Prathyusha Educational Trust, CHENNAI V. ACIT, CHENNAI

ITA 637/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5045 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 14-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAILENDRA MAMMIDI CIT
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Search and seizure; Document seized; Charitable institution; Principle of natural justice; Benefit of exemption; Cancellation of registration; Documents seized
• Section: 12AA; 132; 10; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . , . , BEFORE SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NOS.370, 637 & 638/CHNY/2017 /ASSESSMENT YEARS: NIL, 2010-11 & 2011-12 PRATHYUSHA EDUCATIONAL TRUST, 3 RD FLOOR, OLD NO.8, NEW NO.18, 12 TH CROSS STREET, INDIRA NAGAR, CHENNAI-600 020. VS. PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL 2, CHENNAI. & THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3), CHENNAI. [PAN: AAATP 5521 H] ( # /APPELLANT) ( $%# /RESPONDENT) # & / APPELLANT BY : MR.R. VIJAYARAGHAVAN, ADV. $%# & /RESPONDENT BY : MR. SAILENDRA MAMMIDI, CIT & /DATE OF HEARING : 04.04.2018 & /DATE OF PRONOUNCEMENT : 19.06.2018 / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER : THE ASSESSEE FILED THESE APPEALS AGAINST THE ORDE R OF THE PCIT, CENTRAL-2, CHENNAI, PASSED U/S.12AA(3) IN C NO. 27 50/C-2/2013-14 DT ITA NO.370, 637 & 638/CHNY/2017 :- 2 -: 07.12.2016 AND THE ORDERS OF THE LD. CIT(A)-18 , CHENNAI IN ITA NOS 628 & 732/ 15-16 DT 12.1.2017 FOR A YS 2010-11 & 2011-12 , RESPECTIVELY. 2. 'M/S PRATHYUSHA EDUCATIONAL TRUST', THE ASSESSEE , A TRUST, FORMED VIDE DEED EXECUTED ON 1.8.2000, WAS GRANTED REGISTRATION U/S 12AA BY THE DIRECTOR OF INCOME TAX (EXEMPTIONS), CHENNAI IN F.N O.2(361)/2002-03, DATED 22.10.2002. THE ASSESSEE TRUST RUNS AN ENGINEERING COLLEGE BY NAME M/S PRATHYUSHA INSTITUTE OF TECHNOLOGY & MANAGEMENT . 3. A SEARCH & SEIZURE ACTION WAS CARRIED OUT AT THE PREMISES OF THE TRUST ON 2.7.2010, DURING WHICH CERTAIN INCRIMINATING DOC UMENTS SUCH AS REGISTERS, NOTE BOOKS ETC. WERE FOUND AND SEIZED. THEY REVEALE D THAT THE TRUST IS RUN FOR THE PURPOSES OF PROFIT AND NOT SOLELY FOR EDUCATI ONAL PURPOSES. SUBSEQUENTLY, THE A O ISSUED NOTICES FOR AYS 2010-11 & 2011-12, R ESPECTIVELY. THE ASSESSEE FAILED TO ; FURNISH BOOKS OF ACCOUNT, EXPLANATION W ITH REGARD TO ENTRIES APPEARING IN THE SEIZED BOOKS IN SPITE OF NUMEROUS OPPORTUNITIES AFFORDED AND FAILED TO GIVE ANY EXPLANATION WITH REGARD TO THE E NTRIES IN THE SEIZED NOTEBOOK/MATERIAL TOWARDS THE HUGE AMOUNTS COLLECTE D FROM STUDENTS VIZ., RS.8,05,000/- FOR A Y 2010-11, RS.1,49,37,200/- FO R AY 2011-12, TOTALLING TO RS.1,57,42,700/- ETC BEFORE THE AO. AFTER CONSIDE RING THE SEIZED MATERIALS, THE SWORN STATEMENTS RECORDED FROM SHRI P. RAJA RA O, CHAIRMAN AND TRUSTEE AND SHRI RAMAYYA VUTUKURI, DGM (FINANCE) AND OTHER MATERIALS ETC , THE A O HELD, INTER ALIA, THAT FROM THE FACTS GATHERED DUR ING THE COURSE OF SEARCH AND CONFRONTED TO THE MANAGING TRUSTEE AND THE OFFICER- IN-CHARGE OF ACCOUNTS ITA NO.370, 637 & 638/CHNY/2017 :- 3 -: AND AS DEPOSED BY THEM, THE ASSESSEE HAS VIOLATED T HE BENEFICIAL PROVISIONS CONTAINED UNDER THE INCOME TAX ACT IN MANY WAYS. SU CH CONTUMACIOUS CONDUCT IN RUNNING THE AFFAIRS OF THE TRUST GO AG AINST THE BASIC TENETS OF THE TRUST AND TRUSTEESHIP. HENCE, THE AO TREATED THE ASSESSEE AS AN AOP AND DETERMINED THE INCOME ON 28.03.2013 WITHOUT G IVING BENEFIT OF EXEMPTIONS UNDER SECTIONS 10 & 11 FOR BOTH THE A YS 2010-11 & 2011-12. AGGRIEVED, THE ASSESSEE FILED APPEALS BEFORE TH E LD. CIT(A) FOR THESE A YS. 4. MEANWHILE, BASED ON THE SEIZED DOCUMENTS, SWORN STATEMENT RECORDED DURING THE SEARCH FROM THE MANAGING TRUSTEE AND OT HER SENIOR EXECUTIVES OF THE TRUST ETC, THE LD. PRINCIPAL COMMISSIONER OF I NCOME TAX, CENTRAL-2, CHENNAI ( LD. PCIT) NOTICED THAT THE ASSESSEE T RUST IS NOT CARRYING OUT ACTIVITIES IN ACCORDANCE WITH ITS OBJECTS AND HENC E, HE ISSUED SHOW CAUSE NOTICES U/S 12AA(3) DT 18.7.2013 & 26.9.2016 PROP OSING TO CANCELL THE REGISTRATION ALREADY GRANTED TO IT . 4.1. AFTER CONSIDERING THE ASSESSEES SUBMISSI ONS , REPLY AND AFTER TAKING INTO ACCOUNT RELEVANT MATERIAL ETC , THE LD. PCIT HELD THAT THE ASSESSEE IS NOT CARRYING ITS ACTIVITIES IN ACCORDANCE WITH LAW , AND THE ACTIVITIES OF THE TRUST ARE IN ACCORDANCE WITH ITS OBJECTS AND HENCE, THE LD. PCIT CANCELLED THE REGISTRATION GRANTED EARLIER TO THE ASSESSEE U/S 12 AA(3) W E F 1.4.2009 I.E. FROM A Y 2010-11 ONWARDS PRIMARILY ON THE FOLLOWING 3 COUNTS : (I) HUGE AMOUNT OF RS.1,57,42,700/- COLLECTED FROM STUDENTS IN CASH, AS RECORDED IN THE SEIZED DOCUMENT VIDE ANNEXURE ANN/J XP/REG/S-L WAS MADE ITA NO.370, 637 & 638/CHNY/2017 :- 4 -: WITHOUT ISSUING ANY RECEIPTS AND WITHOUT ENTERING T HEM IN THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE TRUST , WAS LYING WITH THE MANAGING TRUSTEE AND OTHER TRUSTEES DURING THE SAID PERIOD AND HAVE NOT BEEN USED FOR THE OBJECTS OF THE TRUST. (II) RS. 6 CRORE ADVANCED TO M/S PRATHYUSHA ASSOCIA TES SHIPPING PVT. LTD. (PASPL), A SISTER CONCERN ENGAGED IN CIVIL CONSTRUC TIONS, FREE-OF-INTEREST. THOUGH IT WAS CLAIMED TO HAVE BEEN ADVANCED TOWARDS COST OF CONSTRUCTION OF THE BUILDINGS FOR THE TRUST, IT WAS NOT MADE BY ANY TENDER OR RECEIPT OF BIDS IN A TRANSPARENT MANNER. FROM THE EVIDENCES PLACED, SU CH HUGE ADVANCES WAS FOUND NOT TO HAVE BEEN MADE TOWARDS COST OF CONST RUCTION OF THE BUILDINGS OF THE TRUST. THEREFORE, THE IMPUGNED ADVANCES WERE HELD AS NOT MADE FOR THE PURPOSES OF THE TRUST AND (III) THE PAYMENT OF RS.4.92 LAKHS MADE IN TH E ASSESSMENT YEAR 2011-12, TO MS. PRATHYUSHA , DAUGHTER OF THE MANAGING TRUSTE E, FOR WHICH THERE WAS NO JUSTIFICATION WITH REFERENCE TO HER QUALIFICATIONS AND THE SERVICES RENDERED AND HENCE THE IMPUGNED PAYMENT IS NOT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. 5. ON THE APPEALS FILED BEFORE THE LD. CIT(A) AGAIN ST THE ASSESSMENT ORDERS, HE HELD, INTER ALIA, THAT THE EXEMPTIO N ORIGINALLY GRANTED TO THE ASSESSEE HAS BEEN CANCELLED BY THE DGIT (INV.), TAM IL NADU AND PONDICHERRY AND THE PR. CIT CENTRAL-2, CHENNAI, VIDE ORDERS DAT ED 18-11-2014 AND 07.12.2016, RESPECTIVELY, AFTER GIVING DUE OPPORTU NITY TO THE ASSESSEE. AS ON ITA NO.370, 637 & 638/CHNY/2017 :- 5 -: DATE, THOSE ORDERS CANCELLING THE EXEMPTION, HOLD G OOD AND HAVE NOT BEEN SET ASIDE OR REVERSED. THEREFORE, THE LD. CIT(A) CANNO T SHUT HIS EYES TO THE SAID FACTUM OF CANCELLATION. FURTHER, AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, MATERIAL ETC., THE LD. CIT (A) DISMIS SED BOTH THE APPEALS. AGAINST ALL THESE 3 ORDERS, THE ASSESSEE FILED T HESE APPEALS. 6. AT THE TIME OF HEARING, THE AR SUBMITTED THAT TH E DECISION TO BE MADE ON THE ORDER OF THE LD. PCIT, CENTRAL-2, CHENNAI, W OULD DECIDE THE MATTERS IN ALL THESE APPEALS. THE A R SUBMITTED THAT THE A SSESSEE IS A PUBLIC CHARITABLE TRUST HAVING THE MAIN CHARITABLE OBJECT OF EDUCATION AND RUNS AN ENGINEERING COLLEGE BY THE NAME M/S PRATHYUSHA INS TITUTE OF TECHNOLOGY & MANAGEMENT. THE ASSESSEE MADE A DETAILED SUBMIS SION BEFORE THE LD PCIT THAT THE TRUST HAS NOT RECEIVED ANY CAPITATION FEES AND THE SUM OF RS.1.57 CRORES IS ONLY THE ADVANCE FEES COLLECTED FROM STUD ENTS. IT WAS FURTHER SUBMITTED THAT EVEN IF IT IS TO BE CONSTRUED AS CAP ITATION FEES, THE SAME CANNOT BE A REASON FOR CANCELLATION OF REGISTRATION. THE L D PCIT ERRED IN HOLDING THAT THE APPELLANT TRUST HAS NOT CARRIED OUT ACTIVITIES IN ACCORDANCE WITH THE OBJECTS OF THE TRUST , IT IS RUN SOLELY FOR THE PURPOSE OF PROFIT AND NOT SOLELY FOR EDUCATIONAL PURPOSES. HE HAS FAILED TO APPRECIATE T HAT THE SOLE OBJECT OF THE TRUST IS PROVIDING EDUCATION AND ITS ENTIRE INCOME HAS BEEN APPLIED ONLY FOR THE SAID PURPOSE. THE LD. PCIT ERRED IN HOLDING THA T THE SUM OF RS.1.57 CRORES RECEIVED BY THE APPELLANT FROM THE STUDENTS IS A RE CEIPT IN EXCESS OF THE PRESCRIBED FEES AND CAPITATION FEES , WHICH HAVE NOT BEEN ACCOUNTED FOR IN ITA NO.370, 637 & 638/CHNY/2017 :- 6 -: THE BOOKS OF ACCOUNTS AND HAVE NOT BEEN UTILISED FOR THE PURPOSE OF OBJECTS OF THE TRUST. HE FAILED TO APPRECIATE THAT IT WAS NOT THE CASE OF ANY STUDENT OR THE PAYER THAT SUCH PAYMENT WAS IN EXCE SS OF FEES OR CAPITATION FEES. THE SUM HAS BEEN DULY ACCOUNTED FOR IN THE BO OKS OF ACCOUNTS UPON THE STUDENT GETTING THE ADMISSION, DULY AS FEES. IN CAS E OF STUDENTS WHO DID NOT GET THE ADMISSION, THE ADVANCE FEES HAS BEEN RETU RNED AND THE SAME IS NOT INCOME OF THE APPELLANT. THE CONCLUSION THAT IT IS CAPITATION FEES OF EXCESS OVER THE PRESCRIBED FEES HAS BEEN ARRIVED AT WITHOUT ANY BASIS OR EVIDENCE. THERE IS NO BASIS IN CONCLUDING THAT THE RECEIPT IS FOR ANY PURPOSE OTHER THAN THE OBJECT. THE LD. PCIT OUGHT TO HAVE APPRECIATED THAT THE RECEIPTS ARE DULY APPLIED IN CARRYING OUT THE OBJECTS OF THE TRUST. REGARDING THE ADVANCE OF RS. 6 CRORES GIVEN TO M/S PRATHYUSHA ASSOCIATES SH IPPING P LTD (PASPL), IT WAS SUBMITTED THAT THE SAME IS MOBILISATION ADVANCE TOW ARDS THE CONTRACT FOR CONSTRUCTION OF HOSTEL FOR STUDENTS WHICH WAS AWARD ED TO THE SAID CONCERN BASED COMPETITIVE BIDDING. THE LD. PCIT ERRED IN HO LDING THAT THE ADVANCE MADE BY THE APPELLANT TO M/S PRATHYUSHA ASSOCIATES SHIPPING P LTD IS NOT TOWARDS CONSTRUCTION OF HOSTEL. THE LD. PCIT FAILE D TO APPRECIATE THAT THE SAME REPRESENTS MOBILISATION ADVANCE IN RESPECT OF THE CONTRACT AWARDED TO THEM ON COMPETITIVE BIDDING, FOR CONSTRUCTION OF HO STEL FOR THE STUDENTS. AS REGARDS THE PAYMENT OF RS.4.92 LAKHS TO MS PRATHYUS HA , IT WAS SUBMITTED THAT SHE IS A MBA GRADUATE AND FULL TIME CEO OF THE EDUCATIONAL INSTITUTION RUN BY THE TRUST AND THE PAYMENT IS THEREFORE JUSTIFIED . THE LD. PCIT ERRED IN ITA NO.370, 637 & 638/CHNY/2017 :- 7 -: HOLDING THAT THE JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT ARE NOT APPLICABLE TO THE FACTS OF THE CASE OF THE APPELLAN T AND ARE DISTINGUISHABLE. 