers (whether or not of the same class) to exercise and perform, concurrently, the powers and functions in respect of any area or persons or classes of persons or incomes or classes of income or cases or classes of cases; and, where such powers and functions are exercised and performed concurrently by the Assessing Officers of different classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply.

(6) Notwithstanding anything contained in any direction or order issued under this section, or in section 124, the Board may, by notification in the Official Gazette, direct that for the purpose of 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.”

8. A perusal of sub-clause (1) to (3) would indicate that Board would issue directions authorizing the authorities to exercise the powers and perform all or any of the functions conferred on them by way of that Notification. While issuing Notification, Board would keep in mind four criteria mentioned in sub-clause (3) of this Section. In other words, the authorities under the Income Tax Act would exercise powers according to the jurisdiction vested in them by the CBDT. In exercise of this power, Board has issued Notification No. 52 and 53 of 2014 whereby Commissioner of Income Tax (Exemptions) Chandigarh was authorized to grant registration under Section 12AA as well as cancel such registration. The identical issue was considered by ITAT Delhi Bench in the case of Aggarwal Vidhya Pracharni Sabha v. PCIT, ITA 1308/Del/2023. Copy of this decision is available on page No. 1 to 40. In this case also, PCIT, Central, Gurgaon has exercised the powers under Section 12AB sub-section (4) and cancelled the registration granted to the assessee under Section 12AA. The Tribunal has considered all attendant circumstances and thereafter held that PCIT, Central Circle, Gurgaon was not competent to cancel the registration. The ITAT took into consideration Notification No. 52 and 53 as well as the order passed under Section 127(2) of the Income Tax Act. The Notifications dated 22.10.2014 are being taken note in paragraph No. 12 page No.1 7 to 21 of this order of the Tribunal. Thus, the Tribunal has also considered whether Section 12AB(4) brought on the Statute Book w.e.f. 01.04.2022 could be applied with retrospective effect. Both these issues have been examined by the Tribunal exhaustively. The Tribunal also took into consideration orders of other Co-ordinate Benches. We take note of the discussion made by the Tribunal on these issues which read as under :

“9. After giving thoughtful consideration to the facts and circumstances of the case and to the submissions, it comes up that the admitted case of the Revenue is that there was no specific order under any provisions of the Act other than the order dated 26.10.2020 passed u/s 127 of the Act centralizing the case of M/s Aggarwal Vidya Pracharni Sabha consequent to a search and seizure action u/s 11 ITA No. 1308/Del/2023 132(1) of the Act to vest Ld. PCIT, Gurgaon the powers to pass the impugned order. The ld. DR has relied on the Explanation attached to section 127 of the Act to submit that the word, ‘case’ has been defined for the purpose of section 127 and consequent to the centralization of the assessment, the ld.PCIT, Gurgaon had got powers to commence proceedings u/s 12AB(4) of the Act for cancellation of registration of the assessee.

9.1 In this context, the ld. counsel for the assessee has heavily relied on the CBDT Notification No.52/2014 made available at page 2 to 6 of the paper book submitting that in regard to powers u/ss 11 and 12 of the Act, the CIT (Exemptions), Chandigarh had specific jurisdiction and which could not have been transferred. Relying on the order u/s 127 of 26.10.2020, it was submitted that the order specifically mentions the transfer of case for carrying out post search investigation and meaningful assessment and not for any other purpose like cancellation of the registration.

10. Now to decide the question of valid exercise of jurisdiction by ld.PCIT, Gurgaon, it will be first relevant to reproduce the section 127 of the Act as follows:-

“Power to transfer cases.

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

(2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,—

(a) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order;

(b) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf.

(3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place.

(4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred.

Explanation.—In section 120 and this section, the word “case”, in relation to any person whose name is specified in any order or direction issued there under, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.

