Society For Educational Reserch & Community Health(Serch), Ranchi V. Commissione of Income Tax, Ranchi

ITA 12/RAN/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60095 (ITAT-RANCHI)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 02-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Search and seizure; Charitable institution; Opportunity of being heard; Principle of natural justice; Benefit of exemption; Cancellation of registration
• Section: 143(3); 133A; 12A; 12AA; 68; 263

Judgement Text

ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 1 IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI CIRCUIT BENCH, RANCHI BEFORE: SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 12 / RANCHI / 20 11 ASSESSMENT YEAR : N.A. SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH) RANCHI VS. CIT (CENTRAL) PATNA (APPELLANT) (RESPONDENT) PAN NO. AAHTS 2661J APPELLANT BY: SHRI A.K. RASTOGI, ADVOCATE RESPONDENT BY: SHRI HARSHWARDHAN PD., SR.S.C. DATE OF HEAR I NG: 14.02.2012 DATE OF PRONOUNCEMENT: 24 .02.2012 ORDER PER B.R. MITTAL, JUDICIAL MEMBER:- THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(CENTRAL) DATED 24.6.2011 VIDE WHICH HE HAS CANC ELLED THE REGISTRATION OF THE ASSESSEE SOCIETY U/S 12AA(3) OF THE INCOME-TAX ACT, ON FOLLOWING GROUNDS: 1. FOR THAT THE LEARNED CIT, CENTRAL, PATNA HAS ERRED IN CANCELING REGISTRATION GRANTED BY THE THEN CIT U/S 12A(2) DAT ED 22.7.2008. 2. FOR THAT THE LEARNED CIT CENTRAL, PATNA HAS ERRED I N HOLDING THAT VIDE NOTICE DATED 15.2.2011 AND 12.4.2011 THE APPELLANT WAS PROVIDED AN OPPORTUNITY OF BEING HEARD PRIOR TO CANCELLATION OF REGISTRATION BY ORDER IMPUGNED. 3. FOR THAT THE NOTICE DATED 15.2.2011 AND 12.4.2011 ( COPY ENCLOSED) MERELY REQUIRES THE PRESENCE OF THE APPELLANT ON CA PTIONED SUBJECT AND WAS SIGNED BY THE HEADQUARTERS OF THE COMMISSIO NER AND NOT BY THE COMMISSIONER HIMSELF THAT TOO WITHOUT ASSIGNING ANY REASON WHATSOEVER AND/OR WITHOUT CONFRONTING THE APPELLANT ON THE MATERIAL/EVIDENCES/FINDINGS USED WHILE PASSING THE ORDER IMPUGNED. 4. FOR THAT THE LEARNED CIT, CENTRAL, PATNA HAS ERRED IN RELYING ON THE FINDINGS CONTAINED IN THE ASSESSMENT ORDER FOR A.Y. 2007-08. ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 2 5. FOR THAT THE LEARNED CIT, CENTRAL, PATNA HAS VIOLAT ED THE PRINCIPLES OF EQUITY, NATURAL JUSTICE AND FAIR PLAY BY NOT CONFRO NTING THE APPELLANT WITH THE FINDINGS AND MATERIAL USED FOR THE PURPOSE S OF CANCELING THE REGISTRATION IN THE ORDER IMPUGNED. 6. FOR THAT THE ORDER PASSED IS VIOLATIVE OF PRINCIPLE S OF EQUITY NATURAL JUSTICE AND FAIR PLAY. 7. FOR THAT THE WHOLE ORDER IS AB-INITIO VOID FOR WANT OF COMPLIANCE TO THE RULE OF NATURAL JUSTICE. 8. FOR THAT THE LEARNED CIT, CENTRAL, PATNA HAS ERRED IN HOLDING THAT THE DONATION OUT OF WHICH CORPUS FUND OF RS.21.40 LAKHS HAS BEEN CREATED IS NOT VOLUNTARY RATHER IT WAS COMPULSORY. 9. FOR THAT THE LEARNED CIT, CENTRAL, PATNA HAS ERRED IN HOLDING THAT DONATION RECEIPT MUST MENTIONED THAT IT FORMS PART OF CORPUS FUND. 10. FOR THAT THE LEARNED CIT, CENTRAL, PATNA HAS ERRED IN HOLDING THAT SOME SPECIFIC DIRECTION IS REQUIRED TO BE GIVEN BY THE D ONOR AT THE TIME OF DONATION. 11. FOR THAT THE LEARNED CIT, CENTRAL, PATNA HAS ERRED IN HOLDING THAT NO CONFIRMATION OF LOAN OF RS.1 LAKH FROM INSTITUTE OF SCIENCE AND MANAGEMENT WAS GIVEN. 12. FOR THAT THE LEARNED CIT, CENTRAL, PATNA HAS FAILED TO APPRECIATE THAT NO REQUISITION WAS MADE TO THE APPELLANT FOR PROVID ING CONFIRMATION FROM THE INSTITUTE OF SCIENCE AND MANAGEMENT REGARD ING LOAN OF RS.1 LAKH. 13. FOR THAT THE LEARNED CIT, CENTRAL, PATNA HAS ERRED IN HOLDING THAT THE ACTIVITIES OF INSTITUTION ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE INSTITUTION. 14. FOR THAT THE LEARNED CIT, CENTRAL, PATNA HAS NOT BR OUGHT ON RECORD CONTRAVENTION OF ANY OF THE OBJECTS BY THE APPELLAN T. 15. FOR THAT THE LEARNED CIT, CENTRAL, PATNA HAS FAILED TO APPRECIATE THAT THE CONDITION PRECEDENT FOR INVOKING SECTION 12AA(3 ) IS ABSENT IN THE APPELLANTS CASE AND HENCE CANCELLATION OF REGISTRA TION IS WRONG, ILLEGAL AND UNJUSTIFIED ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE APPELLANTS CASE. 16. FOR THAT THE WHOLE ORDER IS BAD IN FACTS AND LAW OF THE CASE AND IS FIT TO BE MODIFIED. 17. FOR THAT THE OTHER GROUNDS, IF ANY, SHALL BE URGED AT THE TIME OF HEARING OF THE APPEAL. ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 3 2. THE RELEVANT FACTS ARE THAT THE ASSESSEE IS A SO CIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT AND FORMED ON 26.7.2 005. A COPY OF TRUST DEED IS PLACED AT PAGES 57 TO 71 OF THE PAPER BOOK. ON PERUSAL OF COPY OF THE DEED, IT IS OBSERVED THAT THERE ARE VARIOUS OBJECTS MENTIONED BUT DOMINANT OBJECT OF THE SOCIETY IS TO IMPART EDUCATION BY RUN NING AN INSTITUTE NAMELY INSTITUTE OF SCIENCE AND MANAGEMENT (ISM). THE A SSESSEE SOCIETY WAS GRANTED REGISTRATION U/S 12AA OF THE INCOME-TAX ACT ON 22.7.2008 EFFECTIVE FROM ASSESSMENT YEAR 2008-09 AND A COPY OF THE SAID CERTIFICATE IS PLACED AT PAGE 13 OF THE PAPER BOOK. 3. LD. CIT HAS STATED THAT THERE WAS A SEARCH AND S EIZURE OPERATION U/S 132(1) OF THE INCOME-TAX ACT IN THE RESIDENTIAL PRE MISES OF R.A.K. VERMA GROUP OF CASES ON 20.3.2009 AND SUBSEQUENT DATES. ALONG WITH SAID SEARCH AND SEIZURE OPERATION, A SURVEY OPERATION U/S 133A OF THE INCOME-TAX ACT ON 20.3.2009 WAS ALSO CARRIED OUT IN THE CASE OF THE A SSESSEE. PURSUANT THERETO ORDERS U/S 153C READ WITH SECTION 143(3) WERE PASSE D ON 30.12.2010 FOR ASSESSMENT YEARS 2006-07 AND 2008-09 AND WHEREAS FO R THE ASSESSMENT YEAR 2009-10 ORDER U/S 143(3) WAS PASSED ON 30.12.2010. 4. LD. CIT HAS STATED THAT AS PER ASSESSMENT ORDER DONATIONS RECEIVED BY THE ASSESSEE INSTITUTION WERE NOT VOLUNTARY AND STU DENTS HAD TO PAY THE AMOUNTS COMPULSORILY. THE ASSESSEE SOCIETY HAD SHO WN ADDITION TO THE CORPUS FUND TO THE EXTENT OF RS.21,40,000/- IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08. THE LD. CIT HAS STATE D THAT TO TEST CHECK GENUINENESS OF THE CORPUS FUND AT RS.21,40,000/- SU MMONS WERE ISSUED TO VARIOUS DONORS. LD. CIT HAS STATED THAT ONE DR. A. K. SINGH DENIED HAVING MADE ANY DONATION TO THE ASSESSEE AND WHEREAS 4 PER SONS, DETAILS OF WHICH ARE MENTIONED AT PAGE 2 OF THE ORDER (RECEIVED AGGR EGATE SUM OF RS.75,000/-) REFUSED TO HAVE MADE DONATION TO THE A SSESSEE AND FURTHER 10 PERSONS TO WHOM SUMMONS WERE ISSUED, THE DETAILS GI VEN BY LD. CIT AT PAGE 2 OF THE IMPUGNED ORDER (RECEIVED FROM WHOM AGGREGA TE SUM OF RS.1,90,000/-) DID NOT REPLY TO THE SUMMONS. ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 4 LD. CIT HAS STATED THAT THE DONATION TO THE TUNE OF RS.2,65,000/- (RS.75,000 + RS.1,90,000/-) IS A PART OF THE WHOLE CORPUS FUND OF RS.21,40,000/- IS INGENUINE. THEREFORE, LD. CIT HA S CONSIDERED THE WHOLE AMOUNT OF CORPUS FUND OF RS.21,40,000/- AS INGENUIN E. THE LD. CIT HAS FURTHER STATED THAT THE ASSESSEE HAS CLAIMED LOAN O F RS.1 LAKH FROM INSTITUTE OF SCIENCE AND MANAGEMENT BUT NO LOAN CONFIRMATION WAS FILED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS AND ACCORDINGLY THE SAID LOAN AMOUNT WAS TREATED AS UNE XPLAINED CASH CREDIT WITHIN THE MEANING OF SECTION 68 OF THE INCOME-TAX ACT. 5. IN VIEW OF THE ABOVE LD. CIT HAS STATED THAT ACT IVITIES OF THE ASSESSEE ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OB JECTS AND ACCORDINGLY HAS CANCELLED THE REGISTRATION WHICH WAS GRANTED VIDE C ERTIFICATE DATED 22.7.2008 EFFECTIVE FROM ASSESSMENT YEAR 2008-09. HENCE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. ON BEHALF OF THE ASSESSEE SUBMISSIONS WERE MADE FIRSTLY DISPUTING THE VALIDITY OF THE NOTICE ISSUED U/S 12AA(3) OF THE IN COME-TAX ACT AND SECONDLY DISPUTING THE ACTION OF THE LD. CIT TO CANCEL REGIS TRATION GRANTED TO THE ASSESSEE SOCIETY. 7. IN RESPECT OF VALIDITY OF NOTICE ISSUED, LD. A.R . REFERRED PAGES 9 & 10 OF THE PAPER BOOK AND SUBMITTED THAT SAID NOTICES D ATED 15.2.2011 AND 12.2.2011 WERE ISSUED BY INCOME-TAX OFFICER GIVING THE SUBJECT MATTER AS CANCELLATION OF REGISTRATION U/S 12AA(3) OF THE INC OME-TAX ACT AND ASKING THE ASSESSEE TO APPEAR BEFORE THE LD. CIT EITHER PERSON ALLY OR THROUGH ITS AUTHORIZED REPRESENTATIVE. THAT IN THE SAID NOTICE S, NO REASONS HAVE BEEN GIVEN ON THE BASIS OF WHICH REGISTRATION IS PROPOSE D TO BE CANCELLED. HE FURTHER SUBMITTED THAT NOTICES ISSUED WERE NOT UNDE R THE SIGNATURE AND SEAL OF LD. CIT AND THEREFORE, LD. CIT CANNOT BE SAID TO HAVE ASSUMED JURISDICTION TO PROCEED TO CANCEL REGISTRATION GRANTED TO THE AS SESSEE. LD. A.R. SUBMITTED THAT IN RESPONSE TO NOTICE ISSUED DATED 15.2.2011, ASSESSEE FILED A REPLY ON 3.5.2011 AND REFERRED PAGE 11 & 12 OF THE PAPER BOO K. IN THE REPLY IT WAS ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 5 STATED THAT ASSESSEE SOCIETY IS CARRYING ON ITS ACT IVITIES FOR CHARITABLE PURPOSES I.E. EDUCATION AS PER SECTION 2(15) OF THE INCOME-T AX ACT AND ALSO REQUESTED THAT IF ANY CLARIFICATION IS REQUIRED, ADEQUATE AND REASONABLE OPPORTUNITY MAY BE GRANTED TO ENABLE THE ASSESSEE TO FURNISH THE SA ME BEFORE ANY ADVERSE ORDER IS PASSED. LD. A.R. SUBMITTED THAT NO ADEQUA TE OPPORTUNITY WAS GRANTED TO THE ASSESSEE AND LD. CIT HAS CANCELLED T HE REGISTRATION BY THE IMPUGNED ORDER DATED 24.6.2011. LD. A.R. SUBMITTED THAT PURPOSE OF NOTICE ISSUED U/S 12AA(3) IS AKIN TO NOTICE U/S 263 OF INC OME-TAX ACT AND RELYING ON THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT I N THE CASE OF CIT VS. SATTAN DAS MOHAN DAS SIDHI 230 ITR 591 AND DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GARDEN SILK MILLS LTD. VS . CIT 221 ITR 861 SUBMITTED THAT IT HAS BEEN HELD THAT IF THE NOTICE ISSUED U/S 263 IS NOT UNDER THE SEAL AND SIGNATURE AND IF NOTICE ISSUED SUFFERS FROM WANT OF DETAILS ON THE BASIS OF WHICH LD. CIT ASSUMES JURISDICTION THAT TH E ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE, ON THIS VERY GROUND, THE ASSUMPTION OF JURISDICTION BY LD. CIT U /S 263 OF THE ACT HAS BEEN HELD TO BE INVALID, ILLEGAL AND ORDER PASSED BY LD. CIT U/S 263 OF THE ACT WAS QUASHED. THE LD. A.R. SUBMITTED THAT SIMILAR VIEW HAS BEEN TAKEN BY ITAT, PATNA BENCH IN THE CASE OF SATISH KUMAR KESHRI VS. ITO (TECH) PATNA 104 ITD 382. 8. LD. A.R. FURTHER SUBMITTED THAT THE IMPUGNED ORD ER HAS BEEN PASSED BY LD. CIT CANCELING THE REGISTRATION WITHOUT CONFR ONTING THE ASSESSEE WITH THE MATERIALS USED AGAINST IT. HENCE, THERE IS VIO LATION OF PRINCIPLE OF NATURAL JUSTICE AND RELYING ON THE DECISION OF THE HONBLE PATNA HIGH COURT IN THE CASE OF RAMANAND PRASAD AND OTHERS VS. STATE OF BIH AR 1983 BR&LJ 84 SUBMITTED THAT THE ORDER IS LIABLE TO BE ANNULLED. 9. THUS LD. A.R. HAS DISPUTED VALIDITY OF NOTICE ON 3 GROUNDS I.E. (I) LETTERS DATED 15.2.2011 AND 12.4.2011 WERE NOT ISSU ED UNDER SEAL AND SIGNATURE OF THE COMMISSIONER OF INCOME-TAX, (II) A SSUMPTION OF JURISDICTION WITHOUT A DETAILED SHOW CAUSE NOTICE IS INVALID FRO M ITS INCEPTION AND (III) NON- ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 6 CONFRONTATION OF MATERIALS/EVIDENCES RELIED UPON FO R PASSING THE IMPUGNED ORDER. 10. WITHOUT PREJUDICE TO ABOVE, LD. A.R. FURTHER SU BMITTED THAT CIT HAS RELIED ON THE ASSESSMENT ORDER OF ASSESSMENT YEAR 2 007-08, THE PERIOD WHEN ASSESSEE WAS NOT EVEN GRANTED REGISTRATION U/S 12AA OF THE INCOME-TAX ACT. HE SUBMITTED THAT THE ASSESSEE IS REGISTERED FROM 2 2.7.2008 EFFECTIVE FROM ASSESSMENT YEAR 2008-09. THE LD. A.R. REFERRED PAG ES 28 TO 34 OF THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE FILED ITS RETU RN OF INCOME AND THE SAME WAS ACCEPTED BY THE ASSESSING OFFICER EXCEPT MAKING TWO VARIATIONS I.E. (A) TREATING THE EXPENDITURE AS CAPITAL AS AGAINST REVE NUE EXPENDITURE CLAIMED BY ASSESSEE OF RS.10,000/- AND (B) TO DISALLOW PROVISI ON FOR AUDITED FEE OF RS.4,494/-. HE FURTHER REFERRED TO PAGES 34 TO 39 OF PAPER BOOK AND SUBMITTED THAT RETURN FILED FOR ASSESSMENT YEAR 200 9-10 WERE ACCEPTED BY THE DEPARTMENT. 11. LD. A.R. SUBMITTED THAT AFTER THE GRANT OF REGI STRATION TO THE ASSESSEE THERE IS NO FINDING THAT THE ASSESSEE IS NOT CARRYI NG ITS EDUCATIONAL ACTIVITY IN ACCORDANCE WITH THE AIMS AND OBJECTIVES. HE SUBMIT TED THAT WHETHER DONATIONS WERE VOLUNTARY AND/OR FORMING PART OF COR PUS OR NOT IS IMMATERIAL AS THEY WERE RELEVANT FOR ASSESSMENT YEAR 2007-08, THE PERIOD PRIOR TO GRANT OF REGISTRATION TO THE ASSESSEE U/S 12A OF THE ACT WHICH WAS GRANTED VIDE CERTIFICATE DATED 22.7.2008. HE SUBMITTED THAT AS PER SECTION 12AA(3) OF THE ACT ONCE THE REGISTRATION IS GRANTED, LD. CIT CAN C ANCEL THE REGISTRATION ON TWO CIRCUMSTANCES I.E. (I) IF ACTIVITIES OF TRUST O R INSTITUTION ARE NOT GENUINE OR (II) ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH O BJECTS OF THE TRUST OR INSTITUTION. LD. A.R. SUBMITTED THAT THESE DONATIO NS WERE RECEIVED BY THE ASSESSEE IN FURTHERANCE OF ASSESSEE OBJECT I.E. EDU CATION. HE SUBMITTED THAT GENUINENESS OF THE ACTIVITIES VIS--VIS RECEIPT OF DONATIONS IS NOT DOUBTED BY CIT AND DONATIONS HAVE BEEN RECEIVED BY DRAFTS. FU RTHER, LD. A.R. SUBMITTED THAT LOAN OF RS.1 LAKH, FROM INSTITUTE OF SCIENCE & MANAGEMENT, WAS REFLECTED IN THE BALANCE SHEET OF THE SAID LENDER AND THE SAI D LENDER WAS ALSO ASSESSED TO TAX BY THE SAME ASSESSING OFFICER. THEREFORE, T HE ADVERSE INFERENCE DRAWN ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 7 BY LD. CIT IS WHOLLY MISCONCEIVED AND CANNOT BE A G ROUND FOR CANCELLATION OF REGISTRATION U/S 12AA(3) OF THE INCOME-TAX ACT. LD . A.R. SUBMITTED THAT THE ASSESSEES ACCOUNTS HAVE BEEN FOUND TO BE AMENABLE TO PROPER VERIFICATION. THERE IS NO PROOF OF CONCEALMENT OF INCOME NOR IT I S THE GROUND OF SIPHONING OFF FUNDS. LD. A.R. SUBMITTED THAT IT IS ON RECORD AND NOT DISPUTED BY THE DEPARTMENT THAT THE ONLY ACTIVITY OF THE ASSESSEE S OCIETY IS EDUCATION AND THERE IS NO OTHER ACTIVITY. THAT ASSESSEE SOCIETY EXISTS SOLELY FOR EDUCATIONAL PURPOSES AND RECEIPTS ARE ALSO FROM EDUCATIONAL ACT IVITIES AND ARE ALSO UTILIZED FOR THE PURPOSE OF EDUCATION. LD. A.R. SUBMITTED T HAT AUDITED SET OF ACCOUNTS WERE FILED BY THE ASSESSEE ALONG WITH RETURN OF INC OME FROM YEAR TO YEAR. HE SUBMITTED THAT IF THE ACTIVITY OF THE ASSESSEE IS E DUCATIONAL PURPOSES AND EVEN IF THERE IS SURPLUS OF THE FUND, THE REGISTRAT ION GRANTED U/S 12AA CANNOT BE CANCELLED. LD. A.R. RELYING ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF AMERICAN HOTEL AND LODGING ASSOCIATION EDUC ATIONAL INSTITUTE VS. CBDT 301 ITR 86 SUBMITTED THAT PRESCRIBED AUTHORITY WHILE CONSIDERING THE REGISTRATION IS TO EXAMINE THE NATURE, ACTIVITIES A ND GENUINENESS OF THE INSTITUTION AND THE MERE EXISTENCE OF PROFIT/SURPLU S DO NOT DISQUALIFY THE INSTITUTION TO BE CALLED AN EDUCATIONAL INSTITUTION . LD. A.R. SUBMITTED THAT AN EDUCATIONAL INSTITUTION WOULD NOT CEASE TO EXIST SO LELY FOR EDUCATIONAL PURPOSES MERELY BECAUSE IT HAS GENERATED SURPLUS IN COME AFTER MEETING ITS EXPENDITURE AND REFERRED THE DECISION OF THE HONBL E PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARIT ABLE TRUST VS. UNION OF INDIA 327 ITR 73. LD. A.R. SUBMITTED THAT THE CANC ELLATION OF REGISTRATION BY THE LD. CIT MERELY ON ACCOUNT OF SOME DONATIONS REC EIVED PRIOR TO DATE OF REGISTRATION GRANTED TO THE ASSESSEE COULD NOT BE C ONSIDERED TO HOLD THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT GENUINE AND/OR N OT CARRIED IN ACCORDANCE WITH ITS AIMS AND OBJECTS. HE SUBMITTED THAT THE A SSESSEE IS STILL RUNNING EDUCATIONAL INSTITUTION AND IMPARTING EDUCATION. H E SUBMITTED THAT ONCE REGISTRATION IS GRANTED IT CAN BE CANCELLED WITH DU E PROCESS OF LAW. LD. A.R. SUBMITTED THAT ORDER OF LD. CIT TO CANCEL THE REGIS TRATION SHOULD BE QUASHED. 12. ON THE OTHER HAND, LD. D.R. SUPPORTED THE ORDER OF THE LD. CIT. HE SUBMITTED THAT THERE WAS A SEARCH AND SEIZURE OPERA TION IN THE PREMISES OF ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 8 R.A.K. VERMA GROUP OF CASES WHO ARE THE MANAGING CO MMITTEE MEMBERS OF THE SOCIETY AND SIMULTANEOUSLY SURVEY WAS CARRIED O UT IN THE PREMISES OF THE ASSESSEE SOCIETY. HE SUBMITTED THAT PURSUANT TO TH E IRREGULARITIES FOUND NOTICES WERE ISSUED FOR CANCELLATION OF REGISTRATIO N AND THE ASSESSEE FILED ITS REPLY, A COPY OF WHICH IS PLACED AT PAGE 11 & 12 OF PAPER BOOK. THEREFORE, FAIR OPPORTUNITY OF HEARING WAS GIVEN TO THE ASSESS EE BEFORE CANCELLATION OF REGISTRATION ORDER WAS PASSED BY LD. CIT. LD. D.R. SUBMITTED THAT ASSESSEE ACCEPTED DONATIONS COMPULSORILY FROM STUDENTS AND T HERE WAS NO SUCH DIRECTION TO TREAT THE SAID DONATIONS RECEIVED TO F ORM PART OF CORPUS. HE SUBMITTED THAT IF THE ACTIVITIES ARE NOT CARRIED ON IN ACCORDANCE WITH ITS OBJECTS FOR WHICH SOCIETY IS FORMED, THE CANCELLATI ON OF REGISTRATION IS JUSTIFIED. LD. D.R. REFERRED SECTION 2(15) OF THE INCOME-TAX A CT AND SUBMITTED THAT AS PER AMENDMENT, IF A SOCIETY IS CARRYING OUT ITS ACT IVITY IN THE NATURE OF TRADE OR BUSINESS OR RENDERING ANY SERVICES IN RELATION I N TRADE OR BUSINESS FOR A FEE OR FOR ANY CONSIDERATION, IT SHALL NOT BE A CHARITA BLE PURPOSE. LD. D.R. SUBMITTED THAT THE ASSESSEE IS MAKING SURPLUS BY CH ARGING HIGHER FEE FROM THE STUDENTS AND THEREFORE THE ASSESSEE IS CARRYING ON ITS ACTIVITY OF EDUCATION IN THE NATURE OF A TRADE OR BUSINESS AND HENCE IT COULD NOT BE CONSIDERED AS A CHARITABLE PURPOSE. HE SUBMITTED T HAT THE LD. CIT HAS RIGHTLY CANCELLED THE REGISTRATION GRANTED TO THE ASSESSEE SOCIETY U/S 12A/12AA OF THE INCOME-TAX ACT. 13. IN REPLY TO SUBMISSIONS OF LD. D.R., LD. A.R. R EFERRED CBDT CIRCULAR NO. 11/2008 DATED 19.12.2008 AND SUBMITTED THAT AS PER SAID CIRCULAR IT HAS BEEN CLARIFIED THAT NEWLY INSERTED PROVISO TO SECTION 2( 15), ON WHICH LD. D.R. HAS PLACED RELIANCE, WILL NOT APPLY IN RESPECT OF FIRST 3 LIMBS OF SECTION 2(15)OF THE ACT I.E. (I) RELIEF OF THE POOR, (II) EDUCATION OR (III) MEDICAL RELIEF. HE SUBMITTED THAT IT WAS CLARIFIED THAT IT WILL CONSTITUTE CHARI TABLE PURPOSE EVEN IF IT INCIDENTALLY INVOLVES THE CARRYING ON OF COMMERCIAL ACTIVITIES. LD. A.R. FURTHER SUBMITTED THAT IF THERE IS ANY UTILIZATION OF FUND WHICH IS NOT IN ACCORDANCE WITH AIMS AND OBJECTS AND/OR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, THE BENEFIT COULD BE DENIED IN NOT GIVING EXEMPTION U/S 11 OF THE ACT AT THE ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 9 TIME OF ASSESSMENT BUT REGISTRATION CANNOT BE CANCE LLED. LD. A.R. SUBMITTED THAT THE ORDER OF THE LD. CIT IS NOT VALID AND THE SAME SHOULD BE QUASHED. 14. WE HAVE CAREFULLY CONSIDERED THE ORDER OF THE L D. CIT, SUBMISSIONS OF LD. REPRESENTATIVE OF THE PARTIES, THE CASES CITED BEFORE US AND HAVE ALSO PERUSED RELEVANT PAGES OF THE PAPER BOOK PLACED BEF ORE US. 15. WE OBSERVE THAT THE ASSESSEE IS A SOCIETY REGIS TERED UNDER THE SOCIETIES REGISTRATION ACT AND ITS DOMINANT OBJECT IS TO IMPART EDUCATION BY RUNNING AN INSTITUTE ISM. WE OBSERVE THAT THE ASSE SSEE WAS GRANTED REGISTRATION U/S 12AA OF THE ACT ON 22.7.2008 EFFEC TIVE FROM ASSESSMENT YEAR 2008-09 AND A COPY OF THE SAID CERTIFICATE IS PLACE D AT PAGE 13 OF THE PAPER BOOK. WE OBSERVE THAT THERE WAS A SEARCH AND SEIZU RE OPERATION IN THE RESIDENTIAL PREMISES OF R.A.K. VERMA GROUP OF CASES U/S 132(1) ON 20.3.2009 AND SIMULTANEOUSLY A SURVEY OPERATION U/S 133A OF I NCOME-TAX ACT WAS CARRIED OUT IN THE CASE OF THE ASSESSEE. WE OBSERV E THAT IT WAS FOUND THAT ASSESSEE HAD TAKEN IN THE FINANCIAL YEAR RELEVANT T O THE ASSESSMENT YEAR 2007-08 COMPULSORY DONATION TO THE EXTENT OF RS.21, 40,000/- AND THE SAME WAS TREATED TO FORM PART OF CORPUS FUND. IT IS REL EVANT TO STATE THAT DURING THE ASSESSMENT YEAR 2007-08 THE ASSESSEE WAS NOT RE GISTERED U/S 12A/12AA OF THE INCOME-TAX ACT AND ACCORDINGLY THE ASSESSEE WAS NOT ENTITLED FOR ANY EXEMPTION OF THE SAID DONATION U/S 11 OF THE INCOME -TAX ACT IN THE ASSESSMENT YEAR 2007-08. WE OBSERVE THAT THE CIT H AS FURTHER STATED THAT THERE WAS A LOAN OF RS.1 LAKH TO THE ASSESSEE FROM INSTITUTE OF SCIENCE & MANAGEMENT BUT NO LOAN CONFIRMATION WAS FILED. ON THE BASIS OF THE ABOVE FACTS LD. CIT INITIATED ACTION FOR CANCELLATION OF REGISTRATION AND ACCORDINGLY CANCELLED THE REGISTRATION GRANTED TO THE ASSESSEE SOCIETY. THE ASSESSEE BEFORE US HAS DISPUTED THE ACTION OF LD. CIT FIRSTL Y CHALLENGING THE VALIDITY OF THE NOTICE ISSUED U/S 12AA(3) OF THE INCOME-TAX ACT . 16. WE OBSERVE THAT TWO NOTICES DATED 15.2.2011 AND 12.4.2011 WERE ISSUED UNDER THE SIGNATURE OF INCOME TAX OFFICER (H QRS.), ADMN. & TECH. ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 10 COPIES OF THE SAID NOTICES ARE PLACED AT PAGES 9 & 10 OF THE PAPER BOOK. WE CONSIDER IT PRUDENT TO STATE THE CONTENTS OF SAID N OTICES WHICH ARE AS UNDER: 1 ST NOTICE: GOVERNMENT OF INDIA OFFICE OF THE COMMISSIONER OF INCOME TAX (CENTRAL), PATNA F.NO.CIT(C)/PAT/SERCH, RANCHI/12AA(3)/2010-2011/532 4 15 TH FEBRUARY, 2011 TO THE SECRETARY, M/S. SOCIETY FOR EDUCATIONAL RESEARCH & COMMUNITY H EALTH (SERCH) H.NO.I-187, HARMU HOUSING COLONY RANCHI SIR, SUB: CANCELLATION OF REGISTRATION U/S 12AA(3) OF TH E INCOME TAX ACT, 1961 IN THE CASE OF M/S. SOCIETY FOR EDUCATIONAL RE SEARCH & COMMUNITY HEALTH (SERCH), H.NO.I-187, HARMU HOUSING COLONY, RANCHI-MATTER REG. PLEASE REFER TO THE ABOVE. I AM DIRECTED TO INFORM THAT THE COMMISSIONER OF IN COME-TAX (CENTRAL), PATNA DESIRES YOUR APPEARANCE AT 12.30 P.M. ON 08.04.2011 ITSELF EITHER PERSONALLY OR THROUGH YOUR AUTHORIZED REPRESENTATIV E. YOURS FAITHFULLY, SD/- (INDRESHWAR DAYAL) INCOME TAX OFFICER (HQRS.) ADMN. & TECH FOR: COMMISSIONER OF INCOME-TAX (CENTRAL), PATNA ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 11 2 ND NOTICE: GOVERNMENT OF INDIA OFFICE OF THE COMMISSIONER OF INCOME TAX (CENTRAL), PATNA C.R. BUILDING, 3 RD FLOOR, BIRCHAND PATEL MARG, PATNA-800 001 [(TEL: EPABX 2504020-21, EXTN-330, 0612-2504149, 25 04695 (FAX)] F.NO.CIT(C)/PAT/SERCH, RANCHI/12AA(3)/2011-2012/192 12 TH APRIL, 2011 TO THE SECRETARY M/S. SOCIETY FOR EDUCATIONAL RESEARCH & COMMUNITY H EALTH (SERCH) H.NO.I-187, HARMU HOUSING COLONY RANCHI. SIR, SUB: CANCELLATION OF REGISTRATION U/S 12AA(3) OF I NCOME TAX ACT, 1961 IN THE CASE OF M/S. SOCIETY FOR EDUCATIONAL RE SEARCH & COMMUNITY HEALTH (SERCH), H.NO.I-187, HARMU HOUSING COLONY, RANCHI REG. PLEASE REFER TO THE ABOVE. I AM DIRECTED TO INFORM THAT THE COMMISSIONER OF IN COME TAX (CENTRAL), PATNA DESIRES YOUR APPEARANCE EITHER PERSONALLY OR THROUGH YOUR AUTHORIZED REPRESENTATIVE RE-FIXING THE CASE FOR HEARING AT 11.30 A.M. ON 03.05.2011 ITSELF. YOURS FAITHFULLY, SD/- (INDRESHWAR DAYAL) INCOME TAX OFFICER (HQRS.), ADMN.&TECH. FOR: COMMISSIONER OF INCOME TAX (CENTRAL), PATNA. 17. WE OBSERVE THAT ASSESSEE FILED ITS REPLY DATED 3 RD MAY, 2011, COPY PLACED AT PAGES 11 & 12 OF THE PAPER BOOK. THERE A FTER LD. CIT HAS PASSED THE IMPUGNED ORDER DATED 24.6.2011 TO CANCEL THE RE GISTRATION OF THE ASSESSEE SOCIETY. BEFORE WE CONSIDER THE ISSUE AS TO WHETHER THE NOTICES ISSUED FOR CANCELLATION OF REGISTRATION ARE VALID O R NOT, WE CONSIDER IT NECESSARY TO STATE SECTION 12AA(3) OF THE INCOME-TA X ACT WHICH READS AS UNDER: ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 12 12AA (3): WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) [O R HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT S TOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO.2) ACT, 1996 (33 OF 1Q 996)]] AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NO T 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 CANC ELING THE REGISTRATION OF SUCH TRUST OR INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSE D UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A R EASONABLE OPPORTUNITY OF BEING HEARD.] 18. IT IS OBSERVED THAT POWER OF CANCELLATION OF RE GISTRATION CAN BE EXERCISED BY THE COMMISSIONER IF HE IS SATISFIED TH AT ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR NOT BEING CARRIED OU T IN ACCORDANCE WITH THE OBJECT OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE. THE LD. CIT BEFORE PASSING AN ORDER IN WRITING CANCELING THE REGISTRAT ION OF SUCH TRUST OR INSTITUTION SHALL GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO SUCH TRUST OR INSTITUTION. NOW THE QUESTION ARISES AS TO WHETHER LD. CIT HAS GIVEN REASONABLE OPPORTUNITY TO THE ASSESSEE BEFORE EXERCISING HIS P OWER TO CANCEL REGISTRATION U/S 12AA(3) OF THE INCOME-TAX ACT. 19. IT IS OBSERVED THAT IN THE NOTICES ISSUED DATED 15.2.2011 AND 12.4.2011 THE LD. CIT HAS NOT GIVEN ANY REASONS AND /OR INDICATED THE BASIS ON WHICH CANCELLATION OF REGISTRATION IS PROPOSED U /S 12AA(3) OF THE INCOME- TAX ACT. WE OBSERVE THAT WHEN LD. CIT ASSUMES JURI SDICTION U/S 263 OF THE INCOME-TAX ACT ON THE GROUND THAT THE ASSESSMENT OR DER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS P REJUDICIAL TO THE INTEREST OF THE REVENUE, HE HAS TO STATE BASIS IN THE NOTICE AS IT WAS HELD BY THEIR LORDSHIPS OF HONBLE HIGH COURT OF GUJARAT IN THE CASE OF GAR DEN SILK MILLS LTD. (SUPRA) THAT WHEN THE SHOW CAUSE NOTICE ISSUED U/S 263 OF T HE ACT DO NOT INDICATE THE BASIS ON WHICH LD. CIT HAS ASSUMED JURISDICTION U/S 263 OF THE ACT, THE SAID NOTICE IS VAGUE AND IS LIABLE TO BE QUASHED. A SIMILAR QUESTION CAME BEFORE THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF SATTAN DAS MOHAN DAS SIDHI (SUPRA) WHERE IN IT WAS HELD THAT W HEN A NOTICE ISSUED U/S ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 13 263 IS TO BE SENT TO THE ASSESSEE, THE NOTICE SHOUL D CONTAIN REASONS AS TO HOW THE ORDER IS PREJUDICIAL TO THE REVENUE. THEIR LORDSHIPS OF MADHYA PRADESH HIGH COURT HELD THAT IF THE COMMISSIONER DI D NOT FAIRLY INDICATE THE GROUNDS USED BY HIM FOR ORDERING CANCELLATION OF AS SESSMENTS MADE BY THE INCOME-TAX OFFICER, THE TRIBUNAL WAS JUSTIFIED IN R EVERSING THE COMMISSIONERS ORDER AS THE ASSESSEE WAS DEPRIVED O F FAIR OPPORTUNITY TO SHOW CAUSE AGAINST PROPOSED ACTION. FURTHER, ITAT PATNA BENCH IN THE CASE OF SATISH KUMAR KESHRI (SUPRA) QUASHED THE PROCEEDI NGS INITIATED U/S 263 OF THE ACT AS ILLEGAL AND INVALID ON THE GROUND THAT W HEN SHOW CAUSE NOTICE THROUGH WHICH LD. CIT ASSUMED JURISDICTION U/S 263 OF THE ACT WAS NOT UNDER HIS SEAL AND SIGNATURE AND ALSO THAT NOTICE SUFFERE D FROM WANT OF DETAILS ON THE BASIS OF WHICH LD. CIT CAME TO THE CONCLUSION T HAT ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 20. WE ARE OF THE CONSIDERED VIEW THAT THE NOTICES TO BE ISSUED U/S 12AA(3) OF THE ACT BY COMMISSIONER OF INCOME-TAX TO PROCEED TO CANCEL REGISTRATION GRANTED U/S 12A/12AA OF THE ACT IS AKI N TO THE NOTICE TO BE ISSUED BY LD. CIT U/S 263 OF THE INCOME-TAX ACT, BECAUSE N OTICE TO BE ISSUED U/S 263 OF THE ACT ALSO REQUIRES FAIR OPPORTUNITY TO BE GIVEN TO THE ASSESSEE BEFORE LD. CIT PASS AN ORDER IN RESPECT OF THE ASSE SSMENT ORDER PASSED BY THE ASSESSING OFFICER TO FORM AN OPINION THAT THE A SSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE. SIMILARLY, LD. CIT BEFORE PASSING AN ORDER U/S 12AA (3) OF THE ACT HAS TO SATISFY HIMSELF THAT ACTIVITIES OF SUCH TRUST OR IN STITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT S OF THE TRUST OR INSTITUTION AND TO PROCEED TO CANCEL THE REGISTRATION OF SUCH T RUST OR INSTITUTION HAS TO GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO SUC H TRUST OR INSTITUTION AND FOR WHICH HE HAS TO GIVE A NOTICE TO SUCH TRUST OR INSTITUTION. THEREFORE, SUCH NOTICE TO BE ISSUED, SHOULD CONTAIN SPECIFIC REASON S AND/OR MATERIAL TO BE USED AGAINST THE ASSESSEE, SO THAT THE ASSESSEE COU LD REPLY AND BE GIVEN A FAIR AND REASONABLE OPPORTUNITY BEFORE ANY ORDER IS PASSED. THE HONBLE PATNA HIGH COURT HAS ALSO HELD IN THE CASE OF RAMAN AND PRASAD AND OTHERS (SUPRA) THAT ADHERENCE TO THE PRINCIPLE OF NATURAL JUSTICE IS A FUNDAMENTAL ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 14 OBLIGATION MORE PARTICULARLY WHERE PEOPLE ARE AFFEC TED BY THE ACTS OF AUTHORITY. IT WAS STATED BY THEIR LORDSHIPS OF PAT NA HIGH COURT THAT RIGHT TO BE HEARD BEFORE AN ADVERSE ORDER IS PASSED, WHICH E NTAILS CIVIL CONSEQUENCES, IS, BY IMPLICATION, A DUTY TO ACT FAIRLY. IT WAS S TATED THAT EVEN WHERE THE ORDER IS ADMINISTRATIVE IN CHARACTER, AN ADMINISTRA TIVE ORDER WHICH INVOLVES CIVIL CONSEQUENCES MUST BE MADE CONSISTENTLY WITH T HE RULES OF NATURAL JUSTICE AFTER INFORMING THE AGGRIEVED PARTY OF THE CASE AGA INST THEM. 21. WE OBSERVE THAT IN THE CASE BEFORE US, IT IS A FACT THAT IN THE NOTICES ISSUED DATED 15.2.2011 AND 12.4.2011, REPRODUCED HE REIN ABOVE, ARE NOT ONLY THAT THEY ARE NOT UNDER THE SEAL AND SIGNATURE OF THE COMMISSIONER BUT ALSO IT IS A FACT THAT THEY DO NOT STATE THE REASON S/MATERIALS SO THAT THE ASSESSEE COULD BE CONFRONTED WITH THE MATERIALS/EVI DENCES USED AGAINST IT BEFORE LD. CIT ASSUMED JURISDICTION U/S 12AA(3) OF THE ACT TO CANCEL THE REGISTRATION OF THE ASSESSEE SOCIETY. THEREFORE, W E FIND MERITS IN THE CONTENTION OF THE LD. A.R. THAT NOTICES ISSUED U/S 12AA(3) OF THE ACT ARE NOT VALID AND ACCORDINGLY THE ORDER OF LD. CIT TO CANCE L REGISTRATION OF THE ASSESSEE SOCIETY IS NOT VALID AND IS LIABLE TO BE Q UASHED. 22. NOT ONLY THIS, WE OBSERVE THAT IN THE ORDER PAS SED BY LD. CIT, THE ONLY REASONS GIVEN BY HIM ARE THAT THE ASSESSEE ACCEPTED COMPULSORY DONATIONS IN ASSESSMENT YEAR 2007-08 AND TREATED IT AS A PART OF CORPUS, AND ALSO ACCEPTED LOAN OF RS.1 LAKH FROM ISM. WE ARE OF THE CONSIDERED VIEW THAT THE SAID GROUNDS TAKEN BY LD. CIT TO CANCEL THE REGISTR ATION GRANTED TO THE ASSESSEE SOCIETY U/S 12A/12AA OF THE ACT HAVE NO ME RITS BECAUSE ONCE THE REGISTRATION IS GRANTED, LD. CIT CAN CANCEL THE SAI D REGISTRATION U/S 12AA(3) OF THE ACT, IF HE IS SATISFIED THAT SUCH TRUST OR INST ITUTION ARE NOT GENUINE OR ARE NOT BEING CARRYING OUT ITS ACTIVITIES IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. WE OBSERVE THAT THE ASSESSEE HAS B EEN FORMED WITH THE DOMINANT OBJECT OF RUNNING EDUCATIONAL INSTITUTION AND THE ASSESSEE IS ADMITTEDLY RUNNING THE INSTITUTION. MERELY BECAUSE THE ASSESSEE HAS TAKEN DONATION AND/OR LOAN, IT DOES NOT ESTABLISH THAT TH E ASSESSEE IS NOT CARRYING ON ITS ACTIVITIES IN ACCORDANCE WITH ITS OBJECTS OR THE ASSESEE SOCIETY IS NOT ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 15 GENUINE. MOREOVER, THERE IS NO MATERIAL BROUGHT ON RECORD BY THE DEPARTMENT THAT THE ASSESSEE IS NOT RUNNING ITS ACT IVITIES FOR CHARITABLE PURPOSES I.E. FOR EDUCATIONAL PURPOSES. IN THIS CO NTEXT, IT IS RELEVANT TO REFER THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF OXFORD ACADEMY FOR CAREER DEVELOPMENT VS. CHIEF COMMISSION ER OF INCOME-TAX AND ORS. 315 ITR 382, WHEREIN ON THE BASIS OF THE INFOR MATION IT WAS FELT BY THE DEPARTMENT THAT THE SOCIETY WAS BEING RUN FOR THE P URPOSE OF PROFIT AND THAT THE PRESIDENT AND ITS FAMILY MEMBERS WERE ALSO OBTA INING BENEFIT FROM IT AND ACCORDINGLY A NOTICE WAS ISSUED TO CANCEL THE REGIS TRATION GRANTED U/S 12A OF THE ACT. IT WAS ALSO CONTENDED ON BEHALF OF THE DE PARTMENT THAT THERE WAS UNUSUAL HUGE MARGIN AND THE ASSESSEE WAS ENGAGED IN THE COMMERCIAL ACTIVITIES RATHER THAN CHARITABLE. THAT AS PER BAL ANCE SHEET, HUGE AMOUNT FROM THE STUDENTS WAS CHARGED. THE PROFIT MARGIN E MBODIED IN THE CHARGES TAKEN FROM THE STUDENTS WAS HUGE AND IT PROVES THE PROFIT MOTIVE OF THE ASSESSEE. THEIR LORDSHIPS OF THE HONBLE ALLAHABAD HIGH COURT AFTER CONSIDERING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF AMERICAN HOTEL AND LODGING ASSOCIATION EDUCATIONAL INSTITUTE (SUPRA) HELD THAT ONCE THE APPLICANT INSTITUTION CAME WITHIN THE PHRASE E XIST SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR PROFIT, NO OTHER CONDITION LIK E APPLICATION OF INCOME WAS REQUIRED TO BE COMPLIED WITH. THE PRESCRIBED AUTHO RITY WAS ONLY REQUIRED TO EXAMINE THE NATURE, ACTIVITIES AND GENUINENESS OF T HE INSTITUTION. THE MERE EXISTENCE OF PROFIT/SURPLUS DID NOT DISQUALIFY THE INSTITUTION. IT WAS FURTHER STATED THAT FOR GRANT OF APPROVAL SECTION 11 & 13 D ID NOT APPLY. THEIR LORDSHIPS OF THE HONBLE ALLAHABAD HIGH COURT HAS A LSO CONSIDERED THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF C IT VS. SURAT CITY GYMKHANA 300 ITR 214 WHEREIN IT WAS OBSERVED THAT AFTER REG ISTRATION, FURTHER PROBE INTO OBJECT IS NOT PERMISSIBLE. 23. IN THE CASE BEFORE US THERE IS NO DISPUTE TO TH E FACT THAT THE ASSESSEE IS ENGAGED IN EDUCATION. EDUCATION IS PERSE A CHAR ITABLE PURPOSE AS DEFINED IN SECTION 2(15) OF THE ACT. MOREOVER, CBDT VIDE I TS CIRCULAR NO.11/2008 DATED 19.12.2008 HAS ALSO WHILE CONSIDERING THE IMP LICATION THAT HAS ARISEN ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 16 FROM THE AMENDMENT MADE BY FINANCE ACT, 2008 BY ADD ING A PROVISO TO SECTION 2(15) OF THE ACT HAS STATED AS UNDER: DEFINITION OF CHARITABLE PURPOSE UNDER SECTION 2(15) OF THE INCOME-TAX ACT, 1961 SECTION 2(15) OF THE INCOME TAX ACT, 1961 (`ACT) DEFINES CHARITABLE PURPOSE TO INCLUDE THE FOLLOWING:- (I) RELIEF OF THE POOR (II) EDUCATION (III) MEDICAL RELIEF, AND (IV) THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY. AN ENTITY WITH A CHARITABLE OBJECT OF THE ABOVE NAT URE WAS ELIGIBLE FOR EXEMPTION FROM TAX UNDER SECTION 11 OR ALTERNATIVEL Y UNDER SECTION 10(23C) OF THE ACT, HOWEVER, IT WAS SEEN THAT A NUMBER OF E NTITIES WHO WERE ENGAGED IN COMMERCIAL ACTIVITIES WERE ALSO CLAIMING EXEMPTI ON ON THE GROUND THAT SUCH ACTIVITIES WERE FOR THE ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY IN TERMS OF THE FOURTH LIMB OF THE DEFINITION OF `CHAR ITABLE PURPOSE. THEREFORE, SECTION 2(15) WAS AMENDED VIDE FINANCE ACT, 2008 BY ADDING A PROVISO WHICH STATES THAT THE `ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLVES TH E CARRYING ON OF (A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS; OR (B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION T O ANY TRADE, COMMERCE OR BUSINESS; FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRES PECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION OF THE INCOME FROM SUC H ACTIVITY. 2. THE FOLLOWING IMPLICATIONS ARISE FROM THIS AMEND MENT -- 2.1 THE NEWLY INSERTED PROVISO TO SECTION 2(15) WIL L NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SECTION 2(15), I.E., RELIE F OF THE POOR, EDUCATION OR MEDICAL RELIEF. CONSEQUENTLY, WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF, IT WILL CONSTITUTE `CHARITABLE PURPOSE EVEN IF IT INCIDENTALLY INVOLVES THE CARRY ING ON OF COMMERCIAL ACTIVITIES. 2.2 `RELIEF OF THE POOR ENCOMPASSES A WIDE RANGE O F OBJECTS FOR THE WELFARE OF THE ECONOMICALLY AND SOCIALLY DISADVANTA GED OR NEEDY. IT WILL, THEREFORE, INCLUDE WITHIN ITS AMBIT PURPOSES SUCH A S RELIEF TO DESTITUTE, ORPHANS OR THE HANDICAPPED, DISADVANTAGED WOMEN OR CHILDREN, SMALL AND MARGINAL FARMERS, INDIGENT ARTISANS OR SENIOR CITIZ ENS IN NEED OF AID. ENTITIES WHO HAVE THESE OBJECTS WILL CONTINUE TO BE ELIGIBLE FOR EXEMPTION EVEN IF THEY INCIDENTALLY CARRY ON A COMMERCIAL ACTIVITY, SUBJEC T, HOWEVER, TO THE CONDITIONS STIPULATED UNDER SECTION 11(4A) OR THE S EVENTH PROVISO TO SECTION 10(23C) WHICH ARE THAT (I) THE BUSINESS SHOULD BE INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE ENTITY, AND ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 17 (II) SEPARATE BOOKS OF ACCOUNT SHOULD BE MAINTAINED IN R ESPECT OF SUCH BUSINESS. SIMILARLY, ENTITIES WHOSE OBJECT IS `EDUCATION OR `MEDICAL RELIEF WOULD ALSO CONTINUE TO BE ELIGIBLE FOR EXEMPTION AS CHARITABLE INSTITUTIONS EVEN IF THEY INCIDENTALLY CARRY ON A COMMERCIAL ACTIVITY SUBJECT TO THE CONDITIONS MENTIONED ABOVE. 24. THEIR LORDSHIPS OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST (SUPRA) HA S OBSERVED THAT AN EDUCATIONAL INSTITUTION WOULD NOT CEASE TO EXIST FO R EDUCATIONAL PURPOSES MERELY BECAUSE IT HAS GENERATED SURPLUS INCOME AFTE R MEETING ITS EXPENDITURE. IN THE CASE OF TMA PIE FOUNDATION VS. STATE OF KARNATAKA (2002) 8 SCC 481 THEIR LORDSHIPS OF HONBLE APEX CO URT HAS HELD THAT PRIVATE EDUCATIONAL INSTITUTIONS ARE BOUND TO GENERATE FUND S FOR BETTERMENT AND GROWTH OF THE INSTITUTION AND FOR WHICH THERE MAY B E A SURPLUS FOR FURTHERANCE OF EDUCATION. THEREFORE, IT IS NOT ONLY PERMISSIBL E BUT AN IMPORTANT REQUIREMENT TO RUN THE INSTITUTIONS OF SUCH A STRAI N. THEIR LORDSHIPS OF THE APEX COURT HAS ALSO STATED IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTION 224 ITR 310 THAT WHEN SURPLUS IS UTILIZED FOR EDUCATION AL PURPOSE, I.E. FOR INFRASTRUCTURE DEVELOPMENT, IT CANNOT BE SAID THAT THE INSTITUTION WAS HAVING THE OBJECT TO MAKE PROFIT. IT WAS OBSERVED THAT TH E SURPLUS IS USED FOR MANAGEMENT AND BETTERMENT OF THE INSTITUTION COULD NOT BE TERMED AS PROFIT. NOT ONLY THIS ITAT AHMEDABAD BENCH IN THE CASE OF A JIT EDUCATIONAL TRUST VS. CIT 46 DTR 482 HAS HELD THAT MERELY BY GRANTING A R EGISTRATION U/S 12A/12AA TO A TRUST IPSO-FACTO IS NOT ENTITLED FOR THE EXEMP TIONS PRESCRIBED U/S 11 & 12. A TRUST CAN GET EXEMPTION U/S 11 & 12 ONLY IF IT FU LFILLS THE REQUISITE CONDITIONS LAID DOWN THEREIN. THERE IS NO MATERIALS BEFORE U S THAT THE ASSESSEE IS NOT CARRYING ON ITS ACTIVITIES AS PER ITS OBJECTS NOR T HERE IS ANY MATERIAL ON RECORD THAT IT IS NOT A GENUINE SOCIETY AND MERELY BECAUSE SOME DONATIONS HAD BEEN ACCEPTED BY THE ASSESSEE THAT TOO PRIOR TO THE PERI OD WHEN IT WAS REGISTERED U/S 12A OF THE ACT AND/OR HAD TAKEN LOAN FROM ANOTH ER INSTITUTION COULD NOT BE A GROUND TO CANCEL THE REGISTRATION U/S 12AA(3) OF THE ACT. AT THE MOST AT THE TIME OF CONSIDERING GIVING EXEMPTION U/S 11 AND 12 OF THE ACT, IF THE ITA NO12/RANCHI/2011 SOCIETY FOR EDUCATIONAL RESEARC H & COMMUNITY HEALTH (SERCH), RANCHI 18 ASSESSEE IS NOT FULFILLING THE CONDITIONS LAID THER EIN, THE BENEFIT OF EXEMPTIONS COULD BE DENIED TO THE ASSESSEE BUT ON THE BASIS OF THE REASONS GIVEN BY LD. CIT IN THE IMPUGNED ORDER THE CANCELLATION OF REGIS TRATION IS NOT LEGAL AND IS NOT JUSTIFIED. HENCE, EVEN ON THIS GROUND THE ORDE R OF LD. CIT IS LIABLE TO BE VACATED AND IS SET ASIDE. 25. IN THE RESULT, WE HOLD THAT ORDER OF THE LD. CI T FOR CANCELLATION OF REGISTRATION OF THE ASSESSEE IS NOT VALID. HENCE, THE ORDER OF CANCELLATION OF REGISTRATION OF ASSESSEE SOCIETY PASSED BY LD. CIT DATED 24 TH JUNE, 2011 IS QUASHED. 26. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER P RONOUNCED ON 24 TH FEBRUARY, 2012 SD/ - SD/ - ( SHAMIM YAH Y A ) ( B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS RANCHI, DATED 24 TH FEBRUARY, 2012 COPY TO 1 SOCIETY FOR EDUCATIONAL RESEARCH & COMMUNITY HEALTH (SERCH), H.NO.HI - 187, HARMU HOUSING COLONY, HARMU, RANCHI 2 CIT (CENTRAL), PATNA 3 CIT, PATNA 4 THE CIT (A) , PATNA 5 THE DR, ITAT, PATNA 6 GUARD FILE. BY ORDER