Sai Shikshan Sanstha Vs PCIT (ITAT Delhi)
Summary: The Income Tax Appellate Tribunal, Delhi Bench, allowed the appeal of Shri Sai Shikshan Sanstha against the Principal Commissioner of Income Tax (Central), Nagpur and quashed the order cancelling its registration retrospectively and the provisional registration under section 12AB(4) of the Income-tax Act, 1961. The dispute arose from search and seizure and survey action conducted on 17.09.2021, following which the Department relied on seized material, statements and other records to allege specified violations, including alleged cash refunds of salary, cash brokerage for student admissions, unrecorded miscellaneous and prospectus fees, routing of funds through Delhi-based companies and a loan from a paper/shell company. The assessee challenged the jurisdiction of the PCIT, the retrospective application of the specified-violation regime introduced by the Finance Act, 2022, the reference in the show-cause notice to section 12AA(3), the evidentiary basis of the allegations and the procedure followed. On jurisdiction, the Tribunal accepted the Department’s position that, after centralisation under section 127 and in light of Notification No. 70/2014 and the CBDT directive dated 19.01.2024, the PCIT (Central) could exercise the statutory functions over the centralised case. On the principal cancellation issue, however, the Tribunal held that the alleged acts and evidence relied upon related to periods before 01.04.2022, whereas the specified-violation framework in section 12AB(4), substituted by the Finance Act, 2022, operated prospectively. Relying on M.M. Patel Charitable Trust and other Tribunal decisions, and considering the statutory scheme and the decision in Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd., the Tribunal held that the new penal consequences could not be used as the basis for retrospective cancellation. The Tribunal further found that the notice and order did not clearly identify which specific specified-violation clause was invoked and that the statutory procedure under section 12AB(4) had not been followed. It distinguished Advantage India and considered the reasoning in Aggarwal Vidya Pracharni Sabha, Ram Saran Das Kishori Lal, Rukmini Educational Charitable Trust and Independent and Public Spirited Media Foundation, among others. The Tribunal also held that allegations concerning benefits to specified persons under section 13 could not, without more, be converted into specified violations under section 12AB(4), noting the separate statutory treatment of section 13 matters. On the evidentiary issue, the Tribunal found that the PCIT had substantially relied on search material and statements, while subsequent examination and cross-examination of employees had produced denials of salary refunds. It held that retracted statements relied upon for conclusive findings required fresh examination or an opportunity of cross-examination and could not, without independent corroboration, sustain the conclusions. The Tribunal further found no specific basis for treating the trust’s educational activities as non-genuine and no identified registration condition that had been violated. Consequently, the Tribunal decided the second and third issues in favour of the assessee, sustained the corresponding grounds, quashed the impugned order and allowed the appeal.