10.1 Further, we consider it appropriate to reproduce relevant portion of Section 12AB and relevant part Rule 17A as under:-

“Section 12AB; “12AB. Procedure for fresh registration.—(1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,—

(a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years;

(b) where the application is made under sub-clause (ii) or sub-clause (iii) or subclause (iv) or sub-clause (v) of the said clause,—

(i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about—

(A) the genuineness of activities of the trust or institution; and

(B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; and

(ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A), and compliance of the requirements under item (B), of sub-clause (i),—

(A) pass an order in writing registering the trust or institution for a period of five years;

(B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its registration after affording a reasonable opportunity of being heard;

(c) where the application is made under sub-clause (vi) of the said clause, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought,

and send a copy of such order to the trust or institution.

(2) All applications, pending before the Principal Commissioner or Commissioner on which no order has been passed under clause (b) of subsection (1) of section 12AA before the date on which this section has come into force, shall be deemed to be an application made under sub-clause (vi) of clause (ac) of sub-section (1) of section 12A on that date.

(3) The order under clause (a), sub-clause (ii) of clause (b) and clause (c), of sub-section (1) shall be passed, in such form and manner as may be prescribed, before expiry of the period of three months, six months and one month, respectively, calculated from the end of the month in which the application was received.

(4) Where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1) and subsequently, the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution after affording a reasonable opportunity of being heard.

(5) Without prejudice to the provisions of sub-section (4), where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1) 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 item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such noncompliance has occurred, has either not been disputed or has attained finality, then, the Principal Commissioner or the Commissioner may, by an order in writing, after affording a reasonable opportunity of being heard, cancel the registration of such trust or institution.”.

Rule 17A “(5) On receipt of an application in Form No. 10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting registration under clause (a), or clause (c), of sub-section (1) of section 12AB read with sub-section (3) of the said section in Form No. 10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (i) of the sub-rule (1).

(6) If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub-rule (1) or (2) or by not complying with the requirements of sub-rule (3) or (4), the Principal Commissioner or Commissioner, as referred to in sub-rule (5), after giving an opportunity of being heard, may cancel the registration in Form No. 10AC and Unique Registration Number (URN), issued under sub-rule (5), and such registration or such Unique Registration Number (URN) shall be deemed to have never been granted or issued.

(7) In case of an application made under sub-clause (vi) of clause (ac) of sub-section (1) of 4 [section 12A as it stood immediately before its amendment vide the Finance Act, 2023,] during previous year beginning on 1st day of April, 2021, the provisional registration shall be effective from the assessment year beginning on 1st day of April, 2022.

(8) In case of an application made in Form No. 10AB under clause (ii) of the sub-rule (1), the order of registration or rejection or cancellation of registration under sub-clause (ii) of clause (b) of sub-section (1) of section 12AB shall be in Form No. 10AD and in case if the registration is granted, sixteen digit alphanumeric number Unique Registration Number (URN) shall be issued by the Principal Commissioner or Commissioner referred to in of sub-section (1) of section 12AB.

(9) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall:

(i) lay down the form, data structure, standards and procedure of ,-(a) furnishing and verification of Form No. 10A or 10AB ,as the case may be;

(b) passing the order under clause (a), sub-clause (ii) of clause (b) and clause (c) of subsection (1) of section 12AB.

(ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said application made or order so passed as the case may be.]

7. Further, it will be appropriate to reproduce the order u/s 127(2) dated 26.10.2020 available at page No.1 of the paper book:-

” Order u/s 127 (2) of the Income Tax Act, 1961 Consequent to the search & seizure operations u/s 132 of the I.T. Act, 1961 in Dev Wines Group (D.O.S 19.02.2020), the Pr. Commissioner of Income Tax (Central), Gurugram vide letter F.No. Pr.CIT(C)/GGM/Cent./Dev Wines/2020-21/969 dated 24.08.2020 has been given concurrence and requested for centralization of the following cases related M/s Dev Wines Group to DCIT, Central Circle2, Faridabad for coordinated post search investigation & meaningful assessment.

