TaxTMI 
TaxTMI 
2023 (1) TMI 1283
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....which was granted to the Education Society by 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 provisio....
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.... which is also the subject matter of pending assessment which is to be completed after the 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 infrastruct....
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....nch, Jodhpur, in appellant's own case, bearing No. 247/Jodh/2015 dated 6th July 2017 which is binding in nature. (ii) By virtue of operation 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 ....
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....chnic, etc. The names of these institutes, courses offered and the approving authority of these colleges are as under:- S. No. Name of Constituent College of PAHER University 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.....
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....e pen drives were seized. Statement of Rahul Agarwal, Secretary of the society was recorded wherein he confirmed that the documents seized relates to PAHER University and its college i.e. Pacific Dental College. The Ld. PCIT on the basis of these documents issued show cause notice dated 03.12.2019 (reproduced 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, 7....
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....s 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 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 submi....
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.... CIT vs. Islamic Academy of Education (2015) 229 Taxman 274 (Kar.) (HC) The held part is 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 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, ....
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....s of the activities of the trust or the institution. While considering the registration under section 12AA, the scope of enquiry of the Commissioner would be limited to the aforesaid extent only." Rajasthan Vikas Sansthan Vs. CIT 78 DTR 411 (Raj HC) The registration can be cancelled on the ground that the activity of the trust are not genuine or are not being carried out in accordance with the object of the trust. In case there 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 disall....
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....bsequent years as per the following table:- Batch/FY Tuition Income Development Fees Hostel Fees Total BDS Batch(2012- 13) 2012-13 1,90,00,000(PB 98) 2,18,35,000(PB 99) 1,13,65,000(PB 100) 5,22,00,000 2013-14 1,90,00,000(PB 102 ) - 1,13,65,000(PB 104) 3,03,65,000 2014-15 1,90,00,000(PB 105) - 1,13,65,000(PB 106) 3,03,65,000 2015-16 1,90,00,000 - 1,13,65,000 3,03,65,000 Total 7,60,00,000/- 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 consid....
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.... fees is part of the total fees of various courses reflected in Sch.XIX under the head Fees received (PB 117-120).The remaining amount is received in subsequent years which is included in the Fees received from the students in the subsequent years as per the following table:- Batch/FY Tuition Income Hostel Fees Total BDS Batch(2014-15) 2014-15 40000000 40,50,000 4,40,50,000 2015-16 40000000 57,65,000 4,57,65,000 2016-17 40000000 45,85,000 4,45,85,000 2017-18 40000000 49,65,000 4,49,65,000 16,00,00,000 1,93,65,000 17,93,65,000/- 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 b....
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....3 fees The paper indicates that the total package for 3 years for admission in Endo PDC 2016 is Rs.35 lakhs i.e.(2+3+6+24=35) plus hostel fees of Rs.70,000/-. She has taken admission in 2016-17 74 Sazid Husain * Endo * 30+Hostel * 10 on 5th Feb 2015 * 10 on Feb 2016 * 10 on Feb 2017 The paper indicates the total package for 3 years for admission in Endo course is Rs.30 lakhs i.e.10 lakhs per annum plus hostel fees. He has taken admission in 2015- 16 76 Narendra Kumar Gujar * 21+Hostel * 3 paid on 3rd Feb * 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.21 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 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 lakh....
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.... 5 flats. It is submitted that assessee vide sale deed dt.20.01.2015(PB 160-174) purchased the said 5 flats for Rs.1,13,00,130/- as is evident from the copy of ledger account of Kamal Prompart Pvt. Ltd (PB 158). Thus these flats are duly recorded in the books of the society and reflected in the balance sheet(PB 36&159). Hence the observation of PCIT that these are unaccounted payment/investment is incorrect. (vii)In Para 4.6 the Ld. PCIT by referring to Pages 59-60 of annexure A Exhibit 3(PB 175-176), noted that the same is a cash book of PAHER society from 01.01.2015 to 29.01.2015 wherein opening cash balance of Rs.1,22,60,928/- and credits of Rs.1,08,30,670/- are recorded, and the same could not be verified from the regular 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 K....
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....s notice from 01.04.2009 but the alleged irregularities nowhere lead to a conclusion that activities of the trust are not genuine or are not carried out as per its objects. Otherwise also the documents on the basis of which allegation of irregularities are made relate to AY 2014-15, AY 2015-16 and AY 2016-17. Hence the withdrawal of registration u/s 12AA(3) w.e.f. 01.04.2009 is bad in law. Reliance in this connection is placed on the following:- Indian Medical Trust vs. PCIT &Anr. (2019) 414 ITR 296 (Raj HC) "The provisions of s. 12AA(3), empower the CIT 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. For in such a situation, the same would have 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 asses....
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....ification do not provide that the CIT(E) can transfer its power or jurisdiction to other CIT or Pr. CIT. In the said notification the CBDT has authorized the CIT(E) to issue order in writing for the exercise of the powers and functions by the Add. CIT or JCIT or TRO who are subordinate to him, and has authorized the Add.CIT to issue order in writing for the exercise of the powers by the Assessing Officer who are subordinate to him. In section 124 Jurisdiction of Assessing Officer has been given, not the Jurisdiction of Commissioner. Further in Sec. 127 power of transfer of cases has been given and transfer of cases is given from one Assessing Officer to other Assessing officer not from CIT to CIT. Hence the registration u/s 12A can be withdrawn only by the Prescribed Authority who is empowered 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 Associ....
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.... u/s 12A of the Income Tax Act, 1961 vide order dated 10/10/2002. It was also approved under section 10(23C)(vi) vide letter dated 31.05.2007 for Assessment year 2005-06 and onwards. 6.1 As per facts, a search and seizure action was conducted on the Pacific Group of Udaipur under section 132(1) of the IT Act, 1961 on 26.08.2015. Warrant of authorization under section 132(1) was also issued and duly executed in respect of the assessee trust being part of the Pacific Group. In the search and survey proceedings, various incriminating documents were found and seized/impounded. During the course of search at the residential premises of Shri Sharad Kothari, Registrar of the assessee trust on 26.08.2015 some loose papers and three pen drives were seized. Statement of Shri Sharad Kothari was recorded under section 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 contraven....
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....onsidered as the cash sheet of PAHER University but Sharad Kothari and B R Agarwal failed to verify this from the books of account of the assessee. (g) The imprest account of Sharad Kothari for the period 01.04.2014 to 31.03.2015 were furnished to the AO at the time of assessment proceedings which showed that cash of Rs.2 crore was provided on 16.06.2014, Rs.3.68 crore during the period 28th to 31stJuly and Rs.1 crore on 02.09.2014. No supporting documents and explanation were furnished with respect to these transactions. (h) During the assessment proceedings bank accounts of the trust were obtained. From the perusal of the bank account it is seen that there are voluminous transactions of debit and credits entered into with B.R Agarwal and his family members for which there is no justifiable reason or explanation given by the assessee trust. 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 spe....
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....en constituted separately for these class or type of cases. Hence, the case of the assessee admittedly falls in the jurisdiction with the ld. CIT (Exemption). 6.3. We found from perusal of the record that a search and seizure operation has been carried out in the case of Pacific Group of Udaipur on 26.08.2015. Warrant of authorization under section 132(1) of the Act was also issued and duly executed in respect of the assessee trust being part of the Pacific Group. The Notification referred above does not provide that ld. CIT (E) can transfer his power or jurisdiction to other CIT or PCIT. In the said notification the CBDT has authorized the CIT (E) to issue order in writing for the exercise of powers and functions by the Addl. CIT or JCIT or TRO who are subordinate to him, and has authorized the Addl. CIT to issue order in writing for the exercise of powers by the Assessing Officer who are 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 un....
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....ief Commissioner or Chief Commissioner or Principal Commissioner 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 Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal 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 su....
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....y. (5) The directions and orders referred to in sub-sections (1) and (2) may, wherever considered necessary or appropriate for the proper management of the work, require two or more Assessing Officers (whether or not of the same class) to exercise and perform, concurrently, the powers and functions in respect of any area or persons or classes of persons or incomes or classes of income or cases or classes of cases; and, where such powers and functions are exercised and performed concurrently by the Assessing Officers of different classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply. (6) Notwithstanding 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....
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....2A proceeding has been transferred to the Pr. CIT(Central) automatically, when both the proceedings are separately or independent and also has to be done or conducted by the different rank Authorities. More particularly when for the purpose of Exemption cases or 12A registration a Separate Commissioner of Income Tax has been Authorized for whole of Rajasthan by the CBDT by its Notification dated 22.10.2014. In support of the above contention, the ld AR has relied on the decision in the case of Dilip Tanaji Kashid vs. M.l. Karmakar PR. CIT& ANR. (2018) 304 CTR 0436 (Bom) wherein It has been held Transfer of jurisdiction-Power of competent officers-Centralization of case- Dissenting note-Assessee was issued notice enshrining proposal for transfer of his case from Kolhapur to Mumbai, so as to centralise cases relating to D.Y. Patil Group-Assessee objected that such notice did not referred to any agreement being reached by officers of equal rank at Mumbai and Kolhapur- These objections 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....
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....annot be deemed to be in consonance with any possible interpretation to be valid or legal. This court is of the opinion that the provisions of section 12AA (3) of the Act of 1961, empowers the Commissioner of Income Tax 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. For in such a situation, the same would have been clearly specified in the said provision. 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. I find support in my opinion from the following cases with reference to the issue of cancellation or withdrawal of registration with retrospective effect: In the case of Oxford Academy for Career Development Vs. Commissioner of Income Tax: (2009) 315 ITR 382, it was thus observed that: 16. In the instant case, the petitioner is a registered society, which was 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 wa....