Institute of Marketing & Management, New Delhi V. CIT(Exemp), New Delhi

ITA 1721/DEL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5904 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 26-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEETA SINGH
• Assessee Lawyers: VED JAIN CA SHRI ASHISH CHADHA
• Keywords: Charitable institution; Opportunity of being heard; Question of law; Cancellation of registration
• Section: 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO.1721/DEL/2015 INSTITUTE OF MARKETING & MANAGEMENT, B-11, QUTAB INSTITUTIONAL AREA, NEW DELHI. VS. CIT (EXEMPTIONS), NEW DELHI. PAN : AAAAI0016R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, CA SHRI ASHISH CHADHA, CA DEPARTMENT BY : SMT. MEETA SINGH, CIT-DR DATE OF HEARING : 10-04-2018 DATE OF PRONOUNCEMENT : 30-05-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 14.01.2015 PASSED BY THE LD. CIT(EXEMPTIONS), NEW D ELHI (HEREINAFTER REFERRED TO AS THE CIT) CANCELLING THE REGISTRATION GRANTE D U/S 12A(A) OF THE I.T. ACT, 1961. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A SOCIETY REGISTERED U/S 12A(A) VIDE ORDER DATED 04.04.1975 (NO.DIE/(C)(1-42 9) AND IS ALSO APPROVED U/S 80G(5)(VI) VIDE ORDER DATED 20.05.2009, VALID F OR THE A.Y. 2010-11 TO A.Y. 2012-13. FURTHER, IT WAS ALSO NOTIFIED U/S 10(23C) (IV) FOR THE ASSESSMENT YEAR 2008-09 AND ONWARDS VIDE DGIT(E)S ORDER 2 ITA NO.1721/DEL/2015 NO.DGIT(E)/10(23C)(IV)/2008/1164 DATED 12.11.2008. HOWEVER, THE EXEMPTION GRANTED TO ASSESSEE U/S 10(23C)(IV) HAS B EEN WITHDRAWN BY DGIT(E) VIDE ITS ORDER REF. DGIT(E)/10(23C)(IV)/W/8/118/201 1-12/1869 DATED 28.02.2012. 3. THE LD. CIT OBSERVED THAT THE ASSESSEE HAS BEEN FILING ITS RETURN OF INCOME CLAIMING EXEMPTION U/S 11 OF THE I.T. ACT. IT IS R UNNING EDUCATIONAL INSTITUTES IN THE NAME AND STYLE OF INSTITUTE OF MARKETING AND MA NAGEMENT, NEW DELHI. HE OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCE EDINGS FOR ASSESSMENT YEARS 2009-10 AND 2010-11, THE ASSESSING OFFICER HAD NOTE D A LARGE NUMBER OF DISCREPANCIES IN THE ACCOUNTS AND AFFAIRS OF THE AS SESSEE SOCIETY FOR WHICH HE HAD REJECTED THE CLAIM OF EXEMPTION U/S 11 AND HELD ITS INCOME TO BE TAXABLE AS AOP. KEEPING IN VIEW THE DISCREPANCIES NOTED IN TH E ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER AND ALSO THE DGITS ORDER WITHDRAWING APPROVAL U/S 10(23C)(IV), NOTICE U/S 12AA(3) WAS ISSUED TO THE A SSESSEE POINTING OUT CERTAIN DISCREPANCIES AS PER PARA 2.1 OF THE ORDER OF THE L D. CIT. 4. THE ASSESSEE FILED A REPLY VIDE SUBMISSION DATED 01.11.2012 AND 04.12.2012. THE ASSESSEE ALSO REQUESTED THAT THE P ROCEEDINGS MAY BE KEPT IN ABEYANCE TILL THE ISSUE OF WITHDRAWAL OF EXEMPTION U/S 10(23C)(IV), WHICH IS PRESENTLY BEFORE THE HONBLE HIGH COURT, IS DECIDED . IT