Accordingly, in exercise of power conferred by sub-section (2) of Section 127 of the Income Tax Act, 1961 and under all other powers enabling me in this behalf, I, the Commissioner of Income Tax(Exemptions), Chandigarh hereby transfer the following case(s), particulars of which are mentioned hereunder in Columns (2) and (3) from the Assessing Officer mentioned in Column (4) therein, to the of the Assessing Officer mentioned in Column (5) –

.Sl. No. Name and Address of the Assessee PA N From To
1 (2) (3) (4) (5)
M/s Aggarwal vidhya Pracharni Sabha (Aggarwal College, Ballabhgarh) AABTA34 09 Circle-2 (E), Chandigarh DCIT, Central Circle-2, Faridabad DLC-CC-136-4

 

This order shall take effect from 26.10.2020.”

12. We also consider it appropriate to reproduce the relevant part of the Notification dated 22.10.2014 providing for the territorial jurisdiction of CIT(E) in furtherance of powers given to the Board u/s 120 (1) and (2) of the Act, made available at pages 2 to 5 of the paper book:-
“NOTIFICATION
New Delhi, the 22nd October, 2014
(Income-Tax)
S.O. 2754 (E).—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.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 –
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2. This notification shall come into force with effect from the 15th day of November, 2014.

[Notification No. 52 /2014/F. No. 187 /38 /2014 (ITA.I)] DEEPSHIKHA SHARMA, Director”

12.1 A reference was made by Ld. AR about the circular no 11 of 2022 dated 3rd June 2022, giving clarification regarding Form no 10 AC till the date of this circular and it will be relevant to reproduce para 1 of this circular herebelow;
“Circular No. 11 of 2022
F. No.370142/4/2021-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(TPL Division)
Dated: 3rd June, 2022

Sub: Clarification regarding Form No 10AC issued till the date of this Circular – reg.

Finance Act, 2022 has inserted sub-section (4) in section 12AB of the Income tax Act, 1961 (the Act) allowing the Principal Commissioner or Commissioner of Income-tax to examine if there is any “specified violation” by the trust or institution registered or provisionally registered under the relevant clauses of sub-section (1) of section 12AB or subsection (1) of section 12AA. Subsequent to examination by the Principal Commissioner or Commissioner of Incometax, an order is required to be passed for either cancellation of the registration or refusal to cancel the registration. Similar provisions have also been introduced in clause (23C) of section 10 of the Act by substituting the 21 ITA No. 1308/Del/2023 fifteenth proviso of the said clause with respect to fund or institution trust or institution or any university or other educational institution or any hospital or other medical institution referred under sub-clauses (iv), (v), (vi), (via) of this clause and which have been approved or provisionally approved under the second proviso to the said clause. These amendments are effective from 1st April, 2022. In addition to the specified violations referred above, the power of cancellation has also been granted under sub-rule (5) of rule 17A and subrule (5) of rule 2C of the Income-tax Rules, 1962 (the Rules) to the Principal Commissioner or Commissioner authorised by the Board. This Circular only relates to cancellation of registration/approval or provisional registration/approval in the case of “specified violation”.

13. Now, as we go through the impugned order passed u/s 12AB(4) of the Act, the ld. PCIT mentions that consequent to the completion of assessment proceedings, certain facts were communicated to his office by the AO pertaining to AY 2014-15 to 202021 vide his letter dated 23.08.2022. This letter dated 23.08.2022 has been reproduced at page No.32 of the impugned order and it shows that this letter was issued in supersession of earlier letter dated 11.04.2022. Further, the subject of the letter is as follows:-

“Sub: Proposal for cancellation of registration granted u/s 12AA/12AB of the Act as per provisions of Section 12AB(4) of the Act in the case of ‘Aggarwal Vidya Pracharni Sabha ‘ ” – Reg.

