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TMI Blog2020 (9) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... ny of the conditions laid down as above. There have been deficiencies in the infrastructure as found by the first report which were found to have been rectified by the second committee comprising of Addl. Secretary, Go I Dean AIIMS, Addl. DG, DGHS, and keeping in view the fact that MCI has granted due permission for the academic session 2010-11, keeping in view the fact of non- sanction of prosecution of Sh. Ketan Desai, keeping in view the order of the Hon ble High Court of Delhi, dropping the proceedings till sanction is received, keeping in view the submission of the revenue that no prosecution is pending against the assessee as on now, keeping in view the aims objects of the trust are in consonance with the provisions of Section 2 (15 ) there has been no violation of clause (ii) para 4 of the trust deed as alleged by the ld. PCIT, we hereby hold that the order of the ld. PCIT dated 27 .10 .2017 cancelling the registration since inception, u/s 12AA(3) of the Act is legally not valid. 1) The order of the ld. PCIT cancelling the registration since inception is hereby revoked. 2) The order has been passed in accordance with the provisions of the Income Tax Act, 1961 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in withdrawing registration under section 12 AA(3) of the Act since inception and same is without jurisdiction and contrary to the statutory provisions. 3. The instant appeal filed by the assessee is directed against the order of the learned Pr. Commissioner of-Income Tax dated 27.10.2017, whereby learned Pr. CIT has passed an order u/s 12AA(3) r.w.s. 12A of the Act and cancelled the registration granted to the assessee u/s 12A of the Act by the CIT-XI, Chandigarh-II, Chandigarh vide F.No. CIT/CHD- II/Tech/3612 dated 02.04.2005. The facts in brief leading to the instant appeal are as under: 4. The assessee assessee is a charitable trust and was established in the year 2003. The assessee trust is running medical college i.e. educational institutions. Besides the educational institutions, the assessee trust is also running a hospital at Banur, Punjab. Since, the objects of the assessee trust being charitable within the meaning of section 2(15) of the Income Tax Act, 1961 and hence the assessee trust was granted registration u/s 12AA of the Act on 02.04.2005 by the Commissioner of Income Tax vide an order CIT/CHD-II/Tech/3612. Apart from the registration, the assessee was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Dr. Ketan Desai, President of MCI, Sh. J.P. Singh and Dr. Sukhwinder Singh, Vice-Chairman of Gyan Sagar Medical College on the allegation that for permission for admission of 4th Batch of MBBS Srudents of Academic Year 2010-11, undue favours has been given to the assessee trust for money. 13. After 2 days of filing FIR, CBI had conducted physical inspection and did the videography of the entire college which was submitted in the CBI court along with the report filed on 16.09.2011. As per the submissions, in this videography all the deficiencies which were observed in the first inspection of MCI held on 11/12.01.2010 were found to be rectified. In this videography the auditorium is seen to be under construction. The CBI in its Chargesheet filed in the CBI court had stated that the only deficiency found by them during the inspection conducted by CBI was of the auditorium. 14. 25.04.2010: After the lodging of the FIR, a letter was issued by the Ministry of Health Family Welfare to constitute a three member fact finding team to inspect the medical college again to verify whether the recommendations made by the MCI on 05.04.2010 were in order or not. 15. 26.04.2010: Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein on the aforesaid allegation of alleged payment of illegal gratification of ₹ 2 Cr. to Dr. Ketan Desai, an addition was made by treating the same as income earned from undisclosed sources in the hands of the assessee trust. 21. On 27.10.2017, the ld. Pr. CIT passed an order, wherein the registration granted u/s 12AA of the Act was cancelled since inception on the ground that assessee trust is allegedly involved in nefarious activities for inducting of fresh batch of students for academic session without requisite infrastructure. It was submitted that the order of the ld. Pr. CIT withdrawing the registration granted to the assessee u/s 12AA of the Act since inception is unsustainable in law for the reason that the solitary basis of the ld. Pr. CIT that assessee trust was trying to pay bribe of ₹ 2 crore to Dr. Ketan Desai, the then Chief of Medical Council of India for getting permission for admission of fresh batch of students, is factually incorrect and is without any material and infact is based on the FIR and Chargesheet which infact is merely in the nature of allegation. 22. 