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

The Appellate Tribunal ITAT Delhi allowed the appeal by Sarv Hitkari Educational Society, directing the restoration of its registration under section 12A of the Income-tax Act. The cancellation of registration was deemed erroneous as the society did not violate conditions and the sale of land was found to be void ab initio due to lack of consideration. Despite engaging in a sham transaction, the society's genuine charitable activities were upheld, leading to the successful appeal and reinstatement of registration.

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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 The society's registration was withdrawn by the CIT (E) due to the sale of land without permission, deemed ingenuine.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.

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