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TMI Blog2013 (5) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... empowers the ld. CIT to cancel or withdraw the registration u/s. 12A of the IT Act. In the absence of such power, registration granted u/s. 12A cannot be withdrawn or cancelled before 01.06.2010. In the present case, the ld. CIT in para 13 of the impugned order has cancelled the registration without giving the date from which date the cancellation of registration would be effective. Therefore, in the absence of any date from when the registration would be cancelled, the order of the ld. CIT cannot be sustained in law. - ITA No. 128/Agra/2013, ITA No. 127/Agra/2013 - - - Dated:- 24-5-2013 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER Shri Pankaj Gargh, Advocate : for the appellant Shri Waseem Arshad, Sr. D.R. : for the respondent ORDER Bhavnesh Saini, J.M.: Both the appeals by the different assessees are directed against different orders of ld. CIT, Central, Kanpur dated 28.03.2013, canceling the registration u/s. 12AA(3) of the IT Act. Both the parties submitted that issue is same in both the appeals and mainly argued ITA No. 128/Agra/2013. Therefore, for the purpose of disposal of both the appeals, the appeals are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation of the assessee was found afterthought and it was found by the AO that the assessee has been taking capitation fees, which was recorded in the annexure found in search. The assessee has not been true to his objects that are charitable in nature. The AO issued show cause notice to the assessee during the assessment proceedings as to why the amount (B) may not be treated as unaccounted donation from the students seeking admission in various courses. The assessee produced books of account before the AO, but the reply of assessee was not found acceptable because the amount reflected in the seized paper was not reflected in the books of account maintained by the assessee. The assessee submitted before the AO that a complaint was received alleging that some amount over and above the amount of fees have been paid by few number of students being charged by the person named Shri Ashok Darayani mentioning the amount of alleged donation. This complaint was forwarded to the Director of HIDs, Dr. Jagdish HG with the specific instruction to seriously investigate the matter and, if required, a committee be constituted taking some senior staff members to ascertain the correctness of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also Due amount (A) Received amount (A), Due amount (B) Received amount (B) and Balance. The A.O. has in the course of examination the documents, informed that through the receipt amount due is reflected in the books of account of the assessee trust but the amount due (B) mentioned in the list has not been found credited in the books of account of the assessee trust. A copy of Annexure A-1 (page 11to 15) have been seen and these clearly indicate that the amount (B) shown as Due amount has been systematically mentioned and received apparently in cash form and has not been found credited in the books of account of the Trust. Even in the list of confirmed admission due amount (B) has been very clearly mentioned which is enclosed as Annexure A to this order. It can be seen from this Annexure in the case of students from Sl. No. 1 to 19, various amounts have been mentioned which clearly indicate that due Amount (B) has been systematically received from students but has not found credited in the books of account of the assessee trust. Another interesting list as per Annexure A-2 (Page No. 1 to 4, 6 to 15) which were seized from the office of Sharda University, Sharda Hospi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trust and is not included in the books of account and is accordingly not applied for the purpose of the trust. Thus, it is clear cut case where the income derived from the property held under the trust is systematically applied for the benefit of the trustees and not for the purpose of the trust. 11. it is also noted, as indicated above, that this act of taking on money is carried out in a systematic manner and all the trustees who are responsible for the conduct of the business are not only more of it but also beneficiary of this income which is derived from the property held under the trust, and they have not taken any action to prevent this. 12. In his response, the assessee has tried to make out the case that on money was taken from some staff members. Dr. Jagdish HG had carried out an investigation and two staff persons were terminated on recommendation of Shri Ashok Daryani is mentioned. This explained of the assessee is not found acceptable as in the list in Annexure A-1 (page 11 12) very clearly indicates that these amounts have been authorized by Shri Ashok Daryani himself and in the list of Column under the head authorised the name of Sri Ashok Daryani is me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the trust. His main arguments are that the assessee exists solely for educational purpose and has been working for that purpose as per objects of the assessee-trust. Therefore, cancellation of registration is not justified. All the allegations in the impugned order are explained through material on record and submitted that Annexure 1, found during the course of search is not admissible at all against the assessee. He has also filed all the assessment orders u/s. 153A/143(3) passed in the case of assessee trust and its three trustees. 