TaxTMI 
TaxTMI 
2023 (3) TMI 95
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3. That the Ld. PCIT (Central) has erred in withdrawing the approval only on the basis of some alleged rough jottings on a paper in respect of exchange of property, owning of cars and certain statements of teachers without any cross examination and as such withdrawal of approval in utter disregard of the explanations rendered is arbitrary, illegal and unjustified. 4. That the Ld. PCIT(Central) has further erred in holding that the activities of the assessee society are not being carried out in accordance with its aims and objects and also not in accordance with all or any of the conditions subject to which it is approved which is factually incorrect and as such order withdrawing the approval is arbitrary, illegal and unjustified. 5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 6. That the order of the Ld. Commissioner of Income Tax is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable." 2. Briefly the facts of the case are that the assessee society is engaged in the field of education and running a school in the name of St. Peter's School, C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee Society at H.No. 533, Sector 18-B, Chandigarh and H.No. 163, Sector 11A, Chandigarh were being used by Mrs. Patricia Khanna, the Chairperson and her family members as their residence. It was further stated that an Exchange Deed dt. 15/12/2016 was found during the course of survey which was executed between the assessee society and Mr. Arun Kumar Dhir, wherein 100% of the property situated at Sector 18-B was exchanged for 80% share of another property situated at Sector 11A, Chandigarh and the assessee society has received Rs. 60 lakhs by way of cheques to equalize the value of the two properties. Further, a notepad was found in the bag of Mr. Shane John Khanna a member and Secretary of the society and on perusal of the noting therein, it was found that in addition to Rs. 60 lakhs, Rs. 2.50 crore was also paid in cash by Mr. Arun Kumar Dhir which was diverted and neither accounted for in the books of the assessee nor used for its objects. It was stated by the ld PCCIT that during the course of survey, it was found that the society owned a fleet of luxury cars which were being used by the Chairperson and her family members alongwith Ms. Vardhini Verma, a member of the societ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Section 10(23C)(vi) specially the 3rd & 14th proviso of said section. Accordingly, the approval originally granted under section 10(23C)(vi) by the then ld CCIT, Chandigarh vide his order dt. 14/02/2007 with effect from A.Y. 2003-04 was withdrawn by the ld PCIT(Central), Gurgaon vide the impugned order dated 21/10/2021. 8. Against the said findings and direction of the Ld. PCIT, the assessee society is in appeal before us. 9. During the course of hearing, various contentions have been advanced by both the parties. Firstly, we refer to the ld AR's contention regarding retrospective withdrawal of the exemption approval. The ld AR submitted that ld PCIT has withdrawn the exemption under Section 10(23C)(vi) with retrospective effective, i.e, with effect from A.Y 2003-04 which is clearly without requisite jurisdiction, arbitrary, unjust and without sanction of law. It was submitted that this is the second time when the exemption has been withdrawn unsettling the position in the earlier years. It was submitted that when the exemption was earlier withdrawn and thereafter, reinstated by the order of the Hon'ble Punjab and Haryana High Court which was affirmed by the Hon'ble Supre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....use (v) is notified by the Central Government or is approved by the prescribed authority, as the case may be, or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), is approved by the prescribed authority and subsequently that Government or the prescribed authority is satisfied that- (i) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not- (A) applied its income in accordance with the provisions contained in clause (a) of the third proviso; or (B) invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso; or (ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution- (A) are not genuine; or (B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved; or (iii) such fund or institution or trust or any university or other educati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for any previous year; or (c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall (i) call for such documents or information from the fund or institution or trust or any university or other educational institution or ay hospital or other medical institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence of any specified violation; (ii) pass an order in writing cancelling the approval of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution, on or before the specified date, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violation has taken place (iii) pass an order in writing refusing to cancel the approval of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution, on or before the specified date, if he ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... specified violations have taken place in such previous year. It was submitted that the satisfaction can be recorded once the matter has been examined and specific finding has been recorded by way of a written order. It was submitted that the said power of withdrawal being prospective in nature has been brought out more clearly in the amended provisions, however, the same was always intended and should be read into the existing provisions as well as held by the various Courts and different Benches of the Tribunal. 16. In this regard, our reference was drawn on the decision of Hon'ble Allahabad High Court in case of Agra Development Authority [2018] 407 ITR 562 (All), Hon'ble Rajasthan High Court in case of Indian Medical Trust Vs. Pr. CIT, Jaipur (2019) 108 taxman.com 93 (Raj), Hon'ble Madras High Court in case of Auro Lab vs ITO (2019) 102 taxmann.com 225, Indore Benches of the Tribunal in case of Shri Jairam Education Society Bhopal (in ITA Nos. 90 & 548/lnd/2019 dated 13/10/2021) and Hyderabad Benches of the Tribunal in case of Aurora Educational Society Vs. Pr. CIT(Central) (in ITA Nos. 318 to 321 (Hyd) of 2020 dt. 20/04/2021). 17. In his submissions, the ld Sr DR submitt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o withdraw the exemption approval granted under section 10(23C)(vi) of the Act. On the issue of whether such powers can be exercised by the ld PCIT(Central) retrospectively or prospectively and in order to appreciate the rival contentions in this regard, we refer to the various decisions which have been relied upon during the course of hearing before us. 20. In case of Agra Development Authority (Supra), briefly the facts of the case before the Hon'ble Allahabad High Court were that the assessee had applied for registration under Section 12A of the Act which was granted to the assessee w.e.f. 1.4.2003 by an order in writing issued by the Commissioner of Income Tax-I Agra dated 24.9.2003. Thereafter, notice under Section 12AA(3) of the Act was issued to the assessee on 6.3.2012 whereby it was first proposed by the Commissioner to cancel the assessee's registration and in that background, the issue framed by the Hon'ble High Court was whether the Revenue having granted registration to the assessee way back, on 24.9.2003, could now cancel that registration with effect from a date prior to the date of issuance of the notice seeking to cancel the assessee's registration. It w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... application for registration and upon an order being passed thereon, the registration was granted to the assessee. Thereafter, it has to be said that the assessee's assessing authority has given effect to that registration in accordance with law for all assessment years inasmuch as the revenue has not set up a contrary case. 42. Then, it is also not the case of the revenue that the assessee had obtained registration by practicing fraud /or collusion or concealment of any material fact. In absence of such allegation, the registration granted to the assessee could never be alleged to be a nullity. 43. In the instant case, undisputedly the registration had been granted much prior to the introduction of the first proviso to Section 2(15) of the Act. Therefore, on the date of grant of registration to the assessee, it was fully eligible for the registration. The registration thus granted did not suffer from any inherent or fundamental defect. 44. Then, the assessee continued to avail the benefit of the registration for all the assessment years subsequent to the grant of its registration. Such a registration order cannot be allowed to be cancelled with retr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on'ble Rajasthan High Court in case of Indian Medical Trust Vs. Pr. CIT, Jaipur (Supra) has taken a similar view and held that the provisions of section 12AA (3) empowers the Commissioner to initiate steps for cancellation of the registration of a Trust, but the legislation had no intention of giving the said provision a retrospective effect and for in such a situation, the same would have been clearly specified in the said provision. It was held by the Hon'ble Rajasthan High Court that the interpretation of the said provision has to be harmonious rather than being prejudicial to the institutions as it would instigate and create a fear of the Income Tax Department and has referred to earlier decisions of the Hon'ble Allahabad High Court in case of Oxford Academy for Career Development and Agra Development Authority. It would be relevant to refer to the findings of the Hon'ble Rajasthan High Court which read as under: "28. Indisputably, the order dated 16th Jan, 2018, made by the Commissioner of Income Tax thereby canceling the registration granted under section 12A and withdrawing the approval given under section 10 (23C) (v) & 10 (23A) (via) of the Act of 1961, to the pet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsidering the totality of the facts and circumstances of the case, we hold that the order dt. 9th March, 2004, passed by the CIT (Annex. No. 15 to the writ petition) as per the then law is without power and jurisdiction and therefore, it is liable to be set quashed. 27. Accordingly, the impugned order dt. 9th March, 2004, passed by opposite party No. 2 withdrawing/rescinding the order granting registration on 1st April, 1999, to the petitioner's society under Section 12A of the Act, is quashed. Consequently, the registration granted to the petitioner's society on 1st April, 1999, stands restored for the assessment years under consideration." B. In the case of Assistant Commissioner of Income Tax Vs. Agra Development Authority: (2018) 90 Taxman 288, it was observed thus: "50. In the context of the IT Act, 1961 it is undisputed that the grant of registration is a one time affair. The assessee is required to apply for registration under s. 12A of the Act. Once the assessee has been registered under s. 12A of the Act, by a specific order passed by the CIT, it stands established for the purpose of the Act that the activity being pursued by that assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ii.Whether the effect of the power of cancellation conferred to the comissioner vide amendment to Sec 12 AA (3) dated 01.06.2010 is prospective or retrospective? iii.What will be the effective date on which the petitioner will lose his registration and the entitlement to exemption on account of the cancellation order dated 30.12.2010? iv.Whether the completed assessment for the past years can be reopened on account of cancellation of the certificate of registration at a distant date? 17.On a cursory glance at the periodical amendments to the Income Tax Act regarding the exemptions granted to the charitable trusts, it is seen that until 2004, when the new Section 12AA was amended, there was no power under the Income Tax Act, 1961 to the Commisisoner of Income Tax or any other authotity to revoke/cancel the registration once granted for such Charitable Trusts. Later, on 01.06.2010 vide Finance Act, 2010, Section 12AA(3) was further amended to include specifically the registrations granted under erstwhile Section 12A of the Income Tax Act, 1961 also within the ambit of revocation/ cancellation as contemplated under the 2004 amendment. 18.On perusal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion, 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. 22.On the fourth and last question as to whether the completed assessment can be reopened on the ground of cancellation of certificate of registration at a later/future date, what follows as a sequel to the decisions in the other three questions is an emphatic 'No'. Courts have categorically held that unless the assessee obtained registration by fraud, collusion or concealment of any material fact, the registration granted can never be alleged to be a nullity. In the case on hand, it is evident that fact of the cancellation of the registration triggered the proceedings and evidently forms the preamble of each of the impugned orders. And clearly, there is no allegation of fraud or misdeclaration on the part of the petitioners and the respondents were candid in confessing that the certificate was granted erroneously. Therefore, reopening t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....details of income and expenditure which have been claimed by the assessee to be dumb documents and the detailed discussion with regard to these documents will be dealt by us in the subsequent paras. Based on these documents Ld. Pr. CIT has alleged that the funds of the society have been used for the benefit of members of the society and bogus expenditure has been claimed. Apart from these allegation based on the alleged loose papers no doubt has been raised at any point of time by the revenue authorities about the genuineness of charitable activity carried out by the assessee and the activities of imparting education to the students. 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, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of exemption. The newly inserted proviso to section 10(23C)(vi) read as under: "Provided also that where the income or part of income or property of any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), has been applied directly or indirectly for the benefit of any person referred to in sub-section (3) of section 13, such income or part of income or property shall, after taking into account the provisions of sub-sections (2), (4) and (6) of the said section, be deemed to be the income of such fund or institution or trust or university or other educational institution or hospital or other medical institution of the previous year in which it is so applied." 25. In case of Aurora Education Society (Supra), we find that Co-ordinate Hyderabad Benches of the Tribunal has set-aside the cancellation of registration u/s 10(23C)(vi) firstly, on account of inherent lack of jurisdiction with the ld PCIT(Central) at the time of issue of first show-cause notice and secondly on account of fact that cancellation has been don....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 1962 empowers the Prescribed Authority under the Act to withdraw the approval granted under such-section as per the provisions of the section 10(23)(C)(v/) of the IT Act, 1961. 4. By an earlier CBDT notifications in S.O.3026(E) and 3027(E) both dated 1st December, 2014, the CBDT has authorised the Commissioners of Income-tax (Exemptions) to act as 'Prescribed authority' for the purposes of sub-clause (vz) and sub-clause (via) of clause (23C) of Section 10. Thus, the role of the Chief Commissioner for such purposes has been assigned to the Commissioner of Income Tax(Exemption). This was, however, omitted w.e.f. 05 November, 2019 vide CBDT Notification No. S03215(E)/No.60/2019 in F.No.370142/14/2018 -TPL. The CBDT vide such notification has amended Rules 2C and 2CA. 5. The amended Rule 2C is as under: '2C. (1) The prescribed authority under sub-clause(z'v),sub-clause(v), subclause( vz') and sub-clause(via) of clause (23C) of Section 10 shall be the Principal Commissioner of Commissioner whom the Central Board of Direct Taxes may authorise to act in this behalf. 6. Thus, as things stood as on the date of order, the CIT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nces of the case in the light of Rule2CA of the Income-tax Rules, 1962 and going by hon'ble apex court's constitutional bench decision in Commissioner of Customs (Import) v. Dilip Kumar & Com. [2018] 95 taxmann.com 327/69 GST 239 (SC) and conclude that the impugned order withdrawing the assessee's approval is not sustainable for want of the Pr.CIT(Central)'s jurisdiction. We make it clear that we are dealing with an instance of patent lack of jurisdiction at the threshold itself which cannot be made good in latter stages. 9. There is yet another equally significant aspect of the matter before us. There is hardly any dispute that the / Pr.CIT's order; assuming but not accepting it as correct, has withdrawn the assessee's approval from the day which was granted the very relief i.e., from 27-03-2008 turning out to be well beyond the period of show cause notice itself. And that too, without even indicating as to how the assessee had violated the conditions of its approval granted earlier in all these intervening assessment years wherein it had also been assessed without any violation of the approval's conditions. 10. We therefore rely upon ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otice, we are of the considered view that the ld PCIT(Central) was not legally correct in withdrawing the approval u/s 10(23C)(vi) retrospectively and such approval can only be withdrawn from the date of issuance of the show cause notice dated 15/06/21 that is, with effect from A.Y 2022-23 and subsequent years. 28. Moving further, in order to determine whether the withdrawal of approval under section 10(23C)(vi) can be directed even prospectively in the instant case, what is relevant to examine is whether the assessee society has not applied its income in accordance with the provisions contained in clause (a) of the third proviso; or has not invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso; or the activities of assessee society are not genuine; or the activities of the assessee society are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved; or the assessee society has not complied with the requirement of any other law for the time being in force. 29. In the following paragraphs, we shall now be discussing each of the matters raised by the Ld. PCIT, Gur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s recovered from them. It was accordingly held by the ld PCIT that although there is no dispute that the investment in the properties was made as per the objects of the society, however the same was used as personal residential accommodation by the Chairperson in violation of its objects. 32. In this regard, the Ld. AR has contended that a part of property situated at Sector 18-B, Chandigarh was being used as an accommodation by Sh. S.S. Khanna, the erstwhile Chairman and Mrs. Patricia Khanna for their residence and as stop gap residence for faculty members and school children. It was submitted that Mrs. Patricia Khanna had since taken over as Chairperson of the assessee society and she has been allowed to retain the accommodation. It was submitted that the said property was subsequently exchanged for another property situated at Sector 11, Chandigarh and it is not a case where both the properties were used as an accommodation at the same time. It was submitted that both these properties were registered in name of the assessee society. It was submitted that the perquisite value of accommodation has been duly reflected in income tax returns of Mrs. Patricia Khanna. It was submitt....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... No. 163, Sector 11-A, Chandigarh, are strictly in consonance with the objective of the Society and which fact, has not been faulted with by the Show Cause Notice. Moreover, the said investment adhere to the norms laid down in Section 11(5) (x) of the Income Tax Act, 1961. 6.4 The only, so called violation if any, as per para 2.1 of the Show Clause Notice is that the properties of the assessee Society were being used by the Chairperson/ Members for personal purposes. 6.5 The Society has to draw your kind attention that at the time of grant of approval by the worthy Chief Commissioner, the owning of the property i.e. H. No. 533, Sector 18-B, Chandigarh and its occupation by the then Chairperson, Mr. S.S. Khanna, was a matter of considerable debate and investigation. This will be evident from the official correspondence resting with the following letters; (i) CIT/CHD-II/2005-06/5200 dated 09-03-2006 Annexure-I (ii) Reply dated 21 -03-2006 Annexure-II (iii) CC/CHD/Judl/2006-07/3040 dated 26/27-12-2006. Annexure-III (iv) Reply dated 06-01 -2007. Annexure-IV 6.6 It was after deliberate consideration of facts, circumstances ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... changing society, yet firmly upholding a belief i n basic values and standards. 6. To Project the school as the servant of the community, and accept its proper share of responsibility for equipping each child to find his own niche in his occupation and in society 7. To make extensive use of 'Project Work' to encourage the investigative approach. 8. To train the mind and shape the character of the younger generation. 9. To provide, facilities for learning social sciences, music, dance, drams, art, poetry, oration, games and physical training. 10. To teach moral science including ethical values in accordance with the basic human principles. 11. To inspire the younger generation to discover their talents in different arts and sciences for their own benefits and to be good citizens of India and good individuals for the betterment of the world at large. 12. To render free education to deserving pupils and to provide financial assistance to promote their education and other talents. 13. To provide educational, social and financial assistance to the handicapped or under-developed youth irrespective of caste, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it in furtherance of its work. It has been further provided that the affairs of the assessee society shall be managed by an executive committee consisting of five persons namely, Chairperson, Mrs Patrica Khanna, Secretary, Mr Shane John Khanna, Finance Secretary Mr Anil Kumar Batra, Member, Col, Igbal Singh and Member, Ms Vardhini Verma. It has been further provided that the executive committee shall have powers and authority to do all acts, matters, things and deeds which may be necessary or expedient for the purposes of the society. In particular, it has also been provided that the executive committee is authorized to purchase, take-over or give on lease acquire or sell and let all properties, tangible or intangible properties, construct, alter, maintain keep in repair and develop all lands, houses, housing complexes, building, playgrounds necessary or convenient as desirable for the purposes of the society. 38. As per the findings of the ld PCIT, though the investment in the house properties were made as per the aforesaid objects of the assessee society but the fact that the same were used as personal residential accommodation by the Chairperson is in violation of the asssess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cupation of residential house, the clarification is that this property is not being used for the residence of the principal alone, that the 1st Floor is used for accommodating temporary staff, hostel for school children and as guest house accommodation for various visiting officials." Taking the same into consideration and due examination thereof, the approval u/s 10(23C)(vi) was granted by the ld CCIT on 14/02/2007. We therefore find that the matter relating to residential accommodation provided by the assessee society to its then chairman Mr S.S Khanna and Mrs Patricia Khanna, Principal was duly examined while grant of initial approval and the same was clearly as per the objects of the assessee society and it is also manifest from the records that rent was recovered from them. 40. It is also a matter of record that Mrs Patricia Khanna has since taken over from Mr S.S Khanna and is rendering services as the chairperson of the assessee society and as part of her services, she has been allowed by the assessee society to retain and occupy the said residential accommodation and there is thus no dispute in this regard that a facility by way of residential accommodation has been prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y did not own personal vehicle and the vehicles purchased and registered in the name of the assessee society are used by them. Basis the same, the Ld. PCIT was of the view that since Khanna family did not own any personal vehicle, it proves that the vehicle of the assessee society are being used by Chairperson, her family members and other members of the society for their personal purposes and the assessee's explanation was called for which was examined but not found acceptable by the Ld. Pr. CIT. 44. As per the Ld. PCIT, the funds of the assessee society were meant for application towards the educational objects of the society. However these were diverted for buying luxury cars for personal use of Khanna family. It was further stated by the Ld. PCIT that the assessee society could not provide any evidence in the form of salary slips etc. to prove that the cars were provided to the Chairperson and other members in lieu of the services rendered by them to the society and same were offered by them in respective hands for taxation or they have reimbursed any money to the assessee society. It was finally held by the Ld. PCIT that although the investment in the luxury vehicles per se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther members of the assessee society and there has been no adverse findings recorded by the Assessing officer during all these past years regarding personal usage of any of these vehicles. It was accordingly submitted that the findings of the ld PCIT(Central) are not borne out of the records and in absence thereof, the same deserve to be set-aside. 46. In support, reliance was placed on Coordinate Mumbai Benches decision in case of ITO vs Cancer Aid & Research Foundation (ITA No. 1782/Mum/2014 dated 16/07/2014) wherein on account of purchase of BMW car in name of the trustee, the registration u/s 12AA was initially cancelled and subsequently restored by the Tribunal and the relevant findings therein read as under: "18. The second objection of the learned DIT(E) is that the assessee had purchased BMW 325i car in personal name of the trustee Mr. A.A. Kazi, vide bill dated 20th March 2009. The car was purchased out of the funds of the trust. The learned DIT(E) held that nothing has been brought on record to show the need of buying such a luxury car. As brought on record, this issue was subject matter of scrutiny in the assessment year 2009-10, wherein the Assessing Officer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stainable either on facts or in law, so as to hold that the activities of the trust are either not genuine or they are not being carried out in accordance with the objects within the scope of section 12AA(3). Moreover, nothing has been brought on record to show that the application of the income of the trust from year-to-year has not been made towards attainment of the objects i.e., for the Cancer Aid & Research Foundation charitable purposes. If no discrepancy has been found in the income and expenditure account and there is a proper application of income towards the objects in accordance with the provisions of section 11, then neither the charitable nature of the trust should be doubted nor it can be held that its activities are not genuine or are not in accordance with the objects for which registration was granted. Accordingly, we reverse the findings of the learned DIT(E) and hold that the registration granted to the assessee cannot be cancelled under section 12AA(3) on the ground stated by the learned DIT(E) in the impugned order. The grounds thus raised by the assessee are allowed." 47. The Ld. Sr DR submitted that the vehicles have been used by the Chairperson and her fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hicles, and since the chairperson and other members of the society donot own any personal vehicle, he has arrived at a finding that the subject vehicles have been provided to them exclusive for personal usage. 50. In our understanding, these vehicles have been provided to the respective members of the assessee society for discharge of their services to the assessee society as it evident from the record when the matter was initially enquired by the ld CCIT(Chandigarh) and at the same time, given that these vehicles are at the exclusive disposal of the individual members, possibly, some personal usage cannot be ruled out and it thus gives an impression that these vehicles have been provided to them exclusively for personal usage. The exclusive disposal of vehicle vis-à-vis exclusive personal usage thus seems to be have created the present situation which has led to the impugned findings of the ld PCIT(Central). 51. It is not unusual to provide dedicated vehicle facility to the members of the assessee society for commuting from home to office and back and for other official purposes, however, to hold that the vehicles have been provided exclusive for personal purposes won....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hed the cheques and also to provide copy o the signed cheques which were encashed. Basis the said information and inquiry, the assessee was asked to provide its explanation which was considered but not found acceptable by the Ld. PCIT. 54. As per ld PCIT, the assessee society may be disbursing the salary to the teachers as prescribed by the rules in this regard but the evidences collected clearly indicated that part of the salary was taken back by the management of the school every month and the actual salary paid to them was less than the amount which was entered in the books of account kept by the school and the only conclusion which can be drawn is that the funds of the society were misappropriated by the chairperson and the members for their personal purposes by inflating the salary expenses of the teachers and other staff members. 55. During the course of hearing, the ld AR has assailed the aforesaid findings of the ld PCIT. It was submitted that the Revenue had alleged that signed cheque books were found from the drawer of the Chairman office. It was submitted that a description of the Chairman office is that it has a cabinet which has several drawers and most of the ti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of service contract between Management and staff." In another reply dated 04.03.2021, the assessee submitted as under: "12.1 Para 2.6 of the present Show Cause Notice deals with the discovering of certain cheque books of the employees of the Society form the drawer of chairperson's office at Saint Peter's School. 12.2 Respectfully submitted that the survey part had conducted a thorough investigation with regards to the cheques. 12.3 The Society had filed a detailed explanation in its reply dated 14.02.2019 duly incorporated in the Show Cause Notice. The Department/ Survey Teams had recorded the statement of 30 teachers independently without allowing the participation of any member of the Society. So, it can be safely said that the said statements were recorded free of influence, coercion or pressure from the part of the Society. The statements of teachers are sacrosanct and cannot be disagreed on basis of presumption that one Mr. Mohan, who is an account assistant, acted as an agent/ representative of the Society/ management for collecting the cheques. The Society never used the services or deployed Mr. Mohan to collect the cheques on i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....livelihood of these teachers was dependent on the school and its management and they cannot be expected to give a statement which might implicate the management and jeopardize their jobs. Hence, the modus operandi adopted by the school management is required to be analyzed and unearthed in light of the human probabilities and surrounding circumstances. The withdrawals of fixed amount in cash by bearer cheques in the first week of every month by Mr. Mohan who is Account Assistant of school corroborates the modus operandi adopted by the school to inflate the salary expenses. The above facts are supported by the evidences in form of the bank statements and copies of encashed cheques of the bank accounts maintained by the teachers in the ICICI Bank which were obtained from the bank. It is also noted that the numbers of cheques used for such withdrawals from the account of one teacher are consecutive which indicated that one signed cheque book was given by each teacher to the management which was exclusively used to make such withdrawals from their accounts through Mr. Mohan. Otherwise, there is no reason as to why the numbers of all such cheques which were used during the diff....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ss Swati Srivastava has stated that she was working with the school since 01/02/2018 and she has received Rs 24,000/- in her bank account though exact salary is Rs 15,500/- and she returns the balance to school by blank cheque. It is equally relevant to note that out of other teachers whose statements have been recorded, seventeen teachers have categorically stated "No" to the question whether they have handed over the signed cheque book. 60. The question that arises for consideration is what is the relative strength of negative statements vis-à-vis positive statements and whether negative statements can be discarded altogether and only positive statements have to be considered. Further, whether the implications arising out of the positive statements can be extrapolated to cover all of the earlier years even prior to appointment of these two teachers in the assessee school and that too, in respect of whole of the school faculty and staff members. To our mind, the answer to both of these questions is clearly in negative. Where one look at the human probability, how can two persons statement of expression represent statement of expression of thirty persons. It is not a case....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... available on record and carefully analysis thereof, it cannot be held that there is misappropriation of society's funds all these years by way of inflating salary expenditure and withdrawing money from the respective teachers bank accounts and that too, for benefit of Chairperson and members of the assessee's society. This is however subject to part of salary withdrawn in respect of aforesaid two teachers and who have confirmed that they have parted with their salary. In respect of part of salary so withdrawn in respect of these two teachers, the Assessing officer is directed to verify the same and take appropriate action as per law in regular assessment proceedings in the hands of the assessee society for the years involved. 63. In case of Shri Jairam Education (Supra), we find that similar fact pattern was under consideration before the Indore Benches. In the said case, basis certain loose papers found during search, it was alleged by the Revenue that the fund of the assessee society have been misappropriated by the members of the society and the funds have been used for the benefit of members and bogus expenditure has been claimed. It was held by the Coordinate Bench that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 3,78,53,325/- whereas as per the exchange deed, the difference worked out to Rs. 60 lacs only which is basically to equalize the value of the properties and the said amount of Rs. 60 lacs was paid by Shri Arun Kumar Dhir by four cheques to the assessee society and details thereof have been given in para 7 of the impugned order. 67. The Ld. PCIT, on perusal of the Fixed Assets Schedule for F.Y 2016-17, further observed that the assessee society has not properly accounted for the transaction of exchange of properties in its books of account. In this regard, the ld PCIT referred to submission dt. 14/02/2019 wherein the assessee society submitted that the said transaction was not accounted for in the books of account as physical possession of the properties were to be taken on a future date and in support thereof, a copy of memorandum of understanding dated 20/03/2018 signed between the assessee society and Shri Anil Kumar Dhir was submitted. 68. Referring to the MoU dated 20/03/2018, the ld PCIT further observed that the MOU has been signed more than a year after execution of the Exchange Deed wherein it was stated that the property at Sector 11A was not in a habitable cond....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the exchange deed and which was duly accounted for in the books of accounts during the financial year 2016-17. Our reference was drawn to the Fixed Asset Schedule forming part of the annual accounts for the financial year 2016-17 where a figure of Rs 46,88,000/- has been mentioned and it was submitted that the same represents the cheque payment of Rs 60 lacs net of commission of Rs 5 lacs paid to Shri Narender and TDS amounting to Rs 8.12 lacs. 72. It was further submitted that in response to show cause notices, the society has explained the difference between the collector rate of Rs. 4,32,20,150/- and exchanged/transaction value of Rs. 7,52,00,000/- vide replies dated 14.02.2019 and 04.03.2021 placed in the Paper Book at Pages 6-14 and Pages 281-288 respectively. However, the ld PCIT, negating the registered exchange deed, merely on the basis of certain rough jottings in Note pad came to the conclusion that the assessee society had received Rs. 2,50,00,000/- as unaccounted money as exchange value as against the submission of assessee society that the builder Mr. Arun kumar Dhir had expended the money on reconstruction of H.No. 163, Sec. 11A Chandigarh and therefore the act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Haryana High Court in case of Paramjit Singh vs ITO [2010] 323 ITR 588 wherein it was held that the sale consideration as disclosed in the sale deed has to be accepted and it cannot be contradicted by adducing any oral evidence. It was submitted that following the said decision, it is clear that no evidence can be admitted to prove that any amount was paid or received relating to transfer of the property outside the written exchange deed. It was accordingly submitted that there is no basis in allegation made by the ld PCIT that certain consideration has been received in cash over and above the new house property and cheque payment in exchange for the old house property and which has not been accounted for in the books of account of the assessee society and the funds so received were diverted for the benefit of the Chairperson and members of the assessee society. 77. Per contra, the Ld. Sr. DR relied on the findings of the Ld. PCIT and submitted that the entries so found in the notepad are clearly matching as far as the cheque payments are concerned with the details mentioned in the exchange deed and given that, the corresponding cash figures along with dates were also mentione....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s taken care of, while determining the value of the property at Rs.7,52,00,000/- as against the circle rate of Rs.4,32,20,150/-. This paper reflected the tentative value of property to be exchanged and there was no cash dealing between the parties to the Exchange Deed. The assessee also questioned the fact as to why the society would determine the exchange value at a higher figure than the collector rate. lt was reiterated that the difference between the exchange value & collector rate is the cost of construction incurred by the builder, which would otherwise have been paid in cash. The explanation furnished by the assessee is baseless. If the property at H.No. 163. Sector-11A, Chandigarh was an old structure then as on the date of exchange 15.12.2016, its value should be lower than the collector value and not higher by the amount of Rs. 3.20 crore. Secondly, the question of the assessee as to why the society would determine the exchange value at a higher figure than the collector rate is again not tenable. It is apparent that the Exchange Value was fixed up at higher value so that to equalize the value of the properties, a lower amount of Rs. 60 lakh (Rs. 8.12 crore - Rs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er property situated at Sector 11A, Chandigarh owned by Mr. Arun Kumar Dhir. As per the exchange deed, the value of the property situated at Sector 18-B was determined at Rs. 8,12,00,000/- as against collector rate of 8,10,73,475/- and the value of the property situated at Sector 11A was determined at Rs. 7,52,00,000/- as against collector rate of Rs. 4,32,20,150/-. It is also not in dispute that the exchange deed was duly registered with Stamp Duty Authority on 15/12/2016 and stamp duty amounting to Rs 24,36,000/- was also paid and the property is registered and owned by the assessee society. 79. The ld PCIT has contested the value of property situated at Sector 11A so determined between the two parties and the mode of discharge of consideration. The ld PCIT has held that where the collector value of 80% share of H.No. 163. Sector-11A. Chandigarh was only Rs. 4,32,20,150/-, the same has been artificially enhanced without any basis to Rs. 7,52,00,000/-. It has been held by the ld PCIT that where the exchange value of H.No. 163, Sector-11A, Chandigarh is taken at collector value of Rs. 4,32,20,150/-, then for the exchange of the properties, an amount of Rs. 3.78 crore (Rs. 8.10 c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it was agreed that the builder shall demolish and reconstruct the structure and the difference therefore represents the tentative cost of construction incurred by the builder. We are not going into the merit of the said explanation as we equally find ourselves incapacitated in appreciating the same in absence of any guidance from the Valuation officer. Had the matter been referred to the valuation officer, the said explanation of the assessee society could have been easily examined and verified by the Valuation officer. The ld PCIT however decided to brush aside the same without referring the matter to the Valuation officer and further without bringing any contrary evidence on record in terms of any comparable third party transaction in the same area or in vicinity thereof. In the instant case, we therefore find that merely basis certain apprehension and howsoever strong such apprehension may be, the ld PCIT was not correct in disregarding the transacted value so arrived at between the two parties without referring the matter to the Valuation officer who is a specialist in the field of valuation and whose inputs as a specialist have been recognized under law as well as by the Court....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts thereof discarded in light of certain rough note pad entries. In our view, the exchange deed which evidence the transfer of the impugned immoveable property not just contain the description of the property being transacted but also the underlying terms and conditions subject to which the transfer has been effected including the quantum of consideration and mode and manner of discharge of such consideration and nothing more can be read and understood other than what has been stated therein unless the same is rescinded and/or cancelled which is not a case before us. 83. As per ld Sr DR, the entries so found in the notepad are in handwriting of Mr Shane John Khanna and are clearly matching as far as the cheque payments are concerned with the details mentioned in the exchange deed and given that, the corresponding cash figures along with dates were also mentioned therein in the same handwriting, the same clearly establishes that it relates to the same transaction of exchange of two properties and there was payment of part consideration amounting to Rs. 2.5 crore by way of cash which has not been reflected in the exchange deed and has been misappropriated. However, as per ld AR, t....