13.1 Then what comes up is that the ld. PCIT has made out a case that the powers he had exercised u/s 12AB(4) are by virtue of clause (a) to sub-section (4) of section 12AB on the basis of ‘noticing’ occurrence of specified violation. The ld. PCIT has considered himself to be empowered by virtue of Explanation attached to 22 ITA No. 1308/Del/2023 section 127, defining ‘case’, to commence proceedings under this Act u/s 12AB(4) after the order dated u/s 127 dated 16.10.2020.
14. Having considered the aforesaid, it comes up that the order of transfer u/s 127 dated 26.10.2020 is shown to be passed under sub-clause (a) to sub-section (2) of section 127 of the Act which gave powers to CIT(E) Chandigarh to pass order of transfer qua such ‘Assessing Officers’ who are subordinate to other the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. Thus when we consider the definition of “Assessing officer” u/s 2(7A) of the Act, certainly PCIT, Gurgaon, who has passed the impugned order is not an ‘assessing officer’, and order passed dated 26.10.2020, under sub-clause (a) to sub-section (2) of section 127 of the Act only referred to transfer of jurisdiction of ‘assessing officer’ subordinate to CIT(E) Chandigarh to DCIT, Central Circle-2, Faridabad DLC-CC136-4 as assessing officer and not original jurisdiction of CIT(E) Chandigarh with regard to the subject matter as stands vested by order of CBDT dated 22/10/2014.
14.1 Further, what is material is that by the Notification dated 22.10.2014 the Board, exercising powers under sub-section (1) and sub-section (2) of section 120 vested powers to perform all the functions in respect of class of cases referred in the column No.5 of the Schedule of this Notification and had created a specific 23 ITA No. 1308/Del/2023 jurisdiction on territorial basis in regard to the provisions generally dealing with claim of exemptions u/ss 10,11,12, 13A and section 13B of the Act.
14.2 Thus as we refer to the Notification dated 22.10.2014, the clause (a) vested powers with Commissioners of Income-tax (Exemptions), for class or class of cases pertaining to section 10, section 11, section 12, section 13A and section 13B of the Act and clause (b), to issue orders in writing for the exercise of ‘their’ powers and perform all ‘their’ functions by Additional Commissioners of Incometax or Joint Commissioners of Income-tax and Tax Recovery Officers who are subordinate to them and that signifies that again this delegation of powers by CIT(E), Chandigarh could have been qua officers subordinate to CIT(E), Chandigarh only and not, in any way, gave powers to CIT(E), Chandigarh to pass an order u/s 127(2)(b) of the Act to transfer powers vested by Board to any other Tax Authority.
14.3 Next, as we refer to Section 12 AB and Rule 17A which have come into effect from 01.04.2021, and read it with the Circular no. 11 dated 3rd june 2022, it comes up that section 12AB(2) of the Act provides that the pending applications under clause (b) of sub-section (1) of section 12AA before the date on which section 12AB came into force shall be deemed to be applications made under sub- 24 clause (4) of clause (ac) of sub-section (1) of section 12A on that date for grant of registration.
14.4 However, as far as provision of cancellation of the registration provided by sub-section (4) of section 12AA is concerned, sub-section (4) of section 12AB brings into place a completely new self-contained procedural code for conducting inquiry about ‘specified violations’, cancelling registration or refusing to cancel registration.
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.
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.
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 ld. PCIT passing the impugned order liable to be quashed.
16. Furthermore, if examine the legality of the procedure followed by ld.PCIT, Gurgaon to pass order u/s 12AB(4), by recourse to exercise of powers by virtue of clause (a) of sub-section (4) of section 12AB, it comes up that ld.PCIT, Gurgaon admits that a ‘proposal’ for cancellation of the registration of the assessee trust granted u/s 12AA of the Act was forwarded vide letter dated 23.08.2022 by the AO through the Range head. In this context, if we refer to second proviso to subsection (3) of section 143 of the Act, the same provides that if the AO is satisfied about any specified violation provided in sub-section (4) of section 12AB, the AO shall send a ‘reference’ to the PCIT or Commissioner