2013 (11) TMI 664 - HC - Income Tax

High Court Upholds ITAT Decision on Section 12AA Registration Cancellation

The High Court upheld the ITAT's decision to set aside the Commissioner's cancellation of registration under Section 12AA of the Income Tax Act, 1961. The ... Presumption u/s 292C of the Income tax act – Presumption to be supported by corroborative evidence – Cancellation of registration u/s 12A of the Income tax act - A search and seizure operation was carried out in the premises of the trust on 17.9.2010. During the course of search, certain documents were found which indicated that some receipt of cash against certain admission form number during the course of counseling by Gautam Budh Pravadhik University on 3.9.2010 to 5.9.2010 - Show cause notice was issued to the assessee on 18.3.2013. The Commissioner of Income Tax (Admn.) relied on the seized document, which was recovered from the main office of BMAS Engineering College, Agra from the seat of Shri Manish Gupta, the main counseller in the Admission Cell. The papers were found in torn position and rearranged by pasting - These papers give details of 31 students along with their registration numbers and date of receipt of money against their names. During post search proceedings Shri Y.K. Gupta the Director and Shri Pradeep Kumar Gupta were also confronted on 20.09.2010. Both of them gave evasive reply. They could not offer any comment on seized papers. Held that:- Seized documents appears to be the dumb documents and would not lead anywhere to prove the case of the Revenue Department. The same seized papers, therefore, are not admissible in evidence against the assessee, as also denied by the assessee. The presumption u/s. 292 C of the IT Act has been rebutted. No evidence of actual receipt of on money/ donations/ capitation fee is found in search. No incriminating evidence or corroborative evidence was found in search against the assessee to support that the seized papers pertained to the asessee to prove receipt of any on money by the assessee trust. No person from investigation wing examined any of the student or parents to prove the payment of on money. Even the recovered documents have not been sent to any hand writing expert for getting their opinion to prove their nexus with the assessee trust and to put liability upon the assessee. In the absence of any corroborative evidence against the assessee, therefore, following the same reasons for decision, cancellation of registration is not justified in this case - No evidence was found with regard to payment of any money to the assessee trust. The presumption under Section 292C of the Act was rebutted by denial of the assessee with no evidence of actual receipt of on money/ donation/ capitation fees was found in search. No incriminating evidence or corroborative evidence was found – Decided against the Revenue. Issues:Cancellation of registration under Section 12AA of the Income Tax Act, 1961 based on seized documents indicating unaccounted cash receipts during counseling sessions for admissions. The Commissioner of Income Tax (Central) cancelled the registration granted under Section 12AA and directed the computation of income as if no registration existed. The Income Tax Appellate Tribunal (ITAT) allowed the appeals filed by the assessees, setting aside the Commissioner's order.Analysis:The judgment revolves around the cancellation of registration under Section 12AA of the Income Tax Act, 1961, due to alleged unaccounted cash receipts during counseling sessions for admissions. The Commissioner of Income Tax (Central) cancelled the registration granted under Section 12AA based on seized documents indicating cash receipts against admission forms during counseling sessions. Following a search and seizure operation, certain documents were found, suggesting cash receipts against admission forms during counseling sessions by Gautam Budh Pravadhik University. The Commissioner relied on the seized document and issued notices to the assessee for unaccounted donations. The assessee failed to provide satisfactory explanations, leading to the cancellation of registration.The ITAT, in its judgment, analyzed the evidence found during the search and seizure operations. The ITAT observed that the cancellation of registration seemed to be based on taxing the surplus of income over expenditure, rather than substantive violations. The ITAT highlighted that the cancellation was premature, as the assessment proceedings were ongoing. Referring to a similar case, the ITAT concluded that the cancellation was unjustified, as the assessee's activities aligned with the objectives of an educational trust. The ITAT also noted discrepancies in the seized papers, indicating they were not conclusive evidence of unaccounted cash receipts by the assessee trust.The High Court upheld the ITAT's decision, emphasizing that no substantial questions of law arose from the findings of fact recorded by the ITAT. The High Court concurred with the ITAT's assessment that no concrete evidence of unaccounted donations or capitation fees was found during the search and seizure operation. The High Court affirmed that the presumption under Section 292C of the Income Tax Act was rebutted, and no corroborative evidence was presented against the assessee. Consequently, the High Court dismissed both income tax appeals, affirming the ITAT's decision to allow the appeals filed by the assessees.In conclusion, the judgment delves into the cancellation of registration under Section 12AA of the Income Tax Act, 1961, based on seized documents indicating unaccounted cash receipts during counseling sessions for admissions. The ITAT's decision to set aside the Commissioner's order was upheld by the High Court, emphasizing the lack of substantial legal questions arising from the factual findings. The judgment underscores the importance of concrete evidence and procedural fairness in tax assessment proceedings.