WAS SUBSEQUENTLY BROUGHT TO THE NOTICE OF THE LD. CIT THAT ALL THESE ISSUES BASED ON WHICH THE 3 ITA NO.1721/DEL/2015 ADDITIONS WERE MADE IN THE ASSESSMENT ORDER, BASED ON WHICH NOTICE U/S 12AA(3) HAS BEEN ISSUED, HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL. THE ASSESSEE IN ITS ELABORATE SUBMISSION ENCLOSED THE COPY OF THE ORDER OF THE LD. CIT(A) AS WELL AS THE ORDER OF THE TRIBUNAL AND ARGUED THAT THE TRIBUNAL HAS VERIFIED AND AFTER EXAMINING VARIOUS I SSUES HAS ALREADY FOUND THAT THERE IS NO GROUND FOR REVOKING OF EXEMPTION U/S 11 OF THE I.T. ACT. THEREFORE, PROCEEDINGS FOR WITHDRAWAL OF EXEMPTION U/S 12A MAY BE DROPPED. 5. HOWEVER, LD. CIT OBSERVED THAT THE ORDER OF THE TRIBUNAL IS NOT ACCEPTABLE AND AN APPEAL HAS BEEN FILED BEFORE THE HONBLE HIG H COURT CHALLENGING THE SAME. IT ALSO CAME TO THE NOTICE OF THE DEPARTMENT THAT THE ASSESSEE HAS WITHDRAWN ITS WRIT PETITION BEFORE THE HONBLE HIGH COURT CHALLENGING THE WITHDRAWAL OF EXEMPTION U/S 10(23C)(IV) AND THE WRI T PETITION HAS BEEN DISMISSED AS WITHDRAWN. HE, THEREFORE, AGAIN ASKED THE ASSESSEE TO EXPLAIN ITS POSITION AFRESH IN REFERENCE TO ITS WITHDRAWAL OF W RIT PETITION CHALLENGING THE ORDER OF THE DGIT WITHDRAWING APPROVAL U/S 10(23C)( IV) OF THE I.T. ACT. THERE WAS NO RESPONSE FROM THE SIDE OF THE ASSESSEE. THE LD. CIT THEREAFTER PROCEEDED TO DECIDE THE ISSUE ON MERIT. HE OBSERVED THAT DGI T WHILE CONSIDERING THE ASSESSEES CASE FOR CONTINUATION OF EXEMPTION GRANT ED U/S 10(23C)(IV) HAS POINTED OUT CERTAIN IRREGULARITIES IN THE AFFAIRS A ND FUNCTIONING OF THE ASSESSEE SOCIETY. THE SAME ARE REPRODUCED BY THE LD. CIT AT PARA 3 OF HIS ORDER. HE 4 ITA NO.1721/DEL/2015 OBSERVED THAT THE DGIT CONCLUDED THAT THE ACTIVITIE S OF THE INSTITUTE ARE NOT SOLELY FOR EDUCATION AND RUN FOR PROFIT. IT HAS BE EN OBSERVED THAT THERE ARE NUMEROUS INSTANCES WHERE THE FEES COLLECTED FROM TH E STUDENTS HAD NOT BEEN SPENT ON THEIR EDUCATION BUT ON REPAIRS & RENOVATIO NS ON A LAVISH SCALE IN THE RESIDENCE OF EXECUTIVE PRESIDENT. FURTHER, NO SATI SFACTORY EVIDENCE WAS FURNISHED WITH REGARD TO PURCHASE OF LIBRARY BOOKS, HUGE AMOUNTS PAID TO BABU LAL AND ALSO THE REASON FOR SALE OF HUDA PLOT FOR A PALTRY SUM OF RS.15,00,000/-. THIS, ACCORDING TO HIM, WAS A CLAS SIC INSTANCE OF COLOSSAL MISMANAGEMENT OF THE FUNDS OF THE INSTITUTION FOR D UBIOUS PURPOSE. IT HAS BEEN HELD THAT THE INSTITUTION IS ENGAGED IN THE ACTIVIT IES WHICH CANNOT BE SAID TO BE FOR CHARITABLE PURPOSES OR ARE IN ACCORDANCE WITH T HE OBJECTS FOR WHICH THE INSTITUTION WAS ESTABLISHED. THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT HAS ALSO POINTED OUT THE SAME IRREGULARI TIES IN ITS FUNCTIONING. KEEPING IN VIEW OF THE ABOVE IRREGULARITIES POINTED OUT BY THE DGIT AND BY THE ASSESSING OFFICER, HE AGAIN ISSUED A SHOW-CAUSE NOT ICE TO THE ASSESSEE TO EXPLAIN AS TO WHY THE REGISTRATION GRANTED U/S 12A( A) OF THE I.T. ACT BE NOT WITHDRAWN. REJECTING THE VARIOUS EXPLANATIONS GIVE N BY THE ASSESSEE AND OBSERVING THAT THE VIOLATIONS REGARDING NORMS OF RE GISTRAR OF SOCIETIES, VIOLATIONS WITH REGARD TO AICTE NORMS AND FINANCIAL IRREGULARITIES AND FURTHER OBSERVING THAT THE ASSESSEE MISCONDUCTED ITSELF BY CLAIMING THAT IT IS APPROVED 5 ITA NO.1721/DEL/2015 U/S 35(1)(III) OF THE I.T. ACT AND DONATIONS MADE T O IT ENJOY INCOME TAX EXEMPTION, THE LD. CIT CANCELLED THE REGISTRATION G RANTED U/S 12A(A) OF THE I.T. ACT. SINCE HE CANCELLED THE REGISTRATION GRANTED U /S 12A WHICH IS A PRIMARY REQUIREMENT FOR GRANTING APPROVAL U/S 80G(5), THE A PPROVAL GRANTED U/S 80G(5) DATED 20.05.2009 WAS ALSO CANCELLED. 6. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT, THE AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPTIONS) CANCELLING THE REGISTRATION GRANTED TO THE ASSESSEE UNDER SECTION 12A(A) OF THE ACT IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(EXEMPTIONS) HAS ERRED BOTH ON FACTS AND IN LAW IN CANCELLING THE RE GISTRATION GRANTED UNDER SECTION 12A(A), SOLELY ON THE BASIS OF OBSERVATION MADE BY THE AO DURING THE ASSESSMENT PROCEEDINGS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(EXEMPTIONS) HAS ERRED BOTH ON FACTS AND IN LAW IN CANCELLING THE RE GISTRATION ON THE BASIS OF FINDINGS GIVEN BY THE AO IN ASSESSMENT PROCEEDING D ESPITE THE FACT THAT THE SUCH FINDINGS OF THE AO STANDS REVERSED BY THE CIT(A) AN D HON'BLE ITAT HAS CONFIRMED THE ORDER OF CIT(A). 4. THE ACT OF THE LEARNED CIT(EXEMPTION) IN NOT FOL LOWING THE ORDER OF HON'BLE ITAT IS IN DISREGARD TO THE PRINCIPLE OF JUDICIAL D ISCIPLINE WHEREBY THE LOWER AUTHORITIES ARE BOUND TO FOLLOW THE ORDER OF THE HI GHER AUTHORITIES. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(EXEMPTIONS) HAS ERRED BOTH ON FACTS AND IN HOLDING THAT THE ACTIVIT IES OF THE ASSESSEE IS NOT AS PER LAW AND ARE NOT GENUINE. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 7. LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE DE CISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ISLAMIC ACADEMY OF EDUCATION REPORTED IN 229 TAXMANN.COM 274 SUBMITTED THAT THE HON'BLE HIGH COURT IN THE 6 ITA NO.1721/DEL/2015 SAID DECISION HAS HELD THAT WHERE THE ASSESSEE TRUS T WAS FULFILLING ITS MAIN OBJECT OF IMPARTING EDUCATION BY ESTABLISHING EDUCATIONAL INSTITUTION AND TAKING ADMISSION OF STUDENTS EVERY YEAR REGISTRATION OF TR UST COULD NOT BE CANCELLED ONLY ON BASIS THAT TRUSTEES WERE MISAPPROPRIATING F UNDS OF SAID TRUST. 8. REFERRING TO THE DECISION OF THE KOLKATA BENCH O F THE TRIBUNAL IN THE CASE OF DR. B.G. MEMORIAL TRUST VS. CIT VIDE ITA NO.516/ KOL/2017 ORDER DATED 15.09.2017, HE SUBMITTED THAT WHERE THE ACTIVITIES OF THE TRUST IN RELATION TO ITS EDUCATIONAL ACTIVITIES HAVE NOT BEEN DOUBTED AND ON THE BASIS OF SAME ACTIVITIES REGISTRATION U/S 12AA WAS GRANTED TO THE ASSESSEE, SIMPLY BECAUSE THE ASSESSEE HAS RECEIVED DONATION FROM SOME PARTIES WHICH ARE I NVOLVED IN THE BOGUS TRANSACTIONS CANNOT BE THE BASIS FOR DENIAL OF THE REGISTRATION CERTIFICATES. 9. REFERRING TO THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO.4182/DEL/2013 ORDER DATED 21.0 2.2014 FOR ASSESSMENT YEAR 2009-10, HE SUBMITTED THAT THE TRIBUNAL HAS DE ALT WITH ALL THE ADDITIONS MADE BY THE ASSESSING OFFICER IN RESPECT OF ALL THO SE DISCREPANCIES AND HAS DECIDED THE CASE IN FAVOUR OF THE ASSESSEE. FURTHE R, LD. CIT(A) RELYING ON THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2009-10 H AS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE FOR ASSESSMENT YEARS 2010-11 AND 2011-12. FURTHER, THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF TH E TRIBUNAL HAS ALREADY BEEN DISMISSED BY THE HONBLE HIGH COURT. THEREFORE, IN VIEW OF THE ORDER OF THE 7 ITA NO.1721/DEL/2015 TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 WHICH HAS BEEN FOLLOWED BY THE LD. CIT FOR ASSESSMENT YEARS 2010-1 1 AND 2011-12, THE ORDER OF THE LD. CIT CANCELLING THE REGISTRATION GRANTED EAR LIER U/S 12A(A) SHOULD BE SET- ASIDE. 10. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE LD. CIT. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDER OF LD. CIT AND THE PAPER BOOK FILED ON BE HALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BE FORE US. THE PROVISIONS OF SECTION 12AA(3) READ AS UNDER :- PROCEDURE FOR REGISTRATION. 12AA. (1) XXXXX (2) XXXXX (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTE D 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 O R COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INST ITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT S OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITI NG CANCELLING 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 REASONABLE OPPORTUN ITY OF BEING HEARD. 12. WE FIND THE LD. CIT CANCELLED THE REGISTRATION GRANTED EARLIER BASICALLY ON THE FOLLOWING GROUNDS :- (A) THE ASSESSING OFFICER IN THE ASSESSMENT PROCEED INGS FOR ASSESSMENT YEARS 2009-10 AND 2010-11 HAD NOTED A LARGE NUMBER OF DIS CREPANCIES IN THE ACCOUNTS AND AFFAIRS OF THE ASSESSEE SOCIETY AND RE JECTED THE CLAIM OF EXEMPTION AND HELD ITS INCOME TO BE TAXABLE OF AOP. 8 ITA NO.1721/DEL/2015 (B) THE DGIT HAS WITHDRAWN THE APPROVAL U/S 10(23C) (VI) ON ACCOUNT OF VARIOUS IRREGULARITIES POINTED OUT BY HIM AND HOLDING THAT THE ACTIVITIES OF THE INSTITUTION ARE NOT RUN SOLELY FOR EDUCATION AND RU N FOR PROFIT. (C) THERE ARE VIOLATIONS REGARDING NORMS OF REGISTR AR OF SOCIETIES AND NORMS OF AICTE. (D) THE ASSESSEE MISCONDUCTED ITSELF BY CLAIMING TH AT IT IS APPROVED U/S 35(1)(III) AND DONATIONS MADE TO IT ENJOY INCOME TAX EXEMPTION . 