6.1 PER CONTRA, THE LD. DR INVITED OUR ATTENTION T O THE RELEVANT PORTIONS OF THE ORDERS OF THE LD. PCIT AND SUBMITTED THAT LD. PCIT ON DUE CONSIDERATION OF THE SEIZED MATERIAL , SWORN STATEMENTS RECORDED AT THE TIME OF SEARCH, OTHER MATERIAL AND APPLYING THE APPROPRIATE RATIOS, HAVE ARRIVED A CLEAR FINDING ON THE IMPUGNED TRANSACTIONS AND CONCLUDED THAT THE ASSESSEES ACTIVITIES ARE NOT IN ACCORDANCE WITH LAW AND IT IS NOT CARRYING ITS ACTIVITIES IN ACCORDANCE WITH THE OBJECTS OF THE TRUST AND HENCE, CANCELLE D THE REGISTRATION GRANTED TO THE ASSESSEE. THE LD. DR SUBMITTED AFTER THIS ORDER WAS PASSED BY THE LD. PCIT, THE ASSESSEE PURSUED ITS APPEALS BEFORE TH E LD CIT(A). INVITING OUR ATTENTION TO THE RELEVANT PORTIONS OF THE ORDER OF THE AO AND THE LD CIT(A) , THE LD. DR SUBMITTED THAT SINCE THE ASSESSEE IS S EEKING THE EXEMPTION, THE ONUS IS ON IT TO PLACE ADEQUATE AND RELEVANT MATERI AL AND SEEK EXEMPTION. IN SPITE THE SEARCH AND SEIZURE ACTION, THE ASSESSEE H AS NOT PLACED ANY MATERIAL BEFORE THE AO IN SUPPORT OF THE EXEMPTION. IT COULD NOT PRODUCE ANY EVIDENCE TO DISPEL THE FINDINGS ARRIVED BY THE LD. PCIT. ON THE OTHER HAND, THE LD. CIT(A) HAS ARRIVED A VERY CLEAR FINDING ON HIS OWN AS TO HOW THE ASSESSEES CLAIMS ARE UNTENABLE AND ACCORDINGLY DISMISSED THE APPEALS. THE LD. DR FURTHER SUBMITTED THAT EVEN AFTER THE CONCURRENT FI NDINGS OF THE AO, LD. CIT(A) AND THE LD. PCIT, THE ASSESSEE HAS NOT PLACED ANY MATERIAL TO DISLODGE THE FINDINGS RECORDED BY THEM AND HENCE THEIR ORDER S MAY BE UPHELD . ITA NO.370, 637 & 638/CHNY/2017 :- 8 -: 7. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH RELEVANT MATERIAL. IN RESPECT OF THE RECEIPTS OF RS.1,57,42,700/- FROM DIFFERENT STUDENTS, AS FOUND IN THE SEIZED REGISTER INVENTORIED AS ANN/JXP/REG/S , SI.NO.1, PERTAINING TO TWO FINANCIAL YEARS 2009-10 & 2010-11, THE RELEVANT PORTION OF THE ORDER OF THE LD. PCIT IS EXTRACTED AS UNDER : 7. 2 NOW, DURING THE PRESENT PROCEEDINGS, AFTER ISS UANCE OF THE SAID NOTICES U/S 12AA(3) OF THE ACT, IN THE FIRST REPLY SUBMITTED ON 8 .8.2013, THE ASSESSEE HAS TRIED TO EXPLAIN SUCH AMOUNTS RECEIVED FROM DIFFERENT STUDEN TS, AS RECORDED IN THE SEIZED DOCUMENT, BY STATING THAT STUDENTS BELONGING TO POO R COMMUNITY, ASPIRING FOR ENGINEERING DEGREE WOULD BLOCK A SEAT IN THEIR PREF ERRED COURSE, IN THE COLLEGE RUN BY THE TRUST, BY PAYING SOME ADVANCE FEES. IT IS FURT HER STATED THAT SUCH PAYMENT IS MADE BY THE CONCERNED STUDENTS BEFORE COUNSELLING(SI C) COMMENCES FOR ADMISSION AND IN THE COUNSELLING, IF THAT STUDENT GETS PRATHYU SHA INSTITUTE AND ALSO THE PREFERRED COURSE, ADMISSION IS GIVEN AND THEN THE AD VANCE FEE COLLECTED IS ADJUSTED AGAINST THE ACTUAL FEES TO BE PAID BY HIM AND A CONS OLIDATED RECEIPT IS ISSUED TO THE STUDENTS. FROM THESE SUBMISSIONS, IT MAY BE CAREFULL Y NOTICED THAT, IT HAS BEEN STATED BY THE ASSESSEE TRUST THAT SUCH AMOUNT HAS B EEN PAID BY THE CONCERNED STUDENT FOR BLOCKING A SEAT IN THE ENGINEERING COLLE GE RUN BY THE ASSESSEE TRUST AND THAT THE SAME IS RECEIVED FROM SUCH STUDENT BEFORE T HE START OF COUNSELING. ONLY ON START OF COUNSELING FOR THE STUDENTS BY THE CONCERNED GOVERNMENT AUTHORITY DURING A PARTICULAR ACADEMIC YEAR, ADMISSION PROCESS FOR ST UDENTS TO DIFFERENT ENGINEERING COLLEGES COMMENCES. ONLY UPON SELECTION OF A STUDENT FOR ADMISSION TO A PARTICULAR ENGINEERING COURSE IN A PARTICULAR ENGINEERING COLL EGE THROUGH THE PROCESS OF COUNSELING, ANY AMOUNT RECEIVED FROM THAT STUDENT B Y THE CONCERNED COLLEGE AUTHORITY CAN BE CONSIDERED FOR ADJUSTMENT OR TREAT ED AS RECEIVED TOWARDS ADVANCE FEES FROM HIM. PRIOR TO SELECTION OF A STUDENT FOR ADM ISSION THROUGH COUNSELING TO AN ENGINEERING COLLEGE, IF ANY AMOUNT IS OR HAS BEEN COLLECTED BY THAT COLLEGE AUTHORITY FROM THAT STUDENT, THEN THE SAME SHOULD N OT BE AND ALSO CANNOT BE CONSIDERED AS TOWARDS ADVANCE FEES RECEIVED FROM SUCH STUDENT. THEREFORE, WHEN ADMITTEDLY, SUCH RECEIPTS TOTAL AMOUNTING TO RS~ 1, 57,42,700/-, HAVE BEEN COLLECTED BY THE ASSESSEE TRUST FROM THOSE STUDENTS DURING THE SAID FINANCIAL YEARS, PRIOR TO START OF COUNSELING, DURING SUCH PERIOD, TH E SAME CANNOT BE CONSIDERED AS TOWARDS ADVANCE FEES. RATHER, THE SAME ARE IN THE NA TURE OF ADVANCE CAPITATION FEE COLLECTED BY THE ASSESSEE TRUST FROM SUCH STUDENTS FO R THE PURPOSE OF GIVING ADMISSION IN THE ENGINEERING COLLEGE RUN BY IT. 7.3 FURTHER, IN THE SUBMISSIONS FILED VIDE LETTER DA TED 6.10.2016, IN RESPONSE TO THE SECOND NOTICE DATED 26.9.2016 U/S 12AA(3) OF THE ACT , ALMOST THE SAME SUBMISSION HAS BEEN MADE. IT HAS BEEN CONTENDED THAT SUCH AMOU NT RECORDED IN THAT SEIZED NOTE BOOK REPRESENTS ADVANCE FEES RECEIVED FROM STUDE NTS, WHICH ON CONFIRMATION OF ADMISSION HAVE BEEN ADJUSTED AGAINST THE FEES REC EIVABLE AND THE BALANCE HAS BEEN RETURNED TO THE STUDENT, WHERE THE ADMISSION H AS NOT BEEN GRANTED. IT HAS ITA NO.370, 637 & 638/CHNY/2017 :- 9 -: BEEN SUBMITTED THAT THE STUDENTS WHO APPROACH THEIR COLLEGE ENQUIRING ABOUT THE ADMISSION GENERALLY MAKES A TOKEN PAYMENT TOWARDS R ESERVING THE ADMISSION OR MAKE SUBSTANTIAL PAYMENT OF FEES TO BLOCK A SEAT AND ENSURE AN ADMISSION. IT IS FURTHER STATED THAT THESE ADVANCES ARE GENERALLY PAI D IMMEDIATELY AFTER THE QUALIFYING EXAMS (INTERMEDIATE OR +2 AS THE CASE MAY BE) ARE OVER, WHERE THE RESULTS WOULD NOT HAVE BEEN ANNOUNCED. IT IS FURTHE R STATED THAT THE STUDENTS WHOSE ADMISSIONS ARE CONFIRMED, THE ADVANCE FEE COLLE CTED IS ADJUSTED AGAINST THE REGULAR FEE AND THOSE STUDENTS WHO DO NOT GET ADMISS ION, THE FEE COLLECTED IS RETURNED. HOWEVER, FOR THE REASONS STATED IN DETAIL, IN THE PROCEEDING PARA 7.2, SUCH SUBMISSION OF THE ASSESSEE TRUST IS NOT TENABLE . IT MAY BE FURTHER MENTIONED HERE THAT IT HAS BEEN ADMITTED BY THE ASSESSEE TRUS T IN BOTH THE SAID REPLIES THAT PRIOR TO COMMENCEMENT OF COUNSELING, STUDENTS APPROA CHING THEIR COLLEGE USE TO MAKE PAYMENT FOR BLOCKING SEATS. FROM THE SAME, IT MAY BE NOTICED THAT THE ASSESSEE TRUST HAS ADMITTED THAT IT HAS COLLECTED S UCH AMOUNTS FROM THE STUDENTS FOR BOOKING ENGINEERING SEATS IN THE COLLEGE RUN BY IT. WHEN AT THAT STAGE, THE ACTUAL ADMISSION PROCESS THROUGH COUNSELING PROCEDU RE HAS NOT COMMENCED, IT CANNOT BE SAID AND ALSO CANNOT BE ACCEPTED THAT SUC H PAYMENT COLLECTED BY THE ASSESSEE FROM THOSE STUDENTS REPRESENTS ADVANCE FEES. SUCH AMOUNT IN VARYING SUMS COLLECTED FROM THOSE STUDENTS, MUCH PRIOR TO TH E COMMENCEMENT OF ADMISSION PROCESS THROUGH COUNSELING, ACTUALLY IS I N THE NATURE OF CAPITATION FEE/DONATION COLLECTED FROM THE STUDENTS FOR THE PUR POSE OF GETTING ADMISSION IN THE COLLEGE RUN BY THE ASSESSEE TRUST. FROM COLLECT ION OF SUCH AMOUNTS TOTALING TO RS.L,57 ,42,700/-, AS RECORDED IN THE SEIZED REGIST ER ANN/JXP/REG/S, SL.NO. 1, FROM STUDENTS PRIOR TO ADMISSION, FOR WHICH THERE WERE NO RECEIPTS ISSUED BY THE ASSESSEE AND FURTHER WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE TRUST, IT CLEARLY SHOWS THAT THE ASSESSEE TRUST HAS NOT CARRIED OUT ITS ACTIVITY AS A CHARITABLE INSTITUTION. FURTHER SUCH ACTIVITY ON THE PART OF THE ASSESSEE TRUST BY COLLECTING VARIOUS AMOUNTS FROM THE STUDENT S, PRIOR TO ADMISSION TO THE ENGINEERING COLLEGE RUN BY IT, WHICH ARE FULLY IN T HE NATURE OF CAPITATION FEE/DONATION COLLECTED BY THE ASSESSEE TRUST, IS AGA INST THE PRINCIPLES OF LAW, AS PER THE DECISION OF HON'BLE SUPREME COURT IN T.M.A PAI FO UNDATION & OTHERS VS STATE OF KARNATAKA AND OTHERS (2002) 8SCC 481. BY INDULGING S UCH ACTIVITY OF COLLECTING CAPITATION FEES FROM STUDENTS FOR THE PURPOSE OF GETTIN G ADMISSION TO THE ENGINEERING COLLEGE RUN BY THE ASSESSEE TRUST, WHIC H IS NOT PERMISSIBLE UNDER LAW, KEEPING IN VIEW THE SAID DECISION OF HON'BLE APEX CO URT, IN MY CONSIDERED VIEW, UNDER SUCH CIRCUMSTANCES, IT WARRANTS CANCELLATION OF REGISTRATION GRANTED TO THE TRUST U/S 12AA TREATING AS A CHARITABLE INSTITUTION . 7.4 COLLECTION OF CAPITATION FEE FROM STUDENTS, OVER A ND ABOVE THE PRESCRIBED FEE FOR ADMISSION, FOR GETTING ADMISSION INTO THE ENGINEE RING COLLEGE RUN BY THE ASSESSEE TRUST, IS NOT PERMISSIBLE UNDER LAW. IN T. M.A PAI FOUNDATION & OTHERS VS STATE OF KARNATAKA AND OTHERS (2002) 8SCC 481, THE HO N'BLE SUPREME COURT HELD THAT EDUCATION IS A NOBLE OCCUPATION ON NO PROFIT & NO LOSS BASIS AND THUS THOSE WHO ESTABLISH AND MANAGE EDUCATIONAL INSTITUTIONS A RE NOT EXPECTED TO INDULGE IN PROFITEERING OR COMMERCIALIZE IT. FURTHER IN ISLAMIC ACADEMY OF EDUCATION & ANOTHER VS STATE OF KARNATAKA & OTHERS (2003) 6 SCC 697, THE H ON'BLE SUPREME COURT HELD THAT THERE COULD BE NO PROFITEERING AND NO CAPITATIO N FEE COULD BE CHARGED AS IMPARTING OF EDUCATION IS ESSENTIALLY CHARITABLE IN NATURE. REFERRING TO THEIR SAID ITA NO.370, 637 & 638/CHNY/2017 :- 10 -: DECISION IN T.M.A PAI FOUNDATION AND THE DECISIONS IN UNNIKRISHNAN J.P & OTHERS VS STATE OF ANDHRA PADESH & ORS (1993) 1 SCC 645 AND IN P .A. INAMDER & ORS VS STATE OF MAHARASHTRA (ORS) (2005) 6 SCC 537, THE HON'B LE SUPREME COURT, IN THEIR RECENT DECISION DATED 2.5.2016, IN THE CASE OF MODER N DENTAL COLLEGE AND RESEARCH CENTRE & ORS VS STATE OF MADHYA PRADESH & ORS, IN CIV IL APPEAL NOA060 OF 2009, HELD THAT THE BASIC THREAD OF REASONING IN THE SAID DECISIONS IS THAT, EDUCATIONAL ACTIVITY IS ESSENTIALLY CHARITABLE IN NATURE AND TH AT COMMERCIALIZATION OR PROFITEERING THROUGH IT IS IMPERMISSIBLE. IN THAT DECISION IN MO DERN DENTAL COLLEGE AND RESEARCH CENTRE, THE HON'BLE APEX COURT HELD THAT CHARGING O F CAPITATION FEE IS NOT PERMISSIBLE. HAVING REGARD TO THE RATIO OF THE AFOREM ENTIONED DECISIONS OF HON'BLE SUPREME COURT, STRICTLY PROHIBITING COLLECTION OF CAP ITATION FEES BY CHARITABLE TRUST/ INSTITUTIONS, FROM STUDENTS FOR THE PURPOSE OF GETTING ADMISSION TO THE EDUCATIONAL INSTITUTIONS RUN BY THEM, AND SINCE IN THE INSTANT CASE, THE ASSESSEE TRUST HAS INDULGED IN COLLECTION CAPITATION FEES FROM THE STUDE NTS FOR THE PURPOSE OF GETTING ADMISSION TO THE ENGINEERING COLLEGE RUN BY IT, AS EXPLAINED ABOVE, THE REGISTRATION EARLIER GRANTED U/S 12AA OF THE ACT IN ITS CASE IS T HUS LIABLE FOR CANCELLATION U/S 12AA(3) OF THE ACT. 7.5 FURTHER, IT MAY BE MENTIONED HERE THAT IN THE D ECISION IN THE CASE OF VODITHALA EDUCATIONAL SOCIETY VS ADIT (EXEMP) REPORTED