M/s. HAI HAY KSHATRIYA EDUCATION SOCIETY, Bhopal V. The CIT, Bhopal

ITA 387/IND/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6117 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-04-2016
• Assessment Year: misc
• Appeal Filed On: 15-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV VARSHNEY
• Assessee Lawyers: YASHWANT SHARMA; VINEET MATTHA
• Keywords: Unexplained investment; Capital asset; Depreciation; Search and seizure; Loose papers; Charitable institution; Opportunity of being heard; Principle of natural justice; Earning of tax free income; Retrospective amendment; Reasonable cause; Cancellation of registration; Revenue expenditure; Capital expenditure
• Section: 143(3); 153A; 12A; 12AA; 147; 148; 263; 132; 11

Judgement Text

H.K. KALCHURI AND OTHERS 12AA 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER A ND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER ITA NO.389/IND/2014 H.K. KALCHURI EDUCATION TRUST, BHOPAL PAN AAATH 3738 E ::: APPELLANT VS CIT-BHOPAL ::: RESPONDENT ITA NO.387/IND/2014 HAI HAY KSHETRIYA EDUCATION SOCIETY, BHOPAL PAN AAAAH 1557 N ::: APPELLANT VS CIT-BHOPAL ::: RESPONDENT ITA NO.388/IND/2014 JAI NARAIN SHIKSHA SAMITI, BHOPAL PAN AAAAJ 2542 F ::: APPELLANT VS CIT-BHOPAL ::: RESPONDENT H.K. KALCHURI AND OTHERS 12AA 2 ITA NO.390/IND/2014 RISHIRAJ MEMORIAL EDUCATION WELFARE SOCIETY, BHOPAL PAN AAAAR 5568 F ::: APPELLANT VS CIT-BHOPAL ::: RESPONDENT APPELLANTS BY SHRI YASHWANT SHARMA & SHRI VINEET MATTHA RESPONDENT BY SHRI RAJEEV VARSHNEY DATE OF HEARING 17.05.2016 DATE OF PRONOUNCEMENT 17.05.2016 ITA NO.386/IND/2014 RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY, BHOPAL PAN AAATR 6468 F ::: APPELLANT VS CIT-BHOPAL ::: RESPONDENT APPELLANT BY SHRI GIRISH AGRAWAL, SHRI HITESH CHIMNANI & SHRI VIVEK KHANDELWAL RESPONDENT BY SHRI RAJEEV VARSHNEY DATE OF HEARING 17.05.2016 DATE OF PRONOUNCEMENT 17.05.2016 O R D E R PER SHRI D.T. GARASIA, JM H.K. KALCHURI AND OTHERS 12AA 3 THESE APPEALS FILED BY THE ABOVE ASSESSEES EMANATE FROM THE DIFFERENT ORDERS OF THE LEARNED CIT DATED 23.4.2014 . BOTH THE PARTIES SUBMITTED THAT IDENTICAL FACTS ARE INVOLVED IN THES E APPEALS AND THE LEAD CASE IS OF H.K. KALCHURI EDUCATION TRUST, THEREFORE , WE ARE TAKING THE FACTS FROM THE CASE OF H.K. KALCHURI EDUCATION TRUST. ITA NO.389/IND/2014 IN THE CASE OF H.K. KALCHURI ED UCATION TRUST THE GROUNDS OF APPEAL RAISED BY THE ASSESSEES READ AS UNDER: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER CANCELLING REGISTRATION U/S 12AA(3) PASSED BY.LD COMMISSIONER OF INCOME TAX (HEREINAFTER REFERRED TO AS 'CIT') IS WHOLLY ILLEGAL, WITHOUT JURISDICTION AND INVALID. 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT GROSSLY ERRED IN CANCELLING REGISTRATION EARLIER GR ANTED U/S. 12A W.E.F. 13.1.1999. THE LD. CIT FAILED TO APPRECIATE THAT POWER TO CANC EL REGISTRATION U/S. 12AA(3) IN CASE OF REGISTRATION EARLIER GRANTED U/S. 12A WAS B ROUGHT ON THE STATUTE ONLY W.E.F. 01.06.2010 PROSPECTIVELY. THE CANCELLATION M ADE BY ID. CIT RETROSPECTIVELY W.E.F. 13.1.1999 FROM THE EFFECTIVE DATE OF GRANTIN G IS, THEREFORE, INVALID AND ILLEGAL. 3. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW. THE IMPUGNED ORDER U/S. 12AA(3) PASSED BY THE LD. CIT I N THE CASE OF APPELLANT IS PATENTLY INVALID, ARBITRARY, CONTRARY TO PROVISIONS OF LAW, CONTRARY TO ALL CANONS OF NATURAL JUSTICE AND IS VOID AB-INITIO ON VARIOUS FA CTUAL AND LEGAL GROUNDS. 4. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, VARIOUS OBSERVATIONS MADE BY THE LD. CIT WHILE CANCELLING R EGISTRATION IN THE IMPUGNED ORDER ARE FACTUALLY INCORRECT, ILLEGAL AND IRRELEVA NT. 5. THE ID. CIT HAS ERRED, BOTH IN LAW AND ON THE FA CTS OF THE CASE, IN NOT APPRECIATING THE SCHEME OF THE ACT WHEREBY HE IS EM POWERED TO CANCEL REGISTRATION OF TRUST/SOCIETY ONLY UNDER PROVISIONS OF S. 12AA(3) OF THE ACT ON SATISFACTION OF THE VERY CONDITIONS CONTEMPLATED TH EREIN. IN THE FACTS OF THE H.K. KALCHURI AND OTHERS 12AA 4 PRESENT CASE, NONE OF THESE CONDITIONS ARE SATISFIE D AND, THEREFORE, THE ACTION OF ID. CIT IS PATENTLY ILLEGAL AND WITHOUT JURISDICTIO N. 6. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE ACTION OF THE ID CIT IN CANCELLING THE REGISTRATION IS BEY OND HIS POWER AND JURISDICTION, AND THEREFORE THE SAME IS REQUIRED TO BE TREATED AS NULL AND VOID AND BE QUASHED ACCORDINGLY. THE ASSESSEES HAVE ALSO RAISED ADDITIONAL GROUND OF APPEAL, WHICH READS AS UNDER: ADDITIONAL GROUND : THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE NOTICE ISSUED U/S 12AA(3) WAS WITHOUT JURISDICTION, UNLAWF UL AND AB-INITIO VOID. IT WAS STATED THAT THE ABOVE IS LEGAL GROUND WHICH GOES TO THE ROOT OF THE CASE AND DOES NOT REQUIRE ANY INVESTIGATION OF FACTS BEC AUSE ALL THE FACTS ARE AVAILABLE IN THE ORDER OF THE LD. CIT. FACTS, IN BRIEF, ARE THAT THE ASSESSEE TRUST WAS GR ANTED REGISTRATION U/S 12A OF THE ACT ON 12.03.2007 WITH EFFECT FROM 1 3.01.1999. THE BACKGROUND OF THIS CASE IS THAT THE SEARCH AND SEIZ URE OPERATIONS WERE CONDUCTED IN THE CASE OF THE ASSESSEE ON 23.07.2009 ALONGWITH OTHER PERSONS OF THE GROUP POPULARLY KNOWN AS CHOUKSEY GR OUP. THE ASSESSEE TRUST IS RUNNING EDUCATIONAL INSTITUTIONS AND MANAG ED BY FAMILY MEMBERS OF THE CHOUKSEY GROUP, WHICH IS RUNNING A NUMBER OF ED UCATIONAL INSTITUTIONS H.K. KALCHURI AND OTHERS 12AA 5 IN MADHYA PRADESH AND CHATTISGARH. THE DETAILS IN R ESPECT OF EDUCATIONAL INSTITUTIONS OF SOME OF THE ASSESSEE SOCIETY MANAGE D BY THE CHOUKSEY FAMILY ARE AS UNDER: SR. NO. NAME OF COLLEGE COURSES OFFERED AFFILIATION START YEAR 1. LAXMI NARAYAN COLLEGE OF TECHNOLOGY, BHOPAL B-TECH, M-TECH, B-PHARMA, M- PHARMA, MBA, MCA AICTE, BARKATULLAH UNIVERSITY & RGPV, BHOPAL 1993 2 LAXMI NARAYAN COLLEGE OF TECHNOLOGY, INDORE B-TECH, M-TECH, B-PHARMA, M- PHARMA, MBA, MCA AICTE, DAV, INDORE 2004 3 LAXMI NARAYAN COLLEGE OF TECHNOLOGY & SCIENCE, BHOPAL B-TECH AICTE 2006 4 CHOUKSEY ENGINEERING COLLEGE,BILASPUR B-TECH, B-PHARMA, M- PHARMA, MBA AICTE CSVTU 2002 5 LN MEDICAL COLLEGE, BHOPAL MBBS MEDICAL COUNCI L OF INDIA, NEW DELHI 2009 6 J K HOSPITAL AND MEDICAL RESEARCH CENTER, BHOPAL - - 2007 7 C L CHOUKSEY HOMEOPATHIC COLLEGE AND HOSPITAL, BILASPUR BHMS CCHS, NEW DELHI 2001 IN VIEW OF THE FACT THAT SEARCH U/S 132 WAS CARRIED OUT IN THE CASE OF THE ASSESSEE I.E. H.K. KALCHURI EDUCATION TRUST, ON 23.07.2009, THE AO ISSUED NOTICES U/S 153A FOR A.YS. 2004-05 TO 2009-1 0 ASKING THE ASSESSEE TO FURNISH ITS RETURN OF INCOME U/S 153A OF THE ACT . IN THE RETURNS OF INCOME FILED IN RESPONSES TO THE SAID NOTICES, THE ASSESSE E DECLARED NIL INCOME CLAIMING EXEMPTION U/S 11 OF THE IT ACT. AFTER CONS IDERING THE FACTS OF THE H.K. KALCHURI AND OTHERS 12AA 6 CASE AND SUBMISSION OF THE ASSESSEE, THE AO PASSED THE ASSESSMENT ORDERS U/S 153A R.W.S 143(3) FOR AYS 2004-05 TO 200 9-10 AND ASSESSMENT ORDER U/S 143(3) FOR A.Y. 2010-11 ON 13.08.2012. IN THE ASSESSMENT ORDERS FOR A.YS. 2004-05 TO 2010-11, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 11 AND ASSESSED THE TOTAL INCOME AS UNDER: A.Y. INCOME ASSESSED (RS.) 2004-2005 4,05,67,440/- 2005-2006 8,23,33,940/- 2006-2007 7,48,87,080/- 2007-2008 9,59,51,000/- 2008-2009 17,66,48,850/- 2009-2010 38,64,52,360/- 2010-2011 50,11,47,960/- THE CIT, VIDE LETTER DATED 15.02.2013, REQUESTED TH E ASSESSEE TRUST TO SHOW CAUSE AS TO WHY THE REGISTRATION GRANTED U/ S. 12A OF THE IT ACT SHOULD NOT BE WITHDRAWN IN THE VIEW OF THE FACTS FO UND AS A RESULT OF THE SEARCH AND THE CONSEQUENTIAL ASSESSMENTS FINALIZED U/S. 153A /143(3) OF THE ACT. THE CIT NOTED THAT IN RESPONSE, THE ASSESS EE HAS MADE FOLLOWING SUBMISSIONS: H.K. KALCHURI AND OTHERS 12AA 7 (I) THE ASSESSED SOCIETY GENUINELY CARRIES OUT ITS ACTIVITIES OF IMPARTING EDUCATION IN ACCORDANCE WITH ITS AVOWED O BJECTS. (II) NONE OF THE CONDITIONS POSTULATED IN THE STAT UTE WARRANTING CANCELLATION OF REGISTRATION EXISTS IN THE CASE OF THE ASSESSEE. (III) SURPLUS GENERATED IS HELD FOR CHARITABLE PURP OSES AND APPLIED FOR CHARITABLE PURPOSES; HENCE THE ASSESSEE EXISTS FOR CHARITABLE PURPOSE. HENCE, BEFORE THE CIT, IT WAS CLAIMED BY THE ASSESS EE THAT THE SOCIETY GENUINELY CARRIES OUT ITS ACTIVITIES OF IMP ARTING EDUCATION IN ACCORDANCE WITH ITS AVOWED OBJECTS AND THE SURPLUS GENERATED IS HELD FOR CHARITABLE PURPOSES AND APPLIED FOR CHARITABLE PURP OSES. HOWEVER, THE CIT DID NOT AGREE TO THE SUBMISSIONS OF THE ASSESSEE AN D HELD THAT THE ACTIVITIES OF THE ASSESSEE TRUST ARE NOT FOR CHARIT ABLE PURPOSES, ACCORDINGLY, THE REGISTRATION GRANTED TO THE ASSESSEE TRUST U/S 12A IS HEREBY WITHDRAWN FROM THE EFFECTIVE DATE OF GRANTING. THE CIT BASED HIS DECISION ON THE BASIS OF VARIOUS ISSUES AND VIOLATIONS OF SEC. 13 WHICH A RE NARRATED HEREINAFTER. THE CIT NOTED THAT ASSESSEE TRUST RUNNING EDUCATION AL INSTITUTES LIKE BUSINESS ENTITIES - PARTNERSHIP FIRMS BY THE ASSESS EE TRUST. DURING THE H.K. KALCHURI AND OTHERS 12AA 8 COURSE OF SEARCH, CERTAIN AGREEMENTS / DRAFTS HAVE BEEN FOUND AND SEIZED. THESE AGREEMENTS ARE REGARDING SHARING OF PROFITS / LOSSES IN VARIOUS INSTITUTIONS RUN BY THE ASSESSED TRUST. THE CONTENT S OF SOME OF THESE AGREEMENTS ARE NARRATED HEREUNDER : A) LPS 2/36 PAGES 46&47 SEIZED FROM THE PREMISES 31 , SHYAMLA HILLS, BHOPAL IS A COPY OF AN AGREEMENT DEED DATE 13.08.20 02 BETWEEN (I)RAM SINGH DHAKRE S/O SHRI BHIKAM SINGH DHAKRE, NARENDRA SINGH DHAKRE, LOKENDRA SINGH DHAKRE, SHIVENDRA SINGH DHAKRE& SMT. SHANTY DHAKRE AND (II) JN CHOUKSEY, POONAMCHOUKSEY, SURESH CHOUKSEY, SMT PRATIBHACHOUKS EY AND ANUPAMCHOUKSEY DULY SIGNED. AS PER THE AGREEMENT , BOTH THE GROUP HAVE DECIDED TO REGISTER THE EXISTING SOCIETY IN THE NAM E OF PRATAPWAHINISAMAJ KALIAN SANSTHA, GWALIOR INTO TRUST; THAT IN ALL THE INSTIT UTION RUN BY THE SAID SOCIETY, BOTH GROUP SHALL HAVE EQUAL PARTNERSHIP AND THAT MEMBERS OF GROUP SHALL BE APPOINTED IN MANAGEMENT / EMPLOYMENT IN THE SAME RA TIO; THAT THE SAID PRATAPWAHINISOCIETY HAS INVESTED RS. 40 LAKHS IN TH E CHOUKSEYENGG. COLLEGE, BILASPUR RUN BY H K KALCHURI EDUCATION TRUST SOCIET Y IS GOING TO INVEST RS. 20% SHARE; AND THAT THE SAID PRATAPWAHINI SOCIETY IS GO ING TO INVEST RS. 36 LAKHS IN INDORE INSTITUTE OF TECHNOLOGY RUN BY RISHIRAJSINGH MEMORIAL WELFARE SOCIETY AND HENCE IT WILL THEREFORE HAVE 18% SHARE. B) LPS 2/25 PAGE 16 IS AN UNSIGNED AGREEMENT MADE O N 09.02.2007 BETWEEN SHRI RAM SINGH DHAKRE AND J N CHOUKSEY , WH O ARE HAVING 50% SHARE EACH IN THE TWO COLLEGES I.E. MPCT AND MPCD & RC RU N BY PRATAPWAHINISAMAJSANSTHA. SHRI RAM SINGH DHAKRE IS ALSO HAVING 5% SHARE IN THE CHOUKSEYENGG. COLLEGE, BILASPUR RUN BY H K KALC HURI EDUCATION TRUST AND 9% SHARE IN RISHIRAJENGG. COLLEGE OF TECHNOLOGY IND ORE. AS PER THE AGREEMENT, SHRI RAM SINGH DHAKRE WILL SURRENDER HIS SAID SHARE OF 5% IN THE CHOUKSEYENGG.COLLEGE,BILASPUR AND 9% SHARE IN RISHI RAJENGG. COLLEGE OF TECHNOLOGY INDORE RUN BY RISHRIRAJ SINGH MEMORIAL W ELFARE SOCIETY IN FAVOUR OF SHRI JAI NARAINCHOUKSEYAND IN EXCHANGE THEREOF SHRI JAI NARAINCHOUKSEYSHALL SURRENDER HIS 50% SHARE IN THE TWO COLLEGES I.E. MP CT AND MPCD& RC RUN BY PRATAPWAHINISAMAJKALYANSANSTHAIN FAVOUR OF SHRI RAM SINGH DHAKRE. FURTHER, SHRI CHOUKSEY IN TWO INSTALMENTS, ONE WITHIN ON MON TH OF THIS AGREEMENT AND THE SECOND INSTALMENT BY AUGUST 2007. FURTHER, PAGE NO. 14 AND 15 OF THE SAID LPS IS A SI GNED LETTER FROM SHRI RAM SINGH DHAKREON THE LETTER HEAD OF MAHARANPRATAP COL LEGE OF TECHONOLGY, H.K. KALCHURI AND OTHERS 12AA 9 GWALIOR, ALONG WITH A MODIFIED DRAFT OF THE ORIGINA L DRAFT AGREEMENT, ADDRESSED TO SHRI JAI NARAINCHOUKSEY CONFIRMING THE OCNTENTS OF ABOVE MENTIONED DRAFT AGREEMENT. FROM THE ABOVE DOCUMENTS, IT IS BEYOND DOUBT THAT E DUCATIONAL INSTITUTIONS UNDER THE GUISE OF CHARITABLE SOCIETIES ARE RUN SOLELY FO R THE PURPOSE OF EARNING AND SHARING OF PROFITS AND NOT FOR ANY CHARITABLE PURPO SES. THE DOCUMENTS FOUND AND SEIZED INCLUDING VARIOUS AGREEMENTS, CLEARLY DEMONS TRATE THAT THOUGH IN FORM THESE ORGANIZATIONS ARE REGISTERED AS CHARITABLE SO CIETIES BUT IN SUBSTANCE, THE INSTITUTIONS ARE BUSINESS CONCERNS FOR THE PURPOSES OF EARNING AND SHARING PROFITS AND WHENEVER ANY PARTY/ PARTNER RETIRES/WITHDRAWS F ROM THE ORGANIZATION, HE IS COMPENSATED IN TERMS OF MONEY BASED ON VALUATION OF ASSETS AND PROFITS/GOODWILL OF THE INSTITUTION. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE IS RUNNING EDUCATIONAL INSTITUTIONS FOR CHARITABLE PURPOSES AS ENVISAGED IN SECTION 2(15) OF THE IT ACT. 2. SO FAR AS GENERATION OF HUGE SURPLUS FROM THE AC TIVITIES OF THE SOCIETY, THE CIT NOTED THAT: THE POSITION OF SURPLUS GENERAT ED VIS A VIS THE TOTAL RECEIPT OF THE ASSESSEE SOCIETY OVER THE LAST FEW YEARS IS TABULATED AS UNDER :- A.Y. RECEIPTS SURPLUS AFTER DEPRECIATION SURPLUS AFTER DEPRECIATION ON AS A PERCENTAGE OF RECEIPTS DEPRECIATION SURPLUS BEFORE DEPRECIATION S SURPLUS BEFORE DEPRECIATION AS A PERCENT AGE OF RECEIPTS 2004-05 854,99,371 1,25,59,189 14.68 99,57,272 2,25 ,16,461 26.33 2005-06 9,53,60,830 1,90,79,748 20 2,44,32,601 4,35 ,12,349 45.62 2006-07 11,35,01,674 1,15,72,483 10.19 2,47,17,364 3,62,89,847 37.97 2007-08 15,58,75,434 3,08,14,721 19.77 3,62,38,735 6,70,53,456 43.02 2008-09 21,40,24,014 5,95,55,525 27.82 3,30,56,624 9,26,12,141, 43.27 2009-10 34,02,3,612 2,68,77,272 7.89 7,55,31,028 10 ,24,08,300 30.09 2010-11 51,53,65,984 10,10,29,581 19.60 9,20,,63,464 19,30,93,045 37.46 IT IS SEEN THAT THE ASSESSEE TRUST HAS GENERATED HU GE SURPLUS FROM YEAR TO YEAR. SINCE THE ASSESSEE IS INCURRING LOWER EXPENDITURE I N RUNNING THE INSTITUTION, IT COULD HAVE REVISED ITS FEE STRUCTURE DOWNWARDS AS T HERE IS NO RESTRICTION IN THE BYE- LAWS IN THIS REGARD. MOREOVER, LOWERING THE FE E WOULD HAVE IMPARTED IT A CHARITABLE NATURE AND ALSO ESTABLISH THAT IT IS NOT FOR THE PURPOSE OF PROFIT. BUT NO SUCH ACTION HAS BEEN TAKEN BY THE SOCIETY. EDUCATIO N MUST MIX WITH PUBLIC H.K. KALCHURI AND OTHERS 12AA 10 BENEFIT. IN SAFDARJUNG ENCLAVE EDUCATION SOCIETY VS . MUNICIPAL CORPORATION OF 'DELHI 109 TAXATION 142, THE HON'BLE SUPREME COURT HAS HELD THAT EDUCATION PER SE IS NOT CHARITABLE UNLESS ELEMENT OF PUBLIC BENEF IT OR PHILANTHROPY IS PRESENT AND THAT IF EDUCATION IS RUN ON COMMERCIAL LINES, T HE INSTITUTION SHOULD NOT GET THE EXEMPTION MERELY BECAUSE IT IS A SCHOOL. THE RATIO OF THIS JUDGMENT WHICH WAS DELIVERED IN THE CONTEXT OF THE PROVISIONS OF SECTI ON 115(4) OF THE DELHI MUNICIPAL CORPORATION ACT, 1957, WHICH HAS A SIMILAR DEFINITI ON OF THE EXPRESSION 'CHARITABLE PURPOSE AS CONTAINED IN SECTION 2(15) OF THE INCOM E- TAX ACT, 1961, IS FULLY APPLICABLE TO THE INSTANT CASE. THE JUDGMENTS DELIVERED BY VARIOUS COURTS ON THE IS SUE OF PROFITABILITY IN THE CONTEXT OF SECTION 10(22) OF THE INCOME- TAX ACT AR E EQUALLY RELEVANT, FOR EXAMINING THE CLAIM OF AN EDUCATIONAL INSTITUTION W HICH CLAIMS TO BE EXISTING FOR CHARITABLE PURPOSES. COURTS HAVE CONSISTENTLY HELD THAT IT IS NOT POSSIBLE TO CARRY OUT ANY ACTIVITY IN SUCH A MANNER THAT RECEIPTS OF THE ACTIVITY EXACTLY EQUAL AND MATCH THE OUTGOINGS IN ARITHMETICAL PROPORTIONS. SO METIMES THERE MIGHT BE SURPLUS OR SOMETIMES THERE MIGHT BE DEFICIT. IF PRI MARY OBJECTIVE IS PROMOTION OF EDUCATION AND PROFIT ARISES INCIDENTALLY; THE INSTI TUTION SATISFIES THE TEST OF LAW. ON THE OTHER HAND, IF PROFITS ARE SYSTEMATIC AND APPEA R TO BE PRIMARY OBJECTIVE AND IMPARTING OF EDUCATION IS INCIDENTAL; IN THAT CASE THE TEST OF LAW IS NOT SATISFIED. THE ISSUE AS TO WHETHER EDUCATION IS DOMINANT OBJEC TIVE AND PROFITS BEING INCIDENTAL VS PROFITS BEING DOMINATE AND EDUCATION BEING INCIDENTAL HAS BEEN FINALLY SETTLED BY THE HON'BLE SUPREME COURT'S DECI SION IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTION (1997) 224 ITR 310. IN FACT IN MOST OF THE YEARS THE SURPLUS/ PROFIT GE NERATED BY THE TRUST IS IN THE RANGE OF 26% TO 45% OF THE GROSS RECEIPTS. THE SURP LUS IS WORKED OUT WITHOUT CONSIDERING THE CLAIM OF DEPRECIATION SINCE THE ENT IRE CAPITAL EXPENDITURE ON THE CAPITAL ASSETS HAS BEEN ALLOWED IN FULL EITHER IN T HE YEAR UNDER CONSIDERATION OR IN EARLIER YEARS. GENERATION OF SUCH HUGE SURPLUS YEAR AFTER YEAR CAN NOT BY ANY YARDSTICK BE TERMED AS INCIDENTAL OR FORTUITOUS BUT IT GOES ON TO ESTABLISH THAT THE THINGS HAVE BEEN SO DESIGNED BY THE ASSESSEE SOCIET Y THAT THERE IS AN INBUILT PROFIT MECHANISM THROUGH WHICH SYSTEMATIC AND REGUL AR PROFITS ARE BEING GENERATED EVERY YEAR. THEREFORE, IF THE TEST LAID D OWN BY THE HON'BLE SUPREME COURT IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTI ON (1997) 224 ITR 310 IS APPLIED, IT IS SEEN THAT PROFIT MAKING IS THE DOMIN ANT OBJECTIVE OF THE ASSESSEE SOCIETY AND EDUCATION IS INCIDENTAL OBJECTIVE. IT IS CLAIMED BY THE ASSESSEE THAT SURPLUS GENERATED IS HELD FOR CHARITABLE PURPOSE AN D APPLIED FOR CHARITABLE PURPOSES AND THEREFORE THE ASSESSEE EXISTS FOR A CH ARITABLE PURPOSE. THE SAID CLAIM OF THE ASSESSEE IS FAR FROM TRUTH AS NUM BER OF VIOLATIONS OF UTILIZING FUNDS FOR NON-CHARITABLE PURPOSES HAS BEEN DETECTED DURING THE COURSE OF SEARCH AND SUBSEQUENT ASSESSMENT PROCEEDINGS. THE GIST OF THE SAME IS AS UNDER: H.K. KALCHURI AND OTHERS 12AA 11 3. SO FAR AS INTEREST FREE ADVANCED BY THE ASSESSEE SOCIETIES/ENTITIES OF THE SAME MANAGEMENT IS CONCER NED, THE CIT NOTED THAT: CERTAIN SUMS HAVE BEEN ADVANCED BY THE ASSESSEE SOC IETY TO SPECIFIED PERSONS AS PER THE PROVISIONS OF SECTION 13(3) OF THE ACT A ND VARIOUS OTHER SOCIETIES/ENTITIES UNDER THE SAME MANAGEMENT. THE R ELEVANT DETAILS ARE AS UNDER :- S.NO . NAME OF THE SOCIETY AMOUNT OUTSTANDING AS ON 31.03.04 31.03.05 31.03.06 31.03.07 31.03.08 31.03.09 31.03.1 0 1 BAKUL SINGH/NEW HILTON SCHOOL 0 0 475000 0 0 0 0 2 CENTRE FOR HUMAN INSENT AND EDUCATION 0 500000 800000 0 0 0 0 3 CHOUKSEY ENGINEERING COLLEGE 0 0 0 0 8796898 0 0 4 CHOUKSEY YADAV PICHHRAVARG EDUCATION SOCIETY 0 0 0 0 2500000 4569961 973813 2 5 D.S.P. EDUCATION SOCIETY 0 0 2700000 0 4230780 0 0 6 HK EDUCATION SOCIETY, BHOPAL 1545316 9 6673373 6673374 0 0 6324580 801209 8 7 HAI HAY KSHATRIYA EDUCATION SOCIETY 0 0 0 0 6319316 0 0 8 J.D.C.T. COLLEGE INDORE 0 0 0 1450000 0 0 0 9 J.D.C.T. SOCIETY 0 0 500000 0 0 0 0 10 JAGATGURU DATTATREY EDUCATION SOCIETY 0 0 0 0 0 954312 1107698 H.K. KALCHURI AND OTHERS 12AA 12 11 JAI NARAYAN SHIKSHA SAMITI 1681410 2 1967808 1 1594853 1 1511475 7 3704278 0 0 12 LNCT INDORE 7803271 0 0 0 0 0 0 13 LORD KRISHNA BANK OFFICERS SOCIETY 0 0 0 3670281 3670281 4337808 1575708 14 LORD KRISHNA COLLEGE 0 0 1300000 2194160 1372760 0 0 15 M.P.C.T. GWALIOR 0 730000 730000 730000 730000 0 0 16 NEW HILTON RESIDENTIAL SCHOOL 0 900000 0 0 0 0 0 17 PRIYADARSHINI CREDIT COOPERATIVE SOCIETY (PCCS) 0 0 0 145426 1481859 0 0 18 PDSS SOCIETY 0 0 0 150000 0 0 0 19 PENDRA NURSING CENTRE 200000 200000 200000 200000 622500 622500 622500 20 RISHIRAJ SINGH MEMORIAL SOCIETY 1000000 2900000 4600000 5100000 3262000 6828468 8 7278668 8 21 STATE BANK OF INDIA STAFF HOUSING SOCIETY 0 350000 1350000 0 0 0 0 22 SHIKHA SINGH 0 500000 500000 0 0 0 0 23 SHIVAM BUILDERS AND CONTRACTORS 0 0 0 0 0 2600000 5150000 24 SRI SAISAKHSAHAKARI CIH 0 0 0 0 1233457 1364019 0 25 YADAV CHOUKSEY 0 0 0 2003019 2193842 0 0 4127054 2 3243145 4 3577690 5 3075764 3 4011797 1 8905786 8 9899282 4 H.K. KALCHURI AND OTHERS 12AA 13 IT IS NOTICED THAT ASSESSEE HAD GIVEN ADVANCES TO O THER SOCIETIES; CONTROL AND MANAGEMENT OF THOSE SOCIETIES IS ALSO UNDER THE SAM E PERSONS WHO ARE MANAGING THE ASSESSEE SOCIETY. THE ASSESSEE HAS ALS O GIVEN ADVANCES TO SBI STAFF HOUSING SOCIETY ANDPRIYADARSHINICREDIT COOPER ATIVE SOCIETY WHICH ARE ALSO MANAGED BY THE OFFICE BEARERS OF THE ASSESSEE SOCIE TY AND THEY HAVE SUBSTANTIAL INTEREST IN THOSE SOCIETIES. THE ADVANCES HAD BEEN GIVEN WITHOUT INTEREST AND WITHOUT OBTAINING ANY SECURITY. EVEN IF, PRIYADARSH ANICREDIT COOPERATIVE SOCIETY IS RUNNING BUS TRANSPORT, THE ADVANCE GIVEN TO THAT SO CIETY CANNOT BE SAID TO BE FOR FURTHERANCE OF OBJECTIVE OF THE ASSESSEE SOCIETY. I T IS ALSO NOTICED THAT THE ASSESSEE HAD ALSO GIVEN ADVANCE TO SHRI JAI NARAINC HOUKSEYON 11.06.2009 OF RS. 200000/- AND ON 19.09.2009 OF RS. 394000/-. EVE N IN REGARD TO OTHER SOCIETIES WHICH ARE THOUGH REGISTERED U/S 12A BUT I T WAS FOUND THAT THOSE SOCIETIES ARE ALSO CONDUCTING THEIR ACTIVITIES AS A BUSINESS ORGANIZATION FOR EARNING AND SHARING PROFIT AND NOT FOR CHARITABLE PURPOSES. THEREFORE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , IT CANNOT BE SAID THAT THE ADVANCES WERE GIVEN BY THE ASSESSEE SOCIETY SOLELY FOR THE PURPOSE OF FURTHERANCE OF ITS CHARITABLE OBJECTIVES OF PROVIDI NG EDUCATION. 4. SO FAR AS SEIZURE OF HUGE AMOUNT OF CASH AND JEW ELLERY FROM THE OFFICE BEARERS IS CONCERNED, THE CIT NOTED : DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS CASH OF RS. 2,47,64,530/- AND JEWELLERY VALUING AT RS. 3,39,64,248/- WERE FOU ND FROM THE RESIDENCES AND LOCKERS OF THE OFFICE BEARERS OF THE CASH WAS ALSO FOUND IN THE LOCKERS BELONGING TO THE OFFICE BEARERS OF THE SOCIETY. SHRI JAI NARA INCHOUKSEY, MANAGING TRUSTEE OF THE ASSESSEE SOCIETY HAS SURRENDERED RS. 4.00 CRORE S IN HIS HAND REPRESENTING UNEXPLAINED CASH, JEWELLERY AND OTHER UNEXPLAINED I NVESTMENT AND ALSO RS. 2500000/- IN THE HANDS OF HIS SON SHRI ANUPAMCHOUKS EYON ACCOUNT OF UNEXPLAINED INVESTMENT IN LAND ETC. SHRI SURESH CHO UKSEYHAS SURRENDERED RS. 1.00 CRORE ON ACCOUNT OF UNEXPLAINED CASH AND JEWEL LERY. SHRI JAINARAINCHOUKSEYWHEN ASKED DURING THE STATEMENT RE CORDED U/S 132(4) REGARDING THE SOURCE OF CASH OF RS. 57,87,665/- FOU ND AT HIS RESIDENCE, HE INITIALLY STATED THAT THIS AMOUNT WAS WITHDRAWN FROM BANKS AN D SOME AMOUNT WAS RECEIVED FROM JNCT AND LNCT COLLEGES. HOWEVER, HE F INALLY SURRENDERED UNEXPLAINED INCOME OF RS. 4.00 CRORES IN HIS HAND, WHICH INCLUDED RS. 1.25 CRORES OF UNEXPLAINED CASH CLAIMED TO BE EARNED FRO M BUSINESS OF PROPERTY AND RS. 2500000/- IN THE HANDS OF SHRI ANUPMANCHOUKSEY. H.K. KALCHURI AND OTHERS 12AA 14 IT IS SEEN THAT EVEN THOUGH THE MEMBERS OF CHOUKSEY FAMILY MAINLY SHRI JAI NARAINCHOUKSEYAND SHRI SURESH CHOUKSEY SURRENDERED UNDISCLOSED INCOME U/S 132(4), THEY HAVE NOT SPECIFIED OR SUBSTANTIATED TH E MANNER IN WHICH THE SAID INCOME WAS DERIVED. FROM THE RETURNS OF INCOME FILE D BY THE MEMBERS OF CHOUKSEYFAMILY PARTICULARLY SHRI JAI NARAINCHOUKSEY AND SHRI SURESH CHOUKSEY, IT IS SEEN THAT THEY DO NOT HAVE ANY INCOME FROM BU SINESS OR PROFESSION IN INDIVIDUAL CAPACITY THERE ARE ALSO NO OTHER KNOWN S OURCES OF ANY SIGNIFICANT INCOME REFLECTED IN THE RETURN OF INCOME FILED BEFO RE THE DATE OF SEARCH. THEN WHAT COULD BE THE SOURCE OF UNEXPLAINED INVESTMENT / CASH AND JEWELLERY FOUND. THE ONLY INFERENCE THAT CAN BE DRAWN IS THAT IT IS THE MONEY OF THE TRUST WHICH HAS BEEN SIPHONED OFF AND INVESTED IN ACQUIRING UNEXPLA INED ASSETS. IT ESTABLISHES THAT THE CASH AND JEWELLERY FOUND AND SEIZED HAS BE EN ACQUIRED BY MEMBERS OF CHOUKSEY GROUP BY SIPHONING OFF THE FUNDS OF THE VA RIOUS SOCIETIES INCLUDING THE ASSESSEE TRUST UNDER THEIR COMPLETE CONTROL. THUS, IN MY CONSIDERED OPINION THE INCOME/ FUNDS OF THE ASSESSEE SOCIETY HAVE BEEN USED FOR THE PERSONAL BENEFITS OF THE TRUSTEE AND OFFICE BEARERS AND THE ASSESSEE SOCIETY DOES NO EXIST FOR CHARITABLE PURPO SE. 5. SO FAR AS ADVANCES OF VARIOUS PARTIES (OTHER THA N INTERESTED PERSONS) WITHOUT CHARGING ANY INTEREST AND WITHOUT OBTAINING ANY SECURITY IS CONCERNED, THE CIT NOTED : AS IS EVIDENT FROM THE BALANCE SHEETS, THE ASSESSEE HAS REGULARLY GIVEN HUGE ADVANCES TO VARIOUS PARTIES WITHOUT CHARGING ANY IN TEREST AND WITHOUT OBTAINING ADEQUATE SECURITY. THUS, THE FUNDS OF THE ASSESSEE TRUST WERE NOT SOLE LY USED FOR THE PURPOSES OF CHARITABLE ACTIVITIES AND, THEREFORE THE SOCIETY DO ES NOT EXIST FOR CHARITABLE PURPOSE. 6. SO FAR AS PAYMENT MADE FOR PURCHASE OF HOUSE PRO PERTY 31, SHYAMLA HILLS, BHOPAL IS CONCERNED, THE CIT NOTED T HAT: H.K. KALCHURI AND OTHERS 12AA 15 FROM THE RECORD SEIZED DURING THE COURSE OF SEARCH, IT IS ABUNDANTLY CLEAR THAT PAYMENT FOR PURCHASE OF HOUSE PROPERTY 31, SHYAMLA HILLS, BHOPAL IN THE NAME OF SHRI ANUPAMCHOUKSEY , S/O SHRI JAI NARAINCHOUKSE Y HAS BEEN PARTLY MADE FROM THE ACCOUNT OF THE ASSESSEE TRUST. SHRI ANUPAM CHOUKSEY, WHO HAS SIGNED THE CHEQUE OF RS. 10 LACS FOR PURCHASING THE DEMAND DRAFT IN THE CAPACITY OF DIRECTOR, IS A SPECIFIED / INTERESTED PERSON COVERE D U/S 13(3) OF THE INCOME TAX ACT, 1961. THUS, IT CANNOT BE SAID THAT THE SURPLUS GENERATED BY THE SOCIETY IS USED FOR THE OBJECT OF THE SOCIETY. 7. SO FAR AS PAYMENT TO NEW VALLABHGRIHNIRMANSAHAKA RISAMITI IS CONCERNED, THE CIT NOTED THAT : NEW VALLABHGRIHNIRMANSHAKARISANSTHA MADE PAYMENT OF RS. 3,80,88,000/- TO SHRI ABDUL RASHEED AND SMT SAKEENA BEE PURCHASE OF LAND, WHICH WAS EARLIER DEPOSITED IN THE ACCOUNT OF NEW VALLABHGRIHNIRMANSA HKARISANSTHA FROM THE A/C NO. 63013769031 OF J K HOSPITAL AND MEDICAL RESEARC H CENTRE, A UNIT OF ASSESSEE TRUST. THUS, THE PAYMENT WAS INFACT MADE F ROM THE FUNDS OF THE ASSESSEE SOCIETY. NO LOAN OR ADVANCE HAS BEEN SHOWN TO NEW VALLABHGRI HNIRMANSAHAKARISAMITI IN THE BALANCE SHEET OF THE ASSESSEE TRUST AS ON 31 .03.2008. A SOCIETY MUST USE ITS FUNDS ONLY AND ONLY FOR FURTHERANCE OF ITS OBJE CTS. IN THIS PARTICULAR CASE, THIS REQUIREMENT HAS NOT BEEN FOLLOWED IN TRUE SPIRIT. A S SUCH THE PAYMENT MADE BY THE ASSESSEE TRUST TO NEW VALLABHGRIHNIRMANSAHAKARI SAMITIFOR PURCHASE OF LAND CANNOT BE SAID TO HAVE BEEN MADE FOR THE OBJECT OF THE TRUST. 8. SO FAR AS PAYMENT FOR PURCHASE OF HOTEL NEENAPAL ACE IS CONCERNED, THE CIT NOTED THAT : DURING THE COURSE OF SEARCH, DOCUMENTS RELATING TO INVESTMENT IN HOTEL NEENA PALACE MADE BY SHRI J N CHOUKSEY HAVE BEEN FOUND AN D SEIZED. ON THE BASIS OF THE DOCUMENTS, SHRI J NCHOUKSEY HAS ALSO SURRENDERE D UNDISCLOSED INCOME OF RS. 30,00,000/- ON ACCOUNT OF INVESTMENT IN THE SAI D HOTEL AND ALSO REFLECTED IT IN HIS RETURN OF INCOME. FOR THE PURPOSE OF INVESTMENT MADE BY SHRI J N CHOUKSEY IN HOTEL NEENA PALACE, THE FUNDS WERE WITHDRAWN FRO M THE ACCOUNTS OF THE ASSESSEE SOCIETY AND THE COLLEGE RUN BY IT BY ROUTI NG THE SAME THROUGH THE H.K. KALCHURI AND OTHERS 12AA 16 ACCOUNT OF M/S PRIYANKA BUILDERS, A PARTNERSHIP FIR M IN WHICH THE INTERESTED PERSONS ARE PARTNERS AND HAVE SUBSTANTIAL INTEREST. THESE FUNDS WERE ADVANCED WITHOUT ANY INTEREST AND WITHOUT TAKING ANY SECURITY. THE FUNDS OF THE SOCIETY HAVE NOT BEEN USED SOLELY FOR THE PURPOSE OF THE OBJECTS OF THE SOCIETY AND INSTEAD THESE HAVE BEEN USED FOR THE BENEFIT OF THE PERSONS COVERED UNDER SEC 13(3) OF THE INCOME TAX ACT, 1961 . THUS THE SURPLUS OF THE SOCIETY HAS NOT BEEN USED SOLELY FOR THE PURPOSES O F THE OBJECTS OF THE SOCIETY. 9. SO FAR AS PURCHASE OF JEWELLERY RS. 1,56,600/- I S CONCERNED, THE CIT NOTED THAT : DURING THE COURSE OF SEARCH AT THE PREMISES 31, SHY AMLA HILLS, BHOPAL CERTAIN DOCUMENTS AND LOOSE PAPERS HAVE BEEN FOUND AND SEIZ ED. PAGE 63 OF LPS 2/4 IS BILL NO. 536 DATED 15.08.2007 ISSUED BY M/S JOHARI SONS JEWELLERS, BHOPAL IN THE NAME OF H K KALCHURI EDUCATION TRUST. IT IS FURTHER NOTED THAT DURING APPELLATE PROCEEDIN GS, THE ENQUIRY WAS MADE BY THE AO FROM M/S JOHARI SONS (PROP. SHRI RAJKUMARJOHARI) REGARDING THE PURCHASE OF JEWELLERY BY THE ASSESSEE ON 15.08.2007 OF RS. 1566 00/- AND FOUND THAT THE ASSESSEE HAS ACTUALLY MADE PAYMENT OF RS. 500000/- VIDE CHEQUE NO. 135378/- DRAWN ON STATE BANK OF INDORE, BARKHEDI, BHOPAL TO MR. RAJ KUMAR JOHARIPROP. M/S JOHARISONS, LAKHERAPURA, BHOPAL AND PURCHASED T HE TOTAL JEWELLERY OF RS. 5,00,000/- FROM HIM. IT WOULD BE RELEVANT TO REPROD UCE THE COPY OF ACCOUNT OF THE ASSESSEE H K KALCHURI EDUCATION TRUST, BHOPAL FOR T HE PERIOD FROM 13.04.2005 TO 17.02.2010 AS APPEARING IN THE BOOKS OF M/S JOHARI SONS, BHOPAL AS SUBMITTED BY HIM AS UNDER: COPY OF ACCOUNT OF H.K. KALCHURI EDUCATION TRUST B HOPAL FOR THE PERIOD FROM 13.04.2005 TO 17.02.2010 DATE PARTICULARS DR. CR. 13.04.2005 BY CH.NO 135378 DRAWN ON SBI BARKHERI BRANCH 500000.00 15.08.2007 TO BILL NO. 536 156600.00 20.01.2009 TO BILL NO. 708 73400.00 20.01.2009 TO BILL NO. 128 42750.00 27.01.2010 TO BILL NO. 710 49000.00 12 .02.2010 TO BILL NO. 961 178250.00 TOTAL 500000.00 500000.00 H.K. KALCHURI AND OTHERS 12AA 17 FOR: JOHARI SONS -SD~ RAJ KUMAR JOHARIPROPREITOR M/S JOHARI SONS HAS ALSO ENCLOSED COPY OF CHEQUE NO . 135378 OF STATE BANK OF INDORE, BARKHERIBRANCH, BHOPAL DATED 13.04.2005 ISS UED BY H K KALCHURI EDUCATION TRUST, BHOPAL IN FAVOUR OF MR. RAJ KUMAR JOHRI. FROM THE ABOVE, IT IS EVIDENTLY CLEAR THAT ASSESSEE HAS MADE PAYMENT OF RS. 500000/- TO M/SJOHARISONS FOR PURCHASE OF JEWELLERY FOR THE BENEFIT OF FAMILY MEMBERS OF INTERESTED PERSONS. IT IS ALSO PERTINENT TO NOTE THAT THE AMOUNT OF RS. 500000/- GIVEN BY THE ASSESSEE ON 13.04.2005 BY CHE QUE TO M/S JOHARI SONS, WHICH REMAINED ADVANCE WITH M/S JOHARI SONS AS ON 3 1.03.2006, BUT THIS AMOUNT OF RS. 500000/- GIVEN AS ADVANCE TO M/S JOHARI SONS IS NOT APPEARING IN THE BALANCE SHEET AS LOANS AND ADVANCES . THIS CLEARL Y SHOWS THAT THE ASSESSEE MUST HAVE BOOKED THE AMOUNT OF RS. 500000/- PAID BY CHEQUE AGAINST SOME OTHER EXPENSES IN ORDER TO SIPHON OFF THE FUNDS OF THE ASSESSEE FOR THE BENEFITS OF INTERESTED PERSONS. IT IS ALSO CLEAR FROM THE ABOVE COPY OF ACCOUNT THAT JEWELLERY HAS BEEN PURCHASED FROM M/S JOHARI SONS ON 13.04.20 05 HAS BEEN UTILIZED FOR THE BENEFITS OF INTERESTED PERSONS, IT CAN BE SAID THAT THE SURPLUS / INCOME OF THE ASSESSEE SOCIETY IS NOT UTILIZED FOR THE OBJECTS OF THE SOCIETY. 10. SO FAR AS FILING OF TWO DIFFERENT SET OF AUDITE D ACCOUNTS BEFORE DIFFERENT AUTHORITIES AS ALSO TWO DIFFERENT ACKNOWL EDGMENTS OF RETURN OF INCOME FOR THE SAME ASSESSMENT YEAR IS CONCERNE D, THE CIT NOTED THAT : THE 'ADMISSION AND FEE REGULATORY COMMISSION' HAVE FURNISHED THE COPY OF AUDITED ACCOUNTS FOR F.Y. 2009- 10 SUBMITTED WITH T HEM BY THE ASSESSEE TRUST. ON COMPARISON OF THE SAME WITH THE AUDITED ACCOUNT FURNISHED WITH THE RETURN OF INCOME OR DURING THE ASSESSMENT PROCEEDINGS, IT IS SEEN THAT THERE IS WIDE MISMATCH BETWEEN THE FIGURE OF ABOVE TWO SET OF AUD ITED ACCOUNTS. THE DIFFERENCE IN MAJOR HEADS OF ACCOUNTS IS TABULATED BELOW: PARTICULARS AS PER AUDITED ACCOUNTS FILED BEFORE THE DEPARTMENT [RS. AS PER AUDITED ACCOUNTS FILED BEFORE THE FEE REGULATORY COMMISSION RS. DIFFERENCE [RS.] H.K. KALCHURI AND OTHERS 12AA 18 INCOME COLLEGE AND OTHER FEE 2,01,24,895 92,97,859 1,08,27 ,036 TUITION FEE 46,22,99,011 37,51,92,202 8,71,06,809 OTHER RECEIPTS 3,29,42,078 7,25,18,478 (-) 3,95,76, 400 TOTAL 51,53,65,984 45,70,08,539 5,83,57,445 EXPENDITURE SALARY TO STAFF 16,24,22,032 26,74,40,157 (->,10,50 ,18,125 OTHER EXPENSES 25,19,14,371 98,59,53,306 (-) ,73,40 ,38,935 TOTAL 41,43,36,403 1,25,33,93,463 ( - ) 83,90,57,060 SURPLUS/DEFICIT 10,10,29,581 ( - ) 79,63,84,924 ( - ) 89,74,14,505 A. THE ASSESSEE TRUST HAS DELIBERATELY FILED TWO DI FFERENT SET OF AUDITED ACCOUNTS BEFORE TWO DIFFERENT AUTHORITIES. B. AUDITED ACCOUNTS FILED BEFORE ADMISSION AND FEE REGULATORY COMMISSION HAS DEFICIT RS.796384924 /- WHEREAS AUDITED ACCOUNTS FILED BEFORE THE DEPARTMENT HAS A SURPLUS OF RS. 101029581 /-. C. FILING OF TWO DIFFERENT SET OF AUDITED ACCOUNTS BEFORE TWO DIFFERENT AUTHORITIES FOR A PARTICULAR FINANCIAL YEAR SHOWS T HAT THE ACCOUNTS OF THE TRUST ARE NOT RELIABLE AND THE ASSESSEE TRUST IS NOT FUNCTION ING SOLELY FOR THE PURPOSE OF EDUCATION BUT FOR THE PURPOSE OF PROFIT. THUS, THE ASSESSEE TRUST DOES NOT EXIST FOR THE OBJ ECTS FOR WHICH IT WAS CREATED BUT EXISTS FOR THE BENEFITS OF THE PERSONS SPECIFI ED U / S. 13(3) OF THE ACT. 11. SO FAR AS PAYMENT FOR PURCHASE OF COLLEGE / SOC IETIES FOR BENEFITS OF TRUSTEES AGREEMENT TO PURCHASE COLLEGES / SOCIET IES FOR RS. 17 CRORES IS CONCERNED, THE CIT NOTED THAT : FROM THE RESIDENCE OF JAI NARAINCHOUKSEYA SIGNED AG REEMENT ON THE LETTERHEAD OF CONGRESS CHUNAVABHIYANSAMITIDATED 24.06.2008 BET WEEN SHRI T.S. KEERAND SHRI J N CHOUKSEY HAS BEEN SEIZED. IT IS CLEARLY ME NTIONED THAT CONTROL OF TWO SOCIETIES, ALONG WITH PROPERTIES, SHALL BE HANDED O VER TO SHRI J N CHOUKSEY FOR A TOTAL CONSIDERATION OF RS. 17 CRORES, IT IS FURTHER MENTIONED IN THE AGREEMENT THAT RS. 1 CRORE HAS ALREADY BEEN PAID AND RS. 3 CRORES WERE TO BE PAID BY 26.06.2008 AND REMAINING RS. 13 CRORES WERE TO BE P AID BY 15.08.2008. FROM THE MATERIAL AVAILABLE ON RECORD, IT IS SEEN T HAT PART OF THE PAYMENT OF PURCHASE CONSIDERATION OF RS. 17 CRORES FOR PURCHAS E OF SOCIETIES HAVE MADE BY H.K. KALCHURI AND OTHERS 12AA 19 H K KALCHURI EDUCATION TRUST, JAI NARAINSHIKSHASAMI TI, RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY AND RISHIRAJ MEMORIAL EDUCATION AND WELFARE SOCIETY BEING SOCIETIES CONTROLLED BY CHOUKSEY GROUP. THUS IN ORD ER TO ESTABLISH CONTROL OF THE FAMILY MEMBERS OF CHOUKSEY GROUP OVER BOTH THE SOCI ETIES/ COLLEGES NAMELY RIT I.E. RISHIRAJINSTITUTE OF TECHNOLOGY RUN BY RISHIRA JSINGH MEMORIAL WELFARE SOCIETY AND RDC I.E. RISHIRAJDENTAL COLLEGE RUN BY RISHIRAJ MEMORIAL EDUCATION AND WELFARE SOCIETY, PAYMENTS HAVE BEEN MADE BY VARIOUS SOCIETIES OF CHOUKSEY GROUP INCLUDING THE ASSESSEE SOCIETY. IT IS THEREFO RE SEEN THAT THESE PAYMENTS HAVE BEEN MADE FOR THE BENEFIT OF INDIVIDUAL MEMBER S OF THE CHOUKSEY GROUP SO THAT THEY CAN ACQUIRE CONTROL OVER THE PROPERTIES O F THE TWO SOCIETIES / COLLEGES. THE VERY FACT THAT THE PARTIES TO THE SAID AGREEMEN T INTO AN AGREEMENT FOR TRANSFER OF RIGHT AND PROPERTIES OF A CHARITABLE IN STITUTION FOR A SUM OF RS. 17 CRORES SHOWN THAT THE SAID SOCIETIES AND THE PARTIE S ENTERING INTO THE AGREEMENT WERE NOT EXISTING FOR ANY CHARITABLE ACTIVITIES BUT WERE EXISTING SOLELY FOR THE PURPOSE OF EARNING PROFITS THEREFROM. 12. THE CIT ALSO NOTED IT IS ALSO CONTENDED THAT VIOLA TION OF RELEVANT PROVISION OF SECTION 11/13 FOR A PARTICULAR YEAR CA N BE APPLIED TO THAT YEAR ONLY FOR WITHDRAWAL/ DENIAL OF EXEMPTIONS U/S 11. T HE SAID CLAIM OF THE ASSESSEE IS NOT TENABLE. ONCE IT IS ESTABLISH BEYON D DOUBT THAT THE ACTIVATES OF THE TRUST ARE NOT CHARITABLE IN NATURE AS ENVISAGED IN SECTION 2(15) OF THE ACT AND THE EDUCATIONAL INSTITUTIONS A RE RUN FOR THE SOLE PURPOSE OF EARNING AND SHARING PROFITS, IT BECOMES APPLICAB LE TO ALL YEARS. FURTHER, THE APPEALS OF THE ASSESSEE HAVE BEEN DECIDED BY TH E LD. CIT(A)-I, BHOPAL VIDE ORDER DATED 13/08/2013 IN APPEAL NOS: CIT (A)- 1 /BPL/IT-112 TO 118/ 12-13. THE APPEAL ON THE ISSUE OF EXEMPTION U/S 11/ 12 OF THE ACT HAS BEEN DISMISSED IN RESPECT OF ALL THE YEARS INVOLVED I.E. A.Y. 2004-05 TO A.Y. 2010.11. H.K. KALCHURI AND OTHERS 12AA 20 IN VIEW OF THE FACTS DISCUSSED ABOVE, THE CIT WAS O F THE CONSIDERED OPINION THAT THE ACTIVITIES OF THE ASSESSEE TRUST A RE NOT FOR CHARITABLE PURPOSES AS ENVISAGED IN SECTION 2(15) OF THE ACT A ND THE EDUCATIONAL INSTITUTIONS ARC RUN FOR THE SOLE PURPOSE OF EARNIN G AND SHARING PROFITS. ACCORDINGLY, THE REGISTRATION GRANTED TO THE ASSESS EE TRUST U/S 12A IS HEREBY WITHDRAWN FROM THE EFFECTIVE DATE OF GRANTIN G. AGGRIEVED WITH THE ACTION OF THE LD. CIT, THE ASSES SEE IS BEFORE US. BEFORE US, THE LD. AR OF THE ASSESSEE HAS MADE ORAL AS WELL AS WRITTEN SUBMISSIONS AS UNDER: GENESIS OF SEC. 12AA(3) ENABLING POWER TO LD. CIT F OR CANCELLATION OF REGISTRATION : THE GENESIS OF PROVISIONS REGARDING REGISTRATION AN D CANCELLATION OF TRUST AND INSTITUTIONS ENSHRINED IN THE INCOME TAX ACT ARE AS UNDER : I. THE HEADING OF SECTION 12A ' CONDITIONS FOR APPLICABILITY OF SECTIONS 11 AND 12' WAS SUBSTITUTED WITH EFFECT FROM 01.06-2007 IN PLA CE OF PREVIOUS TITLE ' CONDITIONS AS TO REGISTRATION OF THE TRUSTS ETC. . IT MEANS THAT PRIOR TO 01.06.2007, THIS SECTION ITSELF PROVIDED CONDITIONS REGARDING R EGISTRATION OF TRUST ETC. II. IT IS NOTED HERE THAT WITH THE SUBSTITUTION OF THE PRESENT TITLE, THIS SECTION NO LONGER PROVIDES FOR REGISTRATION OF TRUST ETC. A SPECIAL PROVISION HAS BEEN ENACTED IN SECTION 12AA PROVIDING FOR PROCEDURE FOR REGISTRATION OF TRUST ETC., WITH EFFECT FROM 01.04.1997. IT IS ALSO NOTED THAT SECTI ON 12A WAS INSERTED IN THE STATUTE BOOK BY THE FINANCE ACT, 1972 WITH EFFECT F ROM 01.04.1973. IT WAS OMITTED AND WAS AGAIN RESTORED WITH EFFECT FROM 01.04.1989. SECTION 12A, AS IT STOOD AT H.K. KALCHURI AND OTHERS 12AA 21 THE RELEVANT TIME WHEN IT PROVIDED FOR REGISTRATION OF TRUST, NOWHERE PROVIDED FOR CANCELLATION OF THE REGISTRATION ONCE GRANTED. IT I S ALSO PERTINENT TO NOTE THAT THE WORDS ' SUCH TRUST OR INSTITUTION IS REGISTERED UND ER SECTION 12AA' WERE ALSO SUBSTITUTED IN THIS SECTION WITH EFFECT FROM 01.04. 1997. IN FACT, THIS SECTION EVEN NOW NOWHERE STIPULATES ABOUT THE CANCELLATION OR WI THDRAWAL OF THE REGISTRATION, ONCE GRANTED UNDER THE SAID SECTION. III. IT IS ONLY UNDER SECTION 12AA, WHICH CAME IN T HE STATUTE BOOK WITH EFFECT FROM 01.04.1997 THAT A FRESH PROCEDURE FOR REGISTRA TION OF THE TRUST OR INSTITUTION IS PRESCRIBED. EVEN UNDER THIS SECTION 12AA, THERE WAS NO PROVISION FOR CANCELLATION OF REGISTRATION ONCE GRANTED TILL THE ENACTMENT OF SUB-SECTION (3) WITH EFFECT FROM 1-10-2004. THERE IS NO DISPUTE WITH REGARD TO THIS FACT THAT THE PROVISION REGARDING CANCELLATION OF REGISTRATION CAME TO BE I NTRODUCED FOR THE FIRST TIME BY VIRTUE OF SUB-SECTION (3) IN SECTION 12AA WITH EFFE CT FROM 1-10-2004. THIS SUB- SECTION (3) PROVIDED THAT WHEN A TRUST OR AN INSTIT UTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AN D SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SU CH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN O RDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTITUTION. FROM THE CONJOINT READING OF SUB-SECTION (1) CLAUSE (B) AND SUB-SECTION (3) OF SECTION 12AA, IT WOULD BE SEEN THAT THE CANCELLATION OF THE REGISTRATION WAS INITIALLY PROV IDED ONLY WHERE THE REGISTRATION WAS GRANTED UNDER CLAUSE (B) OF SUB-SECTION (1). BU T IT DID NOT CONTAIN ENABLINGPROVISION FOR CANCELLATION WHERE THE REGIST RATION WAS OBTAINED AT ANY TIME UNDER OLD SECTION 12A. IV. THIS POWER OF CANCELLATION OF REGISTRATION OBTA INED UNDER OLD SECTION 12A CAME TO BE INCORPORATED ONLY BY WAY OF AMENDMENT IN TRODUCED BY THE FINANCE ACT, 2010 WITH EFFECT FROM 01.06.2010. V. THUS, IT IS AMPLY CLEAR FROM SUB-SECTION (3) THA T THE POWER TO CANCEL THE REGISTRATION ONCE GRANTED WAS ONLY CONFINED TO THE REGISTRATION GRANTED UNDER CLAUSE (B) OF SUB-SECTION (1) OF SECTION 12AA BEFOR E 01.06.2010. ONLY WITH EFFECT FROM 01.06.2010, THE STATUTORY POWER VESTS W ITH THE COMMISSIONER H.K. KALCHURI AND OTHERS 12AA 22 EVEN TO CANCEL THE REGISTRATION GRANTED UNDER ANY O F THE CLAUSES OF SUB- SECTION (1) OF SECTION 12A. VI. IT IS VERY IMPORTANT TO NOTE THAT ON THE DATE OF SH OW CAUSE NOTICE DTD. 15.2.2013 (AND EVEN ON THE DATE OF CANCELLATIO N ORDER DTD. 23.4.2014) , THERE WERE ONLY TWO STATUTORY CONDITIONS OR CIRCUMS TANCES POSTULATED UNDER 12AA(3) LEADING TO CANCELLATION OF REGISTRATI ON THAT- A) ACTIVITIES OF THE INSTITUTION ARE NOT GENUINE OR , B) ITS ACTIVITIES ARE NOT IN ACCORDANCE WITH ITS OB JECTS. VII. THE THIRD STATUTORY CONDITION FOR CANCELLATION ON VIOLATION OF PROVISIONS OF SEC. 13 WAS INCORPORATED SUBSEQUENTLY BY WAY OF NEW SUB SEC. (4) OF SEC. 12AA MUCH LATER ON THE STATUTE BOOK ONLY W.E.F. 1.10.2014 BY WAY OF AMENDMENT BY FINANCE ACT, 2014. THIS THIRD CONDITION WAS WORDED AS UNDER : WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECTION (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLA USE (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 1 996)] AND SUBSEQUENTLY IT IS NOTICED THAT THE ACTIVITIES OF THE TRUST OR THE INS TITUTION ARE BEING CARRIED OUT IN A MANNER THAT THE PROVISIONS OF SECTION 11 AND 12 DO NOT APPLY TO EXCLUDE EITHER WHOLE OR ANY PART OF INCOME OF SUCH TRUST OR INSTIT UTION DUE TO OPERATION OF SUB- SECTION (1) OF SECTION 13, THEN, THE PRINCIPAL COMM ISSIONER OR THE COMMISSIONER MAY BY AN ORDER IN WRITING CANCEL THE REGISTRATION OF SUCH TRUST OR INSTITUTION. PROVIDED THAT THE REGISTRATION SHALL NOT BE CANCELLED UNDER THIS SUB SECTION, IF THE TRUST OR INSTITUTION PROVE THAT THERE WAS A REASONA BLE CAUSE FOR THE ACTIVITIES TO BE CARRIED OUT IN THE SAID MANNER. VIII. THUS, ON THE DATE OF SHOW CAUSE NOTICE DTD. 15.2.2013 ( A ND FOR THAT MATTER EVEN ON THE DATE OF CANCELLATION ORDER DTD. 23.4.2014), FOR EXERCISING POWER BY THE LD. CIT OF CANCELLATION UNDER SECTION 12AA(3), ONLY THE FOLLOWING STATUTORY CONDITIONS WERE REQUIRED TO BE SATISFIED : A. THAT THE TRUST OR SOCIETY HAS ALREADY BEEN GRANT ED REGISTRATION UNDER SECTION 12AA(1)(B) OF THE ACT, OR B. W.E.F. 01.06.2010 - REGISTRATION HAS BEEN GRANTED AT ANY TIME UNDER SECTION 12A AS STOOD BEFORE ITS AMENDMENT BY THE (F INANCE NO.2) ACT 1996; AND H.K. KALCHURI AND OTHERS 12AA 23 C. THE CIT SUBSEQUENTLY IS SATISFIED THAT : ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GE NUINE, OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THEOB JECTS OF THE TRUST OR INSTITUTION. IX. THE LEGISLATIVE INTENT OF INSERTING THIS THIRD STATUTORY CONDITION BY WAY OF INSERTION OF NEW SUB-SECTION (4) IN SEC. 12AA, EMPO WERING CIT TO CANCEL REGISTRATION EVEN FOR VIOLATION OF PROVISIONS OF SE C. 13 W.E.F. 1.10.2014, CAN WELL BE UNDERSTOOD FROM CBDT CIRCULAR NO. 01/2015 DATED 21.1.2015 WHICH READS AS UNDER : CIRCULAR NO. 01/2015 F. NO. 142/13/2014-TPL GOVERN MENT OF MINISTRY OF FINANCE DEPARTMENT OF REVENUE (CENTRAL BOARD OF DIR ECT TAXES) DATED, THE 21ST JANUARY, 2015 9. CANCELLATION OF REGISTRATION OF THE TRUST OR INS TITUTION IN CERTAIN CASES 9.1. THE PROVISIONS OF SECTION 12AA OF THE INCOME-T AX ACT, BEFORE AMENDMENT BY THE ACT, PROVIDED THAT THE REGISTRATION ONCE GRANTED TO A TRUST OR INSTITUTION SHALL REMAIN IN FORCE UNTIL IT IS CANCELLED BY THE COMMISSIONER. TH E COMMISSIONER COULD CANCEL THE REGISTRATION UNDER TWO CIRCUMSTANCES: (A) THE ACTIV ITIES OF A TRUST OR INSTITUTION ARE NOT GENUINE, OR; (B) THE ACTIVITIES ARE NOT BEING CARRI ED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. 9.1.1 THE COMMISSIONER WAS EMPOWERED TO CANCEL THE REGISTRATION ONLY IF EITHER OR BOTH OF THE ABOVE CONDITIONS WERE SATISFIED, AND NO T OTHERWISE. 9.2 THERE HAVE BEEN CASES WHERE TRUSTS, PARTICULARL Y IN THE YEAR IN WHICH THEY HAD SUBSTANTIAL INCOME CLAIMED TO BE EXEMPT UNDER OTHER PROVISIONS OF THE INCOME-TAX ACT THOUGH THEY DELIBERATELY VIOLATED THE PROVISIONS OF SECTION 13 OF THE SAID ACT BY INVESTING IN MODES OTHER THAT SPECIFIED MODES, ETC. SIMILARLY, THERE HAVE BEEN CASES WHERE THE INCOME IS NOT PROPERLY APPLIED FOR CHARIT ABLE PURPOSES OR IS DIVERTED FOR THE BENEFIT OF CERTAIN INTERESTED PERSONS. HOWEVER, DUE TO RESTRICTIVE INTERPRETATION OF THE POWERS OF THE COMMISSIONER UNDER THE SAID SECTION 1 2AA, REGISTRATION OF SUCH TRUSTS OR INSTITUTIONS CONTINUED TO BE IN FORCE AND THESE INSTITUTIONS CONTINUED TO ENJOY THE BENEFICIAL REGIME OF EXEMPTION. 9.3 WHEREAS UNDER SECTION 10(23C) OF THE INCOME-TAX ACT, WHICH ALLOWS SIMILAR BENEFITS OF EXEMPTION TO A FUND, INSTITUTION, UNIVE RSITY ETC, THE POWER OF WITHDRAWAL OF H.K. KALCHURI AND OTHERS 12AA 24 APPROVAL IS VESTED WITH THE PRESCRIBED AUTHORITY IF SUCH AUTHORITY IS SATISFIED THAT SUCH ENTITY HAS NOT APPLIED INCOME OR MADE INVESTMENT IN ACCORDANCE WITH PROVISIONS OF SAID SECTION 10(23C) OR THE ACTIVITIES OF SUCH ENTITY AR E NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH ALL OR ANY OF THE CONDITIONS SUBJECT TO WHICH IT WAS APPROVED. 9.4 THEREFORE, IN ORDER TO RATIONALIZE THE PROVISIO NS RELATING TO CANCELLATION OF REGISTRATION OF A TRUST, SECTION 12AA OF THE INCOME -TAX ACT HAS BEEN AMENDED TO PROVIDE THAT WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION, AND SUBSEQUENTLY IT IS NOTICED THAT ITS ACTIVITIES ARE BEING CARRIED OUT I N SUCH A MANNER THAT, (I) ITS INCOME DOES NOT ENURE FOR THE BENEFIT OF THE PUBLIC; (II) IT IS FOR BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE (IN CASE IT IS ESTABLISHED AFTER COMMENCEMENT OF THE INCOME-TAX ACT, 1961); (III) ANY INCOME OR PROPERTY OF THE TRUST IS USED OR APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF SPECIFIED PERSONS LIKE AUTHOR OF TRU ST, TRUSTEES ETC.; OR (IV) ITS FUNDS ARE NOT INVESTED IN SPECIFIED MODES, THEN THE PRINCIPAL COM MISSIONER OR THE COMMISSIONER MAY CANCEL THE REGISTRATION, IF SUCH TRUST OR INSTITUTI ON DOES NOT PROVE THAT THERE WAS A REASONABLE CAUSE FOR THE ACTIVITIES TO BE CARRIED O UT IN THE AFORESAID MANNER. 9.5 APPLICABILITY: - THIS AMENDMENT TAKES EFFECT FR OM 1ST OCTOBER, 2014. X. FROM THE ABOVE CBDT CIRCULAR, IT IS AMPLY CLEAR THAT THE DEPTT. HAS ADMITTED THIS LEGAL POSITION THAT UP TO 30.9.2014, THERE WAS NO STATUTORY ENABLING POWER U/S12AA(3) WITH CIT TO CANCEL REGISTRATION ON THE CONDITION OF VIOLATION OF PROVISIONS OF SEC. 13 AND HENCE THERE WAS NEED TO P ROMULGATE SUCH CONDITION WHICH CAME TO BE SUBSEQUENTLY INCORPORATED W.E.F 1. 10.2014 ONLY BY WAY OF INSERTION OF NEW SUB-SECTION (4) IN SEC. 12AA. CANCELLATION ORDER TO BE QUASHED, AS POWER OF CANCE LLATION FOR REGISTRATION GRANTED UNDER OLD SEC. 12A ENACTED ONLY FROM A.Y. 2 011-12AND SUBSEQUENT YEARS : THE POWER TO CANCEL REGISTRATION IN RESPECT OF RE GISTRATION OBTAINED UNDER OLD SEC. 12A CAME TO BE ENACTED IN LAW, AS AFORESAID, O NLY ON 1.6.2010 EFFECTIVE FROM A.Y. 2011-12 AND SUBSEQUENT YEARS AND HENCE CA NCELLATION OF REGISTRATION MADE BY CIT W.E.F. 13-1-1999 WAS UNLAWFUL. CBDT CIR CULAR NO. 01/2011, DATED 6TH APRIL, 2011 CLEARLY EXPLAINS THE SAME AS UNDER : H.K. KALCHURI AND OTHERS 12AA 25 7. CANCELLATION OF REGISTRATION OBTAINED UNDER SECT ION 12A. 7.1 SECTION 12AA PROVIDES THE PROCEDURE RELATING TO REGISTRATION OF A TRUST OR INSTITUTION ENGAGED IN CHARITABLE ACTIVITIES. SECTI ON 12AA(3) PREVIOUSLY PROVIDED THAT IF THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE FOUND TO BE NON-GENUINE OR ITS ACTIVITIES ARE NOT IN ACCORDANCE WITH THE OBJECTS FOR WHICH SUCH TRUST OR INSTITUTION WAS ESTABLISHED, THE REGISTRATION GRANTED UNDER SECTION 12AA CAN BE CANC ELLED BY THE COMMISSIONER AFTER PROVIDING THE TRUST OR INSTITUTION AN OPPORTUNITY O F BEING HEARD. 7.2 THE POWER OF CANCELLATION OF REGISTRATION IS IN HERENT AND FLOWS FROM THE AUTHORITY OF GRANTING REGISTRATION. HOWEVER, JUDICIAL RULINGS IN SOME CASES HAVE HELD THAT THE COMMISSIONER DOES NOT HAVE THE POWER TO CANCEL THE REGISTRATION WHICH WAS OBTAINED EARLIER BY ANY TRUST OR INSTITUTION UNDER PROVISION S OF SECTION 12A AS IT IS NOT SPECIFICALLY MENTIONED IN SECTION 12AA. 7.3 THEREFORE, SECTION 12AA HAS BEEN AMENDED TO PRO VIDE THAT THE COMMISSIONER CAN ALSO CANCEL THE REGISTRATION OBTAINED UNDER SEC TION 12A AS IT STOOD BEFORE AMENDMENT BY FINANCE (NO.2) ACT, 1996. 7.4 APPLICABILITY - THIS AMENDMENT HAS BEEN MADE APPLICABLE WITH EFFECT FROM 1ST JUNE, 2010 AND SHALL ACCORDINGLY APPLY FOR ASSE SSMENT YEAR 2011-12 AND SUBSEQUENT ASSESSMENT YEARS . IT IS NEEDLESS TO ARGUE THAT CIRCULAR IS BINDING ON CIT. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS WHEREIN IT WAS UNANIMOUSLY HELD THAT REGISTRATION COULD BE CANCELLED ONLY FROM A.Y. 2011-12 AND SUBSEQUENT YEARS IN RESPECT OF REGISTRATION OBTAINED UNDER OLD SEC. 12A AND ANY ORDER CONTAINING CANCELLATION PRIOR TO THAT DATE IS LIABLE TO BE QUASHED : BEFORE 01.06.2010 THIS SECTION 12AA(3) NOWHERE EMPO WERS THE CIT TO CANCEL OR WITHDRAW REGISTRATION UNDER SECTION 12A OF THE ACT. IN ABSENCE OF SUCH POWER, THE REGISTRATION GRANTED UNDER SECTION 12A CANNOT BE WI THDRAWN OR CANCELLED BEFORE 1.6.2010. THE POWER OF CANCELLATION OF REGISTRATION UNDER SECTION 12A OF THE ACT CAME TO BE INCORPORATED BY WAY OF AMENDMENT INTRODU CED BY FINANCE ACT 2010 W.E.F. 01.06.2010. THE C.B.D.T. CIRCULAR NO.1/2011 DATED 06.04.2011 EX PLAINS THAT THIS AMENDMENT WILL APPLY FOR A.Y. 2011-12 AND SUBSEQUENT YEARS. WHEREAS, IN THE CASE UNDER CONSIDERATION, THE CIT C ANCELLED REGISTRATION H.K. KALCHURI AND OTHERS 12AA 26 UNDER SECTION 12A OF THE ACT FOR A.Y. 2009-10 WHICH IS NOT IN ACCORDANCE WITH THE LAW. THIS VIEW IS FORTIFIED BY THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF DIT(E) V. MOOL CHAND KHAIRATI RAM TRUST ( SUPRA ) AND ORDER OF I.T.A.T. IN THE CASE OF N.H. KAPADIA EDUCATION TRUST ( SUPRA ) WHEREIN THE I.T.A.T., AHMADABAD HAS FOLLOWED THE JUDGMENT OF HON'BLE DELH I HIGH COURT. (PARA 20) NOW WE COME TO THE JUDGMENTS RELIED UPON BY THE REV ENUE. THE CIT & LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON A JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF SINHAGAD TECHNICAL EDUCATION SOCIETY V. CIT [2012] 206 TAXMAN 314 THE CIT WAS OF THE VIEW THAT AS PER THE SAID JUDGM ENT, THE CIT CAN CANCEL REGISTRATION UNDER SECTION 12A/12AA OF THE A CT EVEN FOR EARLIER YEARS. THE CIT IS NOT FULLY CORRECT IN READING THE SAID JUDGME NT, FIRSTLY THE FACTS AND ISSUE BEFORE THE COURT WAS WHETHER POWERS GRANTED BY CIT UNDER SECTION 12AA(3) OF THE ACT WAS VALID AS PER THE CONSTITUTION. THE COURT HELD THAT POWER UNDER SECTION 12AA(3) CAN BE EXERCISED BY THE COMMISSIONE R IN RESPECT OF TRUSTS REGISTERED PRIOR TO 01.06.2010. NOWHERE HAS IT BEEN HELD BY THE COURT THAT SAID POWER IS APPLICABLE TO EARLIER YEARS/ASSESSMEN T YEARS . THE COURT HAS ALSO HELD THAT AMENDMENT DOES NOT TAKE AWAY ANY VES TED ARIGHT NOR DOES IT CREATE NEW OBLIGATION IN RESPECT OF PAST ACTIONS. T HE COURT DID NOT EXPRESS THEIR OPINION ON MERIT OF THE CASE. THUS, WE FIND THAT TH E CIT WRONGLY APPLIED THE SAID JUDGMENT TO THE FACTS OF THE CASE UNDER CONSIDERATI ON.(PARA 21) AGRA DEVELOPMENT AUTHORITY V. CIT (2013) 31 TAXMANN . COM 40 (AGRA ITAT) ABOVE DECISIONHAS BEEN FOLLOWED IN SHARDA EDUCATION TRUST V. CIT (2014) 43 TAXMANN.COM 95 (AGRA ITAT). IN TERMS OF CIRCULAR NO. 1/2011 DATED 6.4.2011, REG ISTRATION ALREADY GRANTED U/S 12A CAN BE CANCELLED ONLY FOR A.Y. 2011-12 AND SUBS EQUENT YEARS ; IN INSTANT CASE, ASSESSMENT YEAR INVOLVE BEING 2009-10, AO COU LD NOT CANCEL REGISTRATION ALREADY GRANTED TO ASSESSEE TRUST BY TAKING OF VIEW THAT ACTIVITIES OF TRUST WERE HIT BY PROVISO OF SEC. 2(15). PRITHVIRAJ KAPOOR MEMORIAL TRUST V. CIT (2014) 43 T AXMANN.COM 20 (MUM. ITAT) ALSO RELIED ON : MOOL CHAND KHAIRATI RAM (2011) 339 ITR 622 (DELHI H C) AJIT EDUCATION TRUST V. CIT (2010) 42 SOT 415 (AHD. ITAT) DIT V. N.H. KAPADIA EDUCATION TRUST (2012) 136 ITD 111 (AHD.ITAT) CIT VS. MANAV SEWA SANSTHAN (2011) 336 ITR 250 (ALL .HC) H.K. KALCHURI AND OTHERS 12AA 27 2. ON MERITS WHETHER ACTIVITIES OF THE ASSESSEE ARE GENUINE OR N OT OR WHETHER THE SAME ARE CARRIED OUT IN ACCORDANCE WITH ITS OBJECTS OR N OT: 2.1 WITHOUT PREJUDICE TO OUR LEGAL OBJECTIONS WHIC H JUSTIFIES QUASHING OF THE NOTICE AND RESULTANT ORDER, IT IS SUBMITTED THAT TH E SUBJECT CANCELLATION ORDER IS ALSO UNLAWFUL ON THE MERITS OF THE CASE. OUR SUBMIS SIONS IN THIS REGARD ARE AS UNDER. 2.2 THE LD. CIT HAS CANCELLED REGISTRATION GRANTED U/S 12A BY DRAWING VARIOUS INFERENCES AND BY MAKING VARIOUS OBSERVATIONS. THES E INFERENCES AND OBSERVATIONS ARE UNFOUNDED, UNCORBORRATED AND UNSUS TAINABLE. HOWEVER, BEFORE PROCEEDING FURTHER, IT WOULD BE RELEVANT FOR US TO REPRODUCE SEC. 12AA(3) WHICH GIVES POWER TO THE CIT TO WITHDRAW THE REGISTRATION . SEC. 12AA(3), AT THE TIME OF INVOCATION OF JURISDICTION, READS AS UNDER : (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUC-SECTION (1) [OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO.2) ACT, 1996 (33 OF 1996] AND SUBSEQUENTLY THE [PRINCIPAL COMMISSIONER OR] COMMIS SIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GEN UINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE, HE SHALL PASS AND ORDER IN WRITING CANCELLING THE REGI STRATION OF SUCH TRUST OR INSTITUTION. PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASS ED UNLESS SUCH TRUST OR INSTITUTIONS HAS BEEN GIVEN A REASONABLE OPPORTU NITY OF BEING HEARD. 2.3 FROM THE PLAIN READING OF THIS SECTION, IT IS TO BE NOTED THAT REGISTRATIONCOULD BE WITHDRAWN BY CIT, AS PER THE L AW THEN APPLICABLE, WHEN HE IS SATISFIED THAT THE ACTIVITIES OF THE INSTITUTION AR E NOT GENUINE OR ITS ACTIVITIES ARE NOT IN ACCORDANCE WITH ITS OBJECTS. H.K. KALCHURI AND OTHERS 12AA 28 2.4 THUS, THE LD. CIT WAS OBLIGED TO ENQUIRE ONLY A BOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND WHET HER ITS ACTIVITIES ARE BEING CARRIED OUT IN ACCORDANCE WITH THOSE OBJECTS. WHAT IS REQUI RED TO BE CONSIDERED FOR GRANT OF REGISTRATION U/S 12AA WAS TO BE AGAIN CONSIDERED AT THE TIME OF WITHDRAWAL OF REGISTRATION. HOWEVER, OBJECTS PER SE CANNOT BE RE -EXAMINED UNDER THE PROVISIONS OF SUB-SEC. (3) OF SEC. 12AA. 2.5 IN THE CASE IN HAND, THERE IS NO DISPUTE ABOUT THE OBJECTS OF THE INSTITUTION WHICH IS TO IMPART EDUCATION. THERE IS ALSO NO DISP UTE ABOUT THE ACTIVITIES OF THE ASSESSEE IN AS MUCH AS THE SAME ARE CONFINED ONLY A ND ONLY TO RUNNING OF VARIOUS EDUCATIONAL INSTITUTIONS WHERE EDUCATION IN DIFFERENT COURSES IS IMPARTED. THESE INSTITUTIONS ARE AFFILIATED WITH DIFFERENT UN IVERSITIES/GOVERNMENT AUTHORITIES. CIT AT PAGE 1, PARA 2 HAS ALSO CATEGORICALLY ACCEPT ED THAT ALL THE OBJECTS/ACTIVITIES OF THE INSTITUTION RELATE TO EDU CATION ONLY. THE RELEVANT OBSERVATIONS OF THE CIT ARE AS UNDER : THE ASSESSEE SOCIETY IS RUNNING EDUCATIONAL INSTIT UTIONS AND MANAGED BY FAMILY MEMBERS OF CHOUKSEY GROUP.......................... ... THE DETAILS IN RESPECT OF EDUCATIONAL INSTITUTIONS AND THE MEMBERS OF MANAGING COMMITTEE OF THE ASSESSEE SOCIETY MANAGED BY THE CH OUKSEY FAMILY ARE AS UNDER : ................................................... ................................................... 2.6 IN VIEW OF ABOVE, THERE IS NO DISPUTE AT ALL T HAT THE ASSESSEE IS NOT DOING ANY OTHER ACTIVITY EXCEPT RUNNING EDUCATIONAL INSTITUTIONS AND IT IS ALSO UNDISPUTED THAT THE OBJECTSOF THE ASSESSEE WAS IMPA RTING EDUCATION WHICH ITSELF HAS BEEN DECLARED AS CHARITABLE PURPOSE IN SEC. 2(1 5).THEREFORE, THE OBSERVATION OF THE CIT THAT ACTIVITIES OF THE TRUST/INSTITUTION ARE NOT FOR CHARITABLE PURPOSE, I.E. FOR EDUCATION, AS ENVISAGED IN SEC. 2(15), IS OPPOS ITE TO HIS OWN FINDINGS AND HENCE UNCALLED FOR AND UNSUSTAINABLE. HENCE, THE O NLY REQUIREMENT TO BE LOOKED INTO NOW WAS REGARDING GENUINENESS OF THE ACTIVITIE S OF THE INSTITUTION.THEREFORE, VARIOUS OBSERVATIONS OF CIT THAT BENEFIT IS PROVIDE D TO OFFICE BEARERS/ GENERATION OF HUGE SURPLUS/EDUCATIONAL INSTITUTIONS ARE RUN LI KE BUSINESS ENTITIES- PARTNERSHIP FIRMS/ INTEREST FREE ADVANCES TO VARIOUS SOCIETIES/ ENTITIES OF SAME MANAGEMENT H.K. KALCHURI AND OTHERS 12AA 29 AND TO OTHERS/SEIZURE OF HUGE CASH AND JEWELLERY FR OM OFFICE BEARER/ FILING OF TWO SETS OF AUDITED ACCOUNTS/ PAYMENT FOR PURCHASE OF C OLLEGES ETC., ARE IRRELEVANT AND EXTRANEOUS ISSUES IN EXAMINING AS TO THE GENUIN ENESS OF THE ACTIVITIES FOR THE PURPOSE OF CANCELLATION OF REGISTRATION U/S 12AA(3) . THE MANNER IN WHICH FUNDS ARE UTILIZED OR BENEFIT IS PROVIDED TO THE OFFICE B EARERS IS LEFT TO THE AO FOR ASSESSMENT STAGE IN COMPUTING THE INCOME OF THE TRU ST OR INSTITUTION. FOR THIS RELIANCE IS PLACED ON THE FOLLOWING DECISIONS : MAHARASHTRA ACADEMY OF ENGINEERING & EDUCATIONAL RE SEARCH (MAEER) VS. CIT (2010) 113 TTJ (PUNE ITAT) CHATURVEDI HAR PRASAD EDUCATIONAL SOCIETY VS. CIT ( 2010) 134 TTJ (LUCK.) 781- H.P. GOVERNMENT ENERGY DEV. AGENCY VS. CIT (2010) 1 34 TTJ (CHD) (UO) 33 RAJASTHAN VIKAS SANSTHAN VS. CIT (2012) 78 DTR 411 (JODH. ITAT) - CIT V. SARVODYA ILLAKIYA PANNAI (2012) 343 ITR 300 (MADRAS HC)- WELHAM BOYS SCHOOL SOCIETY VS. CBDT [2006] 285 ITR 74 (UTTARANCHAL HC) M/S PRATIMA EDUCATIONAL SOCIETY VS. CIT, ITA NO. 72 0/HYD./2012DATED 3.9.2013 ITAT HYDERABAD BENCH 2.7 EACH POSSIBLE ISSUE EXPLAINED BEFORE CIT BUT REMAIN ED UNDISCUSSED/UNDISPOSED OF : WITHOUT PREJUDICE TO ABOVE, SO FAR AS THE VARIOUS O BSERVATIONS OF CIT REGARDING DIFFERENT ISSUES AND VIOLATION OF SEC. 11 & 13 OF T HE ACT ARE CONCERNED, WE HAVE TO SUBMIT THAT THOUGH LD. CIT DID NOT GIVE A DETAIL ED NOTICE AS REQUIRED IN LAW, AS REPRODUCED EARLIER, STILL AS ABUNDANT CAUTION, WE F ILED BEFORE HIM VERY DETAILED SUBMISSIONS ON EACH OF THE POSSIBLE ISSUES, WHICH A RE ENCLOSED SEPARATELY IN A QUESTION ANSWER TABULAR FORMAT AT PAPER BOOK PAGES 347-401. IN THE ABOVE REPLIES, ALL THE POSSIBLE ISSUES WERE DULY EXPLAINE D BY THE ASSESSEE ELABORATELY. BUT, IT IS A SORRY STATE OF AFFAIR THAT THE LD. CIT DID NOT TOUCH UPON ANY OF THE EXPLANATION OF THE ASSESSEE, EXCEPT GIVING PASSING REFERENCE, WHAT TO TALK OF ADEQUATELY DEALING WITH THE SAME. HE FRAMED HIS CAN CELLATION ORDER UNDER UTTER CAPRICE AND WHIMS. THIS VERY FACT INVALIDATES THE W HOLE CANCELLATIONORDER, IN ADDITION TO THE FACT THAT HIS ASSUMPTION OF JURISDI CTION WAS BAD IN LAW, AS H.K. KALCHURI AND OTHERS 12AA 30 SUBMITTED DURING OUR LEGAL OBJECTIONS. FURTHER, AS REGARDS ALLEGATION OF CIT THAT THE EDUCATIONAL INSTITUTIONS ARE RUN BY THE INSTITU TION AS PARTNERSHIP FIRMS FOR THE SOLE PURPOSE OF EARNING AND SHARING PROFITS, IT IS SUBMITTED THAT SUCH ALLEGATION IS WRONG, BASELESS, UNPROVED AND WITHOUT ANY CORROBORA TIVE EVIDENCE FOR THE FOLLOWING REASONS : ENCLOSED ARE COPY OF BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT AT PAPER BOOK PAGES 148-169 SHOWING THAT THERE IS NO SHARING OF PROFITS SHOWN IN INCOME & EXPENDITURE ACCOUNT LIKE DONE IN CASE OF PARTNERSHIP FIRMS/BUSINESSES. SINCE INCEPTION, ALL THE BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT OF ASSESSEE INSTITUTION ARE P REPARED IN ACCORDANCE WITH THE NORMS OF A CHARITABLE ORGANIZATION WHERE THE SU RPLUS IS TRANSFERRED TO TRUST FUND/SOCIETY FUND ACCOUNT IN THE BALANCE SHEET & CA RRIED OVER TO NEXT YEAR FOR THE PURPOSE OF ACCUMULATION AND APPLICATION/USE WHO LLY AND EXCLUSIVELY TOWARDS CHARITABLE PURPOSES ONLY. ALL THE RECEIPTS/ SURPLUS HAVE BEEN UTILIZED WHOLLY AND EXCLUSIVELY TOWARDS THE OBJECTS OF THE INSTITUTION ONLY AND NOTHING ADVERSE HAS BEEN EVEN STATED OR WHISPERED EITHER BY CIT OR BY A O. AND MOST IMPORTANTLY, AS REGARDS THE ALLEGATION OF SHARING OR SIPHONING OF T HE RECEIPTS/SURPLUS/MONEY OF ASSESSEE-TRUST/SOCIETY BY OFFICE BEARERS/TRUSTEES, AS PER SO-CALLED AGREEMENT FOUND, IT IS SUBMITTED THAT THE ONLY POSSIBLE WAY T O DO IT WAS TO INFLATE, THAT TOO EXORBITANTLY, THE CAPITAL AS WELL AS REVENUE EXPEND ITURES OF THE ASSESSEE- TRUST/SOCIETY TO UNSCRUPULOUSLY AND SILENTLY WITHDR AW MONEY. BUT VERY SURPRISINGLY, THERE IS NO WHISPER, MUCHLESS CORROBO RATION, EITHER BY THE CIT OR BY THE AO OF ANY SUCH ASSERTION, CLAIM OR ALLEGATION A GAINST THE ASSESSEE- TRUST/SOCIETY OF HAVING INFLATED ANY CAPITAL OR REV ENUE EXPENDITURES IN ANY OF THE ASSESSMENT YEARS. EVEN IN NEXT TWO ASSESSMENT YEARS , IN A.Y. 2011-12 & 2012- 13, IN THE SCRUTINY ASSESSMENTS DONE U/S 143(3) AFT ER VERIFYING IN DETAIL THE BOOKS OF ACCOUNTS, THERE IS NO SUCH ASSERTION OR CLAIM OF HAVING INFLATED CAPITAL OR REVENUE EXPENDITURE. THAT IN ITSELF PROVES BEYOND D OUBT THAT THE ALLEGATIONS OF THE REVENUE ARE TOTALLY FALLACIOUS, WRONG AND CONJE CTURAL ONLY. HUGE SURPLUS WAS SHOWN BY THE ASSESSEE-INSTITUTION ON YEAR TO YEAR B ASIS WHICH SHOWS BONAFIDES OF THE ASSESSEE-INSTITUTION. HAD MONEY BEEN SIPHONE D OUT, THERE WAS NO NEED TO SHOW SURPLUS IN EACH YEAR. THIS IS BECAUSE SIPHONIN G OUT IS NOT POSSIBLE WITHOUT SUPPRESSING RECEIPTS OR INFLATING EXPENSES, AS AFOR ESAID. HAD THE TRUSTEES/MEMBERS INDULGED IN PROFIT SHARING, AS ALL EGED, AT LEAST AN IOTA OF H.K. KALCHURI AND OTHERS 12AA 31 EVIDENCE, EVEN WORTH THE NAME, SHOULD HAVE BEEN FOU ND IN THE SEARCH ON THE TRUSTEES/MEMBERS. THAT COULD BE IN THE FORM OF STAT EMENT OF PROFIT/INCOME PREPARED IN SOME WAYOR THE OTHER TO WORK OUT AND SE TTLE ACCOUNTS WITH EACH OTHER FOR PROFIT SHARING OR IT COULD BE SOME CASH-R ECEIPT IN ACKNOWLEDGMENT OF RECEIVING OF THE ALLEGED SHARE OF PROFIT OR SOME OT HER EVIDENCE OF THE SORT WITHOUT WHICH IT WAS NOT POSSIBLE TO DETERMINE, WORK OUT& S HARE PROFITS. BUT NO SUCH THING WAS FOUND OR BROUGHT ON RECORD TO EVEN VAGUELYOR RE MOTELY SUGGEST THAT. IN CASE OF ACTUAL IMPLEMENTATION OF THE AGREEMENT, SUCH ACK NOWLEDGMENT OF CASH PAYMENT, IF ANY, WAS NECESSARY TO KEEP RECORD OF SU CH PAYMENT, FOR FUTURE; THIS MUST HAVE BEEN KEPT BY TRUSTEES/MEMBERS BECAUSE LO ADS OF PAPERS WERE KEPT AND FOUND AND SEIZED FROM THEM. THIS FACT WAS ALSO OVERLOOKED BY LD. CIT THAT THE ENTIRE FUNDS/PROPERTY OF THE INSTITUTION IS LYI NG IN THE NAME OF ASSESSEE- TRUST/SOCIETY ONLY AND NOT IN THE NAME OF ITS TRUST EES/MEMBERS. NO ALLEGATION OR EVIDENCE WAS THERE REGARDING DIVERSION OF MONEY FRO M ASSESSEE INSTITUTION TO TRUSTEES/MEMBERS, EVEN FROM INCEPTION, AS STATED AB OVE. PAYMENT TO TRUSTEES/MEMBERS IN LIEU OF THEIR SERVICES WERE NOT EXCESSIVE. THE ASSESSEE- TRUST HAS MAINTAINED DETAILED AND CONTEMPORANEOUS B OOKS OF ACCOUNTS WHICH ARE DULY AUDITED BY CHARTERED ACCOUNTANTS WITH NO ADVER SE REMARKS. THE FUNCTIONING AND MANAGEMENT OF THE EDUCATIONAL INSTITUTES RUN BY THE ASSESSEE-TRUST ARE UNDER STRICT MONITORING AND SUPERVISION OF ALL INDI A COUNCIL OF TECHNICAL EDUCATION (AICTE), A BODY CONSTITUTED BY MINISTRY O F HUMAN RESOURCE DEVELOPMENT, GOVERNMENT OF INDIA. THE SENIORS OFFIC ERS OF THE AICTE CARRY OUT PERIODICAL DETAILED INSPECTION OF THE BOOKS OF ACCO UNTS AND FUNCTIONING OF THE EDUCATIONAL INSTITUTIONS RUN BY THE ASSESSEE. THEY HAVE NEVER GIVEN ANY ADVERSE REPORT OR COMMENT ON THE FUNCTIONING OF THE ASSESSE E. HAD THEY FOUND ANY SUCH LAPSES, AS UNILATERALLY CONCEIVED AND PRESUMEDBY TH E AO, THE APPROVAL OF THE ASSESSEE WOULD HAVE BEEN TERMINATED LONG BACK. BUT THEN NOTHING OF THE SORT HAS BEEN FOUND BY THEMAND ALL THE EDUCATIONAL INSTI TUTES RUN BY ASSESSEE ARE VERY MUCH RUNNING AND IMPARTING EDUCATION TO HUNDRE DS OF STUDENTS IN PRESENT ALSO. IT IS NOWHERE PROVIDED IN THE BYE-LAWS THAT A T THE TIME OF DISSOLUTION OF TRUST/SOCIETY, THE FUNDS WILL VEST IN THE FAMILY OF THE TRUSTEES/ OFFICE-BEARERS. THE LD. CIT ALSO IGNORED THE FACT THAT THE ASSESSEE INS TITUTION IS NOT PARTY TO THE IMPUGNED AGREEMENTS, AND HENCE, NO ADVERSE VIEW COU LD BE TAKEN AGAINST THE H.K. KALCHURI AND OTHERS 12AA 32 TRUST/INSTITUTION WHICH IS AN INDEPENDENT IDENTITY FROM ITS TRUSTEES/MEMBERS. IT IS SETTLED LAW THAT IF IS THERE WAS ANY MISAPPLICATION OF FUNDS OR MISMANAGEMENT, ACTION COULD LIE AGAINST THE PERSON RESPONSIBLE BUT IT IS NOT POSSIBLE TO SAY THAT ANY AMOUNTS OF THE FUNDS OF THE SOCIETY WAS NOT UT ILISED FOR EDUCATIONAL PURPOSES AND FOR THAT REASON THE REGISTRATION OF CH ARITABLE INSTITUTION CANNOT BE CANCELLED. RELIED ON : COSMOPOLITAN EDUCATION SOCIETY 244 ITR 494 (RAJ.) [SLP OF DEPARTMENT DISMISSED BY HONBLE SUPREME COU RT AS REPORTED IN 241 ITR (ST.) 132]. NEEDLESS TO ARGUE THAT A VERY HEAVY DUTY WAS CAST U PON LD.CIT TO PROPERLY AND SUBSTANTIVELY ADJUDICATE AS TO THE OBJ ECTS OF THE INSTITUTION AND GENUINENESS OF THE ACTIVITIES AND NOT GET SWAYED B Y EXTRANEOUS OR IRRELEVANT CONSIDERATIONS, AS UNLAWFULLY DONE BY HIM IN THE PR ESENT CASE. BUT, THE LD. CIT DID NOT TAKE EVEN A LITTLE PAIN TO EVEN TRYTO DO SO AND CANCELLED REGISTRATION ON NON- STATUTORY, NON-EXISTENT AND EXTRANEOUS CONSIDE RATIONS ON THE BASIS OF UNSUBSTANTIATED INFERENCES AND OBSERVATIONS AND UNP ROVED ALLEGATIONS, EXACTLY SIMILAR TO THOSE DRAWN BY AO IN THE ASSESSMENT ORDE R. HE PRACTICALLY DID NOTHING ON HIS OWN OF THE SORT EXPECTED OF HIM. HE NEITHER EXAMINED ANY OF THE TRUSTEES/MEMBERS NOR DID HE EVEN PEEP INTO THE BOOK S OF ACCOUNTS OF ASSESSEE INSTITUTIONS WHICH WERE IMPOUNDED BY THE DEPARTMENT AND WERE UNDER THE SEAL OF THE DEPARTMENT AT THE RELEVANT TIME.THESE WEREINEVI TABLE TO SUPPORT, SUBSTANTIATEAND PROVE HIS ALLEGATION THAT THERE WAS SHARING OF PROFIT BY THE TRUSTEES/MEMBERS, IN ANY WAY. HE ALSO MISERABLY FAI LED TOEVEN TRY TO POINT OUT, MUCH LESS PROVE WITH COGENT EVIDENCE, ANY DISPROPOR TIONATE UNDISCLOSED ASSETS OR MONEY FOUND WITH THE TRUSTEES/MEMBERS TO EVEN RE MOTELY SUGGEST THE CHARGE OF PERSONAL ENRICHMENT BY TRUSTEES/MEMBERS BY WAY O F SHARING OF SURPLUS/PROFIT. IT IS VERY CRUCIAL TO NOTE THAT THE LD. CIT DID NOT EVEN SPELL OUT THIS CHARGE OF PERSONAL ENRICHMENT IN THE NOTICE, AS SUBMITTED EAR LIER, DEPRIVING OF THE ASSESSEE OF PROPER OPPORTUNITY ; NOR DID HE DEAL WITH THE SU BMISSIONS OF THE ASSESSEE GIVEN IN THIS REGARD. HE HAS ACTUALLY ARBITRARILY F RAMED HIS CANCELLATION ORDER ON SURMISES AND CONJECTURES ONLY. THE PERVERSITY IN TH E APPROACH OF THE CIT IS ALSO REFLECTED IN THAT THE ASSESSEE-TRUST/SOCIETY IS VER Y OLD AND CAME INTO EXISTENCE WAY BACK ON 13.1.1999 WHEREAS THE SO-CALLED IMPUGNE D AGREEMENT WAS OF MUCH LATER DATE I.E. DATED 13-8-2002BUT HE HAS CANCELLED REGISTRATION FROM 13.1.1999 I.E. FROM THE DATE OF INCEPTION. THE LD. CIT ALSO C OULD NOT PROPERLY APPRECIATE THIS H.K. KALCHURI AND OTHERS 12AA 33 VITAL FACT THAT THE IMPUGNED AGREEMENT WAS IN RESPE CT OF 2 COLLEGES ONLY WHEREAS THE ASSESSEE RUNS AS MANY AS7 COLLEGES THAT TOO SIN CE SO MANY YEARS, AS PER CHART FURNISHED EARLIER. BUT AS WOULD BE SEEN, THE CIT HAS CANCELLED REGISTRATION OF THE ASSESSEE TRUST/SOCIETY AS A WHOLE. 2.8 ONLY PHOTOCOPY OF AGREEMENTS WERE FOUND WHICH WERE NOT ACTED UPON : AS SUBMITTED, THE VERY AGREEMENT, ON THE BASIS OF W HICH THE BEDROCK OF ALLEGATION HAS BEEN BUILT-UP, WAS NOT ACTED UPON RE ALIZING THAT IT IS NEITHER LEGITIMATE NOR POSSIBLE TO DO IT UNDER THE CHARITAB LE SET UP AND THE ALLEGATION OF ANY SUCH AGREEMENT HAVING BEEN ACTED UPON WAS ALL A LONG DENIED BY THE INSTITUTION AND TRUSTEES/OFFICE BEARERS. NEITHER CI T NOR AO HAS POINTED OUT ANY OF THE CLAUSE OF THE SUBJECT AGREEMENT TO HAVE BEEN AC TED UPON. IT MIGHT BE TAKEN NOTE OF THAT THE IMPUGNED AGREEMENTS FOUND IN SEARC H WERE MERELY PHOTOCOPIES AND NOT ORIGINAL. HAD THE OFFICE BEARERS/TRUSTEES A CTUALLY ACTED UPON ANY SUCH AGREEMENT, THEY WOULD HAVE KEPT THE ORIGINAL FOR TH E PURPOSE OF SAFETY. WITHOUT PREJUDICE TO ABOVE AND WITHOUT ACCEPTING, CIT/AO OU GHT TO HAVE REALIZED THAT IT WAS AN PURPORTED AGREEMENT TO PERFORM CERTAIN ACTIO NS BUT THEY HAVE NOT TRIED TO PROVE, MUCH LESS PROVED, THAT ANY TRANSACTION PURSU ANT TO THE SAID AGREEMENT HAS TAKEN PLACE. THEY OUGHT TO HAVE REALIZED THAT I T IS A SEARCH CASE WHERE ATLEAST AN IOTA OF OTHER SUPPORTIVE EVIDENCE MIGHT HAVE BEEN FOUND, IF THE SAID AGREEMENT WAS ACTUALLY ACTED UPON. BUT, NO SUCH EVI DENCE WAS FOUND IN SEARCH. NO CORROBORATION OR POST-SEARCH INVESTIGATION BY CI T OR AO : NO IOTA OF CORROBORATIVE EVIDENCE WAS FOUND IN SEAR CH OR BROUGHT ON RECORD BY AO, OR FOR THAT MATTER EVEN BY CIT TO SUPPORT THEIR ALLEGATIONS. FOR THIS PURPOSE, IT WAS INCUMBENT UPON CIT/AO TO HAVE CONDUCTED POST SE ARCH INVESTIGATION/ENQUIRY BY SUMMONING THE CONCERNED PA RTIES AND TO BRING ON RECORD CLINCHING EVIDENCE TO PROVE THEIR ALLEGATIONS. BUT SURPRISINGLY, THE CONCERNED PARTIES TO THE AGREEMENT WERE NOT SUMMONED BY THEM AT ALL, WHAT TO TALK OF CROSS EXAMINATION, DESPITE THE FACT THAT THERE WAS CLEAR CUT DENIAL WITH REGARD TO THE SUBJECT AGREEMENT, AS NOT HAVING BEEN ACTED UPON. H.K. KALCHURI AND OTHERS 12AA 34 WHO ALLEGES, HAS TO PROVE : IT IS A SETTLED LAW THAT WHO SO EVER ALLEGES, HAS T O PROVE. THIS IS PARTICULARLY IMPORTANT WHEN THE CONCERNED PERSON DENIES THE ALLE GATION. HENCE, BEFORE CANCELLATION, THE BURDEN ON CIT WAS EVEN MUCH HEAVI ER TO CONCLUSIVELY PROVE BY COGENT EVIDENCE THAT THE SUBJECT AGREEMENT WAS INFA CT ACTED UPON AND THAT THE TRUSTEES/MEMBERS HAVE SHARED SURPLUS OF THE INSTITU TION AND TO ENSURE THAT TRUSTEES/MEMBERS ARE BROUGHT TO TAX FOR SUCH SHARED PROFITS/SURPLUS. BUT, NOTHING OF THE SORT WAS DONE BY HIM AND THE CANCELLATION WA S MADE ONLY ON THE BASIS OF PRESUMPTION, CONJECTURES AND SURMISES ONLY. IN CASE OF CIT VS. SMT. K.C AGNES (2003) 262 ITR 354 (KER.HC) WHERE AGREEMENT WAS FOUND FOR HIGHER AMOUNT BUT SALE DEED OF PROPERTY WAS FOUND FOR LESSER AMOUNT, HON'BLE HIGH COURT HELD AS UNDER :- EVEN IF IT IS ASSUMED TO BE SO , UNLESS IT IS PROVED THAT THE AGREEMENT WAS ACTED UPON AND UNLESS THE AMOUNT STATED IN THE AGREEMENT WAS PAID FOR THE SALE, THE COURT CANNOT COME TO CONCLUSION THAT THE PRICE MENTIONED IN SALE DEED IS NOT CORRECT. ALSO RELIED ON K.P. VERGHESE V.ITO 131 ITR 597 (SC). SIMILARLY, IN THE FOLLOWING DECISIONS ALSO IT HAS BEEN HELD TH AT WHO SO EVER ALLEGES, HAS TO PROVE : SHYAMA CHARAN SAXENA VS. CIT (1984) 145 ITR 689 (ALL. HC) DOON VALLEY ROLLER FLOUR MILLS V. IAC (1989) 31 IT D 238 (DEL.ITAT) 2.9 ALSO ENCLOSED ARE COPY OF ASSESSMENT ORDERS U/S 153A OF SAME AO SHOWING THAT NO SUCH ADDITION ON ACCOUNT OF ALLEGED SHARING OF PROFITS WAS MADE IN THE HANDS OF THE INDIVIDUAL TRUSTEES/MEMBERS. M OREOVER, HAD THE TRUSTEES/MEMBERS MADE SUCH HUGE FORTUNE THROUGH SHA RING OF PROFITS, AS ALLEGED, THE CORRESPONDING UNDISCLOSED ASSETS/INVESTMENT/EXP ENSES MUST HAVE BEEN FOUND IN SEARCH ON THEM.BUT, NEITHER A PENNY OF THE SORT WAS FOUND NOR A PENNY OF IT WAS TAXED IN THE HANDS OF INDIVIDUAL TRUSTEES /MEMBERS ON THIS ACCOUNT, SUCH MERE ALLEGATION, BEREFT OF CORROBORATION AND TAXATI ON IN THE INDIVIDUAL HANDS OF TRUSTEES/MEMBERS, COULD NOT BE USED AGAINST THE ASS ESSEE INSTITUTION, AS UNLAWFULLY DONE BY CIT. FOR THIS PROPOSITION, IT WO ULD BE ADVANTAGEOUS TO QUOTE THE FINDINGS OF HON'BLE ITAT AGRA BENCH IN SHARDA EDUCATIONAL TRUST VS. CIT [2014] 47 ITD 271 (AGRA - TRIB.). SIMILARLY, HON'BLE CHENNAI ITAT IN THE CASE OF H.K. KALCHURI AND OTHERS 12AA 35 SRI BALAJI EDUCATIONAL & CHARITABLE PUBLIC TRUST [2 015] 57 TAXMANN.COM 145 (CHENNAI - TRIB.) HELD. IN THE SAME WAY, HON'BLE UTTARANCHAL HIGH CO URT IN WELHAM BOYS SCHOOL SOCIETY VS CBDT [2006] 285 ITR 74 (UTTARANCHAL HC) HELD. 2.10 FROM THE ABOVE DECISIONS AND ON THE BASIS OF P LETHORA OF DECISIONS QUOTED EARLIER, IT IS CLEAR THAT THE LD. CIT HAS EX CEEDED IN HIS JURISDICTION, EVEN ON MERITS, IN CANCELLING THE REGISTRATION. HE OUGHT TO HAVE UNDERSTOOD THAT REGISTRATION AND EXEMPTION OPERATE IN DIFFERENT FIE LD AND REALM. REGISTRATION IS NOT A GUARANTEE FOR EXEMPTION WHICH HAS TO BE TESTED QU A EACH ASSESSMENT YEAR DURING ASSESSMENT PROCEEDINGS BY AO. IN ANY YEAR, I N WHICH THE INSTITUTION DOES NOT FULFILL THE STIPULATED CONDITIONS U/S 11 & 13, EXEMPTION FOR THAT YEAR WILL BE DENIED BY AO IN THE ASSESSMENT AND SUPPOSE IN THE V ERY NEXT YEAR, ALL THE REQUISITE CONDITIONS ARE FULFILLED, THE EXEMPTION S HALL BE GIVEN BY HIM. BUT, THE ADVERSITY OF NON-FULFILLING THE REQUISITE CONDITION S OF SEC. 11 & 13 WILL NOT DENY OR WITHDRAW THE REGISTRATION WHICH IS ONLY A GATEWAY F OR EXEMPTION. THIS IS BECAUSE, THERE IS NO PROVISION IN THE ACT TO GRANT REGISTRAT ION U/S 12AA ON YEARLY OR PERIODICAL BASIS. THIS IS ONCE IN LIFETIME AND IS J UST TO IDENTIFY AN INSTITUTION AS BEING ENTITLED FOR AVAILING EXEMPTION. 2.11 IN VIEW OF ABOVE, IT CANNOT BE SAID THAT THE A CTIVITIES OF THE INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDA NCE WITH THE OBJECTS OF THE ASSESSEE-TRUST/SOCIETY. EVEN IF IT IS ASSUMED, THOU GH NOT, THAT THERE IS ANY CONTRAVENTION OF SEC. 11 & 13, IT IS TO BE CONSIDER ED BY THE AO AT THE STAGE OF ASSESSMENT FOR COMPUTING THE INCOME AND FOR THAT RE ASON, REGISTRATION OF THE INSTITUTION U/S 12A CANNOT BE CANCELLED. FOR THIS, RELIANCE IS PLACED ON FOLLOWING DECISIONS : IN ASSESSEES OWN GROUP CASE HONBLE INDORE ITAT HA S DECIDED IN FAVOUR OF THE ASSESSEE IN DCIT VS. HAI HAY KSHATRIYA EDUCATIO N SOCIETY IN ITA NO. 51 TO 56 AND 510/IND/ 2007 FOR A.Y. 1998-99 TO 2004 -05 - RELEVANT PAGE 54 PARA 36 (COPY AT PG 396) H.K. KALCHURI AND OTHERS 12AA 36 CIT VS. ISLAMIC ACADEMY OF EDUCATION [2015] 54 TAXM ANN.COM 255 (KARNATAKA) SHRI BALAJI EDUCATIONAL & CHARITABLE PUBLIC TRUST V .CIT [2015] 57 TAXMANN.COM 145 (CHENNAI - TRIB.) DY. CIT VS. COSMOPOLITAN EDUCATION SOCIETY (1999) 1 57 CTR (RAJ) 209 : (2000) 244 ITR 494 (RAJ) CIT VS. RED ROSE SCHOOL (2007) 212 CTR (ALL) 394: ( 2007) 163 TAXMAN 19 - GURU GOBIND SINGH EDUCATIONAL SOCIETY VS. CIT (2009 ) 118 ITD 207 (ASR) OXFORD ACADEMY FOR CAREER DEVELOPMENT [2009] 315 ITR 382 (ALL HC): 2.12 MOREOVER, AS REGARDS GENERATION OF HUGE SURPLU S BY THE ASSESSEE- INSTITUTION, THOUGH WE HAD CITED VARIOUS DECISIONS, AS GIVEN IN THESEPARATE TABLE (SUPRA)AT PAPER BOOK PAGES 353-354 , IN FAVOUR OF THE ASSESSEE THAT MERE GENERATION OF SURPLUS CANNOT BE GROUND FOR DENIAL O F REGISTRATION U/S 12AA OR CANCELLATION U/S 12AA(3), IT IS SUBMITTED THAT THIS ISSUE HAS BEEN SET AT REST BY HON'BLE SUPREME COURT IN THE CASE OF QUEENS EDUCATIONAL SOCIETY VS CIT[2015] 372 ITR 699 (SC) HOLDING THAT WHERE A SURPLUS WAS MADE BY EDUCATIONAL INSTITUTION WHICH WAS PLOUGHED BACK FOR EDUCATIONAL PURPOSES, SAID INSTITUTION WAS TO BE HELD TO BE EXISTED SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR PURPOSE OF PROFIT. THE HON'BLE SUPREME COURT HAS FO LLOWED MANY DECISIONS THEREIN ON WHICH WE ALSO PLACE OUR RELIANCE.IN ASSE SSEES CASE ALSO, SUCH SURPLUS HAS BEEN UTILIZED WHOLLY AND EXCLUSIVELY FO R THE OBJECTS OF THE ASSESSEE- TRUST/SOCIETY ONLY. HENCE, THE ADVERSE OBSERVATION OF CIT IS UNCALLED FOR AND UNWARRANTED. IN VIEW OF ABOVE, IT IS HUMBLY PRAYED THAT THE CANC ELLATION ORDER OF LD. CIT PASSED U/S 12AA(3) MAY KINDLY BE QUASHED AND THE REGISTRAT ION GRANTED TO THE ASSESSEE MAY KINDLY BE RESTORED H.K. KALCHURI AND OTHERS 12AA 37 13. LD. CIT/DR RELIED ON THE ORDER OF THE CIT AND S UBMITTED THAT A SEARCH U/S 132 WAS CARRIED OUT IN THE CASE OF H.K. KALCHUR I EDUCATION TRUST. THE ASSESSEE WAS ASKED TO FILE THE RETURN U/S 153A OF T HE ACT. THE ASSESSEE HAS FILED THE NIL RETURN CLAIMING EXEMPTION U/S 11 OF THE I.T. ACT. DURING THE COURSE OF SEARCH, CERTAIN AGREEMENTS, DRAFTS WERE F OUND AND SEIZED. THESE ARE REGARDING SHARING OF PROFIT, LOSSES IN THE VARI OUS INSTITUTIONS RUN BY THE ASSESSEE TRUST. LPS 2/36 PAGE 46 & 47 SEIZED FROM T HE PREMISES OF THE ASSESSEE IS AN AGREEMENT BETWEEN RAMSINGH DHAKRE AN D OTHERS DHAKRE BROS. AND MR. J.N. CHOUKSEY AND FAMILY MEMBERS HAVE DULY SIGNED, IN WHICH, RAMSINGH, NARENDRA SINGH, LOKENDRA SINGH, SH IVENDRA SINGH AND SMT. SHANTI DHAKRE HAVE SIGNED AND MR. J.N. CHOUKSE Y, POONAM, SURESH AND SMT. PRATHIBHA CHOUKSEY HAVE SIGNED. AS PER THI S AGREEMENT, THESE TWO GROUPS HAVE DECIDED TO RUN THE SOCIETY AND WITH EQUAL PARTNERSHIP, IN WHICH, THE SAID PRATAP VAHINI SOCIETY HAS INVESTED 40 LACS AND THEY HAVE GOT 20% SHARE AND ANOTHER WELFARE SOCIETY WILL HAVE 18% OF SHARE. THUS, THESE TWO GROUPS HAVE DECIDED TO RUN THE INSTITUTIO N AND THAT AGREEMENT WAS FOUND DURING THE COURSE OF SEARCH. THE XEROX CO PY OF THE SAID AGREEMENT WAS FOUND, THUS, FROM THIS DOCUMENT, IT I S PROVED THAT ASSESSEE TRUST RUNS THE EDUCATIONAL INSTITUTIONS FOR SHARING OF PROFIT AND NOT FOR CHARITABLE PURPOSES. MOREOVER, ASSESSEE HAS ALSO GE NERATED SURPLUS FROM H.K. KALCHURI AND OTHERS 12AA 38 THE ACTIVITIES OF THE SOCIETY, WHICH SHOWS THAT THE SOCIETY WAS RUNNING ON COMMERCIAL BASIS. THE TRUST HAS GENERATED PROFIT FR OM 26% TO 45%. MOREOVER, ASSESSEE HAS ALSO GIVEN INTEREST FREE ADV ANCES TO VARIOUS SOCIETIES AND ENTITIES WHICH IS DISCUSSED ON PAGE 8 .1 OF THE ORDER OF CIT. MOREOVER, THERE WAS HUGE CASH AND JEWELLERY FOUND W ITH OFFICE BEARERS. MR. CHOUKSEY AND FAMILY DO NOT HAVE INCOME FROM BUSINES S OR PROFESSION IN INDIVIDUAL CAPACITY. SIMILARLY, ASSESSEE HAS ADVANC ED VARIOUS LOANS WITHOUT INTEREST AND SECURITY. MOREOVER, PAYMENT MADE FOR P URCHASE OF HOUSE, PAYMENT TO VALLABH GRIH NIRMAN SAMITI, PAYMENT FOR PURCHASE OF HOTEL NEEMA PALALCE WERE ALSO MADE. MOREOVER, IN THIS CAS E, DURING THE COURSE OF SEARCH, TWO SETS OF AUDITED ACCOUNTS WERE FOUND FOR FY 2009-10 AND IN BOTH SETS OF AUDITED ACCOUNTS, THE ASSESSEE HAS FIL ED THE DIFFERENT FIGURES FOR THE SAME EXPENDITURE. SIMILARLY, ASSESSEE HAS A LSO MADE PAYMENTS OF 17 CRORES TO ONE OF THE SOCIETIES AND MR. J.N. CHOU KSEY HAS PURCHASED ONE SOCIETY IN CONSIDERATION OF RS.17 CRORES. THEREFORE , ALL THESE EVIDENCES SHOW THAT ASSESSEE HAS NOT CARRIED OUT ITS ACTIVITI ES FOR EDUCATIONAL PURPOSES BUT ASSESSEE HAS CARRIED OUT EDUCATIONAL A CTIVITIES ON COMMERCIAL LINE, THEREFORE, WHENEVER ASSESSEE RUNS ANY INSTITUTION FOR IMPARTING EDUCATION AND IF IT IS NOT FOR CHARITABLE PURPOSES THEN THE H.K. KALCHURI AND OTHERS 12AA 39 REGISTRATION U/S 12AA R.W.S. 2(15) OF I.T. ACT, 196 1 CANNOT BE GRANTED AND HAS BEEN RIGHTLY WITHDRAWN. DURING THE COURSE OF HEARING, LD. DR HAS DRAWN OUR ATTENTION TO THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS. ISLAMIC ACADEMIC EDUCATION, (2015) 54 TAXMANN.COM 255 AND S UBMITTED THAT THE HONBLE KARNATAKA HIGH COURT IN THIS CASE HAS THOUG H HELD THAT IF THE MAIN OBJECT OF THE TRUST IS IMPARTING EDUCATION, THE REG ISTRATION OF TRUST COULD NOT BE CANCELLED ON THE BASIS OF TRUSTEES MISAPPROPRIAT ING THE FUNDS OF THE SAID TRUST, BUT SINCE AGAINST THIS DECISION, THE HON'BLE SUPREME COURT HAS ALREADY ADMITTED THE SLP, THEREFORE, THIS JUDGMENT WILL NOT BE HELPFUL TO THE ASSESSEE. THE LD. DR RELIED UPON THE DECISION OF KE RALA HIGH COURT IN THE CASE OF DAWN EDUCATIONAL CHARITABLE TRUST VS. CIT, 60 TAXMANN 126 (KER), WHEREIN, THE ASSESSEE TRUST HAS FILED AN APPLICATIO N FOR REGISTRATION U/S 12A AND CLAIMED THE EXEMPTION ON THE GROUND THAT SCHOOL RUN BY IT WAS IMPARTING EDUCATION, THEREFORE, TRUST WAS MEANT FOR CHARITABLE PURPOSES. THE CIT MADE AN INQUIRY AND HE FOUND THAT ASSESSEE RUNS A POSH INTERNATIONAL SCHOOL IN THE NAME OF CHARITABLE ACTI VITIES, THEREFORE, IT WAS NOT ENTITLED FOR REGISTRATION. IN THE INSTANT CASE, IT WAS ARGUED BY THE LD. DR THAT THE ASSESSEE RUNS THE EDUCATIONAL COLLEGES ON COMME RCIAL BASIS AS DISCUSSED BY THE CIT IN HIS ORDER, THEREFORE, CIT W AS JUSTIFIED IN CANCELLING H.K. KALCHURI AND OTHERS 12AA 40 THE REGISTRATION GRANTED U/S 12A OF THE ACT. LASTLY , LD. DR RELIED UPON THE ORDER OF THE P & H HIGH COURT IN ITA NO.336 OF 2013 IN THE CASE OF CIT VS. GURU GORAKHNATH CHARITABLE TRUST WHEREIN THE HIGH C OURT HAS REMANDED THE MATTER TO THE CIT ON THE GROUND THAT THE PROVIS IONS OF SEC. 12AA GIVE THE POWERS UNDER SUB-SEC (3) TO CANCEL THE REGISTRA TION OF THE TRUST IF IT IS NOT CARRIED OUT IN ACCORDANCE WITH THE OBJECTS BUT ALSO THE INQUIRY HAS TO BE MADE REGARDING THE GENUINENESS OF ACTIVITIES OF IMP ARTING EDUCATION WITH CHARITABLE PURPOSES. SEC. 2(15) DEFINES CHARITABLE PURPOSES AND INCLUDES EDUCATION AND ADVANCEMENT OF ANY OTHER OBJECT FOR G ENERAL PUBLIC UTILITY BUT IN THE INSTANT CASE, WHEN THE ASSESSEE RUNS EDUCATI ONAL INSTITUTION ON COMMERCIAL LINE, THEN IT CANNOT BE SAID THAT ASSESS EE IS DOING ANY CHARITABLE ACTIVITY. THE LD. DR SUBMITTED THAT IN T HE LIGHT OF THE ABOVE DECISIONS, THE CIT HAS DISCUSSED THE ISSUES AND LIS T OF EDUCATIONAL INSTITUTIONS AND HOSPITALS RUN BY THE TRUST RUN ON COMMERCIAL BASIS, THEREFORE, THE REGISTRATION WAS RIGHTLY REJECTED. M OREOVER, LD. DR SUBMITTED THAT AS PER SEC. 12AA (3), EMPOWERS CIT FOR CANCELL ATION OF REGISTRATION, THE SPECIAL PROVISION ENACTED IN SEC. 12AA PROVIDES THE PROCEDURE FOR REGISTRATION OF TRUST W.E.F. 1.4.1997 AND IN THAT S ECTION, THE REGISTRATION GRANTED CAN BE CANCELLED. THE CANCELLATION POWERS T HAT HAD COME FROM 1.10.2004 PROVIDES THAT WHEN A TRUST OR INSTITUTION HAS BEEN GRANTED H.K. KALCHURI AND OTHERS 12AA 41 REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AN D SUBSEQUENTLY, THE CIT IS SATISFIED THAT ACTIVITIES OF SUCH TRUST ARE NOT GEN UINE OR NOT BEING CARRIED OUT IN ACCORDANCE WITH OBJECTS, HE CAN PASS THE ORDER I N WRITING CANCELLING THE REGISTRATION. HE CONCEDED THAT THE THIRD CONDITION FOR CANCELLATION ON VIOLATION OF SEC. 13 WAS INCORPORATED SUBSEQUENTLY BY WAY OF NEW SUB-SEC. 12AA WHICH HAS POWERS TO CANCEL THE REGISTRATION. T HE LD. DR, HOWEVER, SUBMITTED THAT THIS SUB-SECTION (4) OF SEC. 12AA IS INCORPORATED W.E.F. 1.10.2014 BUT IT HAS RETROSPECTIVE EFFECT AND WHEN THE STATUTE PROVIDES FOR CANCELLATION OF REGISTRATION, THE CIT IS WELL WITHI N HIS JURISDICTION TO CANCEL THE REGISTRATION. 14. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE DISCUSSING THE FACTS OF THIS CASE, IN OUR OPINION, THE BASIC REQUIREMENT FOR CANCELLATION OF THE REGISTRATION HAS TO BE SEEN, THEREFORE, WE REPRODUCE THE RELEVANT SECTI ON AND RELEVANT AMENDMENT WHICH TOOK PLACE IN SECTION 12AA WITH PRE SCRIBED CONDITION FOR APPLICABILITY OF SEC. 11 AND 12 AND PROCEDURE FOR R EGISTRATION AND CANCELLATION OF TRUST U/S 12AA OF THE I.T. ACT, 196 1. PROCEDURE FOR REGISTRATION SECTION 12AA(1) H.K. KALCHURI AND OTHERS 12AA 42 (1) THE COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER CLAUSE (A) [OR CLAUSE (AA) OF SUB-SECTION (1) ] OF SECTION 12A , SHALL (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 A CTIVITIES OF THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THI S 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 APPLICANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. SECTION 12AA(1A) (1A) ALL APPLICATIONS, PENDING BEFORE THE CHIEF COM MISSIONER ON WHICH NO ORDER HAS BEEN PASSED UNDER CLAUSE (B) OF SUB-SECTION (1) BEFORE T HE 1ST DAY OF JUNE, 1999, SHALL STAND TRANSFERRED ON THAT DAY TO THE COMMISSIONER AND THE COMMISSIONER MAY PROCEED WITH SUCH APPLICATIONS UNDER THAT SUB-SECTION FROM THE STAGE AT WHICH THEY WERE ON THAT DAY. SECTION 12AA(2) (2) EVERY ORDER GRANTING OR REFUSING REGISTRATION U NDER CLAUSE (B) OF SUB-SECTION (1) SHALL BE PASSED BEFORE THE EXPIRY OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEIVED UNDER CLAUSE (A) [OR CLAUSE (AA) OF SUB-SE CTION (1)] OF SECTION 12A.] SECTION 12AA(3) [(3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED 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 COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION AR E NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUS T OR INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. ] SECTION 12AA (4) H.K. KALCHURI AND OTHERS 12AA 43 (4) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (3), WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB-S ECTION (1) OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMEN DMENT BY THE FINANCE (NO.2) ACT, 1996 (33 OF 1996) ] AND SUBSEQUENTLY IT IS NOTICED THAT THE ACT IVITIES OF THE TRUST OR THE INSTITUTION ARE BEING CARRIED OUT IN A MANNER THAT THE PROVISIONS OF SECT IONS 11 AND 12 DO NOT APPLY TO EXCLUDE EITHER WHOLE OR ANY PART OF THE INCOME OF SUCH TRUST OR IN STITUTION DUE TO OPERATION OF SUB-SECTION (1) OF SECTION 13, THEN, THE PRINCIPAL COMMISSIONER OR THE COMMISSIONER MAY BY AN ORDER IN WRITING CANCEL THE REGISTRATION OF SUCH TRUST OR INSTITUTIO N. PROVIDED THAT THE REGISTRATION SHALL NOT BE CANCELLED UNDER THIS SUB-SECTION IF THE TRUST OR INSTITUTION PROVES THAT THERE WAS A REASONABLE CAUS E FOR THE ACTIVITIES TO BE CARRIED OUT IN THE SAID MANNER. 15. WE HAVE GONE THROUGH THE ABOVE SEC. 12AA, WHICH GIVES POWERS TO PRINCIPAL CIT OR CIT OF CANCELLATION OF REGISTRATIO N WHERE A TRUST OR INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLA USE (B) OF SUB-SEC. (1) W.E.F. 1.10.2004 OR HAS OBTAINED REGISTRATION AT AN Y TIME U/S 12A AND SUBSEQUENTLY, THE PRINCIPAL CIT OR CIT IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEI NG CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST OR INSTITUT ION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELING THE REGIST RATION OF TRUST OR INSTITUTION. NOW, AS PER THIS SECTION, IF THE ASSESSEE HAS OBTAI NED REGISTRATION BEFORE 1.10.2004 UNDER OLD SECTION 12A, THE COMMISSIONER M AY CANCEL THE REGISTRATION. H.K. KALCHURI AND OTHERS 12AA 44 AS PER SECTION 12AA(3) AMENDED BY FINANCE ACT, 2010 W.E.F. 1.6.2010 WHEREVER A TRUST OR INSTITUTION HAS BEEN G RANTED REGISTRATION UNDER CLAUSE (B) OF SUB-SEC.(1) OF SEC. 12AA OR HAS OBTAI NED REGISTRATION AT ANY TIME U/S 12A AND SUBSEQUENTLY, COMMISSIONER IS SATI SFIED THAT SUCH ACTIVITIES OF TRUST OR INSTITUTION ARE NOT GENUINE OR NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST OR INSTITUT ION, HE MAY PASS AN ORDER IN WRITING TO CANCEL THE REGISTRATION. THIS AMENDME NT HAS ALSO BEEN TAKEN NOTE OF BY THE CBDT AND CBDT VIDE CIRCULAR NO.1/201 1 DATED 6.4.2011 CLEARLY EXPLAINED THE SAME AS UNDER: THE POWER TO CANCEL REGISTRATION IN RESPECT OF RE GISTRATION OBTAINED UNDER OLD SEC. 12A CAME TO BE ENACTED IN LAW, AS AFORESAID, O NLY ON 1.6.2010 EFFECTIVE FROM A.Y. 2011-12 AND SUBSEQUENT YEARS AND HENCE CA NCELLATION OF REGISTRATION MADE BY CIT W.E.F. 13-1-1999 WAS UNLAWFUL. CBDT CIR CULAR NO. 01/2011, DATED 6TH APRIL, 2011 CLEARLY EXPLAINS THE SAME AS UNDER : 8. CANCELLATION OF REGISTRATION OBTAINED UNDER SECT ION 12A. 8.1 SECTION 12AA PROVIDES THE PROCEDURE RELATING TO REGISTRATION OF A TRUST OR INSTITUTION ENGAGED IN CHARITABLE ACTIVITIES. SECTI ON 12AA(3) PREVIOUSLY PROVIDED THAT IF THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE FOUND TO BE NON-GENUINE OR ITS ACTIVITIES ARE NOT IN ACCORDANCE WITH THE OBJECTS FOR WHICH SUCH TRUST OR INSTITUTION WAS ESTABLISHED, THE REGISTRATION GRANTED UNDER SECTION 12AA CAN BE CANC ELLED BY THE COMMISSIONER AFTER PROVIDING THE TRUST OR INSTITUTION AN OPPORTUNITY O F BEING HEARD. 8.2 THE POWER OF CANCELLATION OF REGISTRATION IS IN HERENT AND FLOWS FROM THE AUTHORITY OF GRANTING REGISTRATION. HOWEVER, JUDICIAL RULINGS IN SOME CASES HAVE HELD THAT THE COMMISSIONER DOES NOT HAVE THE POWER TO CANCEL THE REGISTRATION WHICH WAS OBTAINED EARLIER BY ANY TRUST OR INSTITUTION UNDER PROVISION S OF SECTION 12A AS IT IS NOT SPECIFICALLY MENTIONED IN SECTION 12AA. H.K. KALCHURI AND OTHERS 12AA 45 8.3 THEREFORE, SECTION 12AA HAS BEEN AMENDED TO PRO VIDE THAT THE COMMISSIONER CAN ALSO CANCEL THE REGISTRATION OBTAINED UNDER SEC TION 12A AS IT STOOD BEFORE AMENDMENT BY FINANCE (NO.2) ACT, 1996. 8.4 APPLICABILITY - THIS AMENDMENT HAS BEEN MADE APPLICABLE WITH EFFECT FROM 1ST JUNE, 2010 AND SHALL ACCORDINGLY APPLY FOR ASSE SSMENT YEAR 2011-12 AND SUBSEQUENT ASSESSMENT YEARS . 16. NOW, WE WILL DISCUSS THIS PROPOSITION OF LAW IN TERPRETED BY VARIOUS ITATS/COURTS. HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX EXEMPTION VS. MOOLCHAND KHAIRATI RAM, 339 ITR 6 22 HAD OCCASION TO INTERPRET SAME SECTION AND THE HONBLE HIGH COURT H AS EXTENSIVELY DEALT WITH THIS ISSUE IN DETAIL. HONBLE HIGH COURT, OBSE RVED THAT: 5. THERE IS ALSO NO DISPUTE THAT THE REGISTRATION, WHICH IS SOUGHT TO BE WITHDRAWN BY THE AUTHORITY, IS BY VIRTUE OF POWER V ESTED IN THE COMMISSIONER UNDER SECTION 12AA(3) OF THE ACT. THE ORDER WHICH WAS PASSED BY THE DIT WAS UNDER SECTION 12AA(1)(B) READ WITH SECTION 12A OF THE ACT. FOR PROPER APPRECIATION OF THE RIVAL SUBMI SSIONS BASED ON THE INTERPRETATION OF SECTIONS 12A AND 12AA(1)(B) AND 12AA(3) , IT WOULD BE USEFUL TO REPRODUCE RELEVANT PARTS OF THESE SECTION S, WHICH ARE AS UNDER: 12A. [CONDITIONS FOR APPLICABILITY OF SECTIONS 11 AND 12 .] - THE PROVISIONS OF SECTION 11 AND SECTION 12 SHALL NOT APPLY IN RELATION TO THE INCOME OF ANY TRUST OR INSTITUTION UNLESS THE F OLLOWING CONDITIONS ARE FULFILLED, NAMELY: H.K. KALCHURI AND OTHERS 12AA 46 (A) THE PERSON IN RECEIPT OF THE INCOME HAS MADE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION IN THE PRE SCRIBED FORM AND IN THE PRESCRIBED MANNER TO THE 8[***] COMMISSIONER BEFORE THE 1ST DAY OF JULY, 1973, OR BEFORE THE EXPIRY OF A PERIOD OF ONE YEAR FROM THE DATE OF THE CREATION OF THE TRUST OR THE ESTABLISHMENT OF THE I NSTITUTION, 9[WHICHEVER IS LATER AND SUCH TRUST OR INSTITUTION IS REGISTERED U NDER SECTION 12AA ] : 12AA. PROCEDURE FOR REGISTRATION. - (1) THE 2[***] COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRU ST OR INSTITUTION MADE UNDER CLAUSE (A) [OR CLAUSE (AA) OF SUB- SECTION (1)] OF SECTION 12A , SHALL-- (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 ALSO 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 SU CH ORDER SHALL BE SENT TO THE APPLICANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY O F BEING HEARD. (2) ..... (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTE D REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) [OR HAS OBTAINED REGI STRATION 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 COMMISSIO NER IS H.K. KALCHURI AND OTHERS 12AA 47 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 O RDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTITUTION: 6. AT THE OUTSET, IT MAY BE PERTINENT TO NOTE THAT THE TITLE OF SECTION 12A CONDITIONS FOR APPLICABILITY OF SECTIONS 11 AND 12 WAS SUBSTITUTED WITH EFFECT FROM 1ST JUNE, 2007 IN PLACE OF PREVIOUS TIT LE CONDITIONS AS TO REGISTRATION OF THE TRUSTS ETC. . IT MEANS THAT PRIOR TO 1ST JUNE, 2007, THIS SECTION ITSELF PROVIDED CONDITIONS REGARDING REGIST RATION OF TRUST ETC. IT IS NOTED HERE BECAUSE WITH THE SUBSTITUTION OF THE PRE SENT TITLE, THIS SECTION NO LONGER PROVIDES FOR REGISTRATION OF TRUST ETC. A SPECIAL PROVISION HAS BEEN ENACTED IN SECTION 12AA PROVIDING FOR PROCEDURE FOR REGISTRATION OF TRUST ETC. WITH EFFECT FROM 1ST APRIL, 1997. IT IS ALSO NOTED THAT SECTION 12A WAS INSERTED IN THE STATUTE BOOK BY THE FINANCE ACT , 1972 WITH EFFECT FROM 1ST APRIL, 1973. IT WAS OMITTED AND WAS AGAIN RESTO RED WITH EFFECT FROM 1ST APRIL, 1989. SECTION 12A , AS IT STOOD AT THE TIME WHEN IT PROVIDED FOR REGISTRATION OF TRUST, NOWHERE PROVIDED FOR CANCELL ATION OF THE REGISTRATION ONCE GRANTED. IT IS ALSO PERTINENT TO NOTE THAT THE WORDS SUCH TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA WERE ALSO SUBSTITUTED IN THIS SECTION WITH EFFECT FROM 1ST APRIL, 1997. IN FACT, THIS SECTION EVEN NOW NOWHERE STIPULATES ABOUT THE CANCELLATION OR WITHDR AWAL OF THE REGISTRATION, ONCE GRANTED UNDER THE SAID SECTION. IT IS ONLY UND ER SECTION 12AA , WHICH CAME IN THE STATUTE BOOK WITH EFFECT FROM 1ST APRIL , 1997 THAT A FRESH PROCEDURE FOR REGISTRATION OF THE TRUST OR INSTITUT ION IS PRESCRIBED. EVEN UNDER THIS SECTION 12AA , THERE WAS NO PROVISION FOR CANCELLATION OF REGISTRATION ONCE GRANTED TILL THE ENACTMENT OF SUB -SECTION (3) WITH EFFECT FROM 1ST OCTOBER, 2004. THERE IS NO DISPUTE WITH RE GARD TO THIS FACT THAT THE PROVISION REGARDING CANCELLATION OF REGISTRATION CA ME TO BE INTRODUCED FOR THE FIRST TIME BY VIRTUE OF SUB-SECTION (3) IN SECTION 12AA WITH EFFECT FROM 1ST OCTOBER, 2004. THIS SUB-SECTION (3) PROVIDES TH AT WHEN A TRUST OR AN H.K. KALCHURI AND OTHERS 12AA 48 INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLA USE (B) OF SUB- SECTION 1 AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEI NG CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING THE RE GISTRATION OF SUCH TRUST OR INSTITUTION. A PLAIN READING OF THIS PROVISION WOUL D SHOW THAT SECTION 12AA EMPOWERED THE CIT TO GRANT THE REGISTRATION IN THOS E CASES WHERE THE ASSESSEE APPLIED FOR SUCH REGISTRATION UNDER SUB-SE CTION (1) THEREOF. SUB- SECTION (1) PROVIDES THAT THE CIT ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE IN CLAU SE (A) OR CLAUSE (AA) OF SUB-SECTION (1) OF SECTION 12A , SHALL - (A) .... (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, - (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. 7. FROM THE CONJOINT READING OF SUB-SECTION (1) CLA USE (B) AND SUB- SECTION (3) OF SECTION 12AA , IT WOULD BE SEEN THAT THE CANCELLATION OF THE REGISTRATION WAS PROVIDED WHERE THE REGISTRATION WA S GRANTED UNDER CLAUSE (B) OF SUB-SECTION (1). FURTHER CANCELLATION UNDER SUB-SECTION (3) WAS ALSO PROVIDED WHERE THE REGISTRATION WAS OBTAINED AT ANY TIME UNDER SECTION 12A (MAY BE UNDER CLAUSE (A) OR CLAUSE (AA) OF SUB-SECTION (1) OF SECTION 12A ). BUT THIS POWER H.K. KALCHURI AND OTHERS 12AA 49 OF CANCELLATION OF REGISTRATION OBTAINED UNDER SECTION 12A CAME TO BE INCORPORATED BY WAY OF AMENDMENT INTRODUCED BY THE FINANCE ACT , 2010 WITH EFFECT FROM 1ST JUNE, 2010. THAT BEING THE INT ERPRETATION OF SUB- SECTION (3), IT IS AMPLY CLEAR THAT THE POWER TO CA NCEL THE REGISTRATION ONCE GRANTED WAS ONLY CONFINED TO THE REGISTRATION GRANT ED UNDER CLAUSE (B) OF SUB-SECTION 1 OF SECTION 12AA TILL BEFORE 1ST JUNE, 2010. OF COURSE, NOW WITH EFFECT FROM 1ST JUNE, 2010, THE POWER VESTS WI TH THE COMMISSIONER EVEN TO CANCEL THE REGISTRATION GRANTED UNDER ANY O F THE CLAUSES OF SUB- SECTION (1) OF SECTION 12A . IN THAT VIEW OF INTERPRETATION, WE ARE OF THE CONSIDERED VIEW THAT THERE WAS NO POWER VESTED WITH THE COMMISSIONER TO CANCEL OR WITHDRAW THE REGISTRATION GRANTED TO THE ASSESSEE UNDER SECTION 12A(A) IN THE YEAR 1974. 8. SIMILAR QUESTION ALSO AROSE BEFORE THE ALLAHABAD HIGH COURT IN CIT V. MANAV VIKAS AVAM SEWA SANSTHAN, ITA NO .161/2007 DECIDED ON 24TH FEBRUARY, 2010, WHEREIN THE RELIANCE WAS PLACED IN THE CASE OF LUCKNOW BENCH IN OXFORD ACADEMY FOR CAREER DEVELOPMENT V. C HIEF COMMISSIONER OF INCOME TAX, LUCKNOW, (2009) 315 ITR 382 (ALL), W HEREIN IT WAS HELD AS UNDER:- REGARDING CANCELLATION OF REGISTRATION WHICH WAS GR ANTED ON 01.04.1999 UNDER SECTION 12A OF THE ACT, IT IS TRUE THAT THERE WAS NO EXPRESS P ROVISION IN SECTION 12A OF THE ACT FOR CANCELLATION OF THE REGISTRATION. T HE APPLICABILITY OF SECTION 21 OF THE GENERAL CLAUSES ACT, 1897 WAS DISCUSSED BY THE UTTRANCHAL HIGH COURT IN THE CASE OF WELHAM BOY'S SCHOOL SOCIETY (SUPRA), WHERE IT WAS OBSERVED THAT ANY ORDER PASSED BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 12A IS A QUASI-JUDICIAL ORDER, WHICH DOES NOT FALL IN THE CATEGORY OF ORDE RS MENTIONED IN SECTION 21 OF THE GENERAL CLAUSES ACT, 1897 BY RELYING THE RA TIO LAID DOWN IN THE CASE OF GHAURUL HASAN V. STATE OF RAJASTHAN REPORTED IN AIR 1987 SC 107. THE HIGH COURT OBSERVED THAT BY VIRTUE OF SECTION 21 OF THE H.K. KALCHURI AND OTHERS 12AA 50 GENERAL CLAUSES ACT, THE COMMISSIONER OF INCOME TAX HAD NO POWER TO RESCIND THE ORDER PASSED EARLIER BY THE COMMISSIONE R GRANTING REGISTRATION TO THE PETITIONER'S SOCIETY. IT MAY BE MENTIONED TH AT SECTION 12AA(3) WAS INCORPORATED W.E.F. 01.10.2004 TO EMPOWER THE COMMI SSIONER TO CANCEL THE REGISTRATION GRANTED TO A TRUST OR INSTITUTION. THE SAME IS NOT APPLICABLE RETROSPECTIVELY AND IN THE ASSESSEE'S CASE FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. THE OBJECT OF THIS PROVISION IS NOT CLARIFICATION OR EXPLANATORY, SO PRIOR TO THAT DATE, THE AUTHORITIES GRANTING REGISTRATION HAD NO INHERENT POWER TO WITHDRAW OR REVOKE THE REGISTR ATION ALREADY GRANTED. THE ORDER CANCELLING THE REGISTRATION GRANTED TO A TRUST OR INSTITUTION UNDER SECTION 12AA OF THE ACT BEING A QUASI- JUDICIAL ORDER DOES NOT FALL WITHIN THE CATEGORY OF ORDERS MENTIONED UNDER SECTION 21 OF THE GENERAL CLAUSES ACT, 1897, WHICH PROVIDES THAT THE POWER CO NFERRED ON AN AUTHORITY EMPOWER TO ISSUE ORDERS INCLUDING THE POW ER TO RESCIND SUCH ORDERS AND THE COMMISSIONER WOULD NOT HAVE POWER TO RESCIND THE ORDER PASSED BY THE COMMISSIONER EARLIER GRANTING THE REG ISTRATION TO A TRUST OR INSTITUTION. 17. WE, RESPECTFULLY, FOLLOWING THE DECISION OF HON BLE DELHI HIGH COURT, ARE OF THE VIEW THAT THE ASSESSEE TRUST WAS GRANTED REGISTRATION U/S 12A ON 12.3.2007 W.E.F. 13.1.1999 AFTER DUE SATISFACTION T HAT ASSESSEE TRUST WAS ESTABLISHED FOR CHARITABLE PURPOSES TO IMPART EDUCA TION AND SINCE THEN THERE IS NO CHANGE IN OBJECTS WHATSOEVER, THEREFORE , FROM THE ABOVE DECISION AND CBDT CIRCULAR (SUPRA), IT IS CLEAR THA T THERE WAS NO STATUTORY ENABLING POWERS U/S 12AA(3) OF THE ACT WITH THE CIT TO CANCEL THE REGISTRATION FOR THE PERIOD PRIOR TO ASSESSMENT YEA R 2011-12 AS IT COULD BE H.K. KALCHURI AND OTHERS 12AA 51 CANCELLED ONLY FROM ASSESSMENT YEAR 2011-12 AND SUB SEQUENT YEARS IN RESPECT OF REGISTRATION OBTAINED UNDER OLD SECTION 12A AND ANY ORDER CONTAINING SUCH CANCELLATION LIKE THE PRESENT ONE I S LIABLE TO BE QUASHED. SIMILARLY, CIT HAD NO ENABLING POWER TO CANCEL REGI STRATION ON THE CONDITION OF VIOLATION OF PROVISIONS OF SEC. 13 PRIOR TO 1.10 .2014 AS UNLAWFULLY DONE BY HIM AND THERE WAS NO POWER TO PROMULGATE SUCH CONDI TION IN THE NOTICE (INFRA) WHICH CAME TO BE SUBSEQUENTLY INCORPORATED W.E.F. 1.10.2014 ONLY BY WAY OF INSERTION OF SEC. 4 OF SEC. 12AA OF THE I . T. ACT. ON THESE GROUNDS, CANCELLATION ORDER OF CIT IS LIABLE TO BE QUASHED. 18. FOR THE READY REFERENCE, WE REPRODUCE THE NOTIC E WHICH READS AS UNDER: OFFICE OF THE COMMISONER OF INCOME TAX AYAKARBHAWAN' HOSHANGABAD ROAD, BHOPAL- 462 011 F.NO. CIT/BPL/TECH/12A/12-13 DATED 15.02.2013 TO H K KALCHURI EDUCATION TRUST 31, SHYAMLA HILLS BHOPAL SIR, SUB : REGARDING GRANT OF REGISTRATION U/S 12AA OF T HE INCOME TAX ACT- REGARDING. H.K. KALCHURI AND OTHERS 12AA 52 PLEASE REFER TO THE CIT, BHOPAL'S ORDER U/S 12AA(1) (B)(I) OF THE INCOME TAX ACT DATED 12.03.2007 GRANTING YOU REGISTRATION VIDE F.N O. CIT/BPL/TECH/12A/51/06- 07 DATED 12.03.2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN YOUR CASE COMPLETED U/S 153A/143(3) FOR THE A.Y. 2004-05 TO 2010-11 IT HAS BEEN OBSERVED THAT THE ASSESSEE SOCIETY HAS GIVEN BENEFITS TO ITS MEMBERS AND RELATED CONCERNS. THEREFORE, THE PROVISIONS OF SECTION 13 ARE APPLICA BLE AND RESULTANTLY SECTION 11 & 12 WILL NOT OPERATE. DURING THE COURSE OF ASSESSMEN T IT WAS ALSO FOUND THAT THE ASSESSEE SOCIETY WAS NOT ELIGIBLE FOR EXEMPTION U/S 11 & 12 OF I.T. ACT 1961 AS IT HAS VIOLATED THE PROVISIONS OF SECTION 11 TO 13 OF I.T. ACT 1961. AS THE ASSESSEE SOCIETY WAS NOT ELIGIBLE FOR EXEMPT ION U/S 11 & 12, YOU ARE HEREBY GIVEN AN OPPORTUNITY TO APPEAR BEFORE ME ON 26.2.2013 AT 3.35 P.M. TO EXPLAIN AS TO WHY THE REGISTRATION GRANTED TO YOU U /S 12AA OF THE INCOME TAX ACT AS MENTIONED ABOVE SHOULD BE CANCELLED WITH EFFECT FROM THE F.Y. 2003-04. SD./- (S.C. SONKAR) COMMISSIONER OF INCOME TAX, BHOPAL 19. OUR VIEW THAT ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE, CIT HAD NO POWERS TO CANCEL THE REGISTRATION IS ALSO SU PPORTED BY VARIOUS DECISIONS OF HIGH COURTS/TRIBUNALS ETC. WHICH READ AS UNDER: MAHARASHTRA ACADEMY OF ENGINEERING & EDUCATIONAL RE SEARCH (MAEER) VS. CIT (2010) 113 TTJ (PUNE ITAT) HELD : INVESTIGATION WING OF IT DEPARTMENT IN SEARCH AND S URVEY FOUND THAT ASSESSEE TRUST WAS TAKING DONATION AND CAPITATION F EES FOR ADMISSION THOUGH PROHIBITED UNDER MAHARASHTRA EDUCATIONAL INSTITUTIO NS (PROHIBITION OF CAPITATION FEES) ACT, 1987. CANCELLATION OF REGISTRATION U/S 1 2AA(3) ON THAT BASIS IS NOT JUSTIFIED. LANGUAGE USED IN S. 12AA(3) ONLY CONFINE S TO ENQUIRE ABOUT THE ACTIVITIES OF THE TRUST AND ITS GENUINENESS, WHICH MEANS, IN CONSONANCE WITH THE OBJECTS FOR WHICH CREATED AND THOSE OBJECTS AS ALSO ACTIVITIES SHOULD NOT BE A CAMOUFLAGE BUT PURE, SINCERE, CHARITABLE AND FOR PU BLIC UTILITY AT LARGE. NATURALLY, AN INSTITUTION IF ESTABLISHED TO CARRY OUT ANY ILLE GAL ACTIVITY OR ACTIVITIES ARE H.K. KALCHURI AND OTHERS 12AA 53 CAUSING ANY TYPE OF NUISANCE NOT IN THE INTEREST OF PUBLIC AT LARGE SHOULD DEFINITELY LEAD TO CANCELLATION OF REGISTRATION . CIT NOT TO ENTER INTO THE AREA OF INVESTIGATION OF SOURCE OF INCOME AND ALSO APPLICATION OF INCOME, SO THAT THE AMOUNT OF CORRECT EXEMPT INCOME BE PREJUDGED. CIT HAS FAILED TO ESTAB LISH THAT ANY PART OF THE INCOME/RECEIPT OF THE TRUST WAS IN ANY MANNER MISUT ILISED BY THE TRUSTEES FOR THEIR PERSONAL BENEFIT I.E. NOT IN FULFILLMENT OF THE OBJ ECT OF THE TRUST. CHATURVEDI HAR PRASAD EDUCATIONAL SOCIETY VS. CIT ( 2010) 134 TTJ (LUCK.) 781 - HELD : AS PER S. 12AA(3) REGISTRATION GRANTED TO ANY TRUST OR SOCIETY UNDER S. 12AA(1)(B) CAN BE CANCELLED ONLY IF THE CIT IS SATI SFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEI NG CARRIED OUT IN ACCORDANCE WITH THE OBJECTS THEREOF. IN THE INSTANT CASE, IT IS NOT THE CASE OF THE CIT THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE SOCIETY. THUS, B OTH THE CONDITIONS LAID DOWN IN SUB.S (3) OF S. 12AA FOR CANCELLATION OF REGISTRATI ON ARE NOT SATISFIED. OBJECTS PER SE CANNOT BE RE-EXAMINED UNDER THE PROVISIONS OF SU B S. (3) OF S. 12AA. ACTION TAKEN BY THE CIT DID NOT FALL WITHIN THE PAR AMETERS OF SUB-S. (3) OF S. 12AA. HENCE IMPUGNED ORDER IS ILLEGAL AND UNSUSTAINABLE. H.P. GOVERNMENT ENERGY DEV. AGENCY VS. CIT (2010) 1 34 TTJ (CHD) (UO) 33 - HELD : POWER OF THE CIT TO CANCEL THE REGISTRATION IS CIRC UMSCRIBED BY THE CONDITIONS PRESCRIBED IN S. 12AA(3). SUCH POWER DOES NOT PERMIT WHOLESALE REVIEW OF THE INGREDIENTS WHICH HAVE BEEN CONSIDERE D BY THE CIT WHILE GRANTING REGISTRATION UNDER S. 12AA . AT THE TIME OF CANCELLING THE REGISTRATION UNDER S. 12AA(3), THE CIT HAS ONLY TO SATISFY HIMSELF ABOUT THE TWO C ONDITIONS PRESCRIBED THEREIN NAMELY, ACTIVITIES ARE NOT GENU INE OR THE ACTIVITIES ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION . RAJASTHAN VIKAS SANSTHAN VS. CIT (2012) 78 DTR 411 (JODH. ITAT) - HELD : THE REGISTRATION CAN BE CANCELLED ON THE GROUND THA T THE ACTIVITIES OF THE TRUST ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST IN CASE THERE ARE VIOLATIONS AS MENTIONED IN SS. 11 AND 13. THUS THE AO WHILE MAKING ASSESSMENT CAN DENY THE EXEMPTION TO T HE TRUST. FOR GETTING THE EXEMPTION UNDER S. 11, REGISTRATION IS PREREQUISITE . HOWEVER, REGISTRATION IS NOT A GUARANTEE FOR EXEMPTION. IN CASE, THE TRUST FAILS T O COMPLY WITH THE REQUIREMENTS H.K. KALCHURI AND OTHERS 12AA 54 AS MENTIONED IN SS. 11 AND 13 THEN EXEMPTION CAN BE DENIED. IN RESPECT OF FAILURE MENTIONED IN SS. 11 AND 13 IN A PARTICULAR YEAR, IT CANNOT BE SAID THAT REGISTRATION IS TO BE CANCELLED. SURPLUS IN EDUCATI ONAL ACTIVITIES IS NOT RELEVANT FOR CANCELLING THE REGISTRATION. THE EDUCATION ITSELF I S CHARITABLE OBJECT AND IF THE SURPLUS IS UTILIZED FOR THE PURPOSE OF CHARITABLE A CTIVITIES THEN IT CANNOT BE SAID THAT REGISTRATION IS TO BE DISALLOWED. THE GROUND O N WHICH THE REGISTRATION CANNOT BE REFUSED CANNOT BE CONSIDERED AS A GROUND FOR CAN CELING THE REGISTRATION. IF ESTABLISHING AND RUNNING OF SCHOOL IS THE OBJECT OF THE SOCIETY AS GIVEN IN ITS BYE-LAWS THEN IT HAS SATISFIED THAT THE SOCIETY HAS ESTABLISHED THE SCHOOL WHERE EDUCATION IS IMPARTED, AS PER RULE OF FACTUM OF ESTABLISHING AND RUNNING OF SCHOOL IS GENUINE ACTIVITY. THE ENQUIRY REGARDING GENUINENESS OF THE ACTIVITIES CANNOT BE STRETCHED BEYOND THIS. THE PROVISIONS OF S. 13(1)(C)CAN BE INVOKED ONLY AT TIME OF COMPUTATION OF TOTAL INCOME IN THE CASE OF A PERSON WHO IS CLAIMING EXEMPTION UNDER S. 11 OR 1 2 BY THE AO AND NOT BY THE CIT. IF THERE IS ANY MISUTILISATION OF MISMANAGEMEN T THEN ACTION CAN BE TAKEN AGAINST THE MEMBER OF THE SOCIETY. IF THE FUND OF T HE SOCIETY HAS BEEN UTILIZED FOR EDUCATIONAL PURPOSES THEN REGISTRATION SHOULD NOT B E REFUSED AND OVERALL VIEW IS TO BE TAKEN WITHOUT BEING HYPER TECHNICAL IN GRANTI NG EXEMPTION INCLUDING THE OBJECTS OF THE SOCIETY. MAHARASHTRA ACADEMY OF ENGINEERING &EDUCATIONAL RESEARCH (MAEER) VS. CIT (2010) 133 TTJ (PUNE) 706 : (2010) 36 DTR (PUNE)(TRIB) 321, AGGARWAL MITRA MANDAL TRUST VS. D IRECTOR OF IT (EXEMPTION) (2007) 109 TTJ (DEL) 128 AND IAC VS. MATRUSRI EDUCA TIONAL SOCIETY (1994) 49 TTJ (HYD) 146 AND DY. CIT VS. COSMOPOLITAN EDUCATIO N SOCIETY (1999) 157 CTR (RAJ) 209 : (2000) 244 ITR 494 (RAJ) FOLLOWED. CIT V. SARVODYA ILLAKIYA PANNAI (2012) 343 ITR 300 (MADRAS HC)- HELD : THE COMMISSIONER IS EMPOWERED TO GRANT OR REFUSE T HE REGISTRATION AND AFTER GRANTING REGISTRATION, WOULD BE EMPOWERED TO CANCEL IT, BUT ONLY ON THE TWO CONDITIONS LAID DOWN UNDER SECTION 12AA(3). WHETHER THE INCOME DERIVED FROM SUCH TRANSACTION WOULD BE ASSESSED TO TAX AND WHETH ER THE TRUST WOULD BE ENTITLED TO EXEMPTION UNDER SECTION 11 ARE ENTIRELY THE MATTERS LEFT TO THE AO TO DECIDE. WELHAM BOYS SCHOOL SOCIETY VS. CBDT [2006] 285 ITR 74 (UTTARANCHAL HC) H.K. KALCHURI AND OTHERS 12AA 55 HELD : ON THE BASIS OF THE ALLEGED REVIEW OF ACTIVITIES O F THE PETITIONER SOCIETY, THE CIT COULD NOT HAVE WITHDRAWN THE REGISTRATION UNDER SECTION 12AA OF THE ACT EVEN IF IT WAS FOR ENSURING THAT SUCH INSTITUTI ONS DID NOT BECOME A FRAUD ON THE LAW OF THE LAND AND MISUSE THE BENEVOLENT LE GISLATION. AS RIGHTLY POINTED OUT BY THE PETITIONER, EVEN IF THE PETITIONER SOCIETY WAS FOUND TO BE NOT CARRYING ON ANY CHARITABLE ACTIVITY, THE SECOND RESPONDENT COULD ONLY DENY THE BENEFITS OF SECTIONS 11 AND 12 OF THE ACT TO THE PETITIONER SOCIETY AT THE TIME OF ASSESSMENT . M/S PRATIMA EDUCATIONAL SOCIETY VS. CIT, ITA NO. 72 0/HYD./2012DATED 3.9.2013 ITAT HYDERABAD BENCH HELD : SINCE THE QUESTION ABOUT THE IMPARTING OF EDUCATIO N HAS NOT BEEN DOUBTED OR CHALLENGED BY THE REVENUE THEREFORE, THE IMPUGNE D ORDER PASSED BY THE RESPONDENT IS UNSUSTAINABLE IN LAW. STRANGE ENOUGH THERE IS NOTHING ON RECORD TO PROVE SIGHTLESSLY THAT THE PURPOSE OF IMPARTING OF EDUCATION WAS NOT FULFILLED BY THIS INSTITUTE THUS THE REVENUE DEPARTMENT HAS HOPELESSLY FAILED TO ESTABLI SH THAT THERE WAS ANY ILLEGAL ACTIVITY OR INFRINGEMENT OF ANY LAW SO THAT TO DOUBT THE GENUINENESS OF THE ACTIVITIES . IF IT WAS SO THEN IT CAN BE HELD THAT THE ALLEGATIONS OF THE REVENUE REMAINED UNSUPPORTED THU S DESERVES DISMISSAL. THE CIT'S APPROACH FOR DECIDING THE ELIGIBILITY OF REGI STRATION OF A TRUST SHOULD BE DIFFERENT FROM THE ANGLE BY WHICH AN ASSESSMENT OF AN INCOME IS MADE BY THE AO . WHAT PURPOSE DOES IT SERVE TO REVENUE BY CANCELLING A REGISTRATION IF THE ACTIVITIES ARE IN PUBLIC INTEREST BECAUSE IN CA SE OF ANY BREACH OF THE LAWS THE SAME IS SUBJECT TO TAX UNDER SS. 11 AND 12. THESE T WO PROVISIONS AND FEW OTHER PROVISIONS ARE COMPETENT ENOUGH TO TACKLE FIRMLY A DEFAULTER OF PHILANTHROPIC APPLICATION OF INCOME OR FUNDS OF THE TRUST. THE OT HER ADVERSE SIDE OF CANCELLATION IS THAT ON REFUSAL OF REGISTRATION THE ENTIRE RECEI PTS SHALL BE SUBJECT TO ASSESSMENT WITHOUT GRANTING BENEFIT OF S. 11 AND S. 12 TO ASSE SS INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME THOUGH THE FACTUAL POSITION CO ULD BE THAT MAJOR PART MIGHT HAVE BEEN DEVOTED TOWARDS ACHIEVING THE OBJECTS I.E ., IMPARTING EDUCATION, AS IN THIS CASE, BUT THE AO SHALL BE AUTOMATICALLY FORBID DEN TO GRANT ADVANTAGE OF EXEMPTION CONSEQUENT UPON THE CANCELLATION AS IS MA NDATORY IN STATUTE. THE OUTCOME OF THE DELIBERATION MADE IN DETAIL HEREINAB OVE IS THAT PERCURIAN OPINION IS TO DEBAR THE CIT TO ENTER INTO THE AREA OF INVESTIGATION OF SOURCE OF INCOME AND ALSO APPLICATION OF INCOME, SO THAT T HE AMOUNT OF CORRECT EXEMPT INCOME BE NOT PREJUDGED. IF THE CIT HAD ANY INFORMATION OF SOME H.K. KALCHURI AND OTHERS 12AA 56 WRONGFUL MEANS OF EARNING FEES IN THE FORM OF A DON ATION OR THE INFORMATION TELLS ABOUT EXCESSIVE CHARGING OF FEES; THEN THE CIT IN H IS RIGHTS CAN PASS ON THE INFORMATION TO THE CONCERNED OFFICE BEARERS WORKING UNDER THE MAHARASHTRA CAPITATION FEES (PROHIBITION) ACT. THESE AUTHORITIE S HAVE ENOUGH POWER TO DEAL WITH SUCH NATURE OF DEFAULT, SIDE BY SIDE THE CIT IS TO LIMIT HIS JURISDICTION WITHIN THE AMBITS OF PROVISIONS OF THE ACT AND EXPE CTED TO GIVE A FINDING ON FACTS THAT EITHER THE OBJECTS ARE NOT FOR GENERAL P UBLIC UTILITY OR NOT ACHIEVED AS PRESCRIBED UNDER LAW. HOWEVER PRESENTLY THE SITU ATION IS THAT THE REVENUE HAS NOT SAID ABOUT ANY IMMORAL ACTIVITY OF THE APPELLANT OR THE COLLECTION OF FEES WAS BY WRONGFUL MEANS. PRIMA FAC IE NO CASE WAS MADE OUT BY THE CIT SO AS TO EVEN VAGUELY DEMONSTRATE TH AT THE ACTIVITIES OF THE APPELLANT WERE NOT GENUINE OR ACTIVITY OF IMPARTING OF EDUCATION, FOR WHICH THE TRUST WAS CREATED, WERE NOT CARRIED OUT. 20. WE, RESPECTFULLY, FOLLOWING THE ABOVE DECISIONS , AND ON THE BASIS OF CBDT CIRCULAR ARE OF THE VIEW THAT IN THE PRESENT C ASE, CIT HAD NO POWERS TO CANCEL THE REGISTRATION, HENCE WE ALLOW THE APPE AL OF THE ASSESSEE AND HOLD THAT CIT HAD UNLAWFULLY CANCELLED THE REGISTRA TION. HENCE, WE ALLOW THE APPEAL ON THIS GROUND. 21. DURING THE COURSE OF HEARING, THE LEARNED AR F OR THE ASSESSEE HAS AGAIN SUBMITTED EXPLANATION ON MERITS OF EACH A ND EVERY ISSUE DEALT BY THE CIT AS BASIS FOR CANCELLATION OF REGISTRATION I N SYNOPSIS TABULAR FORM. THESE WERE ALSO FILED BEFORE CIT. LEARNED DR COULD NOT CONTROVERT THE SAME. IT WAS ALSO SUBMITTED THAT THE ACTIVITIES OF THE ASSESSEE TRUST WERE CHARITABLE AND GENUINE AND THE REGISTRATION WITHDRA WN BY THE CIT WAS NOT H.K. KALCHURI AND OTHERS 12AA 57 AS PER THE LAW. THESE EXPLANATIONS/SUBMISSIONS ARE FOUND CORRECT. AS REGARDS ALLEGATION OF CIT (AND ALSO OF THE ASSESSIN G OFFICER) THAT THE EDUCATIONAL INSTITUTIONS ARE RUN BY THE ASSESSEE AS PARTNERSHIP FIRMS FOR THE SOLE PURPOSE OF EARNING AND SHARING PROFITS, SUCH A LLEGATION IS ALSO FOUND WRONG, BASELESS, UNPROVED AND WITHOUT ANY CORROBORA TIVE EVIDENCE. FROM THE COPY OF BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT, IT IS CLEAR THAT THERE IS NO SHARING OF PROFITS SHOWN IN INCOME & EXPENDITURE ACCOUNT LIKE DONE IN CASE OF PARTNERSHIP FIRMS/BUSINESSES. SINCE INCEPTION, ALL THE BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT OF A SSESSEE INSTITUTION ARE PREPARED IN ACCORDANCE WITH THE NORMS OF A CHAR ITABLE ORGANIZATION WHERE THE SURPLUS IS TRANSFERRED TO TRUST FUND/SOCI ETY FUND ACCOUNT IN THE BALANCE SHEET & CARRIED OVER TO NEXT YEAR FOR THE P URPOSE OF ACCUMULATION AND APPLICATION/USE WHOLLY AND EXCLUSIVELY TOWARDS CHARITABLE PURPOSES. WE FIND THAT ALL THE RECEIPTS/SURPLUS HAVE BEEN UTI LIZED WHOLLY AND EXCLUSIVELY TOWARDS THE OBJECTS OF THE INSTITUTION AND NOTHING ADVERSE HAS BEEN STATED OR WHISPERED EITHER BY CIT OR BY AO. AN D MOST IMPORTANTLY, AS REGARDS THE ALLEGATION OF SHARING OR SIPHONING OF T HE RECEIPTS/SURPLUS/MONEY OF ASSESSEE-TRUST/SOCIETY BY OFFICE BEARERS/TRUSTEE S, AS PER SO-CALLED AGREEMENT FOUND, THE ONLY POSSIBLE WAY TO DO IT WAS TO INFLATE, THAT TOO EXORBITANTLY, THE CAPITAL AS WELL AS REVENUE EXPEND ITURES OF THE ASSESSEE- H.K. KALCHURI AND OTHERS 12AA 58 TRUST/SOCIETY TO UNSCRUPULOUSLY AND SILENTLY WITHDR AW MONEY. BUT, WE FIND THAT THERE IS NO EVIDENCE OR CASE AGAINST THE ASSES SEE-TRUST/SOCIETY OF HAVING INFLATED ANY CAPITAL OR REVENUE EXPENDITURES IN ANY OF THE ASSESSMENT YEARS EITHER BY THE CIT OR BY THE ASSESS ING OFFICER. EVEN IN NEXT TWO ASSESSMENT YEARS, IN A.Y. 2011-12 & 2012-1 3, IN THE SCRUTINY ASSESSMENTS DONE U/S 143(3) AFTER VERIFYING IN DETA IL THE BOOKS OF ACCOUNTS, THERE IS NO SUCH ASSERTION OR CLAIM OF REVENUE OF H AVING INFLATED CAPITAL OR REVENUE EXPENDITURE. THAT IN ITSELF PROVES BEYOND D OUBT THAT THE ALLEGATIONS OF THE REVENUE ARE TOTALLY FALLACIOUS, UNSUBSTANTIA TED, WRONG AND CONJECTURAL ONLY. IT IS NOTED THAT HUGE SURPLUS WA S SHOWN BY THE ASSESSEE- INSTITUTION ON YEAR TO YEAR BASIS WHICH SHOWS BONA FIDES OF THE ASSESSEE- INSTITUTION. HAD MONEY BEEN SIPHONED OUT, THERE WAS NO NEED TO SHOW SURPLUS IN EACH YEAR. THIS IS BECAUSE SIPHONING OUT IS NOT POSSIBLE WITHOUT SUPPRESSING RECEIPTS OR INFLATING EXPENSES, AS AFOR ESAID. HAD THE TRUSTEES/MEMBERS INDULGED IN PROFIT SHARING, AS ALL EGED BY THE CIT AND ASSESSING OFFICER, AT LEAST AN IOTA OF EVIDENCE, EV EN WORTH THE NAME, SHOULD HAVE BEEN FOUND IN THE SEARCH ON THE TRUSTEE S/MEMBERS. THAT COULD BE IN THE FORM OF STATEMENT OF PROFIT/INCOME PREPAR ED IN SOME WAY OR THE OTHER TO WORK OUT AND SETTLE ACCOUNTS WITH EACH OTH ER FOR PROFIT SHARING OR IT COULD BE SOME CASH-RECEIPT IN ACKNOWLEDGMENT OF REC EIVING OF THE ALLEGED H.K. KALCHURI AND OTHERS 12AA 59 SHARE OF PROFIT OR SOME OTHER EVIDENCE OF THE SORT WITHOUT WHICH IT WAS NOT POSSIBLE TO DETERMINE, WORK OUT & SHARE PROFITS. BU T, WE OBSERVE THAT NO SUCH THING WAS FOUND OR BROUGHT ON RECORD BY CIT OR ASSESSING OFFICER IN ASSESSMENT TO EVEN VAGUELY OR REMOTELY SUGGEST THAT . IN CASE OF ACTUAL IMPLEMENTATION OF THE AGREEMENT, SUCH ACKNOWLEDGMEN T OF CASH PAYMENT, IF ANY, WAS NECESSARY TO KEEP RECORD OF SUCH PAYMEN T, FOR FUTURE; THIS MUST HAVE BEEN KEPT BY TRUSTEES/MEMBERS BECAUSE LOADS O F PAPERS WERE KEPT AND FOUND AND SEIZED FROM THEM. THIS IMPORTANT FACT WAS ALSO OVERLOOKED BY CIT THAT THE ENTIRE FUNDS/PROPERTY OF THE INSTIT UTION IS LYING IN THE NAME OF ASSESSEE-TRUST/SOCIETY ONLY AND NOT IN THE NAME OF ITS TRUSTEES/MEMBERS. IT IS SIGNIFICANT TO NOTE THAT NO ALLEGATION OR EVIDEN CE WAS THERE REGARDING DIVERSION OF MONEY FROM ASSESSEE INSTITUTION TO TRU STEES/MEMBERS, EVEN FROM INCEPTION, EITHER BY CIT OR ASSESSING OFFICER. PAYMENTS TO TRUSTEES/MEMBERS IN LIEU OF THEIR SERVICES WERE FOU ND NOT EXCESSIVE. THE ASSESSEE-TRUST HAS MAINTAINED DETAILED AND CONTEMPO RANEOUS BOOKS OF ACCOUNTS WHICH ARE DULY AUDITED BY CHARTERED ACCOUN TANTS WITH NO ADVERSE REMARKS. THE FUNCTIONING AND MANAGEMENT OF THE EDUC ATIONAL INSTITUTES RUN BY THE ASSESSEE-TRUST ARE UNDER STRICT MONITORING A ND SUPERVISION OF ALL INDIA COUNCIL OF TECHNICAL EDUCATION (AICTE), A BOD Y CONSTITUTED BY MINISTRY OF HUMAN RESOURCE DEVELOPMENT, GOVERNMENT OF INDIA. THE H.K. KALCHURI AND OTHERS 12AA 60 SENIORS OFFICERS OF THE AICTE CARRY OUT PERIODICAL DETAILED INSPECTION OF THE BOOKS OF ACCOUNTS AND FUNCTIONING OF THE EDUCATIONA L INSTITUTIONS RUN BY THE ASSESSEE. THEY HAVE NEVER GIVEN ANY ADVERSE REPORT OR COMMENT ON THE FUNCTIONING OF THE ASSESSEE. HAD THEY FOUND ANY SUC H LAPSES, AS UNILATERALLY CONCEIVED AND PRESUMED BY THE CIT/AO, THE APPROVAL OF THE ASSESSEE WOULD HAVE BEEN TERMINATED LONG BACK. BUT THEN NOTHING OF THE SORT HAS BEEN FOUND BY THE DEPARTMENT AND ALL THE E DUCATIONAL INSTITUTES RUN BY ASSESSEE ARE VERY MUCH RUNNING AND IMPARTING EDUCATION TO HUNDREDS OF STUDENTS IN PRESENT ALSO. IT IS ALSO NO WHERE PROVIDED IN THE BYE-LAWS THAT AT THE TIME OF DISSOLUTION OF TRUST/S OCIETY, THE FUNDS WILL VEST IN THE FAMILY OF THE TRUSTEES/ OFFICE-BEARERS. THE CIT/ASSESSING OFFICER ALSO IGNORED THE FACT THAT THE ASSESSEE INSTITUTION IS N OT PARTY TO THE IMPUGNED AGREEMENTS, AND HENCE, NO ADVERSE VIEW COULD BE TAK EN AGAINST THE TRUST/INSTITUTION WHICH IS AN INDEPENDENT IDENTITY FROM ITS TRUSTEES/MEMBERS. IT IS SETTLED LAW THAT IF IS THERE WAS ANY MISAPPLI CATION OF FUNDS OR MISMANAGEMENT, ACTION COULD LIE AGAINST THE PERSON RESPONSIBLE BUT IT IS NOT POSSIBLE TO SAY THAT ANY AMOUNTS OF THE FUNDS O F THE SOCIETY WAS NOT UTILISED FOR EDUCATIONAL PURPOSES AND FOR THAT REAS ON THE REGISTRATION OF CHARITABLE INSTITUTION CANNOT BE CANCELLED AS HELD IN COSMOPOLITAN EDUCATION SOCIETY 244 ITR 494 (RAJ.) [SLP OF DEPARTMENT DISMISSED BY H.K. KALCHURI AND OTHERS 12AA 61 HONBLE SUPREME COURT AS REPORTED IN 241 ITR (ST.) 132] AND OTHER DECISIONS RELIED UPON BY US IN THIS ORDER. EVEN OTHERWISE, THE CONTENTION OF THE ASSESSEE HAS FORCE THAT THE IMPUGNED AGREEMENTS, ON THE BASIS OF WHICH THE BEDR OCK OF ALLEGATION HAS BEEN BUILT-UP, WAS NOT ACTED UPON REALIZING THAT IT IS NEITHER LEGITIMATE NOR POSSIBLE TO DO IT UNDER THE CHARITABLE SET UP AND T HEREFORE, THE ALLEGATION OF ANY SUCH AGREEMENT HAVING BEEN ACTED UPON WAS ALL A LONG DENIED BY THE INSTITUTION AND TRUSTEES/OFFICE BEARERS. THIS IS BE CAUSE NEITHER CIT NOR AO HAS POINTED OUT ANY OF THE CLAUSE OF THE SUBJECT AG REEMENT TO HAVE BEEN ACTED UPON. IT ALSO NEEDS TO BE TAKEN NOTE OF THAT THE IMPUGNED AGREEMENTS FOUND IN SEARCH WERE MERELY PHOTOCOPIES AND NOT ORIGINAL. HAD THE OFFICE BEARERS/TRUSTEES ACTUALLY ACTED UPON ANY SUCH AGREEMENT, THEY WOULD HAVE KEPT THE ORIGINAL FOR THE PURPOSE OF SAF ETY. APPARENTLY, IT WAS A PURPORTED AGREEMENT TO PERFORM CERTAIN ACTIONS BUT CIT/ASSESSING OFFICER HAVE NOT TRIED TO PROVE, MUCH LESS PROVED, THAT ANY TRANSACTION PURSUANT TO THE SAID AGREEMENT HAS TAKEN PLACE. IT IS A SEARCH CASE WHERE ATLEAST AN IOTA OF OTHER SUPPORTIVE EVIDENCE MIGHT HAVE BEEN F OUND, IF THE SAID AGREEMENT WAS ACTUALLY ACTED UPON. BUT, NO IOTA OF CORROBORATIVE EVIDENCE WAS FOUND IN SEARCH OR BROUGHT ON RECORD BY AO, OR FOR THAT MATTER EVEN BY CIT TO SUPPORT THEIR ALLEGATIONS. FOR THIS PURPOSE, IT WAS INCUMBENT UPON H.K. KALCHURI AND OTHERS 12AA 62 CIT/AO TO HAVE CONDUCTED POST SEARCH INVESTIGATION/ ENQUIRY BY SUMMONING THE CONCERNED PARTIES AND TO BRING ON RECORD CLINCH ING EVIDENCE TO PROVE THEIR ALLEGATIONS. BUT, THE CONCERNED PARTIES TO TH E AGREEMENT WERE NOT SUMMONED BY THEM AT ALL, WHAT TO TALK OF CROSS EXAM INATION, DESPITE THE FACT THAT THERE WAS CLEAR CUT DENIAL WITH REGARD TO THE SUBJECT AGREEMENT BY ASSESSEE, AS NOT HAVING BEEN ACTED UPON. SIMILAR IS THE POSITION REGARDING PAYMENT OF RS.15,83,87,434/- OUT OF AGREED AMOUNT O F RS.17 CRORES. WE FIND THAT THIS PAYMENT HAS BEEN MADE THROUGH CHEQUE TO SOCIETIES REGISTERED U/S 12A DUE TO DISPUTE AMONG TRUSTEES/OF FICE BEARERS TO CONTINUE TO RUN THE CHARITABLE ENTITIES WHERE HUNDREDS OF ST UDENTS ARE BEING IMPARTED EDUCATION. THE RATIONALE AND CIRCUMSTANCES BEHIND THIS PAYMENT AS EXPLAINED BY THE ASSESSEE WERE NOT CONTROVERTED, REBUTTED OR DISPROVED BY THE REVENUE AUTHORITIES. IT IS IMPORTANT TO NOTE THAT THE PAYMENTS WERE NOT MADE TO ANY INDIVIDUAL OFFICE BEARER. IT IS WELL SETTLED LAW THAT WHOSOEVER ALLEGES, HAS TO PROVE. THIS IS PARTICULARLY IMPORTANT WHEN THE CONCERNED PERSON DE NIES THE ALLEGATION. HENCE, IN OUR VIEW, BEFORE CANCELLATION, THE BURDEN ON CIT WAS EVEN MUCH HEAVIER TO CONCLUSIVELY PROVE BY COGENT EVIDENCE TH AT THE SUBJECT AGREEMENT WAS IN FACT ACTED UPON AND THAT THE TRUST EES/MEMBERS HAVE SHARED SURPLUS OF THE INSTITUTION AND SO ALSO TO EN SURE THAT H.K. KALCHURI AND OTHERS 12AA 63 TRUSTEES/MEMBERS ARE BROUGHT TO TAX FOR SUCH SHARED PROFITS/SURPLUS. BUT, NOTHING OF THE SORT WAS DONE BY HIM AND THE CANCELL ATION WAS MADE ONLY ON THE BASIS OF PRESUMPTION, CONJECTURES AND SURMISES ONLY. ALSO, NOTHING WAS TAXED IN THE HANDS OF CONCERNED TRUSTEES/MEMBERS FO R SUCH ALLEGED SHARED PROFITS. IN CASE OF CIT VS. SMT. K.C AGNES (2003) 262 ITR 354 (KER.HC) WHERE AGREEMENT WAS FOUND FOR HIGHER AMOUNT BUT SAL E DEED OF PROPERTY WAS FOUND FOR LESSER AMOUNT, HON'BLE HIGH COURT HEL D AS UNDER :- EVEN IF IT IS ASSUMED TO BE SO , UNLESS IT IS PROVED THAT THE AGREEMENT WAS ACTED UPON AND UNLESS THE AMOUNT STATED IN THE AGREEMENT WAS PAID FOR THE SALE, THE COURT CANN OT COME TO CONCLUSION THAT THE PRICE MENTIONED IN SALE DEED IS NOT CORRECT. ALSO RELIED ON K.P. VERGHESE V.ITO 131 ITR 597 (SC). SIMILARLY, IN THE FOLLOWING DECISIONS ALSO IT HAS B EEN HELD THAT WHO SO EVER ALLEGES, HAS TO PROVE : SHYAMA CHARAN SAXENA VS. CIT (1984) 145 ITR 689 (AL L. HC) DOON VALLEY ROLLER FLOUR MILLS V. IAC (1989) 31 IT D 238 (DEL.ITAT). H.K. KALCHURI AND OTHERS 12AA 64 ITAT AGRA BENCH IN SHARDA EDUCATIONAL TRUST VS. CIT [2014] 47 ITD 271 (AGRA - TRIB.) HELD AS UNDER : THE LD. CIT ON EXAMINATION OF THE MATTER IN ISSUE FOUND THAT THE TRUSTEES HAVE USED PROPERTY OF TRUST FOR PERSON AL ENRICHMENT, I.E. TAKING ON MONEY FOR GRANTING ADMIS SION TO THE STUDENTS AND THE SAME WAS ALSO FOUND TO BE INCRIMIN ATING AGAINST THE ASSESSEE FOR CANCELLATION OF REGISTRATI ON. HOWEVER, NO EVIDENCE IS BROUGHT ON RECORD AS TO HOW TRUSTEES HAVE GOT BENEFIT FOR PERSONAL ENRICHMENT. THE COPIES OF ASSESSMENT ORDERS U/S. 153A HAVE BEEN FILED ON RECORD IN RESPE CT OF ALL THE THREE MAIN TRUSTEES AND IN THEIR CASES, NO ADDI TIONS HAVE BEEN MADE BY THE AO PROVING ANY PERSONAL ENRICHMENT BENEFIT OBTAINED BY THE TRUSTEES. IN THE ABSENCE OF ANY EVIDENCE ON RECORD AGAINST THE TRUSTEES AND IN ABSENCE OF ANY ADDITION MADE AGAINST THEM IN THEIR INDIVIDUAL CASES ON THE BASIS OF THE COMPUTERIZED P APERS, WE ARE OF THE VIEW THAT THE LD. CIT WAS NOT JUSTIFI ED IN TAKING ADVERSE VIEW OF PERSONAL ENRICHMENT BY TRUSTEE AGAI NST THE ASSESSEE TRUST. THERE IS NO BASIS, WHATSOEVER, TO M AKE ALLEGATION AGAINST THE ASSESSEE FOR CANCELLATION OF REGISTRATION. ( PARA 9). SIMILARLY, CHENNAI ITAT IN THE CASE OF SRI BALAJI EDUCATIONAL & CHARITABLE PUBLIC TRUST [2015] 57 TAXMANN.COM 145 ( CHENNAI - TRIB.), HELD AS UNDER : H.K. KALCHURI AND OTHERS 12AA 65 FROM OUR ABOVE DISCUSSIONS IT IS EVIDENT THAT THE A CTIVITIES CONDUCTED BY THE ASSESSEE TRUST ARE ONLY PROMOTING EDUCATION WITHIN THE AMBIT OF SECTION 2(15) OF THE ACT. THE T RUST WAS NOT ENGAGED IN ANY OTHER ACTIVITY OTHER THAT PROMOTING EDUCATION. THE ALLEGATIONS OF THE REVENUE THAT THE TRUST WAS C OLLECTING CAPITATION FEES, DONATIONS, SIPHONING OF UNDISCLOSE D INCOME OF THE TRUST FOR THE BENEFIT OF THE TRUSTEES CAN AT TH E MOST BE TAXED IN THE HANDS OF THE TRUST OR THE TRUSTEES AS THE CASE MAY BE AND MAY EVEN TRIGGER PENAL ACTION AGAINST THE TR USTEES IN ACCORDANCE WITH LAW. MOREOVER NO CONCLUSIVE FINDINGS BY COGENT EVIDENCE ARE ESTABLISHED BY THE REVENUE TO P ROVE THAT THE TRUSTEES HAVE SIPHONED OUT UNDISCLOSED INC OME OF THE TRUST. IT IS ALSO NOT ESTABLISHED BEFORE US BY THE REVENUE THAT THE TRUSTEES WHO HAVE RECEIVED FUNDS B Y SIPHONING THE UNDISCLOSED INCOME OF THE TRUST ARE B ROUGHT TO TAX. BASED ON THESE FACTS AND THE CASE LAWS DISCUSSED HEREIN ABOVE, WE ARE OF THE CONSIDERED VIEW THAT TH E LD. CIT IS NOT JUSTIFIED IN WITHDRAWING THE REGISTRATION GRANT ED U/S.12A(A) OF THE ACT BY INVOKING THE PROVISIONS OF SECTION 12 AA(3) OF THE ACT. SUCH ACT OF THE REVENUE WILL ONLY AFFECT THE P OOR STUDENTS WHO ARE STUDYING IN THE INSTITUTION BY PAYING NOMIN AL AND NORMAL FEES AND ALSO OTHER STUDENTS THEREBY DEFEATI NG THE VERY PURPOSE OF THESE PROVISIONS OF THE ACT, WHICH ARE E NACTED WITH THE INTENTION OF PROMOTING EDUCATION IN THE COUNTRY . THEREFORE, WE HEREBY QUASH THE ORDER OF THE LD. CIT DATED 09.0 6.2014 H.K. KALCHURI AND OTHERS 12AA 66 WITHDRAWING THE REGISTRATION GRANTED U/S.12A(A) OF THE ACT. ( PARA 14) IN THE SAME WAY, HON'BLE UTTARANCHAL HIGH COURT IN WELHAM BOYS SCHOOL SOCIETY VS CBDT [2006] 285 ITR 74 (UTTARANCH AL HC) HELD AS UNDER : ON THE BASIS OF THE ALLEGED REVIEW OF ACTIVITIES OF THE PETITIONER SOCIETY, THE CIT COULD NOT HAVE WITHDRAWN THE REGISTRATION UNDER SECTION 12AA OF THE ACT EVEN IF IT WAS FOR EN SURING THAT SUCH INSTITUTIONS DID NOT BECOME A FRAUD ON TH E LAW OF THE LAND AND MISUSE THE BENEVOLENT LEGISLATION. AS RIGHTLY POINTED OUT BY THE PETITIONER, EVEN IF THE PETITIONER SOCIETY WAS FOUND TO BE NOT CARRYING ON ANY CHARITABLE ACTI VITY, THE SECOND RESPONDENT COULD ONLY DENY THE BENEFITS OF SECTIONS 11 AND 12 OF THE ACT TO THE PETITIONER SOC IETY AT THE TIME OF ASSESSMENT . FROM THE ABOVE DECISIONS AND ON THE BASIS OF PLETHO RA OF DECISIONS QUOTED EARLIER, IT IS CLEAR THAT THE CIT HAS EXCEEDED IN H IS JURISDICTION, EVEN ON MERITS, IN CANCELLING THE REGISTRATION. HE OUGHT TO HAVE UNDERSTOOD THAT REGISTRATION AND EXEMPTION OPERATE IN DIFFERENT FIE LD AND REALM. REGISTRATION IS NOT A GUARANTEE FOR EXEMPTION WHICH HAS TO BE TE STED QUA EACH ASSESSMENT YEAR DURING ASSESSMENT PROCEEDINGS BY AO . IN ANY YEAR, IN H.K. KALCHURI AND OTHERS 12AA 67 WHICH THE INSTITUTION DOES NOT FULFILL THE STIPULAT ED CONDITIONS U/S 11 & 13, EXEMPTION FOR THAT YEAR WILL BE DENIED BY AO IN THE ASSESSMENT AND SUPPOSE IN THE VERY NEXT YEAR, ALL THE REQUISITE CO NDITIONS ARE FULFILLED, THE EXEMPTION SHALL BE GIVEN BY HIM. BUT, THE ADVERSITY OF NON-FULFILLING THE REQUISITE CONDITIONS OF SEC. 11 & 13 WILL NOT DENY OR WITHDRAW THE REGISTRATION WHICH IS ONLY A GATEWAY FOR EXEMPTION. THIS IS BECAUSE, THERE IS NO PROVISION IN THE ACT TO GRANT REGISTRATION U/S 1 2AA ON YEARLY OR PERIODICAL BASIS. THIS IS ONCE IN LIFETIME AND IS JUST TO IDEN TIFY AN INSTITUTION AS BEING ENTITLED FOR AVAILING EXEMPTION. IN VIEW OF ABOVE, IN OUR OPINION, IT CANNOT BE SAID THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT CHARITABLE OR NOT GENUINE OR A RE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE ASSESSEE-TRUS T/SOCIETY. IF THERE IS ANY CONTRAVENTION OF SEC. 11 & 13, IT IS TO BE CONSIDER ED BY THE AO AT THE STAGE OF ASSESSMENT FOR COMPUTING THE INCOME AND FOR THAT REASON AND ALSO FOR IMPROPER ACTS, IF ANY, OF TRUSTEES/MEMBERS, REGISTR ATION OF THE INSTITUTION U/S 12A CANNOT BE CANCELLED. FOR THIS, WE ARE SUPPORTED BY THE FOLLOWING DECISIONS: H.K. KALCHURI AND OTHERS 12AA 68 IN ASSESSEES OWN GROUP CASE, INDORE ITAT HAS DECID ED IN FAVOUR OF THE ASSESSEE IN DCIT VS. HAI HAY KSHATRIYA EDUCATIO N SOCIETY IN ITA NO. 51 TO 56 AND 510/IND/ 2007 FOR A.Y. 1998-99 TO 2004 -05 - RELEVANT PAGE 54 PARA 36: HELD :WHERE THERE IS MISCONDUCT ON THE PART OF THE TRUSTEE, THE CHARITABLE INSTITUTION IS CERTAINLY EXPECTED TO TAK E APPROPRIATE ACTION AGAINST SUCH TRUSTEE FOR RECOVERY OF THE AMO UNT BUT DOES NOT MEAN THAT THE EXEMPTION GRANTED TO THE INSTITUT IONS SHOULD BE FORFEITED. ACCORDINGLY, THE AO WAS NOT JUSTIFIED IN DECLINING THE CLAIM OF EXEMPTION U/S 11 TO THE ASSESSEE SOCIE TY. CIT VS. ISLAMIC ACADEMY OF EDUCATION [2015] 54 TAXM ANN.COM 255 (KARNATAKA) IN THIS RECENT CASE, THERE WAS SEARCH AND FOLLOWING GRAVE ADVERSITIES WERE NOTED BY HON'BLE KARNATAKA HIGH COURT : I. THE ASSESSEE-TRUST FILED RETURNS U/S.153A(A) DEC LARING ADDITIONAL INCOME OF RS.13,23,52,850/-. II. THE INSTITUTION HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNT. III. DONATIONS RECEIVED HAVE BEEN KEPT OUTSIDE THE BOOKS OF ACCOUNT. H.K. KALCHURI AND OTHERS 12AA 69 IV. THE ASSESSEE IS COLLECTING FEES OVER AND ABOVE THE FEES FIXED BY THE UNIVERSITY AND THIS AMOUNT HAS NOT BEE N RECORDED IN THE CASH BOOK AND IT HAS INTRODUCED THIS CASH TO THE BANK AS AND WHEN THE NEED ARISES. THE ASSESSEE HAS ISSUED R ECEIPTS FOR THE SUMS RECEIVED OVER AND ABOVE THE FEES FIXED BY THE UNIVERSITY. V. TRUST INVESTED RS.20 LAKHS IN SHARES OF YIMSRPL, A PRIVATE LIMITED COMPANY OF DIRECTORS/CHAIRMAN. VI. THE ASSESSEE IS PAYING HUGE RENT TO YIMSRPL AND ALSO GIVEN HUGE DEPOSIT OF RS.2,25,00,000/- WHICH WAS CL AIMED AS RENT DEPOSIT. VII. SEARCH U/S.132 WAS CONDUCTED ON 21.9.2005 IN T HE OFFICE PREMISES OF THE INSTITUTE AS WELL AS THE RESIDENTIA L PREMISES OF THE THREE OF THE TRUSTEES.CASH OF RS.74,00,000/- WA S FOUND IN THE RESIDENTIAL PREMISES OF SHRI. Y.ABDULLAHKUNHI A ND THE SAME WAS OFFERED TO TAX BY THE TRUST. VIII. FEES FOR ADMISSION REPORTED TO HAVE BEEN COLL ECTED MUCH HIGHER THAN WHAT WAS RECORDED IN THE BOOKS AND THAT THE ACTUAL AMOUNT OF FEES COLLECTED HAS BEEN SUPPRESSED. IX. THE ASSESSEE HAS ADMITTED THAT THE CONTRACT PAY MENT OF RS.3,50,00,000/- PAID TO M/S. HORIZON CONSTRUCTION CO., SHOWN AS CREDITOR IN THE BALANCE SHEET, WAS ONLY BOGUS AN D THE SAME WAS OFFERED FOR TAXATION. X. ADVANCES ARE MADE TO THE FAMILY MEMBERS OF THE T RUST OUT OF THE TRUST FUND WHICH ARE KEPT OUTSIDE THE AC COUNTS AND REFLECTED IN THE CODED WORDS. H.K. KALCHURI AND OTHERS 12AA 70 DESPITE ALL GRAVE ADVERSITIES AND MISAPPROPRIATIONS AND MISDEEDS DONE BY THE TRUSTEES, IT WAS HELD BY HON'B LE KARNATAKA HIGH COURT AS UNDER : IN THE INSTANT CASE, THE MATERIAL ON RECORD SHOWS T HAT THE TRUST HAS ESTABLISHED EDUCATIONAL INSTITUTION AND IMPARTING MEDICAL EDUCATION. EVERY YEAR, STUDENTS A RE ADMITTED. HUGE INVESTMENT IS MADE FOR CONSTRUCTION OF BUILDINGS FOR HOUSING THE COLLEGE, HOSTEL AND TO PR OVIDE OTHER FACILITIES TO THE STUDENTS WHO ARE STUDYING I N THE COLLEGE. THE COLLEGE IS RECOGNIZED BY THE MEDICAL COUNCIL OF INDIA, STATE OF KARNATAKA AND ALL OTHER STATUTORY AUTHORITIES. THEREFORE, IT CANNOT BE SAID THAT THE TRUST IS NOT GENUINE. ADMITTEDLY, THE STUDENTS ARE BEING ADM ITTED EVERY YEAR. STUDENTS ARE STUDYING IN ALL COURSES. T HUS THE OBJECT OF THE CONSTITUTION OF THE TRUST NAMELY IMPA RTING OF EDUCATION IS GOING ON UNINTERRUPTEDLY. THEREFORE, I T CANNOT BE SAID THAT THE ACTIVITIES OF THE TRUST ARE NOT BE ING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE T RUST. WHEN THE AFORESAID TWO CONDITIONS ARE FULLY SATISFI ED, ON THE GROUND THAT THE TRUSTEES ARE MISAPPROPRIATING T HE FUNDS OF THE TRUST THE REGISTRATION OF THE TRUST CA NNOT BE CANCELLED. IF THE TRUSTEES ARE MISAPPROPRIATING THE FUNDS, IF THEY ARE MAINTAINING FALSE ACCOUNTS, IT IS OPEN TO THE AUTHORITIES TO DENY THE BENEFIT UNDER SECTION 11 OF THE H.K. KALCHURI AND OTHERS 12AA 71 INCOME TAX ACT, BUT THAT IS NOT A GROUND FOR CANCEL LATION OF REGISTRATION ITSELF. SHRI BALAJI EDUCATIONAL & CHARITABLE PUBLIC TRUST V .CIT [2015] 57 TAXMANN.COM 145 (CHENNAI - TRIB.) HELD : ANOTHER ALLEGATION OF THE REVENUE IS THAT, THE TRUS TEES OF THE ASSESSEE TRUST HAVE SIPHONED OUT THE UNDISCLOSE D INCOME OF THE TRUST FOR THEIR PERSONAL BENEFITS. IT IS PER TINENT TO MENTION HERE THAT ALL THE INCOME OF THE CHARITABLE TRUST BE LONGS TO THE TRUST ONLY FOR MEETING OUT ITS OBJECTS. SQUANDERING AWAY THE WEALTH OF THE TRUST FOR PERSONAL BENEFITS OF THE TR USTEES GIVES RISE TO CRIMINAL ACTION AGAINST THEM BY THE COMPETE NT AUTHORITIES. THE STATE/CENTRAL GOVERNMENT CAN ALSO INTERVENE WHEN SUCH OCCASIONS ARISE AND TAKE APPROPRIATE ACTI ON TO BAR THE TRUSTEES FROM THE MANAGEMENT OF THE TRUST OR AP POINT GOVERNMENT ADMINISTRATORS TO MANAGE THE TRUST AND A LSO REMOVE CORRUPT TRUSTEES FROM THE MANAGEMENT OF THE TRUST . IN THE CASE OF THE ASSESSEE, WE DO NOT FIND ANY SUCH A CTIONS TAKEN AGAINST THE TRUSTEES OF THE TRUST OR THE SAME IS NOT BROUGHT TO OUR KNOWLEDGE BY THE REVENUE. IT IS PERTINENT TO MENTION HERE THAT THE CHARITABLE TRUST IS AN ENTITY BY ITSELF HAVING CERTAIN CHARITABLE OBJECTS TO COMPLY WITH BA SED ON THE TRUST DEED. THE RECOGNITION U/S. 12A (A) OF THE ACT IS GIVEN ONLY TO THE TRUST. THE TRUSTEES ARE DIFFERENT ENTITIES WHO MANAGE THE TRUST ACCORDING TO THE OBJECTS OF TH E TRUST. H.K. KALCHURI AND OTHERS 12AA 72 THEREFORE, WE DO NOT UNDERSTAND AS TO WHY THE TRUST SHOULD BE PUNISHED FOR THE CRIMINAL ACTIVITIES OF T HE TRUSTEES, IF AT ALL ANY. MOREOVER THERE ARE REMEDIES TO CLEANSE THE MANAGEMENT OF THE TRUST PROVIDED BY THE CODE OF CIVIL PROCEDURE, 1908 SECTION 92:- PUBLIC CHARITIES. DY. CIT VS. COSMOPOLITAN EDUCATION SOCIETY (1999) 1 57 CTR (RAJ) 209 : (2000) 244 ITR 494 (RAJ) HELD THAT IF THERE WAS ANY MISUTILISATION OR MISMAN AGEMENT, ACTION COULD BE TAKEN AGAINST THE MANAGEMENT OF THE SOCIETY BUT IT IS NOT POSSIBLE TO SAY THAT ANY AMOUNT OF TH E FUNDS OF THE SOCIETY WAS NOT UTILIZED FOR EDUCATIONAL PURPOSE AN D FOR THAT REASON EXEMPTION UNDER S. 10(22) CANNOT BE DENIED. [NOTE : THE ABOVE DECISION HAS BEEN UPHELD BY HONB LE SUPREME COURT BECAUSE THE SLP OF DEPARTMENT HAS BEEN DISMISSED BY HONBLE SUPREME COURT AS REPORTED IN 241 ITR (ST.) 132 AND HAS BECOME LAW OF THE LAND. ] CIT VS. RED ROSE SCHOOL (2007) 212 CTR (ALL) 394: ( 2007) 163 TAXMAN 19 - HELD : REGISTRATION UNDER S. 12AA DOES NOT NECESSARILY ENT ITLE THE ASSESSEETO GET THE INCOME EXCLUDED FROM THE INC OME OF THE PREVIOUS YEAR FOR THE PURPOSE OF DETERMINATION OF T AX LIABILITY, H.K. KALCHURI AND OTHERS 12AA 73 BUT IT ONLY ENTITLES THE ASSESSEE TO CLAIM SUCH EXE MPTION WHICH OTHERWISE COULD NOT BE CLAIMED IN THE ABSENCE OF RE GISTRATION. THE ENQUIRY OF CIT SHALL REMAIN RESTRICTED TO THE E XAMINATION AS TO WHETHER THE ASSESSEE, WHO HAS MOVED THE APPLICAT ION FOR REGISTRATION UNDER S. 12AA, IS ACTUALLY IN THE ACTI VITIES WHICH ARE GENUINE. GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION HAS TO BE SEEN, KEEPING IN VIEW THE OBJ ECTS THEREOF, WHICH NECESSARILY MEANS THAT CIT SHALL SATISFY HIMS ELF ABOUT THE FACT THAT ACTIVITIES ARE GENUINE AND IN CONSONA NCE WITH THE OBJECTS OF THE TRUST OR THE INSTITUTION. IN OTHER W ORDS, IF ESTABLISHING AND RUNNING THE SCHOOL IS THE OBJECT O F THE SOCIETY, AS GIVEN IN BYE-LAWS, IT HAS TO BE SATISFIED THAT T HE SOCIETY HAS ESTABLISHED A SCHOOL WHERE EDUCATION IS IMPARTED AS PER RULES AND THE FACTUM OF ESTABLISHMENT AND RUNNING SCHOOL IS A GENUINE ACTIVITY. THE ENQUIRY REGARDING GENUINENESS OF THE ACTIVITY CANNOT BE STRETCHED BEYOND THIS. GURU GOBIND SINGH EDUCATIONAL SOCIETY VS. CIT (2009 ) 118 ITD 207 (ASR) HELD : FOR ANY IRREGULARITY OR ILLEGALITY COMMITTED BY ITS MEMBERS, A SOCIETY, WHICH IS A JUDICIAL ENTITY HAVI NG INDEPENDENT EXISTENCE, CANNOT BE HELD LIABLE. FURTH ER WHEN THERE IS NO FINDING RECORDED THAT THE INCOME OF THE SOCIETY HAS FLOAT TO ITS MEMBERS, IRREGULARITIES COMMITTED BY T HE MEMBERS IN H.K. KALCHURI AND OTHERS 12AA 74 THEIR INDIVIDUAL CAPACITY CANNOT BE HELD AGAINST TH E SOCIETY FOR THE PURPOSE OF CANCELLATION OF REGISTRATION. THE OBSERVATIONS OF THE CIT THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY WERE NOT GENUINE OR THAT THE SOCIETY HAS EARNED PROFIT, OR T HAT IT HAD CLANDESTINELY TRANSFERRED ITS PROFITS TO ITS MEMBER S WHO HAD NOT PAID TAX THEREON, OR THAT ASSESSEE SOCIETY WAS NOT EXISTING FOR CHARITABLE PURPOSE OR THAT THE ACTIVITIES OF THE AS SESSEE WERE NOT GENUINE OR THAT THEY WERE NOT CARRIED OUT IN AC CORDANCE WITH THE OBJECTS OF THE SOCIETY WERE 'NOT JUSTIFIED. THE OBJECT OF THE ASSESSEE SOCIETY IN FACT, HAD NOT BEEN DOUBTED AT A LL. NO SPECIFIC OR EVEN GENERAL CHARGES HAVE BEEN ALLEGED THAT THE SOCIETY HAD NOT BEEN-CARRYING ON ITS ACTIVITIES AS PER ITS OBJECTS. SO MUCH SO, IN THE ASSESSMENT COMPLETED AFTER PASSI NG OF THE IMPUGNED ORDER THE RETURNED INCOME OF THE SOCIETY H AS BEEN ACCEPTED. IN THESE FACTS THE REGISTRATION GRANTED T O THE SOCIETY CANNOT BE CANCELLED UNDER S. 12AA(3). OXFORD ACADEMY FOR CAREER DEVELOPMENT [2009] 315 ITR 382 (ALL HC): HELD : EVEN ASSUMING, THE COMMISSIONER HAS POWER TO RESCI ND THE ORDER OF REGISTRATION ON THE GROUND THAT THE RE GISTRATION HAD BEEN OBTAINED BY PRACTICING FRAUD OR FORGERY, THERE WAS NOTHING IN THE SHOW-CAUSE NOTICE OR IN THE IMPUGNED ORDER DATED MARCH 9, 2004 ALLEGING THAT THE PETITIONER HA D OBTAINED THE REGISTRATION BY PRACTICING FRAUD OR FO RGERY .' (PAGE 390) H.K. KALCHURI AND OTHERS 12AA 75 MOREOVER, AS REGARDS GENERATION OF HUGE SURPLUS BY THE ASSESSEE- INSTITUTION, ASSESSEE HAS CITED VARIOUS DECISIONS, AS GIVEN IN THE SEPARATE TABLE (SUPRA) AT PAPER BOOK PAGES 353-354, IN FAVOU R OF THE ASSESSEE THAT MERE GENERATION OF SURPLUS CANNOT BE GROUND FOR DEN IAL OF REGISTRATION U/S 12AA OR CANCELLATION U/S 12AA(3). WE FIND THAT THIS ISSUE HAS BEEN SET AT REST BY HON'BLE SUPREME COURT IN THE CASE OF QUEENS EDUCATIONAL SOCIETY VS CIT[2015] 372 ITR 699 (SC) HOLDING THAT WHERE A SURPLUS WAS MADE BY EDUCATIONAL INSTITUTION WHICH WAS PLOUGHED BACK FOR EDUCATIONAL PURPOSES, SAID INSTITUTION WAS TO BE HELD TO BE EXI STED SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR PURPOSE OF PROFIT. THE HON'BLE SUPREME COURT HAS FOLLOWED MANY DECISIONS THEREIN. IN ASSESSEES CASE ALSO, SUCH SURPLUS HAS BEEN UTILIZED WHOLLY AND EXCLUSIVELY FOR THE OBJECT S OF THE ASSESSEE- TRUST/SOCIETY ONLY. HENCE, IN OUR VIEW, THE ADVERSE OBSERVATION OF CIT IS UNCALLED FOR AND UNWARRANTED. 22. THE RATIO IN THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX EXEMPTION VS. MOOLCHAND KHAI RATI RAM (SUPRA) FURTHER SUPPORTS THE CASE OF THE ASSESSEE. 23. ON CONSIDERATION OF FACTS, SUBMISSIONS AND IN T HE LIGHT OF THE AFORESAID JUDICIAL PRONOUNCEMENTS AND IN VIEW OF TH E REASONS DISCUSSED HEREINABOVE, WE HOLD THAT THE ASSESSEE IS A CHARITA BLE ORGANIZATION AND THE H.K. KALCHURI AND OTHERS 12AA 76 ACTIVITIES OF THE ASSESSEE TRUST WERE GENUINE AND I N ACCORDANCE WITH ITS OBJECTS AS REQUIRED BY THE LAW, AND IS ELIGIBLE FOR EXEMPTION U/S 11 R.W. SECTION 12 AND 13 AND THE REGISTRATION WITHDRAWN BY THE CIT WAS NOT AS PER THE LAW. THE ALLEGATION OF CIT THAT THE EDUCATIONAL INSTITUTIONS ARE RUN BY THE INSTITUTION AS PARTNERSHIP FIRMS FOR THE SOLE P URPOSE OF EARNING AND SHARING PROFITS, SUCH ALLEGATION IS NOT JUSTIFIED, INTER-ALIA, BEING WITHOUT ANY CORROBORATIVE EVIDENCE. THUS, WE ALLOW ALL THE GROU NDS OF THE APPEAL EXCEPT ADDITIONAL GROUND OF THE ASSESSEE. THE REGISTRATIO N U/S 12A IS RESTORED BACK FROM THE DATE OF GRANTING. 24. NOW, WE SHALL TAKE THE ADDITIONAL GROUND REGARD ING ASSUMPTION OF JURISDICTION BEING BAD IN LAW. LD. AR HAS TAKEN THI S ADDITIONAL GROUND AND FILED THE WRITTEN SUBMISSION, WHICH READS AS UNDER: NOTICE U/S 12AA(3) WAS UNLAWFUL. HENCE ASSUMPTION OF JURISDICTION IS BAD IN LAW, INVALID AND ABINITIO VOID: (CHALLENGED THROUGH ADDITIONAL GROUND) THE SHOW CAUSE NOTICE OF CIT ISSUED ON 15.2.2013 ( COPY AT PAPER BOOK PG.14 ) IS REPRODUCED BELOW : OFFICE OF THE COMMISONER OF INCOME TAX AYAKARBHAWAN' HOSHANGABAD ROAD, BHOPAL- 462 011 F.NO. CIT/BPL/TECH/12A/12-13 DATED 15.02.2013 TO H K KALCHURI EDUCATION TRUST 31, SHYAMLA HILLS H.K. KALCHURI AND OTHERS 12AA 77 BHOPAL SIR, SUB : REGARDING GRANT OF REGISTRATION U/S 12AA OF T HE INCOME TAX ACT- REGARDING. PLEASE REFER TO THE CIT, BHOPAL'S ORDER U/S 12AA(1) (B)(I) OF THE INCOME TAX ACT DATED 12.03.2007 GRANTING YOU REGISTRATION VIDE F.N O. CIT/BPL/TECH/12A/51/06- 07 DATED 12.03.2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN YOUR CASE COMPLETED U/S 153A/143(3) FOR THE A.Y. 2004-05 TO 2010-11 IT HAS BEEN OBSERVED THAT THE ASSESSEE SOCIETY HAS GIVEN BENEFITS TO ITS MEMBERS AND RELATED CONCERNS. THEREFORE, THE PROVISIONS OF SECTION 13 ARE APPLICA BLE AND RESULTANTLY SECTION 11 & 12 WILL NOT OPERATE. DURING THE COURSE OF ASSESSMEN T IT WAS ALSO FOUND THAT THE ASSESSEE SOCIETY WAS NOT ELIGIBLE FOR EXEMPTION U/S 11 & 12 OF I.T. ACT 1961 AS IT HAS VIOLATED THE PROVISIONS OF SECTION 11 TO 13 OF I.T. ACT 1961. AS THE ASSESSEE SOCIETY WAS NOT ELIGIBLE FOR EXEMPT ION U/S 11 & 12, YOU ARE HEREBY GIVEN AN OPPORTUNITY TO APPEAR BEFORE ME ON 26.2.2013 AT 3.35 P.M. TO EXPLAIN AS TO WHY THE REGISTRATION GRANTED TO YOU U /S 12AA OF THE INCOME TAX ACT AS MENTIONED ABOVE SHOULD BE CANCELLED WITH EFFECT FROM THE F.Y. 2003-04. SD./- (S.C. SONKAR) COMMISSIONER OF INCOME TAX, BHOPAL FROM THE ABOVE NOTICE, IT IS UNDISPUTEDLY EVIDENT T HAT THE LD. CITASSUMED JURISDICTION TO CANCEL REGISTRATION OF THE ASSESSEE ON 15.2.2013,ONLY AND ONLY ON THE BASIS OF THIS THIRD STATUTORYCONDITION OF CANCE LLATION ON ALLEGED VIOLATION OF SEC. 13. BUT, AS SUBMITTED EARLIER, THIS THIRD CON DITION ON THE BASIS OF WHICH LD. CIT ASSUMED JURISDICTION WAS NOT ON THE STATUTE BOO K ON THE DATE OF HIS ASSUMPTION OF JURISDICTION. THIS CAME TO BE INCORPO RATED MUCH LATER ON THE STATUTE BOOK ON 1.10.2014 ONLYBY WAY OF INSERTION O F NEW SUB-SECTION (4) IN SEC. 12AA. IT IS ALSO NEEDLESS TO MENTION THAT EVEN ON T HE DATE OF HIS FINAL CANCELLATION ORDER ON 23.4.2014, IMPUGNED THIRD CONDITION WAS NO T ON THE STATUTE BOOK.THIS H.K. KALCHURI AND OTHERS 12AA 78 LEGAL INFIRMITY VITIATED THE VERY ASSUMPTION OF JUR ISDICTION AND ALSO THE CONSEQUENTIAL CANCELLATION ORDER, AS BEING UNLAWFUL AND UNSUSTAINABLE IN LAW. HERE, IT WILL BE RELEVANT TO MENTION THAT HON'BLE SUPREME COURT IN THE CASE OF CIT V. MAX INDIA LTD. [2007] 295 ITR 282 (SC) HAS HELD THAT THE LAW PREVAILING ON THE DATE OF THE NOTICE U/S. 263 HAS TO BE SEEN F OR VALIDITY OF NOTICE AND RESULTANT ACTION OF CIT AND EVEN RETROSPECTIVE AMEN DMENT SHALL NOT VEST POWER WITH THE LD. CIT. IT WAS HELD BY HON'BLE SUPREME COURT AS UNDER : THEREFORE, SUBSEQUENT AMENDMENT IN 2005 EVEN THOUG H RETROSPECTIVE WOULD NOT ATTRACT PROVISION OF SECTION 263, PARTICULARLY WHEN ONE HAD TO TAKE INTO ACCOUNT POSITION OF LAW AS IT STOOD ON DATE WHEN THE COMMIS SIONER PASSED ORDER DATED 5- 3-1997 IN PURPORTED EXERCISE OF HIS POWERS UNDER SE CTION 263. [PARA 2] IN THE CASE OF RALLIS INDIA LTD. V.ACIT [2010] 323 ITR 54 (BOMBAY) , HON'BLE BOMBAY HIGH COURT ALSO HELD THAT THE VALIDITY OF THE NOTICE ISSUED B Y THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT MUST BE DETERMINED WITH REFERENCE TO THE REASONS WHICH ARE FOUND IN SUPPORT OF THE RE OPENING OF THE ASSESSMENT. THESE REASONS CANNOT BE ALLOWED TO BE SUPPLEMENTED ON THE BASIS WHICH WAS NOT PRESENT IN THE MIND OF THE OFFICER AND COULD NO T HAVE BEEN SO PRESENT ON THE DATE ON WHICH THE POWER TO REOPEN THE ASSESSMENT WA S EXERCISED. IT WAS FURTHER HELD THAT THE VALIDITY OF THE NOTICE OF THE ASSESSI NG OFFICER SEEKING TO RE-OPEN THE ASSESSMENT WOULD HAVE TO BE DETERMINED ON THE LAW A S IT PREVAILED ON THE DATE OF THE NOTICE HAVING REGARD TO THE JUDGMENT OF THE SUPREME COURT IN CIT V. MAX INDIA LTD. ( SUPRA). IN K. VERMA CHARITABLE TRUST V. DIT(E) [2011] 9 TAXMA NN.COM 101 (AHD.), HON'BLE AHMEDABAD ITAT HELD THAT IF THE POWER OF CANCELLATION CAME TO BE INSERTED BY SUBSEQUENT AMENDMENT, THE CIT COULD NOT CANCEL REGISTRATION BEFORE THE AMENDMENTAS HE HAD NO AUTHORITY OR POWER UNDER THE STATUTE TO CANCEL REGISTRATION GRANTED UNDER SECTION 12A, AND ,THEREF ORE, THERE WAS NO NEED TO GO INTO THE MERITS OF THE CASE AND THE ISSUE RAISED ON MERITS HAD BECOME INFRUCTUOUS. HON'BLE BENCH HELD AS UNDER : H.K. KALCHURI AND OTHERS 12AA 79 THE ADMITTED FACTUAL POSITION WAS THAT THE IMPUGNE D ORDER WAS PASSED ON 16- 11-2009, WHEN NO SUCH SPECIFIC JURISDICTION WAS GRA NTED TO DIT (EXEMPTION), AND THE POWERS OF CANCELLATION OF REGISTRATION HAD COME INTO EFFECT FROM 1-6-2010 ONLY. IT IS A WELL-SETTLED LAW THAT THE POWER TO RE VIEW IS NOT AN INHERENT POWER OF JUDICIAL OR QUASI-JUDICIAL OFFICER, UNLESS SPECIFIC ALLY CONFERRED ON HIM BY THE STATUTE, IT MUST BE DELEGATED BY LAW EITHER SPECIFI CALLY OR BY NECESSARY IMPLICATION. IN THE ABSENCE OF SUCH AN AUTHORITY, T HE ACTION OF THE DIT (EXEMPTION) PRIOR TO THE DATE OF INSERTION OF THE S AID CLAUSE COULD BE SAID TO BE BEYOND JURISDICTION. HENCE, THE ORDER OF DIT (EXEMP TION) DATED 16-11-2009 CANCELLING REGISTRATION GRANTED UNDER SECTION 12A W AS TO BE QUASHED. [PARA 8] ALSO, IN THE FOLLOWING CASES OF CANCELLATION OF REG ISTRATION U/S. 12AA(3), IT HAS BEEN UNANIMOUSLY HELD THAT THE STATUTORY CONDITIONS , POWER OR LAW APPLICABLE ON THE DATE OF NOTICE/ORDER SHALL ONLY BE APPLICABLE A ND THE STATUTORY CONDITIONS, POWER OR LAW SUBSEQUENTLY AMENDED BY THE STATUTE SH ALL NOT BE AVAILABLE TO THE LD. CIT FOR CANCELLATION OF REGISTRATION: MOOL CHAND KHAIRATI RAM (2011) 339 ITR 622 (DELHI H C) DIT V. N.H. KAPADIA EDUCATION TRUST (2012) 136 ITD 111 (AHD.ITAT) CIT VS. MANAVSEWASANSTHAN (2011) 336 ITR 250 (ALL.H C) PRITHVIRAJKAPOORMEMORIAL TRUST V. CIT (2014) 43 TAX MANN.COM20 (MUM. ITAT) AGRA DEVELOPMENT AUTHORITY V. CIT (2013) 31 TAXMANN . COM 40 (AGRA ITAT) SHARDA EDUCATION TRUST V. CIT (2014) 43 TAXMANN.COM 95 (AGRA ITAT) AJIT EDUCATION TRUST V. CIT (2010) 42 SOT 415 (AHD. ITAT) HENCE, SINCE JURISDICTION WAS ASSUMED BY THE LD. CI T ON NON- STATUTORY, NON- EXISTENT, EXTRANEOUS AND IRRELEVANT CRITERIA OR CON DITION WHICH WAS NOT ON THE STATUTE BOOK IN THE SEC. 12AA(3) AT THE RELEVANT TI ME OF HIS ASSUMPTION OF JURISDICTION ( AND FOR THAT MATTER, EVEN NOT AT THE TIME OF HIS ORDER) AND THE IMPUGNED CRITERIA OR CONDITION WAS SPECIFICALLY INC ORPORATED BY SUBSEQUENT AMENDMENT MUCH LATER ON THE STATUTE BOOK, AS STATED ABOVE, THE VERY ASSUMPTION OF JURISDICTION IS BAD IN LAW, INVALID A ND ABINITIO VOID AND , THEREFORE, H.K. KALCHURI AND OTHERS 12AA 80 THE CONSEQUENT CANCELLATION ORDER WAS ALSO UNLAWFUL AND INVALID AND DESERVE TO BE QUASHED ON THIS SCORE ALONE. MOREOVER, AS PER SETTLED LAW, THE REASONS, OR JUSTI FYING REASONS, FORM THE ELIXIR OF ADJUDICATION PROCESS AND THE RESULT AND DECISION. T HE LEGAL SIGNIFICANCE OF REASONS IN THE NOTICE AND ITS IMPACT ON ADJUDICATIO N, CAN ALSO BE UNDERSTOOD FROM THE LATEST DECISION OF HON'BLE RANCHI ITAT IN THE CASE OF INSTITUTE OF SCIENCE AND MANAGEMENT VS. CIT (2012) 25 TAXMANN.COM 186 (R ANCHI ITAT) IN WHICH IT WAS HELD AT PARA 19 THAT NOTICE U/S 12AA(3) IS AKIN TO NOTICE U/S 263 ISSUED BY LD. CIT AND HENCE IT MUST CONTAIN SPECIFIC REAS ONS AND/OR MATERIAL TO BE USED AGAINST THE ASSESSEE, SO THAT THE ASSESSEE COULD RE PLY AND BE GIVEN A FAIR AND REASONABLE OPPORTUNITY BEFORE ANY ORDER IS PASSED. THE HON'BLE RANCHI ITAT QUASHED THE ORDER OF CIT ON THIS VERY INFIRMITY OBS ERVING AS UNDER : PARA 20 IT IS A FACT THAT THE NOTICE ISSUED WAS NOT UNDER T HE SEAL AND SIGNATURE OF THE COMMISSIONER AND IT IS ALSO A FACT THAT IT DOES NOT STATE THAT REASONS/MATERIAL SO THAT THE ASSESSEE COULD BE CONF RONTED WITH THE MATERIALS/EVIDENCE USED AGAINST IT BEFORE COMMISSIO NER ASSUMED JURISDICTION UNDER SECTION 12AA(3) TO CANCEL THE RE GISTRATION OF THE ASSESSEE SOCIETY. THEREFORE, NOTICE ISSUED UNDER SE CTION 12AA(3) IS NOT VALID, AND ACCORDINGLY, THE ORDER OF COMMISSIONER T O CANCEL REGISTRATION OF THE ASSESSEE-SOCIETY IS NOT VALID AND IS LIABLE TO BE QUASHED. SIMILARLY, IN THE CASE OF KALINGA INSTITUTE OF INDUSTRIAL TECHNOLOGY V. CIT (2011) 336 ITR 389 (ORISSA), HONBLE ORISSA HIGH CO URT HELD THAT THE POWER UNDER SECTION 12AA(3) OF THE INCOME-TAX ACT MAY BE EXERCISABLE BY THE COMMISSIONER ONLY ON RECORDING HIS SATISFACTION OF THE CIRCUMSTANCES THAT MAY WARRANT THE EXERCISE OF SUCH POWER AND TO RECORD IN THE NOTICE AND THE BASIS, IF AT ALL, FOR THE INITIATION OF SUCH PROCEEDING. IT WAS HELD BY HONBLE DELHI HIGH COURT IN M.K. NAMBYARSAARC LAW CHARITABLE TRUST V. UOI (2004) 269 ITR 556,557-58 ( DELHI HC) THAT REJECTION H.K. KALCHURI AND OTHERS 12AA 81 OF APPLICATION FOR REGISTRATION U/S. 12AA BASED O N IRRELEVANT CRITERIA NOT PRESCRIBED IN THE SECTION IS LIABLE TO BE QUASHED. IT WAS ALSO HELD IN JAMNALALKABRA V. ITO [1968] 69 ITR 461 (ALL.HC) THAT UNLESS PROPER REASONS ARE RECORDED FOR ISSUE OF NOT ICE UNDER SECTION 148, THE ENTIRE PROCEEDING GETS VITIATED. THE OBSERVATIONS O F THE HON'BLE COURT ARE REPRODUCED AS UNDER : IT IS NECESSARILY ENVISAGED THAT HE WILL RECORD ALL THE REASONS HE HAS IN MIND . THIS CONSIDERATION ACQUIRES IMPORTANCE WHEN QUESTIO N IS RAISED AS TO WHAT WERE THE REASONS ON THE BASIS OF WHICH THE INCOME-T AX OFFICER INVOKED THE JURISDICTION CONFERRED UNDER CLAUSE (A) OF SECTION 147 . TO JUSTIFY ACTION BY REFERENCE TO CLAUSE (A) OF SECTION 147 IT IS NOT OPEN TO THE INCOME-TAX OFFICER, IN MY OPINION, TO REFER TO REASONS OTHER T HAN THOSE RECORDED BY HIM PURSUANT TO SUB-SECTION (2) OF SECTION 148 . WHEN REASONS RECORDED IN THE NOTICE FAIL, IT WOULD NOT BE POSSIBLE TO JUSTIFY THE NOTICE ON THE BASIS OF OTHER REASONS. H.E. THE NIZAMS JEWELLERY TRUST V. ASSTT. CWT [199 7] 227 ITR 52 (AP), LAST BUT 1 PARA [RELIED ON : HONBLE SC DECISION IN MOHINDER SINGH GILL V. CEC, AIR 1978 SC 851] WHILE QUASHING THE CANCELLATION ORDER OF LD. CIT U/ S. 12AA(3) IN THE CASE OF INSTITUTE OF SCIENCE AND MANAGEMENT (SUPRA), HON'BLE RANCHI ITAT RELIED ON THE DECISION OF HON'BLE MP HIGH COURT IN CIT VS. SATTANDAS MOHANDAS SIDHI (1998) 230 ITR 591 (MP) IN WHICH IT WAS HELD THAT ISSUANCE OF NOTICE U/S 263 IS NOT ONLY MERE PROCEDURAL FORMALITY AND IT MUST CONT AIN REASONS AS TO HOW THE ORDER IS PREJUDICIAL TO THE REVENUE . THEIR LORDSHIP OF MADHYA PRADESH HIGH COURT HELD THAT IF THE COMMISSIONER DID NOT FA IRLY INDICATE THE GROUNDS USED BY HIM FOR ORDERING CANCELLATION OF ASSESSMENT MADE BY THE INCOME TAX OFFICER, THE TRIBUNAL WAS JUSTIFIED IN REVERSING THE COMMISS IONERS ORDER AS THE ASSESSEE WAS DEPRIVED OF FAIR OPPORTUNITY TO SHOW CAUSE AGAI NST PROPOSED ACTION. H.K. KALCHURI AND OTHERS 12AA 82 SIMILARLY, IN THE CASE OF INSTITUTE OF SCIENCE AND MANAGEMENT (SUPRA), HON'BLE RANCHI ITAT ALSO FOLLOWED DECISION OF HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF GARDEN SILK MILLS LTD.(1996) 221 ITR 861 (GUJ. HC) IN WHICH IT WAS HELD BY THEIR LORDSHIPS THAT WHEN THE SHOW CAUSE NOTICE ISSUED U/S 263 OF THE 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 Q UASHED. ALSO IN SATISH KUMAR KESHRI V. ITO (TECHNICAL) (2007) 104 I TD 382 (PATNA), AGAIN FOLLOWED IN INSTITUTE OF SCIENCE AND MANAGEMENT (SUPRA) , THE PROCEEDINGS INITIATED U/S 263 WERE QUASHED AS BEING ILLEGAL AND INVALID ON THE GROUND, INTER-ALIA, THAT SHOW CAUSE NOTICE THROUGH WHICH THE LD. CIT ASSUMED JURISDICTION SUFFERED FROM WANT OF DETAILS ON THE BASIS OF WHICH LD. CIT CAME TO CONCLUSION THAT ASSESSMENT ORDER IS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF REVENUE. HONBLE CALCUTTA HC IN ZIGMA COMMODITIES (P.)LTD.[2014] 365 ITR 276 (CALCUTTA) ALSOHELD THAT THE NOTICE IS THE FOUNDATION OF THE INVOCATION OF JURISDICTION UNDER SECTION 263 OF THE ACT AND IS TH E SOURCE OF THE POWER OF THE COMMISSIONER TO INVOKE ITS JURISDICTION. HON'BLE BOMBAY HIGH COURT IN THE CASE OF SIEMENS INFORMATION SYSTEM LTD. V. ASSTT. CIT [2007] 293 ITR 548 HELD THAT WHEN NOTICE UNDER SECTION 148 IS ISSUED BASED ON NON-EXISTING REASONS AND HAD BEEN ISSUED UNDER THE MISTAKEN BELIEF, NOTICE WAS NOT VALID SINCE THERE WAS TOTAL NON-APPLICATION OF MIND. HENCE, THE SUBJECT NOTICE WAS LIABLE TO BE QUASHED. SUPPORT IS ALSO DRAWN FROM THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD. VS. R.B. WADKAR 268 ITR 332 ( BOM. HC), THOUGH IN THE CONTEXT OF SEC. 148, WHEREIN IT WAS H ELD BY HON'BLE COURT THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORD ED BY THE ASSESSING OFFICER. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDI TIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN BASED ON R EASONS NOT RECORDED. IT IS FOR THE ASSESSING OFFICER TO DISCLO SE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH HI S REASONS. IT IS FOR HIM TO H.K. KALCHURI AND OTHERS 12AA 83 PUT HIS OPINION ON RECORD IN BLACK AND WHITE. THE R EASONS RECORDED SHOULD BE CLEAR AND UNAMBIGUOUS AND SHOULD NOT SUFFER FROM AN Y VAGUENESS. THE REASONS RECORDED MUST DISCLOSE HIS MIND. REASONS ARE THE MA NIFESTATION OF MIND OF THE ASSESSING OFFICER. THE REASONS RECORDED SHOULD BE S ELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR THE REASONS. REA SONS PROVIDE LINK BETWEEN CONCLUSION AND EVIDENCE. THE REASONS RECORDED MUST BE BASED ON EVIDENCE. NOTICE SHOULD BE EFFECTIVE AND INDICATE ITS PRECISE SCOPE AND ALSO THE POINTS ON WHICH THE PERSON CONCERNED IS EXPECTED TO GIVE REPL Y. B.D. GUPTA V. STATE OF HARYANA AIR 1972 SC 2472 IN VIEW OF ABOVE FUNDAMENTAL LEGAL INFIRMITY WHICH UPROOTS THE VERY ACTION OF THE LD. CIT AND ON THE BASIS OF ABOVE DECISIONS, IT IS PRAYED THAT THE NOTICE AS WELL AS THE CANCELLATION ORDER MAY KINDLY BE QUASHE D BY YOUR HONOURS. 25. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS TAKE N THIS GROUND BUT WHEN IN SEARCH AND SEIZURE OPERATION, THE SUBJECT A GREEMENTS ARE FOUND, THE CIT IS JUSTIFIED IN GIVING THE NOTICE AND THERE IS NO REASON TO QUASH THIS NOTICE, THEREFORE, ADDITIONAL GROUND SHOULD NOT BE ADMITTED. 26. HAVING HEARD BOTH THE PARTIES, WE ARE OF THE VI EW THAT WE HAVE DEALT REGARDING CONTENTS OF NOTICE IN OUR ORDER. MOREOVER , WE HAVE ALREADY ALLOWED THE APPEAL OF THE ASSESSEE, THEREFORE, THIS GROUND OF APPEAL BECOMES ACADEMIC. THUS, DISMISSED BEING ACADEMIC. 27. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ITA NO. 387/IND/2014 IN THE CASE OF HAI HAY EDUCATI ON TRUST 28. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: H.K. KALCHURI AND OTHERS 12AA 84 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE IMPUGNED ORDER CANCELLING REGISTRATION U/S 12AA(3) PASSED BY.LD CO MMISSIONER OF INCOME TAX (HEREINAFTER REFERRED TO AS 'CIT') IS WHOLLY ILLEGAL, WITHOUT JU RISDICTION AND INVALID. 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT GROSSLY ERRED IN CANCELLING REGISTRATION EARLIER GRANTED U/S. 12A W.E.F. 28.10.1997. THE LD. CIT FAILED TO APPRECIATE THAT POWER TO CANCEL REGISTRATION U/S. 1 2AA(3) IN CASE OF REGISTRATION EARLIER GRANTED U/S. 12A WAS BROUGHT ON THE STATUTE ONLY W.E.F. 01. 06.2010 PROSPECTIVELY. THE CANCELLATION MADE BY ID. CIT RETROSPECTIVELY W.E.F. 28.10.1997 F ROM THE EFFECTIVE DATE OF GRANTING IS, THEREFORE, INVALID AND ILLEGAL. 3. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW. THE IMPUGNED ORDER U/S. 12AA(3) PASSED BY THE LD. CIT IN THE CASE OF APPELL ANT IS PATENTLY INVALID, ARBITRARY, CONTRARY TO PROVISIONS OF LAW, CONTRARY TO ALL CANONS OF NATURA L JUSTICE AND IS VOID AB-INITIO ON VARIOUS FACTUAL AND LEGAL GROUNDS. 4. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, VARIOUS OBSERVATIONS MADE BY THE LD. CIT WHILE CANCELLING REGISTRATION I N THE IMPUGNED ORDER ARE FACTUALLY INCORRECT, ILLEGAL AND IRRELEVANT. 5. THE ID. CIT HAS ERRED, BOTH IN LAW AND ON THE FA CTS OF THE CASE, IN NOT APPRECIATING THE SCHEME OF THE ACT WHEREBY HE IS EMPOWERED TO CANCEL REGISTRATION OF TRUST/SOCIETY ONLY UNDER PROVISIONS OF S. 12AA(3) OF THE ACT ON SATISFACTION OF THE VERY CONDITIONS CONTEMPLATED THEREIN. IN THE FACTS OF THE PRESENT CASE, NONE OF THESE CON DITIONS ARE SATISFIED AND, THEREFORE, THE ACTION OF ID. CIT IS PATENTLY ILLEGAL AND WITHOUT JURISDIC TION. 6. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE ACTION OF THE ID CIT IN CANCELLING THE REGISTRATION IS BEYOND HIS POWER AND JURISDICTION, AND THEREFORE THE SAME IS REQUIRED TO BE TREATED AS NULL AND VOID AND BE QUAS HED ACCORDINGLY. ADDITIONAL GROUND: THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE NOTICE ISSUED U/S 12AA(3) WAS WITHOUT JURISDICTION, UNLAWFUL AND AB-I NITIO VOID. ITA NO. 388/IND/2014 IN THE CASE OF JAI NARAIN SHIK SHA SAMITI 29. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE IMPUGNED ORDER CANCELLING REGISTRATION U/S 12AA(3) PASSED BY. LD C OMMISSIONER OF INCOME TAX (HEREINAFTER REFERRED TO AS 'CIT') IS WHOLLY ILLEGAL, WITHOUT JU RISDICTION AND INVALID. 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT GROSSLY ERRED IN CANCELLING REGISTRATION EARLIER GRANTED U/S. 12A W.E.F. 1.4.2003. THE LD. CIT FAILED TO H.K. KALCHURI AND OTHERS 12AA 85 APPRECIATE THAT POWER TO CANCEL REGISTRATION U/S. 1 2AA(3) IN CASE OF REGISTRATION EARLIER GRANTED U/S. 12A WAS BROUGHT ON THE STATUTE ONLY W.E.F. 01. 06.2010 PROSPECTIVELY. THE CANCELLATION MADE BY ID. CIT RETROSPECTIVELY W.E.F. 1.4.2003 FRO M THE EFFECTIVE DATE OF GRANTING IS, THEREFORE, INVALID AND ILLEGAL. 3. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW. THE IMPUGNED ORDER U/S. 12AA(3) PASSED BY THE LD. CIT IN THE CASE OF APPELL ANT IS PATENTLY INVALID, ARBITRARY, CONTRARY TO PROVISIONS OF LAW, CONTRARY TO ALL CANONS OF NATURA L JUSTICE AND IS VOID AB-INITIO ON VARIOUS FACTUAL AND LEGAL GROUNDS. 4. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, VARIOUS OBSERVATIONS MADE BY THE LD. CIT WHILE CANCELLING REGISTRATION I N THE IMPUGNED ORDER ARE FACTUALLY INCORRECT, ILLEGAL AND IRRELEVANT. 5. THE ID. CIT HAS ERRED, BOTH IN LAW AND ON THE FA CTS OF THE CASE, IN NOT APPRECIATING THE SCHEME OF THE ACT WHEREBY HE IS EMPOWERED TO CANCEL REGISTRATION OF TRUST/SOCIETY ONLY UNDER PROVISIONS OF S. 12AA(3) OF THE ACT ON SATISFACTION OF THE VERY CONDITIONS CONTEMPLATED THEREIN. IN THE FACTS OF THE PRESENT CASE, NONE OF THESE CON DITIONS ARE SATISFIED AND, THEREFORE, THE ACTION OF ID. CIT IS PATENTLY ILLEGAL AND WITHOUT JURISDIC TION. 6. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE ACTION OF THE ID CIT IN CANCELLING THE REGISTRATION IS BEYOND HIS POWER AND JURISDICTION, AND THEREFORE THE SAME IS REQUIRED TO BE TREATED AS NULL AND VOID AND BE QUAS HED ACCORDINGLY. ADDITIONAL GROUND: THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE NOTICE ISSUED U/S 12AA(3) WAS WITHOUT JURISDICTION, UNLAWFUL AND AB-I NITIO VOID. ITA NO. 390/IND/2014 IN THE CASE OF RISHIRAJ MEMORI AL EDUCATION & WELFARE SOCIETY 30. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE IMPUGNED ORDER CANCELLING REGISTRATION U/S 12AA(3) PASSED BY. LD C OMMISSIONER OF INCOME TAX (HEREINAFTER REFERRED TO AS 'CIT') IS WHOLLY ILLEGAL, WITHOUT JU RISDICTION AND INVALID. 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT GROSSLY ERRED IN CANCELLING REGISTRATION EARLIER GRANTED U/S. 12A W.E.F. 17.07.2000 THE LD. CIT FAILED TO APPRECIATE THAT POWER TO CANCEL REGISTRATION U/S. 1 2AA(3) IN CASE OF REGISTRATION EARLIER GRANTED U/S. 12A WAS BROUGHT ON THE STATUTE ONLY W.E.F. 01. 06.2010 PROSPECTIVELY. THE CANCELLATION MADE BY ID. CIT RETROSPECTIVELY W.E.F. 17.07.2000 F ROM THE EFFECTIVE DATE OF GRANTING IS, THEREFORE, INVALID AND ILLEGAL. H.K. KALCHURI AND OTHERS 12AA 86 3. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW. THE IMPUGNED ORDER U/S. 12AA(3) PASSED BY THE LD. CIT IN THE CASE OF APPELL ANT IS PATENTLY INVALID, ARBITRARY, CONTRARY TO PROVISIONS OF LAW, CONTRARY TO ALL CANONS OF NATURA L JUSTICE AND IS VOID AB-INITIO ON VARIOUS FACTUAL AND LEGAL GROUNDS. 4. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, VARIOUS OBSERVATIONS MADE BY THE LD. CIT WHILE CANCELLING REGISTRATION I N THE IMPUGNED ORDER ARE FACTUALLY INCORRECT, ILLEGAL AND IRRELEVANT. 5. THE ID. CIT HAS ERRED, BOTH IN LAW AND ON THE FA CTS OF THE CASE, IN NOT APPRECIATING THE SCHEME OF THE ACT WHEREBY HE IS EMPOWERED TO CANCEL REGISTRATION OF TRUST/SOCIETY ONLY UNDER PROVISIONS OF S. 12AA(3) OF THE ACT ON SATISFACTION OF THE VERY CONDITIONS CONTEMPLATED THEREIN. IN THE FACTS OF THE PRESENT CASE, NONE OF THESE CON DITIONS ARE SATISFIED AND, THEREFORE, THE ACTION OF ID. CIT IS PATENTLY ILLEGAL AND WITHOUT JURISDIC TION. 6. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE ACTION OF THE ID CIT IN CANCELLING THE REGISTRATION IS BEYOND HIS POWER AND JURISDICTION, AND THEREFORE THE SAME IS REQUIRED TO BE TREATED AS NULL AND VOID AND BE QUAS HED ACCORDINGLY. ADDITIONAL GROUND: THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE NOTICE ISSUED U/S 12AA(3) WAS WITHOUT JURISDICTION, UNLAWFUL AND AB-I NITIO VOID. ITA NO. 386/IND/2014 IN THE CASE OF RISHIRAJ SINGH MEMORIAL WELFARE SOCIETY 31. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE IMPUGNED ORDER CANCELLING REGISTRATION U/S 12AA(3) PASSED BY LD COMMISSIONER OF INCOME TAX (HEREINAFTER REFERRED TO AS CIT) IS WHOLLY ILLEGAL, WITHOUT JURISDICTION AND INVALID. 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT (A) GROSSLY ERRED IN CANCELLING REGISTRATION EARLIER GRANTED U/S. 12A W.E.F. 01.04.2004. THE LD. CIT FAILED TO APPRECIATE THAT POWER TO CANCEL REGISTRATION U/S. 1 2AA93) IN CASE OF REGISTRATION EARLIER GRANTED U/S. 12A WAS BROUGHT ON THE STATUTE ONLY W.E.F. 01. 06.2010 PROSPECTIVELY. THE CANCELLATION MADE BY LD. CIT RETROSPECTIVELY W.E.F. 01.04.2004 FROM T HE EFFECTIVE DATE OF GRANTING IS, THEREFORE, INVALID AND ILLEGAL. H.K. KALCHURI AND OTHERS 12AA 87 3. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE IMPUGNED ORDER U/S. 12AA93) PASSED BY THE LD. CIT IN THE CASE OF APPELL ANT IS PATENTLY INVALID, ARBITRARY, CONTRARY TO PROVISIONS OF LAW, CONTRARY TO ALL CANONS OF NATURA L JUSTICE AND IS VOID AB-INITIO ON VARIOUS FACTUAL AND LEGAL GROUNDS. 4. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, VARIOUS OBSERVATIONS MADE BY THE LD. CIT WHILE CANCELLING REGISTRATION IN THE IM PUGNED ORDER ARE FACTUALLY INCORRECT, ILLEGAL AND IRRELEVANT. 5. THE LD. CIT HAS ERRED, BOTH IN LAW AND ON THE FA CTS OF THE CASE, IN NOT APPRECIATING THE SCHEME OF THE ACT WHEREBY HE IS EMPOWERED TO CANCEL REGISTRAT ION OF TRUST/SOCIETY ONLY UNDER PROVISIONS OF S. 12AA(3) OF THE ACT ON SATISFACTION OF THE VERY C ONDITIONS CONTEMPLATED THEREIN. IN THE CASE OF THE PRESENT CASE, NONE OF THESE CONDITIONS ARE SATI SFIED AND, THEREFORE, THE ACTION OF LD. CIT IS PATENTLY ILLEGAL AND WITHOUT JURISDICTION. 6. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE ACTION OF THE LD. CIT IN CANCELLING THE REGISTRATION IS BEYOND HIS POWER AND JURISDICTION, AND THEREFORE THE SAME IS REQUIRED TO BE TREATED AS NULL AND VOID AND BE QUASHED ACCOR DINGLY. 7. THAT THE APPELLANT CRAVES YOUR HONOURS LEAVE TO ADD, ALTER OR AMEND GROUNDS OF APPEAL. ADDITIONAL GROUND: THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE NOTICE ISSUED FOR CANCELLING REGISTRATION U/S 12AA(3) WAS WITHOUT JUR ISDICTION, UNLAWFUL AND AB INITIO VOID. 32. SO FAR AS THE ITA NOS.387, 388, 390 & 386/IND/2 014 IN CASES OF HAI HAY KSHETRIYA EDUCATION SOCIETY, JAI NARAIN SHIKSHA SAMITI, RISHIRAJ MEMORIAL EDUCATION & WELFARE SOCIETY & RISHIRAJ SIN GH MEMORIAL WELFARE SOCIETY ARE CONCERNED, BOTH THE PARTIES SUBMITTED T HAT GROUNDS, FACTS & CIRCUMSTANCES OF THESE APPEALS ARE IDENTICAL TO THA T OF H.K. KALCHURI EDUCATION TRUST, DECIDED ABOVE. THEREFORE, OUR FIND ING GIVEN IN THE CASE OF H.K. KALCHURI EDUCATION TRUST WILL PREVAIL IN THE C ASES OF THESE FOUR ASSESSEE SOCIETIES TOO AND THESE SOCIETIES ARE ALSO HELD TO BE CHARITABLE H.K. KALCHURI AND OTHERS 12AA 88 ORGANIZATIONS ELIGIBLE FOR EXEMPTION U/S 11 R.W. SE C. 12 & 13. THE REGISTRATION OF THESE FOUR SOCIETIES AS CANCELLED B Y THE CIT IS ALSO HELD AS UNLAWFUL AND IS RESTORED BACK FROM THE DATE OF GRAN TING. OUR ABOVE FINDINGS ARE WITHOUT PREJUDICE TO AND INDEPENDENT OF OUR FIN DING THAT THE SUBJECT AGREEMENTS DEALT WITH BY THE CIT/ASSESSING OFFICER WERE NOT FOUND IN THE CASE OF JAI NARAYAN SHIKSHA SAMITI (ITA NO.388/IND/ 2014) AND IN HAI-HAY KSHETRIYA EDUCATION SOCIETY (ITA NO.387/IND/2014) A ND HENCE, NO ADVERSE ANALOGY COULD BE DRAWN IN THESE CASES OF THESE AGRE EMENTS. BY FOLLOWING OUR ORDER IN THE CASE OF H.K. KALCHURI EDUCATION TR UST, WE ALLOW GROUNDS OF THESE FOUR ASSESSEES APPEALS ALSO EXCEPT ADDITIONA L GROUND IN TERMS AS INDICATED IN THE ORDER OF H.K. KALCHURI EDUCATION T RUST. FINALLY, ALL THE APPEALS ARE PARTLY ALLOWED. PRONOUNCED IN OPEN COURT ON 17.5.2016. SD/- SD/- (B.C. MEENA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17.5.2016