5. On the other hand, the ld. DR relied upon the impugned order and submitted that addition of unaccounted donations was made in the assessment year 2009-10. There is sufficient evidence available on record that the assessee received on money/donations/capitation fees. Therefore, the registration is rightly cancelled in the matter. Shri Y.K. Gupta could not explain the seized paper in his statement recorded u/s. 132(4) of the IT Act. 6. We have considered the rival submissions, perused the findings in the impugned order and considered the material available on record. Section 12A of the IT Act provides as under : 12A. (1) The provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made. 6.1 Section 12AA of the IT Act provides as under : 12AA. (1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) of sub-section (1)] of section 12A, shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant : Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has been granted registration u/s. 12A vide order dated 01.09.1997 w.e.f. 16.12.1995. It is also not in dispute that the assessee is an educational trust solely exists for educational purpose for imparting education. According to the assessee, the assessee trust started its educational activities from the year 1996 and thereafter educational activities were further extended. The details of the same are filed in paper book. The ld. CIT has reproduced the aims and objectives of the assessee trust in the impugned order and there is no objection to the aims and objectives of assessee trust, which are admittedly charitable and educational in nature. The ld. CIT in para 9 of the impugned order has specifically found that the assessee trust has been established for imparting education and has been recognized of University by the State Government and approved by UGC and maintained high standard of integrity and financial discipline with regard to the function of the trust and income generated from the property held under the trust. The ld. CIT also noted in the same para that the trust property, which is utilized for the purpose of education, consists of entire infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the allotment letters issued by AIEEE and students ledger account and the same got tallied with the seized paper, we find that the amount received from the students, who got admission through AIEEE have been accounted for in the books of account of the assessee. Therefore, the finding of ld. CIT in para 7 is factually incorrect that the amounts have not been credited in the books of account of the assessee. The issue of percentage is also explained by the assessee satisfactorily. Therefore, this is not incriminating in nature against the assessee for the purpose of cancellation of registration. The ld. CIT in para 2 of the impugned order has mentioned that during the course of search, there was indication of seizure / detection of unaccounted cash and unexplained cash deposits in bank account. However, no such fact has been stated by the AO in the assessment orders of the trust or the trustees respectively and even in the report submitted to the ld. CIT for cancellation of registration, no such facts have been mentioned. The ld. CIT also in his findings, has not mentioned anything if any unaccounted cash or unexplained bank deposits were found against the assessee during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets/books of account against the person who was found in possession or control of any books of account or other documents during the course of search to be belonging to such person and the contents of documents to be correct and true. It is admitted fact that during the course of search on 17.09.2010 seized computerized papers/list of students was not found in possession or control of the assessee trust. It was found from the residence of Shri Y.K. Gupta, one of the trustees of the group and no addition have been made against Shri Y.K. Gupta, trustee on recovery of such computerized papers from his residence. Therefore, such list cannot be relied upon in evidence against the assessee with the help of section 292C of the IT Act. Further, the presumption u/s. 292C is rebuttable presumption and the assessee has explained before the authorities below that such computerized list was received by Shri Y.K. Gupta, making certain allegations against the employees upon which matter was referred to Director of Institution Shri Jagdish HG, who had constituted a committee to look into the matter and all the committee members looked after the individual student s files. None of the students h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power of cancellation of registration u/s. 12A came to be introduced by way of amendment by Finance Act, 2010 w.e.f. 01.06.2010. That being the interpretation of sub-sec. (3), it is amply clear that the power to cancel the registration once granted was only confined to the registration granted under clause (b) of sub-sec. (1) of section 12AA till before 01.06.2010. Now, w.e.f. 01.06.2010, the power vests with the Commissioner even to cancel the registration granted under any of the clauses of sub-section (1) of section 12A. Thus, for exercising the powers u/s. 12AA(3) of cancellation of registration u/s. 12A/12AA of the IT Act by the ld. CIT, following conditions have to be satisfied : (i). That the trust or society has already been granted registration u/s. 12AA(1)(b) of the Act; or (ii). With effect from 01.06.2010, registration has been granted at any time u/s. 12A as stood before its amendment by the Finance Act No. 2 of 1996. (iii). The CIT subsequently found and satisfied with (a). activities of such trust or institution are not genuine or (b). are not being carried out in accordance with the objects of the trust or institution. 7.1 Hon ble Orissa High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, CIT had no jurisdiction to cancel registration under s. 12AA(3). 7.4 Hon ble Madras High Court in the case of CIT vs. Sarvodaya Ilakkiya Pannai 343 ITR 300 held The assessee was granted registration under section 12A(1)(a) of the Income-tax Act, 1961. When the returns filed for the assessment years 2008-09 to 2010-11 were scrutinized, it was found that the assessee was engaged in purchase and sale of books. On the ground that the activities of the assessee could not be considered to be charitable activities, a show cause notice was issued by the Commissioner under section 12AA(3) and thereafter, the Commissioner revoked the registration on the ground that the assessee did not deserve exemption under section 11(1)(a). The Tribunal found that the order of the Commissioner was not justified as the power to cancel could be only traced to section 12AA(3) and in the absence of any activity carried on by the assessee contrary to the objects, the registration could not be revoked. On appeal : Held, that under section 12AA, the Commissioner is empowered to grant or refuse the registration and after granting registration, would be empowered to cancel it, but only on the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t time by virtue of sub-section (3) in section 12AA with effect from 1-10-2004. This sub-section (3) provides that when a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. From the conjoint reading of sub-section (1) clause (b) and sub-section (3) of section 12AA, it would be seen that the cancellation of the registration was provided where the registration was granted under clause (b) of sub-section (1). Further cancellation under sub-section (3) was also provided where the registration was obtained at any time under section 12A [may be under clause (a) or clause (aa) of sub-section (1) of section 12A]. But this power of cancellation of registration obtained under section 12A came to be incorporated by way of amendment introduced by the Finance Act, 2010 with effect from 01.06.2010. That being the interpretation of sub-section (3), it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation under section 12A of the Act for A.Y. 2009-10 which is not in accordance with the law. This view is fortified by the judgment of Hon ble Delhi High Court in the case of DIT(E) vs. Mool Chand Khairati Ram Trust, 339 ITR 622 (Delhi) and order of I.T.A.T. in the case of Director of Income-tax (Exemption), Ahmadabad vs. N.H. Kapadia Education Trust, 136 ITD 111 (Ahd) wherein the I.T.A.T., Ahmedabad has followed the judgment of Hon ble Delhi High Court. ii) Even otherwise also, as we notice that registration under section 12A/12AA can be cancelled in the circumstances provided in section 12AA(3) of the Act of which detail has been discussed above in Para no 19 of this order. If we apply the said condition stipulated in section 12AA(3), we find that there is no finding of the CIT that activities of the assessee, Agra Development Authority are nongenuine or not being carried out in accordance with the object of the assessee, Agra Development Authority. Even for the sake of argument if we accept the view of CIT, there may be a case of activities which are not charitable but it cannot be said that those activities of the assessee, Agra Development Authority, are non-genuine or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the CIT wrongly applied the said judgment to the facts of the case under consideration. 21.1. The CIT and ld. Departmental Representative relied upon certain orders of I.T.A.T. where in the issue was different. The issue in those cases were pertaining to grant fresh registration under section 12AA of the Act and not cancellation of registration under section 12A of the Act under section 12AA (3) of the Act. Some of the decisions of I.T.A.T. are contrary to the judgment of Hon ble Delhi High Court in the case of Director of Income Tax (Exemption) vs. Mool Chand Khairati Ram Trust, 339 ITR 622 (Delhi). Therefore, those decisions are distinguishable on facts and did not help to revenue. 21.2. The ld. Departmental Representative relied upon the Orders of I.T.A.T. in the cases of Jammu Development Authority vs. CIT (ITAT, Amritsar Bench), Jalandhar Development Authority vs. CIT. (ITAT, Amritsar Bench), Indore Development Authority vs. CIT. (ITAT, Indore Bench) Moradabad Development Authority vs. ITO (ITAT, Delhi Bench) after amendment in section 2(15), as per proviso to section 2(15) assessee does not remain charitable w.e.f. 2009-10 does not help to the assessee as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution came within the phrase exists solely for educational purposes and not for profit no other condition like application of income was required to be complied withy. The prescribed authority was only required to examine the nature, activities and genuineness of the Institution. The mere existence of profit/surplus did not disqualify the institution. 7.8 In the light of above discussion and provisions of law, case laws, mentioned above, and the facts of the case under consideration, we find that the ld. CIT was not justified in cancelling the registration u/s. 12AA(3) of the IT Act. Section 12AA(3) of the Act empowers the ld. CIT to cancel such registration if he was satisfied that the activities of the trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or Institution, as the case may be. It is not in dispute that the objects of the assessee trust are to carry out the educational activities which are charitable in nature and that the assessee trust solely exists for educational purpose. Thus, the ld. CIT was satisfied that the activities of the assessee trust are genuine and that the same educational activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Commissioner of Income-tax was found to be interruption in the assessment proceedings. In the present case, the Assessing Officer passed the assessment orders for the search period u/s. 153A from assessment years 2005-06 to 2011-12 on dated 31.03.2013 and mainly the substantive additions have been made of net surplus of income over expenditure. Therefore, it is clear that the sole reason for cancellation of registration appears to tax the surplus of income over expenditure, otherwise in the absence of cancellation, the AO would not have been in a position to make such a huge and substantive additions against the assessee. The ld. CIT, therefore, just to help the AO, cancelled the registration within three days of giving show cause notice to the assessee without waiting for conclusion of assessment proceedings. Therefore, the decision of Hon ble Orissa High Court in the case of Kalinga Institute of Industrial Technology (supra) squarely apply in favour of the assessee and against the Revenue. We may note that since conditions of grant of registration and cancellation of registration are same and the assessee satisfies that the objects of assessee trust are educational and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 2011-12, the AO disallowed rent u/s. 13 only. The ld. DR also filed copy of the order sheet of ld. CIT to show that the proceedings were taken up on 25.03.2013 and registration is cancelled on the next date on 28.03.2013. It would show that the surplus income over expenditure have not been added in assessments u/s. 153A and as such no registration is cancelled in this case u/s. 12AA(3) of the IT Act on the same facts and no reasons have been explained why different view is taken by the ld. CIT in the case of assessee trust. The ld. CIT should have in principle taken a consistent view on the identical cases. This reason also supports our findings that registration should not have been cancelled in this case. Considering the above observations, we are of the view that the cancellation of registration is wholly unjustified in the case of assessee. 9. The ld. CIT on examination of the matter in issue found that the trustees have used property of trust for personal enrichment, i.e. taking on money for granting admission to the students and the same was also found to be incriminating against the assessee for cancellation of registration. However, no evidence is brought on record as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No name of student of assessee institution is mentioned. It would not be disclosing any cash received by the assessee trust from the students at the time of admission as observed by the ld. CIT. Only on the back of one paper, Chitra Mangala is noted, but no evidence was found of payment of any amount to the assessee trust. It, therefore, appears to be the dumb documents and would not lead anywhere to prove the case of the Revenue Department. The same seized papers, therefore, are not admissible in evidence against the assessee, as also denied by the assessee. The presumption u/s. 292C of the IT Act has been rebutted. No evidence of actual receipt of on money/donations/capitation fee is found in search. No incriminating evidence or corroborative evidence was found in search against the assessee to support that the seized papers pertained to the assessee to prove receipt of any on money by the assessee trust. No person from investigation wing examined any of the student or parents to prove the payment of on money. Even the recovered documents have not been sent to any hand writing expert for getting their opinion to prove their nexus with the assessee trust and to put liability upo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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