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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 ..... pany [ 2018 (7) TMI 1826 - SUPREME COURT ] 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. 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 There is hardly any dispute that the Pr.CIT s order; assuming but not accepting it as correct, has withdrawn the assessee s approval from the day which was granted the very relief i.e., from 27-03-2008 turning out to be well beyond the period of show cause notice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 even indicating as to how the assessee had violated the conditions of its approval granted earlier in all these intervening assessment years wherein it had also been assessed without any violation of the approval s conditions. We therefore rely upon our foregoing detailed discussion and hold that Pr.CIT(Central) herein has erred in law and as on facts in withdrawing the assessee s approval granted u/s.10(23C)(vi) of the Act. The assessee has also filed a detailed case law paper book as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 (date of original sanction of approval), while the show casue notices mentioned only some points for one year. 4.The Pr.CIT show cause notice for reasons and years are not matching with withdrawing order passed u/s. 10(23C)(vi). 5.The Ld.Pr.CIT ought to have appreciate that fact that to withdraw exemption u/s.10(23C) separate show casue notice to be issued for each year separately but with one notice mentioning some points cannot be correct. 6. The Ld.Pr.CIT without examining the information from the assessee and even before completing the Assessment withdrawing exemption u/s.10(23C) in invalid. 7.On the facts and in the circumstances of the case the Ld.Pr.CIT has mentioned one year in show casue notice given and without analyzing the replies given, Pr.CIT has erred in passing order u/s.10(23C)(vi) cancelling for all the years in six days is not correct. 8. The Ld.Pr.CIT has grossly erred in withdrawing the approval u/s.10(23C) of the Act, without judiciously appreciating the submissions and explanations made. 9.On the facts and in the circumstances of the case, the revocation order passed by the Pr.CIT, withdrawing the approval already granted u/s.10(23C) in the year 2009 by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time before or at the time of the hearing . 4. Coupled with this, assessee/appellant has filed its petition on 16-10-2020 seeking to raise additional grounds. Learned CIT-DR has vehemently opposed assessee s additional grounds petition at this alleged belated stage. His case is that the assessee has tried to make out altogether a new case challenging the Pr.CIT s jurisdiction which does not deserve to be admitted. He has also taken pains to file a brief note objecting assessee s admission of additional grounds as under: The following synopsis of arguments made during hearing before the Hon'ble ITAT on 17/02/2021 is filed as directed by the Hon'ble ITAT on the date of hearing. 1. In all the above cases, Search Seizure Operation conducted by the Department revealed that there is adequate evidence of the assessee's doing real estate business which is beyond the scope of charitable activity. 2. In this regard, a detailed proposal was submitted by the ACIT, Central Circle-2(4), Hyderabad to the Pr.Commissioner of Income Tax(Central), Hyderabad for cancellation of registration u/s 10(23C) granted to the assessee (The details are filed at pages 1-81 of Paper- Book filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee; provided, all the relevant facts are already on record. We go by the very analogy and admit the assessee s additional grounds herein above. 6. We next notice that the Pr.CIT(Central) s order under challenge withdrawing the assessee s approval contains the following detailed discussion: 1. Back Ground: M/s. Karshak Vidya Parishad was granted approval u/s.10(23C)(vi) of the I.T Act, 1961 by the CCIT, Hyderabad-1, vide proceedings in F.No.CC/ Tech.-1/22B(62)1 2007-08, dated 27.03.2008. 1.2 Search seizure operations were conducted on 23.03.2018 in the case of the above institution as being part of Aurora group of cases, during which various documents and incriminating material were found and seized. The incriminating material found during the search revealed that the society was carrying activities which are not in accordance with the objects of the society as approved by the Chief Commissioner. It was also revealed that the activities of the society are not entirely genuine. 1.3 On analysis of bank accounts it was observed that there were unexplained cash credits in the bank accounts of the society. Another finding of the search is that the society did not maintain regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on referred to in subclause (iv) or trust or institution referred to in sub-clause (v) is notified by the Central Government or is approved by the prescribed authority, as the case may be, or any university or other educational institution referred to in sub-clause (VI) or any hospital or other medical institution referred to in sub-clause (via), is approved by the prescribed authority and subsequently that Government or \he prescribed authority is satisfied that (1) 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 proviso; 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- (A) are not genuine; or . (B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved; or (iii) such fund or institution or trust or any university ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts of which were not fully reflected in the receipts and payments accounts filed along with the return. However, subsequently, the receipts are included and the payments were correspondingly increased to balance the receipts. The difference between the original payments as per returns and the revised payments as per the receipts and payments accounts submitted during the assessment proceedings remain unsubstantiated due to lack of evidence of such payments. Therefore] the genuineness of application of the funds towards the approved objects of the society remains unsubstantiated. In view of these violations AO strongly recommended for withdrawal of approval u/s.10(23C). 3. Show Cause for withdrawal: 3.1 Vide letter in F.No. Pr.CIT(C)/10(23C)/20-19-20 dated 10.12.2019 a detailed show cause was sent to the assessee asking it to explain why the society's registration u/s.12A should not be cancelled and also why the approval u/s.10(23C) should not be withdrawn. The reasons specified in the show cause are as under: The societies are required to maintain regular books of accounts, reflecting the actual operations of the societies. These books of accounts are to be audited and Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e society sold certain lands the receipts of which were not fully reflected in the receipts and: payments accounts filed along with the return. However, subsequently, the receipts are included and the payments were correspondingly increased to balance the receipts. The difference between the original payments as per returns and the revised payments as per the receipts and payments accounts submitted during the assessment proceedings remain unsubstantiated due to lack of evidence of such payments. Therefore, the genuineness of application of the funds towards the approved objects of the society remains unsubstantiated. In response to the above show cause notices, the society furnished reply vide letter dated 24.12.2019. 4. Response of the assessee: 4.1 The gist of the submissions made by the assessee vide letter dated 24-12-2019 against the withdrawal of approval u/s.10(23C) are as under: 4.2 Due to introduction of fee reimbursement scheme, the institution started facing financial crisis because of non-receipt of reimbursement fee from the Government, because of this financial crisis the bank loans have become bad and banks tried to auction the lands belonging to the society. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evasive replied without any substantive documentary evidence. 5.1.2 All that the assessee had to say with regard to nonmaintenance of books is that the books have been regularly maintained and audited. The audited financial statements were filed along with the return of income. However, it is not substantiated by the assessee as to why revised receipts and payments had to be filed if the original receipts and payments / financial statements reflected the correct and entire activities of the assessee. The statement that the search party did not draw any inference against the society is not correct as the assessee did not reply to the questions raised by the search party properly. Further, adverse inferences if any would be drawn and finalized by the Assessing Officer at the time of finalizing the assessment order. It is also not correct that the assessee was not provided sufficient opportunity it is a fact on record that the assessee did not respond to various notices and show cause letters given during the assessment proceedings. However, the assessee failed to furnish the complete details to the department and have been changing its version time and again. 5.1.3 The assessee did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come itself is not reflected in the books it becomes impossible to the taxman to examine whether such income is applied for the furtherance of the society's activities. Once the receipt itself is not shown the assessee even need not explain whether the surplus is invested as per the provisions of section 10(23C). Therefore, non_maintenance of books of account and non-inclusion of entire receipts in the books is the well thought of ploy by the assessee to avoid compliance with provisions of section 10(23C). 6. conclusion: 6.1 On perusal of various materials found and seized, results of post search investigations and statements recorded from various persons during the search; it is observed that the assessee society has been continuously, time and again violating the conditions laid down for approval of the society u/s.10(23C). It is observed that no proper books of accounts were maintained for any of assessment years, in the absence of which the receipts and payments could not be authenticated. Therefore it is not possible for the tax authorities to examine whether the receipts of tile institutions were applied to its stated /approved objectives. It is also seen that revised rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification or, by order, withdraw the approval, as the case may be, and foruiard a copy of the order rescinding the notification or withdrawing the. approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer: 6.3 Thus, the Prescribed Authority is allowed to withdraw the exemption granted u/s 10(23C), if the prescribed authority is satisfied that educational institution has not applied its income exclusively and wholly for educational purposes, or invested or deposited funds in violation of clause (b) of third proviso, or the activities of the educational institutions are not genuine or are not being carried out in accordance with all or any of the conditions subject to which it was approved, the prescribed authority may withdraw the approval, after giving a reasonable opportunity of being heard. A copy of the order will be served on the educational institution and to the Assessing Officer. 6.4 The Hon'ble Apex Court in the case of Ms.Mohini Jain v. State of Karnataka Ors. (1992) 3 SCC 666, held that capitation fee was nothing but price of selling education and such tea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not entitled for exemption neither u/s.10(23C) or u/s.11 of the IT Act. 6.8 Hon'ble Madras High Court in the case of Prathyusha Educational Trust vs Principal Commissioner of Income tax vide its order dt.27/06/2019 while upholding the order of withdrawal of 10(23C) held as under: Furthermore, we find that the Assessing Officer while completing the assessment had held that the facts clearly prove that the affairs of the assessee are managed by the Managing Trustee in such a manner the funds collected from some of the students admitted to the institutions run by the assessee are taken away outside the books of accounts of the assessee without even issuing receipts and thereby setting apart these funds of the assessee for purposes other than the objects of the Trust. Further, the Assessing Officer pointed out that the assessee has violated its own objectives by diverting substantial portion of its funds by and to the Managing Trustee without truly recording in the books of accounts maintained by it and as these funds were diverted outside its bocks of accounts the audit report furnished does not reflect the true and correct affaire of the assessee. After referring to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it as merely a skeleton for the purpose of exemption to Educational Trust and rather than a real Educational Trust, solely existing for the purpose of Education. Such sham or bogus Trusts cannot be held to be entitled to exemption under the provisions of Section 10(23-C) of the Act and therefore the Respondent Authority has rightly withdrawn the approval of the petitioner - Trust under the said provision. 6.10 Therefore after carefully considering, the facts of the case and the decisions of various judicial authorities, I find that this is not a fit case for continuing the exemption granted u/s.10(23C)(vi) of the Income-tax Act, 1961. For the above reasons, I hold that the assessee society is not eligible for exemption u/s.10(23C)(vi) of the Income Tax Act. Therefore, the approval granted u/s.10(23C)(vi) of the IT Act by the Chief Commissioner of Income-tax, Hyderabad is hereby withdrawn w.e.f. the date of its approval. 7. We have given our thoughtful consideration to the foregoing legal issue of Pr.CIT(Central) s jurisdiction in withdrawing the assessee s approval with effect from the date the same was granted i.e., 27-03-2008. Learned CIT-DR s written submissions (supra) has reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose Section 10(23)(C)(vi) In respect of aforesaid cases as the cases are centralised with PCIT(Central), Hyderabad and the person holding that charge will become the prescribed authority in view of the afore mentioned amendment. This is for your information and further necessary action . 8. After giving our thoughtful consideration to the foregoing facts on record, we find that the Pr.CIT(Central) s clarification extracted in preceding paragraphs seals the outcome of the assessee s grievance. This taxpayer s detailed paper book pgs. 1 to 47 contain the ACIT, Central Circle s proposal(s) dt.10-06- 2019 and 12-06-2019 recommending cancellation of its approval at pgs.1 to 77 sent to the Pr.CIT(Central Circle), latter authorities show cause notice dt.16-09-2019 (pgs.82 to 98) issuing show cause thereby assuming jurisdiction u/s.10(23C)(vi), reply dt.03-10-2019 pg.99 and dt.04-11-2019 (pages 100 to 116) yet another fresh show cause notice in continuation to the earlier once coming from the Pr.CIT s office dt.20-12-2020 (pages No.117 to 121), assessee s reply dt.24- 12-2009, Pr.CIT s order sheet entries (pages 139 to 143) and his clarification dt.06-11-2020 (supra); stand perused. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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