12.02.2018: Since, Shri Ketan Desai was a public servant, as such, before proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h year MBBS Course in the said medical college. It was argued that, therefore, permission was granted to the Gian Sagar Medical College and Hospital purely on merits and as such, question of any quid pro quo does not arise at all. It was argued that after the allegation of alleged bribe, the CBI Team visited the premises of the trust several times, inspected its accounts and infrastructure which was video graphed also and then found no discrepancy and rather mentioned the institution having world class infrastructure and also could not found any deficiency in the books of accounts for the transaction of ₹ 2 crores which were never paid by the institution nor there was any evidence of such kind of transaction in its books of accounts. Therefore any allegation that any alleged bribe was paid for getting the permission for admission in fourth year is wholly misconceived and unsustainable in law as neither the assessee has paid any such bribe nor there was any occasion for it to pay any such alleged sum. 26. It was argued that it is not the allegation that assessee trust is not carrying out the activities as stated in its objects. It was also not the allegation that activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which allegation is factually incorrect and without any material. 29. It was argued that exemption u/s 11/12 of the Act has been withdrawn on the reason that the learned Pr. CIT has withdrawn the registration granted to the assessee u/s 12AA of the Act by invoking section 12AA(3) of the Act with retrospective effect since inception. It is submitted that aforesaid action of the ld. Pr. CIT cancelling the registration granted to the assessee since inception is unsustainable in law. The ld. AR relied on the order of the the Hon ble High Court of Allahabad in the case of ACIT vs. Agra Development Authority reported in [2018] 90 taxmann.com 282 (Allahabad) wherein their lordships have held as under: 49. In the context of the Income Tax Act, 1961 it is undisputed that the grant of registration is a onetime affair. The assessee is required to apply for registration under Section 12-A of the Act. Once the assessee has been registered under Section 12-A of the Act, by a specific order passed by the Commissioner, it stands established for the purpose of the Act that the activity being pursued by that assessee is for a charitable purpose , under Section 2(15) of the Act. 50. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 07.05.2007 . 2. During the course of enquiry conducted by DDIT(Inv.), Patiala in the case of M/s PACL group of cases on 22.03 . 2010, it was brought on record that CBI had arrested Sh. Kamaljit Sing, CEO of M/s Gian Sagar Medical College Hospital during his official duty on 22.04 .2010 owing to the allegation that he has delivered of ₹ 2 Crore to Dr. Ketan Desai, the then Chief of Medical Council of India through a middleman Sh. J.P. Singh. The same fact was mentioned in the Appraisal report of the DDIT(Inv.), Patiala. 3. On the basis of enquiry conducted by DDIT( Inv.), Patiala and CBI, the AO added the amount of ₹ 2 crore as undisclosed income of the assessee for AY 201-12 which was subsequently confirmed by Ld. CIT(A)-30 , New Delhi vide his order dated 20 .01. 2016 in ITA No. 16/14 -15/1593 . 4. In view of the facts circumstances narrated above, after affording reasonable opportunity to the trust registration granted u/s 12A vide order dated 02.04.2005 to the assessee trust, was cancelled since inception, vide order dated 01. 03.2016 by the Pr. CIT(Central)-3 , New Delhi. 5. The assessee filed appeal against this order before the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pic venture of running of medical college and thereby seeking to claim exemption on the income so generated under section 11 and 12 of the I.T. Act. It is further noted that due to nexus of corruption by way of bribe and criminal misconduct by the assessee trust, registration of the trust was cancelled since inception u/ s 12AA(3 ) of the Income Tax Act, 1961. A Charitable trust conduct must be at par with its provision of trust deed and as, per existing law. Its misconduct and desire to defy rules and norms have been exposed by virtue of the bribe activities. Such incidents cannot be classified as charitable by any reckoning. Such organizations which do not carry any charitable activity, cannot be granted registration. In these facts circumstances, I am satisfied that the activities of the trust axe not genuine and not being carried out in accordance with the objects of the trust. Accordingly, after affording reasonable opportunity to the trust, registration granted u/ s 12 A vide order dated 02 .04.2005 to the assessee trust is cancelled since inception. 32. Heard the arguments of both the parties and perused the material available on record. 33. We find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... students for the academic session 2010-2011. Sir, I am directed to convey the approval of Board of Governor of Medical Council of India for renewal of permission for admission of 4t h batch of 100 (one hundred) MBBS students for academic year 2010-2011 at Gian Sagar Medical College, Patiala. The Board of Governors has granted approval after consideration of the Assessment Report dated 16th 17th June 2010 submitted to Board of Governors of MCI. The permission is however, subjected to the condition that the admission process may be completed as per time schedule prescribed in the regulation of Medical Council of India. I am, further directed to inform that you and your institution are fully responsible to fulfill and maintain norms including that- infrastructure both, physical human resource; teaching faculty and clinical material etc. Throughout the academic year as stipulated in Medical Council of India in case false/ wrong declaration or fabricated documents have been used for procuring permission of the Board of Governors and the said misconduct is brought to notice or comes to the knowledge of the MCI at stage during the current academic year, your institution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36. At this juncture, we have specifically asked the representative of revenue about the ongoing case. The reply of the revenue is reproduced as under: Respected Madam, As per the records available with this office, no prosecution matter is pending against the above mentioned assessee at any stage. Regards, Piyush Kothari DCIT, CC 27 , New Delhi 37. We observe that, the ld. PCIT has revoked the approval u/ s 12AA(3 ) holding that the assessee trust was engaged in the nefarious activities for inducting of fresh batch of students for the academic session without the requisite infrastructure. It was held that it is a clear violation of (ii) of para 4 of the trust deed, simultaneously, violating the provision of Section 2(15 ) of the Act while carrying out of its activity. The ld. PCIT also held that the society was established for a charitable purpose and since there was criminal misconduct by the assessee trust, registration of the trust was cancelled since inspection. For the sake of ready reference, the operative portion of the order of the ld. PCIT cancelling the registration u/s 12AA(3 ) is reproduced hereunder: 7. After considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cs, laboratories, Medical Colleges for the welfare and uplift of the general public, particularly the socially backward group and award scholarship In India for study, research, training, apprenticeship for all or any of the above said ii) To arrange promotion of general health including sanitation and environment. iii) To organize School health programs in coordination with local doctors including government doctors. iv) To organize seminars or various education health topics in schools, educational institutions. v) To set up and run or assist the setting up and running of Adult education centers and coaching centers. vi) To educate and train medical students, engineering students, nurses, midwives and hospital administrators and to grant such diplomas/degrees or recognition as the Trust may prescribe or deem fit from time to time. vii) To grant stipend, scholarship or any other assistance or otherwise to deserving students or scholars in the field of education with special emphasis on the following specialties with an undertaking from them that they would support a similar scholarship when able, after their settlement in life: Medicine, Dentistry, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in any activity which promotes violence, terrorism, fanaticism or political favouritism between the political party verses another. Trust's objective is strictly humanitarian with no political agenda of any sort whatsoever. iii) To receive grants, or aid in the form of money or material for the fulfillment of the objects of the Trust from the Central Government, State Government, Social services organizations and individuals. iv) To do all necessary things for and incidental or conducive for the attainment of the above objectives of the Trust. v) The above objects shall be independent of each other. 40. We have also examined the provisions of Section 12AA, reads as under: [Procedure for registration. 12 AA. (1) The [***] [Principal Commissioner or ] 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 12 A, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub- section (1 ) of section 13 , then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution: Provided that the registration shall not be cancelled under this sub- section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.] 41. The ld. PCIT cancelled the registration basically on two premises, 1) There has been a violation of clause (ii) of the para 4 of the trust deed and 2) Violation of provision of Section 2 (15 ) of the Act while carrying out the activity. The two reasons given by the ld. PCIT are also being examined. 42. The clause (ii) of the para 4 of the trust deed reads Trust shall not be involved in any activity which promotes violence, terrorism, fanaticism or political favouritism between the political party verses another. Trust' s objective is strictly humanitarian with no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n u/ s 12AA(1 )(b) or has been obtained registration at any time u/ s 12A. The ld. PCIT can cancel the registration if the conditions mentioned therein are not satisfied or the activities of the trust are not genuine or the activities are not carried out in accordance with the objects of the trust. We do not find that the ld. PCIT has brought out any of the conditions laid down as above. 45. Hence, keeping in view the entire facts of the case, that there have been deficiencies in the infrastructure as found by the first report which were found to have been rectified by the second committee comprising of Addl. Secretary, Go I Dean AIIMS, Addl. DG, DGHS, and keeping in view the fact that MCI has granted due permission for the academic session 2010-11, keeping in view the fact of non- sanction of prosecution of Sh. Ketan Desai, keeping in view the order of the Hon ble High Court of Delhi, dropping the proceedings till sanction is received, keeping in view the submission of the revenue that no prosecution is pending against the assessee as on now, keeping in view the aims objects of the trust are in consonance with the provisions of Section 2 (15 ) of the Act, keeping in view that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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