Charity Wins! ITAT Quashes Retrospective Cancellation of Trust’s registration for Lack of Jurisdiction

In a significant decision for the non-profit sector, the ITAT bench “A” allowed the appeals of three educational and charitable societies, setting aside retrospective cancellation of their registrations under Section 12A. The issue started when the PCIT, after conducting search operations in 2022, revoked the 12A registrations of three educational and charitable organisations retroactively from the academic years 2011–12, 2014–15, and 2016–17. The societies filed appeals before the ITAT, arguing that the PCIT lacked the authority to cancel such registrations and that the retrospective application of Section 12AB(4) was not legally permissible.

Issue Raised: Could the PCIT cancel 12A registration retrospectively under Section 12AB(4), despite lacking statutory jurisdiction and relying on a law that came into effect prospectively?

ITAT’s Decision: The Tribunal held that the PCIT had no authority to cancel registrations under Section 12AB(4), a power reserved for the CIT (Exemptions), as clarified by CBDT Notification No. 52/2014. Even if assessment jurisdiction is transferred under Section 127, it does not extend the cancellation powers. The cancellation was procedurally flawed, as the PCIT acted on a reference from the AO after the completion of assessments, which is not permissible under the law. The Tribunal found that applying Section 12AB(4) retrospectively was impermissible. The provision, inserted by the Finance Act, 2022, is prospective and applies from AY 2023–24 onward. CBDT Circular No. 23/2022 further supports this view. The ITAT followed prior rulings in similar cases, including Aggarwal Vidya Pracharni Sabha, Islamic Academy of Education and Human Welfare Foundation. The Tribunal ultimately concluded that the PCIT’s actions were without jurisdiction, lacked legal foundation, and amounted to a colourable exercise of power. Accordingly, the cancellation orders were struck down.

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