TaxTMI 
TaxTMI 
2021 (10) TMI 911
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....e M. P. Societies Registration Act, 1973 since 28.11.2016. The object of the society is imparting education. Trinity Institute of Technology and Research (Institute) is the college established under the assessee society. This college imparts education by offering various courses which include Bachelor of Engineering in various branches like Civil Engineering, Mechanical Engineering, Electronics and Telecommunication Engineering, Computer Science and Information Technology. This Institute also offers courses for MBA and M.Tech. A search and seizure action u/s 132 of the Act was conducted at the various premises of the Ramani Group and associates, Bhopal on 30th August,2016. During the course of search, many documents/loose papers pertaining to the assessee society namely LPS-6, LPS-7, and LPS- 11 were found. Thereafter notice u/s 148 of the Act dated 29.11.2017 was served upon the assessee followed by serving of notices u/s 143(2) & 142(1) of the Act along with questionnaire. During the course of assessment proceedings the assessee was confronted with the seized material and after considering the submissions of the assessee assessment was completed on 29.12.2017, assessing the incom....
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....nd that too with retrospective effect from 01.04.2008. (3) That on the facts & in the circumstances of the case and in law, the findings of the learned Pr. CIT that, the affairs of the assessee are not genuine and are not being carried out in accordance with the objects and aims of the trust and the funds of the trust were being used for the benefits of the members of the trust, are wholly wrong, injudicious, unlawful and opposed to facts Hence such findings be quashed and the order of the learned Pr. CIT withdrawing/cancelling the registration be kindly cancelled. (4) That on the facts & in the circumstances of the case and in law, the learned Pr. CIT is wholly wrong and injudicious in his findings that the provisions of section 13(l)(c)(ii) are applicable in this case. Such findings be quashed and it be held that the said provisions of section 13(1)(c)(ii) are not applicable at all. The order of the learned Pr. CIT U/s.l2AA(3) and 12AA(4) is unlawful and, therefore, be kindly cancelled. . (5) That on the facts & in the circumstances of the case and in law, that section 12AA(4) was inserted w.e.f. 01.10.2014 by Finance (No.2) Act, 2014. The said section ....
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.... 29.12.2017 raising following grounds: 1. That on the facts & in the circumstances of the case and in law, the initiation of re-assessment proceedings and issue of notice u/s 148 dated 28.03.2017 are unlawful, bad in law and without jurisdiction hence the assessment made be kindly cancelled. 2. That on the facts & in the circumstances of the case and in law, the learned lower authorities erred and in not justified in assessing the income of the assessee as the income from business and profession u/s 28 of the I.T. Act. The assessee submits that it is running an educational institution and the income of the institution is the income u/s 11 of the I.T. Act. The finding of the ld. Lower authorities assessing the income u/s 28 be kindly quashed and it be held that income of the assessee is assessable as income u/s 11 of the I.T. Act. 3. That on the facts & in the circumstances of the case and in law, the learned lower authorities are wholly wrong and opposed to facts that the assessee has claimed bogus salary expenditure of Rs. 20,48,173 such wrong and injudicious findings be quashed and be held that no bogus expenditure as alleged was claimed by the assessee....
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....bmissions: A. Apropos additional ground of appeal - Impugned order and notice issued u/s 12AA both are bad in law, invalid, illegal and without jurisdiction 1. Assessee filed additional ground of appeal through a separate application dated 05.02.2021 which is a legal ground going to the root of the matter. Assessee requests that additional ground of appeal may please be admitted in the interest of justice and appropriate adjudication of the matter. 2. Assessee is a charitable society registered u/s 12A of the Act. Registration u/s 12A is granted by CIT (Exemption), Bhopal. Thus, the jurisdiction of registration is with CIT (Exemption), Bhopal. 3. Basis of jurisdiction under the Act has been provided by CBDT under section 120(3) of the Act, which reads - "In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income-tax authority authorised by it may have regard to any one or more of the following criteria, namely :- (a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (d) cases or classes of cases." 4. Section 1....
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....nd seizure operations were conducted in the case of assessee. Neither any proceedings u/s 153C were conducted. 9. Subsequently, based on seized documents in case of Shri Prakash Hariramani, proceedings u/s 143(3) rws 147 were completed for AY 2010-11 on 29.12.2017 by Ld. ACIT(Central)-II, Bhopal. [PB 42-58] 10. It was only after the completion of proceedings u/s 143(3) rws 147 that a proposal was sent by the Ld. AO vide letter dated 07.02.2018 through JCIT (Central), Bhopal vide letter dated 15.02.2018 requesting Ld. Pr. CIT (Central), Bhopal for cancellation of registration u/s 12A of the assessee. Notice u/s 12AA was issued by Ld. Pr. CIT (Central), Bhopal on 02.04.2018. In response to this notice, reply was submitted by assessee. Ld. Pr. CIT (Central), Bhopal passed the impugned order u/s 12AA(3) and 12AA(4) on 29.11.2018. [PB 01, 02-06] 11. Proceedings u/s 127 are limited only for the purpose of coordinated assessments. Section 127 of the Act provides for transfer of power from one Assessing Officer to another Assessing Officer. This section does not provide for transfer of power from one CIT to another CIT. Section 127 of the Act reads as - ....
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....n) is satisfied that the activities of any trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, may cancel the registration. Provisions of section 12AA(3) do not empower Ld. Pr. CIT(Central), Bhopal to cancel the registration. 16. Above contentions of the assessee are squarely covered by the decision of Hon'ble Jaipur Bench of ITAT in the case of Wholesale Cloth Merchant Association - ITA No. 688/JP/2019 - order pronounced on 06.01.2021 - [CLPB 65-122] 2. Para 13 - "We also observe that, thereafter the ld. DCIT(CC) Kota, as sent a proposal to the Pr. CIT(C), Jaipur to cancel the 12A registration of the assessee vide letter dated 31.12.2018. On the basis of proposal from DCIT(CC) Kota, the ld. Pr. CIT has issued the show cause notice to the assessee u/s 12AA(3)/(4) dated 22.02.2019............" 3. In the instant case, Ld. ACIT (Central)-2, Bhopal vide letter dated 07.02.2018 and on the recommendation of JCIT (Central), Bhopal requested Ld. Pr. CIT (Central), Bhopal to cancel registration u/s 12A of the assessee society. It was in view of this proposal that Ld. Pr. CIT (Central), Bhopa....
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.... of the trust and thus provisions of section 12AA(3) are not applicable 1. Assessee is duly registered under the M.P. Society Registration Act, 1973 for imparting education. Approval u/s 12AA has also been granted to the assessee. [PB 15] Registration of a trust and cancellation of the same are administrative functions whereas assessment of the trust is a quasi judicial function. Administrative function and quasi judicial functions cannot be mixed up together. 2. In the instant case, cancellation of registration granted u/s 12AA is based on certain seized documents in the form of loose sheets. The evidences relied upon for cancellation of registration of the assessee u/s 12AA of the Act do not in any way demonstrate and establish that the receipt are suppressed and expenses are inflated. There is no cogent and positive material which corroboratively demonstrates that money has been allegedly siphoned off for personal benefits of the trustees of the assessee. 3. Proper books of account are maintained by the assessee in the ordinary course of its educational activities. The books of accounts are duly audited and no adverse remarks have been made. T....
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....e registration was obtained by the assessee under fraud or mis-representation. 7. In no other situation, the registration granted can be cancelled / withdrawn by the CIT(Exemption). Thus, the finding of CIT(Exemption) cancelling registration has not only to be conceptual or contextual but should be within the four corners of law so that they are not surpassing the power granted u/s 12AA(3). 8. Following are the circumstances in which an institution can avoid breach of trust under the Act i. Carrying on objects discretely for charitable or religious purposes ii. Complying with the terms as enumerated in the deed of trust iii. Maintaining proper books of accounts iv. Investing of income in a manner that is in accordance with the law v. No diversion of income or the assets of the trust vi. Applying income only for charitable or religious purposes in terms of the deed of trust. vii. Complying with all other provisions as required under the income tax or any other law. 10. The assessee has complied with all the above listed requirements and has not breached the trust entrusted by the Act w....
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....a. Pg 2 para 2 - Charitable Society registered under the M.P. Societies Registration Act, 1973. Main object is to carry out educational activities in medical and education field. Medical colleges and hospital run are approved by various Government bodies namely MCI, INC and SNC, Director Medical Education, MP, MSU, Jabalpur and Barkartullah University, Bhopal b. Pg 2 para 3 - Registration granted u/s 12AA on 29.11.2002 w.e.f. 01.04.2002. Search & Seizure operations - Chirayu Group on 04.11.2016. Cash and jewellery were found at the residence of the family members of Director and promoter of various entities of Chirayu Group. c. Pg 3 para 4 - Proposal for cancellation by Ld. AO duly recommended by Addl. CIT (Central), Bhopal. d. Pg 6 para 5 - On the basis of the proposal by Ld. AO show cause notice u/s 12AA was issued by Ld. Pr.CIT(Central), Bhopal e. Pg 9 1st para - Regular assessment conducted & completed much prior to search. All the documents with regards to receipt of donation were furnished. Ld. AO accepted the documents without making any addition. f. Pg 10 1st para - Ld. Pr. CIT cancelled the registration by invoking provisions of section 12AA(3) retrospective....
