Guru Ram Dass Educational Society Vs DCIT/ACIT (ITAT Chandigarh)
Scope of renewal proceedings with cancellation proceedings and jurisdictional validity in renewal of Trust Registration
Conclusion: PCIT had erroneously mixed up the scope of renewal proceedings with cancellation proceedings under Section 12AB(4). Further, Settlement Commission itself had accepted the charitable nature and genuineness of the assessee’s activities and PCIT (Central) was found to lack jurisdiction to adjudicate the issue of renewal/cancellation of registration.
Held: Assessee-trust, engaged in imparting education and already holding registration under Section 12AA since 31.10.2001, applied for renewal of registration under revamped registration regime. The assessee had earlier been granted registration for AYs 2022-23 to 2026-27 pursuant to an application filed in Form 10AC. Subsequently, after a search action conducted on 03.10.2019, PCIT initiated proceedings under Section 12AB(4) while considering the assessee’s application for renewal and rejected the renewal primarily relying upon findings emerging from the search, allegations of inflated expenses, absence of bills and vouchers, and disclosures made before the Settlement Commission. Revenue contended that assessee’s conduct before the Settlement Commission and surrender of additional income demonstrated that its activities were not genuine and were not being carried out in accordance with its charitable objects. Assessee however contended that PCIT had wrongly mixed up proceedings for renewal of registration with cancellation proceedings under Section 12AB(4); that Rule 17A permitted examination only of accounts relating to three preceding years; and that the Settlement Commission itself had rejected the Department’s allegations of siphoning of funds and held that the trust continued to carry on genuine educational activities. Assessee further challenged the jurisdiction of PCIT (Central), contending that only the Commissioner of Income Tax (Exemptions) had authority to deal with registration and cancellation matters under Sections 12AA/12AB in view of CBDT Notifications issued under Section 120. It was held that the assessee’s activities of imparting education were per se charitable within the meaning of Section 2(15) and that neither the Assessing Officer nor the Settlement Commission had doubted the genuineness of such activities. It was further held that PCIT committed a serious error in conflating proceedings for renewal of registration with proceedings for cancellation under Section 12AB(4), both operating in distinct fields with separate jurisdictional requirements. Tribunal observed that for renewal under Section 12A(1)(ac)(ii), the enquiry was confined to genuineness of activities and compliance with allied laws, whereas cancellation under Section 12AB(4) required establishment of specified violations. Tribunal also held that PCIT wrongly relied upon material pertaining to earlier assessment years beyond the permissible period contemplated under Rule 17A. On the jurisdictional issue, following several co-ordinate Bench decisions, the Tribunal held that the ld. PCIT (Central) lacked jurisdiction to adjudicate renewal/cancellation proceedings under Sections 12AA/12AB, such powers being vested exclusively in the Commissioner of Income Tax (Exemptions) by virtue of notifications issued under Section 120. Accordingly, the impugned order rejecting renewal of registration was quashed and the assessee’s claim was allowed.
