THE LITTLE PEARL CHARITABLE SOCIETY,DELHI V. PR. COMMISSIONER OF INCOME TAX (CENTRAL) - 3 , DELHI

ITA 251/DEL/2025

AI Insights

The case involves The Little Pearl Charitable Society, which appealed against the order of the Principal Commissioner of Income Tax (Central)-3, Delhi, that retrospectively cancelled its registration under Sections 12A, 12AA, and 12AB of the Income Tax Act, 1961, starting from the Assessment Year 2013-14. The cancellation was based on alleged specified violations identified during a search and seizure operation. The Tribunal examined whether the retrospective application of the law for cancellation was valid, considering the amendments introduced by the Finance Act, 2022, which were effective only from April 1, 2022. The Tribunal referenced several judicial precedents and CBDT circulars to conclude that the retrospective cancellation was not permissible.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839190 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 16-01-2025
• Other Referred Cases: Principal Commissioner of Income-tax (Central) V. Centre For Policy Research, Sheetal International (P.) Ltd. V. Chief commissioner of Income Tax, Commissioner of Income-Tax - Central V. Sunita Dhadda, Human Welfare Foundation vs DCIT (Exemption), Lala Sher Singh Memorial Jeevan Vigyan Trust Society v. PCIT (Central)-3, New Delhi, Islamic Academy of Education vs. PCIT, Heart Foundation India vs. CIT, Pune, Nathaneil Junior Education Society vs. Principal (Central)-3 Delhi & Ors., Lakhmi Chand Charitable Society vs. PCIT, Central 3, New Delhi
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ITS LETTER ASKED MONTH
• Keywords: Set aside; Retrospective amendment; Unexplained investment; Principle of natural justice; Search and seizure; Assessment record; Charitable institution; Cancellation of registration
• Section: 143(3); 12AA; 132; 12A; 80G

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B ”: NEW DELHI BEFORE Ms. MADHUMITA ROY, JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 251/DEL/2025 Assessment Year: 2013-14 The Little Pearl Charitable Society, 27, CC Colony Kalyan Vihar, Model Town- III, Delhi-110009 PAN: AADAT 0655 L Vs PCIT (Central)-3, Delhi. APPELLANT RESPONDENT Assessee represented by Shri Pranav Yadav, Adv.; & Shri vibhu Gupta, Adv. Department represented by Shri Shrikant Namdeo, CIT(DR) Date of hearing 21.11.2025 Date of pronouncement 18.02.2026 O R D E R PER Ms. MADHUMITA ROY, JM: The instant appeal, filed by the assessee, is directed against the order dated 30.12.2024 passed by the Principal Commissioner of Income-tax (Central)-3, Delhi, under Section 12A r.w.s. 12AA & 12AB(4) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), for the Assessment Year 2013-14. 2. Grounds of appeal raised by the assessee read as under: Printed from counselvise.com 2 ITA No. 251/Del/2025 “1. That the learned Pr. Commissioner of Income Tax(Central)-3, Delhi has erred in law and on facts in withdrawn registration U/s 12A r.w.s. 12AA and 12AB of Income Tax Act, 1961 retrospectively from the F.Y. 2012-13 i.e. relevant to A.Y. 2013-14 and further year is bad in eye of the law. As stated in judgment of hon'ble Supreme Court of India in case of Principal Commissioner of Income-tax (Central) V. Centre For Policy Research, SLP (CIVIL) DIARY NO(S). 44698 OF 2023, JANUARY 5, 2024. 2. Since the assessment for the A.Y. 2013-14 is time barred as held by the jurisdictional High Court of Delhi in the case of Sheetal International (P.) Ltd. V. Chief commissioner of Income 2 Tax W.P.(C) 12632 of 2024 CM APPLS. 52458 and 52459 of 2024, dated November 4, 2024 and accordingly cancellation of exemption u/s 12A r.w.s. 12AA & 12AB (4) of the Income Tax Act, 1961 from F.Y. 2012-13 is also time barred. 3. That the order of the learned PCIT (Central)-3, Delhi is erroneous in law and is against the principles of natural justice by not giving proper show cause notice and without giving proper opportunity to being heard. 4. That the learned Pr. Commissioner of Income Tax (Central)-3, Delhi has erred in law and on facts by not allowing Cross Examination to appellant of all documents/records etc on which PCIT(Central)-3, Delhi heavily relied upon. As per law settled 4 Judgment of Hon'ble Supreme Court of India in case of Commissioner of Income-Tax - Central V. Sunita Dhadda, Special Leave Petition (Civil) Diary No(S), 9432 of 2018, March 28, 2018. it was held that not allow assessee to cross examine there being violation of principle of natural justice. 5. That the learned Pr. Commissioner of Income Tax(Central)-3, Delhi has erred in law and on facts by heavily relied on documents/records seized from 3rd party data as per settled law without any Corroborative evidence. 6. That the learned Pr. Commissioner of Income Tax (Central) -3. Delhi has erred in law and on facts by conclude that the activities of the appellant are not genuine or are not being carried out in accordance with its stated objects. Printed from counselvise.com 3 ITA No. 251/Del/2025 7. That the order of the learned PCIT(Central)-3, Delhi is bad in eye of the law as the PCIT(Central)-3, Delhi has no jurisdiction over continuing the exemption/revocation of exemption/cancellation of exemption U/s 12A r.w.s. 12AA & 12AB(4) of 7 the Income Tax Act, 1961 still lies with the Principal Chief Commissioner of Income Tax (Exemption) as per section 127 r.w.s section 120 of Income Tax Act, 1961 and without sharing any satisfaction note to the assessee in term of sub section 3 of the section 143 of the Act. 8. That your appellant trust craves leave to add, to amend, alter, 8 or withdraw any or more grounds of appeal on or before the hearing of appeal.