IN (20 SOT 353), IT WAS HELD BY THE HON'BLE ITAT, HYDERABAD BENCH, THAT WHEN THE ASSESS EE COLLECTS MONEY FROM STUDENTS OVER AND ABOVE THE FEES PRESCRIBED BY THE G OVERNMENT FOR THE PURPOSE OF ADMISSION, IT AMOUNTS TO SELLING OF EDUCATION AND TH E ELEMENT OF CHARITY NO LONGER REMAINS THERE, AND THUS, THE ASSESSEE IN THAT CASE SHALL NOT BE ENTITLED FOR EXEMPTION U/S 11 OF THE ACT. 7.6 FURTHER, THE HON'BLE ITAT, HYDERABAD, IN THEIR DECISION IN ITA NO.585/HYD/2012 & ITA NO.586/HYD/2012, DATED 31.8.2 012, IN THE CASE OF M/S JOGINPALLY BR EDUCATIONAL SOCIETY AND M/S JB EDUCATI ONAL SOCIETY, UPHELD THE ORDERS DATED 29.3.2012 PASSED U/S 12AA(3) BY THE CI T(CENTRAL) HYDERABAD, CANCELLING REGISTRATION U/S 12AA IN THE CASE OF THE SAID TWO SOCIETIES ON GROUND OF COLLECTION OF CAPITATION FEES BY THE SAID TWO SOCIETI ES, WHICH WERE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. FOLLOWING SEARCH & SE IZURE OPERATION CONDUCTED IN THE CASE OF THE SAID SOCIETY, FROM THE SEIZED DOCUMEN TS, IT WAS FOUND THAT THE ASSESSEE HAS COLLECTED CAPITATION FEES FROM THE STUD ENTS, OVER AND ABOVE THE PRESCRIBED FEE, FOR THE PURPOSE OF ADMISSION, WHICH WE RE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OF THE SOCIETY. UNDER THESE CIRCUMSTANCES, AND SINCE THE ACTIVITY CARRIED ON BY THE SAID SOCIETY WERE FOUND T O BE NOT OF CHARITABLE NATURE, THE REGISTRATION GRANTED U/S 12AA OF THE ACT, WAS CANCEL LED BY THE CIT(CENTRAL), HYDERABAD, AND THE SAID ORDERS OF THE CIT (CENTRAL), HYDERABAD, WAS UPHELD BY THE HON'BLE ITAT, HYDERABAD, VIDE THEIR SAID ORDER IN I TA NO.585/HYD/2012 & ITA NO.586/HYD/2012, DATED 31.8.2012. 7.7 FURTHER, THE HON'BLE MADRAS HIGH COURT IN THEIR DECISION IN THE CASE OF P.S GOVINDASAMY NAIDU & SONS (324 ITR 44), HAVE HELD TH AT THE AMOUNTS PAID BY THE PARENTS OF STUDENTS OVER AND ABOVE THE PRESCRIBED FE E, IS A CAPITATION FEE AND THE INSTITUTION COLLECTING SUCH FEE EXISTED ONLY FOR THE PURPOSES OF PROFIT AND NOT SOLELY FOR EDUCATIONAL PURPOSES AND THEREFORE IS NOT ENTITLE D FOR EXEMPTION U/S 11 OR U/S 12 OF THE ACT. ITA NO.370, 637 & 638/CHNY/2017 :- 11 -: 7.8 THUS, FOR THE REASON OF COLLECTING CAPITATION FEE BY THE ASSESSEE TRUST FROM THE STUDENTS, FOR PURPOSE OF GETTING ADMISSION TO THE EN GINEERING COLLEGE RUN BY THE ASSESSEE, AS DISCUSSED ABOVE AND PLACING RELIANCE O N THE SAID DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT AND HON'BLE ITAT, HYDERAB AD, THE REGISTRATION GRANTED U/S 12AA IN THE CASE OF THE ASSESSEE TRUST, IS LIABLE FO R CANCELLATION U/S 12AA(3) OF THE ACT. 8. FURTHER, FROM THE MATERIAL GATHERED DURING THE S EARCH U/S 132 IN THE C OF THE ASSESSEE TRUST AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DURING THE PRESENT PROCEEDINGS AND THE MATERIAL AVAILABLE ON R ECORD, IT IS NOTICED THAT THE ASSESSEE TRUST HAS CARRIED OUT ACTIVITIES WHICH ARE NOT IN ACCORDANCE WITH ITS OBJECTS, MENTIONED IN THE TRUST DEED, THEREBY, ENTA ILING CANCELLATION OF REGISTRATION U/S 12AA(3) OF THE ACT. 8.1 IT MAY BE MENTIONED HERE THAT THE VARIOUS AMOUN TS COLLECTED BY THE ASSESSEE TRUST FROM THE STUDENTS, AS RECORDED IN THE SEIZED D OCUMENT VIDE ANNEXURE ANN/JXP/REG/S-L, HAVE NOT BEEN ENTERED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE TRUST. NO RECEIPTS HAVE BEEN ISSUED BY THE ASSESSEE FOR SUCH AMOUNTS COLLECTED BY IT FROM THOSE STUDENTS, AT THE TIME OF RECEIPT OF SUCH AMOUNT FROM EACH STUDENT. THESE FACTS POINTED OUT IN THE SAID SH OW CAUSE NOTICE U/S 12AA(3) HAVE NOT BEEN DENIED BY THE ASSESSEE. IN THE SUBMIS SIONS FILED IN RESPONSE TO THE SAID SHOW CAUSE NOTICE U/S 12AA(3), IT HAS BEEN STA TED THAT AFTER THE ADMISSION OF A STUDENT TO THE COLLEGE RUN BY THE ASSESSEE TRUST IS CONFIRMED, THE AMOUNT COLLECTED FROM THAT STUDENT IS ADJUSTED AGAINST THE ACTUAL FEE TO BE PAID AND A CONSOLIDATED RECEIPT IS ISSUED. IT IS FURTHER STATED THAT ENTRY IN THE REGULAR BOOKS WOULD SHOW THE TOTAL OF THE FEES RECEIVED FROM THE STU DENTS INCLUDES ADVANCE FEES RECEIVED EARLIER. FROM SUCH SUBMISSION AND FROM THE MATERIAL GATHERED DURING THE SEARCH, IT STANDS PROVED THAT SUCH AMOUNTS COLLECTE D BY THE ASSESSEE TRUST FROM THE STUDENTS, PRIOR TO THEIR ADMISSION, HAVE NOT BEEN E NTERED/RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. THIS FACT WAS N OTICED AT THE TIME OF SEARCH CONDUCTED ON 2.7.2010. IN THIS CONTEXT, IT IS NECES SARY AND ALSO IT IS PERTINENT TO REFER TO THE REPLY GIVEN BY SHRI RAMAYA VUTUKURI, DGM -FINANCE OF THE ASSESSEE TRUST, TO QUERY NOSA TO 8 OF HIS SWORN STATEMENT RE CORDED DURING THE COURSE OF SEARCH PROCEEDINGS ON 3.8.2010, WHICH ARE REPRODUCE D AS UNDER :- '4. I AM SHOWING YOU ANN/JXP/REG/S-L SEIZED FROM THE COLLEGE ON 2/07/2010. PLEASE EXPLAIN THE CONTENTS OF THE SAME. ANS : THESE ARE THE RECEIPTS FROM THE STUDENTS. 5. WHETHER THESE RECEIPTS ARE ENTERED IN THE SOFTWAR E MAINTAINED IN THE COLLEGE OR THE BOOKS OF ACCOUNT MAINTAINED AT M/S PR ATHYUSHA EDUCATIONAL TRUST OFFICE. ANS : SO FAR IT HAS NOT BEEN ENTERED IN ANY BOOKS OF ACCOUNTS. 6. HAD ANY RECEIPTS HAS BEEN ISSUED FOR THE AMOUNTS MENTIONED IN THE REGISTER ANN/JXP/REG/S-1. ANS: NO. 7. WHETHER THE TRANSACTIONS ENTERED IN THE REGISTER HAS BEEN REFLECTED IN THE CASH BOOK MAINTAINED IN THE COLLEGE OR THE TRUS T OFFICE. ANS: NO 8. COULD YOU PLEASE CONFIRM WITH YOUR ACCOUNTS STAFF W HETHER THE RECEIPTS MENTIONED IN THE REGISTER ANN/JXP/REG/S-1 ARE ENTER ED IN THE SOFTWARE MAINTAINED ITA NO.370, 637 & 638/CHNY/2017 :- 12 -: IN THE COLLEGE OR THE BOOKS OF ACCOUNT MAINTAINED AT M/S PRATHYUSHA EDUCATIONAL TRUST OFFICE. ANS : I CONFIRMED WITH THE ACCOUNTS STAFF SHRI SIVAPRAKA SAM AND SMT SIVAGAMA SUNDARI. THE RECEIPTS MENTIONED IN THE SAID REGISTER HAS NOT BEEN ENTERED IN THE BOOKS OF ACCOUNTS MAINTAINED AT THE T RUST OFFICE OR WITH THE SOFTWARE MAINTAINED IN THE COLLEGE'. 8.2 FROM THE SAID SWORN STATEMENT GIVEN BY THE DGM- FINANCE OF THE ASSESSEE TRUST, THUS, IT MAY BE NOTICED THAT THE INCOME/FUNDS OF THE ASSESSEE TRUST AMOUNTING TO RS.1,57,42,700/-, AS PER THE SAID SEIZ ED REGISTER HAVE NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE TR UST, FOR THE SAID FINANCIAL YEAR AND THE SAME WERE LYING WITH THE MANAGING TRUSTEE A ND OTHER TRUSTEES OF THE ASSESSEE TRUST AND DURING THE SAID PERIOD, THE SAME HAVE NOT BEEN USED FOR THE OBJECTIVES OF THE ASSESSEE TRUST. WHEN THE RECEIPT O F SUCH AMOUNT HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE, THE MANNER OF UTILIZATION OF THE SAID AMOUNT, AFTER RECEIPT OF THE S AME BY THE MANAGING TRUSTEE WHICH REPRESENTS INCOME OF THE TRUST, DURING THE INT ERVENING PERIOD, IS NOT KNOWN. THEREFORE, IN THE SHOW CAUSE NOTICE DATED 18.7.2013 ISSUED U/S 12AA(3) OF THE ACT, IT WAS SPECIFICALLY POINTED OUT THAT THE PURPOSE OF A PPLICATION OF THOSE RECEIPTS CAN ONLY BE FOR ANYTHING OTHER THAN THE OBJECTS OF THE T RUST. IN THIS CONTEXT, IT IS RELEVANT TO REFER TO THE OBSERVATIONS MADE IN THIS R EGARD, IN PARA 15 OF THE SAID NOTICE U/S 12AA(3) ISSUED BY THE CIT, CENTRAL-II, W HICH ARE REPRODUCED AS UNDER ;- '15. AS MENTIONED IN THE FOREGOING PARAGRAPHS, THE M ANAGING TRUSTEE AND THE RELEVANT OFFICERS OF THE TRUST HAVE ADMITTED IN TH E SWORN STATEMENTS RECORDED DURING THE COURSE OF SEARCH AND IN THE POST SEARCH I NVESTIGATION THAT THE AMOUNTS SO. COLLECTED WERE COLLECTED IN CASH FOR WHICH NO RE CEIPTS WERE ISSUED AND NO ENTRIES WERE MADE IN THE BOOKS OF ACCOUNTS, EVEN AFTE R A GAP OF TWO YEARS. THOUGH THE BOOKS MAINTAINED BY THE TRUST WERE AUDITED AND AUDIT REPORTS WERE FURNISHED, SUCH AUDIT REPORTS DO NOT REFLECT THE TRUE AFFAIRS OF THE TRUST, IN SO FAR AS SUCH HUGE AMOUNTS COLLECTED IN CASH WITHOUT GIVING ANY RECEIP TS HAVE BEEN DIVERTED OUTSIDE THE TRUST'S REGULAR BOOKS OF ACCOUNTS AND CONTROL. T HUS, IN THE CASE OF THE ASSESSEE TRUST, THE FUNDS COLLECTED CANNOT BE SAID TO HAVE BE EN UTILISED SOLELY FOR THE PURPOSES OF RUNNING THE EDUCATIONAL INSTITUTION .... .. ....... IN ANY CASE, THE AUDIT REPORT OF THE TRUST DID NOT INCORPORATE SUCH RECEIPTS. WHEN THOSE RECEIPTS ARE NOT RECORDED ANYW HERE, THE PURPOSE OF APPLICATION OF THOSE RECEIPTS CAN ONLY BE FOR ANYTHIN G OTHER THAN THE OBJECTS OF THE TRUST, AS SUCH RECEIPTS WERE ADMITTEDLY KEPT OUTSID E THE REGULAR BOOKS OF ACCOUNTS MAINTAINED BY THE TRUST'. 8.3 HOWEVER, TO SUCH ISSUES RAISED VIDE THAT PARA 1 5 OF THE SAID SHOW CAUSE NOTICE U/S. 12AA(3), THE ASSESSEE TRUST HAS N OT GIVEN ANY REPLY IN ITS WRITTEN SUBMISSIONS FILED ON 08.08.2013. FURTHER, EVEN THOU GH REFERENCE WAS MADE TO THE SAID SHOW CAUSE NOTICE ISSUED DATED 18.7.2013, IN T HE SECOND NOTICE DATED 26.9.2016 U/S 12AA(3) ISSUED BY ME, NO REPLY HAS BE EN FURNISHED WITH REFERENCE TO SUCH ISSUE POINTED OUT TO THE ASSESSEE, 'THAT THE P URPOSE OF APPLICATION OF THOSE RECEIPTS CAN ONLY BE FOR ANYTHING OTHER THAN THE OBJ ECTS OF THE TRUST, AS SUCH RECEIPTS WERE ADMITTEDLY KEPT OUTSIDE THE REGULAR B OOKS OF ACCOUNTS MAINTAINED BY THE TRUST'. RATHER, SILENCE ON THE PART OF THE ASSES SE TO SUCH SPECIFIC POINT RAISED IN THAT SHOW CAUSE NOTICE U/S 12AA(3), IT INDIRECTLY S HOWS THAT SUCH FUNDS AMOUNTING ITA NO.370, 637 & 638/CHNY/2017 :- 13 -: TO RS.L,57 ,42, 700/-, CONSTITUTING INCOME OF THE AS SESSEE TRUST, HAVE NOT BEEN UTILISED FOR THE PURPOSE OF OBJECTIVES OF THE ASSESSEE TRUST, AS MENTIONED IN THE TRUST DEED. 8.4 AS MENTIONED ABOVE, THE ASSESSEE TRUST HAS 24 O BJECTS MENTIONED IN THE TRUST DEED EXECUTED ON 01.8.2000. ALL THE OBJECTS ARE MEN TIONED UNDER SI.NO FROM (A) TO (X) MENTIONED AT PAGES 3 TO 5 OF THE TRUST DEED. OUT OF THE SAME, THE OBJECT CLAUSES (Q) AND (V), WHICH ARE RELEVANT PERTAINING TO SUCH ISSUE, IN THIS CASE, ARE REPRODUCED AS UNDER:- (Q) TO HOLD, INVEST AND REINVEST ANY MONEY OF THE TR UST IN SUCH SECURITIES OR MANNER AS MAY BE FROM TIME TO TIME BE DETERMINED AND TO APPLY ALL OR ANY OF THE FUNDS TO ADVANCE THE OBJECTS OF THE TRUST. TO PUR CHASE AND SELL IMMOVABLE PROPERTY IN ANY PLACE/S OF INDIA FOR AND ON BEHALF OF THE TRUST. (V) THE INCOME AND PROPERTIES OF THE TRUST SHALL BE UTILISED FOR THE PROMOTION AND FULFILMENT OF THE AIMS AND OBJECTS OF T HE TRUST. 