Ajit Education Trust, Bharuch V. The CIT-III, Bharuch

ITA 2666/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9780 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 18-08-2010
• Assessment Year: misc
• Appeal Filed On: 25-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH SHRI SHELEY JINDAL
• Keywords: Income from undisclosed sources; Charitable institution; Opportunity of being heard; Benefit of exemption; Cancellation of registration
• Section: 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER DATE OF HEARING : 18/08/2010 DRAFTED ON: 07 /09/2010 ITA NO.2666/AHD/2008 ASSESSMENT YEAR : - AJIT EDUCATION TRUST SHRAVAN VIDHYADHAM DAHEJ BYPASS LINK ROAD BHARUCH VS. COMMISSIONER OF INCOME TAX-III BARODA PAN/GIR NO. : AAATA 5950H ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI J.P. SHAH RESPONDENT BY: SHRI SHELEY JINDAL, CIT-DR O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX-III, BARODA PASSED U/S.12AA(3) OF THE I.T. ACT, 1961 DA TED 19/06/2008. THE APPELLANT HAS RAISED THE FOLLOWING GROUND: THE LEARNED COMMISSIONER OF INCOME TAX-III, BARODA, HAS ERRED IN PASSING THE ORDER UNDER SECTION 12AA(3) OF THE ACT AND REVOKING THE REGISTRATION GRANTED TO THE APPELLANT (TRUST) EARLI ER VIDE ORDER NO.BRD/SIB/110-13-A/90-91 DATED 22.2.1991. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CO MMISSIONER OF INCOME TAX III, BARODA, OUGHT NOT TO HAVE REVOKED THE REGISTRATION. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX III, IS PRAYED TO BE QUASHED. ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 2 - 2. THE APPELLANT IS STATED TO BE A TRUST IMPARTING EDUCATION BY RUNNING A SCHOOL. IT WAS NOTED BY THE LD.CIT IN T HE IMPUGNED ORDER THAT THE TRUST, VIZ. AJIT EDUCATION TRUST WAS GRANTED REGISTRATION U/S.12A(A) OF THE I.T. ACT, 1961 ON 22/02/1991. ACCORDING TO THE COMMISSIONER, IT WAS SUBSEQUENTLY ALLEGED THAT THE ACTIVITIES OF THE TRUST WERE NOT GENUINE. IT WAS ALSO FOUND THAT THE ACTIVITIES OF THE TRUST HAVE NOT BEEN CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST . THEREFORE, IT WAS PROPOSED TO CANCEL THE REGISTRATI ON AND FOR THAT PURPOSE A SHOW-CAUSE NOTICE DATED 24/02/2006 WAS ISSUED. AS PER THE SUBJECT OF THE SAID NOTICE, THE SAME WAS ISSUED BY INVOKING THE PROVISO TO SECTION 12AA(3) OF THE I.T. ACT, 1961 FOR CANCELLAT ION OF REGISTRATION U/S.12A(A) OF THE I.T. ACT, 1961. IN THE SAID NOTICE, IT WAS ASKED TO THE ASSESSEE-TRUST TO EXPLAIN AS TO WHY NO BOOKS OF ACC OUNT FOR PRE-PRIMARY UNIT OF SHRAVAN VIDHYADHAM SCHOOL WERE FOUND AT T HE TIME OF SURVEY CONDUCTED ON 01/09/2005 U/S.133A OF THE I.T. ACT, 1 961. FURTHER, IN THE SAID SHOW-CAUSE NOTICE IT WAS ASKED TO EXPLAIN AS T O WHY RECEIPTS OF RS.14.41 LACS FOR THE FINANCIAL YEARS 2003-04, 2004 -05 & 2005-06 WERE FOUND UNACCOUNTED? IT WAS ALSO FOUND THAT THE ASSE SSEE HAD ACCEPTED ADMISSION-FEES TO THE TUNE OF RS.6.43 LACS IN CASH FOR THE FINANCIAL YEARS 2003-04, 2004-05 & 2005-06 WHICH WAS ALSO NOT ACCOU NTED FOR IN THE BOOKS. IT WAS ALSO MENTIONED THAT THE TRUST WAS N OT FILING THE RETURNS OF INCOME, HENCE ACTED IN CONTRAVENTION OF THE PROVISI ONS OF SECTION 139(4A) OF THE I.T. ACT, 1961 FOR ASSESSMENT YEAR 2 004-05. THE APPELLANT HAS FURNISHED THE SUBMISSIONS AT LENGTH A ND PRIMARILY OBJECTED THAT THE ALLEGATIONS MADE WERE NOT CORRECT BECAUSE THE ACTIVITIES OF THE EDUCATION TRUST WERE CARRIED OUT AS PER THE OBJECTS OF THE TRUST . IT WAS INFORMED THAT THE TRUST WAS CREATED FOR IMPARTING EDUCATION TO THE ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 3 - STUDENTS OF LOWER AND MIDDLE CLASS SECTIONS OF THE SOCIETY. THE TRUST WAS CREATED WITHOUT HAVING ANY DISTINCTION AS TO CA STE, COLOUR AND CREED. THE TRUST WAS STATED TO BE RUNNING FOR ALM OST LAST 15 YEARS HAVING STRENGTH OF ABOUT 1500 STUDENTS. THE EDUCATION W AS BEING PROVIDED FOR PRE-PRIMARY, PRIMARY, SECONDARY AND HIGHER SECONDAR Y SECTIONS OF STUDENTS. IT WAS ALSO EXPLAINED THAT WHATEVER IRR EGULARITIES WERE POINTED OUT AT THAT TIME, THE SAME WERE PROPERLY CORRECTED BY THE ASSESSEE. IN RESPECT OF THE QUESTION OF NON-FILING OF THE RETURN S, IT WAS PLEADED THAT THE MANAGEMENT WAS UNDER THE IMPRESSION THAT AN EDUCATI ONAL INSTITUTION IS NOT REQUIRED TO FILE THE RETURN OF INCOME. BEFORE THE LD.CIT, IT WAS EMPHASIZED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NEVER POINTED OUT BY THE ASSESSING AUTHORITY THAT E ITHER THE OBJECTS OF THE TRUST HAVE EVER BEEN DEFEATED OR THE ACTIVIT IES OF THE TRUST WERE NOT GENUINE BEING NOT CARRIED OUT IN ACCORDANC E WITH THE OBJECT OF THE TRUST. IT WAS ALSO EXPLAINED THAT THE TRUST BEING AN E DUCATIONAL TRUST WAS, THEREFORE, ELIGIBLE FOR EXEMPTION UNDER THE PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE I.T. ACT, 1961. HOW EVER, LD.CIT WAS NOT CONVINCED PRIMARILY ON ACCOUNT OF CERTAIN DISCREPA NCIES AS NOTED DURING THE COURSE OF SURVEY; REPRODUCED FOR READY REFERENC E:- (I) THERE WERE NO BOOKS OF ACCOUNT FOR PRE-PRIMAR Y UNIT OF SHRAVAN VIDHYADHAM SCHOOL RUN BY THE TRUST AND THE TOTAL RECEIPTS OF RS.14.41 LACS OF THIS UNIT FOR THE FINA NCIAL YEARS 2003-04, 2004-05 AND 2005-06 WERE FOUND UNACCOUNTED . (II) THE TRUST WAS FOUND TO HAVE ACCEPTED ADMISSION FEE OF RS.6.43 LACS IN CASH FOR THE FINANCIAL YEARS 2003-0 4, 2004- 05 AND 2005-06 WHICH WERE NOT AT ALL ACCOUNTED FOR IN THE BOOKS. ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 4 - (III) THE TRUST WAS FOUND TO HAVE INCURRED RS.8.77 LACS I N CASH ON CONSTRUCTION OF BUILDING IN THE FINANCIAL YEARS 200 2-03, 2003-04 AND 2004-05 WHICH WAS NOT ACCOUNTED FOR IN THE BOOKS. (IV) UNACCOUNTED CASH OF RS.14,512/- WAS FOUND AT THE PR EMISES OF THE TRUST. (V) IN HIS STATEMENT, SHRI KIRAN BINIWALE, THE MANAGING TRUSTEE, ADMITTED UNACCOUNTED INCOME OF RS.9.81 LACS OF THE TRUST IN THE FINANCIAL YEARS 2002-03 TO 200-06. (VI) IN CONTRAVENTION OF PROVISION OF SECTION 139(4A), T HE TRUST HAD NOT BEEN FILING RETURNS OF INCOME EXCEPT FOR TH E ASSESSMENT YEAR 2004-05 AND THE RETURN OF EVEN THIS YEAR DID NOT CONTAIN COMPLETE ACCOUNTS OF DIFFERENT UNITS AN D THE CONSOLIDATED ACCOUNT OF THE TRUST, NO AUDIT REPORT IN THE PRESCRIBED FORM NO.10-B AS MANDATED BY SECTION 12A( B) HAD BEEN ENCLOSED WITH THE SAID RETURN. THE RETURN FOR THE ASSESSMENT YEAR 2005-06 HAS NOT BEEN FILED, TILL DA TE. 2.1. ON ACCOUNT OF THOSE REASONS, IT WAS HELD BY TH E LD. COMMISSIONER THAT THE FUNDS OF THE TRUST WERE MISUSED BY NOT ACCOUNTING F OR THE RECEIPTS AS WELL AS THE EXPENSES. AS PER LD. COMMISSIONER, THE ACTIVITIES WERE ALSO NOT IN ACCORDANCE WITH THE OBJ ECTS OF THE TRUST, HENCE, BY INVOKING THE PROVISIONS OF CANCELLATION O F REGISTRATION HE HAS DECIDED TO CANCEL THE REGISTRATION GRANTED EVEN PRI OR TO 01/10/2004. IT WAS CONCLUDED THAT THE BENEFIT OF REGISTRATION WAS REVOKED WHICH WAS EARLIER GRANTED BY AN ORDER OF REGISTRATION DATED 2 2/02/1991. NOW THIS IMPUGNED ORDER PASSED U/S 12AA(3), INVALIDATING THE EXISTED REGISTRATION, IS CHALLENGED BEFORE US. 3. FROM THE SIDE OF THE APPELLANT, MR.J.P.SHAH LEAR NED AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED. AT THE OUT -SET HE HAS PLACED STRONG RELIANCE ON A REPORTED DECISION OF ITAT PUNE BENCH PRONOUNCED ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 5 - IN THE CASE OF MAHARASHTRA ACADEMY OF ENGINEERING A ND EDUCATIONAL RESEARCH (MAEER) VS. CIT [36 DTR (PUNE) (TRIB) 321 ]. HE HAS ALSO EMPHASIZED THAT THE TRUST WAS EARLIER GRANTED A REGISTRATION U/S.12A(A) ON 22/02/1991. IT WAS ALSO MENTIONED THAT FOR ASSESSMENT YEARS 1999-2000 TO 2005-06, THE ASSESSMENTS HAVE BE EN MADE U/S.143(3) R.W.S. 254 OF THE I.T. ACT, 1961 AND THE EDUCATIONAL INSTITUTION WAS GRANTED EXEMPTION AS PRESCRIBED U/S .10(23C)(IIIAD) OF THE I.T. ACT, 1961. THEREAFTER REFERRING THE CURRENT CONTROVERSY AROSE N VIDE AN ASSESSMENT ORDER FOR AY 1999-2000, THE LEAR NED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS POINTED OUT THAT THE ASSESSING OFFICER HAS RECORDED THE PAST HISTORY OF THE CASE THAT EARL IER THE TRUST WAS REGISTERED, HOWEVER, THE REGISTRATION WAS REVOKED, HENCE, THE EXEMPTIONS WERE DENIED UNDER THE ACT. THE MATTER HAD GONE UP TO THE LEVEL OF TRIBUNAL AND VIDE ORDER DATED 23/04/2008, THE MATTE R WAS RESTORED TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO EXA MINE THE ALLOWABILITY OF DEDUCTION CLAIMED U/S.10(23C)(IIIAD) OF THE I.T. ACT, 1961. WHILE PASSING THE CONSEQUENTIAL ASSESSMENT ORDER, THE ASS ESSING OFFICER HAS CONCLUDED THAT AT NO STAGE IT WAS FOUND THAT THE TR UST HAD EVER EARNED PROFIT OR THE TRUST HAD EVER CROSSED THE PRE SCRIBED LIMIT OF RS.1 CRORE. RATHER, IT WAS MENTIONED BY THE ASSESSING OFFICE R THAT HE HAD NOT FOUND OUT ANY ADVERSE ACTIVITY WHICH WOULD HAVE DEPRIVED THE BENEFIT OF EXEMPTION. LIKEWISE FOR ASSESSMENT YEAR 2000-01 VIDE ORDER DATED 11/12/2009, THE EXEMPTION AS PRESCRIBED U/S.1 0(23C)(IIIAD) OF THE I.T. ACT, 1961 WAS ALLOWED. THE SAME RECOURSE WAS ADOPTED FOR ASSESSMENT YEARS 2001-02, 2002-03, 2003-04, 2004-05 & 2006-07. REPEATING THE REFERENCE OF THE SAID EARLIER DECISIO N OF THIS TRIBUNAL,I.E. ITAT B BENCH FOR ASSESSMENT YEARS 1999-2000 TO 20 04-05 IN ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 6 - ASSESSEES OWN CASE ORDER DATED 23/04/2008 MR.SHAH HAS REITERATED THAT VIDE