2017 (7) TMI 615 - HC - Income Tax

Cancelling registration granted under Section 12AA(1)(b)(i) - Held that - Out of five grounds in respect of ground no. 2 only Assessee s explanation has been accepted by CIT-II but rest four grounds have been upheld for passing order of cancellation of registration. No part of findings of CIT-II has been reversed by Tribunal. It has affirmed view taken by CIT-II but for the purpose of discussion has relied more on the findings of CIT-II with respect to ground no. 5. It is not a new ground as it is already part of ground no. 5 mentioned in show cause notice. The contention of learned counsel for appellant that Tribunal has made out a new case, we find unacceptable and contrary to record, hence it is rejected. So far as proposition of law that no new ground can be taken before Tribunal which is not part of show cause notice, in our view, is not at all applicable in the present case. Appellant has tried to make out a case which is not evident from record and in fact the ground which has been stressed by Tribunal in confirming order passed by CIT is part of ground no. 5 which is one of the four grounds on which registration was cancelled by CIT-II, hence neither the judgments relied by appellant, in our view, are applicable in the case in hand nor the same help appellant in any manner. So far as argument regarding observations made by Tribunal when application for registration was considered, we find has rightly been distinguished by Tribunal. When an order is to be passed on the basis of activities of Assessee having already taken and borne out from record, same have to be examined not on mere averments contained in Memorandum of Society but in the light of actual activities carried out by Society which was not the position when issue of grant of registration was to be considered. - Decided against Assessee.

Summary

Issues Involved:
1. Justification of ITAT in upholding CIT's order under Section 12AA(3) of the Income Tax Act.
2. Justification of ITAT in allowing CIT to go beyond the grounds taken in the show cause notice.

Issue-wise Detailed Analysis:

1. Justification of ITAT in upholding CIT's order under Section 12AA(3) of the Income Tax Act:

The Assessee's appeal under Section 260A of the Income Tax Act, 1961, challenges the judgment of the Income Tax Appellate Tribunal (ITAT) which upheld the Commissioner of Income Tax-II (CIT-II) order dated 03.09.2012. The CIT-II had cancelled the registration granted under Section 12AA(1)(b)(i) by exercising power under Section 12AA(3). The CIT-II's decision was based on several grounds, including the improper utilization of society funds, lack of documentary evidence for land purchases, and the surrender of anonymous donations during a survey.

The ITAT found that the CIT-II was justified in concluding that the activities of the trust were not genuine and were not being carried out according to the objectives of the institution. The Tribunal emphasized that the society was not run as per its Memorandum of Association, particularly noting the significant fees charged by the dental college, which contradicted the society's stated objective of providing free health education and dental treatment.

2. Justification of ITAT in allowing CIT to go beyond the grounds taken in the show cause notice:

The Assessee argued that the ITAT had affirmed the CIT-II's order based on a new ground not included in the initial show cause notice, thus violating the principles of natural justice. However, the High Court found this contention unfounded. The Tribunal upheld the CIT-II's findings on the grounds specified in the show cause notice, particularly focusing on the society's deviation from its stated objectives.

The Tribunal did not introduce any new grounds but rather stressed the findings related to the society's commercial activities and the misuse of funds, which were part of the original grounds for cancellation. The High Court noted that the Tribunal's emphasis on the society not being run as per its objectives was consistent with the CIT-II's findings and did not constitute a new ground.

Conclusion:

The High Court concluded that the ITAT did not err in upholding the CIT-II's order canceling the registration under Section 12AA(3). The Tribunal's decision was based on substantial evidence showing that the society's activities were not genuine and were not being carried out according to its stated objectives. The appeal was dismissed with costs, affirming that the Tribunal had not introduced any new grounds beyond those specified in the show cause notice.