2019 (1) TMI 989 - AT - Income Tax

ITAT Delhi reinstates Sarv Hitkari Educational Society's 12A registration after sham land sale

Sarv Hitkari Educational Society Versus CIT (Exemptions), New Delhi

The Appellate Tribunal ITAT Delhi allowed the appeal by Sarv Hitkari Educational Society, directing the restoration of its registration under section 12A ... Cancellation of registration granted to the assessee society u/s 12A - it was observed that assessee society has sold land belonging to it without permission of CIT (E) which makes its activities ingenuine - Addition u/s 68B - acceptance of additions by the assessee contrary to legal position - Held that:- When the assessee society has not become the owner of the land in question, there is no question of indulging in into ingenuine activities or that the activities of assessee society are not being carried out in accordance with the object of the Trust. It is nowhere the case of the CIT (E) that the assessee society is not running in accordance with its aims and objects. No doubt, assessee society has entered into a sham transaction by virtue of the sale deeds dated 24.07.2006 and 26.09.2007 qua the land in question in order to misrepresent AICTE to get the approval for setting up a polytechnic college, but this fact has not proved in any manner that the activities of the assessee trust are not genuine or are not being carried out in accordance with its aims and objects. Rather in the remand report it is recorded by the AO that assessee society is running an educational institution having 1000 students on its roll with huge teaching staff and no complaint has been received as to its activities. Contention of the DR that once the addition made by the AO u/s 69B of the Act qua the sale of land in question for a consideration of ₹ 7,50,000/- by the assessee society has been accepted by the assessee, the assessee society is estopped from claiming that it has not transferred the land in the name of Darshan Singh, is not sustainable as discussed in the preceding paras that it cannot be treated as a sale transaction at all being without consideration, factum of merely accepting the addition made by AO u/s 69B, would not change the legal position. CIT (E) has erred in cancelling the registration granted to the assessee society u/s 12A - Decided in favour of assessee. Issues:Cancellation of registration u/s 12A - Ingenuine activity - Violation of conditions - Withdrawal of registration - Genuine charitable activities - Sale of land without permission - Legal validity of cancellation.Analysis:The judgment pertains to an appeal by Sarv Hitkari Educational Society challenging the cancellation of its registration under section 12A of the Income-tax Act, 1961. The society's registration was withdrawn by the CIT (E) due to the sale of land without permission, deemed ingenuine. The Assessing Officer added Rs. 7,50,000 to the society's income under section 69B for selling land without authorization. The society contended that the cancellation was unjust as the land was never transferred to them and the sale deed was without consideration. The AO's remand report supported this claim, revealing that the land transfer was to meet AICTE conditions for a polytechnic college.The Tribunal noted that the sale deed was void ab initio as no consideration was exchanged, and possession remained with the original owner. The cancellation was deemed improper as the society did not violate the conditions laid down by the CIT (E) since they never became the land's owner. Despite engaging in a sham transaction to obtain AICTE approval, the society's charitable activities were found genuine, with no evidence of non-compliance with its objectives. The AO confirmed the society's educational operations with a significant student and staff count, indicating no irregularities.The Tribunal rejected the argument that accepting the addition under section 69B estopped the society from disputing the land transfer, emphasizing the lack of consideration. Consequently, the cancellation of registration was deemed erroneous, and the appeal was allowed, directing the restoration of the society's registration under section 12A. The judgment was delivered on November 30, 2018, by the Appellate Tribunal ITAT Delhi, comprising Shri N.K. Billaiya, Accountant Member, and Shri Kuldip Singh, Judicial Member.