2012 (12) TMI 1218 - AT - Income Tax

Appeal allowed as CIT's cancellation of registration lacked evidence; emphasize thorough investigation

Tejas Education Society Versus Commissioner of Income Tax-IV, Pune

The Tribunal allowed the assessee's appeal, finding that the CIT's order to cancel the registration under Sec. 12AA(3) was not supported by evidence of ... - Issues Involved:1. Cancellation of registration u/s 12AA(3) of the I.T. Act.2. Allegations of non-genuine activities and misuse of funds.3. Jurisdiction and scope of CIT's powers under Sec. 12AA(3).Summary:Issue 1: Cancellation of registration u/s 12AA(3) of the I.T. ActThe appeal challenges the order of the CIT-IV, Pune, dated 30.3.2011, which canceled the registration granted to the assessee u/s 12A on 15.1.1989. The CIT observed discrepancies in the reconciliation of fixed assets, unsupported additions to assets, and lack of details on reserves and surpluses. The CIT also noted that the assessee charged higher fees than standard schools, collected donations for admissions, and allegedly misused funds for personal benefits, violating Sec. 13(1)(c) of the Act.Issue 2: Allegations of non-genuine activities and misuse of fundsThe CIT alleged that the trust coerced teachers into accepting lower salaries, misappropriated funds, and operated the school without proper permissions. The CIT concluded that the trust's activities were not genuine and not in accordance with its objectives, leading to the cancellation of registration u/s 12AA(3).Issue 3: Jurisdiction and scope of CIT's powers under Sec. 12AA(3)The Tribunal examined the scope of Sec. 12AA(3), which allows the Commissioner to cancel registration if the trust's activities are non-genuine or not aligned with its objectives. The Tribunal referred to judicial precedents, including Oxford Academy for Career Dev. and Aggarwal Mitra Mandal Trust, which clarified that the CIT's powers are limited to verifying the genuineness of activities and objectives, not the utilization of funds, which falls under the A.O.'s jurisdiction.Conclusion:The Tribunal found that the CIT's order was based on unsupported allegations and did not address the trust's objectives. The Tribunal emphasized that the CIT should have conducted a thorough investigation to prove non-genuine activities. The Tribunal concluded that the CIT's order did not meet the requirements of Sec. 12AA(3) and canceled the order, restoring the trust's registration.Result:The assessee's appeal is allowed, and the order is pronounced in the open Court on 19th December 2012.