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TMI Blog2021 (4) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... All these condonation averments have gone un-rebutted from the Revenue's side. As per the hon'ble apex court's landmark decision in Collector, Land Acquisition Vs. Mst.Katiji & Ors [167 ITR 471] (SC) and University of Delhi Vs. Union of India, Civil Appeal Nos.9488 & 9489/2019, dt.17-12-2019 holding that such a technical aspect must made way for the cause of substantial justice, the impugned identical delay stands condoned. All these cases are now taken up for hearing on merits. 3. Both the learned representatives inform us at the outset that all these assesses' appeals challenge correctness of the Pr.CIT's order withdrawing their respective Section 10(23C)(vi) approvals. And that we ought to take up ITA No.320/Hyd/2020 in the case of Karshak Vidya Parishad as the 'lead' case for the sake of convenience and brevity. We thus treat the above case as the 'lead' one raising the following substantive grounds: "1.The order of the Pr.CIT (Central), withdrawing the exemption granted u/s.10(23C)(vi), is arbitrary, erroneous, without proper reasons and bad in law. 2.The LearnedPr.CIT (Central) erred in issuing common show cause notice for both 12A and 10(23C)(vi) which is bad in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval already granted in 2009 by the CCIT, without proper authority and finding any defects from the year 2009 onwards. 13.Without prejudicial to the above grounds on withdrawal of approval, we strongly object for withdrawing the approval u/s.10(23C) (vi) of the Act, retrospectively with effect from the date of its sanction in 2009, which is against the legal precedence on the issue. 14.On the facts and in the circumstances of the case Ld.Pr.CIT was under misconceoption while holding that the appellant has done real eatate business, when, in fact, the appellant has just sold out its agricultural lands, desperately, only to discharge its pressing bank liability, which was taken for the purpose of the trust and in the interest of continuing the charitable activity in running education institutes without any hinderance. 15. Ld.Pr.CIT has erred in cancelling the approval u/s.10(23C) of Act, drawing inference that the books of account are not proper, without preperly and judiciously appreciating that the society has maintained books of account, got them audited u/s. the Act, Audit Report was submitted and merely submission of explanation to AO with regards to income and exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Paper Book filed by the undersigned. It is also submitted that as per Notification No.SO 3215(E)[No.60/2019](F.No.370142/ 14/20 18-TPL] (dated 5.9.2019, issued with regard to amendment of Rules 2C and 2CA of the Income Tax Rules, the PCIT has jurisdiction for revocation of approval granted ix] s 10(23C) of the Income Tax Act. It is humbly submitted that the assessee has not raised the issue of jurisdiction before the PCIT and the same is raised for the first time before the Hon'ble ITAT and the assessee was not prevented by any sufficient cause in not raising the said ground before the PCIT. 4. In light of the above , the appeals may kindly be dismissed and the order of the PCIT may kindly be sustained". 5. We have given our thoughtful consideration to the rival pleadings regarding assessee's petition dt.16-10-2020 seeking to admit its above stated additional grounds. There could be hardly any dispute that the very question of Pr.CIT(Central)'s jurisdiction herein to withdraw Section 10(23C)(vi) approval goes to root of the matter. That being the case, we quote hon'ble apex court's landmark decision in National Thermal Power Co. Ltd., Vs., CIT [229 ITR 383] (SC) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h it is established; ii) The assessee will not invest or deposit its funds (other than voluntary contributions received and maintained in the form of jewellery, furniture) for any period during the previous years relevant to the assessment years mentioned above otherwise than in anyone or more of the forms or modes specified in subsection (5) of section 11; iii) This order will not apply in relation to any income being profits and gains of business unless the business is incidental to the attainment of the objectives of the assessee and separate books of accounts are maintained in respect of such business; iv) The assessee will regularly file its return of income before the income tax authority in accordance with the provisions of income tax act, 1961; v) That in the event of dissolution, its surplus and the assets will be given to a charitable organizations with similar objectives and no part of the same will go to any of the members of M/s. Karshak Vidya Parishad, Hyderabad500013. vi) Approval granted by this order is subject to the fulfilment of the conditions contained in the provisions to section 23c and its subject to cancellation in terms of proviso 13 to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Proposal for withdrawal of approval: 2.1 During the assessment proceeding in consequential the search, it was observed by the assessing officer that the society acted in violation of the conditions laid down for approval u/s.10(23C). The Assessing Office vide letter dated 06.12.2019 sent the proposal for withdrawal of approval u/s.10(23C). The Assessing Officer in her detailed proposal cited various violations as detailed below: i) No proper books of accounts were found during the search which would authenticate that the receipts of the institution were applied to its stated / approved objectives. ii) The society was required to maintain regular books of accounts, reflecting the actual operations of the society. These books of accounts are to be audited and form 10B is required to be filed, along with return of income, certifying the correctness. of books of account. But it is found that the society's books of accounts are not regularly maintained and the financial statements submitted are manipulated and unsubstantiated. iii) As per the receipts and payments accounts submitted during the assessment proceedings, heavy amounts were shown as payments towards various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vouchers and ledger account copies pertaining to the said expenditure have been furnished even after several questionnaires and show-cause notices. Hence, without sufficient evidence and non-submission of books of accounts from the assessee-societies, it cannot be established beyond doubt that the quantum and nature of expenditure incurred by them is correct." 3.2 Subsequently another show cause was issued on 20/12/2019 as there is a change of incumbent. The issues raised therein are as under. i) No proper books of accounts were found during the search which would authenticate that the receipts of the institution were applied to its stated / approved objectives. ii) The society was required to maintain regular books of accounts, reflecting the actual operations of the society. These books of accounts are to be audited and form 10B is required to be filed, along with return of income, certifying the correctness of books of account. But it is found that the society's books of accounts are not regularly maintained and the financial statements submitted are manipulated and unsubstantiated. iii) As per the receipts and payments accounts submitted during the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere suspicion cannot form basis for withdrawal of approval. As a society is in deep financial trouble the lands had to be sold and all the sale proceeds were utilized for the purpose of stated objectives of the society. Therefore, it is submitted that the foundation requisite for the withdrawal of approval u/s.10(23C) is not fulfilled in assessee's case and, hence, it is requested to drop the proceedings. 5.ISSUES FOR CONSIDERATION: I have carefully considered the facts and circumstances of the case and have gone through the submission made on behalf of the society. I have also considered the material found and seized during the search operation and also statement recorded during search and post search investigation. 5.1 NON MAINTENANCE OF BOOKS / FURNISHING WRONG FINANCIAL STATEMENTS TO THE DEPARTMENT 5.1.1 On examination of entire facts, it is seen that the society which is required to maintain regular books of accounts which would reflect the actual day to day to day operations of the society, did not do so. These books of accounts are also required to be audited and Form 10B needs to be filed along with the return certifying the correctness of the books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained and there are financial transactions outside the books of accounts then the statement that the society's activities are being carried out as per the objects remains only on paper. Nonmaintenance of books in itself reliects the intention of the society members I trustees to hide the actual transactions from the eyes of the approving authority. There is a catena of decision the non_maintenance of proper books of accounts and carrying out of the operations I financial transactions outside the books of accounts casts the shadow on the objectives of the society and hence the genuineness of the society. 5.1.4 The search revealed the fact that the assessees' books were never regularly maintained and there have always been transactions out of the books of accounts. Evidence for transactions outside books of accounts were found during the search. Had the search & seizure operation has not taken place these receipts would never have been brought to the notice of the income tax department. The society's approval is granted subject to the conditions specified therein. The assessee by not reflecting the transactions in the books of accounts has conveniently avoided to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way to divest the society land at less than market price with obvious intentions. Above all till date the assessee society is not able to submit its correct receipts and payment account along with relevant proof to show that the society's funds have been utilized for the furtherance of objective of the society in accordance with the approval granted by the prescribed authority. 6.2. A perusal of provisions of sec 10(23C) clearly show that the approval to the society is granted subject to the conditions laid down in the then proviso 13. The relevant provisions of Section 10(23C) reads as under:- Government or the prescribed authority is satisfied that- (i) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not- (A) applied its income in accordance with the provisions contained in clause (a) of the third prouiso; or (B) invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso ; or (ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed by Government. A private aided or unaided professional institution or any other educational institution of a State is required to collect fees with regard to infrastructure and benefit of students of that educational institution. Collection of money over and above fee prescribed by Committee would amount to collection of capitation fee and such an institution would face legal conseqeunces for same (Vodithala Education Society Vs ADIT, [2008] 20 SOT 353 (HYD)]. 6.6 In the case of SCIENTIFIC EDUCATIONAL ADVANCEMENT SOCIETY v. UNION OF INDIA AND ANOTHER [2010], 323 ITR 84 (P&H), the Hon'ble High Court held that Educational institution should exist solely for purposes of education and if it is not, the society is not eligible for exemption u/s.10(23C)(vi) of the Act. 6.7 The Hon'ble ITAT, Hyderabad vide their orders on 22.3.2012 in the case of M/s.Islamic Educational Society had observed, as under: "Further, we find that the Constitutional Bench of Apex Court in the case of T.M.A.Pai Foundations and others Vs State of Karnataka & Others (2002) 8 SCC 481 examined the issue of collection of capitation fees for the admission of students over and above fees prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meters for the same and only bona fide, chaste and pure Educational Institutions could expect such exemptions from the Income Tax which as per the said norms and the rules of interpretation of such provisions of exemption have to be strictly construed by the Courts of law. Any liberal or flexible interpretation 'looking over' the strict compliance of the conditions is likely to defeat the very purpose of grant of such exemption and the business houses which additionally want to run Educational Institutions also as business enterprises cannot be allowed to take the benefit of exemption from Income Tax. under the cover of a registered Educational Trust through the Books of Accounts of the Trust, in which all kinds of other business activities may keep on happening. 24. It is only after the search operations under Section 132 of the Act, which in the present case revealed the ugly part of the Trust activities and the reasons based on such material gathered by the Income Tax. Authorities cannot be brushed aside and such reasons as stated in the impugned order are found to be sufficient for upholding the correctness of the impugned order. .................................. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed Authority during that period. Consequent to search operation, the aforesaid group cases were centralized with ACIT, CC-2(4), Hyderabad under the administrative control of PCIT(Central), Hyderabad. The CIT(E) amongst others PCITs, on recommendation of PCIT(Central) passed 127 orders assigning the cases to ACIT, CC-2(4), Hyderabad. The proviso to Section 10(23)(C)(vi) of the Income Tax Act, 1961 read with rule 2CA of the Income Tax Rules, 1962 empowers the Prescribed Authority under the Act to withdraw the approval granted under such-section as per the provisions of the section10(23)(C)(vi) of the IT Act, 1961. 4. By an earlier CBDT notifications in S.O.3026(E) and 3027(E) both dated 1st December, 2014, the CBDT has authorised the Commissioners of Income Tax (Exemptions) to act as 'Prescribed authority' for the purposes of subclause (vi) and sub-clause (via) of Clause (23C) of Section 10. Thus, the role of the Chief Commissioner for such purposes has been assigned to the Commissioner of Income Tax(Exemption). This was, however, omitted w.e.f. 05 November, 2019 vide CBDT Notification No.S03215(E)/No.60/2019 in F.No.370142/14/2018 - TPL. The CBDT vide such noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hdrawn the assessee's approval with effect from the date it had been granted the same (supra). And that the latter action also involved illegality since this approval had come way back in the year 2009 as against the search carried out almost after a decade i.e., 23-03-2018. We thus adopt strict interpretation in the given facts and circumstances of the case in the light of Rule2CA of the Income Tax Rules, 1962 and going by hon'ble apex court's constitutional bench decision in CCCE Vs. Dilip Kumar and Company (2018) [9 SCC 1 (SC)] and conclude that the impugned order withdrawing the assessee's approval is not sustainable for want of the Pr.CIT(Central)'s jurisdiction. We make it clear that we are dealing with an instance of patent lack of jurisdiction at the threshold itself which cannot be made good in latter stages. 9. There is yet another equally significant aspect of the matter before us. There is hardly any dispute that the Pr.CIT's order; assuming but not accepting it as correct, has withdrawn the assessee's approval from the day which was granted the very relief i.e., from 27-03-2008 turning out to be well beyond the period of show cause notice itself. And that too, without ..... X X X X Extracts X X X X X X X X Extracts X X X X
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