13. SO FAR AS THE ORDER OF THE ASSESSING OFFICER RE JECTING THE CLAIM OF EXEMPTION U/S 11 IS CONCERNED, WE FIND THE LD. CIT( A) ALLOWED THE EXEMPTION U/S 11 AND ON FURTHER APPEAL FILED BY THE REVENUE, THE TRIBUNAL VIDE ORDER DATED 21.02.2014 (SUPRA) HAS HELD THAT THE LD. CIT(A) WAS CORRECT IN HOLDING THAT THE ALLEGATIONS CANNOT BE THE BASIS FOR DENYING THE EXE MPTION U/S 11 OF THE I.T. ACT. IT HAS FURTHER UPHELD THE OBSERVATIONS OF THE LD. C IT(A) THAT EXEMPTION U/S 11 IS AVAILABLE ON COMPLIANCE OF THE CONDITIONS AS PRESCR IBED IN SECTION 11 AND SECTION 12 OF THE I.T. ACT. SINCE THE LD. DR COULD NOT POINT OUT ANY ERROR OR DEFECT IN THE FINDING GIVEN BY THE LD. CIT(A), THE TRIBUNAL HELD THAT THE OBJECTS OF THE ASSESSEE SOCIETY BEING EDUCATION IN NATURE A ND FALL WITHIN THE MEANING OF CHARITABLE PURPOSE U/S 2(15) OF THE I.T. ACT AND SI NCE THE SOCIETY WAS REGISTERED U/S 12A ALLOWED THE CLAIM OF EXEMPTION U/S 11 OF TH E I.T. ACT. SINCE THE APPEAL FILED BY THE REVENUE HAS ALREADY BEEN DISMISSED BY THE TRIBUNAL AND UPHELD BY THE HON'BLE HIGH COURT AND THE ASSESSEE SOCIETY IS IMPARTING EDUCATION WHICH IS NOT IN DISPUTE, THEREFORE, LD. CIT, IN OUR OPINION, IS NOT JUSTIFIED IN CANCELLING THE 9 ITA NO.1721/DEL/2015 REGISTRATION GRANTED EARLIER BY INVOKING PROVISIONS OF SECTION 12AA(3) OF THE I.T. ACT. THE ADDITION, IF ANY, CAN BE MADE BY THE ASSESSING OFFICER IN THE REGULAR ASSESSMENT BUT REGISTRATION CANNOT BE CANCE LLED ONLY ON THE BASIS OF CERTAIN VIOLATIONS BY THE TRUSTEES UNLESS AND UNTIL IT IS PROVED THAT THE ASSESSEE TRUST IS NOT FULFILLING ITS MAIN OBJECT OF IMPARTIN G EDUCATION. 14. WE FIND THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF ISLAMIC ACADEMY OF EDUCATION (SUPRA) WHILE DECIDING A SOMEW HAT IDENTICAL ISSUE HAS OBSERVED AS UNDER :- 4. THE APPEAL WAS ADMITTED TO CONSIDER THE FOLLOWI NG SUBSTANTIAL QUESTIONS OF LAW: WHETHER THE TRIBUNAL WAS CORRECT IN HOLDING THAT TH E REGISTRATION GRANTED U/S. 12A OF THE ACT HAD BEEN INCORRECTLY CANCELLED U/S. 12AA(3) OF THE ACT BY THE COMMISSIONER DESPITE BEING SATISFIED BASED ON MATERIAL DETECTED IN THE COURSE OF SEARCH THAT THE ACTIVITY OF THE TRUST WAS NOT GENUINE AND WAS NOT B EING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST? 5. THE LEARNED COUNSEL FOR THE REVENUE ASSAILING TH E IMPUGNED ORDER CONTENDED THAT THE MATERIAL ON RECORD DISCLOSES THAT CASH WAS FOUND IN THE RESIDENTIAL PREMISES OF THE CHAIRMAN WHICH WAS OFFERED TO TAX BY THE TRU ST. A SUM OF `3.5 CRORES IS ADMITTED TO BE A BOGUS ENTRY AND OFFERED TO TAX. AD VANCES ARE MADE TO THE FAMILY MEMBERS OF THE TRUST OUT OF THE TRUST FUND WHICH AR E KEPT OUTSIDE THE ACCOUNTS AND REFLECTED IN THE CODED WORDS. THE ACTIVITI ES OF THE TRUST ARE NOT CARRIED OUT IN ACCORDANCE WITH LAW AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT. THEREFORE, HE SUBMITS THAT A CASE FOR CANCELLATION IS MADE OUT AND THE TRIBUNAL ERRONEOUSLY SET- ASIDE THE CIT ORDER. 