8.5 IN THE AFOREMENTIONED TWO OBJECT CLAUSES, IT IS STIPULATED THAT THE FUNDS AND INCOME OF THE ASSESSEE TRUST ARE TO BE UTILISED TO A DVANCE THE OBJECTS OF THE TRUST AND FOR PROMOTION AND FULFILLMENT OF THE AIMS AND OBJE CTS OF THE TRUST. THUS, AS PER SUCH OBJECT CLAUSES, ALL THE INCOME AND FUNDS OF THE TRUST, ARE TO BE UTILISED ONLY FOR THE PURPOSES OF OBJECTS OF THE TRUST. SINCE IN THE INS TANT CASE, THE SAID AMOUNT OF RS.L,57,42,700/- COLLECTED FROM STUDENTS DURING THAT PERIOD, REPRESENTING INCOME OF THE ASSESSEE TRUST, BUT NOT RECORDED IN THE BOOKS O F ACCOUNTS MAINTAINED, HAVE NOT BEEN UTILISED FOR THE PURPOSE OF OBJECTIVES OF THE T RUST, UNDER SUCH CIRCUMSTANCES, IT CLEARLY SHOWS THAT THE ASSESSEE TRUST HAS NOT CARRI ED OUT ACTIVITY IN ACCORDANCE WITH THE OBJECT CLAUSES (Q) & (V), IN OTHER WORDS, THE A CTIVITY ON THE PART OF THE ASSESSEE TRUST FROM UTILISATION OF THE SAID AMOUNT OF RS.L,57,4 2,700/- COLLECTED FROM STUDENTS RECORDED IN THAT SEIZED DOCUMENT, CONSTITUTING ITS INCOME, IS FOUND TO BE NOT IN ACCORDANCE WITH THE SAID TWO OBJECT CLAUSES (Q) & ( V). UNDER THESE CIRCUMSTANCES, IT IS THUS EVIDENT THAT THE ASSESSEE TRUST HAS CARR IED OUT ACTIVITY, WHICH ARE NOT IN ACCORDANCE WITH THE OBJECT CLAUSES I.E (Q) & (V). U NDER THESE CIRCUMSTANCES, THAT IS WHEN THE ASSESSEE TRUST IN THIS CASE, HAS NOT CARRI ED OUT ACTIVITY IN ACCORDANCE WITH SUCH TWO OBJECTS, AS PER CLAUSES (Q) & (V), EXPLAIN ED ABOVE, THE CASE IS THUS COVERED UNDER THE SECOND LIMB OF THE CONDITIONS STIP ULATED AS PER THE PROVISIONS CONTAINED IN SECTION 12AA(3) OF THE ACT, THEREBY WAR RANTING CANCELLATION OF REGISTRATION GRANTED U/S. 12AA, IN THE CASE OF THE A SSESSEE TRUST. 7.1 THE ASSESSEE FILED APPEALS AGAINST THE ASSESSME NT ORDERS BEFORE THE LD. CIT(A) AND THE LD. CIT(A) DISPOSED THE APPEALS AFTE R CONSIDERING THE ORDER OF THE LD. PCIT AND OTHER MATERIAL. IN ORDER TO AP PRECIATE THE ENTIRE FACTS AND CIRCUMSTANCES OF THIS ISSUE, THE RELEVANT PORTION O F THE ORDER OF THE LD. CIT(A) IS EXTRACTED AS UNDER : ITA NO.370, 637 & 638/CHNY/2017 :- 14 -: THAT APART, THE DOCUMENT VIZ ., LONG SIZE NOTE BOO K BEARING ANN/JXP/REG/S AT SL. NO. 1, WHICH WAS SEIZED DURING THE COURSE OF SEARCH CLEARLY DEFY THE STAND OF THE APPELLANT. IT IS NOT OPEN TO THE APPELLANT TO CONTE ND THAT THE SAID SEIZED DOCUMENT IS NOT AN ACCOUNT BOOK MAINTAINED IN THE REGULAR CO URSE OF BUSINESS. THE POSITION OF LAW IS THAT ENTRIES MADE IN LOOSE SHEETS OF PAPER DO NOT HAVE THE PRESUMPTIVE VALUE AS SET OUT IN SECTION 34 OF THE INDIAN EVIDENCE ACT 1872. THIRD PARTIES CANNOT BE IMPLICATED ON THE STRENGTH OF SUCH ENTRIES BUT WH ERE THE AUTHENTICITY AND GENUINENESS OF THE SEIZED MATERIAL ARE ADMITTED BY T HE APPELLANT HIMSELF, THE POSITION IS CLEARLY DIFFERENT. IN THE PRESENT CASE, T HE APPELLANT WAS SPECIFICALLY PUT ON THE FACTS WITH REGARD TO THE CONTENTS OF THE SAID NOTE BOOK. IT HAS BEEN ADMITTED THAT THE AMOUNTS MENTIONED THEREIN WERE AC TUALLY RECEIVED BY THE APPELLANT BUT WERE NOT REFLECTED IN THE BOOKS OF ACCO UNT. IT IS NOT THE CASE OF THE APPELLANT THAT THEY DID NOT RECEIVE THE PAYMENTS ME NTIONED IN THE SAID NOTEBOOK. IN OTHER WORDS, THE APPELLANT HIMSELF HAS ADMITTED T HAT RECEIPTS AMOUNTING TO RS.1,57,42,700/- REFLECTED THE UNACCOUNTED ADMISSION FEES COLLECTED DURING THE ASSESSMENT YEAR 2010-11 & 2011-12. THIS SIGNIFICANT STAND IS SUFFICIENT TO SUSTAIN THE ORDER IMPUGNED IN THIS APPEAL. THE APPELLANT BEING A REGISTERED TRUST WHICH WAS GR ANTED EXEMPTION U/S. 11 OF THE IT. ACT, WAS OBLIGED TO MAINTAIN ITS BOOKS OF ACCOUN T IN A PROPER MANNER AND APPLY THE FUNDS RECEIVED ONLY FOR THE OBJECTS OF THE TRUST. BUT IN THE PRESENT CASE, IT IS EVIDENT ON THE BASIS OF THE SEIZED RECORDS THAT HUGE SUMS WERE UNAUTHORIZED COLLECTED FROM THE STUDENTS AND WERE NOT BROUGHT INT O THE BOOKS OF ACCOUNT OF THE TRUST. EVEN RECEIPTS WERE NOT ISSUED IN FAVOUR OF THE STUDENTS. THUS IT IS CLEAR THAT THE APPELLANT HAD DIVERTED THE FUNDS AND DID NOT APP LY THEM FOR THE OBJECTS OF THE TRUST. THEREFORE, THE AO RIGHTLY HELD THAT THE TRUST HAD VIOLATED THE TERMS OF THE TRUST AS WELL AS THE CONDITIONS SUBJECT TO WHICH EX EMPTION WAS GRANTED U/S. 11. THE ORDER PASSED BY THE AO IS CLEARLY RIGHT AND NO REAS ON HAS BEEN BROUGHT FOR REVERSING THE SAME. HENCE THIS GROUND OF APPEAL FOR BOTH THE AYS IS DISMISSED. 10.2. GROUND NO.2 RELATING TO CLAIM OF ADVANCE FEES R ECEIVED: BEFORE DEALING WITH THE ISSUE ON HAND IT WILL BE NEC ESSARY TO HAVE A GLIMPSE OF THE SEIZED DOCUMENT (PHOTO COPY AS BELOW) TO HAVE A CLEAR PICTURE. ..(PHOTO COPY IS NOT EXTRACTED O THER PORTIONS ARE EXTRACTED AS UNDER:) THE APPELLANT CLAIMS THAT - 'THESE AMOUNT REPRESENTS ADVANCE FEES RECEIVED FROM S TUDENTS WHICH ON CONFIRMATION OF ADMISSION, HAVE BEEN ADJUSTED AGAINST THE FEES' RECEIVABLE AND THE BALANCE HAS BEEN RETURNED TO THE STUDENT WHERE THE ADMISSION IS NOT GRANTED .... THE STUDENTS WHO APPROACH THE COLLEGES ENQUIRING AB OUT ADMISSION GENERALLY EITHER MAKES A TOKEN PAYMENT TOWARDS RESERVING THE ADMISSI ON OR MAKE SUBSTANTIAL ADVANCE PAYMENTS OF FEES TO BLOCK A SEAT AND ENSURE A N ADMISSION WHICH IN THE EDUCATION INDUSTRY CALLED AS ADMISSION SHOPPING. TH EREAFTER THESE STUDENTS WOULD BE WAITING FOR THEIR COUNSELLING TO GET COMPLETED T O GET ADMISSION UNDER THE GOVERNMENT QUOTA AND IT IS ONLY AFTER KNOWING THE OU TCOME UNDER THE GOVT QUOTA COUNSELLING PROCESS THESE STUDENTS WILL START SHOPP ING AROUND FOR FINALIZING THE ADMISSION AND AT THIS JUNCTURE EVENTUALLY THE ADVAN CE RECEIVED FROM STUDENTS MIGHT RESULT IN ADMISSION OR WILL RESULT IN REFUND. THE UN CERTAINTY OVER THE EVENTUAL ITA NO.370, 637 & 638/CHNY/2017 :- 15 -: ADMISSION PROCESS IN RELATION TO THE STUDENT TAKING UP THE ADMISSION IS CONSIDERABLY HIGH AND IN ORDER TO MITIGATE THE RISK IT HAS BEEN THE CONSISTENT PRACTICE THAT ONLY UPON CONFIRMATION OF ADMISSION OF THE STUDENT, THE FEE COLLECTED WILL BE ENTERED IN THE BOOKS OF ACCOUNTS FAILING WHICH THE SAME IS DULY RETURNED. IF THE APPELLANT STARTS ISSUING RECEIPTS FOR THE ADVA NCES ACCEPTED THE COLLEGE WOULD BE UNDER OBLIGATION TO ACCEPT THE ADMISSION WHATEVE R MAY BE ACADEMIC PERFORMANCE OF THE STUDENT AS THESE ADVANCES ARE GEN ERALLY PAID IMMEDIATELY AFTER THE QUALIFYING EXAMS (INTERMEDIATE OR +2 AS THE CASE MAY BE) ARE OVER WHERE THE RESULTS WOULD NOT HAVE BEEN ANNOUNCED. IF THE TRUST ISSUES RECEIPTS AND ACCOUNTS THE SAME AS INCOME OR ADVANCE IT GETS ITSELF BINDING ON ITS PART TO CONSIDER THE ADMISSION FOR ALL THE PEOPLE WHO EVER HAD PAID THE A DVANCE (IF ADMISSION ARE DENIED, IT GETS INTO LEGAL ISSUES) AND THIS WOULD B E A SIGNIFICANT COMPROMISE BY THE COLLEGE IN TERMS OF QUALITY OF ACADEMIC STANDARDS. IT MIGHT BE WRONG IF THE TRUST DOES NOT ACCOUNT FOR THESE STUDENTS UPON THEIR CONFI RMATION FOR ADMISSION, WHEREAS IT IS NOT THE CASE HERE AND THESE STUDENTS WHO EVER HAS PAID THE ADVANCE WHOSE ADMISSIONS ARE CONFIRMED, THE ADVANCE FEE COLLECTED I S ADJUSTED AGAINST THE REGULAR FEE AND FOR THOSE STUDENTS WHO DOES NOT GET ADMISSION , THE FEE COLLECTED IS RETURNED AND WHEN THE AMOUNTS ARE REFUNDED NOT MANY TRAILS ARE CREATED. FURTHER WHEN THE TRUST IS ENJOYING THE TAX CONCESSI ONS NO TAX EVASION MOTIVE CAN BE ATTRIBUTED AS REASON FOR THE CURRENT METHOD OF AC COUNTING, THUS IT BALLS DOWN TO THE ASPECT THE CURRENT METHOD OF ACCOUNTING FOR FEES I S FOLLOWED FOR THE CONVENIENCE OF THE TRUST FOR HANDLING A HIGH ACADEMIC STANDARD AND SEAMLESS ADMISSION PROCESS WHICH NEED TO BE APPRECIATED RATH ER THAN REGRESSIVELY ATTRIBUTING SO MANY MALICIOUS INTENTIONS TO THE SAME. FURTHER THE CURRENT SYSTEM OF ACCOUNTING DOES NOT PE RMIT AN ENTRY INTO THE SYSTEM OF THE COLLEGE UNLESS THERE IS AN UNIQUE STUDENT ID NUMBER THAT IS CREATED FOR MAKING AN ENTRY TOWARDS THE FEES, THUS AT ADVANCE FEE S STAGE THERE WILL BE NO UNIQUE ID NUMBER FOR THE STUDENT AND IT IS ONLY AT THE STAGE OF FIRM ADMISSION, THIS NUMBER WILL BE CREATED TILL SUCH TIME THESE AD-HOC ADVANCE FEES COLLECTED FROM STUDENTS WHO ARE ON THE ADMISSION SHOPPING CANNOT B E ENTERED INTO THE SYSTEM OF FEES COLLECTION FROM STUDENTS.' THE EXPLANATION OF THE APPELLANT THAT THESE PAYME NTS REPRESENT ADVANCE FROM STUDENTS, CAN BY NO STRETCH OF IMAGINATION IS ACCEPT ABLE. THE SEIZED DOCUMENT IN WHICH THE SO CALLED ADVANCES HAVE BEEN ENTERED WAS GONE THROUGH. AS A RESULT THE FOLLOWING GLARING INSTANCES WERE FOUND. SL.NO STUDENT NAME ADVANCE PAID DATE REMARK 1 3 S. DINESH KUMAR 50,000 1,00,000 23.11.09 16.12.09 TOTALLY HE HAS PAID RS. 1,50,000/- 2 4 P.S.S.D. MURTHY 50,000 1,50,000 30.11.09 18.12.09 TOTALLY HE HAS PAID RS. 2,00,000/- 5 7 V. SRINATH 20,000 1,05,000 12.01.10 13.02.10 TOTALLY HE HAS PAID RS. 1,25,000/- 6 9 K.M. KUMAR 50,000 1,50,000 06.02.10 03.03.10 TOTALLY HE HAS PAID RS. 1,50,000/- 8 29 D. LOKESH 50,000 50,000 18.02.10 29.04.10 TOTALLY HE HAS PAID RS. 1,00,000/- ITA NO.370, 637 & 638/CHNY/2017 :- 16 -: 14 72 S. NANDINI 5,000 1,00,000 06.04.10 29.05.10 TOTALLY SHE HAS PAID RS. 1,05,000/- 15 20 V. MONISHA 5,000 45,000 06.04.10 09.04.10 TOTALLY SHE HAS PAID RS. 50,000/- 21 88 D. VAISHALI 50,000 1,00,000 09.04.10 02.06.10 TOTALLY SHE HAS PAID RS. 1,50,000/- 22 30 A VINOD 15,000 35,000 NO DATE 29.04.10 TOTALLY HE HAS PAID RS. 50,000/- 25 31 N. SURENDRANATH 50,000 75,000 NO DATE 01.05.10 TOTALLY HE HAS PAID RS. 1,25,000/- 27 32 N.V.S.L. KEERTHANA 5,000 20,000 29.04.10 05.05.10 TOTALLY SHE HAS PAID RS. 25,000/- THE ABOVE DETAILS ARE ONLY SAMPLE AND INSTANCES CAN BE MULTIPLIED. ADMITTING BUT NOT ACCEPTING THAT THESE ARE ONLY ADVANCES, WHAT IS THE NECESSITY TO PAY FURTHER AMOUNT FOR THE SECOND TIME. FURTHER THE SO CALLED AD VANCES HAVE BEEN RECEIVED FROM NOVEMBER 2009 TO JULY 2010. THIS FACT GOES AGAIN ST THE APPELLANT'S CONTENTION THAT AS SOON AS THE STUDENTS WROTE THEIR SCHOOL FINAL EXAMINATION, THEY WOULD PAY THE ADVANCE IN ORDER TO RESERVE A SEAT. IF THE APPEL LANT REALLY INTENDS TO BRING THE ABOVE AMOUNTS INTO THE REGULAR BOOKS OF ACCOUNT, IT COULD HAVE ISSUED A PROVISIONAL RECEIPT DULY SERIALLY NUMBERED AND GIVING A NOTE AT THE BOTTOM OF THE SAID PROVISIONAL RECEIVED AS 'THE ISSUANCE OF THIS PROVIS IONAL RECEIPT DOES NOT CONFER ON THE STUDENT ANY RIGHT TO CLAIM A SEAT STRAIGHT AWAY '. HAVING NOT ADHERED TO ANY SUCH SYSTEM, IT CAN EMPHATICALLY BE CONCLUDED THAT THE STUDENTS WERE PRESSURIZED TO PAY A PRICE FOR A SEAT. ITS CLAIM THAT IN RESPECT OF STUDENTS WHO DID NOT GET A SEAT FOR SOME REASONS, THE SO CALLED ADVANCE HAD BE EN RETURNED, WAS ALSO NOT PROVED WITH CONCLUSIVE AND CORROBORATIVE EVIDENCE. FURTHER, IN A SIMILAR CASE, THE HON'BLE ITAT HAS GI VEN ITS VERDICT AS UNDER. AS THE ISSUES ARE IDENTICAL, THE ORDER OF THE HON'BLE ITAT' S CHENNAI IN ITA NO. 1475/MDS/2010, DATED 31.7.2014, IN THE CASE OF MADR AS MEDICAL MISSION, CHENNAI V. ACIT, CENTRAL CIRCLE, CHENNAI, IS REPRODUCED BEL OW: 'IN THE COURSE OF SEARCH, DEMAND DRAFTS TOTALLING TO RS.18 LAKHS WERE FOUND. THESE AMOUNTS WERE NOT RECORDED IN THE BOOKS OF ACCO UNT MAINTAINED BY THE ASSESSEE, AT THE TIME OF SEARCH. NO EXPLANATION WAS OFFERED BEFORE THE AO. LATER ON, BEFORE THE CIT(APPEALS), THE EXPLANATION OF THE ASSESSEE WAS THAT THOSE AMOUNTS WERE COLLECTED FROM RESPECTIVE APPLICANTS AN D THE AMOUNTS WOULD BE ENTERED IN THE ACCOUNTS ONLY AFTER THE ADMISSION PRO CESS WAS FINALIZED. THE ASSESSEE ALSO EXPLAINED THAT THE AMOUNTS WERE PAID BACK TO THOSE APPLICANTS, WHO WERE NOT ADMITTED TO THE NURSING COURSE. WE FIND THAT THE ABOVE EXPLANATION OF THE ASSESSEE IS DEVOID OF ANY MERIT. IT IS A FACT THAT DDS AMOUNTING TO RS.18 LAKHS WERE FOUND AT THE TIME OF SEARCH. IT IS ALSO TRUE THAT THOSE AMOUNTS WERE NOT RECORDED I THE BOO KS OF ACCOUNT OF THE ASSESSEE. EVEN IF THOSE AMOUNTS WERE COLLECTED BY TL E ASSESSE E FROM THE RESPECTIVE APPLICANTS SUBJECT TO THE FINALIZATION OF ADMISSION P ROCESS, NOTHING PREVENTS THE ASSESSEE FROM BRINGING THOSE AMOUNTS IN ITS REGULAR BOOKS OF ACCOUNT. KEEPING SUCH A HUGE AMOUNT OF RS.18 LAKHS OUTSIDE THE BOOKS OF ACCOUNT CANNOT BE ITA NO.370, 637 & 638/CHNY/2017 :- 17 -: JUSTIFIED AT ALL. THE ASSESSEE COULD HAVE ACCOUNTED THE RECEIPTS AS AND WHEN RECEIVED UNDER A PARTICULAR PROVISIONAL HEAD. WHEN THE ADMISSION PROCESS IS OVER, THE PROVISIONAL HEAD COULD BE CLOSED BY TRANSFERRING THE AMOUNTS TO FEES AND DUES ACCOUNT IN THE CASE OF APPLICANTS ADMITTED FOR THE N URSING COURSE AND BY RETURNING THE AMOUNTS IN RESPECT OF THE APPLICANTS NOT SELECT ED FOR THE COURSE. THEREFORE THE EXPLANATION OF THE ASSESSEE THAT THE AMOUNTS WERE NO T RECORDED IN THE BOOKS OF ACCOUNT FOR THE REASON THAT THE ADMISSION PROCESS W AS NOT COMPLETE AT THE TIME OF SEARCH IS NOT ACCEPTABLE IN LAW. THE DETAILS MUST B E PROPERLY RECORDED AT LEAST IN A ROUGH BOOK. IT IS A CLEAR CASE THAT THE ENTIRE AMOU NT OF RS.18 LAKHS WAS BLACKED OUT OF THE RECORDS OF THE ASSESSEE. IN ADDITION TO THIS, THE ASSESSEE HAS NEVER EXPLAIN ED HOW FINALLY, THIS AMOUNT WAS ADJUSTED OR ACCOUNTED IN THE BOOKS OF ACCOUNT. THE A SSESSEE HAS NOT FURNISHED THE DETAILS THAT HOW MUCH AMOUNTS WERE RETURNED TO THE APPLICANTS, WHO WERE NOT ADMITTED TO THE NURSING COURSE. THE CIT(APPEALS) AC CEPTED THE EXPLANATION OF THE ASSESSEE AND DELETED THE ADDITION ONLY ON THE GROUN D THAT ' .... ADMISSION PROCESS WAS NOT OVER ... ' WHETHER ADMISSION PROCESS WAS CO MPLETE OR NOT, RECEIPT AND PAYMENTS OF MONEY SHOULD BE ACCOUNTED IN THE BOOKS THEN AND THERE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE CONVINCED THAT THE ASSESSEE SOCIETY HAD COLLECTED CAPITATION FEES FROM THE STUDENTS ADMITTED TO THE NURSING COURSE AND THESE CAPITATION FEES WERE KEPT OUTSIDE THE BOOKS OF THE ASSESSEE. THEREFORE, THE AO IS JUSTIFIED IN TREATING THE SUM OF RS.18 LAKHS A S UNACCOUNTED CAPITATION FEES. THE CIT(APPEALS) IS NOT JUSTIFIED IN DELETING THE SA ID AMOUNT OF RS.18 LAKHS AND ACCORDINGLY, HIS ORDER ON THIS ISSUE IS SET ASIDE A ND THE ADDITION IS RESTORED.' RESPECTFULLY FOLLOWING THE ABOVE TRIBUNAL'S DECISION, I UPHOLD THE ACTION OF THE AO IN BRINGING TO TAX SUCH ALLEGED ADVANCES, AS UNACCO UNTED CAPITAL FEE. HENCE THIS GROUND OF APPEAL FOR BOTH THE AYS IS DISMISSED. 7.2 FROM THE ABOVE, IT IS CLEAR THAT ON A SEARCH A ND SEIZURE ACTION, IT WAS FOUND THAT HUGE AMOUNT OF RS. 1,57,42,700/- WAS COLLECTED FROM STUDENTS, IN CASH , WITHOUT ISSUING ANY RECEIPTS AND WITHO UT ENTERING THEM IN THE REGULAR BOOKS OF ACCOUNTS MAINTAINED BY THE TRUST. SUBSEQUENTLY, THE ASSESSEE WAS REQUIRED TO PROVE ITS EXEMPTION CLAIM. AFTER CO NSIDERING THE ASSESSEES SUBMISSIONS ETC, THE ABOVE FACTS WERE CONFIRMED WIT H A FINDING THAT THE IMPUGNED SUM WAS LYING WITH THE MANAGING TR USTEE AND OTHERS DURING THE SAID PERIOD, WHICH HAVE NOT BEEN USED FOR THE OBJECTS OF THE ASSESSEE AND THE TRUST, IN FACT, THE ASSESSE HA S INDULGED IN ACTIVITIES WHICH ITA NO.370, 637 & 638/CHNY/2017 :- 18 -: ARE NOT PERMISSIBLE UNDER LAW ETC. THE ASSESSEE CHALLENGED THESE FINDINGS BUT HAS NOT PLACED MATERIAL VIZ CERTIFIED COPIES OF CONTEMPORANEOUS AUDITED OR UNAUDITED PROFIT /LOSS ACCOUNT OR INCOME AND EX PENDITURE STATEMENT, AS THE CASE MAY BE , IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT ,1961, AND THEIR ENCLOSURES AND APPROPRIATE DOCUM ENTS SHOWING THAT THE IMPUGNED SUM WERE ACCOUNTED FOR BY THE TRUST , USED FOR THE PURPOSES OF THE TRUST ETC AND HENCE, IT COULD NOT ASSAIL AS TO HOW THE DECISIONS ARRIVED BY THE LOWER AUTHORITY (IES) IS/ ARE NOT CORRECT ETC. IN THE FACTS AND CIRCUMSTANCES, IT IS CLEAR THAT THE ASSESSEE TRUST HAS NOT K EPT CLEAR AND ACCURATE ACCOUNTS OF THE TRUST-PROPERTY AND FAILED TO FURNISH WITH FU LL AND ACCURATE INFORMATION AS TO THE IMPUGNED AMOUNT AND STATE OF THE TRUST PROPE RTY. BUT FOR THE SEARCH AND SEIZURE ACTION, ALL THE ABOVE FACTS WOULD N OT HAVE SURFACED AT ALL. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND S INCE THE ASSESSE HAS NOT LAID ANY MATERIAL TO PROVE THAT THE IMPUGNED SUM WA S ACCOUNTED FOR BY THE TRUST , USED FOR THE PURPOSES OF THE TRUST ETC, THE REFORE, THE DECISIONS ARRIVED BY THE LOWER AUTHORITY (IES) IS/ ARE UPHELD AND TH E CORRESPONDING GROUNDS OF THE ASSESSEES APPEAL ARE DISMISSED. 7.3 THE ABOVE ISSUE COULD BE EXAMINED FROM ANOTHER ANGLE ALSO. THE ASSESSEE CLAIMS TO BE A PUBLIC CHARITABLE TRUST. S ECTION 4 OF THE INDIAN TRUSTS ACT (ITA) , 1882 IS EXTRACTED AS UNDER : ITA NO.370, 637 & 638/CHNY/2017 :- 19 -: OF THE CREATION OF TRUSTS 4. LAWFUL PURPOSE :- A TRUST MAY BE CREATED FOR AN Y LAWFUL PURPOSE. THE PURPOSE OF A TRUST IS LAWFUL UNLESS IT IS (A) FORBIDDEN BY LAW, OR (B) IS OF SUCH A NATURE THAT, IF PERMITTED, IT WOUL D DEFEAT THE PROVISIONS OF ANY LAW, OR (C) IS FRAUDULENT, OR (D) INVOLVES OR IMPLIES INJURY TO THE PERSON OR PR OPERTY OF ANOTHER, OR (E) THE COURT REGARDS IT AS IMMORAL OR OPPOSED TO P UBLIC POLICY. EVERY TRUST OF WHICH THE PURPOSE IS UNLAWFUL IS VOI D. AND WHERE A TRUST IS CREATED FOR TWO PURPOSES, OF WHICH ONE IS LAWFUL AND THE OTHER UNLA WFUL, AND THE TWO PURPOSES CANNOT BE SEPARATED, THE WHOLE TRUST IS VOID. EXPLANATION.--IN THIS SECTION THE EXPRESSION 'LAW' INCLUDES, WHERE THE TRUST-PROPERTY IS IMMOVEABLE AND SITUATE IN A FOREIGN COUNTRY, THE LA W OF SUCH COUNTRY. 7.4 THE ABOVE PROVISION IS SIMILAR TO SECTION 23 OF THE INDIAN CONTRACT ACT IX OF 1872. THE ASSESSEE IS GOVERNED BY THE ABOV E PROVISIONS. IN THIS REGARD, THE BOMBAY HIGH COURT IN PHULCHAND LAKHMICH AND JAIN AND ... VS HUKUMCHAND GULABCHAND JAIN AND . ON 15 SEPTEMBER, 1959 : (1960) 62 BOMLR 308 HELD THAT SINCE THE PROVISIONS OF THE ITA ARE BASED ON GENERAL PRINCIPLES & RULES OF ENGLISH LAW, THEY ARE APPLIED TO PUBLIC CHARITABLE TRUST BY ANALOGY UNLESS THEY ARE FOUND INCONSISTENT WITH THE RULES & PRACTICES FOLLOWED BY THE INDIAN COURTS. THE RELEVANT PORTION IS EXTR ACTED AS UNDER : IT IS TRUE THAT BY SECTION 1 THE PROVISIONS OF THE INDIAN TRUSTS ACT ARE NOT MADE APPLICABLE TO PUBLIC TRUSTS. EVEN SO, THE PROVISION S OF THE TRUSTS ACT ARE FOUNDED ON GENERAL PRINCIPLES, AND RULES OF ENGLISH LAW. IN MAT TERS WHICH ARE NOT PROVIDED FOR, THE COURTS IN INDIA APPLY THE PRINCIPLES AND RULES OF ENGLISH LAW. ON THE SUBJECT UNLESS THEY ARE INCONSISTENT WITH THE RULES AND PRA CTICE OF THIS COURT. (SEE SHIVRAMDAS V. B. V. NERURKAR, , RAMBABU V. COMMITTEE OF RAMESHWAR, BOM LR 667 AND NATHIRI MENON V. GOPALAN NAIR, 39 MAD 597 : AIR 1916 MAD 92 ). ITA NO.370, 637 & 638/CHNY/2017 :- 20 -: 7.5 THE HONBLE SC IN SHEIKH ABDUL KAYUM VS. MULLA ALIBHAI DT 17 AUGUST 1962 : 1963 AIR 309 HAS HELD THAT THE SECTIONS OF THE INDIAN TRUST ACT EMBODY NOTHING MORE OR LESS THAN THE PRINCIPLES WHI CH HAVE BEEN APPLIED TO ALL TRUSTS IN ALL COUNTRIES. THE RELEVANT PORTION I S EXTRACTED AS UNDER : IT IS TRUE THAT S. I OF THE INDIAN TRUSTS ACT MAKES PROVISIONS OF THE ACT INAPPLICABLE TO PUBLIC OR PRIVATE RELIGIOUS OR CHARITABLE ENDOWM ENTS; AND SO, THESE SECTIONS MAY NOT IN TERMS APPLY TO THE TRUST NOW IN QUESTION. TH ESE SECTIONS HOWEVER EMBODY NOTHING MORE OR LESS THAN THE PRINCIPLES WHICH HAVE BEEN APPLIED TO ALL TRUSTS IN ALL COUNTRIES. 7.6 FURTHER, THE HONBLE SC IN THE CASE OF STATE OF UTTAR, PRADESH VS. BANSI DHAR & ORS DT 11 DECEMBER 1973 : 1974 AIR 1084 HAS HELD THAT THERE IS A COMMON AREA OF LEGAL PRINCIPLES WHICH COVERS ALL TR USTS, PRIVATE & PUBLIC, AND MERELY BECAUSE THEY FIND A PLACE IN THE ITA, THEY C ANNOT BECOME UNTOUCHABLE WHERE PUBLIC TRUSTS ARE INVOLVED. THE RELEVANT PORTION IS EXTRACTED AS UNDER : THEREFORE, THIS 'ELECENT CONNOTES A PUBLIC' TRUST. THE NEXT QUESTION IS WHETHER THE INDIAN TRUSTS ACT, 1882, APPLIES 1. (1923) 1 CH. 25 8, 266. L748SCI/74 688 TO THE PRESENT CASE. THE COURTS BELO W HAVE ARGUED THEMSELVES INTO AN APPLICATION OF S. 83 OF THE TRUSTS ACT. SRI DIXIT RIGHTLY OBJECTS TO THIS COURSE BECAUSE THA T ART RELATES ONLY TO PRIVATE TRUSTS, PUBLIC CHARITABLE TRUSTS, HAVING BEEN EXPRESSLY, EX CLUDED FROM ITS AMBIT BUT WHILE THESE PROVISIONS PROPRIO VIGORE DO NOT APPLY, CERTA INLY THERE IS A COMMON AREA OF LEGAL PRINCIPLES WHICH COVERS ALL TRUSTS, PRIVATE A ND PUBLIC, AND MERELY BECAUSE THEY FIND A PLACE IN THE TRUSTS ACT, THEY CANNOT BECAME ' UNTOUCHABLE' WHERE PUBLIC TRUSTS ARE INVOLVED. CARE MUST CERTAINLY BE EXERCIS ED NOT TO IMPORT BY ANALOGY WHAT IS NOT, GERMANE TO THE GENERAL LAW OF TRUSTS, BUT WE NEED HAVE NO INHIBITIONS IN ADMINISTERING THE LAW BY INVOKING THE UNIVERSAL RUL ES OF EQUITY AND GOOD CONSCIENCE UPHELD BY THE ENGLISH JUDGES, THOUGH ALSO SANCTIFIED BY THE STATUTE RELATING TO PRIVATE TRUSTS. THE COURT BELOW HAVE DRAWN INSPIRAT ION FROM S. 83 OF THE TRUSTS ACT ITA NO.370, 637 & 638/CHNY/2017 :- 21 -: AND WE ARE NOT INCLINED TO FIND FAULT WITH THEM ON TH AT SCORE BECAUSE THE PROVISION MERELY REFLECTS A RULE OF GOOD CONSCIENCE AND OF GENE RAL APPLICATION. 7.7 IN THE CASE OF BIHARILAL JAISWAL VS CIT REP ORTED IN 217 ITR 746 (SC) , WHERE AN ISSUE AROSE WHETHER THE REGISTRATION OF PA RTNERSHIP FIRM CAN BE REFUSED ON THE GROUND THAT THE PARTNERSHIP CONSTITU TED WAS ILLEGAL FOR BREACH OF PROVISIONS OF CLAUSE VI OF THE GENERAL LICENCE C ONDITIONS MADE UNDER THE EXCISE RULES, ALTHOUGH NO ACTION WAS TAKEN BY THE C OLLECTOR FOR CANCELLATION OF THE LICENCE UNDER CLAUSE XIV OF THE LICENCE IN FORM CS 3, INSPITE OF WRITTEN INTIMATION ABOUT ITS CONSTITUTION. THE SUPREME COU RT HELD THAT THE GRANT OF REGISTRATION UNDER THE INCOME-TAX ACT, IT MUST BE REMEMBERED, CONFERS A SUBSTANTIAL BENEFIT UPON THE PARTNERSHIP FIR M AND ITS MEMBERS. THERE IS NO REASON WHY SUCH A BENEFIT SHOULD BE EXTENDED TO P ERSONS WHO HAVE ENTERED INTO A PARTNERSHIP AGREEMENT PROHIBITED BY LAW. ONE ARM OF LAW CANNOT BE UTILISED TO DEFEAT THE OTHER ARM OF LAW. DOING SO WOULD BE OPP OSED TO PUBLIC POLICY AND BRING THE LAW INTO RIDICULE. IT WOULD BE WRONG TO T HINK THAT WHILE ACTING UNDER THE INCOME-TAX ACT, THE INCOME-TAX OFFICER NEED NOT LOOK TO THE LAW GOVERNING THE PARTNERSHIP WHICH IS SEEKING REGISTRATION. IT WOULD PROBABLY HAVE BEEN A DIFFERENT MATTER IF THE INCOME-TAX ACT HAD SPECIFICALLY PROVIDE D THAT THE REGISTRATION CAN BE GRANTED NOTWITHSTANDING THAT THE PARTNERSHIP IS VIO LATIVE OF ANY OTHER LAW---BUT IT DOES NOT SAY SO. 7.8 FROM THE ABOVE, IT IS CLEAR THAT SINCE THE PROVISIONS OF INDIAN TRUSTS ACT REFLECT PRINCIPLES OF EQUITY, JUSTICE AND GO OD CONSCIENCE , IN OUR CONSIDERED OPINION, THE AUTHORITIES GRANTING EXEM PTIONS ARE DUTY BOUND TO VERIFY FOR ANY SUCH VIOLATIONS. AS THE TAX CONCESSI ONS INVOLVE A SACRIFICE OF PUBLIC REVENUE, IT BECOMES IMPERATIVE TO ENSURE THE TAX CONCESSIONS ARE NOT ABUSED AND ENJOYED ONLY BY THOSE CHARITABLE TRUSTS WHICH ACTUALLY DESERVE. ITA NO.370, 637 & 638/CHNY/2017 :- 22 -: 7.9 WHEN WE TEST THE FACTS AND CIRCUMSTANCES OF TH IS CASE IN THE LIGHT OF THE ABOVE RATIOS, IT IS CLEAR THAT THE ASSESSEE TRUST HAS CARRIED ITS ACTIVITIES WHICH INVITED THE SEARCH AND SEIZURE ACTION BY THE REVENUE , WHICH RESULTED IN UNEARTHING OF EVIDENCES, INTER ALIA, THAT THE AS SESSEE COLLECTED HUGE AMOUNT OF RS. 1,57,42,700/- FROM STUDENTS, IN CASH , WITHOUT ISSUING ANY RECEIPTS AND WITHOUT ENTERING THEM IN THE REGULAR BOOKS OF ACCOUNTS MAINTAINED BY THE TRUST . WHEN THE ASSESSEE , A P UBLIC CHARITABLE TRUST, HAS NOT KEPT CLEAR AND ACCURATE ACCOUNTS OF THE TRUST-P ROPERTY AND FAILED TO FURNISH WITH FULL AND ACCURATE INFORMATION AS TO THE IMPUGN ED AMOUNT AND STATE OF THE TRUST PROPERTY, A FINDING WAS ARRIVED THAT THE IM PUGNED SUM WAS LYING WITH THE MANAGING TRUSTEE AND OTHERS DURING THE SAID PERIOD, WHICH HAVE NOT BEEN USED FOR THE OBJECTS OF THE ASSESSEE TRUST. THESE FACTS HAVE NOT BEEN DISPROVED. ALL THESE ACTIVITIES VIOLATE THE PROVISIONS OF THE INDIAN TRUSTS ACT, THE INCOME TAX ACT ETC AND HENCE THE ASSESSEES CASE CLEARLY FALLS WITHIN THE MISCHIEF OF ALL THE ABOVE CLAUSES OF SECTION 4 OF THE INDIAN TRUSTS ACT , SUPRA. AN ASSESSEE WHICH CLAIMS TO BE A TRUST EXISTING FOR PUBLIC CHARITABLE PURPOSES BUT DOES NOT CARRY ITS ACTIVITI ES IN ACCORDANCE WITH ITS OBJECTS WOULD CERTAINLY FALL WITHIN THE PROHIBITIO NS OF CLAUSES OF S4 OF THE INDIAN TRUSTS ACT 1882, AS EXTRACTED ABOVE. FURTHER , ALLOWANCE OF THIS TYPE OF ACTIVITIES WOULD CERTAINLY DEFEAT THE VERY PROVISIO NS OF THE INCOME TAX ACT, 1962 ALSO. IN THE FACTS AND CIRCUMSTANCES THE LD. PCITS DECISION, INTER ALIA, THAT THE ASSESSEE HAS INDULGED IN ACTIVITIES WH ICH ARE NOT PERMISSIBLE UNDER ITA NO.370, 637 & 638/CHNY/2017 :- 23 -: LAW AND IT HAS NOT CARRIED ITS ACTIVITIES IN ACCOR DANCE WITH ITS OBJECTS IS JUSTIFIED AND HENCE ALL THE ASSESSEES GROUNDS OF APPEAL ON THIS ISSUE STAND DISMISSED. 8. IN RESPECT OF THE ISSUE OF INTEREST FREE ADVANCE OF RS. 6 CRORES GIVEN TO M/S PRATHYUSHA ASSOCIATES SHIPPING P LTD (PASPL), A SISTER CONCERN , THE RELEVANT PORTION OF THE ORDER OF THE LD PCIT IS EXT RACTED AS UNDER : 9. FURTHER, IN THE SAID SHOW CAUSE NOTICE U/S. 12 AA(3) DATED 18.7.2013, IT WAS POINTED OUT THAT THE ASSESSEE TRUST HAD GIVEN AN AD VANCE OF RS.6 CRORES TO ITS SISTER CONCERN AND IT WAS FURTHER POINTED OUT THAT THE TRU ST FUNDS HAVE NOT BEEN APPLIED IN THE MANNER STIPULATED IN THE TRUST DEED. IN RESP ONSE TO SUCH ISSUE RAISED, THE ASSESSEE HAS SUBMITTED THAT THE AMOUNT OF RS.6 CRORE S WAS ADVANCED TO PASPL, A COMPANY ENGAGED IN CIVIL CONSTRUCTION. IT WAS STATE D THAT THE TRUST HAD TO CONSTRUCT ADDITIONAL BUILDINGS FOR PROVIDING BETTER FACILITIES TO THE STUDENTS. IT WAS STATED THAT THE CONTRACT FOR CONSTRUCTION WAS GRANTED TO PASPL C ONSTRUCTIONS, AS PER AN AGREEMENT MADE ON 29.12.2009. IT IS FURTHER STATED T HAT THE CONTRACT WAS AWARDED THROUGH A BIDDING PROCESS BY A TEAM OF CIVIL ENGINEE RING EXPERTS, FROM AMONGST BIDS RECEIVED BY THE TRUST. STATING THAT THE TOTAL C OST OF THE PROJECT WAS RS.20 .08 CRORES AND AS PER CLAUSE (IX) OF THE AGREEMENT, THE TRUST WAS TO PROVIDE 30% OF THE TOTAL CONTRACT AMOUNT BY WAY OF MOBILISATION ADVANCE , IT WAS SUBMITTED THAT AS PER SUCH AGREEMENT, A SUM OF RS.6 CRORE WAS ADVANCED TO M/S PASPL. IT WAS CONTENDED THAT THE AWARDING OF CONSTRUCTION CONTRACT TO M/S PASPL CONSTRUCTION IS TO THE ADVANTAGE OF THE ASSESSEE TRUST, AS IT ENABLE D THEM TO INCUR LESSER CONSTRUCTION COST COMPARED TO THIRD PARTIES. IT WAS FURTHER STATED THAT THERE WAS NO DETRIMENT TO THE FUNDS OF THE ASSESSEE TRUST. LASTLY , IT WAS CONTENDED THAT THERE WAS NO VIOLATION OF THE PROVISIONS OF THE TRUST DEED OR PROVISIONS OF THE ACT. 9.1 HOWEVER, SUCH CONTENTION OF THE ASSESSEE TRUST THAT IN THAT PROCESS OF AWARDING THE CONTRACT TO PASPL CONSTRUCTIONS AND GIVING SAID ADVANCE OF RS.6 CRORES WERE NOT DETRIMENT TO THE FUNDS OF THE ASSESSEE TRUST AND SUCH ADVANCE WAS PAID TOWARDS THE COST OF CONSTRUCTION OF THE BUILDINGS ARE NOT TENABLE, WHEN THE ENTIRE FACTS AND THE COPIES OF LEDGER ACCOUNTS OF PASPL-CONS TRUCTION FILED BY THE ASSESSEE DURING THE PRESENT PROCEEDINGS, ARE ANALYSED CAREFUL LY. 9.2 IT HAS BEEN SUBMITTED THAT THE CONTRACT FOR CONS TRUCTION WAS AWARDED THROUGH A BIDDING PROCESS BY A TEAM OF CIVIL ENGINEERING EXPER TS FROM AMONGST BIDS RECEIVED BY THE TRUST. IT IS FURTHER STATED THAT THE ENTIRE P ROCESS OF AWARDING THE CONTRACT WAS A TRANSPARENT ONE AND IS SUPPORTED BY RECORDS M AINTAINED FOR THE PURPOSE. IN THIS CONTEXT, IT IS SUBMITTED THAT DURING THE COURS E OF HEARING ON 19.8.2013, THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE TRUST WAS REQUESTED TO FURNISH COPIES OF CORRESPONDENCE IN RESPECT TO AWARD OF CONTRACT, CALL ING AND RECEIVING OF TENDERS FOR ITA NO.370, 637 & 638/CHNY/2017 :- 24 -: CONTRACT AND APPROVALS TAKEN FOR CONSTRUCTION . HOW EVER, THE REQUISITE DETAILS HAVE NOT BEEN FURNISHED. IT MAY BE MENTIONED HERE THAT IN THE COVERING LETTER TO THE DETAILS FILED ON 15.10.2013, UNDER POINT NO.6, THE A SSESSEE HAS REFERRED TO FURNISHING OF COPIES OF TENDERS RECEIVED FROM M/S AB CO NSTRUCTION IN CONNECTION WITH TENDERS FOR AWARD OF CONTRACT FOR COLLEGE BUILDI NG. FROM THE XEROX COPY OF A LETTER DATED 9.10.2009 SIGNED BY ONE SHRI T. ANBARA SAN FROM AB CONSTRUCTION, FILED BY THE ASSESSEE, IT IS NOTICED THAT THOUGH THERE IS MENTION UNDER THE HEAD SUB: ABOUT QUOTATION FOR CONSTRUCTION OF MAIN BUILDING ET C, IN ABSENCE OF ANY REFERENCE TO ANY SPECIFIC TENDER NOTICE, FROM THE ASSESSEE TRU ST, IT APPEARS THAT THE ASSESSEE ITSELF HAS OBTAINED SUCH DOCUMENT FROM THE SAID PARTY AND FILED THE SAME DURING THE PRESENT PROCEEDINGS ON 15.10.2013. FURTHER, IN ABSENCE OF ANY SIGNATURE/INITIAL OF ANY EXECUTIVE/OFFICIAL OF THE ASSESSEE TRUST ON THE SAID LETTER FROM THAT PARTY FURNISHED, IT RATHER INDICATES THAT THE SAME HAS NOT BEEN RECEIVED IN THE NORMAL COURSE OF ITS ACTIVITY DURING THE RELEVANT PERIOD, B UT THE SAME HAS BEEN OBTAINED BY THE ASSESSEE TRUST ITSELF, FOR THE PURPOSE OF MAKING S UCH CLAIM. FURTHER, IN ABSENCE OF ANY MENTION/REFERENCE TO THE DATE OF ISSUE OF SUCH T ENDER NOTICE ETC. FOR AWARDING OF CONTRACT, THE CONTENTION OF THE ASSESSEE THAT THE CONSTRUCTION CONTRACT TO M/S PASPL WAS AWARDED THROUGH A BIDDING PROCESS FR OM AMONGST THE BIDS RECEIVED BY THE TRUST, IN A TRANSPARENT MANNER IS N OT ACCEPTABLE. FURTHER, IT MAY BE MENTIONED THAT ALONG WITH SUCH SUBMISSIONS, THE ASS ESSEE HAS ONLY FURNISHED A XEROX COPY OF THE AGREEMENT FOR WORK SHOWN AS EXECUT ED ON 29.12.2009 WITH M/S PASPL AND XEROX COPIES OF CERTAIN ESTIMATES FOR CERTAI N BUILDINGS, WITHOUT BEARING ANY DATE IN EACH SUCH COPY AND COPIES OF CERTAIN LED GER ACCOUNTS OF PASPL- CONSTRUCTION FOR THE PERIOD FROM 1.4.2009 TO 31.3.201 0, FROM 1.4.2010 TO 31. 3.2011 AND FROM 1.4.2011 TO 31.3.2012. FROM THE SAM E, IT CANNOT BE SAID AND IT ALSO CANNOT BE ACCEPTED THAT GIVING SUCH CONSTRUCTI ON WORK TO THAT SISTER CONCERN, WAS THROUGH CALLING FOR A TENDER AND RECEIPT OF BIDS IN A TRANSPARENT MANNER. 9.3 FURTHER, AS PER THE SAID SUBMISSION OF THE ASSES SEE TRUST, THE AMOUNT OF RS.6 CRORE ADVANCE PAID TO M/S PASPL WAS TOWARDS COST OF CONSTRUCTION OF THE BUILDINGS FOR THE TRUST TO BE USED BY THE TRUST FOR EDUCATIONAL PURPOSES. THUS, AS PER SUCH SUBMISSION, SUCH AMOUNT HAS BEEN PAID TOWARDS COST OF CONSTRUCTION OF THE BUILDINGS TO BE USED BY THE ASSESSEE TRUST. HOWEVER , SUCH CONTENTION DOES NOT APPEAR TO BE CORRECT, AS EVIDENT FROM THE LEDGER ACC OUNTS OF PASPL-CONSTRUCTION FOR DIFFERENT YEARS FILED BY THE ASSESSEE TRUST DURING THE PRESENT PROCEEDINGS. 9.4 AS NOTICED, FROM THE LEDGER ACCOUNT OF PASPL CO NSTRUCTION FOR THE PERIOD 01.04.2009 TO 31.03.2010 FURNISHED BY THE ASSESSEE, A SUM OF RS. 6 CRORES WAS PAID TO PASPL CONSTRUCTION ON 08.02.2010 VIDE A C HEQUE DRAWN ON INDIAN BANK, T.NAGAR, SHOWING AS FOR 'MOBILISATION OF ADVANCE' FOR COLLEGE CONSTRUCTION. THE SAID ENTIRE AMOUNT WAS LYING AS A CREDIT BALANCE AS ON 3 1.3.2010 AGAINST THAT PASPL- CONSTRUCTION. 9.4.1 AS PER THE LEDGER ACCOUNT OF PASPL-CONSTRUCTIO N FOR THE PERIOD 1.4.2010 TO 31.3.2011, THE SAID AMOUNT OF RS .6 CRORES IS SHOWN AS OPENING BALANCE DURING THE YEAR. LATER, THE SAID PASPL -CONSTRUCTION HAS RAISE D A BILL FOR RS.1,23,67,390/- FOR WORK DONE AT MAIN BUILDING AND WORK SHOP VIDE RA BI LL DATED 12.4.2010. HOWEVER, INSTEAD OF ADJUSTING THAT BILL AGAINST THE EARLIER ADVANCE GIVEN OF RS.6 CRORES, THE ASSESSEE HAS PAID SEPARATELY FOR THE SAME, VIDE CHEQ UE ISSUED ON 21.4.2010 THROUGH INDIAN BANK, T NAGAR. FURTHER LATER, ON 7.5 .2010, THE SAID PASPL- ITA NO.370, 637 & 638/CHNY/2017 :- 25 -: CONSTRUCTION HAS RAISED A BILL FOR RS.88,60,312/- FOR CERTAIN WORK DONE AT MAIN BUILDING ETC. THIS TIME ALSO, INSTEAD OF ADJUSTING T HAT BILL AGAINST THAT ADVANCE OF RS.6 CRORES GIVEN EARLIER, THE ASSESSEE HAS MADE PA YMENT SEPARATELY, VIDE CHEQUE ISSUED ON 13.5.2010 ON INDIAN BANK, T. NAGAR FOR AN AMOUNT OF RS.90,41,000/-, WHICH IS MORE THAN THE AMOUNT OF SAID BILL. LATER, ON 15.5.2010, THE SAID PASPL- CONSTRUCTION HAS RAISED ANOTHER BILL FOR AN AMOUNT O F RS.60,40,548/- FOR WORK DONE AT MAIN BUILDING. THIS TIME AGAIN, INSTEAD OF ADJUST ING THAT BILL FROM SUCH ADVANCE OF RS.6 CRORE GIVEN DURING THE F.Y 2009-10, THE ASSE SSEE HAS MADE PAYMENT SEPARATELY ON 22.7.2010 VIDE CHEQUE DRAWN ON INDIAN BANK, T NAGAR, AND THE CLOSING BALANCE AS ON 31.3.2011, AGAINST THE SAID P ASPL-CONSTRUCTION, IS SHOWN AT RS.6,01,80,688.28. FROM SUCH FINANCIAL TRANSACTIONS MADE BY THE ASSESSEE TRUST VIS-A-VIS THE SAID ASSOCIATE CONCERN PASPL-CONSTRUC TION, IT CANNOT BE SAID THAT THE SAID ADVANCE OF RS.6 CRORE MADE TO THAT ASSOCIATE C ONCERN, WAS PAID FOR COST OF CONSTRUCTION OF THE BUILDINGS FOR THE TRUST. HAD SU CH CONTENTION OF MAKING THAT ADVANCE OF RS.6 CRORES TO THE SAID PASPL-CONSTRUCTIO N, FOR COST OF CONSTRUCTION BEEN TRUE, THE ASSESSEE WOULD HAVE ADJUSTED THE BIL LS FOR CONSTRUCTION RAISED BY THAT ASSOCIATE CONCERN DURING THE FY 2010-11, AGAIN ST SUCH ADVANCE, INSTEAD OF MAKING PAYMENT SEPARATELY FOR THE SAME. THUS, THE AC TUAL FINANCIAL TRANSACTIONS MADE BY THE ASSESSEE WITH THE SAID ASSOCIATE CONCER N, AS EVIDENT FROM THE COPIES OF SAID LEDGER ACCOUNTS OF THAT CONCERN FILED BY THE A SSESSEE, DISPROVE SUCH CONTENTION OF THE ASSESSEE. 9.4.2 FURTHER, AS PER THE LEDGER ACCOUNTS FOR THE SU BSEQUENT YEAR, I.E FROM 1.4.2011 TO 31.3.2012, FOR THE BILL OF RS.1,86,15,06 6/- RAISED BY THAT PASPL- CONSTRUCTION, THE ASSESSEE HAS ADJUSTED THE SAME ON 31.3.2012 AGAINST THE SAID ADVANCE GIVEN EARLIER AND ON THE SAME DATE I.E 31.3 .2012, THE LAST DATE OF THAT FINANCIAL YEAR, HAS ADJUSTED THE BALANCE AMOUNT OF RS 4,15,65,622/- AGAINST CERTAIN OTHER AMOUNTS MENTIONED AS PAYABLE TO PASPL FROM CO LLEGE . 9.5 FROM THE AFOREMENTIONED FINANCIAL TRANSACTIONS CA RRIED ON BY THE ASSESSEE, AS NOTICED FROM THE LEDGER ACCOUNTS OF PASPL-CONSTRUCTION , FOR THE THREE DIFFERENT FINANCIAL YEARS (COPIES ENCLOSED AS ANNEXURES '8'), IT IS THUS EVIDENT THAT THE SAID ADVANCE OF RS.6 CRORE MADE BY THE ASSESSEE TRUST TO THAT SISTER CONCERN, IS NOT TOWARDS CONSTRUCTION COST OF THE BUILDINGS OF THE TRU ST. IN OTHER WORDS, IT CAN BE SAID THAT THE SAID HUGE PAYMENT OF RS.6 CRORE MADE B Y THE ASSESSEE TRUST TO THAT SISTER CONCERN WAS NOT FOR THE PURPOSE OF OBJECTIVE O F THE ASSESSEE TRUST, AS PER THE OBJECT CLAUSES (Q) & (V) REFERRED TO IN PARA 8,4 ABO VE. THUS, IT MAY BE NOTICED THAT SUCH ACTIVITY UNDERTAKEN BY THE ASSESSEE, IN ADVANC ING THAT AMOUNT OF RS.6 CRORE TO THAT SISTER CONCERN PASPL FOR A CONSIDERABLE PERI OD OF MORE THAN TWO YEARS, STARTING FROM 8.2.2010, WAS NOT FOR THE PURPOSE OF AD VANCEMENT OF OBJECTS OF THE TRUST AND UNDER SUCH CIRCUMSTANCES, THE CASE OF THE ASSESSEE TRUST, BEING COVERED UNDER THE SECOND LIMB OF THE CONDITIONS STIPULATED IN SUB-SECTION (3) OF SECTION 12AA OF THE ACT, IT WARRANTS CANCELLATION OF REGISTRA TION EARLIER GRANTED TO THE ASSESSEE TRUST U/S 12AA OF THE ACT. 8.1 FROM THE ABOVE, IT IS CLEAR THAT THE LD. PCIT R EQUESTED THE ASSESSEE TO FURNISH COPIES OF CORRESPONDENCE IN RESPECT TO AWAR D OF CONTRACT, CALLING AND ITA NO.370, 637 & 638/CHNY/2017 :- 26 -: RECEIVING OF TENDERS FOR CONTRACT AND APPROVALS TAK EN FOR CONSTRUCTION ETC . HOWEVER, THE REQUISITE DETAILS HAVE NOT BEEN FURNIS HED. FROM THE DETAILS/ MATERIAL FURNISHED, THE LD. PCIT HELD THAT (I) THE ASSESSEE ITSELF HAS OBTAINED SUCH DOCUMENT FROM THE SAID PARTY AND FILED THE SAME, IT RATHER INDICATES THAT THE SAME HAS NOT BEE N RECEIVED IN THE NORMAL COURSE OF ITS ACTIVITY DURING THE RELEVANT PERIOD, BUT THE SAME HAS BEEN OBTAINED BY THE ASSESSEE TRUST ITSELF, FOR THE PURPOSE OF MA KING SUCH CLAIM. FROM THEM, IT CANNOT BE SAID AND IT ALSO CANNOT BE ACCEPTED THAT GIVING SUCH CONSTRUCTION WORK TO THAT SISTER CONCERN, WAS THROUGH CALLING FOR A T ENDER AND RECEIPT OF BIDS IN A TRANSPARENT MANNER. (II) FROM THE SUBSEQUENT CONDUCT OF THE PARTIES, THE LD PCIT HELD THAT RS.6 CRORE, INTEREST FREE, ADVANCE PAID ON 08.02.2010 TO M/S P ASPL WAS NOT TOWARDS COST OF CONSTRUCTION OF THE BUILDINGS FOR THE TRUST, AS PER THE TRANSACTIONS REFLECTED IN THE LEDGER COPIES PRODUCED BEFORE HIM BY THE ASSESSEE. FROM THEM, THE PCIT FOUND THAT FOR THE PERIOD 08.02.2010 TO 30.3.2010 , THE C LOSING BALANCE AS ON 31.3.2010 WAS SHOWN AT RS.6,00,00,000/-. PASPL HAS RAISED A B ILL FOR RS.1,23,67,390/- FOR WORK DONE AT MAIN BUILDING AND WORK SHOP ON 12.4.20 10. INSTEAD OF ADJUSTING THAT BILL AGAINST THE EARLIER ADVANCE GIVEN OF RS.6 CRORES, THE ASSESSEE HAS PAID THE SAME ON 21.4.2010. FURTHER, ON 7.5.2010, PASPL HAS RAISED A BILL FOR RS.88,60,312/- FOR CERTAIN WORK DONE AT MAIN BUILDI NG ETC. THIS TIME ALSO, INSTEAD OF ADJUSTING THAT BILL AGAINST THAT ADVANCE OF RS.6 CRORES GIVEN EARLIER, THE ASSESSEE HAS MADE PAYMENT ON 13.5.2010 AT RS.90,41 ,000/-, WHICH IS MORE THAN THE AMOUNT OF SAID BILL. ON 15.5.2010, PASPL HAS RA ISED ANOTHER BILL FOR RS.60,40,548/- FOR WORK DONE AT MAIN BUILDING. THIS TIME AGAIN, INSTEAD OF ADJUSTING THAT BILL FROM SUCH ADVANCE OF RS.6 CRORE GIVEN DURING THE F.Y 2009-10, THE ASSESSEE HAS MADE PAYMENT ON 22.7.2010 AND THE CLOSING BALANCE AS ON ITA NO.370, 637 & 638/CHNY/2017 :- 27 -: 31.3.2011 WAS SHOWN AT RS.6,01,80,688/-. ON 31.3.2 012 , AN ADJUSTMENT WAS MADE THAT TOO FOR RS. RS.1,86,15,066/- ONLY AND T HE BALANCE AMOUNT OF RS 4,15,65,622/- WAS ADJUSTED AGAINST CERTAIN OTHER AM OUNTS MENTIONED AS PAYABLE TO PASPL FROM COLLEGE AND (III) FROM THE ABOVE FINANCIAL TRANSACTIONS BETWEEN THE ASSESSEE TRUST AND PASPL, IT CANNOT BE SAID THAT THE SAID ADVANCE OF RS.6 CRORE WAS PAID FOR COST OF CONSTRUCTION OF THE BUILDINGS FOR THE TRUST. HAD SU CH CONTENTION BEEN TRUE, THE ASSESSEE WOULD HAVE ADJUSTED THE BILLS FOR CONSTRUC TION RAISED DURING THE FY 2010- 11, AGAINST SUCH ADVANCE, INSTEAD OF MAKING PAYMENT SEPARATELY FOR THE SAME. THUS, THE ACTUAL FINANCIAL TRANSACTIONS MADE BY THE ASSESSEE WITH THE SAID ASSOCIATE CONCERN, AS EVIDENT FROM THE COPIES OF SA ID LEDGER ACCOUNTS OF THAT CONCERN FILED BY THE ASSESSEE, DISPROVE SUCH CONTEN TION OF THE ASSESSEE. FROM THE LEDGER ACCOUNTS OF PASPL, FOR THE THREE DIFFERENT F INANCIAL YEARS (COPIES ENCLOSED AS ANNEXURES '8'), IT IS THUS EVIDENT THAT RS.6 CRO RE MADE BY THE ASSESSEE TRUST TO THAT SISTER CONCERN WAS NOT FOR THE PURPOSE OF OBJE CTS OF THE ASSESSEE TRUST AND HENCE WARRANTS CANCELLATION OF REGISTRATION EARLIER GRANTED TO THE ASSESSEE TRUST AND ACCORDINGLY CANCELLED IT. 8.2 THE ASSESSEE CHALLENGED THE ABOVE FINDINGS S TATING THAT THE IMPUGNED SUM WAS MOBILISATION ADVANCE TOWARDS THE CONTRACT F OR CONSTRUCTION OF HOSTEL FOR STUDENTS WHICH WAS AWARDED TO THE SAID CONCERN BASED COMPETITIVE BIDDING AND THE LD. PCIT ERRED IN HOLDING THAT THE ADVANCE MADE BY THE APPELLANT TO M/S PRATHYUSHA ASSOCIATES SHIPPING P LTD IS NOT TO WARDS CONSTRUCTION OF HOSTEL. THE LD. PCIT FAILED TO APPRECIATE THAT THE SAME REPRESENTS ITA NO.370, 637 & 638/CHNY/2017 :- 28 -: MOBILISATION ADVANCE IN RESPECT OF THE CONTRACT AWA RDED TO THEM ON COMPETITIVE BIDDING, FOR CONSTRUCTION OF HOSTEL FOR THE STUDENTS ETC. 8.3 BEFORE US ALSO, THE ASSESSEE HAS FILED THE SAME MATERIAL FILED BEFORE THE LD. PCIT VIZ A XEROX COPY OF AGREEMENT FOR WORK DAT ED 29.12.2009 BETWEEN THE ASSESSEE AND M/S. PASPL, THE XEROX COPIES OF CE RTAIN ESTIMATES FOR CERTAIN BUILDINGS, WITHOUT BEARING ANY DATE IN EACH SUCH CO PY AND COPIES OF CERTAIN LEDGER ACCOUNTS OF PASPL ETC , AS EXTRACTED IN THE ORDER OF THE LD. PCIT IN PARA 9.2, SUPRA. AFTER CONSIDERING THEM ONLY, THE L D. PCIT RECORDED A FINDING FROM THEM THAT IT CANNOT BE SAID AND IT ALSO CANNOT BE ACCEPTED THAT GIVING SUCH CONSTRUCTION WORK TO THAT SISTER CONCERN, WAS THROUGH CALLING FOR A TENDER AND RECEIPT OF BIDS IN A TRANSPARENT MANNER . FROM THE SUBSEQUENT FINANCIAL TRANSACTION , HE HELD THAT RS.6 CRORE PAID BY THE ASSESSEE TRUST TO IT SISTER CONCERN WAS NOT FOR THE PURPOSE OF OBJECTS OF THE A SSESSEE TRUST AND HENCE THE ASSESSEES ACTIONS WARRANT CANCELLATION OF REGI STRATION EARLIER GRANTED TO IT AND ACCORDINGLY CANCELLED IT. 8.4 FURTHER, THE ASSESSEE FILED A XEROX COPY OF V ALUATION REPORT OF A A V PERUMAL AND ASSOCIATES DT 11.12.2014 BASED ON AN I NSPECTION MADE BY THE VALUER ON 08.12.2014 . ON WHICH, THE LD. CIT(A) OB TAINED A REMAND REPORT FROM THE A O AND AFTER AFFORDING OPPORTUNITY TO THE ASSESSEE OBSERVED AS UNDER : THE AO DISALLOWED A PORTION OF THE INTEREST CLAIME D ON LOAN TAKEN BY THE APPELLANT SINCE THE APPELLANT HAD PAID CERTAIN SUM TO ITS ASSOCIATE M/S. PASPL CONSTRUCTION IN WHICH THE TRUSTEES ARE HAVING SUBST ANTIAL INTEREST. THE APPELLANT'S CONTENTION WAS THAT IT WAS GIVEN TO PASPL CONSTRUCT ION, AS ADVANCE TOWARDS COST OF ITA NO.370, 637 & 638/CHNY/2017 :- 29 -: CONSTRUCTION OF CERTAIN BUILDINGS. NO DISALLOWANCE O N THIS COUNT IS WARRANTED INASMUCH AS THE WORK WAS EXECUTED AT A CHEAPER RATE COMPARED TO THE MARKET VALUE ETC. I HAVE GONE THROUGH THE SUBMISSIONS OF TH E APPELLANT. THE APPELLANT'S CONTENTIONS ARE FARFETCHED. FIRST OF ALL NO TENDERS WE RE CALLED FOR, FOR THE PROPOSED CONSTRUCTION WORK. GIVING AN ADVANCE OF RS.6 CRORE AT A STETCH THAT TOO AT THE INITIAL STAGE COULD HAPPEN ONLY WHEN THE APPELLANT HAS SOME INTEREST IN THE CONTRACTOR I.E. M/S.PASPL CONSTRUCTION. HOW THE APPELLANT JUSTIFIES THAT THE COST OF CONSTRUCTION WAS CHEAPER, WHEN ESTIMATE FROM NONE OTHERS WERE OBT AINED. IN THE CIRCUMSTANCES THE ACTION OF THE AO IN DISALLOWING THE PORTION OF I NTEREST IS JUSTIFIED. HENCE THIS GROUND OF APPEAL FOR BOTH AYS IS DISMISSED. 8.5 BEFORE US ALSO, THE ASSESSEE IS NOT ABLE TO ASSAIL HOW THE ABOVE FINDINGS ARE WRONG WITH REFERENCE TO SUCH MATERIAL AND HENCE THE CORRESPONDING GROUNDS OF THE ASSESSEE ARE DISMISS ED. 9. THE ABOVE ISSUES COULD BE EXAMINED FROM ANOTHER ANGLE ALSO. THE TRUSTEES ARE BOUND TO ACT REASONABLY AND FAIRLY I N DEALING WITH THE PROPERTY OF THE TRUST. THEY MUST CONFORM THEIR ACTION WITH THE SAME STANDARD THAT MEET THE TEST OF JUSTNESS, FAIRNESS, REASONABLENESS . AS PER SECTION 15 OF THE INDIAN TRUSTS ACT , A TRUSTEE IS BOUND TO DEAL WIT H THE TRUST-PROPERTY AS CAREFULLY AS A MAN OF ORDINARY PRUDENCE WOULD DEAL WITH SUCH PROPERTY IF IT WERE HIS OWN. THEY ARE BOUND TO EXERCISE THEIR POWE R IN GOOD FAITH IN DEALING WITH THE PROPERTY OF THE TRUST AS AN ORDI NARY PRUDENT MAN WOULD EXERCISE IN THE MANAGEMENT OF HIS OWN AFFAIRS TO PR ESERVE AND PROTECT HIS OWN ESTATE. THEIR ACTS SHOULD BE REASONABLE, JUS T AND FAIR WHICH MUST MEET THE EYE AND THE OFFER ACCEPTED MUST BE COMPETITIVE AND EVERY ATTEMPT SHOULD BE MADE TO SECURE AS MAXIMUM ADVANTAGE AS POSSIBL E TO THE TRUST . ITA NO.370, 637 & 638/CHNY/2017 :- 30 -: 9.1 SECTION 13 OF THE INCOME TAX ACT ALSO BARRED THE EXEMPTION, IN THE CASE OF A PUBLIC CHARITABLE TRUST , SUBJECT TO CER TAIN MODIFICATIONS, IF ANY PART OF THE INCOME, OR ANY PROPERTY OF SUCH TRUST , WAS USED OR APPLIED FOR THE BENEFIT OF THE AUTHOR OF THE TRUST OR FOUNDER OF TH E INSTITUTION OR OF A PERSON WHO HAD MADE A SUBSTANTIAL CONTRIBUTION TO SUCH TRU ST OR INSTITUTION OR OF A RELATIVE OF SUCH AUTHOR, FOUNDER OR CONTRIBUTOR. THE SCHEME EMBODIED IN THE STATUTE PROTECTED THE TAX BENEFIT FROM MISUSE BY RE FERENCE TO PROVISIONS WHICH CAREFULLY CONTROL THE APPLICATION OF THE ACCUMULATE D INCOME FLOWING FROM THE PROPERTY HELD UNDER TRUST OR OWNED BY IT IE., THE MANNER IN WHICH THE RESULTING INCOME IS EMPLOYED. WE ARE CONCERNED WITH THIS ASPECT. SECTION 13(2) EMPHASISES THE CARE AND CAUTION AS REGARD S THE PERSONS UNDERSTOOD IN SECTION 13(3) IE WITH THE PROHIBITED PERSONS AND ALSO AS REGARDS VARIOUS DEEMING SITUATIONS SPELT OUT IN THE VARIOUS CLAUSES VIZ SECTION 13(2)(A) DEALING WITH THE INCOME OR PROPERTY OF THE TRUST. SECTION 13(2) (B) DEALING WITH LAND, BUILDING OR O THER PROPERTY OF THE TRUST SECTION 13(2)(C) RELATES TO THE PAYMENTS BY WAY OF SA LARY, ALLOWANCE OR OTHERWISE PAID OUT OF THE RESOURCES OF THE TRUST OR THE INSTITUTION FOR S ERVICES RENDERED, IF FOUND IN EXCESS OF REASONABLENESS. SECTION 13(2)(C) RELATES TO THE SERVICES WITHOUT ADE QUATE REMUNERATION OR COMPENSATION. SECTION 13(2)(E) RELATES TO THE SITUATION OF PURCHASE OF PROPERTY BY OR ON BEHALF OF THE TRUST FOR CONSIDERATION WHICH IS MORE THAN ADEQUATE. SECTION 13(2)(F) RELATES TO THE SALE BY OR ON BEHALF O F THE TRUST OF ANY SHARES, SECURITY OR OTHER PROPERTY OF THE TRUST. ITA NO.370, 637 & 638/CHNY/2017 :- 31 -: SIMILARLY, SECTION 13(2)(G) RELATES TO THE DIVERSION OF THE INCOME OF THE PROPERTY OR THE TRUST AND, LASTLY, SECTION 13(2)(H) RELATES TO THE INVESTMENT OF THE FUND S OF THE TRUST IN ANY CONCERN OF A PERSON CONTEMPLATED IN SECTION 13(3) OF THE ACT. 9.2. THE ABOVE PROVISIONS ALSO WOULD MAKE IT AB UNDANTLY CLEAR THAT ALL THE PROVISION SEEKS TO PROTECT THE TRUST AND ITS BE NEFIT OF EXEMPTION FROM EVERYTHING WHICH COULD BE UNDERSTOOD IN TERMS OF TH E AFFAIRS OF THE TRUST. IT PROTECTS THE INCOME, IT PROTECTS THE SALE AND PURCH ASE, IT PROTECTS THE USER, IT ALSO PROTECTS VARIOUS OTHER ASPECTS DISCUSSED HEREI N BEFORE. 9.3 THUS, UNDER BOTH THE INDIAN TRUSTS ACT AS WELL AS IN THE INCOME TAX ACT, THE RATIONALE OF ACTIONS OF THE TRUST AND MOTI VE IN EXERCISE OF THEM HAVE TO BE JUDGED IN THE LIGHT OF THE ABOVE PROVISIONS. LACK OF REASONABLENESS OR EVEN FAIRNESS AT EITHER OF THE TWO STAGES, IE WHEN AWARDING THE SO CALLED CONTRACT AND THE TRUSTS SUBSEQUENT CONDUCT RE NDER THOSE ACTIONS INVALID WHICH WOULD RESULT IN REFUSAL OF EXEMPTIONS . IN T HE INSTANT CASE, THE FACTS THAT M/S PRATHYUSHA ASSOCIATES SHIPPING PVT. LTD. ( PASPL), IS A PROHIBITED PERSON, TO WHOM RS. 6 CRORE OF THE ASSESSEES MON EY WAS ADVANCED FREE-OF- INTEREST ETC ARE NOT DISPUTED. THOUGH, THE ASSESSE E CLAIMED TO HAVE ; ADVANCED TOWARDS COST OF CONSTRUCTION OF THE BUILDI NGS FOR THE TRUST, AWARDED THE CONTRACT TO THEM ON COMPETITIVE BIDDING ETC, IT HAS NOT LAID CONTEMPORANEOUS MATERIAL SUBSTANTIATING ITS CONTENT IONS BEFORE THE LD. PCIT AS WELL AS BEFORE THE LD. CIT(A) . WHEN THE PAYMEN T WAS MADE TO A ITA NO.370, 637 & 638/CHNY/2017 :- 32 -: PROHIBITED PERSON, WHEN ITS RATIONALE IS BEING QUES TIONED, THE ONUS IS ON THE ASSESSEE TO PLACE ADEQUATE CONTEMPORANEOUS MATERI AL TO SHOW THAT HOW IT QUANTIFIED THE PROJECT COSTS AND ON WHOSE ADVICE , WHEN AND HOW IT WENT FOR BIDDING , HOW MANY BIDS WERE RECEIVED , WHETHER THE IMPUGNED PERSON HAD ADEQUATE EXPERIENCE IN SIMILAR PROJECTS AND ON WH AT ARE OTHER CRITERIA ON WHICH IT CHOSE THE IMPUGNE D PERSON OVER OTHERS, ON WHAT BASIS AND MATERIAL IT ADVANCED SUCH HUGE AMOUN T TO THE IMPUGNED PERSON, ON WHAT BASIS IT CONTINUED TO ADVANCE TRUST MONEY IN SPITE OF THE FACT THAT HUGE ADVANCE MADE ORIGINALLY IS PENDING ADJUST MENT ETC SO THAT THE ASSESSEES ACTIONS COULD BE CONFIRMED ON THE TOUCH STONE OF THE SAME STANDARD THAT MEET THE TEST OF JUSTNESS, FAIRNESS, REASONABLENESS ETC. BEFORE US ALSO, IT HAS NOT LAID ANY SUCH CONTEMPORANEOU S MATERIAL. HENCE, THE FINDINGS RECORDED BY THE LD. PCIT AND THE LD. CIT ( A) , SUPRA, STAND JUSTIFIED. 10. AS REGARDS THE PAYMENT OF RS.4.92 LAKHS TO MS P RATHYUSHA, THE DAUGHTER OF MANAGING TRUSTEE , IT WAS SUBMITTED THA T SHE IS A MBA GRADUATE AND FULL TIME CEO OF THE EDUCATIONAL INSTITUTION RU N BY THE TRUST AND THE PAYMENT IS THEREFORE JUSTIFIED. ON THIS ISSUE, THE RELEVANT PORTION OF THE ORDER OF THE LD. CIT(A) IS EXTRACTED AS UNDER : THE AO DISALLOWED A PORTION OF SALARY PAID TO THE DAUGHTER OF THE AUTHOR OF THE TRUST. THE APPELLANT SUBMITTED AS UNDER: 'THE DAUGHTER OF MANAGING TRUSTEE IS AN ACADEMICALLY WELL QUALIFIED AND ABLE ADMINISTRATOR OF THE AFFAIRS OF THE TRUST. THE DAU GHTER HAS COMPLETED HER MASTERS DEGREE IN BUSINESS ADMINISTRATION FROM PREST IGIOUS GREAT LAKES BUSINESS SCHOOL AND ACTIVELY TAKES PART IN THE DAY TO DAY RUN NING OF THE EDUCATIONAL INSTITUTION OF ASSESSEE TRUST. IN FACT, THE SALARY PA ID IS SIGNIFICANTLY LOW WHEN ITA NO.370, 637 & 638/CHNY/2017 :- 33 -: COMPARED TO HER ACADEMIC PARTICIPATION AND CARRYING OUT OF THE ACTIVITIES OF THE INSTITUTION. THEREFORE, A GENERAL AND MERE ALLEGATIO N WITHOUT ANY CORROBORATING EVIDENCE THAT THE ABOVE PAYMENT IS MADE, IS EXCESSI VE OR VIOLATIVE OF ANY SPECIFIC PROVISION OF LAW OR THE PAYMENT IS NOT IN ACCORDANCE WITH THE ACTIVITIES OF THE TRUST, IS ONLY A BASELESS ALLEGATION, INCORRECT ON FACTS AN D AGAINST THE PRINCIPLES OF NATURAL JUSTICE.' OUT OF THE SALARY CLAIMED OF RS 4,92,000 THE AO ACCEP TED A SALARY OF RS. 1,80,000 (RS.15,000 X 12) AS REASONABLE AND ADDED BACK THE B ALANCE OF RS.3,12,000/- AS EXCESSIVE. THE APPELLANT HAD NOT PRODUCED ANY DOCUM ENTARY EVIDENCE AS TO THE FUNCTIONING OF THE LADY, NATURE OF WORK ALLOTTED TO HE R, WHAT ARE THE OFFICIAL MATTERS WHICH SHE ATTENDS EVERYDAY ETC., AND AS TO HOW SUCH A HUGE SALARY OF RS.4,92,000 IS REASONABLE. IN THE CIRCUMSTANCES THE ACTION OF TH E AO DOES NOT WARRANT ANY INTERFERENCE. IN THE CIRCUMSTANCES THIS GROUND OF AP PEAL IS DISMISSED. 10.1 BEFORE US ALSO, THE ASSESSEE HAS NOT LAID ANY MATERIAL TO DISLODGE THE ABOVE FINDINGS. BASED ON THE DISCUSSIONS IN PARA 9 , SUPRA, THE CORRESPONDING GROUNDS FAIL. 11. INVITING OUR ATTENTION TO THE SUB-SECTION 4 OF SECTION 12AA WHICH WAS INSERTED WEF 01.10.2014, THE AR MADE A SUBMISSIO NS THAT IN CASE ANY SUM IS FOUND UNREASONABLE WHICH MAY BE DISALLOWED. HOWEVER , THE EXEMPTION GRANTED MAY BE SUSTAINED. 12. WE HAVE CONSIDERED SUCH PLEA AND FIND NO MERIT IN VIEW OF THE DECISION OF THE KERALA HIGH COURT IN AGAPPA CHILD CENTRE VS COMMISSIONER OF INCOME- TAX, 226 ITR 211 KER, DT 8 AUGUST, 1996. FURTHER, IN THIS CASE , THE AUTHORITY EMPOWERED TO GRANT REGISTRATION OF EXEMPTION, AFTE R DUE EXAMINATION OF THE ASSESSEES ACTIVITIES AND THE MANNER IN WHICH S UCH ACTIVITIES WERE CARRIED ON AND THE SURROUNDING CIRCUMSTANCES ETC HAS HELD , INTER ALIA, SUPRA, THAT THE ACTIVITIES CARRIED ON BY THE PUBLIC CHARITABL E TRUST ARE NOT IN ACCORDANCE WITH LAW, THE TRUSTS PROPERTY, INCOME, IS NOT ACCO UNTED FOR AND THEY ARE NOT ITA NO.370, 637 & 638/CHNY/2017 :- 34 -: APPLIED FOR THE PURPOSES OF THE TRUST AND HENCE CA NCELLED THE REGISTRATION EARLIER GRANTED TO IT. WE FIND FOR THE ELABORATE R EASONS MENTIONED , SUPRA, THAT SUCH DECISIONS ARE JUSTIFIED. ONCE THE REGIST RATION IS CANCELLED, WHICH IS BEING UPHELD BY THIS TRIBUNAL ,SUPRA, THE CONSEQUEN CES ARE TO FOLLOW IN ACCORDANCE WITH LAW. 13. IN THE RESULT, THE ASSESSEES APPEAL IN ITA N O. 370/2017 IS DISMISSED. CONSEQUENTLY, THE APPEALS IN ITA NOS 637 & 638 OF 2 017 ARE ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 19 TH , 2018, IN CHENNAI. SD/- ( - . . . / ) (DUVVURU R.L. REDDY) /JUDICIAL MEMBER SD/- ( . ) (S. JAYARAMAN) /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: JUNE 19 TH , 2018. JPV & $23 43 /COPY TO: 1. # /APPELLANT 4. 5 /CIT 2. $%# /RESPONDENT 5. 3 $ /DR 3. 5 ( )/CIT(A) 6. /GF