to withdraw the approval or registration, as the case may be, and clause (b) to this proviso provides that no order making an assessment of total income or loss of such institution or trust shall be made without giving effect to the order passed by PCIT or Commissioner. In the case in hand, the ld.PCIT, Gurgaon has reproduced the part of letter dated 23.08.2022 which has observed about a ‘proposal’ of cancellation of registration u/s 12AB(4) and based upon the same, the ld. PCIT had initiated action. The assessment by said assessing officer was completed in September, 2021, so, before the letter dated 23.08.2022 the assessment proceedings stood culminated. Thus, there was no occasion for concerned AO to invoke ‘reference’ powers under second proviso to sub-section (3) of section 143 of the Act. To that extent Ld. PCIT observations are correct.
16.1 However, what is relevant here is that in any case the ‘reference’ by jurisdictional AO was to be made not to the PCIT or Commissioner, to whom this AO was subordinate but one authorised by board for the purpose of Section 12AB. The one who could grant or cancel the registration as per amended provisions which is not PCIT, Gurgaon, but, would be CIT(E), Chandigarh. Thus assumption of jurisdiction for cancellation of registration u/s 12AB(4) of the Act by virtue of aforesaid transfer of jurisdiction order u/s 127 of the Act is not conceivable.
17. At the same as we observed above that the assessment by said assessing officer was completed in September, 2021, thus, there was no occasion for concerned AO to invoke ‘reference’ powers under second proviso to sub-section (3) of section 143 of the Act. It appears that when confronted with the situation that the second proviso of section 143(3) having come into effect from 01.04.2022 is not applicable to the assessment initiated consequent to search and seizure operations u/s 132 of the Act carried out on 19.02.2020, the ld. PCIT, Gurgaon improved his case by claiming that he had exercised his powers by virtue of clause (a) of sub-section (4) of section 12AB, which entitles a Principal Commissioner or Commissioner to take cognizance on the basis of a ‘specified violation’ coming into his notice during any previous year. At the cost of repetition, we observe that reference in section 12AB is not to PCIT or Commissioner to whom the said Assessing Officer would be subordinate, but, the CIT(E) who has been given special power for grant and cancellation of the registration as original jurisdiction.
17.1 Furthermore, here in this case, the exercise of power u/s 12AB(4) of the Act seems to also not have been done in accordance with law. As what comes up further is that, if at all, PCIT, Gurgaon was acting under clause (a) to Section 12AB(4), then, before issuing the notice dated 08.09.2022, itself the ld. PCIT, Gurgaon should have first formed his opinion that the assessee had committed one or more of a ‘specified violation’. However, as we go through the relevant part of the impugned order we find that the ld.PCIT has not mentioned as to which amongst the various specified violations mentioned in Explanation attached to subsection (4) of section 12AB were attracted so as to show cause the assessee under sub-section (4) of section 12AB of the Act and ask for information by notice dated notice dated 08.09.2022.
17.2 Rather, in the opening paragraph at page 34 of the impugned order, the ld. PCIT mentions, “it was noticed that the assessee trust has committed one or more specified violation. Thereafter, information was called for from the assessee trust by this letter dated 08.09.2022.” We are of the view that when Ld. PCIT was assuming jurisdiction under clause (a) to Section 12AB(4), then while calling for the documents or information under clause (i) of sub-section (4) of Section 12AB, the assessee should be notified as to for which of the ‘specified violation’ the Ld. PCIT is calling for the information or documents. The same is not coming from the impugned order that before issue of notice on 08/09/2022, calling for the documents or information under clause (i) of sub-section (4) of Section 12AB, Ld. PCIT, Gurgaon had actually ‘noticed’ one or more of such ‘specified violation.’ 17.3 In this context further if the final show cause notice dated 14.03.2023 available at pages 7 to 37 of the paper book is considered, it shows in para 4.10 a reference is made to what sort of information was called by letter dated 08.09.2022:-

“4.10 In the light of above facts of the case, it appears that the assessee trust has made specified violation in terms of explanation to Section 12AB(4) of the Income Tax Act, 1961. As such, following information from the assessee trust was called for under Section 12AB of the Act vide this office letter dated 08.09.2022 to examine the activities of the Aggarwal Vidya Pracharni Sabha with a view to ascertain whether the same are covered under the clause of explanation to the provisions of Section 12AB(4) of the Act and other provisions of the Act. Details of information called for the relevant period i.e. AY 2014-15 to 2020-21 is as under:

• Copy of registration u/s 12AA/12AB(1) of the Act.
• Copy of memorandum of association containing the objects for which the Aggarwal Vidya Pracharni Sabha was set up along with copy of registration with the relevant authorities.
• Details of capital expenditure and revenue expenditure incurred for various A.Ys. as mentioned above.
• Copies of Form 10 and Form 10B in respect offunds accumulated u/s 11(1)(a), 11(2) of the Act and year wise utilization of the same.
• Specify the activities of which the accumulatedfunds have been utilized.
• Copy of account of the Aggarwal Vidya Pracharni Sabha with M/s Tirupati Realbuild Pvt. Ltd. And M/s Radhey Krishna Infratech Pvt. Ltd. For the above AYs explaining the nature and purpose of transactions undertaken with the said entities including advance given for the purpose of construction along with supporting evidences in order to substantiate the genuineness of the same.
• Relationship of the Aggarwal Vidya Pracharni Sabha and its members with the directors of M/s Tirupati Realbuild Pvt. Ltd. And M/s Radhey Krishna Infratech Pvt. Ltd.”
17.4 Then in para 4.1.2 sub-clause (d), the ld. PCIT mentions of the earlier letter dated 08.09.2022 that:

“d) Further, vide this office letter dated 08.09.2022, the assessee was requested to furnish details of capital and revenue expenditure incurred for various assessment years. In response, the assessee only submitted copy of Form 10B which is not supported with the details of capital expenditure and copy of accounts and documentary evidence. Further, no activity was specified for which accumulated funds were utilized.”

18. Thus it appears that by this notice dated 14.03.2023, only the assessee for the first time was asked to show cause about the ‘specified violation’ of the nature reproduced below:-

“(a) where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution;”

19. Thus, if it was the case of the PCIT (Central), Gurgaon that he was exercising the powers u/s 12AB(4)(a) on his own cognizance of the ‘specified violation’, then, at first instance as he was not competent authority u/s 12AB(1) to 31 ITA No. 1308/Del/2023 pass an order of registration of the Trust, then, he had no powers u/s 12AB(4) to call for to show cause an order of cancellation. In any case, the manner of exercise of jurisdiction without first making conclusive notice of the alleged ‘specified violation’ is not sustainable.
20. We have also taken into consideration the order of the Jaipur Bench of the in the case M/s Wholesale Cloth Merchant Association v. Pr. CIT (Central), Jaipur in ITA No.688/JP/2019 where this issue of jurisdiction u/s 127 of the Act has been considered and the findings support out aforesaid view on the facts before us. It will be appropriate to reproduce the relevant paras No.14 and 15:-

“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’.”

20.1 The Jaipur Bench has dealt with this issue further in paras 18 to 21 as under:-

“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.

19. 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.

20. 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 v. M.I. Karmakar PR. CIT& ANR. (2018) 304 CTR 0436 (Bom) wherein It has been held:

“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 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.”

21. 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 CoOrdinate 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. v. 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 subsection 2 of section 127 by 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 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 subsection (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 35 ITA No. 1308/Del/2023 of Ranchi and Delhi–Even going by case made out by revenue, no such agreement was spelt out.

8. 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 subsection (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, 38 ITA 688/JP/2019_ M/s Wholesale Cloth Merchant Association v. Pr.CIT there is no reference whatsoever to any such agreement. Clause (b) of subsection (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.

10. 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 36 ITA No. 1308/Del/2023 finding was recorded that there was an agreement between the Jurisdictional Commissioners of Ranchi and Delhi. In the present 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 2 017 (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 ITO 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 v. Union of India (1965) 56 ITR 14 (SC) : TC69R.660 and S. Narayanappa v. CIT (1972) 86 ITR 741 (All) : TC51R.651 distinguished; Sunanda Rani Jain v. 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 v. CIT AND Ors (2016) 388 ITR 0489 (SC) held that

Special Leave Petition–Transfer of case–Validity–High Court of Madras, Madurai Bench, upheld order of C.I.T.1, Madurai, Tamil Nadu, transferring file of assessee from Tamil Nadu to Kerala–Held, as Income-tax/assessment file of assessee has been transferred from one Assessing Officer in Tamil Nadu to another Assessing Officer in Kerala and two Assessing Officers are not subordinate to same Director General or Chief Commissioner or Commissioner of Income Tax, u/s 127(2) (a) an agreement between Director General, Chief Commissioner or 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 v. 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.”

21. In the light of the aforesaid discussion and the law cited before us, we are of the considered view that the impugned order has been passed by Ld. PCIT, Gurgaon, without jurisdiction in context to territorial powers and subject matter as well not in accordance with law and same is liable to be quashed. Accordingly, the additional ground raised by the assessee is allowed. Since the relief is granted to assessee by allowing additional ground itself, the adjudication of other grounds raised by the assessee become academic in nature and are left open. Resultantly, the appeal of the assessee is allowed and the impugned order is quashed.

Order pronounced in the open court on 08.01.2024.”

9. The arguments raised by the ld. CIT DR have been identically taken note by the ITAT. The ld. CIT DR has made reference to an order of the ITAT Delhi in the case of Shree Krishna Educational Trust v. Director General of Income Tax. In this case issue before the Tribunal was whether DGIT (Investigation) Lucknow was justified in cancelling the approval granted under Section 10(23C)(vi) of the Income Tax Act. This approval was to be granted to an educational institution and once an approval is being granted by CIT (Exemptions), then income of an educational institution will not be liable to tax upto a certain quantum. The DG (Investigation), Lucknow has cancelled such approval and this issue travelled upto the Tribunal. The Tribunal has held that DG(Investigation) has no power to cancel the approval granted for the purpose of Section 10(23C)(vi). In the opinion of the Tribunal, it was the CIT (Exemptions) or PCIT, the ld. DR wants to persuade the Bench to take note of the passing reference made by the Tribunal in paragraph No. 4 that such approval could be withdrawn by CIT (Exemption) or PCIT. The question in this order is not for the proposition agitated before us. The dispute in that case was whether DGIT was competent to cancel the approval granted to an assessee under Section 10(23C). While dealing with this issue, an observation is being made that such approval could be cancelled either by CIT (Exemptions) or PCIT. According to the ld. CIT DR, the reference to PCIT be construed as if PCIT has the power to cancel registration under Section 12AA. To our mind, this judgement is not for that authority. It is just a passing observation of one line in paragraph No. 4, but the judgement is in favour of the assessee and for a different proposition. The ld. CIT DR relied upon one more order of the ITAT, Pune Bench. We have perused this judgement and we would like to take note of observations made by the Tribunal in paragraph 16, which read as under :

“16. Then, the next question that comes up for our consideration is that whether or not Ld. POT was justified in cancelling the registration of trust with retrospective effect from financial year 200708. Without delving into the issue whether the Commissioner had been empowered to cancel registration with retrospective effect, it is suffice to hold that in the present case, Hon’ble Bombay High Court in Writ Petition filed by the appellant challenging the show cause notice for cancellation of registration held that the contents of order dated 910-2007 passed by the Commissioner cancelling registration shall be treated as show cause notice to the appellant as extracted supra and this finding had not been reversed till date. In the interest of judicial discipline, the ld. PCIT is bound to obey the Directions of Hon’ble High Court and rightly cancelled the registration w.e.f. financial year 2007-08.”

9.1 Thus, this judgement has not adjudicated the issue as canvassed by the ld. CIT DR. We find that all the Benches of the ITAT across the country are unanimous in its approach that registration granted to an assessee under Section 12AA could only be cancelled by CIT (Exemptions) and not by PCIT. The ITAT, Cuttack as well as Bangalore has conclusively held that Section 12AB sub-section (4) brought on the Statue Book w.e.f. 01.04.2022 cannot be applied with retrospective effect. It is prospective in nature.
10. Respectfully following the judgement of the Co-ordinate Benches on these two propositions, we are of the view that impugned order passed by the PCIT is not sustainable on both the folds of grievances. Hence, we quash the impugned order. We do not deem it necessary to adjudicate any other issue on merit. Accordingly, we allow the appeal of the assessee.
11. In the result, appeal of the assessee is allowed.
20. In view of the above discussion, we are of the view that impugned order of the ld. PCIT is not sustainable on both the folds, hence, we set aside this order and direct the Revenue to renew registration of the assessees u/s 12A(1)(ac)(ii) of the Income Tax Act and issue necessary certificate as per the procedure.
21. In the result, the appeal is allowed.