AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1162
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....ding furniture and necessary medical equipment and medicines required for efficient running of hospital and treatment of patients. Another object of the Trust was opening and/ or helping educational institutions. The Trust established a hospital named 'Ram Saran Dass Kishori Lal Charitable Trust Hospital' ("Kakar Hospital") on 13.12.1971 for achieving its objectives. Government of Punjab recognized the Hospital as being of State Importance vide letter dated 23.07.1980. The said Hospital was sold during FY 2015-16 as disclosed in audited financial statement. 3. The Appellant was initially registered under section 12A of the Income-tax Act, 1961 on 08.10.1975 and as per new regime a fresh registration under section 12A(I)(ac)(i) was granted on 29.03.2022 for AYs 2022-23 to 2026-27. 4. Earlier, registration of the Appellant Trust under section 12A was cancelled by the Commissioner of Income-tax, Amritsar ("CIT, Amritsar') by an order dated 31.12.2008 passed under section I2AA(3) of the Act, wherein it was held that the Appellant was involved in illegal kidney transplant and thus, the activities carried out by the Appellant ceased to be for charitable purposes and wer....
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....t vide letter dated 24.08.2024. The copy of same is at PB Pg. 577-590. The aforesaid proceedings culminated in impugned order dated 26.09.2024 passed by CIT(E), New Delhi, wherein exercising powers under section 12AA(3)/ 12AB(4) of the Act, the CIT(E) cancelled the registration granted to the Appellant with retrospective effect from 01.04.2002. 7. The findings of the CIT(E) in the impugned order are that appellant is engaged in business activity for the purpose of Explanation (a) (b) to section 12AB(4) of the Act, by letting out hospital premises. It is alleged that the leasing out of premises by the Appellant to the doctors at Rs. 3 lakhs per month shows that the Trust is running solely for profit and not for achieving the objects of the Trust and the Appellant has not used the lease rental for running/ operating hospitals and that the Appellant has made earning rental income its primary objective. Reference was made to Board Resolution dated 04.09.2004, wherein the Board of Trustees resolved that due to loss in running of the hospital for last one year or more, it is unanimously decided that the hospital may either be closed or sold on outright basis or leased out to anyone wh....
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....med exemption under section 11 of the Act in the ITR-7 filed for the said period. 7.3 Thus the CIT(E), New Delhi held that the Appellant has made 'Specified Violations' in terms of section 12AB(4). The CIT(E), New Delhi, accordingly, cancelled the registration granted to the Appellant with retrospective effect from 01.04.2002 by invoking powers under section 12AA(3)/ 12AB(4) of the Act. Against the impugned order, the Appellant filed writ petition before the Hon'ble Delhi High Court bearing WP(C) 15744/2024. The same was withdrawn vide order dated 13.11.2024, with the following liberty granted to the appellant: "1. The learned senior counsel appearing for the petitioner, under instructions, seeks to withdraw the present petition with liberty to raise all contentions including transfer of jurisdiction, and the jurisdiction of the concerned officer to cancel the registration with retrospective effect. 2. Dismissed as withdrawn with the aforesaid liberty. Pending applications also stand disposed of." 8. The grounds of appeal raised by assessee are as follows:- "1. The Ld. CIT(E), Delhi erred in law by assuming jurisdiction over cancellation pro....
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....e scheme of Section 12AB(4) and instead had initiated action suo moto without any such provision in the statute. 10. The Ld. CIT(E), Delhi erred in law by relying on alleged Specified Violations which allegedly occurred prior to the grant of registration to the Appellant under Section 12A(1)(ac)(i). Only Specified Violations which are noticed subsequent to the grant of registration under Section 12A(1)(ac)(i) can be taken as grounds for cancellation of registration. In the instant case, all alleged Specified Violations were noticed by and were in the knowledge of the Revenue prior to grant of registration on 29.03.2022. 11. The Ld. CIT(E), Delhi failed to appreciate that the Assessment Year in which the alleged violation is found to have occurred must be the law that is applied unless otherwise stated or implied. 12. The Ld. CIT(E), Delhi erred in law erred in finding a violation of ground 'g' of the Specified Violations under Section 12AB(4) to the extent that it alleged that the Appellant obtained registration dated 29.03.2022 by giving false or incorrect information in its application since the said ground was only introduced w.e.f. 01.04.2023. The Ld.....
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....CIT(E), Delhi failed to appreciate that the Appellant is a separate juridical person and cannot be held liable for criminal offences, if at all, committed by third persons such as donors, donees, doctors or an employee using Trust facilities unless any link is established in any concerted action with the Appellant resulting in chargesgetting framed against it. The Ld. CIT(E), Delhi has failed to establish any such link except by way of inference and surmise, 21. The Ld. CIT(E), Delhi's finding that the Appellant obtained registration dated 29.03.2022 by fraud is wholly fallacious as the Appellant has acted in good faith and made full disclosure of all relevant details while applying for registration. 22. The Ld. CIT(E), Delhi has erred in arriving that the Appellant was granted a fresh registration on 22.09.2023 by CIT(E) Chandigarh whereas the said order only revived the Appellant's registration granted to it in 1975. 23. The Appellant submits that each ground of appeal is without prejudice to one another and craves leave to add to, alter, amend, substitute or modify the same on or before the hearing of the present appeal." 9. At outset it is pertinen....
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....ld not be invoked for cancellation of registration with retrospective effect. Reliance was placed on CBDT Circular No.11/2022, decision in Centre for Policy Research vs PCIT: WP(C) 11270/2023, interim order dated 25.08.2023 (Del), Human Welfare Foundation vs DCIT: ITA No. 2407/Del/2023 (Del Trib.), Lala Sher Singh Memorial Jeevan Vigyan Trust Society vs PCIT: ITA No.10/Del/2025 (Del Trib.), Hemkunt Foundations vs PCIT: ITA No.631/Del/2024 (Del Trib.), Heart Foundation of India vs CIT: ITA No. 1524/Mum/2023 (Mum Trib.), Amala Jyothi Vidya Kendra Trust vs PCIT: [2024] 204 ITD 605 (Bang Trib.), Maa Jagat Janani Seva Trust vs CIT(E): [2024] 208 ITD 120 (Cuttack Trib.), Sri Srinivasa Educational and Charitable Trust vs DCIT: [2025] 173 taxmann.com 577 (Bang Trib.)Centre for Development Communication Trust vs CIT(E): [2024] 114 ITR(T)29 (Jaipur Trib.) and Dera Sacha Sauda vs PCIT: ITA No.21/Chd/2024 (Chd Trib.) 13. As with regard to ground no. 12 ld. Sr. Counsel contended that original registration under section 12A(a) of the Act was granted to the Appellant on 08.10.1975, which was revoked by the CIT(E) vide order dated 31.12.2008. The revocation of the registration was upheld by the....
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....sures made along with the income-tax returns. It was submitted that though return was filed in ITR-7 in the status of charitable trust declaring Nil income, the Appellant duly discharged income-tax liability based on the alternative computation of income in the status of AOP, prepared suo moto, by way of advance tax, TDS and self-assessment tax. [Reliance was placed on PB pg 353-356 for AY 2015-16]. The assessing officer was also duly informed regarding the full facts by way of letters). The Notes filed with the letters) explained the entire facts and circumstances of the case together with Audit Report and statement of amount spent on charitable purposes. It was submitted that this demonstrates the Appellant's intention to comply with tax laws, even in the absence of clarity regarding the registration status.[PB pg 351-375 for AY 2015-16]. Even in the Audit Report filed under section 12A of the Act for each assessment year subsequent to withdrawal of registration, complete facts regarding the said withdrawal and pending appeal before the Punjab and Haryana High Court have been stated, subject to which the Audit Reports have been issued.[PB pg 362-369 for AY 2015-16] The Appell....
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....tions that registration can be cancelled of any previous year, therefore, that implies that registration can be cancelled retrospectively. 17. Now the first legal aspect necessary to keep in mind is that Section 11 of the Act itself recognises that 'Income derive from property held under the trust wholly for charitable or religious purpose', gives sufficient right and power to any Trust for being best judge of the use of its property so far as same is used for charitable or religious purposes. Thus there is no bar on the Trust to derive income from the Trust property. It is the use of that is regulated by the Act. 17.1 The Appellant in reply dated 02.04.2024 filed against show cause notice dated 14.03.2024 issued by CIT(E), has extensively dealt with the allegation regarding "Appellant engaged in business activity". [PB pg 559-562]. In case of assessee the purpose of leasing of hospital premises to doctors by the Appellant is solely for the fulfilment of objects of the Appellant, i.e., providing medical relief. Such leasing is not merely an act of earing rental income but undisputedly the income derived from the trust property has been utilised/ applied by the Appella....
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....time to time, The permission was, however, withdrawn from 20.1.2003 by the Government of Punjab. During the aforesaid authorization period, transplantation surgeries were conducted at the trust hospital from 26.06.1997. The CIT(E) alleged that the doctors and manager of the Trust were involved in illegal transplant of kidneys and charges have been framed in this respect. Since it was discovered that the Appellant was engaged in criminal activities, the registration granted for performing kidney transplant was also cancelled by the State Government on 20.01.2003. 18.1 Now if criminality is concerned the same is alleged to be only of the doctors who were found to be guilty and were convicted of the crimes committed by them under sections 120-B, 201 and 304 of IPC and under section 19 of Transplantation of Human Organs Act whereas the employee/ manager appointed by the Trust, namely, Mr. Hardial Mehta, was acquitted by the Trial Court on the ground that the prosecution has failed to prove its case beyond shadow of reasonable doubt. Except for Hardyal Mehta none of the accused or the convicted in these cases were the employees of the Trust. FIRs do not charge Trust or Trustees of an....
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....of an institution and its activities. Thus, the provisions of the law have to be strictly interpreted and complied with. 19.1 As we take into consideration provisions and scope of 12AB(4) of the Act, we find that it refers to the powers granted for an action subsequent to grant of registration or provisional registration of a trust under section 12AA of the Act, and if, 'subsequently', specified violations are discovered, then, the competent authority is entitled to initiate an action by following a procedure enshrined in clauses (i) to (iv) of sub-section (4) of section 12AB of the Act. 19.2 It comes up that, clause (i) of sub-section (4) of section 12AB of the Act requires that the competent authority shall call for such documents or information from the trust or institution for making such inquiry as he think necessary in order to specify himself about the occurrence or otherwise of any 'specified violation'. This clause (i) when read with clause (ii) of sub-section (4) of section 12AB of the Act indicates that the competent authority shall, before cancelling the registration, call for documents or information or make an inquiry as is necessary and, thereupon, after afford....
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....s of 'specified violation' attracted and for which the assessee is being penalised by cancellation of registration and for convenience, we reproduce para 3.7 and 3.7.1, below:- "3.7 Specified Violation: 3.7.1 Next it is argued that no specified violation as per section 12AB has occurred. This plea is not accepted, for the following reasons: (i) It is amply clear from discussion in Para-3.3 to 3.4.1 supra the property of trust has been applied, other than for the objects of the trust. Thus assessee has made violation as per Explanation (a) to 12AB(4) (ii) It is amply clear from discussion in Para-3.3 to 3.4.1 supra the trust has income from profits and gains of business which is not incidental to the attainment of its objective. Thus assessee has made violation as per Explanation (b) to 12AB(4). (iii) It is amply clear from discussion in Para-3.3 to 3.4.1 supra the activity carried out by the trust is not genuine and not being carried out in accordance with all or any of the conditions subject to which it was registered. Thus assessee has made violation as per Explanation (e) to 12AB(4). (iv) It is amply clear from discussion in ....
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....on (4) of section 12AB of the Act and ask for information by notice dated notice dated 08.09.2022." 24.1 This decision in Aggarwal Vidya Pracharni Sabha (supra), has been challenged by the department before Hon'ble Punjab and Haryana High Court vide ITA-122-2024(O&M) and we find that the appeal is admitted vide order dated 12.12.2024, to examine three questions which are other than, aforesaid conclusion drawn by the co-ordinate bench. As for convenience the order dated 12.12.2024 of Hon'ble Punjab and Haryana High Court is reproduced below:- "Having heard learned counsel for the parties and considering the provisions of Section 127 of the Income Tax Act, 1961 and explanation appended thereto, the present appeal is admitted on following questions of law:- (i) Whether on facts and circumstances of the case and in law, Hon'ble HAT is right in quashing the order passed u/s 12AB cancelling the registration of assessee trust by holding that the PCIT (Central), Gurugram does not have jurisdiction to pass the aforesaid order ? (ii) Whether on facts and circumstances of the case and in law, Hon'ble ITAT is right in only considering the CBDT Notification....