Tribunal modifies effective date for cancellation of registration and approval

The Tribunal upheld the cancellation of registration under section 12A and approval under section 80G(5) but modified the effective date to be prospective, from the previous year in which the assessee sold its educational institutions. The appeal was partly allowed.

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Issues Involved:
1. Validity of the impugned order due to issuance of two show cause notices.
2. Whether the assessee was subjected to search and seizure action within the meaning of section 132(1).
3. Whether the activities of the assessee trust were genuine and carried out as per the objects of the trust.
4. Whether the cancellation of registration under section 12A and approval under section 80G(5) should be with retrospective or prospective effect.

Issue-Wise Detailed Analysis:

1. Validity of the Impugned Order Due to Issuance of Two Show Cause Notices:
The assessee argued that the proceedings for cancellation of registration under Section 12AA(3) concluded with their submissions on 01.08.2017 and that the re-initiation by the successor Pr. CIT with a second notice dated 20.12.2018 was invalid. The Tribunal held that the issuance of the second show cause notice was necessary due to a change in the incumbent and did not vitiate the proceedings. The impugned order was based on the second show cause notice, and thus, the proceedings were valid.

2. Whether the Assessee Was Subjected to Search and Seizure Action Within the Meaning of Section 132(1):
The Tribunal noted that the validity of the search was not relevant to the present appeal. The assessee's objections to the validity of the proceedings initiated under section 153A were deemed irrelevant for the order passed under section 12AA(3) and 80G(5). The Tribunal concluded that the search and seizure action and the subsequent proceedings were valid.

3. Whether the Activities of the Assessee Trust Were Genuine and Carried Out as Per the Objects of the Trust:
The Tribunal examined several issues:
- Receipt of unaccounted donations: The assessee admitted to receiving anonymous donations not recorded in the books, which were offered to tax under section 115BBC. The Tribunal held that this incident alone did not render the trust's activities non-genuine.
- Advances to trustees: The Tribunal found that the advances to trustees were repayments of loans received from group concerns and did not violate sections 11(5) or 13.
- Sale of educational institutions: The Tribunal noted that the sale of all educational institutions in 2017 led to the cessation of charitable activities, justifying the cancellation of registration.

4. Whether the Cancellation of Registration Under Section 12A and Approval Under Section 80G(5) Should Be With Retrospective or Prospective Effect:
The Tribunal referred to the decisions of the Hon'ble Allahabad High Court and Hon'ble Rajasthan High Court, which held that cancellation of registration under section 12AA(3) cannot be retrospective. The Tribunal concurred with these decisions, holding that the cancellation would be prospective from the previous year in which the assessee sold the educational institutions (FY 2017-18).

Conclusion:
The Tribunal upheld the cancellation of registration under section 12A and approval under section 80G(5) but modified the effective date to be prospective, from the previous year in which the assessee sold its educational institutions. The appeal was partly allowed.

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