Hemkunt Foundations Vs PCIT (ITAT Delhi)
No cancellation of assessee-trust registration over Jurisdictional and procedural lapses as clause u/s 12AB(4) not applicable retrospectively
Conclusion: The cancellation of registration under Section 12AB was not justified as PCIT lacked jurisdiction and that the “specified violation” clause under Section 12AB(4) was inapplicable for the financial years in question.
Held: Assessee-trust had reapplied for registration post-amendment, which was granted on 24.09.2021. The Investigation Wing shared evidence found during the survey with AO and PCIT, alleging multiple violations. Based on the survey findings and a reference from AO, PCIT issued show-cause notices citing “specified violations” under Section 12AB(4), including alleged breaches of the Foreign Contribution (Regulation) Act (FCRA), misapplication of funds, and unrecorded cash transactions. PCIT canceled the trust’s registration under Section 12AB from FY 2021-22 onwards vide order, claiming the trust’s activities were not genuine and violated its objectives. Aggrieved by PCIT’s Order, assessee appealed to ITAT. Assessee argued that PCIT lacked jurisdiction, as the authority to grant or cancel registration under Section 12AB vested solely with CIT(E). Assessee further contended that the “specified violation” clause under Section 12AB(4), introduced by the Finance Act, 2022, effective from 01.04.2022, could not apply to FY 2020-21 or FY 2021-22. Assessee relied on precedents such as the ITAT’s ruling in Aggarwal Vidya Pracharni Sabha vs. PCIT and Lakhmi Chand Charitable Society vs. PCIT, which held that only CIT(E) has jurisdiction over Section 12AB matters and that post-2022 provisions could not apply retrospectively. It was held that PCIT lacked jurisdiction, as the authority to cancel registration under Section 12AB rested with CIT(E), per the amended provisions. Tribunal ruled that the “specified violation” clause under Section 12AB(4), effective from 01.04.2022, could not be applied to FY 2020-21 or FY 2021-22, therefore the cancellation order was legally unsustainable. Tribunal also found procedural lapses in the PCIT’s notices, which failed to clearly identify the alleged violations before seeking information, violating principles of natural justice. Tribunal cited the Aggarwal Vidya Pracharni Sabha precedent, the tribunal quashed the PCIT’s order as without jurisdiction and not in accordance with law.
