TaxTMI 
TaxTMI 
2026 (3) TMI 790
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....inally granted registration under Section 12A of the Act vide the order of the Commissioner of Income Tax-I, Lucknow, dated 28.07.2006, effective from 01.04.2005. The Trust was established with charitable objectives and it operates the Hind Institute of Medical Sciences (HIMS), which conducts MBBS and paramedical courses, and the Hind Hospital, a teaching hospital providing medical treatment to patients. 2.1 A search and seizure operation was conducted under Section 132 of the Act on 31.07.2013, at the registered office of the Trust and the premises of its trustees, Dr. A.K. Sachan and Dr. Richa Mishra. During this search, physical cash, loose papers, and digital evidence in the form of hard disks were seized. 2.2 Based on this search, the Assessing Officer (AO) originally framed the assessment orders for Assessment Years (AYs) 2008-09 through 2014-15 on 31.03.2016, making substantial additions on the grounds of alleged unrecorded capitation fees, inflated In-Patient Department (IPD) receipts, and violations of Section 13(1)(c) of the Act. Later, these original assessment orders were relied upon to form the basis and the satisfaction recorded by the Ld PCIT(C) in the impugned....
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....onjectures with no evidence and no material. 4. That the order of cancellation of Registration is bad in law and on facts as it has been passed solely and wholly relying on the order of assessment for AY 2014-15, which order was passed without considering the detailed submissions made by assessee including the reconciliation of the money received from students with those recorded in books of accounts (seized books of accounts in the form of Hard Discs which were not even looked into). 5. That the order of the Pr. CIT Central Lucknow is bad in law as there is complete failure on his part to make an independent application of mind before proceeding to cancel the registration. 6. That the appellant craves leave to adduce additional grounds and/or to amend or withdraw any of the foregoing grounds on or before the time of hearing of appeal." 2.6 The assessee has also raised the following additional ground: "Because on the facts and circumstances of the case and in law, impugned order dated 19.01.2021 is void ab initio as the Ld. Principal Commissioner of Income Tax (Central), Lucknow lacked the requisite jurisdiction to cancel the registration unde....
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....on the erroneous findings of the AO only and there was no independent appreciation of facts by the Ld. PCIT (C). It was further submitted that the subsequent assessment orders, had exonerated the assessee Trust from most of the allegations leveled against it in the original assessment orders and this fact was also to be duly considered in the present appeal. It was also submitted that the Act did not empower the Ld. PCIT (C) to cancel the registration with retrospective effect. He submitted that, thus, in effect, the assessee was challenging the impugned order on two counts namely: (i) the inherent lack of jurisdiction to cancel registration retrospectively and (ii) the collapse of the factual foundation on merits due to favourable subsequent assessment orders. 4.2 The Ld. AR submitted that the scheme of the Act, as interpreted by the Hon'ble Supreme Court and the various Hon'ble High Courts, does not confer upon the Ld. Principal Commissioner the power to revoke a registration with retrospective effect, thereby stripping a charitable institution of its status for past years during which it operated under a valid certificate. It was submitted that registration is a condition pre....
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....decade based on search findings from 2013, an action that violates the ratio laid down by the Hon'ble Karnataka High Court in the case of Director of Income Tax vs. Garden City Educational Trust in Income Tax Appeal No 57 of 2004 wherein it has been that the status of the entity must be respected until prospectively revoked in accordance with due process. Our attention was drawn to Para 16 of the above said order of the Hon'ble Karnataka High Court which states that registration was necessary for the purpose of exemption. 4.4 The Ld. AR further submitted that in order to appreciate the validity of the retrospective cancellation, it is imperative to take note of the legislative history of Section 12AA (3). It was argued that prior to 01.10.2004, there was no express provision in the Act empowering the Ld. Commissioner to cancel a registration once granted. This position was settled by the Hon'ble Supreme Court in Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. v. CIT 403 ITR 1 (SC) wherein, the Hon'ble Supreme Court held that the power to grant registration is a quasi-judicial function, and that in terms the General Clauses Act, Section 21 does not confe....
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....n 2016, the AO failed to open or examine these hard discs. It was submitted that the assessment was completed in great haste, with the Revenue providing copies of seized documents to the Assessee only months before the deadline, and the AO ignoring the partial reconciliations filed. It was submitted by the Ld. AR that upon appeal, the Tribunal, in its order dated 08.03.2021, took serious note of this lapse. The Tribunal set aside the original assessments specifically because the "Assessing Officer also did not take into account the data contained in the hard disks". The Tribunal thereafter remitted the matter for fresh assessment with a specific direction to consider the data in the hard disks and the Assessee's reconciliation. This judicial intervention effectively nullified the original assessment orders. Consequently, the Ld. PCIT's order, which was passed in January 2021 relying entirely on the findings recorded in the assessment order of 2016, was effectively nullified. 4.6 The Ld. AR stated that subsequently, in compliance with the Tribunal's order, the AO initiated a de novo assessment. The seized hard discs were finally opened on 30.06.2021, and the data was provided to ....
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.... perused the material on record. The essential question raised by the assessee before us is as to whether the act of the Ld. PCIT (Central), Lucknow in cancelling assessee's registration under section 12AA of the Act with retrospective effect w.e.f. 1.04.2007 can be held to be legally valid and sustainable. The ld. Authorized Representative for the assessee has argued at length citing before us the statutory provisions of sections 11, 12 and 13 of the Act and has also placed reliance on numerous judicial precedents and has argued that the impugned action of the ld. Ld. PCIT (Central), Lucknow cannot be held to be legally valid in absence of want of powers to cancel the registration with retrospective effect. It has been argued that the denial of exemption for a particular assessment year would not automatically warrant the retrospective cancellation of the registration itself. Reliance has been placed on the judgment of jurisdictional High Court i.e. Hon'ble Allahabad High Court in the case of Agra Development Authority (supra) and it has been submitted that there was nothing in the language of section 12AA(3) of the Act which would suggest that the registration of the assessee may....
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....stration to the assessee, it was fully eligible for registration and further the registration thus granted did not suffer from any inherent or fundamental defect. The Hon'ble Allahabad High Court further observed that thereafter the assessee had continued to avail the benefit of registration for all the assessment years subsequent to the grant of registration and, therefore, such a registration order cannot be allowed to be cancelled with retrospective effect so as to effect past transactions and that too in absence of any express legislative intent and without any adverse inference being first drawn against the assessee. The Hon'ble jurisdictional High Court also went to observe that the Act, therefore, neither contemplates an inviolable right to claim exemption solely on the strength of a registration certificate nor does the Act appear to contemplate that in case of an adverse opinion being formed by the Commissioner, he must necessarily seek to cancel the registration granted by him earlier. In fact, the Act carves out a middle path by allowing the registration to stand but its benefit to be deprived in assessment proceedings in certain specified circumstances. 6.2 Similarly....
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....Public Charitable Trust vs. PCIT (Central) in ITA No. 1130/PUN/2024, vide order dated 21.02.2025 held as under: - "15c. It is also a settled issue that the registration W's 1244 cannot be cancelled from retrospective effect For this view we place reliance on the judgment of Hon'ble Madras High Court in the case of Auro Lab v. ITO (2019) 102 taxmann.com 225 dated 23.01.2019 wherein Hon'ble Court held that "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 evert the pending Tax Appeal is decided in favour of the Revenue, will operate only from the date of the cancellation order, that is 30.12.2010. In other words, the exemption cannot be denied to the petitioner for and up to the Assessment Year 2010-11 on the sole ground of cancellation of the certificate of registration" (emphasis supplied]. 15d. In view of the above discussion with regard to ground no 12 & 6 of the assessee's appeal, in light of the judgments and decisions referred herein above settled and judicial principles, we are of the considered view that firstly,....
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....merits of the issue vis-a-vis the reliance placed by the Ld. PCIT (C) on the search assessment orders and its relevance post the passing of subsequent assessment orders after the original assessment orders were set aside by the ITAT for de novo assessment. 6.8 Insofar as the findings on capitation fee were concerned, we find that the AO in the subsequent assessment order did not give any finding whatsoever, despite examining all seized material, but instead chose to make addition by merely reiterating the contents of the original assessment. 6.8.1 During the course of hearing, the following tabular representation was submitted by the Ld. AR to summarize and show the transformation of facts from the Original Assessment (relied upon by the Ld. PCIT) to the fresh assessment- Issue Original Assessment PCIT's basis for cancellation Fresh Assessment Findings Impact on cancellation Capitation Fees / Building Fund Alleged collection of unaccounted cash as donation or building funds. Cited the findings in original assessment as evidence of nongenuine activity and profiteering. The AO merely followed the earlier findings and did not examine the evidence that ....
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.... legally vitiated. Furthermore, the Assessee maintains that a violation of Section 13, even if proven, does not provide a statutory basis for the cancellation of registration. 6.12 That, insofar as AYs 2012-13 and 2014-15 are concerned, the AO has made specific additions to the tune of Rs. 35,05,000/- and Rs. 28,50,000/- under Section 68 of the Act by holding that the Assessee was charging capitation fee. However, the analysis of the findings of the AO on this issue, show that he has merely reiterated the nullified findings in the original assessment. While this Tribunal had directed the AO to have a fresh look at the evidence, the AO has rather thought it fit to merely repeat, albeit mechanically, the original additions without conducting any independent verification (such as bank inquiries or third-party confirmations) that a de novo enquiry demands. Such finding by the AO cannot be held to support the findings of the Ld. PCIT in the impugned order by which registration has been cancelled retrospectively. 6.13 Therefore, we find that the satisfaction recorded by the Principal Commissioner was entirely derivative, stemming from the adverse findings of the original assessment....