ITAT Rejects Revenue’s Rectification Plea Alleging Lack of Territorial Jurisdiction in Trust’s 12AB Cancellation Matter

The Revenue moved a Miscellaneous Application u/s 254(2) of the Income Tax Act, 1961, seeking rectification of the Tribunal’s order dated 27.07.2023, passed in ITA No.1524/Mum/2023. The Department contended that the Mumbai Benches lacked territorial jurisdiction to decide the appeal because the order impugned, cancellation of registration u/s 12AB(4), was passed by the PCIT (Central), Pune. It was argued that the absence of jurisdiction equals “mistake apparent from the record.”

The assessee is a charitable trust registered u/s 12A vide certificate dated 21.07.1989. A search was conducted on the premises of a related group on 16.12.2020, and a simultaneous survey was carried out on the trust. The case was centralized at Pune by order dated 07.03.2022 u/s 127. For A.Y. 2021-22, the assessee filed its return in the status of an Association of Persons (AOP), declaring income of Rs. 3,75,070. The PCIT (Central), Pune, issued a show-cause notice alleging violation of Explanation (e) and (f) to sub-section (4) of Section 12AB on account of providing freebies to doctors. By order dated 06.03.2023, the PCIT cancelled the registration granted u/s 12A of the Act with retrospective effect from A.Y.2016-17.  The Tribunal, in its earlier order dated 27.07.2023, had allowed the appeal and held that the PCIT (Central), Pune, was not the prescribed authority to cancel the registration and that such cancellation could not be made retrospectively. The Revenue thereafter filed this rectification application on the ground of lack of jurisdiction.

Issue Before ITAT: Whether a plea of lack of territorial jurisdiction, not raised in the original appeal, could be considered a “mistake apparent from the record” within the meaning of Section 254(2) of the Act.

ITAT’s Decision: The Tribunal rejected the Miscellaneous Application filed by the Revenue. It held that the power of rectification under Section 254(2) is limited to correcting a mistake apparent on the face of the record and cannot be exercised to review or recall an order. Since the issue of territorial jurisdiction had not been raised in the original appeal, it could not be entertained at this stage.

The Bench relied on the judgment of the Hon’ble Supreme Court in Reliance Telecom Ltd. wherein it was held that rectification does not include the power to revisit or recall an order, and the proper course in such cases is to prefer an appeal before the High Court. The Tribunal further noted that the decisions cited by the Revenue, including Ramshila Enterprises Pvt. Ltd. and Sungard Solutions (I) (P.) Ltd., were distinguishable and not applicable to the facts of the case. Thus, the limited scope of Section 254(2) and finding no “mistake apparent from record,” the Tribunal dismissed the Revenue’s application as not maintainable.

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