Pacific Academy of Higher Education and Research Society Vs PCIT (ITAT Jodhpur)
ITAT Jodhpur held that it is settled legal position that registration cannot be cancelled from retrospective effect. Hence, cancellation of registration of charitable trust with retrospective effect is invalid.
Facts- The Pacific Academy of Higher Education and Research Society, Udaipur is a society registered under the Rajasthan Society Registration Act, 1958. The main object of society is to impart education. In pursuance to these objects, society was running various educational institutes where more than 10000 students are imparted education. Subsequently, it was given the status of University by the State Government.
A search was conducted on the Pacific Group of Udaipur u/s. 132(1) of the IT Act dated 26.08. 2015. The PCIT observed that during the search at the residential premises of Sharad Kothari, Registrar of the assessee trust, some loose papers and three pen drives and documents seized relates to PAHER University and its college i.e. Pacific Dental College was seized. The PCIT on the basis of these documents issued show cause notice.
The assessee, explained that the reasons assigned for withdrawal of registration and that the Hon’ble Rajasthan High Court had already stayed the implementation of the said order, the legible copies were also provided. It was explained that there was no limitation prescribed for withdrawal of registration and therefore the proceedings for withdrawal are premature which may be kept pending. The PCIT however withdrew the registration already granted under Section 12AA of the Act and the approval given under Section 10(23C)(vi) of the Act with retrospective effect from 01.04.2009.
Being aggrieved, the assessee has preferred the present appeal.
Conclusion- Held that the ld. Pr.CIT (Central) cancelled such approval from A. Y. 2014-15, though the assessee has already assessed from A.Y. 2014-15 under section 143(3)/148 of the Act. It is also a settled legal position of law that Registration cannot be cancelled from retrospective effects.
We are of the opinion that in the present case the ld. Pr.CIT(Central) has no jurisdiction to pass the impugned order. Accordingly, we quash the same. Even otherwise we are also of the view that no retrospective cancellation could be made as neither in the Sec. 12AA (3) nor in Sec. 12AA(4) it has been provided or is seen to have been explicitly provided to have a retrospective character or intend. Therefore, without a specific mention of the amended provisions to operate retrospectively no cancellation for the past years could be ordered.
FULL TEXT OF THE ORDER OF ITAT JODHPUR
These are two appeals filed by the assessee against two separate orders of ld. PCIT (Central), Rajasthan, Jaipur dated 26.12.2019 passed under section 12AA(3) & 12AA(4) and 10(23C)(vi) of the Income Tax Act, 1961. The assessee has raised the following grounds of appeal :-
ITA NO. 04/JODH/2020 :
1. That on the fact and circumstances of the case as well as in law the Ld. Principal Commissioner of Income Tax (Central), Jaipur, by order dated 26th December 2019 cancelled the registration retrospectively by invoking provision of section 12AA(3) and invoking provision of section 12AA(4) of the Income Tax Act, 1961, with effect from 1st April 2009, which was granted to the Education Society by The Commissioner of Income Tax, Udaipur, as per order dated 10th October 2002, without providing adequate opportunity of being heard and further failed to appreciate that the cancellation so made is contrary to the law laid down under section 12AA(3) and 12AA(4) of the Income Tax Act, 1961 read with number of case laws. Hence the order so passed deserves to be quashed/annulled, so order accordingly.
2. That on the fact and circumstances of the case as well as in law the order so passed without providing of reasonable and adequate opportunity of being heard which is against the principle of natural justice and while withdrawing the registration the authority ignored the request letter dated 7 December 2019, which the authority should have taken into consideration in the interest of natural justice.
3 & 3.1 That on the fact and circumstances of the case as well as in law the Ld. Principal Commissioner of Income Tax (Central), Jaipur, had no jurisdiction to cancel the registration granted to the appellant Society (granted as per order dated 10th October 2002 by the Commissioner of Income Tax, Udaipur) by invoking provision of section 12AA(3) which is applicable with effect from 1st June 2010 according to which any registration granted prior to 1st October 2004 cannot be retrospectively withdrawn.
That while refusing registration under section 12AA(3) of the Income Tax Act, 1961, the Ld. Principal Commissioner of Income Tax (Central), Jaipur, failed to bring on record two basic conditions namely, Activities of the Institute are not genuine or are not being carried out in accordance with the objects of the Society or Institution.
4 & 4.1 That on the fact and circumstances of the case as well as in law the Ld. Principal Commissioner of Income Tax (Central), Jaipur, further grossly erred in withdrawing the registration under section 12AA(4) of the Income Tax Act, 1961, with effect from 1st April 2009 on the ground that activities of the Society are being carried out contrary to the provision of Section 11, 12 and sub-section 13(1) of the Income Tax Act, 1961, which is also bad in law.
That as per the settled law the provision of section 12AA(4) cannot be invoked retrospectively as done in the present case and the point in issue is being settled so far in the State of Rajasthan in case of Indian Medical Trust Versus the Principal Commissioner of Income Tax (414 ITR 296), as per the decision of the Honorable High Court of Rajasthan.
5. That on the fact and circumstances of the case as well as in law the impugned order of withdrawal of registration passed under section 12AA(3) and 12AA(4) of the Income Tax Act, 1961, cannot terms to be a valid order in the eye of law in as much as it can be safely said that the order so passed by the Principal Commissioner of Income Tax (Central), Jaipur, in a cyclostyled manner adopting the various reasons which were almost picked up from the matter referred under section 142(2)A of the Income Tax Act, 1961, for Special Audit in the month of December 2017 ignoring the further vital fact that the said matter of 142(2)A is being Stayed by the Honorable High Court of Rajasthan, Jodhpur, and assessment of earlier years of such period is also being Stayed i.e. from Assessment Years 2010-11 to 2016-17.
6. That on the fact and circumstances of the case as well as in law the impugned order so passed on the basis of some loose papers, documents and computer generated sheets found from the employee of the Society which is also the subject matter of pending assessment which is to be completed after the order of Honorable High Court of Rajasthan, Jodhpur, on Compulsory Audit matter.
7. That on the fact and circumstances of the case as well as in law the Principal Commissioner of Income Tax (Central), Jaipur, at Page No. 52, Para No. 5, very conveniently for the withdrawal of registration mentioned that the Society is involved in earning of illegal or unaccounted income in the shape of Capitation Fees and income diverted for the benefit of person(s) referred to in Section 13 (3) of the Income Tax, 1961, which is purely based on assumption, presumption, arbitrary in nature and contrary to the fact of the case.
8. That on the fact and circumstances of the case as well as in law the Principal Commissioner of Income Tax (Central), Jaipur, while withdrawing the benefit/approval under section 12AA(3) and 12AA(4) of the Income Tax Act, 1961, completely failed to appreciate that the education and research society exists for the purpose of imparting education since last more than 20 years in various disciplines having substantial investment in land and buildings and other infrastructures, team of learned faculties known in the State of Rajasthan and not meant for the purpose of earned of profit. This aspect remains to be considered by the Principal Commissioner of Income Tax (Central), Jaipur.
ITA NO. 05/JODH/2020 :
1. That on the fact and circumstances of the case as well as in law the impugned order dated 26th December 2019 passed by the Principal Commissioner of Income Tax (Central), Jaipur, resulted into withdrawal of the approval granted under section 10(23C)(vi) of the Income Tax Act, 1961, with effect from 1st April, 2009 is bad in law, unjustified, based on assumption and presumption for want of adequate and reasonable opportunity of being heard.
2. That on the fact and circumstances of the case as well as in law the impugned order dated 26th December 2019 passed by the Principal Commissioner of Income Tax (Central), Jaipur, who assumed jurisdiction to initiate the proceeding as to withdraw approval under section 10(23C)(vi) of the Income Tax Act, 1961, cannot terms to be a prescribed authority in law in view of Notification No. SO. 676(E)[No. 20/2015 (F.No. 196/26/2014-ITAI) dated 5th March, 2015.
2.1 That as per the decision of the Honorable High Court of Rajasthan in case of Indian Medical Trust versus the Principal Commissioner of Income Tax (414 ITR 296), the prescribed authority is not empowered to withdraw the benefit of approval under section 10(23C)(vi) of the Income Tax Act, 1961.
3. That on the fact and circumstances of the case as well as in law the Principal Commissioner of Income Tax (Central), Jaipur, under section 10(23C)(vi) of the Income Tax Act, 1961, by which the authority refused to grant the approval of exemption under section 10(23C)(vi) of the Income Tax Act, 1961, is totally against the fact of the case, material on record and order so passed is untenable in the eye of law.
4. That on the fact and circumstances of the case as well as in law the Principal Commissioner of Income Tax (Central), Jaipur, refused the registration on flimsy grounds based on assumption and presumption and the order passed in haste and hurry within an interval of 4 to 5 days without appreciating the fact of the case which was specially brought to the notice vide letter dated 7th December, 2019 i.e.
(i) Ignored the order of Honorable Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur, in appellant’s own case, bearing No. 247/Jodh/2015 dated 6th July 2017 which is binding in nature.
(ii) By virtue of operation of search under section 153A from Assessment Years 2010-11 to 2016-17 for Compulsory Audit proceeding initiated under section 142(2)A of the Income Tax Act, 1961, Stayed by the Honorable High Court of Rajasthan.
(iii) The Principal Commissioner of Income Tax (Central), Jaipur, ignored the contention of letter dated 7th December, 2019. Had in fact the contention of the said letter taken into consideration, no occasion said to have been arises as to pass the order in such a fashion which has resulted into withdrawal of benefit of approval granted under section 10(23C)(vi) of the Income Tax Act, 1961.
5. That on the fact and circumstances of the case as well as in law the Principal Commissioner of Income Tax (Central), Jaipur, while withdrawing the benefit/approval under section 10(23C)(vi) of the Income Tax Act, 1961, completely failed to appreciate that the education and research society exists for the purpose of imparting education since last more than 20 years in various disciplines having substantial investment in land and buildings and other infrastructures, team of learned faculties known in the State of Rajasthan and not meant for the purpose of earned of profit. This aspect remains to be considered by the Principal Commissioner of Income Tax (Central), Jaipur.
6. That on the fact and circumstances of the case as well as in law the withdrawal of approval under section 10(23C)(vi) of the Income Tax Act, 1961 with effect from 1st April 2009 is also bad in law as the reason assigned by the Principal Commissioner of Income Tax (Central), Jaipur, in order so passed is exactly repetition of the fact which is also the subject matter/part of Writ filed before the Honorable High Court of Rajasthan in case of compulsory Audit under section 142(2)A of the Income Tax Act, 1961.
7. That on the fact and circumstances of the case as well as in law the Principal Commissioner of Income Tax (Central), Jaipur, to justify as to take action as to withdraw approval very conveniently mentioned that the research and education society is engaged as to receive Capitation Fees which is also purely based on assumption and presumption and contrary to the fact.
8. That the appellant craves, leave, to add, to amend, modify, rescind, supplement or alter any of the grounds of appeal stated hereinabove on or before or at the time of hearing of appeal.
2. The brief facts of the case are that Pacific Education Society, Udaipur is a society registered under Rajasthan Society Registration Act, 1958 vide Registration No.45/Udaipur/95-96 dated 17th October,1995(PB 01-02). The society changed its name to Pacific Academy of Higher Education and Research Society. Copy of the letter dated 12.03.2007 by Registrar Societies along with the Revised certificate dated 12.03.2007 regarding change of name is at (PB 03). The main object of the society is to impart education (PB 04-14). The society solely exists for charitable purposes and not for the purposes of profit. In pursuance to these objects, society is running various educational institutes where more than 10000 students are imparted education. Subsequently it was given the status of University by the State Government vide notification dated 29.04.2010. The society is having 20 constituent colleges imparting education in the diversified fields including Dental Sciences, Engineering, Management, Pharmacy, Hotel Management, Polytechnic, etc. The names of these institutes, courses offered and the approving authority of these colleges are as under:-