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....ety has established and is consistently running colleges and hospitals d. Pg 50 para 28 - Ld. Pr. CIT has not made independent enquiry or investigation or collected evidence 14. In our view the alleged irregularity in the admission in one of the colleges noted by CBI should not have been taken as a basis for cancelling registration u/s 12AA e. Pg 50 para 29 - Allegation on the genuineness of donors and creditworthiness in doubt, we observe that this issue has no strength to form a basis for cancellation of registration u/s 12AA(3). This issue to be dealt in regular assessment proceedings. f. Pg 61 para 36 - Consistently held by Hon'ble Courts and Coordinate Benches that registration granted u/s 12AA cannot be cancelled by invoking provisions of section 12AA(3) unless it is established by material evidence that the activities of such trusts or institutions are not genuine or are not being carried out in accordance with the objects of the trusts or reasonable opportunity of being heard not granted before cancelling registration. g. Pg 73 point (iv) - Issues raised in show cause notice not relevant for cancellation of registration u/s 12AA(3). These issues to be examine....
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..... i. It is humbly submitted that the registration granted u/s 12AA(1) deserves to be quashed and the registration granted u/s 12AA be restored w.e.f. 01.04.2008. b) Divine Shiksha Samiti - [2020] 121 taxmann.com 175 - Hon'ble Jurisdictional High Court of Madhya Pradesh - order pronounced on 06.01.2020 - HEAD NOTE - ".....Whether therefore, where there was no doubt about genuineness of objects of society for grant of registration under section 12AA, Tribunal was correct in directing Commissioner (Exemption) to grant registration to society under section 12AA, irrespective of findings of Commissioner (Exemption) that there was diversion of income of assessee society for providing undue benefit to its office bearers and thus society existed for purpose of profit of office bearers and not for charitable purpose - Held, yes" [Para 7 and 8] [In favour of assessee] [CLPB 135-140] 11. Without prejudice to the additional ground, it is submitted that the power to cancel the registration is granted only with a prospective effect. It would not affect assessments in respect of earlier assessment years. Ld. Pr. CIT (Central), Bhopal has cancelled the registration u/s 12AA re....
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....iolated. 2. Ld. Pr. CIT(Central), Bhopal cancelled the registration u/s 12AA by invoking the provisions of section 12AA(4). [PCIT order page 20 para 23] 3. Section 12AA(4) was inserted w.e.f. 01.10.2014 which provides that the registration u/s 12AA can be cancelled for violation of provisions of section 13(1). In the instant case, as mentioned in the show cause notice, assessment for AY 2010-11 was completed u/s 143(3) rws 147 by alleging that provisions of section 13(1)(c) are violated. Assessment proceedings relate to AY 2010-11 i.e. a period prior to the insertion of provisions of section 12AA(4). Allegation of misappropriation of funds is made only for one year i.e. AY 2010-11 and not in any other years. Nothing negative has been observed by the Ld. Pr.CIT (Central), Bhopal from the date of grant of registration u/s 12A on 01.04.2008 except for only one year i.e. AY 2010-11. It is only for AY 2010-11 that Ld. Pr. CIT(Central), Bhopal has alleged that the funds of the assessee are being used for the benefit of the members of the assessee. 4. As mentioned above, section 12AA(4) is not applicable in the instant case for cancell....
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...., registration granted u/s 12AA was cancelled by invoking provisions of section 12AA(3) and 12AA(4) read with sections 13(1)(c)(ii) and section 13(3). Violation of provisions of section 13 cannot be a basis for cancellation of registration u/s 12AA. Impugned order cancelling the registration u/s 12AA ought to be quashed. D. Apropos ground no. 7 - payment of excess salary, funds of the charitable trust were siphoned out and used by the members of the charitable society, fee receipts not fully reflected in the audited accounts 1. Ld. Pr. CIT(Central), Bhopal has made reference to various rough notings, jottings and calculations appearing in the various loose papers and has drawn inferences on the basis of such loose papers found in the search of Shri Prakash Hariramani from his residence. 2. Nothing corroborative has been brought on record to establish - a. Salary was paid to non existing employees b. Higher salary was paid by cheque and difference was repaid by the employees in cash c. Entire income is not shown in the books of accounts d. Fee receipts are not fully reflected in the books of accounts 3. Ld. Pr. ....
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....n by the assessee. [PB 34] 9. It is submitted that the books of account of the assessee society are duly audited. No adverse remarks have been made by the auditor. Ld. Pr. CIT(Central), Bhopal without bringing on record cogent and positive material concluded that the fee receipts are not fully reflected in the audited financials. 10. The document seized from the residential premises of Shri Prakash Hariramani contains rough notings and jottings and the difference in no case can be treated as under recording of fee receipts. These notings and jottings are projections/estimation of the collection of fees and do not reflects the actual collection of fees. 11. Assessee preferred an appeal before Ld. CIT(A) against order passed u/s 143(3) rws 147 for AY 2010-11. Before Ld. CIT(A), assessee along with other grounds raised the following grounds of appeal - a. Disallowance of expenditure of Rs. 3,52,94,416 and [PB 97, ground no. 3] b. Addition on concealment of fees of Rs. 69,70,505 [PB 98, ground no. 7] Ld. CIT(A) accepted the audited books of accounts of the assessee. Ld. CIT(A) allowed the ground raised on disallowance of expenditure....
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....mmissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order; (b) where the Directors General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub- section (1) or sub- section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub- section (1) or sub- section (2) may be made at any stage of the proceedings, and shall not render necessary the re- issue ....
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....given. This plea of the appellant does not hold any strength in view of provision of sub sec 3 of 127 which emphasises that" Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing officer or Assessing Officers (whether with or without concurrent jurisdiction) and the of ices of all such officers are situated in the same city, locality or place. 4.5) The appellant has placed reliance in the ITAT, Indore's decision in the case of Chirayu Charitable Foundation I ITA no.l79 IIND/2019 , facts of which case does not squarely relates to the present case. Moreover, the additional ground raised by the appellant is regarding challenge of jurisdiction of the Pr.CIT(C), is not a subject in the citation referred. 4.6) The appellant has taken ground that instant exercise relating to revocation of registration of the assessee is without jurisdiction. Section 12AA read with rule 17 A and CBDT circular no. 584 dated 13.11.1990 requires that while seeking registration u/s 12A I....
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....ng cancellation of registration based on the applicability of provision of section 13(1 )(c), retrospective cancellation of registration by application of provisions of section 12AA( 4) and on applicability of section 12AA(3). In regard to the above, the appellant has resorted to different grounds which are as under: 5.1) In the instant case allegation of misappropriation of funds made only for one year i.e. A.y. 2010-11 and not in any other years. However, for the entire period from the date of grant of registration U/S 12A on 01.04.2008, Ld. Pr. CIT(Central), Bhopal has observed that the affairs of the assessee are not genuine and are not being carried out in accordance of the objects of the appellant and also the funds of the assessee are being used for the benefits of the members of the assessee. 5.2) Pr. CIT(Central), Bhopal has cancelled the registration U/S 12AA with effect from 01.04.2008 (with retrospective effect). 5.3) If the provision of section 13 are violated, then the Assessing Officer is empowered to forfeit the exemption permissible U/S 11 & 12 and that also to the extent of amount not allowed U/S 11 & 12 it is also added by the ....
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....he registration granted u/s 12AA of the Act. 12. Averting to the facts of the instant case, search as conducted u/s 132 of the Act at Ramani Group. It is also not in dispute that various loose papers alleged to be incriminating in nature were found during the course of search. It is a normal procedure that subsequent to search all the cases relating to the group are centralized with central circle for making assessment by this process of centralization, it also becomes easy for the Ld. Assessing Officer to assess the income along with referring the seized material which interconnected and relating to group concerns/associates/individuals. 13. In the instant case, order u/s 127(2) of the Act dated 23.11.2016 was passed by the CIT(E), Bhopal. Copy of this order is reproduced below: 14. From perusal of the above order, we find that the jurisdiction of the assessee has been transferred from DCIT(E), Bhopal to ACIT(Central)-2 Bhopal. We also note that the Permanent Account No. of the assessee have been migrated to the ACIT(Central)-2 Bhopal. This order came to force w.e.f. 23.11.2016. Though assessee has referred to various judicial pronouncements in its reports but the same wi....
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.... carried out by the assessee and the activities of imparting education to the students. 15a. For granting registration u/s 12AA of the Act ld. Pr. CIT/CIT has to be satisfied that the trust of society or institutions is running for charitable objects and activities is carried out are genuine in nature. In the instant case, the seized material relied upon does not establish that the activities of the assessee are not genuine and are not being carried out in accordance with objects. It is merely on the basis of certain loose papers found and seized during the search operation carried out in the case of Prakash Hari Ramani(related to Ramani group) at his residence that Ld. Pr. CIT(Central) preceded to cancel the registration granted earlier. 15b.We find that recently this Tribunal in the case of Chirayu Charitable Foundation (ITANo.179/Ind/2019 dated 09.02.2021 dealing with similar issue of cancellation of registration u/s 12AA of the Act on the allegation of genuineness of donation and their creditworthiness. This tribunal after placing reliance on various judicial pronouncements held that registration u/s 12AA of the Act cannot be cancelled unless it is established by material....
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....r the sake of reference, we extract para 8 as under:- 8. That your goodself has, in your notice dated 13/11/2015, alleged that the assessee has received a donation of Rsl,00,00,000/- from M/s Herbicure Health Care Bio Herbal Research Foundation in the A/Y 2011-12 by paying an amount of Rs. 1,00,00,000/- in cash to M/s Herbicure Health Care Bio Herbal Research Foundation itself. This allegation is totally untrue as nothing of this sort has been written or mentioned in the confirmation, given by M/s Herbicure Health Care Bio Herbal Research Foundation. Till date no evidence to the contrary has been made available to the assessee which could substantiate your honour's allegation that the amount ofRs. 1,00,00,000/- was paid by the assessee in cash to the donor in exchange of donation received by cheque. However, in case, there is any authentic material available with your honour which could throw some light on this issue, the same may be given to the assessee so that a specific reply on the same could be submitted on it" (ii) The Co-ordinate Bench of Mumbai in the Case of Lilavati Kirtilal Mehta Medical Trust, Bandra V. CIT (Central) -I, Mumbai [2019] 108....
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.... - Trib.) • CIT (Exemptions) v. Cancer Aid & Research Foundation Income Tax Appeal No.505 of 2015 • Prabodhan Shikshan Prasarak Sanstha v. Dy. CIT taxmann.com 33/[2015] 152 ITD 473 (Pune - Trib.) • Tamil Nadu Cricket Association v. DIT (Exemption) 633/221 Taxman 275/[2013] 40 taxmann.com 250 (Mad.) 12. Therefore, in view of our aforesaid discussion, on the preliminary point itself, we find that the impugned order of the Commissioner cancelling the registration u/s. 12AA(3) of the Act is bereft of a valid jurisdiction. (iii)The Hon'ble Karnataka High Court in the case of CIT Vs. Islamic Academic of Education reported in 229 Taxman 274 (Karn) held as under :- In the instant case, the material on record shows that the Trust has established educational institution and imparting medical education. Every year, students are admitted. Huge investment is made for construction of buildings for housing the college, hostel and to provide other facilities to the students who are studying in the College. The College is recognized by the Medical Council of India, State of Karnataka and all other statutory authorities. Therefore, it....
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....scope of enquiry of the Commissioner would be limited to the aforesaid extent only." (v)The decision of Krupanidhi Educational Trust Vs. DIT (E) - 152 TTJ 673, wherein it is held as under :- The DIT(E) in the order u/s 12AA(3) of the Act, do not make out any case, which can show the activities of the assessee are not genuine or that the activities of the assessee are not being carried out in accordance with the objects of the trust or institution. The fact that the Assessee was paying commission to persons who solicit students for studying in the Assessee's institution cannot lead to the conclusion that the Assessee is not imparting education. Similarly purchase of a BMW car, borrowing of loans from Sindhi Financiers, non maintenance of regular books of accounts, violations of provisions of Sec.13(1)( c) of the Act in as much as the trustees were paid enormous salary are all by way of passing reference having norelevance to whether or not the Assessee was pursuing education as its main object. There are no facts brought out in the impugned order regarding the genuineness of the activities of the trust or as to whether the object of education was not pursued by the....
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....s to empower the commissioner to cancel the registration of the trust where he is satisfied that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the trust or Institution. This could not by any stretch of imagination be regarded as retrospective alternation of the law. In the case before us, as per the amendment by the Finance Act, 2010, the Commissioner has claimed to be empowered to initiate steps for the cancellation of the registration of a trust or Institution where the activities of the trust or institution are not genuine or are not being carried out in accordance with the objects thereof even in relation to a trust which was registered under S. 12A as it then stood." So basic requirement for invoking S. 12AA(3) is that the activities of the trust are not genuine and are not being carried out in accordance with the objects of the trust. The CIT has recorded her findings in the order u/s 12AA(3) that the trust is imparting knowledge at cost and therefore, not a charitable Trust within the purview of S. 2(15) of the Act, secondly, the appellant trust has contravened the provisions of Ss. 11(5) and 13(1) (c) of the Act. ....
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....egistration already granted u/s.12AA of the Act is contained in Sec. 12AA(3) of the Act and it reads as follows: "(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard." The provisions of section 12AA of the Act, deals with procedure for registration of trust/institutions. As per said section, the Commissioner shall look into the objects of the trust and its activities and satisfy himself about that the objects of the trust are charitable in nature and its activities are genuine and such activities are carried out in accordance with its objects. Sub-section (3) inserted with effect from 1st Oct., 2004 empowers the Commissioner to cancel the registration ....
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....neness of the activities. 38. On perusal of the judgments and decisions referred herein above, we find that they are squarely applicable on the facts of the instant appeal and the issue raised before us and thus favours the assessee. Before concluding we would like to summarise our findings and observations in following manner:- (i) As regards the alleged donations received from various concerns mentioned in the impugned order, we are satisfied with the identity of the alleged donors, genuineness of the transaction of giving donatiion to the assessee trust since most of the alleged donors are either charitable trusts or known to the Directors/ Promoters and the transactions being carried out through banking channel and we are also satisfied with the creditworthiness of the alleged donors as they have sufficient financial strength to provide the donation to the assessee trust, (ii) As regards the alleged irregularity in education process noted by CBI the matter is still subjudice with the court and the order of Regulatory Authority namely Admission Fee Regulatory Committee stand stayed by the Hon'ble jurisdictional High Court vide stay order dated 23.7....
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....der so and direct the revenue authorities to restore the registration u/s 12AA(1) of the Act granted to assessee society w.e.f. 1.4.2011. Accordingly all the grounds raised by the assessee are allowed. 15c. It is also a settled issue that the registration u/s 12AA cannot be cancelled from retrospective effect. For this view we place reliance on the judgment of Hon'ble Madras High Court in the case of Auro Lab v. ITO (2019) 102 taxmann.com 225 dated 23.01.2019 wherein Hon'ble Court held that "Since the act of cancellation of registration has serious civil consequences and the amended provision is held to have only a prospective effect the effect of cancellation, in the event the pending Tax Appeal is decided in favour of the Revenue, will operate only from the date of the cancellation order, that is 30.12.2010. In other words, the exemption cannot be denied to the petitioner for and up to the Assessment Year 2010-11 on the sole ground of cancellation of the certificate of registration." [emphasis supplied] 15d. In view of the above discussion with regard to ground no.1 2 & 6 of the assessee's appeal, in light of the judgments and decisions referred herein above settled....
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....r. CIT erred in invoking the provision of section 12AA(3) of the Act merely on the basis of his finding that the provisions of section 13(1)(c)(ii) are applicable on the assessee. We find that the alleged seized documents only pertains to financial year 2009-10 i.e. A.Y. 2010-11 and not for any other year. Nothing adverse has been observed by Ld. Pr. CIT(Central) from the date of registration u/s 12AA of the Act i.e. 01.04.2008 till the date of passing impugned order except for A.Y. 2010-11. It is judicially settled that if provisions of section 13(1)(c) of the Act are attracted, the benefits of exemption under section 11 & 12 of the Act are not available to the assessee, it is subject matter of the assessment proceedings as to whether the exemption u/s 11 & 12 of the Act is to be denied or forfeited to the extent of violation of provision of section 13(1)(c) of the Act is formed by the Ld. AO but it can in no way lead to cancellation of registration granted u/s 12AA of the act unless any cogent and positive material is brought on record to establish that the society is not carrying out genuine charitable activities as per the objects for which it has established. If the provisions....
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....business and not for carried out charitable activity, treated the net income over expenditure of Rs. 1,96,50,937/- as business income, disallowed bogus salary expenses at Rs. 20,48,173/-, made addition for unexplained money on account of business receipts at Rs. 69,70,505/- and also denied the deduction for capital expenditure claimed by the assessee having been applied for charitable purposes. Income assessed at Rs. 2,86,69,615/-. Assessee challenged all the finding of the ld. AO before the Ld. CIT(A) and partly succeeded. Ld. CIT(A) held that proceedings u/s 148 of the Act are valid Ld. CIT(A) also held that in view of the seized loose papers and the finding of the ld. AO the assessee society is not running for charitable purpose and therefore, not entitled for claiming deduction u/s 11 & 12 of the Act. Ld. CIT(A) allowed claim of expenditure of at Rs. 3,52,94,416/- denied by the ld. AO and held that the real income of the assessee is loss at Rs. 1,56,43,479/- as against the income of Rs. 1,96,50,937/- considered by the ld. AO. Ld. CIT(A) also confirmed the addition for bogus salary expenditure of Rs. 20,48,173/-. However, Ld. CIT(A) granted partial relief with regard to addition....
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....ice u/s 148 was issued on 28.03.2017. Reasons recorded for issuance of notice u/s 148 refer to the search conducted in the Hariramani Group, Bhopal on 30.08.2016. During the course of conduct of search, certain documents were found and seized from the residence of Shri Prakash Hariramani which relate to the assessee. These documents are LPS -6, LPS-7 and LPS-ll. [PB 38] 5. Nowhere it has been provided in section 13 that if some part of the income is applied for the benefit of persons mentioned in section 13(3), then the income of the institution will take colour of business and it will become automatically assessable u/s 28 of the Act. Section 13 provides that only the said part of the income will not be qualified for the purpose of exemption/deduction u/s 11 and 12 of the Act. [PB 45] 6. By applying the provisions of section 11 and 12, computation of income was submitted by assessee according to which, loss of Rs. 4,82,20,098 was claimed by the assessee, including claim for capital expenditure. [PB 46] 7.Without prejudice to the claim of assessee u/s 11 & 12, loss of Rs. 1,56,43,480 was arrived at by applying the provisions of section 28 for which comput....
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....tee, Shri Vijay Hariramani has taken the excess cash generated from booking of alleged bogus salary. Ld. AO has made addition without bringing on record any cogent and positive material found during the course of conduct of search. [PB 49] 14. Shri Vijay Hariramani was also covered by the search conducted in the Hariramani Group. No evidence/document was found to establish corroboratively that he had siphoned off the funds of the institution by booking of the alleged bogus salary and taking extra cash. [PB 49] 15.The seized paper does not reflect if any amount was paid to Shri Vijay Hariramani. Assessee submits that the author of the paper is not known and the basis of tabulation is not appearing in the paper. Search was also conducted in the premises of Shri Vijay Hariramani but nothing corroborative was found to establish that he received an amount of Rs. 5,61,877 from the assessee institution. Further there is no corroborative evidence to establish the flow of money from the assessee institution to Shri Vijay Hariramani. Addition based merely on surmises and conjectures is bad in law, unsustainable and ought to be deleted. [PB 50] 16.Without prejudice,....
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....and jottings done by him for his personal references. Proceedings initiated on the basis of such loose papers ought be quashed. B. Apropos Ground no.2 - Income of the assessee society assessed as business income u/s 28 1. It is submitted that assessee is a charitable society registered under the M. P. Societies Registration Act, 1973 since 28.11.2016. Registration u/s 12A was granted on 20.03.2008. The object of the society is imparting education. Trinity Institute of Technology and Research (Institute) is the college established under the assessee society. This college imparts education by offering various courses which include Bachelor of Engineering in various branches like Civil Engineering, Mechanical Engineering, Electronics and Telecommunication Enginnering, Computer Science and Information Technology. This Institute also offers courses for MBA and M.Tech. [PB 01 - 18] 2. It is also submitted that the assessee society is approved by various bodies like All India Council of Technical Education (AICTE), New Delhi, National Council for Teachers Education (Statutory body of Government of India) and Director of Technical Education, Government of India. ....
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....ich computation was submitted. Ld. CIT(A) granted relief vide ground no. 3 by accepting the fact that assessee has incurred expenses of Rs. 3,52,94,416 for running and managing the educational institute. [PB 41 & CIT(A) Page 21 Para 4.3] 11. Assessee submits that despite relief granted by Ld. CIT(A) for which Department is not in appeal, entire claim of exemption u/s 11 & 12 cannot be disallowed by re-characterizing it as "income under the head Profits and Gain of Business or Profession". Only that part of the income of the assessee shall not qualify for the purpose of exemption u/s 11 and 12 of the Act which is held to be covered u/s 13 and not otherwise. C. Apropos Ground no.3 - Allegation of bogus salary expenditure of Rs. 20,48,173 1. In the reasons recorded, Ld. AO has made reference to the document seized from the residential premises of Shri Prakash Hariramani at para (iii), page 60 to 63 of LPS -11. On the basis of this document, Ld. AO has inferred that assessee has paid bogus salary of Rs. 20,48,173. [AO Page 4 to 7 and Page 10 Para 12 to 14] 2. Loose papers on the basis of which Ld. AO has alleged that assessee has paid bogus salary of....
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....ations for which he had all the powers and where whittle. He chose not to take appropriate actions for cross-checking the same from the concerned employees. [PB 48-49] 5. Nothing corroborative has been brought on record to establish that the there is shortage of cash and that one of the trustees has siphoned this excess cash generated on account of booking of alleged bogus salary expenses. It is submitted that one of the trustees, Shri Vijay Hariramani was also subjected to the search but no documents or material was seized to establish that the said trustee siphoned the funds of the assessee society by booking bogus salary expenses. 6. It is a settled law that no addition can be made merely on the basis of loose sheets without any corroborative and independent evidence. Loose sheets do not form "Books of Accounts" and entries in such loose sheets are irrelevant and not admissible u/s 34 of the Evidence Act. Only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, those are admissible. Hon'ble Apex Court in the case of V C Shukla and Common Cause (A Registered Society) 30 ITJ 197, has been held that independent evi....
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.... particularly when the period / date noted on the said loose paper does not relate to the impugned assessment year i.e. AY 2010-11. E. Apropos Ground no. 6 - addition of Rs. 8,47,694 sustained as unrecorded fees 1. The addition has been made merely on the basis of the loose paper. It is submitted that the difference of the fees is not on account of under-recordings of fee receipts but it is due to projections, jottings, etc. These figures are merely for estimation of collection of fee done by some person not known to assessee. The document contains broad noting of various items and does not reflect the actual figures. [AO Page 12 and PB 55] 2. It is a settled law that no addition can be made merely on the basis of loose sheets without any corroborative and independent evidence. Loose sheets do not form "Books of Accounts" and entries in such loose sheets are irrelevant and not admissible u/s 34 of the Evidence Act. Only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, those are admissible. In the case of V C Shukla (supra), it has been held that independent evidence is necessary as to the trustworthines....
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....ingly, it is most humbly submitted that the amount of Rs. 3,25,76,619 incurred by the assessee society towards capital expenditure be allowed as application of funds u/s 11. [PB 46] 4. It is submitted that the provisions section 11 were amended according to which the capital expenditure incurred were not considered as application of fund applicable from AY 2015-16 and only depreciation was to be considered as application of funds. This amendment is applicable prospectively. The year under consideration is AY 2010-11 hence the amended provisions are not applicable. Accordingly, amount of capital expenditure of Rs. 3,25,76,619 be kindly allowed as application of funds u/s 11 and 12. Considering the above facts, circumstances of the case, submissions made, documents on record and judicial precedents, additions/disallowance made and re-characterisation done by Ld. AO ought to be deleted. 23. Per contra Ld. DR supported the finding of both lower authorities and also submitted that seized loose papers indicates that the assessee society is involved in diverting the funds of the society to the benefit of its members and also claimed excess expenditure by issuing salar....
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....out by the assessee society. All the discussion are only confined to the loose papers. Revenue authorities have not disputed the fact that the college owned by the society are running regularly for imparting education under various streams for last many years, under the approval of related organizations of Central Government. 26a. We, therefore, under the given facts and circumstances, are of the considered view that both lower authorities erred in treating income of assessee as business income. We are of the view that assessee is not carrying out any business of profession and it is established that the assessee is a charitable society running for charitable purpose and imparting education through its colleges and institutions and the objects of the assessee society failed under the provisions of section. 2(15) of the Act and is not in the nature of advancement of any other object of general public nor it is involved in carrying out of any activity in the nature of trade, commerce or business. Therefore neither the proviso to section 2(15) are applicable to the assessee nor it can be held that assessee is carrying out business of profession. Thus, ground No.2 of the assessee ap....
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.... trustees) based on the seized loss sheet and violation of provisions of section 13(1)(c) of the Act. Assessee has also challenged that both the lower authorities erred in denying exemption claimed u/s 11 & 12 of the Act based on the observation that the payment of Rs. 5,61,877/- has been made to the trustees from the funds of the society. 28a. We find that in the alleged loose sheets placed at page 9 of assessment order there is a summary of transactions for the period 01.04.2009 to 30.06.2010 including consolidated figures for assets expenses, liabilities source of funds etc. In the last line of the sheet is mentioned that "shortage of cash, (Vijay Sir) as on 30.06.2010" and an amount of Rs. 5,61,877/- is mentioned against it. Prima facie, it seems that the alleged figure of Rs. 5,61,877/- is linked to Vijay sir and the date is 30th June 2010 which falls under the A.Y. 2011-12. However, Ld. AO has made the addition for A.Y. 2010-11. This fact in itself proves that the action of the Ld. AO of making addition during A.Y. 2010-11 was wrong. Also it is evident from the assessment order that this particular issue placed at page 9 of the assessment order, there are various other ite....
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....0 Advance fees as on 31.03.2010 6325612 Less: opening advance fees as on 31.03.2009 2930825 3394787 Caution money as on 31.3.2010 694500 Less: opening caution money as on 31.3.2009 363000 331500 25773749 Therefore, the difference come at Rs. 847694/-(Rs. 2,66,21,443- Rs. 2,57,73,749). Therefore the addition made by AO to the extent of Rs. 8,47,694/- is confirmed the appellant will get relief of Rs. 61,22,811/- . Therefore, the appeal on this ground is partly allowed. 29a. From perusal of the alleged loose sheet which is neither signed no the author of it is known we observe that some jottings of fees collection, major expenses, bank loan, unsecured loan, assets are written. Prima facie, it looks to be a some estimate or projection or rough jottings which may have been carried out at any particular time. It in itself indicates that this sheet is a dumb document/rough jottings which cannot be correlated to the actual figures for F.Y. 2009-10, in view of the judgment of Hon'ble Supreme Court in the case of V.C. Shukla and Common Cause (su....