Rukmini Educational Charitable Trust Vs PCIT (Central) (ITAT Bangalore)
No Retrospective Power to Cancel u/s 12AB(4), Reference by AO Before 143(2) Notice Held Void– AO’s ‘Borrowed Satisfaction’ & Retrospective Action Held Invalid
Assessee-trust, engaged in educational activities & registered u/s 12AA (later migrated to 12AB), challenged the PCIT(Central)’s order dated 30.09.2024 cancelling its registration u/s 12AB(4)(ii) following a search u/s 132 on 23.06.2022 in the Divyasree/Shyamaraju group. PCIT held that the trust diverted funds of about ₹145.41 crore to its trustees for purchasing agricultural lands in their own names, wrote off advances of ₹46.40 crore, & thereby violated its charitable objects.
Assessee’s contentions:
- AO’s reference to PCIT under the 2nd proviso to s.143(3) was made before issuing notice u/s 143(2); hence no valid “satisfaction” of violation.
- PCIT(Central) lacked jurisdiction—only CIT(Exemptions) could cancel registration.
- s.12AB(4) was inserted w.e.f. 1.4.2022, so cannot operate retrospectively for earlier A.Ys.
- No diversion existed—the lands were bought in trustees’ names since the trust couldn’t hold agricultural land; used for charitable purposes.
Revenue’s stand:
PCIT was competent under s.127 & CBDT Circular No.23/2022 (03.11.2022). Reference by AO validly based on search evidence of diversion & bogus billing; power under s.12AB(4) applied from 1.4.2022 to any year.
Tribunal’s findings:
- PCIT’s jurisdiction upheld: Once jurisdiction transferred u/s 127 to AO under PCIT(Central), the PCIT validly exercised powers of cancellation.
- Reference invalid for A.Ys. 2015-16, 2016-17 & 2019-20: AO’s reference dated 05.03.2024 preceded any scrutiny notice (issued only on 26.06.2024). Satisfaction was merely borrowed from search findings, not based on inquiry; hence invalid.
- Retrospective application: Following coordinate Bench rulings (e.g., Amala Jyothi Vidya Kendra Trust v. PCIT, 157 taxmann.com 235; Sri Srinivasa Educational & Charitable Trust v. DCIT, ITA No.835/Bang/2023), power u/s 12AB(4) effective only from A.Y. 2022-23; cancellation for earlier years impermissible.
- For A.Y. 2022-23: AO’s reference (19.02.2024) followed valid 143(2) notice; PCIT had authority to examine. However, since AO’s satisfaction lacked independent inquiry & PCIT’s show-cause did not specify which “specified violation” under the Explanation to s.12AB(4) was invoked, even this cancellation was unsustainable.
Held:
PCIT(Central)’s order dated 30.09.2024 cancelling registration u/s 12AB(4)(ii) for all four years quashed.
Result- All four appeals allowed; registration restored.