6. PER CONTRA, LEARNED COUNSEL APPEARING FOR THE AS SESSEE SUBMITTED THAT WHEN ONCE THE GENUINENESS OF THE TRUST IS NOT DISPUTED A ND WHEN THE OBJECT OF THE TRUST NAMELY IMPARTING EDUCATION HAS BEEN CARRIED ON UNIN TERRUPTEDLY, A CASE FOR CANCELLATION OF THE TRUST IS NOT MADE OUT. IF THERE ARE VIOLATIONS, SUCH AS NOT ACCOUNTING THE MONEY RECEIVED WHICH WAS FOUND IN TH E POSSESSION OF THE TRUSTEES, BOGUS ENTRIES IN THE ACCOUNTS AND PAYMENTS MADE TO THE MEMBERS OF THE FAMILY WHICH ARE RECORDED IN CODE NUMBERS, THE BENEFIT UNDER SEC TION 11 OF THE INCOME TAX ACT NEED NOT BE EXTENDED AND SUCH AMOUNTS SHOULD BE TAX ED. BUT THAT IS NOT A JUSTIFICATION FOR CANCELLATION OF REGISTRATION OF THE TRUST. 7. SECTION 12AA PROVIDES FOR PROCEDURE FOR CANCELLA TION OF REGISTRATION OF THE TRUST OR INSTITUTION BY THE COMMISSIONER OF INCOME TAX. THE POWER OF CANCELLATION OF REGISTRATION FLOWS FROM THE POWER TO REGISTER. HOWE VER, THERE HAS BEEN UNNECESSARY 10 ITA NO.1721/DEL/2015 LITIGATION ON THIS ISSUE. UNDER WHAT CIRCUMSTANCES, THE REGISTRATION OF A TRUST OR INSTITUTION GRANTED UNDER SECTION 12A COULD BE CANC ELLED BY THE COMMISSIONER OF INCOME TAX WAS THE SUBJECT MATTER OF VARIOUS INTERP RETATION BY THE VARIOUS HIGH COURTS. IN ORDER TO AVOID SUCH UNNECESSARY LITIGATI ONS, THE PARLIAMENT INTRODUCED SUB-SECTION (3) TO SECTION 12AA BY FINANCE (NO.2) A CT OF 2004 WITH EFFECT FROM 1.10.2004 WHICH READS AS UNDER: SECTION 12AA(3): WHERE A TRUST OR AN INSTITUTION H AS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) [O R HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE I TS AMENDMENT BY THE FINANCE (NO.2) ACT, 1996 (33 OF 1996) AND SUBSEQUEN TLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INST ITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT S OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITI NG 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 OPPORTUN ITY OF BEING HEARD.] AS IS CLEAR FROM THE CIRCULAR NO.5 OF 2005 DATED 15 .7.2005 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, THE AFORESAID SECTIO N WAS AMENDED SO AS TO SPECIFICALLY PROVIDE THAT IF THE COMMISSIONER OF IN COME TAX IS SATISFIED THAT THE ACTIVITIES OF ANY TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE T RUST OR INSTITUTION, HE SHALL, AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE CONCERNED TRUST OR INSTITUTION, PASS AN ORDER IN WRITING CANCELLING TH E REGISTRATION GRANTED UNDER THE SAID SECTION. THEREFORE, IN VIEW OF THE AFORES AID EXPRESS PROVISION, REGISTRATION GRANTED TO A TRUST COULD BE CANCELLED UNDER TWO CIRCUMSTANCES NAMELY, (1) WHEN THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE NOT GENUINE; AND (2) THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION. ONLY IF THE COMMISSIONER IS SATISFIED THAT ANY ONE OF THESE CONDITIONS EXISTS, THEN HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGIS TRATION OF SUCH TRUST OR INSTITUTION. THEREFORE WHAT FOLLOWS IS, EXCEPT THE AFORESAID TWO GROUNDS AND ON NO OTHER GROUND, AN ORDER CANCELLING REGISTRATION OF THE TRUST COULD BE PASSED. 8. IN THE INSTANT CASE, THE MATERIAL ON RECORD SHOW S THAT THE TRUST HAS ESTABLISHED EDUCATIONAL INSTITUTION AND IMPARTING MEDICAL EDUCA TION. EVERY YEAR, STUDENTS ARE ADMITTED. HUGE INVESTMENT IS MADE FOR CONSTRUCTION OF BUILDINGS FOR HOUSING THE COLLEGE, HOSTEL AND TO PROVIDE OTHER FACILITIES TO THE STUDENTS WHO ARE STUDYING IN THE COLLEGE. THE COLLEGE IS RECOGNIZED BY THE MEDICAL C OUNCIL OF INDIA, STATE OF KARNATAKA AND ALL OTHER STATUTORY AUTHORITIES. THER EFORE, IT CANNOT BE SAID THAT THE TRUST IS NOT GENUINE. ADMITTEDLY, THE STUDENTS ARE BEING ADMITTED EVERY YEAR. STUDENTS ARE STUDYING IN ALL COURSES. THUS THE OBJECT OF THE CONSTITUTION OF THE TRUST NAMELY IMPARTING OF EDUCATION IS GOING ON UNINTERRUPTEDLY. THEREFORE, IT CANNOT BE SAID THAT THE ACTIVITIES OF THE TRUST ARE NOT BEING CARRIED O UT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. WHEN THE AFORESAID TWO CONDITIONS ARE FU LLY SATISFIED, ON THE GROUND THAT THE TRUSTEES ARE MISAPPROPRIATING THE FUNDS OF THE TRUS T THE REGISTRATION OF THE TRUST CANNOT BE CANCELLED. IF THE TRUSTEES ARE MISAPPROPR IATING THE FUNDS, IF THEY ARE 11 ITA NO.1721/DEL/2015 MAINTAINING FALSE ACCOUNTS, IT IS OPEN TO THE AUTHO RITIES TO DENY THE BENEFIT UNDER SECTION 11 OF THE INCOME TAX ACT, BUT THAT IS NOT A GROUND FOR CANCELATION OF REGISTRATION ITSELF. THAT IS PRECISELY WHAT THE TRI BUNAL HAS HELD. THEREFORE, THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE. THERE IS NO MERIT IN THIS APPEAL. ACCORDINGLY, THE APPEAL IS DISMISSED. 15. RESPECTFULLY FOLLOWING THE DECISION CITED ABOVE AND CONSIDERING THE FACT THAT THE ASSESSEE TRUST IS IMPARTING EDUCATION AS P ER ITS MAIN OBJECTS, WE ARE OF THE OPINION THAT THE LD. CIT IS NOT JUSTIFIED IN CA NCELLING THE REGISTRATION U/S 12AA(3) OF THE I.T. ACT. WE ACCORDINGLY SET-ASIDE THE ORDER OF THE LD. CIT AND RESTORE THE REGISTRATION GRANTED EARLIER. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH MAY, 2018. SD/- SD/- (BEENA A. PILLAI) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30-05-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(EXEMPTIONS) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI