TaxTMI 
TaxTMI 
2026 (2) TMI 446
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....dice to each other: 1. That in the facts and circumstances of the case and in law, the CIT(E) grossly erred in cancelling the registration granted to the Appellant under Section 12A of the Act vide order dated 24.09.2021 for Assessment Years 2022-23 to 2026-27, with effect from the date of the said order. 2. That in the facts and circumstances of the case and in law, the CIT(E) grossly erred in holding that the activities of the Appellant being CBP, MDP and Research & Consultancy, are in violation of Section 2(15) and Section 11(4A) of the Act, falling within the definition of 'Specified Violation' under clause (b) of Explanation to Section 12AB(4) of the Income-tax Act, 1961. 3. That in the facts and circumstances of the case and in law, the CIT(E) grossly erred in holding that the activities like conducting programmes in Construction & Construction Management carried on by the Appellant are not a charitable activity in the nature of 'education' u/s. 2(15) of the Income-tax Act, 1961. 4. That in the facts and circumstances of the case and in law, the CIT(E) grossly erred in holding that the activities consisting of CBP, MDP and R....
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....otices dated 14.01.2025 and 05.02.2025 issued to the Appellant. 2. That, on the facts and in the circumstances of the case and in law, the impugned order passed by the CITE) cancelling the registration is invalid and bad in law, as the show-cause notices dated 14.01.2025 and 05.02.2025 initiating the cancellation proceedings did not invoke any clause of the Explanation to Section 12AB(4) in relation to 'Specified Violation'. 3. That, on the facts and in the circumstances of the case and in law, the Faceless AO erred in making a reference under the Second Proviso to Section 143(3) of the Income-tax Act, 1961 to the CIT(E) for withdrawal of the registration granted to the Appellant, without providing the Appellant with an opportunity of being heard as to why a reference under the Second Proviso to Section 143(3) of the Income-tax Act, 1961 should not be made. 4. That, on the facts and in the circumstances of the case and in law, the CIT(E) erred in exercising the powers u/s. 12AB(4) of the Income-tax Act, 1961 thereby cancelling the registration of the Appellant. 5. That, on the facts and in the circumstances of the case and in law, the CIT....
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.... and skill formation at all levels of the construction and other allied industries. It was further observed from the records that the assessee has undertaken various activities including Company Based Programmes ("CBP"), MDP Programmes, conferences and publications, etc., which do not come under the purview of formal education activities, but are in the nature of providing training, skill development programmes for professionals involved in the field of construction and allied services, as per the requirement of business or profession. It was further noted that the assessee has received income from these activities under the guise of educational activities. Thus, apart from the income from the main object, i.e., Education, the assessee has received income from afore-noted activities, which do not come under the purview of "Educational Activities". From the return of income filed by the assessee for the assessment year 2022- 23, it was noted that out of the total expenditure incurred by the assessee amounting to Rs.83,25,13,683/-, during the year under consideration, less than 5% of the expenditure was spent on the object of the Trust, i.e., Education. It was observed that the asses....
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....lved in the field of construction and allied services, for which the assessee charges fees and these programmes were conducted at the request of the customer without any entrance examinations. Further, the learned CIT(E) noted that the assessee for the assessment year 2022-23, has provided consultancy services to various private companies and has also charged fees of Rs.24,79,000/-, which is completely in the trade, commerce or business. As regards the expenditure towards the employee benefits incurred towards teaching and non-teaching staff, the learned CIT(E) held that the assessee was granted recognition for formal education activity vide Maharashtra Government Gazetted on 12.05.2022, therefore the norms of UGC are applicable to the assessee when it started formal educational activities i.e. from assessment year 2023-24 and prior thereto the question of expenditure towards employee benefits does not arise. Thus, it was held that the expenditure made by the assessee-trust remains unexplained. The learned CIT(E) further noted that the assessee has not maintained a separate book of accounts in respect of the activities which are in the nature of business. Accordingly, on the basis ....
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....ction 12AB(4), in relation to which the assessee was never provided an opportunity to show cause. By referring to the provisions of Explanation to section 12AB(4) of the Act, the learned Senior Counsel submitted that the list of "Specified Violation" was enlarged by the Finance Act, 2022, with effect from 01.04.2022, and therefore, the same is only applicable and has relevance to the assessment year 2023-24 and onwards. It was also submitted that proceedings for cancellation of registration under section 12A of the Act were initiated earlier on an identical basis on which the impugned order cancelling the registration has been passed. However, the said proceedings were subsequently dropped by the learned CIT(E) vide order dated 25.03.2023. In respect of his earlier submission that no opportunity of hearing was granted to the assessee in respect of allegation of violation of clause (b) of Explanation to section 12AB(4) of the Act, the learned Senior Counsel submitted that the learned CIT(E) erroneously recorded the findings that the assessee during the assessment proceedings, accepted that it had not maintained separate books of account in respect of business, which is incidental to....
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....2022-23, the assessee-trust filed its return of income on 21.09.2022, declaring a total income of Rs. Nil, after claiming exemption under section 11 of the Act. The assessee's return was selected for scrutiny under CASS. During the assessment proceedings, in exercise of the powers granted to the Assessing Officer ("AO") under second proviso to section 143(3) of the Act, the AO made a reference to the learned CIT(E) for withdrawal of the registration granted to the assessee on the basis that the assessee has committed "Specified Violation" as defined in Explanation to section 12AB(4) of the Act. Accordingly, the learned CIT(E) issued notice dated 14.01.2025 granting an opportunity to the assessee to show cause as to why the registration granted to it under section 12A of the Act should not be cancelled as per section 12AB(4) of the Act. The said show cause notice is reproduced as follows for ready reference: - "The assessee National Institute of Construction Management and Research has received the order for regular registration under sub clause (i) of clause (ac) of Sub Section (1) of section 12A on 24.09.2021 for AY 2022-23 to AY 2026-27. The assessee has fil....
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.... evident that the assessee trust is engaged in commercial activities by undertaking professional courses, organizing conferences and other activities in lieu of receipt of fees and the trust is spending the major portion of the funds on activities which are more beneficial towards the business prospect of the assessee trust. Thus, the activities of the trust fall under the definition of Specified Violation as per section 12AB(4) of the Income tax Act. In view of the above, you are hereby provided with an opportunity to show cause as to why the registration granted to the trust u/s 12A of the Act should not be cancelled as per section 12AB(4) of the Income tax Act due to above mentioned violations. In addition, you are requested to provide the below information within the stipulated date and time: 1. A detailed note on the yearly actual activities conducted by your organization since the grant of regular registration, under section 12AB of the Act along with substantiating evidence in terms of documents. photos, videos, media reporting. or any other evidence that you may choose to submit in this regard. 2. Kindly furnish proof of expenses of the above acti....
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....ned CIT(E) alleged that the activities of the assessee-trust fall under the definition of "Specified Violation" as per section 12AB(4) of the Act. 13. During the hearing, the learned Senior Counsel, amongst the various arguments raised challenging the impugned order, submitted that the reference made by the AO under second proviso to section 143(3) of the Act, during the assessment proceedings for the assessment year 2022-23, is invalid, as the assessee was not granted an opportunity of being heard prior to making such a reference. In this regard, the learned Senior Counsel submitted that whenever an administrative or quasi-judicial action entails drastic civil consequences, the Courts have held that a fair hearing is ordinarily required. Thus, the learned Senior Counsel submitted that principle of audi alteram partem must be read under the provisions of second proviso to section 143(3) of the Act and since prior to making such a reference, in the instant case, without providing an opportunity of hearing to the assessee, the same has resulted in violation of principles of natural justice, and therefore, the reference itself by the AO to the learned CIT(E) is invalid. 14. Befo....
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....ows: - "(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) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or (c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall- (i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation; (ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous ....
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....be furnished by the trust or the institution, if the learned CIT(E) is not satisfied about the occurrence of any of the "Specified Violation", then as per the provisions of section 12AB(4), the learned CIT(E) can also pass an order in writing refusing to cancel the registration. Thus, we are of the considered view that the legislature has, very carefully, keeping the interest of the trust or institution in mind, has laid down well-defined procedure, in compliance of the principles of natural justice, to be followed before passing any order under section 12AB(4) of the Act, which may have an adverse consequence on the trust or institution referred to in section 11 of the Act. Therefore, we do not find any merit in the submission of the learned Senior Counsel that by not granting an opportunity of hearing to the assessee prior to making the aforesaid reference, the principle of natural justice has been violated. 18. In this regard, gainful reference can be made to the provisions of section 92CA(1) of the Act under which the AO is empowered to refer the computation of arm's length price in relation to international transaction and specified domestic transaction entered into by the ....
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....er the second proviso to section 143(3) of the Act. Accordingly, additional ground no.3 raised in the assessee's appeal is dismissed. 20. It is evident from the record that the assessee filed its response to the show cause notice dated 14.01.2025 before the learned CIT(E). From the perusal of the said response, forming part of the paper book from page 121- 218, it is evident that the same was in respect of various allegations made by the learned CIT(E) vide its show cause notice, and the necessary details as sought by the learned CIT(E) were furnished by the assessee. After considering the details filed by the assessee, the learned CIT(E), vide impugned order dated 04.06.2025, not only held that the activities like conducting programmes in construction and construction management, in service training programme conducted by the assessee cannot be termed as educational activities for charitable purposes as defined under section 2(15) of the Act and these activities are in nature of trade, commerce or business, under the guise of education activities, but also held that by not maintaining a separate books of account in respect of these activities, there is a specified violation und....
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....ate religious purposes, which does not enure for the benefit of the public; or (d) the trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste; or (e) any activity being carried out by the trust or institution- (i) is not genuine; or (ii) 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 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." 22. Thus, from the plain reading of the provisions of the Explanation to section 12AB(4) of the Act, it is evident that insofar as the non-maintenance of books of account by the trust or institute in respect of the business which is incidental to the attainment of its objects, same is dealt in clause (b), while the....