\" 3. The facts of the case, in brief, are that the assessee Little Pearl Charitable Society is a Society, running the following schools under it: a) Mother's Pride School Kalyan Vihar, New Delhi b) Presidium School, Kalyan Vihar, New Delhi 4. The Little Pearl Charitable Society is an educational Society which was registered on 29.01.1996. Order of registration of Society under Section 12A read with section 12AA of the Act was passed by the Office of the Director of Income Tax (Exemption) dated 12.11.2012. Further, certificate of exemption/continuation of exemption u/s 80G of the IT Act was passed by the Office of the DIT(E), Delhi vide letter dated 12.11.2012. The assessee was granted fresh registration vide order dated 05.04.2022 for the period AY 2022-23 to 2026-27. Further, approval under Section 80G of the Income Tax Act, 1961 was also granted to the Society w.e.f. A.Y. 2022-23 to A.Y. 2026-27 vide URNdated 05.04.2022. Printed from counselvise.com 4 ITA No. 251/Del/2025 5. The aims and objects of M/s The Little Pearl Charitable Society as per its Memorandum of Association (MOA) are reproduced as under: (i) To establish service, educational and research communities in order to further the cause of neo humanistic living symbolising the love for plants, animals, human and over Inanimate world. (ii) To establish necessary educational institutions, fields of humanity, sciences both for vocational and non-vocational purposes for all ages. (iii) To improve living conditions in the educational campus with respect to security, cleanliness, maintenance of parks, sanctuaries, roads, water supply, sewage, drainage energy centres, transportation facilities and amenities that may be required for the residents from time to time. (iv) To undertake research in any field of human interest and establish training programmes to disseminate knowledge for the all-round development of society. (v) To encourage cross-cultural exchanges and foster universal brotherhood/sisterhood through exchange of schools, students, publications or any such collaborations which unite the human Society. (vi) To publish books, journals etc. for nurturing all branches of human knowledge. The income of the publications will be utilised for the development of institutions of learning and culture. (vii) To provide medical relief to the deserving and backward classes. (viii) To Construct and establish, clinics and hospital for providing such medical relief and facilities. Printed from counselvise.com 5 ITA No. 251/Del/2025 (ix) Grant of medical relief in any form to destitute orphans and to needy and poor persons who are blind, infirm or handicapped and to similar other persons. (x) To donate to or otherwise assist in any manner, any public charitable institutions for public charitable objects, in so for as such donations or assistance do not contravene and of the objects enumerated in the Memorandum. (xi) To create awareness and give training to the poor and downtrodden children and the young people, in some crafts which ensures them reasonable livelihood. (xii) To arrange marriages of poor and needy women and to give financial subsidies and grants, grants-in-aid, education to their children and medical treatment when necessary. (xiii) To accept any donations, contributions either in cash or in kind from any person, firm, company, institution or Government for such purposes. (xiv) To do all such other work which may be helpful for the promotion of the aims and objects of the society. (xv) The association shall be purely a non-political and partisan body. (xvi) All the income, earning, moveable, immoveable properties of the society shall be solely utilised and applied towards the promotion of its aims and objects only as set forth in the Memorandum of Association and no profit thereon shall be paid or transferred directly or indirectly by way of dividends, bonus profits or in any manner whatsoever to the present or the past members of the society or to any other person claiming through any one or more of the present or the past members. No member of the society shall Printed from counselvise.com 6 ITA No. 251/Del/2025 have any personal claim on any moveable or immoveable properties of the society or make any profits, whatsoever, by virtue of his membership. 6. A Search and Seizure operation under Section 132 of the Actwas conducted on Sudha Gupta, Devendra Gupta &others on 24.08.2022 wherein it was revealed that Mother's Pride and Presidium Group of schools run by Smt. Sudha Gupta and Sh. Devendra Gupta, were involved in systematic tax evasion. The following issues identified during the course of search and post search investigation: i) Raising funds from public through a Ponzi investment scheme. (ii) Diversion of funds of trusts/societies for personal uses. (iii) Mis-match in fee collection data as per school fee software & tally data. (iv) Investment of unaccounted cash in immovable properties. 7. In consequence to the search & seizure action, case of the assessee was centralized with the Central Circle-29, Delhi from Ward (Exemption)- 2(3), Delhi by and under the order under Section 127 of the Income Tax Act) dated 19.01.2023 issued by the CIT(Exemption), Delhi . 8. During the course of assessment proceedings, the assessing officer being satisfied that the Society had committed specified violation as defined in Explanation to sub-clause (4) of Section 12AB, referred the matter to the Pr. CIT(Central)-3, Delhi as per the provisions of the second proviso to sub-section (3) Printed from counselvise.com 7 ITA No. 251/Del/2025 of Section 143 substituted by the Finance Act, 2022, proposing cancellation of registration of the assessee society. 9. The Ld. PCIT on the basis of the proposal and going through the search and assessment records, issued a show cause notice regarding cancellation of registration of the Society under Section 12AB(4)r.w.s 12A and 12AA of the Act on 30.06.2024. The said notice was duly served upon the assessee through the declared e-mail as well as speed post requiring the assessee to furnish the relevant details along with supporting documentary evidences to the said office on or before 15.07.2024. In response to the notice, the assessee by its letter asked for 1 month time to submit its reply. Further, another notice dated 23.07.2024 was issued to the assessee for furnishing the reply in respect of show cause notice dated 30.06.2024. In response to the said letter dated 23.07.2024, the AR of the assessee submitted POA and raised objections against the cancellation of the registration of Society under Section 12A r.w.s 12AA & 12AB(4) of the Income Tax Act, 1961. 10. The registration under Section 12A read with Section 12AA of the Act was finally cancelled by the impugned order dated 30.12.2024 passed by the Ld. PCIT whereby and whereunder the Registration under Section 12A r.w.s. 12AA and 12AB of the Act has been withdrawn retrospectively from ASSESSMENT YEAR 2013-14 with the following observations: Printed from counselvise.com 8 ITA No. 251/Del/2025 “15. Directions; The provisions of section 12AB(4) mandate that if any specified violation is established for a particular previous year then the cancellation of registration whether granted under Section 12A r.w.s 12AA or under section 12AB shall be cancelled from that previous year and all subsequent previous years. That is to say that if the violation is done by the assessee in PY 2012- 13 relevant to the Assessment Year 2013-14 then the cancellation of registration granted under section 12A read with Section 12AA of the Act shall be effective for the PY 2012-13 till PY 2020-21 and cancellation of Registration granted under section 12AB for PY 2021-22 onwards. Therefore, the cancellation would operate perpetually from the first of the years in respect of which the violation has taken place irrespective of the fact whether the registration was granted under section 12A r.w.s 12AA or under section 12AB or whether there has been any violation in any of the subsequent years or not. The legislative mandate is that once charitable organization commits a specified violation it should not be allowed benefit at any time in future also. In view of the above the: 1) registration of the society under Section 12A r.w.s. 12AA and Section 12AB is cancelled from the previous year relevant to the Assessment year 2014-15 and subsequent Assessment years for the specified violations noted in point (f) above. 2) registration of the society under Section 12A r.w.s. 12AA and Section 12AB is cancelled from the previous year relevant to the Assessment year 2016-17 and subsequent Assessment years for the specified violations noted in point (g) above. 3) registration of the society under Section 12A r.w.s. 12AA and Section 12AB is cancelled from the previous year relevant to the Assessment year 2013-14 and subsequent Assessment years for the specified violations noted in point (h) above 4) registration of the society under Section 12A r.w.s. 12AA and Section 12AB1s cancelled from the previous year relevant to the Assessment year 2018-19 and subsequent Assessment years for the specified violations noted in point (i) above. Printed from counselvise.com 9 ITA No. 251/Del/2025 16 In view of above discussed facts, the activities of M/s The Little Pearl Charitable Society were found to be non-genuine and the income derived from property held under society, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the society, therefore, the same were not being carried out in accordance with the declared aims & objects and conditions subject to which registration was granted to it u/s 12A r.w.s. 12AA, and section 12AB of the Income Tax Act, 1961. The first violation was found during the FY 2012-13 (relevant to AY 2013-14) therefore, the registration of Mis The Little Pearl Charitable Society u/s 12A r.w.s. 12AA and 12AB is withdrawn for the period of F.Y. 2012-13 ie. relevant to A.Y. 2013-14 and further years. 16.1 It is held that each of the specified violation for each of the Assessment years involved is an independently established default based on appreciation of evidences. In case if at any appellate level any of the specified violation are held to be not in existence then also if the other defaults are upheld the consequential cancellation order would continue to operate independently.” 11. Being aggrieved by and/or dissatisfied with the said order passed by the Ld. PCIT, the assessee is in appeal before us. 12. The Ld. AR before us at the very outset of the matter argued on the 1st legal ground being cancellation of registration of the Society with retrospective effect which goes to the root of the matter and, therefore, we have proceeded to deal with the same at the very threshold. 13. On this issue we have heard rival submissions made on behalf of the respective parties and perused the entire materials available on record. The Society was registered under Section 12A(a) of the Income Tax Act, 1961 vide Registration dated 12.11.2012, this registration was effective upto A.Y. 2021-22. Printed from counselvise.com 10 ITA No. 251/Del/2025 After insertion of clause (AC) in section 12(1) of the Act, the registration of the Society was renewed from A.Y. 2022-23 to A.Y. 2026-27 vide registration dated 05.04.2022. As per the Ld. PCIT, the provisions of section 12AB(4) mandates that in the event any specified violation is established for a particular previous year then the cancellation of registration whether granted under Section 12A r.w.s 12AA or under section 12AB shall be cancelled from that previous year and all subsequent previous years, meaning thereby if the specified violation is made by the assessee for previous F.Y. 2012-13 relevant to A.Y. 2013-14 the registration granted under Section 12A read with Section 12AA could be cancelled w.e.f. the same previous year 2012-13 till 2020-21 and the registration granted under Section 12AB w.e.f. previous year 2021-22. The cancellation would operate perpetually from the first year in respect of which the violation has been done by the assessee irrespective of the fact that the registration having been granted under Section 12A read with 12AA or under Section 12AB or whether this has been violated in any subsequent year or not. 13.1 In fact the registration of the society granted under Section 12A read with Section 12AA and under Section 12AB has been cancelled from the previous year relevant to A.Y. 2013-14 and subsequent year for the specified violation on the premise of incriminating documents/evidences having been gathered discloses that the Society is indulged in non-genuine activities and further that there was Printed from counselvise.com 11 ITA No. 251/Del/2025 diversion of funds of the Society and further violation of Section 13(1)(c) of the Act. However, the assessee before us raised the ground as to whether the registration cancelled by the impugned order is sustainable in the eye of law by invoking the provisions of Section 12AB(4) particularly when the same has been inserted by the Finance Act 2022 w.e.f. 1.4.2022. 14. Relying upon this particular insertion of the provision of law, which is prospective in nature and therefore, claimed to be not applicable in the case in hand wherein the cancellation of registration was made with retrospective effect from Financial Year 2012-13 relevant to A.Y. 2013-14. In this regard we have considered the judgement passed by the Co-ordinate Bench in the matter of Human Welfare Foundation vs DCIT (Exemption), Circle-1(1), New Delhi wherein the order of cancellation of registration granted under section 12A of the Act of the assessee society for AY 2018-19 has been set aside and the registration under Section 12A of the Act has been restored , having regard to the introduction of concept of “specified limitation” u/s 12AB(4) by the Finance Act, 2022 effective from 01.09.2022. 14.1 We find in the case of Lala Sher Singh Memorial Jeevan Vigyan Trust society v. PCIT (Central)-3, New Delhi reported in 2025 (6) TMI 1756 as relied upon by the Ld. AR that on the identical facts and circumstances of the matter has Printed from counselvise.com 12 ITA No. 251/Del/2025 held that the expression “specified violation” and consequential withdrawal of registration was introduced in the Finance Act, 2022 having effect from 1.4.2022 and therefore can be said to be applicable from Assessment Year 2023-24 and onwards and no retrospective operation can be given in such a case by the authorities. While passing this order the Coordinate Bench was pleased to refer the CBDT Circular No. 23/2022 dated 15.11.2022. 14.2 Finally, the Coordinate Bench observed the following while allowing the appeal preferred by the assessee: “7. In our considered opinion, the expression \"specified violation and consequential withdrawal of registration was introduced in the Finance Act, 2022 only with effect from 1.4.2022 and could be made applicable only from Assessment Year 2023-24 and onwards and not retrospectively. This view is also clarified by the CBDT Circular No. 23/2022 dated 15.11.2022 vide para 9.3.3. of the Circular. 8. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we hold that the Learned PCIT(Central) was not having jurisdiction to pass the impugned order under section 12AB(4) of the Act cancelling the registration of assessee society and also with retrospective effect. Accordingly, the impugned order of Learned PCIT(Central) is hereby quashed. The grounds raised by the assessee are allowed.” 14.3 The Bangalore Bench in the case of CIT vs. Islamic Academy of Education vs. PCIT reported in (2022) 160 taxmann.com 217 as relied by the Ld. AR has also duly been considered wherein it has been held that the specified violation Printed from counselvise.com 13 ITA No. 251/Del/2025 committed by the assessee, if any, has to be considered independently and not violation committed in AY 2021-22 for cancelling the registration granted u/s 12AB of the Act for AY 2022-23 to 2026-27. In the case of Heart Foundation India vs. CIT, Pune, as relied upon by the Ld. AR has been duly considered by us wherein withdrawal of registration made with retrospective effect has been nullified. In that particular case, the PCIT has cancelled the registration under the new Section 12AB whereas the clause (ii) to sub-section (4) of Section 12AB specifically provides that cancellation can be done for such previous year and all subsequent previous years which makes it clear that the cancellation cannot be done with retrospective effect. In that particular case, the cancellation with retrospective effect from AY 2016-17 was found to be not tenable. 14.4. We note that on 26.11.2025 the Coordinate Bench in ITA No.214/Del/2025 in the matter of Nathaneil Junior Education Society vs. Principal (Central)-3 Delhi & Ors. wherein retrospective cancellation of registration by the PCIT, Central dated 30.12.2024 was challenged and the fact of the case in the matter of Lala Sher Singh Memorial vs. PCIT (Central) in ITA No.10/Del/2025, Jindal Charitable Society vs. PCIT (Central) in ITA No.20/Del/2025 and Florence Nightingale vs. PCIT (Central) in ITA No.10/Del/2025 by the order dated 16.06.2025 were found to be identical. The assessee in those matters was none other than the group society under the name of Prudence School, in Ashok Vihar wherein on Printed from counselvise.com 14 ITA No. 251/Del/2025 28.04.2022 a search and seizure operation under Section 132 of the Act was conducted on Smt. Sudha Gupta, Shri Devendra Gupta and others including the Prudence group and statements of some individuals were recorded. The modus operandi of the group managed by Smt. Sudha Gupta, Shri Devendra Gupta and Prudence group of school managed by Shri G.S. Matharoo was in systematic tax evasion raising funds from public through cash and cheque, siphoning of funds from trusts/societies for personal use and unexplained investments. The case belonging to Smt. Sudha Gupta, Shri Devendra Gupta including the assessee were centralized to Central Circle 29 from Circle (Exemptions) 1(1),Delhi vide order dated 15.11.2022 under Section 127 of the Act and the AO Central Circle 29, Delhi was satisfied that the assessee committed certain specified violations as per explanation to Section 12AB(4) of the Act and referred the matter to the Ld. PCIT, Central proposing cancellation of registration of the assessee as per second proviso to section 143(2) of the Act substituted by the Finance Act, 2022 made applicable from 01.04.2022 onwards. The other facts are exactly similar to those of the assessee before us which is evident from para 7 onwards:- “7. Both the parties agreed to the fact that the issue in dispute is squarely covered by the decision of coordinate Bench of this Tribunal in the case of Lala Sher Singh Memorial Vs. PCIT (Central) in ITA No. 10/Del/2025, Jindal Charitable Society Vs. PCIT (Central) in ITA No. 20/Del/2025 and Florence Nighingale Vs. PCIT (Central) in ITA No. 10/Del/2025 vide order dated 16.06.2025. For the sake of convenience, the operative portion of the said order is reproduced as under :- Printed from counselvise.com 15 ITA No. 251/Del/2025 3. We have heard the rival submissions and perused the materials available on record. The present appeal is filed against the order passed by the Learned PCIT (Central) on 30-12-2024 under section 12A r.w.s. 12AA and 12AB(4) of the Act by retrospectively cancelling the assessee’s registration earlier granted under section 12AA of the Act. The assessee is an educational society duly registered under section 12AA of the Act and enjoying exemption under section 80G of the Act. The assessee society operates under the name of ‘Prudence School’ in Ashok Vihar, New Delhi. On 24-08- 2022, a search and seizure operation under section 132 of the Act was conducted on Smt Sudha Gupta, Shri Devendra Gupta and others including the Prudence Group and statements of some individuals were recorded. The case of the department is that the search and seizure operation revealed the modus operandi of Mother's Pride and Presidium group of schools managed by Smt Sudha Gupta and Shri Devendra Gupta and Prudence group of schools managed by Sri G.S. Matharoo in systematic tax evasion i.e. raising funds from public through cash and cheque, siphoning of funds from trusts/ societies for personal use and unexplained investments. The cases belonging to Smt Sudha Gupta and Shri Devendra Gupta group including the assessee were centralized to Central Circle 29 from Circle (Exemptions) 1(1), Delhi vide order passed under Section 127 of the Act dated 15-11-2022. The learned assessing officer i.e. Central Circle 29 Delhi was satisfied that the assessee had committed certain specified violations as per explanation to Section 12AB(4) of the Act. Hence, the case of the assessee was referred to the learned PCIT (Central) proposing cancellation of registration of the assessee as per second proviso to Section 143(3) of the Act substituted by Finance Act, 2022 and applicable from 1.4.2022 onwards. …………. “6. Considered the rival submissions and material placed on record. We observed that on the similar facts available on record, the coordinate Bench has decided the exactly similar issue in the case of Lakhmi Chand Charitable Society vs. PCIT, Central 3, New Delhi in ITA No.1803/Del2024 vide order dated 22.08.2024 as under :- “10. We have heard the rival submissions made by the respective parties, we have further perused the relevant materials available on record including the orders passed by the authorities below. 11. The case of the assessee is this that the reference dated 04.05.2022 and also dated 31.07.2023 made by the Assessing Officer on the basis of 2nd Proviso to Section 143(3) of the Act is not applicable in the case in hand. The said reference granted under Section 12AA can only be made during the pendency of the assessment proceedings which admittedly has been concluded on 29.03.2022 for the appellant before us. According to the appellant’s counsel such reference could have been made only during the course of assessment proceedings so that the effect of such order passed by the PCIT can be considered while passing final order of assessment by the Assessing Officer. In the case in hand as the assessment proceedings has already been concluded on 29.03.2022 the effect of such alleged violation cannot be made in the assessment order itself as was the main argument advanced by the Ld. Counsel appearing for the assessee before us. 11.1 Moreso, this particular 2nd proviso to Section 143(3) of the Act was substituted and made effective from 01.04.2022 whereby and whereunder the Assessing Officer has been vested with the power to make reference to the PCIT for institutions granted registration under Section 12AA/12AB of the Act. In that view of the mater as there was no provision existing in the statute prior to 01.04.2022 vesting jurisdiction upon the Printed from counselvise.com 16 ITA No. 251/Del/2025 Assessing officer to make reference for alleged violation under Section 12AB(4) of the Act as amendment to Section 12AB(4) and 2nd proviso to Section 143(3) were made w.e.f 01.04.2022. The reference has, thus, no basis and is liable to be quashed. …………. 13. The further case made out by the appellant is this that the PCIT invokes Section 12AA of the Act, while issuing show cause notices dated 05.07.2023 and 16.08.2023 whereas Section 12AA(5) of the Act provides that the provision of Section 12AA are not to be applied on or after 01.04.2021. In that view of the matter the show cause notices mentioned hereinafter issued by the Ld. PCIT are flawed and not maintainable in view of the provision of Section 12AA (5) of the Act. The power to cancel registration granted under Section 12A r.w.s 12AB of the Act can no longer be exercised under Section 12AA(3) after 01.04.2021. 14. Section 12AB(4) was substituted by the Finance Act 2022 w.e.f 01.04.2022 vesting jurisdiction to the Ld. PCIT to cancel registration granted under Section 12AA(1) of the Act or under Section 12AB(1) of the Act. As Section 12AB(4) was not in existence in the statute prior to 01.04.2022 such specified violation, if any, existed prior to 01.04.2022 cannot be touched by the Ld. PCIT by invoking Section 12AB(4) of the Act. 15. Otherwise also the alleged violation specified in the show cause notices pertained to the period prior to search dated i.e. 14.10.2020 and therefore proceeding emanating under Section 12AB(4) of Act proposing cancellation of Registration for Assessment Year 2015-16 to 2021-22 is totally unlawful and ultravires to the provisions of Section 12AB(4) of the Act. …………. 10.1 Further, we consider it appropriate to reproduce relevant portion of Section 12AB and relevant part Rule 17A as under:- \"Section 12AB, 12AB Procedure for fresh registration (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub section (1) of section 12A, shall, (a) where the application is made under sub clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years, (b) where the application is made under sub-clause(ii) or sub-clause(iii) or sub clause(iv) or sub clause(v) of the said clause:- (1)…. ………. (9) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall: (i) lay down the form, data structure, standards and procedure of, (a) furnishing and verification of Form No. 10A or 10AB, as the case may be, Printed from counselvise.com 17 ITA No. 251/Del/2025 (b) passing the order under clause (a), sub clause (11) of clause (b) and clause (c) of sub- section (1) of section 12AB. (ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said application made or order so passed as the case may be.] ……. 13. Now, as we go through the impugned order passed u/s 12AB(4) of the Act, the PCIT mentions that consequent to the completion of assessment proceedings, facts were communicated to his office by the AO pertaining to AY 2014-15 to 2020 vide his letter dated 23.08.2022. This letter dated 23.08.2022 has been reproduced at page No.32 of the impugned order and it shows that this letter was issued in supersession of earlier letter dated 11.04.2022. Further, the subject of the letter is as follows:- “Sub. Proposal for cancellation of registration granted u/s 12AA/12AB of the Act as per provisions of Section 12AB(4) of the Act in the case of 'Aggarwal Vidya Pracharni Sabha’ ” – Reg. 13.1 Then what comes up is that the Id. PCIT has made out a case that the powers he had exercised u/s 12AB(4) are by virtue of clause (a) to sub-section (4) of section 12AB on the basis of 'noticing' occurrence of specified violation. The Id. PCIT has considered himself to be empowered by virtue of Explanation attached to section 127, defining 'case', to commence proceedings under this Act u/s 12AB(4) after the order dated u/s 127 dated 16.10.2020. …….. 14.3 Next, as we refer to Section 12AB and Rule 17A which have come into effect from 01.04.2021, and read it with the Circular no. 11 MANU/DTCR/0011/2022 dated 3rd June 2022, it comes up that section 12AB(2) of the Act provides that the pending td applications under clause (b) of sub-section (1) of section 12AA before the date on which section 12AB came into force shall be deemed to be applications made under sub-clause (4) of clause (ac) of sub-section (1) of section 12A on that date for grant of at registration. 14.4 However, as far as provision of cancellation of the registration provided by sub- section (4) of section 12AA is concerned, sub-section (4) of section 12AB brings into place a completely new self-contained procedural code for conducting inquiry about specified violations', cancelling registration or refusing to cancel registration. 14.5 The Rule 17A, as clarified by Circular dated 3rd June 2022 provides that is addition to the 'specified violations', the power of cancellation has also been granted under sub rule (5) of rule 17A and sub-rule (5) of rule 2C of the Income tax Rules, 1962 to the Principal Commissioner or Commissioner authorised by the Board. The authorization u/s 12AB or Rule 17A if have to be construed, by virtue of Board Notification dated 22.10.2014, then we pointed out during the hearing, to Id. D.R that this Notification dated 22.10.2014 does not mention specifically that the powers which can be exercised by Id. PCIT u/s 12AB(4) of the Act and which have come into effect from 01.04.2021 would also be exercised by virtue of this Notification dated 22.10.2014 or that further jurisdiction u/s 12AB of the Act could be transferred to other authorities as Printed from counselvise.com 18 ITA No. 251/Del/2025 per this Notification. The query was left unsatisfied and no other Notification a Circular was brought to our notice.” …….. 20. So far as the provision of Section 12AB(4) of the Act as exercised by the PCIT is concerned the Ld. A.R relied upon a judgment passed by the Bangalore Bench in the case of M/s Islamic Academy of Education, Manglore in ITA No. 610/Bang/2023 for Assessment Year 2021-22, a copy whereof has also been annexed to the paper book filed before us by the appellant. While dealing with this particular aspect of the matter the Bench has been pleased to observe as follows: “8.1.9 registration Before the amendment by the Finance Act, 2022, Section 12AB(4) provided for cancellation of registration in case of any violation under Section 13. The amended Section 12AB(4) does not consider a violation of Section 13(l)(c) and Section 13(l)(d) as specified violations. Consequently, the registration cannot be cancelled on the ground that the assessee has violated Section 13(l)(c) or Section 13(1)(d). 8.1.10 The Finance Act 2023 has inserted clause (g) in Explanation to Section 12AB(4) to provide that giving incomplete, false, or inaccurate information in a registration application under Section 12A(l)(ac) will be deemed as a “specified violation\" that can lead to the cancellation of registration. 8.2 Thus, it means that the following registration could be cancelled: 8.2.1 The PCIT/CIT can cancel the following registrations granted to a trust or institution: (a) Final registration or provisional registration granted under section 12AB(1)(a)/(b)/(c); (b) Final registration granted under section 12AA(1). The erstwhile provision did not cover cases of provisional registration granted under section 12AB(1)(c). Now, the provisional registration granted for the first time can also be cancelled by the authorities. 8.3 As seen from the above, since the assessee has secured the registration u/s 12A of the Act dated 4.6.1992, which was effective till the date of 23.9.2021 and this registration granted u/s 12A cannot be cancelled u/s 12AB(4)(ii) of the Act for the previous year 2020-21 covering the assessment year 2021-22. On the other hand, he could cancel the registration from assessment year 2022-23 onwards u/s 12AB(4)(ii) of the Act. In our opinion, if there is any violation in the previous assessment year 2020-21 relating to the assessment year2021-22, this cannot be reason to cancel the registration granted for the assessment year 2022-23 to 2026-27 as the assumption of jurisdiction u/s 12AB(4)(ii) of the Act is itself wrong on the reasons discussed herein above. The specific violation committed by the assessee in any of these assessment years is to be considered independently and not the violation committed in assessment year 2021-22 for cancelling the registration granted u/s 12AB of the Act Printed from counselvise.com 19 ITA No. 251/Del/2025 for the assessment year 2022-23 to 2026-27. As such, we make it clear that the ld. PCIT at liberty to pass the fresh order of cancellation independently u/s 12AB(4)(ii) of the Act for these assessment years i.e. 2022-23 to 2026- 27, if so advised. Accordingly, we allow this ground taken by the assessee. Ordered accordingly.” 21. We find inspiration from the essence of the ratio laid down in the above judgment and observe that in view of the provision of Section 12AA(5) of the Act as the provision of Section 12AA cannot be applied on order after 01.04.2021 the show cause notices issued by the PCIT to the appellant dated 05.07.2023 and 16.08.2023 are, thus, found to be erroneous and therefore liable to be quashed. Once the show cause is found to be non est in the eyes of law, the entire proceeding is naturally found to be on a wrong foundation of law and thus, liable to be set aside. Similarly, invoking the provision of Section 12AB(4) of the Act by the PCIT to cancel registration for specified violation is also not permissible at the same has not seen the light of day prior to 01.04.2022; the same is therefore, not applicable to Assessment Years 2015-16 to 2021-22 as wrongly has been applied in the case in hand. 22. Thus, having regard to these particular facts and circumstances of the case the issuance of show cause notices proposing cancellation of registration alleging specified violation occurred prior to 01.04.2022 i.e. for Assessment Year 2015-16 to 2021-22 and the final order passed by the Ld. PCIT cancelling registration of the appellant society for Assessment Year 2015-16 to 2021-22 by wrongly invoking the provision of Section 12A r.w.s 12AA and 12AB(4) of the Act is found to be erroneous, bad in law, whimsical, in non application of mind and thus, unsustainable. 23. Before parting we would like to note that the further direction given by the Ld. PCIT to this effect that even if the appellant society is found that specified violation is not in existence then also the consequential cancellation order would continue to operate independently by and under the impugned order dated 31.03.2024 is nothing but colourable exercise of power, not only arbitrary or erroneous but establishes the biasness on the part of the authorities below; by hook or crook the authority was bent upon to cancel the registration of the appellant trust which is evident from such observation and/or decision made by the Ld. PCIT. In fact, on that score alone the order passed by the Ld. PCIT is also found to be bad in law and liable to be quashed. With the aforesaid observations we thus, quash the impugned order passed by the Ld. PCIT. 24. The appeal is, therefore, allowed.” 7. Respectfully following the above decision, we are inclined to allow various grounds raised by the assessee in this case and accordingly, we quash the impugned order passed by the ld. PCIT cancelling 12A registration granted to the assessee.” 6. Further we find that the co-ordinate bench decision of this Tribunal in the case of Human Welfare Foundation vs DCIT (Exemptions) reported in 174 taxmann.com 650 dated 29.4.2025 had held that PCIT cannot cancel the registration retrospectively. The relevant operative portion of the said order is reproduced hereunder:- “19. In view of the above discussions and considering the amendment in section 12AB(4) made by Finance Act, 2022, CBDT circular No. 11 of 2022 and the judicial pronouncements of various Hon'ble high courts and co- ordinate benches of tribunal, we are of the view that the registration granted Printed from counselvise.com 20 ITA No. 251/Del/2025 u/s 12A cannot be cancelled with retrospective effect from AY 2018-19 when the CIT was granted power to cancel w.e.f. 1.4.2022, thus the same can be done from AY 2022-23. It is also observed that the PCIT has invoked the explanation to section 12AB(4) to hold the assessee committed \"specified violations,\" particularly in terms of application of income and genuineness of the activities. As the Finance Act, 2022, introduced the concept of \"specified violations\" under section 12AB(4), became effective only from April 1, 2022. Accordingly, order of ld. CIT(E) in cancelling the registration granted u/s 12A of the Act to the assessee society from AY 2018-19 is set aside and registration u/s 12A to the assessee is restored. The ground of appeal No. 1 of the assessee is allowed.” 7. In our considered opinion, the expression ‘specified violation’ and consequential withdrawal of registration was introduced in the Finance Act, 2022 only with effect from 1.4.2022 and could be made applicable only from Assessment Year 2023-24 and onwards and not retrospectively. This view is also clarified by the CBDT Circular No. 23/2022 dated 15.11.2022 vide para 9.3.3. of the Circular. 8. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we hold that the Learned PCIT(Central) was not having jurisdiction to pass the impugned order under section 12AB(4) of the Act cancelling the registration of assessee society and also with retrospective effect. Accordingly, the impugned order of Learned PCIT(Central) is hereby quashed. The grounds raised by the assessee are allowed. 9. We find that the Learned PCIT (Central) had passed an identical order and had withdrawn the registration with retrospective effect from Assessment Year 2011-12 onwards in the case of Lala Sher Singh Memorial Jeevan VIgyan Trust Society and from Assessment Year 2014-15 onwards in the case of Florence Nightingale Educational Society. Those orders are also quashed in view of aforesaid decision. 10. In the result, the assessees’ appeals are allowed.” 8. Respectfully following the same, the instant appeals of the six different assessees’ are allowed. 9. In the result, all the appeals filed by the assessee are allowed.” 14.5. We note that the above order passed by the Co-ordinate Bench has taken into consideration the order passed in the matter of Human Welfare Foundation (supra) and other judgements as mentioned therein and held that the expression specified violation and consequential withdrawal of registration as introduced by the Finance Printed from counselvise.com 21 ITA No. 251/Del/2025 Act, 2022 having effect from 01.04.2022 could not be made applicable prior to AY 2023-24 and only on and from AY 2023-24 onwards and, thus, retrospective operation is found to be bad in law and, therefore, quashed. We also note that the above matters relate to the same search and seizure operation conducted on 24.08.2022 upon the assessee before us and the facts are admittedly identical. 14.6 Thus, having regard to the entire aspect of the matter when exercising the power by the Ld. PCIT in cancelling the registration granted to the assessee under Section 12A r.w.s. 12AA and 12AB of the Act is found to have been wrongly done w.e.f. A.Y. 2013-14 relying upon the provision of law introduced only by the Finance Act 2022 w.e.f. 01.04.2022, particularly when the Finance Act has not entrusted jurisdiction upon the PCIT to apply the same with retrospective effect, the order of cancellation of registration impugned before us is palpably bad in law. We note that we are also inspired by the ratio laid down by the decisions of different Coordinate Benches as discussed above and respectfully relying upon the same the order impugned is found to be liable to be quashed. Ordered accordingly. The Registration of the Society is directed to be restored. Printed from counselvise.com 22 ITA No. 251/Del/2025 14.7 Since we have decided on the legal ground taken as Ground No.1, no adjudication is required on the other ground either legal or on merit raised by the assessee. 15. In the result, the appeal of the assessee is allowed. Order pronounced in open court on 18.02.2026. Sd/- Sd/- (NAVEEN CHANDRA) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated, 18.02.2026. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "