TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 1283
X X X X Extracts X X X X
X X X X Extracts X X X X
....The Commissioner of Income Tax, Udaipur, as per order dated 10th October 2002, without providing adequate opportunity of being heard and further failed to appreciate that the cancellation so made is contrary to the law laid down under section 12AA(3) and 12AA(4) of the Income Tax Act, 1961 read with number of case laws. Hence the order so passed deserves to be quashed/annulled, so order accordingly. 2. That on the fact and circumstances of the case as well as in law the order so passed without providing of reasonable and adequate opportunity of being heard which is against the principle of natural justice and while withdrawing the registration the authority ignored the request letter dated 7 December 2019, which the authority should have taken into consideration in the interest of natural justice. 3 & 3.1 That on the fact and circumstances of the case as well as in law the Ld. Principal Commissioner of Income Tax (Central), Jaipur, had no jurisdiction to cancel the registration granted to the appellant Society (granted as per order dated 10th October 2002 by the Commissioner of Income Tax, Udaipur) by invoking provision of section 12AA(3) which is applicable with effect from ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he order of Honorable High Court of Rajasthan, Jodhpur, on Compulsory Audit matter. 7. That on the fact and circumstances of the case as well as in law the Principal Commissioner of Income Tax (Central), Jaipur, at Page No. 52, Para No. 5, very conveniently for the withdrawal of registration mentioned that the Society is involved in earning of illegal or unaccounted income in the shape of Capitation Fees and income diverted for the benefit of person(s) referred to in Section 13 (3) of the Income Tax, 1961, which is purely based on assumption, presumption, arbitrary in nature and contrary to the fact of the case. 8. That on the fact and circumstances of the case as well as in law the Principal Commissioner of Income Tax (Central), Jaipur, while withdrawing the benefit/approval under section 12AA(3) and 12AA(4) of the Income Tax Act, 1961, completely failed to appreciate that the education and research society exists for the purpose of imparting education since last more than 20 years in various disciplines having substantial investment in land and buildings and other infrastructures, team of learned faculties known in the State of Rajasthan and not meant for the purpose of ear....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ration of search under section 153A from Assessment Years 2010-11 to 2016-17 for Compulsory Audit proceeding initiated under section 142(2)A of the Income Tax Act, 1961, Stayed by the Honorable High Court of Rajasthan. (iii) The Principal Commissioner of Income Tax (Central), Jaipur, ignored the contention of letter dated 7th December, 2019. Had in fact the contention of the said letter taken into consideration, no occasion said to have been arises as to pass the order in such a fashion which has resulted into withdrawal of benefit of approval granted under section 10(23C)(vi) of the Income Tax Act, 1961. 5. That on the fact and circumstances of the case as well as in law the Principal Commissioner of Income Tax (Central), Jaipur, while withdrawing the benefit/approval under section 10(23C)(vi) of the Income Tax Act, 1961, completely failed to appreciate that the education and research society exists for the purpose of imparting education since last more than 20 years in various disciplines having substantial investment in land and buildings and other infrastructures, team of learned faculties known in the State of Rajasthan and not meant for the purpose of earned of profit. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty Approving Authority/ Affiliated to 1. Pacific Dental College & Hospital Dental Council of India, New Delhi Affiliation with Pacific Academy of Higher Education & Research University 2. Pacific Institute of Management AICTE, New Delhi, Affiliation with Pacific Academy of Higher Education & Research University 3. Pacific Institute of Technology AICTE, New Delhi, Affiliation with Pacific Academy of Higher Education & Research University 4. Pacific College of Pharmacy AICTE & PCI, New Delhi, Affiliation with Pacific Academy of Higher Education & Research University 5. Pacific Institute of Hotel Management AICTE, New Delhi Affiliation with Pacific Academy of Higher Education & Research University 6. Pacific Institute of Business Studies Affiliation with Pacific Academy of Higher Education & Research University 7. Pacific Institute of Journalism & Mass Communication Affiliation with Pacific Academy of Higher Education & Research University 8. Pacific Institute of Law Bar Council of India, New Delhi Affiliation with Pacific Academy of Higher Education & Research University 9. Pacific Institute of Fire & Safety Management Affiliation with Pacific Academy of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roduced at Pg 06-24 of the order). The issues raised in the show cause notice are summarized as under:- (a) Certain pages contain details of admission along with the name of students and their packages in the first year of BDS course for academic year 2012- 13, 2013-14 & 2014-15. The total amount of the respective years is Rs.1569.76 lakhs, 1920.60 lakhs, 1677.95 lakhs. The relevant pages are reproduced in the assessment order at Pg 40-47. As the same did not reconcile with the books of account, these amounts were considered as unaccounted capitation fees received by the society. (b) An excel sheet found containing the details of the fees of the 2nd, 3rd& 4th year of BDS from BDS batch 2007-08 and the same remained unexplained by the assessee. The same is reproduced at Pg 48 of the order. (c) From Pg.no.23 to 25 of annexure A Exhibit-1 and Pg.no. 72 to 74, 76 & 80 of annexure A Exibhit-3 it is noted that Rs.34 lakhs in AY 2012-13, Rs.22 lakhs in AY 2013-14 & Rs.45 lakhs in AY 2015-16 and Rs.20 lakhs in AY 2016-17 are in the nature of unaccounted capitation fees as the same remained unexplained. The relevant pages are reproduced at Pg 48-49 of the order. (d) From the pen ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ithout providing the required documents and adequate opportunity of hearing has withdrawn the registration already granted u/s 12AA of the Act and the approval given u/s 10(23C)(vi) of the Act with retrospective effect from 01.04.2009 for the reasons stated in Para 3 above. 2.3 Against the impugned order of the ld. Pr. CIT, the assessee has preferred the present appeals before us on the grounds mentioned hereinabove. 3. Ground No. 1 to 8 of the appeal are interrelated and interconnected and relates to challenging the order of the ld. Pr. CIT (Central), Rajasthan, Jaipur for cancelling the registration of the assessee Trust under section 12AA(3) and 12AA(4) of the Act, 1961, Therefore, we have decided to adjudicate these grounds by this common order. 4. Before us, the ld. Counsel for the assessee submitted in his written submissions as under : "1. At the outset it is submitted that the sole reason for cancelling the registration granted u/s 12A of the Act to the society is on the allegation that the (i) assessee trust is earning illegal/ unaccounted income in the garb of capitation fees thus involved in activities which are against public policy and (ii) income of the trust is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 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 cannot be said that the Trust is not genuine. Admittedly, the students are being admitted every year. Students are studying in all courses. Thus the object of the constitution of the Trust namely imparting of education is going on uninterruptedly. Therefore, it cannot be said that the activities of the Trust are not being carried out in accordance with the objects of the Trust. When the aforesaid two conditions are fully satisfied, on the ground that the trustees are misappropriating the funds of the Trust the registration of the Trust cannot be cancelled. If the trustees are misappropriating the funds, if they are maintaining false accounts, it is open to the authorities to deny the benefit under section 11 of the Income Tax Act, but that is not a ground for cancelation of registration itself. That is precisely what the Tribunal has held. Therefore, the substantial question of law is answered in favour of the assessee and against the revenue. There is no merit in this appeal." Tamil Nadu Cricket Assoc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....here are violations as mentioned in s. 11 and 13 of the Act, the AO while making assessment can deny the exemption to the trust. For getting the exemption u/s 11, registration is pre-requisite. However, registration is not a guarantee for exemption. In case the Trust fails to comply with the requirements as mentioned in s. 11 and 13 of the Act then exemption can be denied. In respect of failure mentioned in s. 11 and 13 in a particular year, it cannot be said that registration is to be cancelled. Surplus in educational activities is not relevant for cancelling the registration. The education itself is charitable object and if the surplus is utilized for the purpose of charitable activities then it cannot be said that registration is to be disallowed. The ground on which the registration cannot be refused, cannot be considered as a ground for cancelling the registration. 2. So far as violation of condition mentioned in 12AA(4) is concerned the main allegation of is that the assessee has received capitation fees which is not recorded in books and has made unaccounted investment and done voluminous transaction with the trustees. These allegations are factually incorrect as explained....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- 2,18,35,000/- 4,54,60,000/- 14,32,95,000/- (b) For Batch 2013-14 the total amount as per page 16 to 19 of Annexure A Exibhit-1 in respect of 103 students is Rs.1920.60 lakhs. However since the seats available is only 100, therefore 3 students out of this list were not given admission. The details of the 100 students who were given admission by whom amount of Rs.1794.60 lakhs was payable over four years and the details of 3 students who were not given admission by whom the amount payable was Rs.126 lakhs is given at (PB 107-109). From the same it can be noted that the 100 students to whom admission was given, the total fees of 4 years after considering the scholarship given to students amounting to Rs.13.05 lakhs works out to Rs.1807.65 lakhs against which the fees pertaining to FY 2013-14 including Tuition Fees, Development fees & Hostel fees is Rs.484.90 lakhs (400+66.25+18.65) (PB 102-104).The current year tuition income is Rs.400 lakhs but pending the decision in the Board Meeting as to the increase in the tuition fees only Rs.190 lakhs is recognized in the current year and the balance 210 lakhs is recognized in FY 2014-15 as prior period income(PB 102). This ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....From the above table it can be noted that as per books the total fees received from the students for Batch 2014-15 works out at Rs.17,93,65,000/- which is more than amount shown in the papers found during the search. Thus the assessee has fully disclosed the fees received from the students in the books of account and the allegation of the Ld. PCIT that the same is unaccounted capitation fees is incorrect and without any basis. (ii) It is stated in Para 4.2 of the order that an excel containing details of the fees of 2nd 3rd and 4th year of BDS batch of 2007-08 was found from which it is seen that excess fees of Rs.852.24lakhs has been collected. From where this excel sheet is found is not specified. Further as per the table given in the order this excel sheet is not for BDS batch 2007-08 alone but it is for Batch 2007-08 to 2012-13. All the students who have been admitted in BDS course for batch 2007-08 to 2012-13, the package of fees is for 4 years and the amount received from the student in the respective years is duly recorded in the regular books of account as explained above. Therefore the allegation that the amount specified in this table remained unexplained by the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f which Rs.5 lakhs is paid in 2012 and the same is verifiable from the ledger copy given at (PB 125-126). 76 Umang Desai * Endo- Rs.38 lakhs * 3 paid * 5 in 2012 * 5 in 2013 * 5 in 2014 The paper indicates that he has taken admission in 2012-13 and the total package for the course is Rs.38 lakhs out of which Rs.5 lakhs is paid in 2012 and the same is verifiable from the ledger copy given at (PB 127). 80 Abhishek Norton * Endo PDC 2012-13 * 42+Hostel * Rec 2 lakhs on 29.12 * 3 lakhs on 07.01 * 25 before admission * 5 in 2013 * 5 in 2014 The paper indicates that he has taken admission in 2012-13 and the total package for the course is Rs.42 lakhs plus hostel fees out of which Rs.5 lakhs is paid in 2012 and the same is verifiable from the ledger copy given at (PB 128). From the above facts it can be noted that on these papers the plan of payment by the student in the MDS course is noted. However the students who took the admission, the fees is duly recorded in the books of account and the student who paid some amount but did not take the admission was refunded back the amount paid by them. Thus the allegation that these are unaccounted capitation fees is incorrect rather the t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r books of accounts. In this connection it may be noted that this not the cash book of assessee. It is in the shape of ledger account of Pacific Dental college which is a rough noting of cash transaction done by Mr. Madanwho is handling the cash transaction of PAHER group as such. Hence on the basis of this paper no adverse inference can be drawn against the assessee. (viii) In Para 4.7 it is observed that as per imprest account of ShriSharad Kothari furnished before the AO during proceedings u/s 153A, he was provided substantial cash advances during the year, the purpose of which could not be explained satisfactorily. In this connection it is submitted that the same are not in the nature of cash advances. The assessee trusts collects cash from students/patients, and entrusts the same to ShriSharad Kothari for depositing it in the assessee'sbank accounts. ShriSharad Kothari immediately deposits the amounts in the assessee's bank accounts, as can be seen from the imprest account. Sometimes cash given to ShriSharad Kothari is of Pacific Dental College and Hospital which is deposited with them. During the financial year 2014-15, cash of Rs.9,04,44,200/- was given to ShriSharad Koth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave been clearly specified in the said provision. Sec. 12AA(3) does not suggest or in any way contemplate that the registration of the assessee may be cancelled with retrospective effect. Cancellation of registration can only be prospective." ACIT vs. Agra Development Authority(2018) 407 ITR 562 (All. HC) "Then, there is nothing in the language of s. 12AA(3) that may suggest registration of the assessee may be cancelled with retrospective effect. The use of the words 'or have obtained registration at any time under s. 12A added by amendment w.e.f. 1st June, 2010, only indicate that the CIT was vested with the power to cancel a registration that may have been granted to an assessee at any time prior to the aforesaid amendment itself. However, it does not indicate that thereby the CIT had been empowered to cancel the registration of the assessee with retrospective effect i.e., w.e.f. a date prior to the date of issuance of the order/notice to cancel the registration. Clearly, the act of cancellation of registration has serious civil consequences. In absence of any legislative intent expressed to suggest that the legislature had empowered the CIT to cancel the assessee's registr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ered to grant the same and by the Notification No 52/2014 and 53/2014 dt. 22.10.2014 the CIT(E) is empowered for the same. The Pr. CIT has no power to cancel and therefore order passed by him cancelling the registration is without jurisdiction and thus not sustainable. In this connection reliance is placed on the decision of ITAT Jaipur Bench in the case of Wholesale Cloth Merchant Association vs. Pr. CIT (Central), Jaipur (Rajasthan) ITA No. 688/JP/2019 vide order dated 06/01/2021 (PB 184-240) where the order passed by Pr.CIT(Central), Jaipur withdrawing the registration u/s 12AA(3)/12AA(4) of the Act after detailed discussion in para 11 to 21 of its order, held that the Pr. CIT had no jurisdiction to pass order u/s 12AA(3) & 12AA(4) and accordingly quashed the order of cancellation. In view of above the order of Ld. PCIT withdrawing the registration u/s 12AA of the Act is bad in law and the same be quashed." 5. On the other hand, the ld. D/R has relied upon the order passed by the ld. Pr. CIT (Central) Rajasthan, Jaipur and also submitted that there were various evidences in possession of the department which indicated that the assessee was not working as per the objectives ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 131 of the Act. Further, statement of Shri Rahul Agarwal, Secretary of the society was recorded under section 131 of the Act by the ADIT (Inv.) wherein he confirmed that the documents seized relates to PAHER University and its college i.e. Pacific Dental College. During the course of search and in the post search enquiries, it was found that the Trust is being run in contravention of the Trust's objectives and also in contravention of the conditions, subject to which the Trust was notified. During search proceedings, it was also found that there were numerous accounts, in books of accounts of the Trust, to which huge advances were made. Debit balances in these accounts were carried forward from year to year. The ld. Pr. CIT, on the basis of these documents found and seized, issued show cause notice dated 03.012.2019 to the assessee trust which are summarized as under :- (a) Certain pages contain details of admission along with the name of students and their packages in the first year of BDS course for academic year 2012-13, 2013-14 & 2014-15. The total amount of the respective years is Rs.1569.76 lakhs, 1920.60 lakhs, 1677.95 lakhs. The relevant pages are reproduced in the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. The ld. A/R of the assessee submitted that in response to the said show cause notice and the observation made therein, the assessee filed reply dated 07.12.2019. In this reply it was explained that the reasons assigned for withdrawal of registration are same as given in the order u/s 142(2A) dt.27.12.2017 (PB 62-92) for special audit but the Hon'ble Rajasthan High Court vide order dated 16.03.2018 (PB 93-94) has already stayed the implementation of the said order, the legible copy of the seized document/ statement referred in the show cause notice be provided, there is no limitation prescribed for withdrawal of registration and therefore the proceedings for withdrawal are premature which may be kept pending. The Ld. PCIT, however, vide order dated 26.12.2019 without providing the required documents and adequate opportunity of hearing has withdrawn the registration already granted u/s 12A of the Act and the approval given u/s 10(23C)(vi) of the Act with retrospective effect from 01.04.2009. 6.2 First of all, we would like to deal with legal objection raised by the assessee with regard to the jurisdiction of Pr. CIT(Central) in issuance of show cause notice and in passing of co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....subordinate to him. In section 124 jurisdiction of Assessing Officer has been given, not the jurisdiction of Commissioner. Further, in section 127 power of transfer of cases has been given from one Assessing Officer to other Assessing Officer and not from CIT to CIT. Therefore, registration under section 12A or approval under section 10(23C)(vi) can be withdrawn only by the prescribed authority who is empowered to grant the same. Notification No. 52/2014 and 53/2014 dated 22.10.2014 only empower the CIT (E) to withdraw the registration/approval. The Pr. CIT has not been given power to withdraw/cancel the registration/approval. 6.4 Further, in the said notification, there is no mention where CIT(E) can transfer to other CIT or Pr.CIT. The said notification of CBDT has authorized the CIT(E) to issue order in writing for the exercise of the powers and functions by the Addl.CIT or JCT or TRO who are "subordinate" to them and has authorised the Addl.CIT to issue order in writing for the exercise of the powers by the Assessing Officer who are the subordinate to them. In section 124 of the Act, the jurisdiction of Assessing Officer has been given and not 'Jurisdiction of Commissioner'. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 reissue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation.-In section 120 and this section, the word "case", in relation to any person whose name is specified in any order or direction issued there under, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year. 6.6 Sec. 120 (4) to 120(6) also provide the work assigned to the subordinate officers which is reproduced below: (4) Without pre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....withstanding anything contained in any direction or order issued under this section, or in section 124, the Board may, by notification in the Official Gazette, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income-tax authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as may be specified in the notification. We also observe that as per Sec. 120(6) of the Act, the CBDT by its Notification No. 52/2014 and 53/2014 dated 22.10.2014 has given power to CIT(Exemption) Jaipur for the State of Rajasthan for all cases of persons in the territorial area specified in column (4) claiming exemption under clauses (21), (22), (22A), (22B), (23), (23A), (23AAA), (23B), (23C), (23F), (23FA), (24), (46) and (47) of section 10, section 11, section 12, section 13A and section 13B of the Act and assessed or assessable by an Income-tax authority at serial numbers 131 to 140 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....jections were however overruled and assessee's case was transferred-High Court quashed purported transfer u/s 127-Held, "Centralisation Committee" which took decision for transfer of jurisdiction, is not authority envisaged u/s 127(2)-Counter-affidavit filed on behalf of Revenue does not disclose that there was any agreement between authorities of equal rank, as a pre-condition for invoking powers u/s 127-"Absence of dissenting note" from officer of equal rank who has to agree to proposed transfer would not constitute agreement, envisaged u/s 123(2)(a)-Assessee's petition allowed. 6.9 We further observe that the ld. Pr.CIT (Central) cancelled such approval from A. Y. 2014-15, though the assessee has already assessed from A.Y. 2014-15 under section 143(3)/148 of the Act. It is also settled legal position of law that Registration cannot be cancelled from retrospective effects. In this regard, the ld AR has relied on the decision of the Hon'ble Supreme Court in case of State of Rajasthan and others vs Basant Agrotech India Ltd. and other 388 ITR 81(SC) wherein it has been decided that "only a legislation can make a low retrospective and prospectively subject justifiability and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... earlier granted registration under Section 12A on 1-4-1999. A survey was conducted at the business premises on 20-9-2002, from where documents were impounded. The registration was cancelled for the assessment years 2000-01 and 2001-02 for the reasons that the surplus was quite heavy. In the impugned order, it was mentioned by the CIT that there was an unusual huge margin and the petitioner was engaged in the commercial activities rather than charitable. As per the balance-sheet, huge amount from the student was charged. The profit margin embodied in the charges taken from the students are so huge and it proves the profit motive of the petitioner. The funds were misused by the president and his family members of the petitioner. 20. The expression "charitable purpose" is defined in Section 2(15) of the IT Act, 1961. It is of inclusive nature as revealed in the language. Earlier the words "the advancement of any other object of general public utility" in this definition were succeeded by the words "not involving the carrying on of any activity for profit". These words were omitted by the Finance Act, 1983, w.e.f. 1st April, 1984. 26. In the light of the above discussion and ....