TaxTMI 
TaxTMI 
2026 (5) TMI 993
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....ts activities. Accordingly, the CIT issued show cause notice on 13.03.2025, which is a part of CIT's order at pages no. 3 to 6 of Assessee Paper Book (hereinafter 'APB'). The CIT on perusal of bank statement of the assessee noted that there are number of high value debit transactions in favour of the Members of the Society i.e. Sh. Anil Tayal, President and Smt. Shewta Tayal, Vic-President and Savita Tayal. He also noticed from the bank statement that there are several cash deposits and withdrawals in assessee' bank account. He required the assessee to explain the debit transactions and cash deposits/withdrawals and how these transactions are related to charitable activities carried out by the society which are in agreement with the objects of the society along-with supporting documents. The assessee filed complete details which are reproduced in his order at page no. 8 & 9. The CIT considered the reply of the assessee, but noted that neither of the activities establish the charitable nature of the trust in regard to these transactions. The CIT reproduced the bank statement and the transactions entered into with the assessee society by Sh. Anil Tayal, Smt. Shewta Tayal and Smt. Sav....
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....f Industries & Commerce, Haryana. The assessee also filed copy of Constitution of assessee-society which is enclosed at assessee's paper book at pages 55-80. The assessee also filed the copy of affiliation of the assessee society being an educational society with the Director of Elementary Education, Haryana, Panchkula dated 12.11.2021 which is enclosed at assessee's paper book pages 81-82. Assessee also filed another affiliation with Directorate of School Education dated 28.8.2025 which is enclosed at assessee's paper book pages 83-85. 4. Ld. Counsel for the assessee pointed out from the order of the CIT that only charge leveled by the CIT is that there are loan transactions with Anil Tayal and assessee-society. It has taken unsecured loan from Anil Tayal to meet the infrastructure and academic needs etc. etc. and there are frequency of transactions conducted by the assessee-society with Sh. Anil Tayal. He pointed out from the ledger account which shows an opening balance of Rs. 64,89,869/- as on 01.04.2024 and had paid Rs. 92,50,000/- during the financial year 2024-25 and precisely pointed out that Rs. 71,00,000/- and Rs. 20,00,000/- on 25.04.2024 and Rs. 1,50,000/- on 20.05.2....
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....y held that the assessee is being used for the benefit of its own members namely, Mr. Anil Tayal, Smt. Shweta Tayal and Smt. Savita Tayal. In view of the frequency of transactions conducted by its members with the society, he argued that the CIT has rightly rejected the registration for the reason that the assessee has not provided any documentary evidence to establish the nexus between the unsecured loans raised and furtherance of charitable activities in the nature of infrastructure or academic needs per se. He also argued that the assessee-society has not claimed any application of income in the income tax return since last two years. He also argued that even the rent paid to Gargi Farms by the assessee-society for its operation is at variance in price, which is not substantiated or supported by any fair market value or rent valuation. In terms of above, Ld. CIT(DR) stated that the CIT has rightly rejected the registration application and he urged the Bench to confirm the same. 7. We noted from the facts of the case that admittedly assessee-society is running a school in the name of Pista Devi Education Society, situated at A-603, Bhawani Apartments, Plot No. 91, Sector-54, G....
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....llowance while framing assessment u/s. 143(3) by the AO and this cannot be the reason that the assessee is not engaged in the charitable activity or is violating the terms and conditions of the trust. There is no case made out by the CIT that the income derived by the assessee has been applied other than for the objects of the trust / institution or the institution income from profits and gains of business which is not incidental to the attainment of its objects of the trust or institution has not applied any part of its income which does not ensures for the benefit of the public. It is also not the case that trust/society is not genuine or is not being carried out its activities in accordance with law or any of the conditions subject to which society registered. It is also not the case that the institution has not complied with the requirement of any other law or application referred to any clause (ac) of sub section (1) of Section 12A of the Act, contain false and incorrect information. 8. In view of the above, now we will discuss the applicability of provisions of section 13(1) and 12AB(4) of the Income Tax Act, 1961 for the refusal of Registration u/s. 12AB of the Act and th....
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....itution, any income thereof- (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income ensures, or (ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in subsection (3), such part of income as referred to in sub-clauses (i) and (ii):" A plain and harmonious reading of the above provision clearly demonstrates that section 13 of the Act comes into operation only when exemption u/s. 11 or 12 of the Act is claimed and seeks to deny such exemption to the extent of violation, if any. The provision nowhere contemplates or authorises denial of registration u/s. 12AB of the Act on this ground. Therefore, even assuming that there is any alleged violation of section 13 of the Act, the same can at best result in denial of exemption u/s. 11 and 12 of the Act for the relevant assessment year and cannot be a ground for refusal of registration u/s. 12AB of the Act. 10.....
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....itiated only where the registration already stands granted and either: • the CIT notices the occurrence of one or more specified violations during any previous year; or • a reference is received from the AO upon noticing such specified violations during assessment proceedings in terms of the second proviso to section 143(3) of the Act; or • the case is selected based on risk management strategy formulated by the Board. In this context, the provisions of section 12AB(4) of the Act are reproduced hereunder: "(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 accord....
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.... 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 98[; or] (g) the application referred to in clause (ac) of sub-section (1) of section 12A contains false or incorrect information.] 12. A conjoint reading of s. 12AB(4) of the Act along with the above Explanation clearly establishes that the legislature has consciously empowered the CIT to cancel or withdraw registration only upon satisfaction that one or more specified violations have occurred, such as non-genuine activities, deviation from objects, non- compliance with applicable laws, or furnishing of false or incorrect information. In the present scenario, where, the objects of the applicant trust are charitable in nature; • the activities carried out are genuine and in furtherance of such objects; • there is no finding or allegation that ....
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....tional institution or any hospital or other medical institution shall be made by him without giving effect to the order passed by the Principal Commissioner or Commissioner under clause (ii) or clause (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or clause (iii) of sub-section (4) of section 12AB:" 15. We have also perused the applicability of provisions of section 13(1) and 12AB(4) of the Act as reproduced above. It is an admitted fact that the assessee-society filed an application seeking registration u/s. 12AB of the Act and CIT has made an observation that the applicant trust has allegedly made certain payments to its trustees/specified persons and, on that basis, has proposed to invoke the provisions of section 13 of the Act, alleging that the funds of the trust are being utilised for the benefit of persons referred to in s. 13(3) of the Act and accordingly denied the registration u/s. 12AB of the Act. It is noted that Section 13 of the Act has no application at the stage of grant of registration u/s. 12AB of the Act. The provisions of section 13 of the Act are intended solely to regulate and restrict the availability of exemption u/s. 11 and 1....
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....e is no finding or allegation that the objects of the trust are non- charitable or that the activities are in-genuine, fictitious, or a mere camouflage, no ground survives for denial of registration u/s. 12AB of the Act. 17. It is also observed that no specific violation u/s. 12AB(4) of the Act has been committed by the applicant trust, because the statutory scheme clearly envisages that action u/s. 12AB(4) of the Act can be initiated only where the registration already stands granted and either (i) the CIT notices the occurrence of one or more specified violations during any previous year; or (ii) a reference is received from the AO upon noticing such specified violations during assessment proceedings in terms of the second proviso to section 143(3); or (iii) the case is selected based on risk management strategy formulated by the Board. Hence, it is clearly establishes that the legislature has consciously empowered the CIT to cancel or withdraw registration only upon satisfaction that one or more specified violations have occurred, such as non-genuine activities, deviation from objects, non- compliance with applicable laws, or furnishing of false or incorrect information. Wher....