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Judgment
PER KRINWANT SAHAY A.M.
Appeal in this case has been filed by the assessee against the order dated 27.03.2026 passed by the PCIT, Central-1, Delhi for the A.Y. 2026-27. Grounds of appeal are as under :-
1.That the impugned order dated 27.03.2026 passed by the Respondent under item (B) of sub-clause (b) of clause (ii) of 2nd proviso to Section 80G(5) of the Income-tax Act, 1961 ("the Act"), rejecting application for renewal of registration under clause (ii) of 1ª proviso to Section 80G(5) of the Act ("impugned application"), is illegal, arbitrary, contrary to facts and law, and liable to be quashed.
2 That on facts and in law, Respondent failed to appreciate that the powers qua cancellation of registration u/s. 12AB & 80G of the Act vests exclusively with the PCIT (Exemption)/CIT(Exemption) vide CBDT Notification No. 52/2014 dated 22.10.2014 r.w.s. 120 and exercise of such powers by the Respondent is without jurisdiction and contrary to Section 119 of the Act.
3.That the Respondent grossly erred in mechanically rejecting the application solely on the ground of non-existence of registration u/s 12AB, sans independently examining 'genuineness of activities' and 'fulfilment of all conditions laid down in clauses (i) to (v)', mandated vide 2nd proviso to Section 80G(5) of the Act.
4.That the Respondent erred in law and on facts in holding registration u/s 12AB mandatory for grant of approval u/s 80G(5) of the Act, in the absence of explicit requirement u/s 80G(5) (i) of the Act read with Rule 11AA of the Income-tax Rules, 1962 ("the Rules").
5.Without prejudice, the Respondent erred in rejecting impugned application for AY 2027-28 and onwards on grossly irrelevant and wholly inapplicable survey findings pertaining to AY 2019-20 to AY 2024-25, forming premise for cancellation of registration u/s 12AB of the Act.
6.That the Respondent erred both on facts and in law in traversing beyond the scope of jurisdiction by retrospectively cancelling approval, sans authority conferred vide item (B) of sub-clause (b) of clause (ii) of 2nd proviso to Section 80G(5) of the Act.
7.Without prejudice, the Respondent erred in law in exceeding the limited scope of enquiry at the stage of granting approval u/s. 80G(5) of the Act, by examining incurrence of alleged bogus expenses and consequential rejection of registration u/s. 12AB of the Act, relevant for matters in subsequent assessment.
That the appellant craves leave to add, amend, alter or withdraw any of the above
During proceedings before us the Ld. Counsel for the assessee filed a brief submission that contains brief facts of the case as well as main arguments taken by the assessee in the appeal. It is reproduced as under :-
“1.The Appellant is an educational society registered under Section 12A and Section 80G of the Income-tax Act, 1961 ("the Act"), and is engaged in charitable activities within the meaning of Section 2(15) of the Act. The Appellant runs a school under the name K.R. Mangalam World School (Sen. Sec. School) situated at S Block, Greater Kailash - 11, New Delhi, imparting quality education to all sections of the society.
2.The Appellant is registered under the Registrar of Societies under the Societies Registration Act 1860 since 19.12.2001. A certified copy of the Registration Certificate dated 19.12.2001 along with the Memorandum of Association and the Rules & Regulations (By-Laws) of the Society is enclosed at page 28 and 29 to 38 of PBK.
A Certified copy of the registration approval order dated 2.10.2021 for AY 2022-23 to AY 2026-27 passed u/s 12A (1) (ac) (i) is enclosed at page 39-41 of PBK and passed under Section 80G (5) of the Act is at page 46-47 of 80G PBK.
3.Pursuant to a survey conducted on 13.01.2025, an order u/s 127(2) dated 27.05.2025 was passed by the Commissioner of Income-tax (Exemptions) ("CIT(E)"), Delhi transferring assessment jurisdiction from ACIT(E)Circle-(1)(1), Delhi to DCIT/ACIT, Central Circle-02, New Delhi. The order was passed for administrative convenience, coordinated investigation and meaningful assessment-Refer Annexure 1
4.The Appellant filed an application in Form 10AB dated 28.09.2025 seeking renewal of registration for a further period of 5 years (from AY 2027-28 onwards), in accordance with Section 12A read with Section 12AB of the Act (refer page 1251 to 1261 of PBK).
