TaxTMI 
TaxTMI 
2025 (2) TMI 981
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.... and on facts in not dealing with many precedents of Honourable ITAT holding that, jurisdiction u/s 12A cannot be shifted /transferred through any order u/s 127 of the ITA, 1961. 3. The Learned PCIT-Central Circle, Pune erred in law and on facts in cancelling registration u/s 12A/12AA for the period from 1/4/2019 to 31/3/2021 without any cogent reasons. 4. The registration u/s 12A r.w.s. 12AB for the period from 1/4/2021 onwards is cancelled without issuing show cause notice for the same and without any cogent reasons. 5. The Learned PCIT (Central), Pune erred in law and on facts in holding that, activities of the Appellant are not genuine and funds are deployed for personal benefit of its members. Learned PCIT (Central), Pune erred in keeping heavy reliance on the statements recorded during search, without appreciating fact that the statements were recorded under peculiar circumstances and despite the fact of their retraction thereafter. 6. The Learned PCIT (Central), Pune also erred in law and on facts in holding that retraction affidavits of various persons have no credence and that, these retractions are "planned". 7. The Learned PCI....
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....al) subsequent to search u/s. 132 of the Act. Based on the reference received from ld. AO dated 20.07.2023 a show cause notice was issued to the assessee trust on 21.07.2023 by ld.PCIT(C). In the said show cause notice, assessee was asked to reply about the issues arising out of the search proceedings which included partial receipt of staff salary doctors salary, PG stipend and capitation fee in cash by the trustee of the assessee trust. The details of the alleged cash receipt on account capitation fee, refund of staff salary, doctors salary, PG stipend and others during F.Yrs. 2019-20 to 2021.22 (A.Y. 2020-21 to 2022-23) are referred in the show cause notice which is appearing on page 7 of the impugned order. Reference was also made to the statements of various staff persons of the assessee trust recorded during the course of search where they have alleged to have admitted the fact of receiving cash towards capitation fee as well as the staff salary, doctor salary, PG stipend. Based on this information, assessee was asked as to why registration u/s. 12A of the Act granted on 16.02.2001 should not be cancelled. Assessee gave reply to the show cause notice making multifold contentio....
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....r institution and (b) compliance of such requirements of any other law for time being in force by trust or institution as are material for the purpose of achieving its objects. Thereafter, satisfying itself about the objects and genuineness of the activities of the trust or institution registration can be granted. iii. If the concerned authority after granting registration is satisfied that either (a) the activities of such trust or institution are not genuine or (b) are not being carried out in accordance with the objects of the trust or institution, as the case may be, or on noticing the violations mentioned in section 12AA(4) of the Act, the registration of such trust or institution can be cancelled u/s 12AA(3)/12AA(4) of the Act. iv. W.e.f. 01/04/2021, section 12AB of the Act was introduced for fresh registration of a trust or institution. Similar conditions were imposed on authority for granting registration as they existed u/s 12AA of the Act. However, for cancellation of the registration, section 12AB of the Act has introduced certain 'specified violations' for trust or institution w.e.f. 01/04/2022 which are defined in Explanation to section 12AB(4....
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....e trust or institution on an activity must be genuine and the activity itself must be within the objects of the trust or institution. To elucidate further it can be said that if the application of income or the expenses claimed by the trust or institution are found to be bogus or fraudulent then such activity involving application of income cannot be considered as genuine activity or an activity as per the objects of the trust or institution. Further, even if the application of income is genuine but the activity per se is not as per the objects of the trust or institution then in both the cases, the said trust or institution would be liable for cancellation of its status of exemption. vi. If it is a finding of fact that the trust or institution are involved in nongenuine activity or activity that is not as per the objects of the trust as well as specified violations u/s 12AB, then the trust or institution will have to face its consequences in terms of cancellation of registration as charitable entity." 5. Thereafter, ld. PCIT has dealt with the issue of incriminating documents found and seized during the course of search regarding receipt of cash back from salaries, PF ....
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....tors, staff, PG students to Cosmos Bank which were obtained from the bank. It is also noted that numbers of cheques used for such withdrawal from the account of one doctor were consecutive, which indicated that cheque book was solely used to give back part of the salary in cash. Otherwise there is no reason as to why numbers of such cheques which were used during different months in a year would be consecutive. There is no denial of the fact that Institute may be disbursing the salary/stipend to the doctors, staff and the PG students. But the evidences collected clearly indicate that part of the salary was taken back by the Institute run by the assessee trust every month and actual salary paid to them was less than the amount which was entered in the books of accounts kept by the Institute. This clearly establishes that the funds of the Institute were misappropriated by the trustee Shri Mehul B. Patel and other trustees for their personal purposes. 6.2 Receipt of Capitation fee from students The other issue is related to the fact that the assessee trust is taking capitation fee from students in lieu of granting admission, which is in violation of various laws. Var....
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.... dated 27/08/2022, he accepted that Shri Pandurang Kallepalli & Shri Umakant Dhage used to hand over the cash to him. He collected cash in the range of Rs. 20,00,000/- to Rs. 50,00,000/- on regular basis on instructions of Shri Mehul B. Patel, trustee of the assessee trust & Mr. Dhaval Patel and then he handed over the same cash to Shri Mehul B. Patel or Shri Dhaval Patel. He also accepted that the cash was generated from capitation fee received from students of the Institute run by the assessee trust against Quota Seats. He also confirmed that cash amounting to Rs. 2,86,00,000/- as reflected in the excel sheet was received by him. In the light of the above facts, it is evident that the assessee trust had received capitation fee from students. 7. The assessee trust has made its submissions in response to the show cause notices as discussed above. After perusal of the submissions of the assessee trust, it is observed that the assessee trust has raised the following contentions: a) Challenge the jurisdiction of the Pr. CIT(C) to deal with the issue of cancellation of registration u/s 12AB(4). b) Retraction of statements of the trust authority and d....
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.... dated the 22nd October, 2014 are Principal Commissioners of Income-tax Nagpur- 1, Nagpur-2, Nagpur- 3, Pune-1, Pune-2, Pune-3, Pune-4, Pune-5, Pune-6. Hence the jurisdiction of Commissioner of Income-tax (Exemption), Pune is limited to the cases of persons in the state of Maharashtra excluding Mumbai & Navi Mumbai claiming exemption under section 10, 11, 12 13A & 13B of the Act and which are assessed or assessable by an Income-tax authority at serial numbers 225 to 227 and 236 to 241 as mentioned above. 7.1.5 The Notification No. 70/2014 dated 13.11.2014 provides for the jurisdiction of Principal Commissioner of Income-tax (Central), Pune. As per clause (b) of the notification, the Principal Commissioners/ Commissioners of Income-tax (Central) or Joint Commissioners of Income-tax subordinate to them, shall exercise powers and perform the functions as stipulated in the Income-tax Act, 1961 in respect of such cases or classes of cases or such persons or classes of persons, assigned to Assessing Officers subordinate to them, under section 127 of the said Act, from the date of publication of the notification. Explanation to section 127 of the Act reads as under: "In ....
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....urisdiction to assess the income of an assessee by virtue of the directions issued by the Board under sub-section (1) or sub-section (2) of section 120 of the Act. The direction u/s 120(1) is given by the Board, for the exercise of the powers and performance of the functions by all or any of the Income-tax Authorities, as specified u/s. 116 of the Act. As per sub-section (2) of section 120 of the Act, the Board may delegate its powers to Income-tax authorities as specified in section 116, for issuing the orders in writing, for the exercise of the powers and performance of the functions by all or any of the other Income-tax Authorities who are subordinate to it. 7.1.7 Thus, it can be said that once an order u/s 127 of the Act is passed transferring the jurisdiction of the person, the transferee Income-tax Authorities as mentioned in section 116 of the Act shall exercise all the powers and perform the functions as stipulated in the Act in respect of all the proceedings which may be commenced after the date of such order in respect of any year and such power includes passing the order registering a trust and also cancelling the registration. 7.1.8 Further, the CBDT v....
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....o PG students and salaries paid to the doctors and staff. He also accepted that the capitation fee in cash was taken from the students over and above their regular fees. Further, the above modus operandi also gets strengthened from the excel sheet found & seized from premise of Shri Balaji Pandurang Alli, Chief Accountant of the assessee trust. Shri Balaji Pandurang Alli, in his statement recorded u/s 132(4) also explained the data found in the excel sheet and also confirmed the above modus operandi of the assessee trust. Shri Rajanbhai Chimanbhai Patel whose name was frequently appearing in the excel sheet prepared by Shri Balaji Pandurang Alli, has also accepted the same modus operandi and has stated that Shri Pandurang kallepalli & Shri Umakant Dhange used to hand over the cash to him which was finally handed over to Shri Mehul B Patel or Shri Dhaval Patel (trustee of the assessee trust). The above facts are supported by the material evidences in the form of bank account statements and copies of bearer cheques issued by doctors, staff, PG students to Cosmos Bank which were obtained from the bank. It is also noted that numbers of cheques used for such withdrawal from the account ....
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....ge, Accounts Officer of the assessee trust. He also accepted that the Institute/ management run by the assessee trust was taking cash back from the salary paid to doctors. ii) The statement of Shri Pandurang Kallepalli was confronted to Shri Vilas Jadhav (office boy at Mehul construction Company) and Shri Rajanbhai Patel (employee of Mehul Construction company) who also accepted that the Institute/ management run by the assessee trust was taking cash back from the salary paid to doctors. Further, in the statement recorded on oath, Shri Rajanbhai Chimanbhai Patel admitted that Shri Pandurang Kallepalli & Shri Umakant Dhage used to hand over the cash to him on regular basis, which was collected by way of the above modus. (iii) During search u/s 132, the statements of four doctors, one staff and four PG students were recorded in which they accepted that they parted with a portion of their salary every month in favour of the management through bearer cheques. They have admitted giving cash back from salary/stipend during the search action u/s 132 of the I.T. Act, 1961 dated 25.08.2022. iv) The denial by other doctors, staff and students that they gave back th....
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....ned manner under the guidance, control and influence of their employer which is the assessee trust in order to generate evidence in favour of the assessee trust. In view of this, there is no reason to give any credence to these retraction affidavits. vii) As already discussed, the seized documents and bank statements corroborate the fact that cash was being taken back from the various employees after disbursal of salaries/stipend. It clearly establishes that the income of the assessee trust was not wholly applied towards its objectives and was in fact being diverted for the benefit of individuals associated with it and thus, it can be concluded that the assessee trust was indulging in specific violation as defined in Explanation to section 12AB(4) of the Act. Moreover, since the application of income earned as discussed above by the trust or institution has been found to be fraudulent, therefore, its activities cannot be considered to be carried out as per the objects of the trust. Accordingly, the trust is liable for cancellation u/s 12AA of the Act also for the registration granted u/s 12A. 7.3 Seized material and its evidentiary value cannot be conclusive proof....
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....and his family members/trustee. The books of account of the society were manipulated and window dressed to hoodwink the department. These funds could have been used for educational and health service purposes, to improve the quality of education and health and for reducing the education and health service cost for the weaker sections of the society. However, the members of the society have used it as a tool to earn profits for their personal benefit. The institute has not applied its income wholly and exclusively to the aims and objects for which it is established. (v) During post search investigation, the DDIT(Inv.) Unit-III(4), Solapur requisitioned various bank account statements. Further, copies of bearer cheques which were used to withdraw cash from accounts of salaried doctors, salaried staff and PG students were obtained from respective Banks. Following facts were found from these bank statements and copies of bearer cheques: (a) There were regular cash withdrawals in the pattern of Rs. 68,800/- and Rs. 34,400/- in case of salaried doctors of the Institute run by the assessee trust. Also, regular cash withdrawals of Rs. 27,500/- were found in cases of salar....
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....allepalli, cashier of the assessee trust in his statement accepted that the Institute received capitation fee in cash from students. He also accepted that he collected cash and handed over the same to Shri Rajanbhai Patel (employee of Mehul Construction Company Private Ltd) and Shri Vilas Jadhav (office boy at Mehul Construction Company Pvt. Ltd.) on the instructions of Shri Balaji Pandurang Alli, Chief Accountant and Shri Umakant Ramchandra Dhage, Accounts Officer of the assessee trust. These facts were confronted to Shri Vilas Shankar Jadhav, office boy at Mehul Construction Company Pvt Ltd & Shri Rajanbhai Chimanbhai Patel and they accepted the same. (iii) In his statement, Shri Rajanbhai Chimanbhai Patel has accepted that he collected cash in the range of Rs. 20,00,000/- to Rs. 50,00,000/- on regular basis on instructions of Shri Mehul B. Patel, trustee of the assessee trust & Mr. Dhaval Patel and then he handed over the same cash to Shri Mehul B. Patel or Shri Dhaval Patel. He also accepted that the cash was generated from capitation fee received from students of the Institute run by the assessee trust against Quota Seats. He also confirmed that cash amounting to Rs. ....
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....e withdrawal of registration was to be done only prospectively from the date of detection of violation then the exemption already availed for the period when there was violation which was detected subsequently would get allowed by default. It will prompt the unscrupulous trusts to violate the conditions of registration u/s 12AA with impunity till it is detected and withdrawn from a prospective date. This is neither the intention of the Act nor such interpretation is permissible, which allows the mischief to succeed even for the period for which the conditions are not found to be fulfilled on ground that the registration can be cancelled only prospectively w.e.f. the date of detection of violation. (iii) Hon'ble Karnataka High Court in a Writ Petition No. 3468- 3472/2018 in the case of Navodaya Education Trust v. UOI has observed as under: "As far as the withdrawal of the approval with effect from 01/04/2009 is concerned, even that cannot be assailed, because the evidence and material discussed in detail in the impugned order reflect such entries in the Books of Accounts which reflect illegality having existing on record right from the Financial Year 2010-11 on....
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....ee has also submitted that in case of 08 doctors and employees working with the assessee trust, assessments have been completed by accepting returned income and no evidence of cash received back from the salary paid to doctors/stall has been found while passing the assessment orders. The submission of the assessee trust has been considered. On perusal of the assessment orders of few doctors and employees submitted by the assessee, it is seen that the AO has held that in the returns of income, these doctors/employees had shown entire salary received from employer i.e. the assessee trust and no evidence of cash received by them from the assessee trust has been found. Out of these 08 doctors/employees referred by the assessee, statements of Dr. Chandrakant Sahebrao Waghmare and Dr. Ashok Kumar Rajput were recorded during the search proceedings and they had accepted that they had returned part of salary in cash to the Institute /management. It was also confirmed that they had handed over the blank bearer cheques with their signatures to Shri Balaji Pandurang Alli. It is pertinent to mention here that same modus operandi was confirmed by Dr. Nilesh Madhav Bhosale & Dr. Abdul Ka....
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....on granted u/s 12AB is liable to be cancelled u/s 12AB(4) of the Act. 6. Finally, ld.PCIT (Central) cancelled the registration u/s. 12A/12AA for F.Y. 2019-20 to F.Y. 2020-21 and also the one granted u/s. 12AB from F.Y. 2021-22 onwards and the final conclusion drawn by the ld. PCIT (Central) is reproduced below : "In view of the above stated facts, it is clear that there is occurrence of specified violation as defined in clause (e) & (f) of Explanation below section 12 AB(4) of the Act since the assessee trust has not complied with the conditions mentioned at clauses m and p of Column 10 of Form 10AC vide which it was granted registration u/s 12A(1)(i)(ac) of the Act. Moreover, it is also established as discussed above in detail that the assessee has not carried out its activities for the objects for which it was constituted as it has not utilized its funds for its objects but for the personal benefit of its members. Therefore, its activities cannot be said to be genuine and it cannot be said that the assessee has carried out its activities in accordance with its objects. This fact makes the assessee trust liable for cancellation of registration as per the provisions of ....
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.... hard copy form/soft copy form (Diary page / Pen Drive, etc.) were seized by the I-T authorities. 1.12. Statements recording During the course of search, statements of various persons were recorded. These person in their statement, admitted that, practice of handing over part of salary / stipend to the "a" trust officials, through bearer cheques, exists. One of the persons interrogated during search proceedings admitted payment of higher fees (i.e. four times of regular fees). For institutional quota, charging of higher fees is permissible. However, majority of the statements were retracted thereafter through sworn affidavits, by giving detailed reasons. Retraction affidavits were made two months time from the date of search. Copies of search statements and retraction affidavits are filed in Paper-Book-II. 1.13. Cancellation of registration Based on the seized documents (soft form and Diary page), and based on various statements recorded u/s 132(4), assessment proceedings were initiated. During the course of assessment proceedings, learned PCIT-CC initiated proceedings for cancellation of registration granted u/s 12A and 12AB. Replies of "a" were sought for. Appel....
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....nt case, alleged irregularity relates to AY 2020-21 onwards. Now, "Specified violation" are applicable from AY 2022-23 (and not for earlier years). For earlier years, criteria of "Specified Violations" can't be applied. This issue remained to be considered by learned PCIT. 2.4 Registration cancellation for "specified violations' is plausible only when, the PCIT is satisfied about the same. Point of PCIT, reaching a "satisfaction" stands at al higher pedestal, compared to earlier pedestal (say) ..AO has reason to suspect.... .. AO has reasons suggesting escapement... ..AO is of the opinion.. .. AO has reason to believe, etc. In present case, point of "satisfaction" is not reached. Statements recorded during the course of search have been retracted within two months time after search. Copies of all retraction Affidavits were filed on record. Same have been summarily brushed asides. Conclusions have been reached on mere suspicion of alleged irregularities. 2.5 Issue of cancellation of registration u/s 12AB ought to be tested at the end of Assessment proceedings (especially when, the Assessment proceedings are ongoi....
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.... "denial" of Mr. Mehul Patel, Managing Trustee of the Appellant, as regards involvement of the Appellant / and any Trustee, in the alleged irregularities stated by the I-T authorities at the time of search itself b. "retractions" of the employees of the Appellant within two months from search date (whose statements were recorded and relied heavily by the learned PCIT (Central)] c. "retractions" made by various doctors and students of the Appellant within two months from search date [whose statements were heavily relied upon by the learned PCIT(Central)] d. Explanation / submissions made by Appellant that, no any unaccounted asset/property/cash, etc. was found in residential premises of "trustees" Hence, the decisions based on the 1st notice dated 21/7/2023 are mere suspicions/assumptions/presumptions and hence, not as per law. B. 2nd notice issued u/s 12AA(3) and u/s 12AA(4) dated 20/3/2024 Copy of the said notice is given at Page 25 of the Paper-Book. Perusal of the said notice reveals that, learned PCIT(Central) has used powers u/s 12AA on 20/4/2024. It will be relevant to note wording of section 12AA(5) in this regard. The sa....
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....ejudice to main challenges) From a collective perusal of sections 12AA/12AB, etc. it reveals that, power to cancel "registration" u/s 12A/12AA/12AB exists with the same authority which grants the same. A similar view emerges from the combined reading of CBDT notification dated 1/4/2021 and 9/5/2022. Copies of the said notifications are enclosed in the Paper- Book. As such, exemption granted by regular CIT/CIT(E) / CIT (CPC) cannot be cancelled by PCIT(Central) in any case 3. Merits of the case 3.1. Statements recording and their subsequent retraction Copies of statement u/s 132 of the ITA, 1961 of employees, doctors, students are given at page 122 to 281 of Paper-Book-II. It is submitted that, statements were recorded under extreme pressure situation. Statements were misunderstood / misconstrued while passing the order dated 27/3/2024. It is submitted that the statements are retracted by majority of the persons. Copies of retraction of statements u/s 132 of the ITA, 1961 is given at Page 282 to 354 of the ITA, 1961. All retraction affidavits are brushed aside and not considered in their proper perspective. 3.2. Premature act to cancel 12....
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....ed during the course of hearing. 3.3. Emerging trend of denial of exemption only to the extent of violations Appellant relies upon decisions of jurisdictional High Court in following cases - -Audyogik Shikshan Mandal [2019] 101 taxmann.com 247 (Bombay) -Maharashtra Academy of Engineering and Educational Research taxmann.com 290 (Bombay) 161 (Appellant has submitted copies of the above decisions during the course of hearing). In these cases, Hon'ble Bombay High Court, after considering views of various other High Courts, has laid down that, exemption u/s 11 ought to be denied only to the extent of violative portion. Similarly, Appellant has referred to section 13(1) and 115BBI, wherein, withdrawal of exemption only for violative part is provided for. This changing principle of the I-T law has been glossed over by learned PCIT-CC." 9. Further, ld. Counsel for the assessee referred to legal compilation of case laws running into 206 pages and also relied on the following decisions : 1. Shri Jairam Education Society Vs. PCIT - ITA Nos.90 & 548/Ind/2019, dated 13.10.2021 2. CIT (Central) Vs. Shikshan Prasarak JMandali ....
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....n nature were found and seized. Assessee trust enjoys registration u/s. 12A of the Act granted on 16.02.2001 which was subsequently renewed u/s. 12AB(1) of the Act w.e.f 01.04.2021. During the pendency of the assessment proceedings subsequent to carrying out of the search, ld. PCIT on the basis of a reference received from ld. AO under second proviso to section 143(3) of the Act carried out the proceedings so as to examine whether the assessee has made any 'specified violation' as defined in clause (f) of Explanation to section 12AB(4) of the Act and also issued show cause notice in this regard to the assessee as to why registration u/s. 12A/12AA be not cancelled. In reply, the assessee made multifold contentions challenging the jurisdiction of the ld. PCIT of passing the order of cancellation u/s. 12A, 12AA and 12AB(4) of the Act, the powers of the authority u/s. 12AB(4) of the Act to cancel the registration granted u/s. 12A of the Act, merits of the case contending that the allegations made against the assessee trust of receiving refund of cash in lieu of expenses incurred towards staff salary, doctors salary, PG stipend as well as receiving capitation fees are merely based on th....
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....rom pages 8 to 24 of the paper book show-causing the assessee as to why the registration u/s. 12A of the Act granted on 16.02.2001 should not be cancelled. For examining this aspect, we first need to go through section 12AB of the Act. Section 12AB of the Act provides for the procedure for fresh registration and the same has been brought into Statute by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions Act) (TOLA) 2021 w.f. 01.04.2021. Earlier section 12 was inserted by the Finance Act, 2020 w.e.f. 01.06.2020 but omitted by TOLA with retrospective effect from 01.06.2020. Section 12AB of the Act which is inserted w.e.f. 01.04.2021, the powers of cancelling the registration of the trust are provided u/s. 12AB(4) of the Act which reads as under : "[(4) Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,- (a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or (b) th....
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....) is not being carried out in accordance with all or any of the conditions subject to which it was registered; or (f) the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of subsection (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality 7[; or] (g) the application referred to in clause (ac) of sub-section (1) of section 12A is not complete or it contains false or incorrect information.]" 15. Now going through section 12AB(4) of the Act, we observe that section 12AB(4) only refers to the registration or provisional registration granted u/s. 12AB(1)(a)(b)(b) and 12AA(1)(b) of the Act but there is no mention of section 12A of the Act. Now in absence of any express powers whether the ld.PCIT was justified to issue show cause notice u/s. 12AB(4) of the Act for cancelling the registration u/s. 12A of the Act. To adjudicate this issue, we would first like to refer the judgment of Hon'ble Supreme Court of India in the case of Industrial Infrastructure Development Corpora....
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....pression "order" employed in Section 21 would show that such "order" must be in the nature of a "notification", "rules" and "bye laws" etc. (see Indian National Congress(1) v. Institute of Social Welfare [2002] 5 SCC 685. 24. In other words, the order, which can be modified or rescinded by applying Section 21, has to be either executive or legislative in nature whereas the order, which the CIT is required to pass under Section 12A of the Act, is neither legislative nor an executive order but it is a "quasi judicial order". It is for this reason, Section 21 has no application in this case. 25. The general power, under Section 21 of the General Clauses Act, to rescind a notification or order has to be understood in the light of the subject matter, context and the effect of the relevant provisions of the statute under which the notification or order is issued and the power is not available after an enforceable right has accrued under the notification or order. Moreover, Section 21 has no application to vary or amend or review a quasi judicial order. A quasi judicial order can be generally varied or reviewed when obtained by fraud or when such power is conferred by th....
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....gh Court in the case of Welhom Boys' School Society v. CBDT [2006] 285 ITR 74//2007) 158 Taxman 199 and Allahabad High Court in the case of Oxford Academy for Career Development v. Chief CIT [20091.315 ITR 382 29. All the three High Courts after examining the issue, in the light of the object of Section 12A of the Act and Section 21 of the General Clauses Act held that the order of the CIT passed under Section 12A is quasi judicial in nature. Second, there was no express provision in the Act vesting the CIT with power of cancellation of registration till 01.10.2004; and lastly, Section 21 of the General Clauses Act has no application to the order passed by the CIT under Section 12A because the order is quasi judicial in nature and it is for all these reasons the CIT had no jurisdiction to cancel the registration certificate once granted by him under Section 12A till the power was expressly conferred on the CIT by Section 12AA(3) of the Act w.e.f. 01.10.2004. 30. We are of the considered view that the view taken by the abovementioned three High Courts in the respective cases is in conformity with law and we accordingly approve the said view taken by these High ....
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....ow cause notice. In any case, the show cause notice for cancellation of registration having been issued on 6.10.2022, ld CIT (E) could not have cancelled registration retrospectively w.e.f 1.4.2014 insofar as the provisions of section 12AA/12AB does not provide for the cancellation of registration with retrospective effect. This view of our finds supports from the decision of ITAT Bangalore Bench in the case of Amala Jyothi Vidya Kendra Trust (supra), wherein, from paras 6 to 6.10, the Co-ordinate Bench has held as follows: "6. We have heard the rival submissions and perused the materials available on record. The main contention of the ld. A.R. is that the ld. PCIT cancelled the registration granted to the assessee w.e.f. the previous year i.e. 2017-18 relevant to assessment year 2018-19 by applying the provisions as stood on 29.12.2023, which cannot be applied for the violations of the provisions of section 12AA or 12AB of the Act. According to the ld. A.R., the ld. PCIT has cancelled the registration granted to the assessee since the ld. PCIT was satisfied that one or more specified violations have taken place. The specified violations are mentioned in explanation to sec....
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....noticed that, the activities of the trust or the institution are being carried out in a manner that the provisions of section 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then the Pr. Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institutions. Provided, that the registration shall not be cancelled under this subsection if the trust or institution proves that, there was reasonable cause for the activity to be carried out in the said manner." 6.2 This section has been amended by Finance Act, 2022 w.e.f. 1.4.2022 as follows: 12AB(4): Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of subsection (1) or clause (b) of subsection (1) of section 12AA, as the case may be, and subsequently,-- a) The Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; b) The Principal Commissioner or Commissioner has received a reference from the....
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....subject to which it was registered; or f) The trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality. 6.3 As per section 12AB(4) of the Act as applicable to assessment year 2017-18, the ld. PCIT if he is satisfied that activities of the Trust or institution are not genuine or not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution after affording reasonable opportunity of being heard. As per section 12AB(5) of the Act, when trust or institution complied wholly or in part of the income of such trust or institution in violation of section 13(1) of the Act or if they complied with any other law, for the time being in force by the trust or institution as are material for the purpose of achieving its objectives as mentioned in section 12AB(1)(b)(ii)(B) of the Act. However, in ....
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.... well-settled that the Income-tax, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force...... The High Court has, however, relied upon a decision of this court in CIT v. Isthmian Steamship Lines, where it was held as follows: 'It will be observed that we are here concerned with two datum lines: (1) the 1st of April, 1940, when the Act came into force, and (2) the 1st of April, 1939, which is the date mentioned in the amended proviso. The first question to be answered is whether these dates are to apply to the accounting year or the year of assessment. They must be held to apply to the assessment year, because in income-tax matters the law to be applied is the law in force in the assessment year unless otherwise stated or implied. The first datum line therefore, affected only the assessment year of 1940-41, because the amendment did not come into force till the 1st of April, 1940. That ....
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....er : 20. On the second question as to whether the cancellation will operate from a retrospective date, it was held that the amendment to section 12AA(3) is prospective and not retrospective in character. The courts reasoned that even when Parliament had plenary powers to enact retrospective legislation in matters of taxation, the amended section is not seen to have explicitly provided to have a retrospective character or intend. Therefore, without a specific mention of the amended provisions to operate retrospectively, the cancellation cannot operate from a past date. 21 On the third question of the effective date of operation of the cancellation order, it was held that the cancellation will take effect only from the date of the order/notice of cancellation of registration. Since the act of cancellation of registration has serious civil consequences and the amended provision is held to have only a prospective effect the effect of cancellation, in' the event the pending tax appeal is decided in favour of the Revenue, will operate only from the date of the cancellation order, that is December 30, 2010. In other words, the exemption cannot be denied to the petiti....
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....cellation the registration was granted. However, the power to cancel the registration with retrospective effect is not provided in the Statute. This being so, as the registration in the present case, has been cancelled retrospectively, same is not permissible as the same is not provided in the Statute, the order passed by ld CIT(E) cancelling the registration retrospectively stands cancelled." 17. Now from going through the above decisions of Coordinate Bench in the case of Maa Jagat Janani Seva Trust (supra) wherein catena of judgments have been referred and also the ratio laid down by the Hon'ble Apex Court in the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. (supra) has been followed, we find that the same is squarely applicable on the facts of the instant case and therefore we are inclined to hold that since there is no express power provided u/s. 12AB(4) of the Act for cancelling the registration granted u/s. 12A of the Act, ld. PCIT (Central) grossly erred in issuing show cause notice u/s. 12AB(1) of the Act on 21.07.2023. The said show cause notice is held to be invalid and void ab-initio and therefore finding of ld. PCIT (Central) is rever....
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....e word 'specified violation' was not appearing in the original section 12AB(4) w.e.f. 01.04.2021 but there was an amendment brought into by the Finance Act, 2022 w.e.f. 01.04.2022 inserting the word 'specified violation' and its definition. Now prior to 01.04.2022, there is no mention of the word 'specified violation' with regard to cancellation of registration granted u/s. 12A, 12AA and 12AB of the Act. In the instant case, the allegation made by the Revenue authorities is with regard to cash received against staff salary, doctors salary, PG stipend through bearer cheque and also receiving capitation fee in cash during the period F.Yrs. 2019-20 to F.Y. 2021-22. The 'specified violation' as referred by ld. PCIT in the impugned order relates to three financial years. However, as observed above, the word 'specified violation' has been brought into Statute from 01.04.2022. Therefore, the same could not have been applied in the case of assessee as there is no 'specified violation' word in section 12AB(4) of the Act prior to 01.04.2022. 20. Now even though section 12AB(4) applies to the registration granted u/s. 12AA of the Act as provided in section 12AB(4) but then we will have to ....
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..... PCIT has only referred to some 'specified violations during F.Yrs. 2019-20 to 2021-22 which was going on under scrutiny by AO. There were only few statements which were recorded during the course of search which are the basis of the alleged allegation and that too have been retracted and apart from that no other evidence and no accounted assets, unaccounted income were found during search at assessee's premises and therefore they are merely allegations and there is no concrete finding disproving the genuineness of activities of trust. Therefore, even sub-section (3) and sub-section (4) of section 12AA could not have been invoked in absence of any specified violation for the years under consideration. 22. To conclude we allow the legal ground raised by the assessee in Ground Nos. 2 and 3 and hold that since the show cause notices issued to the assessee on 21.07.2023 and 20.03.2024 are invalid and void ab-initio for want of express powers for cancellation of registration u/s. 12A of the Act and also proceedings wrongly started u/s. 12AA of the Act in view of the amendment brought in from 01.04.2021 and lastly the 'specified violation word being inserted from 01.04.2022 cannot be....
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....tracted and Mr. Mehul B. Patel who is the main trustee of the assessee trust has also denied to have entered into any such transaction. Following submissions filed by the assessee to this effect before us as well as before the lower authorities : "3. Statement of Shri Mehul Patel recorded during the course of search: Your Honour will appreciate that the statement of Mehul B Patel was recorded during the course of search. Copy of the said statement is enclosed herewith as Annexure 2. In the said statement, Mr. Mehul Patel was asked on the various issue raised by Your Honour in the Notice. While replying on the issue, Mr. Mehul Patel has categorically denied his as well as Assessee Trust involvement in the matter. Under the circumstances, any decision on the basis of statement of various staff members, which are also, retracted explaining the circumstances in which the statements have been given, without properly appreciating the denial in the statement of Mehul Patel will be unjustified. Your Honour will appreciate that the denial statement of Shri Mehul Patel has not been proved wrong by the search party in the search proceedings or post search investigation. Thus....
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....T Delhi holding that statement of college authorities is not sufficient to make addition in the hands of person giving capitation fee. The relevant observations of the ITAT are reproduced below in case law of Krishna D. Pawar v. ITO (Mum.)(Trib.) (ITA No. 151/Mum/2022 dt. 25-4-2023 (AY. 2014-15).: Here, the managing trustees of the concerned college had given details of capitation fees paid by students to the 1-T department's investigation wing. In this case, the /TAT held: "Only on the basis of the scribbled note without any other oral! documentary evidence to support the allegation of capitation fees it is quite unsafe to fasten addition." It quashed the addition of Rs 95 lakh. Copy of the decision is enclosed herewith as Annexure 5. From the above an analogy can be drawn that the Trust cannot be held responsible for the statement made by its employees which are recorded under a peculiar circumstance and more so when the Trustee has refused the charges/allegations made by the employees, which is uncontroverted." 26. Now on going through the above statement of the assessee and also with the conjoint reading of the ld.PCIT in the impugned order, we....
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....n or any discrepancy in the activity of the assessee trust, then to the extent of such discrepancy or violation assessee trust could be subjected to addition but it cannot lead to cancellation of registration u/s. 12A, 12AA and 12AB of the Act (as the case may be) unless and until the activities of the assessee trust are not found to be genuine. 28. Even though the quantum of addition based on the Excel sheet found in the Pendrive at the residential premises of Chief Accountant coupled with the statements of staff, doctors would be dealt with by the AO in the course of regular assessment, but we observe that ld.PCIT has only referred to these details but has not given any specified finding. It has been argued before the ld. PCIT that Pendrive was not found at the premises of the assessee trust. Details mentioned in such Pendrive has been stated to be made towards some memorandum of hypothetical entries by Mr. Balaji Pandurang Alli given in his retraction statement. The doctors, students and employees of the trust have also retracted the statements and have denied that they have refunded the money to the assessee trust. So the total gambit of the allegation of the assessee trust ....
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....ents 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." 30. Now going through the above decision of Hon'ble Karnataka High Court, we find that the facts of the instant case are verbatim similar because in the instant case also no doubt has been raised about carrying out of the activities of the assessee trust as per the objects for which it has been registered and....
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....d Medal 2019 9 Alfiya Perampalli MUHS-Nashik First in F.M.T.-"Dr. Sudhakar Sane Gold Medal" 2021 1.5 Award of certificates to undergraduate medical students on Successful completion of Research projects are as under: Sr. No. Name of the Student Name of the Funding Agency Guide Name Department of Principal Investigator Year of Award 1 Komal Gangar ICMR-STS Dr Sachin Mumbare PSM 2015 2 Prateek Thanvi ICMR-STS Dr Umbardand OBGY 2015 3 Saumitra Kulkarni ICMR-STS Dr Mangala P. Ghatole Microbiology 2016 4 Parv Modi ICMR-STS Dr Rahul Deshpande Gen. Medicine 2016 5 Onkar Kole ICMR-STS Dr. Prafulla Kamble Physiology 2016 6 Ira Sameer Dhamdhere ICMR-STS Dr Manjunath Patil Ophthalmology 2016 7 Likhita S.H. ICMR-STS Dr Prakash Dudhani PSM 2016 8 Shubhashree Shridhar Page ICMR-STS Dr Reshma Mehta Ophthalmology 2016 9 Sonali Agrawal ICMR-STS Dr. Girish Raparti Pharmacology 2017 10 Tanishka Bakshi ICMR-STS Dr. Suman Sardesai OBGY 2017 11 Leander Gomes ICMR-STS....
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.... 17422 39352 3604 23918 330999 2023 56964 24777 10915 7586 39341 48963 43080 29506 21507 43535 4654 28364 359192 2024 84196 29288 13282 19012 37107 68355 40126 30356 25336 40533 4753 32787 425131 Total 709877 174022 92975 58338 403479 552966 443089 412845 202082 419710 36345 243604 3749332 IPD Patient Statistics Year Gen. Medicine Skin & VD TB & Chest Psy Paediatrics Gen. Surgery Ortho Ophthal ENT OBGY Casualty Total 2012 3548 78 20 20 1398 2935 1308 1229 551 1789 2153 15029 2013 3566 311 238 187 1100 3275 1352 2035 624 1695 2067 16450 2014 3121 271 231 192 1189 3920 1524 2432 1224 2345 2586 19035 2015 4214 251 327 237 1960 4456 2254 1944 1418 2918 2556 22535 2016 5485 356 333 307 2903 5099 2812 1858 1312 3146 2811 26422 2017 5688 452 360 335 3013 5374 3128 1881 1141 3559 3209 ....
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.... 62909 34598 31639 19079 48034 34772 359601 1.7. Further, the assessee trust also carries on IPF Scheme under Bombay Public Charitable Trust Act 1950. As per this act every charitable trust has to reserve 10% of the total beds for Indigent and Weaker Section patient and to provide 100% free treatment to indigent patient and at concessional rate of 50% to weaker section patient. The summery of IPF facility provide from the beginning to till date are as follows, Year No. of Indigent Patients Amt. Spent for Indigent Patients from IPF A/C No. of weaker Section Patients Amt. Spent for weaker Section Patients from IPF A/c Total No. of Indigent & Weaker Patients Total Amt. Spent From IPF A/c 2011-12 2,660 9,756,480 23 20,887 2,683 9,777,367 2012-13 3,978 12,181,510 3,552 11,242,615 7,530 23,424,125 2013-14 3,504 9,149,270 4,508 5,564,997 8,012 14,714,267 2014-15 2,232 7,415,880 4,528 5,529,400 6,760 12,945,280 2015-16 728 6,815,524 1,584 4,318,449 2,312 11,133,973 2016-17 822 3,57,378 219 1,355,362 1,041 4,925,740 ....
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....ege building and other expenses which are appearing in the audited books of account. 33. We find that similar set of facts as well as the issue came up for adjudication before the Coordinate Bench, Indore in the case of Shri Jairam Education Society Vs. PCIT - ITA Nos.90 & 548/Ind/2019, dated 13.10.2021. Relevant finding of the Tribunal is reproduced below : "15. Apropos to Ground no.1, 2 & 6 assessee has challenged the cancellation of registration u/s 12AA of the Act retrospectively w.e.f. 01.04.2008 by invoking provisions of section 12AA(3) & 12AA(4) of the Act. We observe that the assessee society is registered under M.P. Society Registration Act 1973 and enjoying the benefit of section 12AA of the Act vide order u/s 12AA of the Act dated 20th March 2008. The proceedings u/s 12AA(3) & 12AA(4) of the Act were initiated subsequent to search proceeding carried out on Ramani Group on 30th August 2016. Certain loose papers were found having some details of salary payments, calculation of higher salary, cash payment, hand written details of income and expenditure which have been claimed by the assessee to be dumb documents and the detailed discussion with regard to these d....
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....e Co-ordinate Bench of Lucknow in the case of Fateh Chand Charitable Trust v. CIT (Exemptions) v. CIT (Exemptions) [2017] 83 taxmann.com 33 (Lucknow - Trib.) Hon'ble Tribunal while dealing with the issue of Cancellation of registration under Section 12AA (iii) of the I.T Act held that: Para 13. "Having carefully examined the order of the Id. Commissioner of Income Tax (Exemptions) in the light of the rival submissions, we find that on receipt of certain information from the Id. Commissioner of Income Tax (Exemptions), Kolkata; Id. Commissioner of Income Tax (Exemptions) has issued notice under section I2AA(3) of the Act to the assessee on 13.11.2015 for compliance on 24.11.2015. On 24.11.2015 the assessee sought adjournment and hearing was adjourned to 27.11.2015. On 27.11.2015 the assessee has filed a detailed reply to the charges leveled against it in show cause notice. The assessee emphatically denied the allegations leveled against the assessee that it has received a donation of Rs. 1 crore through cheque after making payment of the same in cash to M/s Herbicure Health Care Bio Herbal Research Foundation. The reply filed by the assessee is available at pages 19 to 25 o....
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....ssioner is that the violation carried out by the assessee would lead to denial of exemption u/s. 11 & 13 of the Act and, therefore, the pre-requisite of section 12AA(3) of the Act is satisfied. In para 9 of the impugned order, the Commissioner records that the violation of section 11 & 13 of the Act would result in forfeiture of exemption not only for the year in which such transactions occur but also for the years when such arrangement continues to be in force. In our considered opinion, such an approach of the Commissioner is quiet misdirected and is inconsistent with the legal position on the subject contemplated u/s. 12AA(3) of the Act so as to cancel registration already granted. We may add here that we are not shutting out the case of the Revenue to examine whether or not there has been a violation of section 13 of the Act, but we are only trying to say that the same is not relevant for the purpose of cancellation of registration u/s. 12AA(3) of the Act. Of course, such matters can be dealt with in the course of assessment proceedings and, in our view, the same ought to be dealt with, if the situation so warrants. Presently, we are confining ourselves with examining the effic....
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....ating 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. (iv) The Hon'ble Allahabad High Court in the case of Red Rose School reported in (2007) 163 Taxman 19 (All.), wherein it is observed that:- "CIT is entitled to see only the genuineness of objects and activities : It has been held that while refusing application under section 12A the Commissioner has to examine only two aspects, i.e., genuineness of the activities of the trust /institution and object of the trust / institution. Once there is no dispute about the genuineness of the activities; the Commissioner cannot take shelter of any other outer source for refusing registration under section 12A. The issue of registration under section 12A and the scope of enquiry at the stage of section 12AA was discussed, it was categorically held in the said decision that section 12....
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....motive from the definition of charitable purpose applies only to the category of trusts which has as its object, the object of "advancement of any other object of general public utility". It does not apply to the other categories of charitable purpose viz., "relief to poor, education and medical relief". As rightly pointed out by the learned counsel for the assessee, eleemosynary element is not essential element of charity. It is also not a necessary element in a charitable purpose that it should provide something for nothing or for less than it costs or for less than the ordinary price. The surplus generated, if it is held for charitable purpose and applied for charitable purpose of the assessee, and then the Assessee has to be considered as existing for a charitable purpose. There are enough safeguards provided in Sec.12 and 13 of the Act to ensure that personal benefits of the persons in control of the trusts are not treated as having applied for charitable purpose and for being brought to tax like provisions of Sec.13(1) (c) of the Act which restricts unreasonable and excessive payments to certain category of persons connected with a trust or other institution. In such circumst....
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....tive and therefore, the impugned order of the CIT passed u/s 12AA(3) is nothing but a review of its earlier order which is impermissible in law. (vii) The decision of Rajasthan Vikas Sansthan Vs. CIT reported in 78 DTR 411 (Raj), wherein it is held as under :- 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. Thus 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....
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.... imparting education. Once an institution came profit" no other condition like application of income was required to be complied with. The mere existence of profit/surplus did not disqualify the institution. Breach of the conditions of the trust deed would not disentitle the institution from getting the benefit which the institution had been granted earlier being a charitable trust. Nowhere in her order, the CIT has taken any objection to the charitable and educational nature of the institution. In fact, the objects of the institution as declared in the trust deed do reflect that all are philanthropic or benevolent in nature, precisely, for the purpose of imparting education. Strange enough, there is no finding recorded by the CIT contrary to this fact. Rather, this is also not the case of the CIT that the institution is doing some other activity of earning profit other than the activity of running educational institutions. The established factual position is that the institution is not doing any other activity except running educational institutions. In such circumstances, the action of cancellation of registration cannot be upheld. As far as the object of the assessee is concerne....
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.... notice dated 6.12.2018 issued by Ld. PCIT are not relevant for cancellation of registration u/s 12AA(3) of the Act. Such types of issues can be examined by the Assessing Officer during the course of regular assessment proceedings wherein on the basis of his examination/ investigation necessary view as permissible in law can be taken if violation of Section 11 and Section 13 of the Act by the assessee are observed. Ld. PCIT can only cancel the registration u/s 12AA(3) of the Act if it is found that the activities of the society/trust are either not genuine or are not being carried out in accordance with its object provided in bye laws. (v) We also find that nothing on record has been brought before us by way of an independent enquiry by Ld. PCIT thereby collecting necessary evidence which can show that the activities of the assessee society are either not genuine or are not being carried out as per the objects of the society which were filed before the registering authority at the time of granting registration u/s 12AA of the Act. It is therefore established that the activities carried out by the appellant assessee society by way of running hospitals and medical colleges f....
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....rising out of the loose papers is concerned in this case alleging that the fund of the assessee society have been misappropriated by the members of the society or there is any ambiguity in the claim of expenses, it can well be taken care of at the time of assessing the income and if needed the additions can be made to the income of the assessee and the same should be restricted only to the issue involved. However in no case the remaining income of the trust/society should be affected by way of denying the benefit of exemption u/s 11 & 12 of the Act. We accordingly allow ground no.1 2 & 6 of the assessee's appeal." 34. Now going through the above finding of the Coordinate Bench, the crux of the issue is that if it is established that the assessee trust/societies is carrying out genuine activities as per the objects for which they have been established, then the issue arising out of any loose paper/documents/ incriminating material alleging that the funds of the society have been misappropriated or there is ambiguity in the claim of expenses, the same can be taken care of at the time of assessing the income and the additions involving such issues can be made but for the remaining ....