THIS ORDER AFTER CONSIDERING THE FACTS OF THE CASE IT WAS UNAMBIGUOUSLY DIRECTED TO ALLOW THE CLAIM OF EXEMPT ION U/S.10(23C)(IIIAD) AS PER LAW. IN ADDITION TO THE BASIC CONTENTION THAT THE EDUCATIONAL INSTITUTION SHOULD BE GRANTED EXEMPTION U/S.10(23C)(IIIAD) OF THE I.T. ACT, 1961, AN INTERESTING POINT HAS ALSO BEEN RAISED BY MR.J.P.SHAH . AS PER HIS ARGUMENT, THE COMMISSIONER GOT THE POWER TO CANCEL THE REGISTRATION GRANTED U/S 12 A BY VIRTUE OF THE WORDS OF SECTION 12AA(3) W.E.F. 1.6.2010, OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A AS IT STOOD BEFORE ITS AMEND MENT BY THE FINANCE (NO.2) ACT,1996 . HE HAS INFORMED THAT UP TILL 31.5.2010 SECTION 12AA(3) HAD NO SUCH PHRASEOLOGY IN THE SECT ION. SO LD COUNSEL HAS CLARIFIED THAT THE AMENDMENT TO SEC. 12AA(3) CAME IN JUNE 2010 BUT THE SHOW CAUSE NOTICE WAS ISSUED ON 24.2.2006. MEANING THEREBY THE LD CIT HAS EXCEEDED HIS JURISDICTION BY INVOKIN G THE CANCELLATION OF REGISTRATION THOUGH AT THAT POINT OF TIME HE HAD NO SUCH POWERS AS PER THE STATUTE. THOSE POWERS IN RESPECT OF CANCELLATION OF A REGIST RATION, ALREADY GRANTED U/S 12A, HAD COME ONLY W.E.F. FIRS T JUNE 2010. EVEN THE IMPUGNED ORDER IS DATED 19.6.2008 I.E. MUCH PRI OR TO THE DATE OF COMMENCEMENT OF THE SAID AMENDMENT. SO MR.SHAH LD. AR, HAS PLEADED THAT THE INVOCATION OF PROVISIONS OF SECTION 12AA(3 ) OF THE I.T. ACT, 1961 WERE AB INITIO WRONG. EARLIER A REGISTRATION WAS TO BE GRANTED U/S.12A(A) OF THE I.T. ACT, 1961. HOWEVER, BY THE INTRODUCTION OF SECTION 12AA(3) A PROCEDURE HAS BEEN LAID DOWN FOR CANCELLA TION OF THE REGISTRATION OF A TRUST. IN THIS SECTION, I.E. SEC TION 12AA(3), IT IS PRESCRIBED THAT WHERE THE TRUST OR INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE(B) OF SUB-SECTION(1) AND SUBSEQUENTLY FOUND THE ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 7 - ACTIVITIES OF THE TRUST ARE NOT GENUINE OR NOT IN A CCORDANCE WITH THE OBJECTS, THEN HE CAN PASS AN ORDER CANCELING THE RE GISTRATION. THERE IS AN ANOTHER AMENDMENT W.E.F. 0-1/06/2010 ACCORDING TO W HICH EITHER THE REGISTRATION HAS BEEN GRANTED U/S.12AA(1)(B) OF THE I.T. ACT, 1961 OR THE SAID TRUST HAD OBTAINED REGISTRATION AT ANY TIME U/ S.12A(A) OF THE I.T. ACT, 1961 BUT IF SUBSEQUENTLY THE COMMISSIONER IS S ATISFIED THAT THE ACTIVITIES ARE NOT GENUINE OR NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS THEN THE COMMISSIONER SHALL HAVE TO PASS A N ORDER IN WRITING CANCELING THE REGISTRATION. THEREFORE, IT WAS VEHE MENTLY ARGUED THAT VIDE SAID INSERTION W.E.F. 01/06/2010, THE PROCEDURE OF CANCELLATION IS LAID DOWN AS PER SUB-SECTION (3) OF SECTION 12AA AND TH E SAME IS EFFECTIVE FROM THAT VERY DATE AS IT IS CLARIFIED BY THE NOTES ON THE CLAUSES OF AMENDMENT REPORTED IN 321 ITR (ST) PG83. HE HAS CONCLUDED THAT THE POWER OF CANCELLATION WAS WRONGLY APPLIED BY THE LD . COMMISSIONER, HENCE THE ORDER OF CANCELLATION NEEDS TO BE REVOKED . 4. ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE, MR.SHELLEY JINDAL, LEARNED CIT DR APPEARED AND SUPPORTED THE O RDER OF THE LD. CIT. THE LEARNED DEPARTMENTAL REPRESENTATIVES MAIN RELI ANCE WAS ON THE SURVEY MATERIAL. ONCE BOOKS OF ACCOUNT WERE NOT F OUND AND THE ASSESSEE WAS UNDISPUTEDLY CHARGING EDUCATION-FEES FROM THE S TUDENTS, THEREFORE, ACCORDING TO HIM, IT IS NOT A CASE OF A TRUST PUREL Y FOR EDUCATIONAL PURPOSES BUT THIS TRUST WAS ALSO ENGAGED IN PROFIT EARNING. MR. JINDAL HAS THUS PLEADED THAT IN SUCH A SITUATION THE LD. COMMI SSIONER WAS FULLY EMPOWERED FOR CANCELLATION OF REGISTRATION. EVEN AS PER THE SECTION EXISTED AT THAT POINT OF TIME THE STATUTE HAD ENSHR INED SUCH AN AUTHORITY. IT WAS WRONG ON THE PART OF THE ASSESSEE TO ARGUE THAT THE POWER FOR ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 8 - CANCELLATION DID NOT AVAILABLE AT THAT POINT OF TIM E. THEREFORE MR.JINDAL HAS VEHEMENTLY SUPPORTED THE ACTION OF THE LD. COMM ISSIONER . 5. WE HAVE HEARD BOTH THE SIDES AT LENGTH. B EFORE WE PROCEED TO DISCUSS THE MERITS OF THE CASE, LET US FIRST DISCUS S THE SECTIONS INVOLVED. THE EXISTENCE OF SECTION 12A IS VERY OLD IN THE STATUTE INTRODUCED ORIGINALLY BY THE FINANCE ACT,1972 W.E.F.1.4.73. T HIS SECTION IS THE FIRST STEP FOR AVAILING THE BENEFIT OF EXEMPTION PRESCRIB ED IN SECTIONS 11 & 12 OF THE ACT. A PERSON IN RECEIPT OF INCOME HAS TO M AKE AN APPLICATION FOR REGISTRATION OF THE TRUST IN THE PRESCRIBED MANNER WITHIN THE PRESCRIBED TIME. IT IS WORTH TO MENTION THAT EVEN THE NOMENCLA TURE OF THIS SECTION EXPLICITLY SUGGESTS THE INTENTION OF THE LEGISLATUR E, WHICH READS AS , CONDITION FOR APPLICABILITY OF SECTIONS 11 AND 12 . THIS SECTION HAS FEW SALIENT FEATURES WHICH ARE NECESSARY TO PONDER UPON TO RESOLVE THE ISSUE IN HAND. SECTION 12A(1)(A) PRESCRIBES THAT A PERSON IN RECEIPT OF INCOME HAS TO MOVE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION ON FORM NO.10A AS PER RULE 17A. THIS WA S THE ONLY SECTION IN THE I.T.ACT IN THE PAST BEFORE THE INSERTION OF SECTION 12AA W.E.F.1.4.1997 { FINANCE (NO.2)ACT1996}. AS PER SEC TION 12A A PERSON IN RECEIPT OF INCOME HAS TO MAKE AN APPLICATION FOR REGISTRATION OF THE TRUST BEFORE THE EXPIRY OF A PERIOD OF ONE YEAR FRO M THE DATE OF CREATION OF THE TRUST. IT MAY NOT BE OUT OF PLACE TO MENTION TH AT SINCE THE ORIGINAL SECTION 12A WAS INSERTED BY THE FINANCE ACT,1972 W. E.F. 1.4.1973 THEREFORE A CUT-OFF DATE 1/7/1973 FOR FILING OF APP LICATIONS HAS ALSO BEEN PRESCRIBED. ALL THE OLD TRUSTS ALREADY IN EXISTENCE WERE EXPECTED TO FILE THE REQUISITE APPLICATION BY THAT DATE I.E.1/7/1973 . THE PURPOSE OF THIS REFERENCE SHALL BE MADE CLEAR IN A WHILE IN THIS J UDGEMENT. ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 9 - 6. LATER ON, W.E.F. 01/04/1997 { FINANCE (NO.2) ACT 1996} A PROCESS FOR REGISTRATION HAD COME IN THE STATUTE BY INCLUS ION OF SECTION 12AA OF THE ACT WITH THE NOMENCLATURE PROCEDURE FOR REGISTRATION. AS A MEASURE OF RATIONALIZATION A PROCEDURE HAS BEEN PRE SCRIBED FOR GRANT OF REGISTRATION TO A TRUST. ON RECEIPT OF APPLICATIO N U/S.12A OF THE I.T. ACT, 1961, AS REFERRED ABOVE, THE COMMISSIONER CAN CALL FOR SUCH INFORMATION FROM THE TRUST AS HE THINKS NECESSARY IN ORDER TO S ATISFY HIMSELF FIRST , ABOUT THE GENUINENESS OF THE ACTIVITIES AND THE SECOND, ABOUT THE OBJECTS OF THE TRUST ; { REFER SEC.12AA(1)(A)&(B)} . THEREAFTER, IF SATISFIED, HE CAN PASS AN ORDER IN WRITING REGISTERING THE TRUST, { REFER SEC.12AA(1)(B)(I)}. BUT IF NOT SATISFIED, PASS AN ORDER IN WRITING REFUSING TO REGISTER THE SAID TRUST, {REFER SEC.12AA(1)(B)(I I)}. FOR THE SAKE OF READY REFERENCE THE RELEVANT PORTIONS OF SECTION 12 AA IS REPRODUCED BELOW:- SECTION 12AA: - THE COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UND ER CLAUSE (A) [OR CLAUSE (AA) OF SUB-SECTION (1)] OF SECTION 12A, SHA LL (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY A LSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF T HE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE (I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDE R IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT : ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 10 - PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY O F BEING HEARD. [(1A) ALL APPLICATIONS, PENDING BEFORE THE CHIEF CO MMISSIONER ON WHICH NO ORDER HAS BEEN PASSED UNDER CLAUSE (B) OF SUB-SECTION (1) BEFORE THE 1ST DAY OF JUNE, 1999, SHALL STAND TRANS FERRED ON THAT DAY TO THE COMMISSIONER AND THE COMMISSIONER MAY PROCEED W ITH SUCH APPLICATIONS UNDER THAT SUB-SECTION FROM THE STAGE AT WHICH THEY WERE ON THAT DAY.] (2) EVERY ORDER GRANTING OR REFUSING REGISTRATION U NDER CLAUSE (B) OF SUB-SECTION (1) SHALL BE PASSED BEFORE THE EXPIRY O F SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEI VED UNDER CLAUSE (A) [OR CLAUSE (AA) OF SUB-SECTION (1)] OF SECTION 12A. ] [(3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AND SUBSEQUENTLY 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 OB JECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN O RDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTIT UTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASS ED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONAB LE OPPORTUNITY OF BEING HEARD.] [ INSERTED BY THE FINANCE (NO.2) ACT, 2004 W.E.F. 1.10.2004 ] 7. THE PURPOSE OF THE FOREGOING DISCUSSION AS SO FAR HAVE BEEN MADE AND THE REFERENCE OF THE OLD PROVISIONS OF SEC.12A VIS-A-VIS SEC 12AA IS THAT AN INTERESTING ANALYSIS HAS EMERGED. THAT AS P ER SEC.12AA(1) THE PROCEDURE FOR EITHER TO GRANT OR FOR THE REFUSAL OF THE REGISTRATION IS ONLY IN RESPECT OF THE APPLICATION FOR REGISTRATION MOVE D U/S 12A(1)(A). THEREFORE UP TO THIS STAGE THE STATUTE HAD MADE THE PROVISION IN SEC.12AA TO DEAL WITH AN APPLICATION OF REGISTRATION AS PER SEC.12A OF THE ACT. MEANING THEREBY VIDE SEC.12AA(1) THE OLD BUT ALREAD Y EXISTED PROCEDURE WAS DULY TAKEN CARE OF BY THE HONBLE LAW MAKERS. ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 11 - 8. NEXT , WE HAVE TO EXAMINE THE IMPACT OF THE INTRODUCTION IN THE STATUTE OF SEC.12AA(3) OF THE ACT. THIS WAS INSERTE D BY THE FINANCE (NO.2) ACT 2004 W.E.F. 1.10.2004 AND READS AS FOLLO WS :- SECTION 12AA(3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED R EGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AND SUBSEQUENTLY TH E 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 OB JECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN O RDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTIT UTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASS ED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONAB LE OPPORTUNITY OF BEING HEARD.] 81.1 THEREFORE, ON READING IT IS APPARENT THAT TH IS SUB-SECTION TALKS ABOUT THE REGISTRATION GRANTED WITHIN THIS SECTION I.E. 1 2AA (1)(B). 8.2. THROUGH THIS SECTIONS THUS THE COMMISSIO NER HAS CATEGORICALLY BEEN GRANTED POWER TO CANCEL REGISTRATION. A QUES TION HAS BOTHERED US THAT WHETHER SEC.12AA(3) IS IN A WAY A DUPLICITY OF AN EXISTING CLAUSE OF REFUSAL OF REGISTRATION AS PER SEC.12AA(1)(B)(II)?. THE ANSWER CAN BE THAT VIDE SEC.12AA(1)(B)(II) THE CIT CAN REFUSE THE REGI STRATION APPLICATION U/S 12A; BUT VIDE SEC. 12AA(3) THE CIT IS GIVEN P OWERS TO DEAL WITH A REGISTRATION GRANTED WITH IN THIS VERY SECTION I.E. U/S 12AA(1)(B)(I). SO AS PER OUR UNDERSTANDING THE SAID POWER OF REFUSAL OF REGISTRATION U/S 12AA(1)(B)(II) IS RESTRICTED TO THE APPLICATION MOV ED U/S 12A SEEKING THE GRANT OF REGISTRATION. WHAT WE HAVE NOTICED IS THAT THE NECESSITY OF THE SAID INTRODUCTION WAS THAT AS PER THE ALREADY EXIST ED SECTION 12A THERE ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 12 - WAS NO SPECIFIC PROVISION FOR THE REFUSAL OF A REGI STRATION . ON ACCOUNT OF THIS REASON THERE WAS A DOUBT IN THE PAST AND LITIG ATION HAD ALSO CROPPED UP THAT IN THE ABSENCE OF ANY SPECIFIC POWER NOT BE ING PROVIDED IN THE SAID SEC. 12A WHETHER A REGISTRATION ONCE GRANTED COULD EVER BE REVOKED BY THE LD.COMMISSIONER. IN THE PAST QUITE OFTEN A Q UESTION HAS BEEN RAKED UP BY THE REVENUE THAT WHETHER A REGISTRATION ONCE GRANTED, IS IT GRANTED FOR EVER EVEN IF IRREGULARITIES ARE NOTICED ? THEN, IT HAD BEEN ARGUED IN DEFENSE BY THE REVENUE THAT IF THE STATUE GIVES AUTHORITY FOR GRANT OF REGISTRATION THEN THE POWER OF REFUSAL OF THE SAID REGISTRATION IS ALWAYS IN-BUILT. AN AUTHORITY TO ALLOW A FACILITY T O A PERSON CO-EXISTS WITH THE AUTHORITY TO WITHDRAW THAT FACILITY. THEREFORE TO REMOVE THIS CONTROVERSY OR AMBIGUITY IT WAS THOUGHT BY THE HON BLE LAW MAKERS TO SPECIFICALLY PRESCRIBE THE PROCEDURE OF REGISTRATIO N AS ALSO, IF NEED BE, ITS REFUSAL. IT IS NOW STREAM LINED THAT AN APPLICATIO N FOR SEEKING REGISTRATION IS TO BE MOVED AS PRESCRIBED IN SECTION 12A AND TH EREAFTER THE PROCEDURE OF REGISTRATION IS TO BE FOLLOWED AS RECOMMENDED IN SEC.12AA. DUE TO THIS ENACTMENT AT PRESENT NO AMBIGUITY EXISTS THAT IF A REGISTRATION IS GRANTED THE SAME CAN BE CANCELLED AS WELL IF NECESS ITATED. THUS THE SCOPE OF BOTH THE SECTION 12AA(1) AND 12AA(3) ARE WIDE E NOUGH TO COVER ALL THOSE REGISTRATION SO FAR BEEN GRANTED EITHER U/S 1 2A OR U/S 12AA(1)(B) I.E. BY THIS VERY SECTION. BUT THE PRESENT CONTROVE RSY DO NOT REST HERE AND THE LEGAL QUESTION AS ADDRESSED TO US NEEDS FURTHER DISCUSSION BUT WITHIN THE AMBITS OF THE FOREGOING BACKGROUND. 9. THE PRESENT CONTROVERSY IS BECAUSE OF AN IN TERESTING TURN TOOK PLACE VIDE AN AMENDMENT IN SUB-SECTION (3) OF SECTION 12A A OF THE I.T. ACT, 1961 AND FOR READY REFERENCE; REPRODUCED BELOW:- ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 13 - SUB-SECTION(3) OF SECTION 12AA OF THE I.T. ACT, 19 61 WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED R EGISTRATION 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 COMMISSIONE R IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INST ITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OB JECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN O RDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTIT UTION: [ PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASS ED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONAB LE OPPORTUNITY OF BEING HEARD.] 10. AS POINTED OUT BY THE LEARNED AUTHORISED REPRE SENTATIVE OF THE ASSESSEE, THE AFORESAID INSERTION AS TYPED IN ITALI CS IS W.E.F. 01/06/2010. MR. SHAH HAS THUS QUESTIONED THAT WHETHER A TRUST CAN HAVE A REGISTRATION U/S.12A OF THE I.T. ACT, 1961 AND SIMU LTANEOUSLY A REGISTRATION U/S.12AA(1)(B) OF THE I.T. ACT, 1961. BECAUSE OF THE REFERENCE OF TWO SECTIONS, NAMELY SEC.12AA(1)(B) AN D ALSO SEC.12A, NOW THIS SUB-SECTION(3) OF SECTION 12AA HAS, HENCE FORTH RAISED THIS CONTROVERSY. AS PER OUR HUMBLE UNDERSTANDING OF LAW IF A PROVISION FOR THE REFUSAL OF REGISTRATION APPLICATION U/S12A WAS ALREADY IN EXISTENCE VIDE SEC. 12AA(1)(B)(II) THEN STILL THERE WAS LAWFU L REQUIREMENT TO AGAIN MENTION THE SAME IN THE SAME STATUTE BY INTRODUCING THE AFORE QUOTED PHRASEOLOGY, (OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SEC TION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANC E (NO.2) ACT, 1996 (33 OF 1996) . NOW THE ANOMALY IS THAT WHETHER FOR THE PURPOSE OF REFUSAL OF A REGISTRATION GRANTED BY SEC. 12A IS IT TO BE DEALT WITH IN TWO SUB-SECTION I.E. 12AA(1)(B)(II) AND 12AA(3)?. BECAU SE OF THIS VARIANCE THE LD.AR HAS CHALLENGED THAT THE REFUSAL OF A REG ISTRATION GRANTED U/S SEC. 12A CAN NOW BE CANCELLED ONLY BY THE LATEST AM ENDMENT IN SEC. ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 14 - 12AA(3) THAT TOO W.E.F. 1.6.2010. SINCE THE LD. CIT HAS PASSED THE ORDER PRIOR TO THE AMENDMENT THE SAME IS VOID AB INTIO, I T WAS ARGUED AND RIGHTLY SO. THE ADMITTED FACTUAL POSITION IS THAT THE IMPUGNED ORDER WAS PASSED ON 19.6.2008, WHEN NO SUCH SPECIFIC JURISDIC TION WAS GRANTED TO CIT, AND THE POWERS OF CANCELLATION OF REGISTRATIO N HAD COME IN TO THE EFFECT FROM 1.6.2010 ONLY. BENEFIT OF THIS AMBIGUIT Y OR BECAUSE OF AN ABNORMAL SITUATION OR IT CAN BE SAID TO A GLITCH O F OVERLAPPING; THE ADVANTAGE SHOULD GO IN FAVOUR OF THE TAXPAYER. THE LAW IS NOW CLEAR FROM 1.6.2010, THAT A REGISTRATION GRANTED U/S 12A CAN B E CANCELLED BY INVOKING SEC. 12AA(3) OF THE ACT. THE LAW IS ALSO C LEAR THAT A REGISTRATION GRANTED U/S 12AA (1) (B) CAN ALSO BE R EVOKED BY INVOKING THIS VERY SECTION I.E. 12AA(3) OF THE ACT; BECAUSE THE CONNOTATION REFUSING TO REGISTER AND CANCELLING THE REGISTRA TION HAVE DISTINCT APPLICATION. 11. NEXT WE HAVE TO DEAL WITH THE ARGUMENT OF MR .JINDAL LD.CIT DR THAT WHETHER OR NOT THE INTRODUCTION OF, OR HAS OB TAINED REGISTRATION ANY TIME UNDER SECTION 12A AS IT STOOD BEFORE ITS AMEND MENT BY FINANCE(NO.2) ACT W.E.F. 1.6. 2010 IS RETROSPECTIVE IN NATURE? HIS MAIN STRESS WAS THAT THE SAID AMENDMENT IS SIMPLY C URATIVE IN NATURE AND THE PROCEDURE OF CANCELLATION WAS ALREADY IN EXISTE NCE IN THE STATUTE, THEREFORE, IT IS WRONG ON THE PART OF THE LD.AR TO ARGUE THAT THE POWERS OF CANCELLATION OF REGISTRATION HAD COME LATER ON WHEN THE REGISTRATION WAS ACTUALLY CANCELLED HENCE AT THAT POINT OF TIME COMMISSIONER HAD ACTED BEYOND HIS JURISDICTION. WE HAVE GIVEN OUR CO NSIDERABLE THOUGHT OVER BOTH THE ARGUMENTS AND HAVE FOUND THAT THE PRE SENT CONTROVERSY HAS TO BE DECIDED IN THE LIGHT OF FEW VERDICTS PRONOUNC ED IN THE PAST. IT IS A ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 15 - MATTER OF SUBSTANCE THAT THE ORIGINAL SEC.12A HAD N EITHER PROVIDED A SPECIFIC CLAUSE PRESCRIBING REGISTRATION NOR IT HAS PRESCRIBED REFUSAL OF REGISTRATION. NOW BY PRESCRIBING BOTH IN SEC.12AA, IT HAS THE SUBSTANTIVE EFFECT OVER THE RIGHTS OF A TAXPAYER. SUCH AN INTRO DUCTION CAN NOT BE TERMED MERELY A PROCEDURAL INTRODUCTION IN THE STAT UTE BUT THIS INTRODUCTION HAS SUBSTANTIALLY MADE AN IMPACT ON TH E SIZEABLE RIGHTS OF A TRUST OR INSTITUTION. EVEN OTHERWISE IF IT IS TO BE TERMED AS A PROCEDURAL AMENDMENT THEN ALSO A PROCEDURAL AMENDMENT CAN NOT BE HELD AS RETROSPECTIVE IN NATURE SO AS TO BE EFFECTIVE FROM AN EARLIER DATE. THERE IS NO DOUBT THAT THE SAID INTRODUCTION IN SEC12AA(3) W AS PROCEDURAL, BECAUSE THE NOTES ON CLAUSES ON THE FINANCE BILL HA VE MADE IT CLEAR AS VIDE [ 321 ITR 83 (ST.), CLAUSE 7] AS FOLLOWS :- CLAUSE 7 OF THE BILL SEEKS TO AMEND SECTION 12AA OF THE INCOME- TAX ACT RELATING TO PROCEDURE FOR REGISTRATION OF A TRUST OR INSTITUTION. UNDER THE EXISTING PROVISION CONTAINED IN SUB-SECTI ON(3) OF THE AFORESAID SECTIONS, IF THE ACTIVITIES OF THE TRUST OR INSTITUTION REFERRED TO IN SUB-SECTION (1), WHICH HAS BEEN GRAN TED REGISTRATION UNDER SUB-SECTION (1), ARE NOT GENUINE OR ARE NOT B EING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INST ITUTION, THE COMMISSIONER SHALL, AFTER GIVING A REASONABLE OPPOR TUNITY OF BEING HEARD TO THE SAID TRUST OR INSTITUTION, PASS AN ORDER IN WRITING CANCELING THE REGISTRATION GRANTED UNDER CLAUSE (B) OF SUB-SECTION (1). IT IS PROPOSED TO AMEND THE SAID SUB-SECTION(3) SO AS TO ALSO PROVIDE FOR CANCELLATION OF REGISTRATION WHERE ANY TRUST OR INSTITUTION HAS OBTAINED REGISTRATION AT ANY TIME U NDER SECTION 12 A BEFORE ITS AMENDMENT. 12. IN THIS CONTEXT AND IN SUPPORT OF THIS VIEW WE DEEM IT PROPER TO PLACE RELIANCE ON A LANDMARK DECISION OF HONBLE UTT ARANCHAL HIGH COURT ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 16 - VIZ. WELHAM BOYS SCHOOL SOCIETY 285 ITR 74 WHEREIN IT WAS HELD THAT THE SEC.12AA(3) WAS INCORPORATED WITH EFFECT FROM A FUTURE DATE I.E. 1.10.2004 VIDE AN AMENDMENT IN FINANCE (NO.2) BILL , 2004 DATED 8.7.2004, THEREFORE NOT A CLARIFICATORY OR EXPLANAT ORY. 13. LIKEWISE IN THE CASE OF SRI CHAITANYA EDUCA TIONAL COMMITTEE 106 ITD 256 ( HYD.) IT WAS DECIDED THAT THE AMENDMENT O F SEC.12AA BY THE THEN FINANCE ACT ( N0.2) OF 2004BY THE INSERTION OF SUB-SEC.