5.Pursuant thereto, the Ld. PCIT(Central), Delhi-1 issued a notice dated 7.01.2026 u/s 12A(1)(ac) (ii) of the Act (refer page 1248 to 1250 of PBK) calling for information. The Appellant duly furnished all requisite details vide reply dated 24.01.2026 (refer page 21 to 1246 of PBK).
6.Thereafter, a show cause notice dated 27.02.2026 was issued under Section 12A(1)(ac) (ii) of the Act (refer page 9 to 10 and page 19-20 of PBK), proposing rejection of the application under clauses (a) and (e) of clause 4 of Section 12AB. The Appellant submitted detailed response vide letters dated 09.03.2026 (refer page 1 to 8 and page 11-18 of PBK).
7.However, the Ld. PCIT(Central), Delhi-1 vide order dated 17.03.2026 cancelled the registration from AY 2019-20 to AY 2030-31 on the following grounds (page 17 to 21 of order):
(1)Advances to certain suppliers/contractors were treated as bogus expenditure and diversion of charitable funds, based on survey/post-survey proceedings u/s 133A, amounting to specified violations under clauses (a) and (e) of Section 12AB;
(ii)transportation receipts were treated as incidental business income without separate books of account, constituting a specified violation under clause (b) of Section 12AB Submissions:
1.GROUND NO. 1.2: THE LD. PCIT (CENTRAL) DELHI-1 HAD NO JURISDICTION TO CANCEL THE APPELLANT'S REGISTRATION U/S 12AB OF THE ACT:
1.The jurisdiction to grant or cancel registration u/s 12AB of the Act vests exclusively with the CIT(Exemptions) by virtue of CBDT Notification Nos. 52/2014 F. No. 187/38/2014 and 53/2014 F. No. 187/35/2014, both dated 22.10.2014, read with section 120 of the Act.
2.Section 120 of the Act mandates that income-tax authorities shall exercise such powers and perform such functions as are assigned by the CBDT. In exercise of said statutory power, the CBDT issued Notifications No. 52/2014 and 53/2014 dated 22.10.2014, whereby the CBDT specifically conferred exclusive jurisdiction in matters relating to grant and cancellation of registration under sections 12AA/12AB upon the CIT (Exemptions).
3.The aforesaid notifications do not authorize the CIT(E) to transfer or delegate such jurisdiction to any other CIT or PL. CIT. On the contrary, they only authorise the CIT (Exemptions) to assign specified functions to officers who are subordinate to him, namely the Addl. CIT, JCIT and TRO, and the Addl. CIT may further assign functions to subordinate Assessing Officers. Sections 120(4) to 120(6) of the Act also contemplate assignment only amongst subordinate authorities.
4.Accordingly, the power to grant or cancel registration under sections 12AA/12AB is a subject-matter jurisdiction specifically vested in the CIT (Exemptions). In the absence of any statutory provision or CBDT notification conferring such power upon the learned PCIT (Central), the impugned order is wholly without jurisdiction and liable to be quashed.
5.In view of Notifications No. 52/2014 and 53/2014, jurisdiction remains vested with the CIT (Exemptions). It is a settled principle that CBDT Instructions and notifications are binding on the Department [K.P. Varghese v. ITO (131 ITR 597) (SC).
6.NO CONFLICT BETWEEN NOTIFICATION NO. 70/2014 AND NOTIFICATIONS NO. 52/2014 & 53/2014:
i.Notification No. 70/2014 neither supersedes nor overrides CBDT Notifications Nos. 52/2014 and 53/2014. Its supersession clause is confined to Notification No. S.O. 822(E) dated 23.08.2001.
"in supersession of the notification of the Government of India, Central Board of Direct Taxes number S.0.822(E), dated the 23rd August, 2001 published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii), dated the 23rd August, 2001, except as respects things done or omitted to be done before such supersession, the Central Board of Direct Taxes hereby,-"
ii.The two sets of notifications operate in distinct fields.
Notification No. 70/2014 deals with assignment of cases pursuant to transfers under section 127 Notifications Nos. 52/2014 and 53/2014 specifically govern subject-matter jurisdiction relating to grant and cancellation of registration of charitable institutions.
iii.Therefore, even where a case is transferred under section 127, such transfer pertains only to assessment jurisdiction and does not divest the CIT (Exemptions) of its exclusive statutory jurisdiction in matters relating to grant or cancellation of registration.
iv.Accordingly, there is no express or implied repeal of Notifications No. 52/2014 and 53/2014, which continue to operate in full force.
v.in any event, a specific notification (52/2014) prevails over a general notification (70/2014).
SCOPE OF SECTION 127-LIMITED TO ASSESSMENT
7.Section 127 forms part of Chapter XIII dealing with assessment machinery and authorises only transfer of assessment jurisdiction between Assessing Officers. As per section 2(7A), the term "Assessing Officer does not include Pr. CIT/CIT acting in their statutory capacity under sections 12AA/12AB. It neither confers nor contemplates transfer of statutory powers vested in the CIT (Exemptions) under sections 12A, 12AA or 12AB- Vidya Pracharni Sabha vs PCIT (Central) in ITA No. 1308/Del/2023- para 4, 8-13.1, 14, 15.1, 20, Richmond Educational Society ITA No. 4779/Del/2025-para 15, Lakhmi Chand Charitable Society V. PCIT-Central 3 (ITA No. 1803/Del/2024-para 16, Hemkunt Foundations [2025] 175 taxmann.com 918 (Delhi -Trib.)-para 9 and 12
8.The expression "case" in section 127 refers to assessment proceedings and matters incidental thereto, and cannot be interpreted to include independent statutory functions such as cancellation of registration.
9.The transfer order dated 27.05.2025 under Section 127 of the Act was passed only for administrative convenience, coordinated investigation and meaningful assessment. The order was passed by the CIT (Exemptions), Delhi transferring assessment jurisdiction from ACIT(E)Circle-(1)(1), Delhi to DCIT/ACIT, Central Circle-02, New Delhi. There is no mention therein of transfer of powers under section 12AB.
10.Consequently, the learned PCIT (Central) assumed a jurisdiction never transferred to him and acted beyond the scope of the section 127 order.
The ld. PCIT (Central)-1, Delhi has cancelled the approval retrospectively of the registration u/s.80G(5) of the Act on the ground that the trust does not fulfil/ has violated the conditions as laiddown in u/s.80G(5) of the IT Act. The primary being it does not have registration u/s.12AB of the Act. The Ld. PCIT(Central)-1, Delhi has observed that the trust fails to satisfy the mandatory conditions laid down in clause-1 and 2nd proviso of section 80G(5) of the Act and on the basis of that he has rejected the application for approval u/s.80G(5) of the Act of the trust. The Ld. Counsel for the assessee argued that the action of the Ld. PCIT (Cental)-1, Delhi was unjustified and illegal because he does not have the power to deny registration or cancel it retrospectively u/s.12AB/2A of the Act and thereby denying the registration u/s.80G(5) of the Act.
Per contra the ld. DR relied on the order of the Ld. PCIT(Central)-1, Delhi.
We have considered the findings given by the Ld. PCIT(Central)-1, Delhi in his order and we have also considered the written submission as well as arguments made by the Ld. Counsel for the assessee during proceedings before us. In our order in appeal against the order of the Ld. PCIT(Central)-1, Delhi for cancelling registration u/s.12A/12AB of the Act we have already given / finding that the action of the Ld. PCIT(Central)-1, Delhi was not justified and accordingly we have quashed his order on this issue and allowed the appeal of the assessee.
Since the assessee has filed appeal on the ground that the Ld. PCIT(Central)-1, Delhi has denied registration u/s.80G(5) of the Act on the ground that the assessee has already been denied registration u/s.12A/12AB of the Act. We find that this order of the Ld. PCIT(Central)-1, Delhi cannot be sustained. Accordingly, assessee’s appeal on this issue is also allowed.
In the result, the order of the Ld. PCIT (Central)-1 on this issue is quashed and the appeal filed by the assessee is allowed.