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TMI Blog2025 (2) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... tration granted u/s. 12A of the Act cannot be cancelled during the proceedings carried out u/s. 12AB(4) of the Act. Assessee challenging the powers available in section 12AB that the show cause notice issued u/s. 12AA on 20.03.2024 is also invalid - Assessee stated that section 12AA(5) of the Act provides that nothing contained in section 12AA of the Act shall apply on or after 01.04.2021 - As in the instant case the proceedings for cancellation of registration have been initiated on 21.07.2023 and therefore even the registration u/s. 12A cannot be cancelled u/s.12AA of the Act in the instant case because the proceedings have been initiated u/s. 12AB which have been brought into Act w.e.f. 01.04.2021. Therefore, the show cause notice u/s. 12AA of the Act issued on 20.03.2024 for cancelling the registration u/s. 12AA(3) and 12AA(4) of the Act for the period 01.04.2019 to 31.03.2021 is invalid and ab-initio as the PCIT (Central) has issued the show cause notice dated 20.03.2024 in a section already stood discontinued from 01.04.2021 onwards. Thus, the assessee succeeds on this second limb of its legal ground. In the show cause notice PCIT has referred to 'specified violation' commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificate granted u/s. 12A/12AB of the Act and running a Medical College, Hospital and Research Centre. Even ld. PCIT has not referred to any other discrepancy in the regular day to day activity of the assessee trust except to the loose documents found during the course of search and that to only pertaining to F.Yrs. 2019-20 to F.Y. 2021-22. Total focus of the ld. PCIT has been around these documents referred in the impugned order but other than these documents nothing wrong has been found in the regular day to day activity of the assessee trust. We also notice that the alleged documents are only confined to the staff salary, doctor salary and capitation fee but the assessee trust is carrying out many more activities and the expenses are of much more magnitude which involves the amount spent towards building construction, medicine, machines, college building and other expenses which are appearing in the audited books of account. If it is established that the assessee trust/societies is carrying out genuine activities as per the objects for which they have been established, then the issue arising out of any loose paper/documents/ incriminating material alleging that the funds of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER : This appeal at the instance of assessee is directed against the order dated 27.03.2024 passed by PCIT (Central), Pune u/s. 12 r.w.s.12AA & 12AB(4) of the Income-tax Act, 1961 (in short 'the Act'). 2. Assessee has raised following grounds of appeal : "1. The Learned PCIT (Central) erred in assuming jurisdiction u/s 12A/12AA/12AB of the IT Act, 1961 and proceeding to cancel the registrations u/s 12A/12AA/12AB. Learned PCIT (Central) Pune ought to have appreciated that, 12A/12AA/12AB related jurisdiction, existing with CIT(Exemption) prior to the search, could not be transferred through order u/s 127 of ITA, 1961 by one CIT to another PCIT. 2. The Learned PCIT (Central), Pune erred in law and on facts in not dealing with many precedents of Honourable ITAT holding that, jurisdiction u/s 12A cannot be shifted /transferred through any order u/s 127 of the ITA, 1961. 3. The Learned PCIT-Central Circle, Pune erred in law and on facts in cancelling registration u/s 12A/12AA for the period from 1/4/2019 to 31/3/2021 without any cogent reasons. 4. The registration u/s 12A r.w.s. 12AB for the period from 1/4/2021 onwards is cancelled wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee trust on 16.02.2001. Thereafter, provisional registration was again granted on 28.05.2021 for the period from A.Y. 2022-23 to A.Y. 2026-27 u/s. 12A(1)(ac)(i) of the Act. A search & seizure action u/s. 132 of the Act was conducted at Mehul Group of cases on 25.08.2022 wherein the assessee trust was also covered. Allegedly various incriminating and loose documents were found and seized. Assessment proceedings were initiated by issuance of notice u/s. 153A for carrying out the proceedings. During the pendency of the assessment proceedings, ld. AO in light of second proviso to section 143(3) of the Act referred to ld.PCIT (Central) as the case was centralised under PCIT(Central) subsequent to search u/s. 132 of the Act. Based on the reference received from ld. AO dated 20.07.2023 a show cause notice was issued to the assessee trust on 21.07.2023 by ld.PCIT(C). In the said show cause notice, assessee was asked to reply about the issues arising out of the search proceedings which included partial receipt of staff salary doctors salary, PG stipend and capitation fee in cash by the trustee of the assessee trust. The details of the alleged cash receipt on account capitation fee, refund o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding, it is beneficial to discuss the general principles of the Act regarding charitable activities and benefit of exemption. i. In order to get the benefit of exemption u/s 11 and 12 of the IT Act, the trust or institution needs to apply for registration u/s 12AA or 12AB of the Act. Income derived from the property held under the trust shall have to be applied for its 'objects' in India. Only then the exemption u/s 11 of the Act would be applicable to these registered entities. ii. As per Sec 12AA of the Act, before granting registration the authority will have to satisfy itself about (a) the genuineness of the activities of the trust or institution and (b) compliance of such requirements of any other law for time being in force by trust or institution as are material for the purpose of achieving its objects. Thereafter, satisfying itself about the objects and genuineness of the activities of the trust or institution registration can be granted. iii. If the concerned authority after granting registration is satisfied that either (a) the activities of such trust or institution are not genuine or (b) are not being carried out in accordance with the objects of the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violations are established on enquiry, then subject to certain conditions, the registration can be cancelled. v. Till the trust or institution is dissolved or ceases to exist, it is a live entity, and every activity of trust or institution will have to be seen from the perspective of being genuine and/or within the objects of the trust or institution. Activity having financial implications will have to stand the tests of being genuine as well as within the objects of the trust or institution. This means that the application of income claimed by the trust or institution on an activity must be genuine and the activity itself must be within the objects of the trust or institution. To elucidate further it can be said that if the application of income or the expenses claimed by the trust or institution are found to be bogus or fraudulent then such activity involving application of income cannot be considered as genuine activity or an activity as per the objects of the trust or institution. Further, even if the application of income is genuine but the activity per se is not as per the objects of the trust or institution then in both the cases, the said trust or institution would be lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee trust. Shri Rajanbhai Chimanbhai Patel whose name was frequently appearing in the excel sheet prepared by Shri Balaji Pandurang Alli, has also accepted the same modus operandi and has stated that Shri Pandurang kallepalli & Shri Umakant Dhange used to hand over the cash to him which was finally handed over to Shri Mehul B Patel or Shri Dhaval Patel (trustee of the assessee trust). The above facts are supported by the evidences in the form of bank account statements and copies of bearer cheques issued by doctors, staff, PG students to Cosmos Bank which were obtained from the bank. It is also noted that numbers of cheques used for such withdrawal from the account of one doctor were consecutive, which indicated that cheque book was solely used to give back part of the salary in cash. Otherwise there is no reason as to why numbers of such cheques which were used during different months in a year would be consecutive. There is no denial of the fact that Institute may be disbursing the salary/stipend to the doctors, staff and the PG students. But the evidences collected clearly indicate that part of the salary was taken back by the Institute run by the assessee trust every m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. He accepted that he collected cash from Shri Pandurang Kallepalli & Shri Umakant Dhage and handed it over to Shri Rajanbhai Chimanbhai Patel. 6.2.3 As the name of Shri Rajanbhai Chimanbhai Patel was mentioned multiple times in excel sheets maintained and prepared by Shri Balaji Pandurang Alli, these facts were confronted to Shri Rajanbhai Chimanbhai Patel, who is an employee of Mehul Construction Company Private Ltd. In his statement recorded u/s 132(4) of the Act dated 27/08/2022, he accepted that Shri Pandurang Kallepalli & Shri Umakant Dhage used to hand over the cash to him. He collected cash in the range of Rs. 20,00,000/- to Rs. 50,00,000/- on regular basis on instructions of Shri Mehul B. Patel, trustee of the assessee trust & Mr. Dhaval Patel and then he handed over the same cash to Shri Mehul B. Patel or Shri Dhaval Patel. He also accepted that the cash was generated from capitation fee received from students of the Institute run by the assessee trust against Quota Seats. He also confirmed that cash amounting to Rs. 2,86,00,000/- as reflected in the excel sheet was received by him. In the light of the above facts, it is evident that the assessee trust had received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessable by an Income-tax authority at serial numbers 225 to 227 and 236 to 241 specified in the notification of Government of India bearing number S.O. 2752(E) dated the 22nd October, 2014. 7.1.4 The Income-tax authorities mentioned at serial numbers 225 to 227 and 236 to 241 specified in the Notification of Government of India bearing number S.O. 2752(E) dated the 22nd October, 2014 are Principal Commissioners of Income-tax Nagpur- 1, Nagpur-2, Nagpur- 3, Pune-1, Pune-2, Pune-3, Pune-4, Pune-5, Pune-6. Hence the jurisdiction of Commissioner of Income-tax (Exemption), Pune is limited to the cases of persons in the state of Maharashtra excluding Mumbai & Navi Mumbai claiming exemption under section 10, 11, 12 13A & 13B of the Act and which are assessed or assessable by an Income-tax authority at serial numbers 225 to 227 and 236 to 241 as mentioned above. 7.1.5 The Notification No. 70/2014 dated 13.11.2014 provides for the jurisdiction of Principal Commissioner of Income-tax (Central), Pune. As per clause (b) of the notification, the Principal Commissioners/ Commissioners of Income-tax (Central) or Joint Commissioners of Income-tax subordinate to them, shall exercise powers a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s transferred u/s 127 of the Act, Pr. CIT (Central), shall exercise all the powers and perform the functions as stipulated in the I.T Act in respect of the case so assigned to Assessing Officers subordinate to him. iv) A bare reading of the provisions of section 120 reveal that an AO has been vested with the jurisdiction to assess the income of an assessee by virtue of the directions issued by the Board under sub-section (1) or sub-section (2) of section 120 of the Act. The direction u/s 120(1) is given by the Board, for the exercise of the powers and performance of the functions by all or any of the Income-tax Authorities, as specified u/s. 116 of the Act. As per sub-section (2) of section 120 of the Act, the Board may delegate its powers to Income-tax authorities as specified in section 116, for issuing the orders in writing, for the exercise of the powers and performance of the functions by all or any of the other Income-tax Authorities who are subordinate to it. 7.1.7 Thus, it can be said that once an order u/s 127 of the Act is passed transferring the jurisdiction of the person, the transferee Income-tax Authorities as mentioned in section 116 of the Act shall exercise all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee trust and as explained by the Accounts officer of the assessee trust i.e Shri Umakant Ramchandra Dhange in his statement recorded u/s 132(4) of the Act. He also accepted in this statement that the trustees/management received cash back from the stipend paid to PG students and salaries paid to the doctors and staff. He also accepted that the capitation fee in cash was taken from the students over and above their regular fees. Further, the above modus operandi also gets strengthened from the excel sheet found & seized from premise of Shri Balaji Pandurang Alli, Chief Accountant of the assessee trust. Shri Balaji Pandurang Alli, in his statement recorded u/s 132(4) also explained the data found in the excel sheet and also confirmed the above modus operandi of the assessee trust. Shri Rajanbhai Chimanbhai Patel whose name was frequently appearing in the excel sheet prepared by Shri Balaji Pandurang Alli, has also accepted the same modus operandi and has stated that Shri Pandurang kallepalli & Shri Umakant Dhange used to hand over the cash to him which was finally handed over to Shri Mehul B Patel or Shri Dhaval Patel (trustee of the assessee trust). The above facts are supported b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajanbhai Patel (employee of Mehul Construction Company Private Ltd) and Shri Vilas Jadhav (office boy at Mehul Construction Company Pvt. Ltd.) on the instruction of Shri Balaji Pandurang Alli, Chief Accountant and Shri Umakant Ramchandra Dhage, Accounts Officer of the assessee trust. He also accepted that the Institute/ management run by the assessee trust was taking cash back from the salary paid to doctors. ii) The statement of Shri Pandurang Kallepalli was confronted to Shri Vilas Jadhav (office boy at Mehul construction Company) and Shri Rajanbhai Patel (employee of Mehul Construction company) who also accepted that the Institute/ management run by the assessee trust was taking cash back from the salary paid to doctors. Further, in the statement recorded on oath, Shri Rajanbhai Chimanbhai Patel admitted that Shri Pandurang Kallepalli & Shri Umakant Dhage used to hand over the cash to him on regular basis, which was collected by way of the above modus. (iii) During search u/s 132, the statements of four doctors, one staff and four PG students were recorded in which they accepted that they parted with a portion of their salary every month in favour of the management through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p papers have been procured in running sequence number, on same date, notarized on same date and wording is also same. This proves the fact that these affidavits have been filed in a planned manner under the guidance, control and influence of their employer which is the assessee trust in order to generate evidence in favour of the assessee trust. In view of this, there is no reason to give any credence to these retraction affidavits. vii) As already discussed, the seized documents and bank statements corroborate the fact that cash was being taken back from the various employees after disbursal of salaries/stipend. It clearly establishes that the income of the assessee trust was not wholly applied towards its objectives and was in fact being diverted for the benefit of individuals associated with it and thus, it can be concluded that the assessee trust was indulging in specific violation as defined in Explanation to section 12AB(4) of the Act. Moreover, since the application of income earned as discussed above by the trust or institution has been found to be fraudulent, therefore, its activities cannot be considered to be carried out as per the objects of the trust. Accordingly, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mehul Patel and his family members as a family venture. The funds of the institute have been diverted for personal use of Mr. Mehul Patel and his family members/trustee. The books of account of the society were manipulated and window dressed to hoodwink the department. These funds could have been used for educational and health service purposes, to improve the quality of education and health and for reducing the education and health service cost for the weaker sections of the society. However, the members of the society have used it as a tool to earn profits for their personal benefit. The institute has not applied its income wholly and exclusively to the aims and objects for which it is established. (v) During post search investigation, the DDIT(Inv.) Unit-III(4), Solapur requisitioned various bank account statements. Further, copies of bearer cheques which were used to withdraw cash from accounts of salaried doctors, salaried staff and PG students were obtained from respective Banks. Following facts were found from these bank statements and copies of bearer cheques: (a) There were regular cash withdrawals in the pattern of Rs. 68,800/- and Rs. 34,400/- in case of salaried doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trustee Shri Mehul B. Patel. (ii) Further, Shri Pandurang Kallepalli, cashier of the assessee trust in his statement accepted that the Institute received capitation fee in cash from students. He also accepted that he collected cash and handed over the same to Shri Rajanbhai Patel (employee of Mehul Construction Company Private Ltd) and Shri Vilas Jadhav (office boy at Mehul Construction Company Pvt. Ltd.) on the instructions of Shri Balaji Pandurang Alli, Chief Accountant and Shri Umakant Ramchandra Dhage, Accounts Officer of the assessee trust. These facts were confronted to Shri Vilas Shankar Jadhav, office boy at Mehul Construction Company Pvt Ltd & Shri Rajanbhai Chimanbhai Patel and they accepted the same. (iii) In his statement, Shri Rajanbhai Chimanbhai Patel has accepted that he collected cash in the range of Rs. 20,00,000/- to Rs. 50,00,000/- on regular basis on instructions of Shri Mehul B. Patel, trustee of the assessee trust & Mr. Dhaval Patel and then he handed over the same cash to Shri Mehul B. Patel or Shri Dhaval Patel. He also accepted that the cash was generated from capitation fee received from students of the Institute run by the assessee trust against Quot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected. If the withdrawal of registration was to be done only prospectively from the date of detection of violation then the exemption already availed for the period when there was violation which was detected subsequently would get allowed by default. It will prompt the unscrupulous trusts to violate the conditions of registration u/s 12AA with impunity till it is detected and withdrawn from a prospective date. This is neither the intention of the Act nor such interpretation is permissible, which allows the mischief to succeed even for the period for which the conditions are not found to be fulfilled on ground that the registration can be cancelled only prospectively w.e.f. the date of detection of violation. (iii) Hon'ble Karnataka High Court in a Writ Petition No. 3468- 3472/2018 in the case of Navodaya Education Trust v. UOI has observed as under: "As far as the withdrawal of the approval with effect from 01/04/2009 is concerned, even that cannot be assailed, because the evidence and material discussed in detail in the impugned order reflect such entries in the Books of Accounts which reflect illegality having existing on record right from the Financial Year 2010-11 onwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d employees working with the assessee trust, assessments have been completed by accepting returned income and no evidence of cash received back from the salary paid to doctors/stall has been found while passing the assessment orders. The submission of the assessee trust has been considered. On perusal of the assessment orders of few doctors and employees submitted by the assessee, it is seen that the AO has held that in the returns of income, these doctors/employees had shown entire salary received from employer i.e. the assessee trust and no evidence of cash received by them from the assessee trust has been found. Out of these 08 doctors/employees referred by the assessee, statements of Dr. Chandrakant Sahebrao Waghmare and Dr. Ashok Kumar Rajput were recorded during the search proceedings and they had accepted that they had returned part of salary in cash to the Institute /management. It was also confirmed that they had handed over the blank bearer cheques with their signatures to Shri Balaji Pandurang Alli. It is pertinent to mention here that same modus operandi was confirmed by Dr. Nilesh Madhav Bhosale & Dr. Abdul Kayyum Shaikh and they have not retracted their statements. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, ld.PCIT (Central) cancelled the registration u/s. 12A/12AA for F.Y. 2019-20 to F.Y. 2020-21 and also the one granted u/s. 12AB from F.Y. 2021-22 onwards and the final conclusion drawn by the ld. PCIT (Central) is reproduced below : "In view of the above stated facts, it is clear that there is occurrence of specified violation as defined in clause (e) & (f) of Explanation below section 12 AB(4) of the Act since the assessee trust has not complied with the conditions mentioned at clauses m and p of Column 10 of Form 10AC vide which it was granted registration u/s 12A(1)(i)(ac) of the Act. Moreover, it is also established as discussed above in detail that the assessee has not carried out its activities for the objects for which it was constituted as it has not utilized its funds for its objects but for the personal benefit of its members. Therefore, its activities cannot be said to be genuine and it cannot be said that the assessee has carried out its activities in accordance with its objects. This fact makes the assessee trust liable for cancellation of registration as per the provisions of section 12AA(3) and 12AA(4) of the Act also(prior to 01/04/2021). 10. I am, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... During the course of search, statements of various persons were recorded. These person in their statement, admitted that, practice of handing over part of salary / stipend to the "a" trust officials, through bearer cheques, exists. One of the persons interrogated during search proceedings admitted payment of higher fees (i.e. four times of regular fees). For institutional quota, charging of higher fees is permissible. However, majority of the statements were retracted thereafter through sworn affidavits, by giving detailed reasons. Retraction affidavits were made two months time from the date of search. Copies of search statements and retraction affidavits are filed in Paper-Book-II. 1.13. Cancellation of registration Based on the seized documents (soft form and Diary page), and based on various statements recorded u/s 132(4), assessment proceedings were initiated. During the course of assessment proceedings, learned PCIT-CC initiated proceedings for cancellation of registration granted u/s 12A and 12AB. Replies of "a" were sought for. Appellant filed it's objections on technical aspects as well as on merits. However, learned PCIT-CC proceeded with the show cause notices and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his issue remained to be considered by learned PCIT. 2.4 Registration cancellation for "specified violations' is plausible only when, the PCIT is satisfied about the same. Point of PCIT, reaching a "satisfaction" stands at al higher pedestal, compared to earlier pedestal (say) ..AO has reason to suspect.... .. AO has reasons suggesting escapement... ..AO is of the opinion.. .. AO has reason to believe, etc. In present case, point of "satisfaction" is not reached. Statements recorded during the course of search have been retracted within two months time after search. Copies of all retraction Affidavits were filed on record. Same have been summarily brushed asides. Conclusions have been reached on mere suspicion of alleged irregularities. 2.5 Issue of cancellation of registration u/s 12AB ought to be tested at the end of Assessment proceedings (especially when, the Assessment proceedings are ongoing). Reason being that, issues of alleged irregularity gets elaborated /explained in detail during the scrutiny proceedings. Cancellation of registration, prior to completion of Assessment proceedings is premature step. 2.6. Key issue - Powers exercised and used by learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and relied heavily by the learned PCIT (Central)] c. "retractions" made by various doctors and students of the Appellant within two months from search date [whose statements were heavily relied upon by the learned PCIT(Central)] d. Explanation / submissions made by Appellant that, no any unaccounted asset/property/cash, etc. was found in residential premises of "trustees" Hence, the decisions based on the 1st notice dated 21/7/2023 are mere suspicions/assumptions/presumptions and hence, not as per law. B. 2nd notice issued u/s 12AA(3) and u/s 12AA(4) dated 20/3/2024 Copy of the said notice is given at Page 25 of the Paper-Book. Perusal of the said notice reveals that, learned PCIT(Central) has used powers u/s 12AA on 20/4/2024. It will be relevant to note wording of section 12AA(5) in this regard. The said sub-section reads as under "12AA(5) - Noting contained in this section shall apply on or after the 1st day of April 2021." From a literal reading of the above sub-section, it transpires that, the old procedure of registration/cancellation of registration, u/s 12AA, has ceased from 1/4/2021. Further, from reading of section 12AB, it transpires that, new procedure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (CPC) cannot be cancelled by PCIT(Central) in any case 3. Merits of the case 3.1. Statements recording and their subsequent retraction Copies of statement u/s 132 of the ITA, 1961 of employees, doctors, students are given at page 122 to 281 of Paper-Book-II. It is submitted that, statements were recorded under extreme pressure situation. Statements were misunderstood / misconstrued while passing the order dated 27/3/2024. It is submitted that the statements are retracted by majority of the persons. Copies of retraction of statements u/s 132 of the ITA, 1961 is given at Page 282 to 354 of the ITA, 1961. All retraction affidavits are brushed aside and not considered in their proper perspective. 3.2. Premature act to cancel 12A when assessment proceedings are ongoing The learned PCIT, CC has assumed the jurisdiction for cancellation of 12A registration of the appellant. It is submitted, learned PCIT ought to have considered various issues as will transpire from assessment proceedings. Now, in the assessment proceedings, additions can be made to the income of the appellant, if any irregularities emerge. Further, from a better perspective, such irregularities (if any), ough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court, after considering views of various other High Courts, has laid down that, exemption u/s 11 ought to be denied only to the extent of violative portion. Similarly, Appellant has referred to section 13(1) and 115BBI, wherein, withdrawal of exemption only for violative part is provided for. This changing principle of the I-T law has been glossed over by learned PCIT-CC." 9. Further, ld. Counsel for the assessee referred to legal compilation of case laws running into 206 pages and also relied on the following decisions : 1. Shri Jairam Education Society Vs. PCIT - ITA Nos.90 & 548/Ind/2019, dated 13.10.2021 2. CIT (Central) Vs. Shikshan Prasarak JMandali (2017) 86 taxmjann.com 7 (Bombay) 3. CIT(Exemptions), Pune Vs. Audyogik Shikshan Mandal (2019) 101 taxmann.com 247 (Bombay) 4. Maa Jagat Janani Seva Trust Vs. CIT(E) - ITA No.248/CTK/2023, dated 16.07.2024 5. Shri Shridevi Charitable Trust Vs. PCIT - ITA No.709/Bang/2023, dated 26.07.2024 10. On the other hand, ld. Departmental Representative apart from supporting the detailed finding of the ld.PCIT as extracted supra has also referred to the following case law compilation in favour of the Revenue : 1. Siddharth G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2AA be not cancelled. In reply, the assessee made multifold contentions challenging the jurisdiction of the ld. PCIT of passing the order of cancellation u/s. 12A, 12AA and 12AB(4) of the Act, the powers of the authority u/s. 12AB(4) of the Act to cancel the registration granted u/s. 12A of the Act, merits of the case contending that the allegations made against the assessee trust of receiving refund of cash in lieu of expenses incurred towards staff salary, doctors salary, PG stipend as well as receiving capitation fees are merely based on the statement of employees which have been subsequently retracted and the Pendrive and loose document found at the residential premises of employee has also been retracted at the subsequent stage and that the Managing Trustee of the assessee trust has denied to be indulged into any of such alleged transaction in the statement given during the course of search. However, the assessee failed to succeed before ld.PCIT and now the assessee is in appeal before this Tribunal raising multifold contentions, mainly the following three issues : a) Challenge to jurisdiction assumed by learned PCIT b) Challenge to powers available in section 12AB c) Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration of the trust are provided u/s. 12AB(4) of the Act which reads as under : "[(4) Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,- (a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or (b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or (c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall,- (i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation; (ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention of section 12A of the Act. Now in absence of any express powers whether the ld.PCIT was justified to issue show cause notice u/s. 12AB(4) of the Act for cancelling the registration u/s. 12A of the Act. To adjudicate this issue, we would first like to refer the judgment of Hon'ble Supreme Court of India in the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. Vs. CIT (2018) 90 taxmann.com 281 (SC) which is relevant as well as the ratio laid down therein. Hon'ble Apex Court has dealt with four questions and held as under : "The main questions, that arise for consideration in this appeal, are four : 17. First, whether the CIT has express power to cancel/withdraw/recall the registration certificate once granted by him under Section 12A of the Act and, if so, under which provision of the Act? 18. Second, when the CIT grants registration certificate under Section 12A of the Act to the assessee, whether grant of certificate is his quasi judicial function and, if so, its effect on exercise of his power of cancellation of such grant of registration certificate? 19. Third, whether Section 21 of the General Clauses Act can be applied to support the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer is not available after an enforceable right has accrued under the notification or order. Moreover, Section 21 has no application to vary or amend or review a quasi judicial order. A quasi judicial order can be generally varied or reviewed when obtained by fraud or when such power is conferred by the Act or Rules under which it is made. (See Interpretation of Statutes, Ninth Edition by G.P. Singh page 893). 26. Relying upon the aforementioned rule of interpretation, this Court has held that the Government has no power to cancel or supersede a reference once made under Section 10(1) of the Industrial Disputes Act, 1947. [See- State of Bihor v. D.N. Ganguly AIR 1958 SC 1018). Similarly, on the same principle it is held that the application of Section 21 of the General Clauses Act has no application to amend or rescind or vary a notification issued under Section 3 of the Commissions of Enquiry Act for reconstituting the commission by replacement or substitution of its sole member except applicable for a limited purpose for extending the time for completing the enquiry. (State of Madhya Pradesh v. Ajay Singh AIR 1993 SC 825). It is also held while construing the provisions of Citi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the CIT by Section 12AA(3) of the Act w.e.f. 01.10.2004. 30. We are of the considered view that the view taken by the abovementioned three High Courts in the respective cases is in conformity with law and we accordingly approve the said view taken by these High Courts in three aforementioned decisions. 31. In the light of the foregoing discussion, the appeal succeeds and is allowed. Impugned order is set aside and the order of ITAT is restored. 32. Needless to say, the CIT would be free to exercise his power of cancellation of registration certificate under Section 12AA(3) of the Act in the case at hand in accordance with law." 16. The ratio laid down by the Hon'ble Apex Court in the case of Infrastructure Development Corporation (supra) is that in absence of any express power conferred to the CIT(A) in section 12AA(3) of the Act the registration granted u/s. 12A of the Act cannot be cancelled and the same ratio is applicable on the present set of facts where registration u/s. 12A has been cancelled in the proceedings carried out after 01.04.2021 u/s. 12AB(4) of the Act. As we have extracted section 12AB(4) of the act in the preceding para, the same clearly deals with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the ld. A.R., the ld. PCIT has cancelled the registration granted to the assessee since the ld. PCIT was satisfied that one or more specified violations have taken place. The specified violations are mentioned in explanation to section 12AB(4) of the Act as follows: Explanation: For the purposes of this sub-section, the following shall mean "specified violation",-- a) Where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or b) The trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or c) The trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not ensure for the benefit of the public; or d) The trust or institution established for charitable purpose created or established after the commencement of this Act, has applied an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified violations during any previous year; b) The Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or c) Such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year; The Principal Commissioner or Commissioner shall- i. call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation; ii. pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place; iii. pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations; iv. forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, in the present case, the ld. PCIT invoked the provisions of section 12AB(4)(a)(ii) of the Act as stood in the assessment year 2022-23. The objection of the ld. A.R. is that for the cancellation of registration for the assessment year 2021-22, he could not invoke the provisions of section 12AB(4)(ii) of the Act which is introduced by Finance Act, 2022 w.e.f. 1.4.2022 and applicable for the assessment year 2022-23 onwards. 6.4 In the case of Isthmian Steamship Lines reported in 20 ITR 572 (SC) wherein the Hon'ble Supreme Court held that "it is a cardinal principle of the tax law that law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication". 6.5 In the case of Karimtharuvi Tea Estate Ltd. Vs. State of Kerala reported in 51 ITR 129 (SC) the same view was taken by the Hon'ble Supreme Court. 6.6 Further, the Hon'ble Supreme Court in the case of Shree Chowdhary Transport Company Vs. ITO reported in 426 ITR 289 (SC) wherein held as under: 17.4 It needs hardly any detailed discussion that in income-tax matters, the law to be applied is that in force in the assessment year in question, unless stated otherwis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year up to and including the assessment year 1939-40.' This decision is authority for the proposition that though the subject of the charge is the income of the previous year, the law to be applied is that in force in the assessment year, unless otherwise stated or implied. The facts of the said decision are different and distinguishable and the High Court was clearly in error in applying that decision to the facts of the present case." (emphasis supplied) 17.6 We need not multiply on the case law on the subject as the principles aforesaid remain settled and unquestionable. Applying these principles to the case at hand, we are clearly of the view that the provision in question, having come into effect from April 1, 2005, would apply from and for the assessment year 2005-06 and would be applicable for the assessment in question. Putting it differently, the Legislature consciously made the said sub-clause (ia) of section 40(a) of the Act effective from April 1, 20056, meaning thereby that the same was to be applicable from and for the assessment year 2005-06; and neither there had been express intendment nor any implication that it would apply only from the financial y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate of registration." 6.9 In this case, the ld. PCIT has cancelled the registration under the new provisions of the Act i.e. 12AB(4)(ii) of the Act, which specifically provides that cancellation can be done for such previous year and all subsequent previous years, which makes it clear that the cancellation cannot be retrospective, therefore, in view of the above discussion, we are of the opinion that cancellation of registration with retrospective effect is invalid in these cases. Since the ld. PCIT invoked the provisions of section 12AB(4)(ii) of the Act, which has been introduced by the Finance Act, 2022 w.e.f. 1.4.2022 so as to cancel the registration with retrospective effect from assessment year 2018-19, which is bad in law. 6.10 It is noted that coordinate bench of this Tribunal in both assessee's case for AY 2021-22 has taken similar view and as quashed the retrospective applicability of the new amended provision u/s 12AB(4)(ii) of the Act. We also note that same view has been taken by Coordinate bench of Mumbai in the case of Heart Foundation of India in ITA No.1524/Mum/2023 vide order dated 17 27.7.2023, wherein held that registration granted u/s 12A of the Act d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut u/s. 12AB(4) of the Act. 18. The second limb of contention raised by the assessee challenging the powers available in section 12AB of the Act is that the show cause notice issued u/s. 12AA of the Act on 20.03.2024 is also invalid. Ld. Counsel for the assessee stated that section 12AA(5) of the Act provides that nothing contained in section 12AA of the Act shall apply on or after 01.04.2021. From 01.04.2021 section 12AB of the Act has been inserted and the proceedings with regard to cancellation of registration u/s. 12AA could be taken up only u/s. 12AB of the Act. But in the instant case the proceedings for cancellation of registration have been initiated on 21.07.2023 and therefore even the registration u/s. 12A cannot be cancelled u/s. 12AA of the Act in the instant case because the proceedings have been initiated u/s. 12AB which have been brought into Act w.e.f. 01.04.2021. Therefore, the show cause notice u/s. 12AA of the Act issued on 20.03.2024 for cancelling the registration u/s. 12AA(3) and 12AA(4) of the Act for the period 01.04.2019 to 31.03.2021 is invalid and ab-initio as the ld.PCIT (Central) has issued the show cause notice dated 20.03.2024 in a section already st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low : "(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently the Principal Commissioner or 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: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard. (4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of subsection (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that- (a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee u/s. 12A of the Act on 16.02.2001 and also erred in cancelling the registration granted u/s. 12A r.w.s.12AB of the Act granted on 28.05.2021. Thus registration u/s. 12A and 12AB of the Act granted to the assessee trust are restored. 23. Though we have already allowed the legal issues raised by the assessee in Grounds of appeal No.2 and 3 and have reversed the finding of ld.PCIT (Central) of cancelling the registration granted to the assessee u/s. 12A and 12A r.w.s 12AB of the Act, we will now proceed to deal with merits of the case with regard to the observation of ld. PCIT based on the seized document, and other loose sheets found during the course of search along with the Pendrive found at the residential premises of Chief Accountant of the assessee trust and proceeding to cancel the registration. 24. Ld. PCIT has referred to various documents in the impugned order which mainly includes the statement of various employees and also referring to Excel Sheet appearing in the Pendrive found at the residential premises of Mr. Balaji Pandurang Alli, Chief Accountant alleging that assessee trust has received following amounts in cash : Cash received during FY 2019-20 (in Rs. ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed material represents print out taken from the seized pen drive which was found at the residential premises of Shri Balaji Alli. The entries in the pen drive cannot be independently verified and are not supported by any conclusive proof or independent evidences and therefore it cannot be taken as basis for decision regarding registration of Trust u/s 12AB(4) of Income Tax Act. It is therefore submitted that the evidencary value of such entries may be subjected to evaluation and verification in the Assessment Proceedings as well as Appellate Proceedings to arrive at a reasonable and judicious decision about the correctness and completeness of the entries in the pen drive seized. Any abrupt decision based on such evidence will lead to miscarriage of justice. 5. Denial by Doctors, students and employees: Your Honour will appreciate that the statements of various doctors, student and employees were recorded during the course of post search enquiry. In the said statements they have denied or to have refunded money to the Trust. This direct evidence of the denial should be preferred against any opinion/surmise based on stray jottings/entries recorded in the pen drive. Copies of sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset and the assessee trust of being indulged in the alleged activity has been found and all that what is referred are statements which has been subsequently retracted. It is claimed that all the statements given by the staff members/Chief Accountant of the assessee trust were given during the course of search were under extreme pressure and the same stands retracted within two months of giving the original statements. Apart from the statements, no other incriminating material/loose document were found at the premises of the assessee trust. Whatever loose documents/Excel Sheet in the Pendrive which have been referred to by ld. PCIT were found at the premises of third person, i.e. employee of the assessee trust. The Managing Trustee of the assessee trust in the statement given during the course of search has not accepted the allegations levelled by the search team based on the statements of staff members and Mr.Mehul B. Patel stated that no cash has been received back from the staff members out of the stipend and nor against capitation fee. So what remains is just the preponderance of probability and a theory based on statements which have been retracted and the seized material fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the observation that the bearer cheques were used to withdraw the cash from the account of staff, doctors salary and students, the bearer cheques are signed by a particular person and they themselves have retracted from their original statement. Therefore, this action of withdrawing the money is solely the action of the person looking after the accounts of the assessee trust directly and it cannot be inferred that the assessee trust has withdrawn the said amount from various account holders. Also no unaccounted assets, excess cash or bullion was found and seized. 29. On the strength of these facts that they are mere allegations against the assessee trust of diversion of funds but no concrete finding has been given by the ld.PCIT and that the matter is still pending for adjudication on merit before the AO, it was submitted that until and unless the activities are not found to be genuine, even if there are some instance of any violation giving rise to certain additions then the same can be taken care off by the AO in the assessment proceedings but registration u/s. 12A/12AB of the Act cannot be cancelled. Very same issue has been dealt by the Hon'ble Karnataka High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Under Graduate medical students and award of certificates, details of OPD patients and IPD patients as well as the treatments given to the in-patients have been filed before us. We would like to take note of the statistics supplied by the assessee which are as follows: 1.2. Details of teaching staff are as under- Sr. No. Faculty No. of Faculty 1 Professor 31 2 Associate Professor 45 3 Assistant Professor 95 4 S.R. 60 5 J.R. 141 6 Tutor 58 1.3. Details of non-teaching staff are as under: Sr. No. Faculty/Staff No. of Faculty 1 Technician 93 2 Clerk 82 3 lab attendant 21 4 Sweeper 155 5 Other 67 6 Library 8 7 Security 45 8 Nursing 378 9 Pharmacist 15 10 Warden 2 11 Accounts 16 12 Other 15 Total 897 1.4. Further, achievements of undergraduate medical students in Academic Feast for UG student are as under: Sr.no Name of the Student Name of the Organizer Award Name Exam Year 1 Neelanjana Ghosh MUHS-Nashik First in Biochemistry-"Dr. Adinath Narayan Suryakar Gold Medal" 2015 2 Surbhi Pattanshetti MUHS-Nashik Fourth in I MBBS-in University 2016 3 Neelanjana Ghosh MUHS-Nashik First in F.M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tients and IPD Patients treated over the period of time are as under: OPD Statistics Year Gen. Medicine Skin & VD TB & Chest Psy Paediatrics Gen. Surgery Ortho Ophthal ENT OBGY Dental Casualty Total 2012 35757 4767 - 255 19104 22367 17239 18809 6008 15135 2622 8660 150723 2013 37437 7181 4382 1187 23065 28722 24069 25065 8626 22975 2876 12311 197896 2014 44132 8988 5667 1925 25579 33762 28035 28474 11767 25071 3088 13701 230189 2015 48281 11057 6721 2055 29981 39692 34307 31807 14507 29466 2605 14716 265195 2016 52645 8316 4855 2505 30424 44245 35151 36384 11599 31773 2290 15210 275397 2017 52585 8968 5650 2978 29506 41546 34791 35595 12658 34085 2305 17202 277869 2018 58498 19552 5865 4160 33092 48107 39647 38529 33183 35698 2137 17118 335586 2019 71607 15801 12842 5334 42000 54073 43344 43846 17152 42979 2111 20003 371092 2020 47508 7815 6382 2903 23980 32337 26545 23491 9495 24359 819 18414 224048 2021 62630 11060 7768 3186 33383 44888 36680 35168 12822 34749 2481 21200 306015 2022 57637 16452 8646 5252 36917 45909 400 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 6049 756 471 244 3543 5312 2762 2386 1773 4000 2541 29837 2022 6416 1085 449 378 4424 5687 3082 2956 1904 5030 2228 33639 2023 7724 2091 694 396 5146 6635 4235 3662 2095 7028 2362 42068 2024 6397 2258 564 520 4437 5212 4054 3146 2234 6142 2844 37808 Total 69651 117076 5853 3810 38180 62909 34598 31639 19079 48034 34772 359601 1.7. Further, the assessee trust also carries on IPF Scheme under Bombay Public Charitable Trust Act 1950. As per this act every charitable trust has to reserve 10% of the total beds for Indigent and Weaker Section patient and to provide 100% free treatment to indigent patient and at concessional rate of 50% to weaker section patient. The summery of IPF facility provide from the beginning to till date are as follows, Year No. of Indigent Patients Amt. Spent for Indigent Patients from IPF A/C No. of weaker Section Patients Amt. Spent for weaker Section Patients from IPF A/c Total No. of Indigent & Weaker Patients Total Amt. Spent From IPF A/c 2011-12 2,660 9,756,480 23 20,887 2,683 9,777,367 2012-13 3,978 12,181,510 3,552 11,242,615 7,530 23,424,125 2013-14 3,504 9,149, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, medicine, machines, college building and other expenses which are appearing in the audited books of account. 33. We find that similar set of facts as well as the issue came up for adjudication before the Coordinate Bench, Indore in the case of Shri Jairam Education Society Vs. PCIT - ITA Nos.90 & 548/Ind/2019, dated 13.10.2021. Relevant finding of the Tribunal is reproduced below : "15. Apropos to Ground no.1, 2 & 6 assessee has challenged the cancellation of registration u/s 12AA of the Act retrospectively w.e.f. 01.04.2008 by invoking provisions of section 12AA(3) & 12AA(4) of the Act. We observe that the assessee society is registered under M.P. Society Registration Act 1973 and enjoying the benefit of section 12AA of the Act vide order u/s 12AA of the Act dated 20th March 2008. The proceedings u/s 12AA(3) & 12AA(4) of the Act were initiated subsequent to search proceeding carried out on Ramani Group on 30th August 2016. Certain loose papers were found having some details of salary payments, calculation of higher salary, cash payment, hand written details of income and expenditure which have been claimed by the assessee to be dumb documents and the detailed discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinate Bench of Lucknow in the case of Fateh Chand Charitable Trust v. CIT (Exemptions) v. CIT (Exemptions) [2017] 83 taxmann.com 33 (Lucknow - Trib.) Hon'ble Tribunal while dealing with the issue of Cancellation of registration under Section 12AA (iii) of the I.T Act held that: Para 13. "Having carefully examined the order of the Id. Commissioner of Income Tax (Exemptions) in the light of the rival submissions, we find that on receipt of certain information from the Id. Commissioner of Income Tax (Exemptions), Kolkata; Id. Commissioner of Income Tax (Exemptions) has issued notice under section I2AA(3) of the Act to the assessee on 13.11.2015 for compliance on 24.11.2015. On 24.11.2015 the assessee sought adjournment and hearing was adjourned to 27.11.2015. On 27.11.2015 the assessee has filed a detailed reply to the charges leveled against it in show cause notice. The assessee emphatically denied the allegations leveled against the assessee that it has received a donation of Rs. 1 crore through cheque after making payment of the same in cash to M/s Herbicure Health Care Bio Herbal Research Foundation. The reply filed by the assessee is available at pages 19 to 25 of the compila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee would lead to denial of exemption u/s. 11 & 13 of the Act and, therefore, the pre-requisite of section 12AA(3) of the Act is satisfied. In para 9 of the impugned order, the Commissioner records that the violation of section 11 & 13 of the Act would result in forfeiture of exemption not only for the year in which such transactions occur but also for the years when such arrangement continues to be in force. In our considered opinion, such an approach of the Commissioner is quiet misdirected and is inconsistent with the legal position on the subject contemplated u/s. 12AA(3) of the Act so as to cancel registration already granted. We may add here that we are not shutting out the case of the Revenue to examine whether or not there has been a violation of section 13 of the Act, but we are only trying to say that the same is not relevant for the purpose of cancellation of registration u/s. 12AA(3) of the Act. Of course, such matters can be dealt with in the course of assessment proceedings and, in our view, the same ought to be dealt with, if the situation so warrants. Presently, we are confining ourselves with examining the efficacy or otherwise of the action of the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it under section 11 of the Income Tax Act, but that is not a ground for cancelation of registration itself. That is precisely what the Tribunal has held. Therefore, the substantial question of law is answered in favour of the assessee and against the revenue. There is no merit in this appeal. (iv) The Hon'ble Allahabad High Court in the case of Red Rose School reported in (2007) 163 Taxman 19 (All.), wherein it is observed that:- "CIT is entitled to see only the genuineness of objects and activities : It has been held that while refusing application under section 12A the Commissioner has to examine only two aspects, i.e., genuineness of the activities of the trust /institution and object of the trust / institution. Once there is no dispute about the genuineness of the activities; the Commissioner cannot take shelter of any other outer source for refusing registration under section 12A. The issue of registration under section 12A and the scope of enquiry at the stage of section 12AA was discussed, it was categorically held in the said decision that section 12AA does not speak anywhere that the CIT, while considering the application for registration, shall also see that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncement of any other object of general public utility". It does not apply to the other categories of charitable purpose viz., "relief to poor, education and medical relief". As rightly pointed out by the learned counsel for the assessee, eleemosynary element is not essential element of charity. It is also not a necessary element in a charitable purpose that it should provide something for nothing or for less than it costs or for less than the ordinary price. The surplus generated, if it is held for charitable purpose and applied for charitable purpose of the assessee, and then the Assessee has to be considered as existing for a charitable purpose. There are enough safeguards provided in Sec.12 and 13 of the Act to ensure that personal benefits of the persons in control of the trusts are not treated as having applied for charitable purpose and for being brought to tax like provisions of Sec.13(1) (c) of the Act which restricts unreasonable and excessive payments to certain category of persons connected with a trust or other institution. In such circumstances, the order u/s 12AA(3) of the Act, cannot be sustained. (vi) The decision of Prabodhan Prasarak Shikshan Santhan Vs. DCIT-15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vii) The decision of Rajasthan Vikas Sansthan Vs. CIT reported in 78 DTR 411 (Raj), wherein it is held as under :- The registration can be cancelled on the ground that the activity of the trust are not genuine or are not being carried out in accordance with the object of the trust. In case there are violations as mentioned in s. 11 and 13 of the Act. Thus the AO while making assessment can deny the exemption to the trust. For getting the exemption u/s 11, registration is pre-requisite. However, registration is not a guarantee for exemption. In case the Trust fails to comply with the requirements as mentioned in s. 11 and 13 of the Act then exemption can be denied. In respect of failure mentioned in s. 11 and 13 in a particular year, it cannot be said that registration is to be cancelled. Surplus in educational activities is not relevant for cancelling the registration. The education itself is charitable object and if the surplus is utilized for the purpose of charitable activities then it cannot be said that registration is to be disallowed. The ground on which the registration cannot be refused, cannot be considered as a ground for cancelling the registration. (viii) The Co- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institution. Breach of the conditions of the trust deed would not disentitle the institution from getting the benefit which the institution had been granted earlier being a charitable trust. Nowhere in her order, the CIT has taken any objection to the charitable and educational nature of the institution. In fact, the objects of the institution as declared in the trust deed do reflect that all are philanthropic or benevolent in nature, precisely, for the purpose of imparting education. Strange enough, there is no finding recorded by the CIT contrary to this fact. Rather, this is also not the case of the CIT that the institution is doing some other activity of earning profit other than the activity of running educational institutions. The established factual position is that the institution is not doing any other activity except running educational institutions. In such circumstances, the action of cancellation of registration cannot be upheld. As far as the object of the assessee is concerned, this is not the case of the Revenue that the assessee was not imparting education. Since the question about the imparting of education has not been doubted or challenged by the Revenue, the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein on the basis of his examination/ investigation necessary view as permissible in law can be taken if violation of Section 11 and Section 13 of the Act by the assessee are observed. Ld. PCIT can only cancel the registration u/s 12AA(3) of the Act if it is found that the activities of the society/trust are either not genuine or are not being carried out in accordance with its object provided in bye laws. (v) We also find that nothing on record has been brought before us by way of an independent enquiry by Ld. PCIT thereby collecting necessary evidence which can show that the activities of the assessee society are either not genuine or are not being carried out as per the objects of the society which were filed before the registering authority at the time of granting registration u/s 12AA of the Act. It is therefore established that the activities carried out by the appellant assessee society by way of running hospitals and medical colleges for the benefit of public at large and for the students are for charitable purposes only as provided in Section 2(15) of the Act. 39. We therefore in view of our above finding arrived at after examining the facts of the instant case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing the income and if needed the additions can be made to the income of the assessee and the same should be restricted only to the issue involved. However in no case the remaining income of the trust/society should be affected by way of denying the benefit of exemption u/s 11 & 12 of the Act. We accordingly allow ground no.1 2 & 6 of the assessee's appeal." 34. Now going through the above finding of the Coordinate Bench, the crux of the issue is that if it is established that the assessee trust/societies is carrying out genuine activities as per the objects for which they have been established, then the issue arising out of any loose paper/documents/ incriminating material alleging that the funds of the society have been misappropriated or there is ambiguity in the claim of expenses, the same can be taken care of at the time of assessing the income and the additions involving such issues can be made but for the remaining income of the society, benefit of exemption u/s. 11 of the Act cannot be denied. 35. As far as the decisions relied on by the ld. Departmental Representative are concerned, we have gone through all those decisions carefully and find that the sole substantive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the objects of the trust the ld. PCIT erred in cancelling the registration u/s. 12A/12AB of the Act based on some statements recorded during the course of search but subsequently retracted and other seized material which were the subject matter of assessment proceedings undergoing at that point of time and therefore even if any addition is made by the AO, the benefits of registration u/s. 12A/12AB of the Act shall continue to be enjoyed by the assessee for the remaining amount of income earned by it. Even the assessee succeeds on Ground of appeal No.10 because the 'specified violation' allegedly made by the assessee trust cannot be said to be justified because the word 'specified violation' has been brought into the Act from 01.04.2022 and the alleged violation are based on the documents and details for the F.Yrs. 2019-20 to 2021-22 which are prior to 01.04.2022. Accordingly, Grounds of appeal Nos. 1 and 2 raised by the assessee are dismissed and Grounds of appeal Nos.3 to 10 are allowed. Ground No.11 being general in nature needs no adjudication.
37. In the result, the appeal of the assessee is partly allowed.
Order pronounced on this 21st day of February, 2025. X X X X Extracts X X X X X X X X Extracts X X X X
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