(3) THEREIN W.E.F.1.10.2004 WAS NOT PROCEDURAL BUT WAS SUBSTANT IVE LAW THEREBY CONFERRING A JUDICIAL POWER OF CANCELLATION ON THE COMMISSIONER. 14. SINCE THE AMENDMENT IN QUESTION IS ABSOLUTELY A T PARITY WITH THE EARLIER AMENDMENT AS DISCUSSED BY THE HONBLE H.C. SUPRA , THEREFORE , WE HEREBY HOLD THAT THE INSERTION OF THE NEW CLAUSE W.E.F.1.6.2010 SHOULD NOT BE APPLICABLE RETROSPECTIVELY AND ITS OPERATION HAS TO BE EFFECTIVE FROM THE DATE IT WAS INTRODUCED AND ON WARDS. THIS IS THE ONE ASPECT FOR QUASHING THE ORDER OF LD. COMMISSIONER HOWEVER THE RE IS ONE MORE LEGAL ASPECT OF THIS ISSUE. IT IS AN UNDISPUTED FACT THA T AN ORDER U/S 12A WAS PASSED BY A COMMISSIONER AND THAT ORDER WAS UNDER C ONSIDERATION BEFORE THE LD. COMMISSIONER. NOW THE QUESTION IS THAT WHET HER AN OFFICER HAS POWER OF REVIEW OF HIS ORDER UNLESS AND UNTIL IT IS SPECIFICALLY PROVIDED IN THE STATUTE ON A PARTICULAR DATE. IT IS A WELL SETT LED LAW THAT THE POWER TO REVIEW IS NOT AN INHERENT POWER OF A JUDICIAL OR QU ASI JUDICIAL OFFICER , UNLESS SPECIFICALLY CONFERRED ON HIM BY THE STATUTE . IT MUST BE DELEGATED BY LAW EITHER SPECIFICALLY OR BY NECESSARY IMPLICAT ION. IN THE ABSENCE OF SUCH AN AUTHORITY THE ACTION OF THE LD. COMMISSIONE R PRIOR TO THE DATE OF INSERTION OF THE SAID CLAUSE CAN BE SAID BE BEYOND JURISDICTION. APPLYING ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 17 - THE PRINCIPLE OF NOSCITUR A SOCIIS WE HOLD THAT IN THE ABSENCE OF A DELEGATED AUTHORITY TO RESCIND OR WITHDRAW OR REVIE W OF A REGISTRATION ALREADY GRANTED U/S 12A THE ORDER CHALLENGED BEFORE US IS LIABLE TO BE QUASHED. 16. ON MERITS, WE HAVE EXAMINED THE OBJECTS OF THE TRUST WHICH WERE PLACED IN THE COMPILATION. THE OBJECTS HAVE EXPLICI TLY STATED THAT THE TRUST WAS ESTABLISHED FOR EDUCATIONAL PURPOSES. NO WHERE IN THE ORDER OF THE COMMISSIONER THERE WAS AN ALLEGATION THAT THE TRUST WAS NOT RUNNING AN EDUCATIONAL INSTITUTION . THEREFORE WE HAVE TO EXAM INE THE CORRECTNESS OF THE CANCELLATION OF THE REGISTRATION IN TERMS OF TH E LANGUAGE OF SEC.12AA OF THE ACT AS PRESCRIBED IN SUB-SEC.(1) AND PARTICU LARLY IN CLAUSE (A) & (B) OF THE SECTION ALREADY REPRODUCED HEREINABOVE IN PA RAGRAPH NO.6 OF THIS ORDER. 17. A COMMISSIONER HAS TO CALL FOR AN INFORMAT ION SO AS TO SATISFY HIMSELF I) WHETHER THE OBJECTS OF THE TRUST HAVE BE EN FULFILLED BY RUNNING AN INSTITUTION AND II) WHETHER THOSE ACTIVITIES ARE GENUINELY CARRIED OUT BY THE TRUST. SO AFTER SATISFYING HIMSELF AN ORDER I N WRITING REGISTERING THE TRUST CAN BE PASSED. SO FAR AS THE RUNNING OF THE EDUCATIONAL INSTITUTION IS CONCERNED, EVEN THE ASSESSING OFFICER WHILE PASSING ASSESSMENT ORDERS FOR SEVERAL YEARS, AS REFERRED SUPRA, HAS HELD THAT THE TRUST IS ENTITLED FOR DEDUCTION U/S.10(23C)(IIIAD) OF THE I.T. ACT, 1961. IF THE REVENUE OFFICER HIMSELF IS QUALIFYING THIS TRUST AS AN EDUC ATIONAL INSTITUTION AND THEN GRANTING THE SAID DEDUCTION, THEN AS A RESULT IT WAS NOT JUSTIFIABLE ON THE PART OF THE LD. COMMISSIONER TO HOLD SUCH A CON FLICTING VIEW, WHICH CAN SAID TO BE AN ALTOGETHER CONTRARY TO THE FACTS OF THE CASE. THE ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 18 - ALLEGATION WAS THAT THE BOOKS OF ACCOUNT WERE NOT F OUND IN A PROPER MANNER. BECAUSE OF THE ABSENCE OF THE BOOKS OF AC COUNT, IT WAS ALSO DOUBTED WHETHER THE EDUCATIONAL FEES RECEIVED FROM THE STUDENTS WAS EVER APPLIED FOR THE PURPOSE OF EDUCATION. A QUESTION HAS GENERALLY BEEN RAISED IN THE PAST ON SEVERAL OCCASIONS, THAT WHILE DECIDING U/S 12AA AN APPLICATION OF REGISTRATION FILED U/S 12A OF THE I. T. ACT, 1961, WHETHER THE ASSESSEE IS SUBJECT TO INVESTIGATION ABOUT THE APPLICATION OF ITS INCOME. SEVERAL COURTS HAVE PRONOUNCED THAT THE AP PLICATION OF INCOME OR THE UTILIZATION OF THE FUNDS CAN BE SUBJECT TO S CRUTINY AT THE ASSESSMENT PROCEEDINGS AS PRESCRIBED UNDER SECTIONS 11 & 12 OF THE I.T. ACT, 1961. THIS IS THE VIEW TAKEN BY THE ITAT PUNE BENCH IN TH E CASE OF MAHARASHTRA ACADEMY OF ENGINEERING AND EDUCATIONAL RESEARCH (MAEER) VS. CIT [36 DTR (PUNE) (TRIB) 321] (SUPRA), WHEREI N THE TRIBUNAL HELD AS UNDER:- IN THE RECENT PAST SUB-S. (3) WAS INSERTED IN S. 1 2AA W.E.F. 1ST NOV., 2004 WHICH GIVES POWER OF CANCELLATION OF REG ISTRATION TO THE CIT, IF HE FINDS THAT THE ACTIVITIES ARE NOT GENUIN E OR NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TR UST. THESE POWERS ARE CONFERRED WITH A VIEW TO ENSURE THAT IF ONCE A REGISTRATION HAS BEEN GRANTED UNDER S. 12AA, A TRUS T OR INSTITUTION MAY NOT TAKE ANY SUCH LIBERTY OF MISUSE OF THE REGI STRATION OR THE PROVISIONS BY GOING HAYWIRE RATHER FURTHERING THE O BJECTS OF THE TRUST OR GENUINELY NOT PURSUING THE ACTIVITIES FOR WHICH IT WAS ESTABLISHED. THE MOST IMPORTANT FEATURE OF S. 12AA IS AS ALSO REFERRED IN THIS APPEAL FOR ADJUDICATION, THAT THIS SECTION HAS ONLY LAID DOWN THE PROCEDURE OF REGISTRATION AND THIS SE CTION NOWHERE SPEAKS THAT WHILE CONSIDERING THE APPLICATION OF RE GISTRATION, THE CIT SHALL ALSO LOOK INTO THE PROCEDURE OF EARNING O F INCOME AND SOURCES FROM WHERE RECEIPTS ARE DERIVED. THE POWER OF ENQUIRY, IN RESPECT OF SOURCES OF RECEIPTS AND THE UTILIZATION OF INCOME IS ENTRUSTED IN SEPARATE SECTIONS. THE LANGUAGE THUS U SED IN THIS SECTION ONLY CONFINES TO ENQUIRE ABOUT THE ACTIVITI ES OF THE TRUST AND ITS GENUINENESS, WHICH MEANS, IN CONSONANCE WITH TH E OBJECTS FOR WHICH CREATED AND THOSE OBJECTS AS ALSO ACTIVITIES SHOULD NOT BE A ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 19 - CAMOUFLAGE BUT PURE, SINCERE, CHARITABLE AND FOR PU BLIC UTILITY AT LARGE. WHAT IS IMPLICIT IS THAT THE CIT HAS TO SINC ERELY EXAMINE THAT THE OBJECTS AS ALSO THE ACTIVITIES SHOULD NOT BE PR IMA FACIE AGAINST THE BASIC STRUCTURE FOR WHICH BENEFICIAL LAW IS MAD E AND ALSO BE NOT IN CONFLICT WITH THE GENERAL PUBLIC UTILITY. NA TURALLY AN INSTITUTION IF ESTABLISHED TO CARRY OUT AN ILLEGAL ACTIVITY OR ACTIVITIES ARE CAUSING ANY TYPE OF NUISANCE NOT IN THE INTERES T OF THE PUBLIC AT LARGE SHOULD DEFINITELY LEAD TO CANCELLATION OF REG ISTRATION. THE SCHEME OF THE ACT OTHERWISE DO NOT SUBSCRIBE AND AL LOW A TRUST TO TAKE THE BENEFIT OF THE PROVISIONS OF SS. 11 AND 12 UNLESS ESTABLISH THE PRESCRIBED UTILIZATION OF THE INCOME, EVEN IF, AT ALL THE TRUST HOLDS THE REGISTRATION IN ITS HANDS. THEREFORE AT T HE STAGE OF GRANTING REGISTRATION THE CIT IS NOT EXPECTED TO BO THER HIMSELF ABOUT THE OTHER PROVISIONS OF THE ACT AND SUPPOSED TO CONFINE HIMSELF TO THE PROCEDURE OF REGISTRATION AS LAID DO WN THEREIN. 18. THE PROPOSITION LAID DOWN THEREIN HAS TO BE APP LIED IN THE PRESENT APPEAL. THAT THE LD. COMMISSIONER HAS TO COMPREHEN D THE OBJECTS OF THE TRUST WHETHER THEY ARE MEANT FOR PUBLIC UTILIT Y {REQUIREMENT OF SEC.12AA(1)(B)} AND SECONDLY THAT THE ACTIVITIES HA VE ACTUALLY AS ALSO GENUINELY BEEN CARRIED OUT TO FULFILL THE AIMS OF T HE TRUST {REQUIREMENT OF SEC.12AA(1)(A)}. IN THE PRESENT CASE, THE TRUST BEING AN EDUCATIONAL INSTITUTION AND UNDISPUTEDLY IMPARTING EDUCATION, T HEREFORE, IT WAS NOT JUSTIFIABLE ON THE PART OF THE LD. COMMISSIONER TO DENY THE REGISTRATION. NEVERTHELESS, THE APPLICATION OF INCOME AND THE UTI LIZATION OF FUNDS IS ALWAYS SUBJECT TO SCRUTINY BY THE ASSESSING OFFICER WHILE ASSESSING THE INCOME OF THE TRUST, FOR THIS LEGAL PROPOSITION WE CAN RELY ON SANJEEVAMMA HANUMATHE GOWDA CHARITABLE TRUST 285 IT R 327(KART.) RED ROSE SCHOOL 212 CTR 394 (ALL) ACHARYA SEWA NIYA S UTTARANCHAL 105 TTJ 761. WE MAY, THEREFORE, CLARIFY THAT MERELY BY GRANTING A REGISTRATION U/S.12A/12AA OF THE I.T. ACT, 1961 A T RUST IPSO FACTO IS NOT ENTITLED FOR THE EXEMPTIONS PRESCRIBED UNDER SECTIO NS 11 & 12 OF THE I.T. ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 20 - ACT, 1961. NEITHER DE JURE NOR DE FACTO, I.E. NEITHER IN PRINCIPLE NOR IN PRACTICE, A TRUST CAN GET EXEMPTION UNDER SECTIONS 11 & 12 M ERELY ON GETTING A REGISTRATION U/S.12AA/ (IN THE PAST 12A) OF THE I.T. ACT, 1961. 19. IN THE LIGHT OF ABOVE DISCUSSION, WE HEREBY HOLD THAT THE CANCELLATION OF REGISTRATION, ON BOTH THE COUNTS I. E. ON MERITS AS ALSO ON THE LEGALITY OF JURISDICTION, WAS NOT IN ACCORDANCE OF LAW. AS A RESULT, GROUND RAISED BY THE ASSESSEE IS ALLOWED. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 24/ 09 /2010. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 24/ 09 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT-III, BARODA 4. THE LD. CIT(APPEALS)-CONCERNED 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD ITA NO. 2666/AHD/2008 AJIT EDUCATION TRUST VS. CIT - 21 - 1. DATE OF DICTATION.. 07/09/2010 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 08/09/2010 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 22/09/2010. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT - 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 24/9/2010. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 24/9/2010 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER