NATIONAL INSTITUTE OF CONSTRUCTION MANAGEMENT AND RESEARCH,MUMBAI V. DCIT(EXEM), CIRCLE - 2, MUMBAI

ITA 4324/MUM/2025

AI Insights

The case involves the National Institute of Construction Management and Research, which appealed against the cancellation of its registration under section 12A of the Income Tax Act by the CIT(E). The CIT(E) had cancelled the registration based on findings that the institute engaged in activities classified as business rather than purely educational, and did not maintain separate books for these activities. The Tribunal admitted additional evidence from the assessee and set aside the CIT(E)'s order, restoring the matter for fresh consideration.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 826585 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2022-2023
• Appeal Filed On: 30-06-2025
• Other Referred Cases: NTPC vs. CIT, Sole Trustee LokShikshana Trust vs. CIT, M/s. New Noble Educational Society Vs. The Chief Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SOLGY JOSE T. KOTTARAM
• Assessee Lawyers: V. SRIDHARAN
• Keywords: Set aside; Business income; Opportunity of being heard; Additional evidence; Transfer pricing; International transaction; Principle of natural justice; Charitable institution; Cancellation of registration; Audi alteram partem
• Section: 143(3); 263; 11; 12A; 12

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.4324/MUM/2025 (Assessment Year: 2022-23) National Institute of Construction Management and Research, Walchand Centre, Walchand Terraces, Tardeo Road, AC Market Mumbai – 400034 PAN : AAATN1348J ............... Appellant v/s Deputy Commissioner of Income Tax (Exemptions), Circle - 2, MTNL Tel Ex Building, Cumballa Hill, Peddar Road, Mumbai - 400026 ……………… Respondent Assessee by : Shri V. Sridharan, Sr. Adv. Shri Ravi Sawana, Ms. Neha Sharma Ms. Prativa Agarwal Revenue by : Shri Solgy Jose T. Kottaram, CIT-DR Date of Hearing – 04/12/2025 Date of Order - 09/01/2026 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the order dated 04.06.2025, passed by the learned Commissioner of Income Tax (Exemptions), Mumbai, [“learned CIT(E)”], under section 12AB(4) of the Income Tax Act, 1961 (“the Act”) cancelling the registration granted to the assessee under section 12A of the Act. Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 2 2. In this appeal, the assessee has raised the following grounds: - “Being aggrieved by the order passed by the Ld. Commissioner of Income-tax (Exemptions), Mumbai (\"CIT(E)\"), the Appellant begs to prefer the present appeal on the following grounds which are without prejudice to each other: 1. That in the facts and circumstances of the case and in law, the CIT(E) grossly erred in cancelling the registration granted to the Appellant under Section 12A of the Act vide order dated 24.09.2021 for Assessment Years 2022-23 to 2026-27, with effect from the date of the said order. 2. That in the facts and circumstances of the case and in law, the CIT(E) grossly erred in holding that the activities of the Appellant being CBP, MDP and Research & Consultancy, are in violation of Section 2(15) and Section 11(4A) of the Act, falling within the definition of 'Specified Violation' under clause (b) of Explanation to Section 12AB(4) of the Income-tax Act, 1961. 3. That in the facts and circumstances of the case and in law, the CIT(E) grossly erred in holding that the activities like conducting programmes in Construction & Construction Management carried on by the Appellant are not a charitable activity in the nature of 'education' u/s. 2(15) of the Income-tax Act, 1961. 4. That in the facts and circumstances of the case and in law, the CIT(E) grossly erred in holding that the activities consisting of CBP, MDP and Research & Consultancy carried on by the Appellant are not a part of the educational activities but are business activities. 5. That in the facts and circumstances of the case and in law, the CIT(E) erred in holding that the Appellant has not maintained separate books of accounts in respect of its activities consisting of CBP, MDP and Research & Consultancy and hence, the Appellant is in violation of Section 11(4A) of the Act. 6. That in the facts and circumstances of the case and in law, the CIT(E) grossly erred in not appreciating that the entire assets of the Appellant-Trust are a property held under trust, wherefrom all the activities including the alleged business activities are being undertaken and therefore, Section 11(4) shall be applicable and Section 11(4A) shall have no applicability. 7. That in the facts and circumstances of the case and in law, the CIT(E) grossly erred in not following the judgment of the Hon'ble Income-tax Appellate Tribunal in the case of the Appellant, where the Tribunal had concluded that the activities carried on by the Appellant are in the nature of 'education' u/s. 2(15) of the Income-tax Act, 1961. 8. That in the facts and circumstances of the case and in law, the CIT(E) erred in not appreciating the fact that the Appellant is carrying on the educational activities is also supported by the approval received by the Appellant-Trust to establish NICMAR University by the Maharashtra & Telangana Government. 9. That in the facts and circumstances of the case and in law, the CIT(E) erred in holding that the expenditure in the nature of Compensation to Employees Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 3 incurred by the Appellant towards the employee benefits of its teaching and non-teaching staff is unexplained. 10. That in the facts and circumstances of the case and in law, the Faceless AO erred in making a reference under 02*d Proviso to Section 143(3) of the Income-tax Act, 1961 to the CIT(E) for withdrawal of the registration granted to the Appellant.” 3. Vide its application dated 28.08.2025, the assessee sought admission of the following additional grounds of appeal: - “1. That, on the facts and in the circumstances of the case and in law, the CIT(E) grossly erred in passing the impugned order cancelling the registration of the Appellant on the grounds not provided for in the show-cause notices dated 14.01.2025 and 05.02.2025 issued to the Appellant. 2. That, on the facts and in the circumstances of the case and in law, the impugned order passed by the CITE) cancelling the registration is invalid and bad in law, as the show-cause notices dated 14.01.2025 and 05.02.2025 initiating the cancellation proceedings did not invoke any clause of the Explanation to Section 12AB(4) in relation to 'Specified Violation'. 3. That, on the facts and in the circumstances of the case and in law, the Faceless AO erred in making a reference under the Second Proviso to Section 143(3) of the Income-tax Act, 1961 to the CIT(E) for withdrawal of the registration granted to the Appellant, without providing the Appellant with an opportunity of being heard as to why a reference under the Second Proviso to Section 143(3) of the Income-tax Act, 1961 should not be made. 4. That, on the facts and in the circumstances of the case and in law, the CIT(E) erred in exercising the powers u/s. 12AB(4) of the Income-tax Act, 1961 thereby cancelling the registration of the Appellant. 5. That, on the facts and in the circumstances of the case and in law, the CIT(E) erroneously and vaguely recorded that the Appellant had agreed to non-maintenance of separate books of accounts in respect of business which is incidental to the attainment of its objectives during the course of assessment proceedings, when no such submission was made by the Appellant nor was the Appellant put to notice of such submission by the CIT(E).” 4. Since the issues raised by way of additional grounds are legal issues, which can be decided on the basis of material available on record, the additional grounds of appeal raised by the assessee are admitted for adjudication in view of the ratio laid down by the Hon’ble Supreme Court in NTPC vs. CIT, reported in (1998) 229 ITR 383 (SC). Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 4 5. The brief facts of the case are that the assessee was formed in 1983 with the objects of imparting knowledge and education to the students in the field of construction management and research. The assessee was granted registration under section 12A of the Act on 06.02.1984. Thereafter, on 24.09.2021, the assessee was granted registration under section 12A of the Act for the assessment years 2022-23 to 2026-27. Pursuant to the reference received from the Faceless Assessing Officer as per the provision of the second proviso to section 143(3) of the Act, proceedings under section 12AB(4) of the Act were initiated in the case of the assessee. As per the reference received, the assessee-trust has filed its return of income for the assessment year 2022-23 on 21.09.2022 in ITR-7, declaring a total income of Rs. Nil after claiming exemption under section 11 of the Act. The return filed by the assessee was selected for scrutiny under CASS for the following reasons: - “1. Claim of Large Value Refund. 2. Large amount applied for charitable or religious purpose out of preceding previous years accumulation. 3. Large investment in property (Form 26QB) as compared to total income. 4. Large amount of income accumulated or set apart by Trust.” 6. It was noted that, as per the return of income filed by the assessee for the assessment year 2022-23, the assessee has categorised its activities as “Charitable and Religious” under the sub-classification as “Education”. However, the Memorandum of Association and records of the assessee revealed that the assessee is engaged in the activities for the promotion of training, research, professionalism and skill formation at all levels of the construction and other allied industries. It was further observed from the records that the assessee has undertaken various activities including Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 5 Company Based Programmes (“CBP”), MDP Programmes, conferences and publications, etc., which do not come under the purview of formal education activities, but are in the nature of providing training, skill development programmes for professionals involved in the field of construction and allied services, as per the requirement of business or profession. It was further noted that the assessee has received income from these activities under the guise of educational activities. Thus, apart from the income from the main object, i.e., Education, the assessee has received income from afore-noted activities, which do not come under the purview of “Educational Activities”. From the return of income filed by the assessee for the assessment year 2022- 23, it was noted that out of the total expenditure incurred by the assessee amounting to Rs.83,25,13,683/-, during the year under consideration, less than 5% of the expenditure was spent on the object of the Trust, i.e., Education. It was observed that the assessee has made expenditure on compensation of employees, entertainment and hospitality, repair and maintenance, etc., which are not related to the main object of the assessee trust, i.e. Education. Thus, it was noted that the assessee was utilising only a meagre part of its funds for the objects of trust to cover up its commercial activities, and a major portion of its funds was spent on activities that aid its commercial operations. 7. Since the activities of the assessee trust fall under the definition of “Specified Violation” as per section 12AB(4) of the Act, in exercise of the power granted under section 12AB(4)(b) of the Act, proceedings for Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 6 cancellation of the registration under section 12A of the Act were initiated and show cause notice was issued to the assessee. 8. After considering the response of the assessee, the learned CIT(E), vide the impugned order dated 04.06.2025, disagreed with the submissions of the assessee and held that the in-service training programmes conducted by the assessee in Construction and Construction Management cannot termed as educational activities for charitable purposes as defined under section 2(15) of the Act, since the “education” for the purpose of section 2(15) of the Act means education in its scholastic sense of structured learning rather than the wider meaning of the term. In this regard, the learned CIT(E) placed reliance upon the decision of the Hon’ble Supreme Court in Sole Trustee LokShikshana Trust, reported in (1975) 101 ITR 234 (SC). The learned CIT(E) also placed reliance on the decision of the Hon’ble Supreme Court in M/s. New Noble Educational Society Vs. The Chief Commissioner of Income Tax, in Civil Appeal No. 3795 of 2014, and held that in the aforesaid decision, it has been reaffirmed that the entities claiming exemption on the ground of imparting education have to be engaged “solely” with education or education-related activities. Accordingly, the learned CIT(E) held that the activities undertaken by the assessee, which resulted in income under the head CBP, MDP, Research and Consultancy as business income, which do not come under the category of “Education”. The learned CIT(E) held that the in-service training programme conducted by the assessee is simply a commercial service provided by the assessee trust to its clients for providing training/skill development programme for professional involved in the field of construction Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 7 and allied services, for which the assessee charges fees and these programmes were conducted at the request of the customer without any entrance examinations. Further, the learned CIT(E) noted that the assessee for the assessment year 2022-23, has provided consultancy services to various private companies and has also charged fees of Rs.24,79,000/-, which is completely in the trade, commerce or business. As regards the expenditure towards the employee benefits incurred towards teaching and non-teaching staff, the learned CIT(E) held that the assessee was granted recognition for formal education activity vide Maharashtra Government Gazetted on 12.05.2022, therefore the norms of UGC are applicable to the assessee when it started formal educational activities i.e. from assessment year 2023-24 and prior thereto the question of expenditure towards employee benefits does not arise. Thus, it was held that the expenditure made by the assessee-trust remains unexplained. The learned CIT(E) further noted that the assessee has not maintained a separate book of accounts in respect of the activities which are in the nature of business. Accordingly, on the basis of material available on record, the learned CIT(E) held that the activities of the assessee-trust are in violation as per section 2(15) and section 11(4A) of the Act and it comes under the purview of “Specified Violation” as mentioned in clause (b) of Explanation to section 12AB(4) of the Act. Accordingly, the learned CIT(E) cancelled the registration granted to the assessee-trust under section 12A of the Act with effect from the date of said order, i.e. 24.09.2021 onwards. Being aggrieved, the assessee is in appeal before us. Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 8 9. During the hearing, the learned Senior Counsel, appearing for the assessee, submitted that the show cause notice dated 14.01.2025 issued by the learned CIT(E), inter alia, alleged that certain activities undertaken by the assessee are not genuine as per the provisions of sections 11, 12 and 12A of the Act. Further, it was mentioned in the show cause notice that the trust was spending the major portion of funds on activities, which are more beneficial towards the business prospect of the assessee-trust and therefore, it was alleged that the activities of the trust fall under the definition of “Specified Violation” as per section 12AB(4) of the Act. The learned Senior Counsel submitted that the Explanation to section 12AB(4) of the Act has seven clauses, which individually are “Specified Violation” and each clause is distinct and exhaustive, wherein each limb carries separate factual premises. By referring to clause (e) of the Explanation to section 12AB(4) of the Act, the learned Senior Counsel submitted that the same refers to the activity being not genuine, as a circumstance which results in “Specified Violation”. Further, by referring to clause (b) of the Explanation to section 12AB(4) of the Act, the learned Senior Counsel submitted that the same deals with non-maintenance of separate books of accounts by the trust in respect of the business which is incidental to the attainment of its objective, as one of the “Specified Violation”. Thus, the learned Senior Counsel submitted that there was no whisper of condition as laid down in clause (b) of the Explanation to section 12AB(4) in the show cause notice issued to the assessee prior to the cancellation of the registration under section 12A of the Act. Thus, it was submitted that the assessee registration was cancelled by invoking the provisions of clause (b) of Explanation to section 12AB(4), in relation to which the assessee was never Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 9 provided an opportunity to show cause. By referring to the provisions of Explanation to section 12AB(4) of the Act, the learned Senior Counsel submitted that the list of “Specified Violation” was enlarged by the Finance Act, 2022, with effect from 01.04.2022, and therefore, the same is only applicable and has relevance to the assessment year 2023-24 and onwards. It was also submitted that proceedings for cancellation of registration under section 12A of the Act were initiated earlier on an identical basis on which the impugned order cancelling the registration has been passed. However, the said proceedings were subsequently dropped by the learned CIT(E) vide order dated 25.03.2023. In respect of his earlier submission that no opportunity of hearing was granted to the assessee in respect of allegation of violation of clause (b) of Explanation to section 12AB(4) of the Act, the learned Senior Counsel submitted that the learned CIT(E) erroneously recorded the findings that the assessee during the assessment proceedings, accepted that it had not maintained separate books of account in respect of business, which is incidental to the attainment of its objects. The learned Senior Counsel, by referring to the application filed by the assessee seeking admission of additional evidence submitted that the necessary details/evidences in respect of income received from these activities are available with the assessee, and only because no show cause notice was issued to the assessee on this aspect, these details could not be furnished before the learned CIT(E). In addition to the submissions as noted above, the learned Senior Counsel submitted that the reference by the Faceless Assessing Officer under the second proviso to section 143(3) during the assessment proceedings for the assessment year Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 10 2022-23 is invalid, as the assessee was not granted an opportunity of being heard prior to making such a reference. 10. On the other hand, the learned Departmental Representative (“learned DR”), by vehemently relying upon the order passed by the learned CIT(E), submitted that the provisions of the Explanation to section 12AB(4) of the Act are applicable to the year under consideration and the information can be of any previous year which is received by the learned CIT(E) for initiating the proceedings under the said section. By referring to the findings recorded in the impugned order, the learned DR submitted that “Education” was not the sole purpose of the assessee and the assessee was engaged in various other activities, which were not purely in the nature of “Education” and falls within the ambit of business. As regards, the submission of the learned Senior Counsel that proceedings for cancellation of registration under section 12A of the Act on identical basis has already being dropped, the learned DR, by referring to the order dated 25.03.2023 passed by the learned CIT(E), submitted that the same were dropped as the Tribunal affirmed the initiation of proceedings under section 263 of the Act on similar issue, and therefore, to avoid multiplicity of proceedings on similar aspect the proceedings for cancellation of assessee’s registration under section 12A of the Act were dropped by the learned CIT(E). 11. We have considered the submissions of both sides and perused the material available on record. In the present case, registration under section 12A(1)(ac)(i) of the Act was granted to the assessee on 24.09.2021 from assessment year 2022-23 to assessment year 2026-27. For the assessment Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 11 year 2022-23, the assessee-trust filed its return of income on 21.09.2022, declaring a total income of Rs. Nil, after claiming exemption under section 11 of the Act. The assessee's return was selected for scrutiny under CASS. During the assessment proceedings, in exercise of the powers granted to the Assessing Officer (“AO”) under second proviso to section 143(3) of the Act, the AO made a reference to the learned CIT(E) for withdrawal of the registration granted to the assessee on the basis that the assessee has committed “Specified Violation” as defined in Explanation to section 12AB(4) of the Act. Accordingly, the learned CIT(E) issued notice dated 14.01.2025 granting an opportunity to the assessee to show cause as to why the registration granted to it under section 12A of the Act should not be cancelled as per section 12AB(4) of the Act. The said show cause notice is reproduced as follows for ready reference: - “The assessee National Institute of Construction Management and Research has received the order for regular registration under sub clause (i) of clause (ac) of Sub Section (1) of section 12A on 24.09.2021 for AY 2022-23 to AY 2026-27. The assessee has filed its ITR for AY 2022-23 on 21.09.2022 in ITR-7 form declaring total income at Rs. Nil after claiming exemption u/s 11 of the Income Tax Act. 1961. The - assessee has claimed that the activity of trust falls under the category of 'education as per section 2(15) of the Act, however, as per the records available with this office, it is seen that the trust has undertaken various other activities including CBP (company-based programs) MDP Programs. Conferences and publications etc. which do not come under the meaning of formal educational activities but are more relevant to providing training/skill development programs for professionals involved in the field of construction and allied services as per the. requirement of business or profession. The assessee has received income from these activities under the guise of educational activities. Thus, apart from the income from the main object i.e. Education. the assessee has received income from below mentioned activities which do not come under the classification of Educational Activities: 1. CBP MDP Programmes (company-based programs). 2. Research & consultancy fee. 3. Conference and Publication. 4. Other receipts-sponsorship & rental income etc. Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 12 The assessee is providing professional services and is in receipt of income in lieu of providing these services. These activities are purely commercial activities. Thus, the activities performed by the assessee trust are not genuine as per the provisions of sections 11, 12 and 12A of the Income Tax Act. Further, as per the ITR of AY 2022-23. total expenditure made by the assessee for AY 2022-23 is Rs. 83.25.13.683/-, out of which only Rs. 3.68.49.253/- (i.e. less than 5% of total expenditure) has been spent on the object of the trust i.e. Education. Other than this, the trust has made expenditure (other than expenditure on object) of Rs. 66.82.24.525/- on Compensation to Employees, Rs. 2,36,05,8071/- on Entertainment and Hospitality. Rs.1,52,28,305/- on Repairs and maintenance etc. which are not related to charitable activities by any common rationality. Thus, the trust is utilizing only a meagre part of its fund on the objects of the trust to cover up its commercial activities and a major portion of its funds are spent on activities which is aiding its commercial activities. Based on the above facts, it is evident that the assessee trust is engaged in commercial activities by undertaking professional courses, organizing conferences and other activities in lieu of receipt of fees and the trust is spending the major portion of the funds on activities which are more beneficial towards the business prospect of the assessee trust. Thus, the activities of the trust fall under the definition of Specified Violation as per section 12AB(4) of the Income tax Act. In view of the above, you are hereby provided with an opportunity to show cause as to why the registration granted to the trust u/s 12A of the Act should not be cancelled as per section 12AB(4) of the Income tax Act due to above mentioned violations. In addition, you are requested to provide the below information within the stipulated date and time: 1. A detailed note on the yearly actual activities conducted by your organization since the grant of regular registration, under section 12AB of the Act along with substantiating evidence in terms of documents. photos, videos, media reporting. or any other evidence that you may choose to submit in this regard. 2. Kindly furnish proof of expenses of the above activities for the period AY 2022-23 to AY 2024-25 (along with documentary evidence like details of recipients. Payment receipts, acknowledgment, bills, etc.) supported by Bank Statement showing the above expenses. 3. A self-certified copy of your Trust Deed/MoA as the case may be (if written in vernacular language please submit a notarized copy translated in English). 4. A copy of your audited Income & Expenditure account, balance sheet and or profit & loss account with all Annexures for AY 2022-23 to AY 2024-25. 5. A copy of your provisional Balance Sheet and Income & Expenditure Statement of FY 2024-25 upto December 2024. 6. Kindly explain how the expenditure made on Compensation to Employees, Entertainment and Hospitality etc. are relevant to attaining the objects of the trust deed/MoA. Also provide the yearwise details of the said expenditure alongwith documentary evidence. Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 13 7. Whether any proceedings against your organization for infringement of any other law in force has been initiated/completed by the relevant authority? Please furnish a notarized affidavit to the effect with complete details duly affirmed by the Managing Trustee/Director, as the case may be. 8. Kindly furnish the KYC of all the Trustees. 9. Kindly provide year-wise details of donations/funds received by the supported by documentary evidence during the AY 2022-23 to 2024-25. In case of non-compliance within stipulated date and time. the registration u/s 12A is liable to be cancelled.” 12. Thus, vide aforesaid show cause notice, it was alleged that the various other activities undertaken by the assessee including CBP, MDP programmes, conference and publications, etc. do not come under the meaning of formal education, but are more relevant to provide training, skill development programme for professionals involved in the field of construction and allied services as per requirement of business or provision. Accordingly, the learned CIT(E) alleged that the activities performed by the assessee-trust are “not genuine” as per the provisions of sections 11, 12 and 12A of the Act. Further, taking into consideration the total expenditure incurred by the assessee, the learned CIT(E) alleged that less than 5% of the total expenditure was spent on the object of the trust. Accordingly, vide aforesaid show cause notice, the learned CIT(E) alleged that the activities of the assessee-trust fall under the definition of “Specified Violation” as per section 12AB(4) of the Act. 13. During the hearing, the learned Senior Counsel, amongst the various arguments raised challenging the impugned order, submitted that the reference made by the AO under second proviso to section 143(3) of the Act, during the assessment proceedings for the assessment year 2022-23, is invalid, as the assessee was not granted an opportunity of being heard prior Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 14 to making such a reference. In this regard, the learned Senior Counsel submitted that whenever an administrative or quasi-judicial action entails drastic civil consequences, the Courts have held that a fair hearing is ordinarily required. Thus, the learned Senior Counsel submitted that principle of audi alteram partem must be read under the provisions of second proviso to section 143(3) of the Act and since prior to making such a reference, in the instant case, without providing an opportunity of hearing to the assessee, the same has resulted in violation of principles of natural justice, and therefore, the reference itself by the AO to the learned CIT(E) is invalid. 14. Before dealing with the aforesaid submission of the assessee, it is relevant to note the provisions of the second proviso to section 143(3) of the Act, which was introduced by the Finance Act, 2022, with effect from 01.04.2022, and the same reads as follows: - “[Provided further that where the Assessing Officer is satisfied that any fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub- clause (via), of clause (23C) of section 10, or any trust or institution referred to in section 11, has committed any specified violation as defined in Explanation 2 to the fifteenth proviso to clause (23C) of section 10 or the Explanation to sub-section (4) of section 12AB, as the case may be, he shall— (a) send a reference to the Principal Commissioner or Commissioner to withdraw the approval or registration, as the case may be; and (b) no order making an assessment of the total income or loss of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall be made by him without giving effect to the order passed by the Principal Commissioner or Commissioner under clause (ii) or clause (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or clause (iii) of sub-section (4) of section 12AB:” Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 15 15. Thus from the plain reading of the provisions of the second proviso to section 143(3), as noted above, it is evident that where the AO is satisfied that any fund or trust or institution, inter alia, referred to in section 11 has committed any “Specified Violation” as defined in Explanation to section 12AB(4) of the Act, he shall send a reference to the Principal Commissioner or Commissioner to withdraw the approval or registration, as the case may be. It is further provided that no order making an assessment of the total income or loss of such trust or institution shall be made without giving effect to the order passed by the Principal Commissioner or Commissioner under clause (ii) or clause (iii) of section 12AB(4) of the Act. Since the aforesaid provisions make a reference to section 12AB(4), it is pertinent to also examine the said provisions, and the same reads as follows: - “(4) Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,— (a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or (b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or (c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall— (i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation; (ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place; Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 16 (iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations; (iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such trust or institution.” 16. From the careful perusal of section 12AB(4) of the Act, it is evident that the Principal Commissioner or Commissioner, inter alia, upon receipt of a reference from the AO under second proviso to section 143(3) of the Act, shall after calling for such documents or information from the trust or institution, as he may think necessary in order to satisfy himself about the occurrence or otherwise of the specified violation, pass an order in writing, after affording the reasonable opportunity of hearing, either cancelling the registration or refusing to cancel the registration if he is not satisfied about the occurrence of any of the specified violations. It is further provided that a copy of the order of cancellation of registration or refusing to cancel the registration, as the case may be, shall be forwarded to the AO and such trust or institution. 17. Thus, from the combined reading of the provisions of the second proviso to section 143(3) and section 12AB(4) of the Act, it is ostensible that the authority to cancel or refuse to cancel the registration is only vested with the learned CIT(E) by the legislature. Further, only power granted to the AO is to make a reference to the learned CIT(E) to withdraw the approval or registration, if it is satisfied that the trust or institution has committed any “Specified Violation” as per the Explanation to section 12AB(4) of the Act. It is further pertinent to note that prior to cancellation of the registration, the learned CIT(E) is specifically directed under the provisions of section 12AB(4) Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 17 of the Act to afford a reasonable opportunity of hearing to the assessee in respect of the “Specified Violation” and only after grant of the opportunity of hearing to the assessee, the statute mandates that the learned CIT(E) can pass an order of cancelling the registration. It is further pertinent to note that if upon consideration of the documents or information, as may be furnished by the trust or the institution, if the learned CIT(E) is not satisfied about the occurrence of any of the “Specified Violation”, then as per the provisions of section 12AB(4), the learned CIT(E) can also pass an order in writing refusing to cancel the registration. Thus, we are of the considered view that the legislature has, very carefully, keeping the interest of the trust or institution in mind, has laid down well-defined procedure, in compliance of the principles of natural justice, to be followed before passing any order under section 12AB(4) of the Act, which may have an adverse consequence on the trust or institution referred to in section 11 of the Act. Therefore, we do not find any merit in the submission of the learned Senior Counsel that by not granting an opportunity of hearing to the assessee prior to making the aforesaid reference, the principle of natural justice has been violated. 18. In this regard, gainful reference can be made to the provisions of section 92CA(1) of the Act under which the AO is empowered to refer the computation of arm’s length price in relation to international transaction and specified domestic transaction entered into by the assessee to the Transfer Pricing Officer (“TPO”), if the AO considered it necessary or expedient to do so. We find that the provisions of section 92CA has laid down various procedures to be followed by the TPO, such as seeking evidence from the assessee in support Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 18 of computation made by the assessee of the arm’s length price in relation to international transaction or specified domestic transaction, consideration of the information or documents referred in section 92D(3), etc., before passing an order under section 92CA(3) of the Act. Accordingly, the issue arose before the Hon’ble Courts whether, under the scheme of provisions contained in Chapter X of the Act, the AO is obliged to grant a hearing to the assessee before making a reference to the TPO. Answering the question in the negative, the Hon’ble Courts held that there is no provision under Chapter X of the Act, which requires the AO to hear the assessee, consider his objection, and only thereafter make a reference to the TPO to compute the arm’s length price. The Courts further held that under the scheme of the provision contained in Chapter X of the Act, the AO is not obliged to grant a hearing to the assessee before making any reference to the TPO. Further, the Courts held that the authority, which has the power to decide and whose decision would prejudice a party entailing civil consequences, would be required to accord an oral hearing. In this regard, reference can be made to the following decisions: -  Veer Gems vs. ACIT, reported in (2011) 15 taxmann.com 55 (Guj.)  Moser Baer India Ltd. vs. ACIT, reported in (2009) 316 ITR 1 (Del.) 19. Therefore, juxtaposing the provisions of the second proviso to section 143(3) and section 92CA(1), it is evident that the AO is merely making a reference to the other statutory authority whose decision shall have a bearing on the rights of the taxpayer. Similarly, juxtaposing the provisions of section 12AB(4) and section 92CA of the Act, it is evident that the legislature has clearly cast an obligation on the learned CIT(E) and TPO, respectively, to grant Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 19 an opportunity of hearing and pass an order after considering the documents or information furnished by the taxpayer. Therefore, we are of the considered view that the AO is not required to grant an opportunity of hearing to the assessee prior to making a reference to the learned CIT(E) under the second proviso to section 143(3) of the Act. Accordingly, additional ground no.3 raised in the assessee’s appeal is dismissed. 20. It is evident from the record that the assessee filed its response to the show cause notice dated 14.01.2025 before the learned CIT(E). From the perusal of the said response, forming part of the paper book from page 121- 218, it is evident that the same was in respect of various allegations made by the learned CIT(E) vide its show cause notice, and the necessary details as sought by the learned CIT(E) were furnished by the assessee. After considering the details filed by the assessee, the learned CIT(E), vide impugned order dated 04.06.2025, not only held that the activities like conducting programmes in construction and construction management, in- service training programme conducted by the assessee cannot be termed as educational activities for charitable purposes as defined under section 2(15) of the Act and these activities are in nature of trade, commerce or business, under the guise of education activities, but also held that by not maintaining a separate books of account in respect of these activities, there is a specified violation under clause (b) of Explanation to section 12AB(4) of the Act. Accordingly, the learned CIT(E) cancelled the registration granted to the assessee under section 12A of the Act from the date of registration itself, i.e. from 24.09.2021. Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 20 21. From the comparative analysis of the show cause notice dated 14.01.2025 issued by the learned CIT(E) and the impugned order passed by the learned CIT(E) cancelling the registration granted to the assessee under section 12A of the Act, it is evident that no opportunity to show cause was granted to the assessee in respect of the alleged violation of clause (b) of Explanation to section 12AB(4) of the Act and the entire emphasis of the learned CIT(E), vide its show cause notice, was on the aspect that the various activities performed by the assessee trust are not genuine as per provisions of sections 11, 12 and 12A of the Act. In this regard, we also agree with the submission of the learned Senior Counsel that no specific clause of section 12AB(4) of the Act was mentioned in the show cause notice, and there was a general averment that the activities of the trust fall under the definition “Specified Violation” as per section 12AB(4) of the Act. We also agree with the submission of the learned Senior Counsel that, if at all, the case of the learned CIT(E), vide show cause notice dated 14.01.2025, was that the assessee’s case falls under clause (e) of Explanation to section 12AB(4) of the Act as it was alleged that the activities of the trust are not genuine. In this regard, at this stage, it is relevant to note the provisions of Explanation to section 12AB(4) of the Act and the same reads as follows: - “Explanation.— For the purposes of this sub-section, the following shall mean \"specified violation\",— (a) where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or (b) the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 21 account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or (c) the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public; or (d) the trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste; or (e) any activity being carried out by the trust or institution— (i) is not genuine; or (ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered; or (f) the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality.” 22. Thus, from the plain reading of the provisions of the Explanation to section 12AB(4) of the Act, it is evident that insofar as the non-maintenance of books of account by the trust or institute in respect of the business which is incidental to the attainment of its objects, same is dealt in clause (b), while the activity being not genuine has been provided in clause (e) of the Explanation which defines the term “Specified Violation”. Therefore, we find merit in the submissions of the learned Senior Counsel that the registration under section 12A of the Act was cancelled by the learned CIT(E) for violation of clause (b) of Explanation to section 12AB(4) of the Act without granting an opportunity of hearing to the assessee. 23. As noted in the foregoing paragraphs, in the present case, the assessee has filed an application seeking admission of additional evidences to support Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 22 its contention that even this case does not fall under clause (b) of Explanation to section 12AB(4) of the Act. As noted above, it is the case of the assessee that since no show cause notice was issued on this aspect, these evidences could not be furnished before the learned CIT(E). Accordingly, having considered the submissions made in the application filed by the assessee seeking admission of additional evidences, we admit these additional evidences. Since these evidences were not taken into consideration by the learned CIT(E) while passing the impugned order cancelling the registration granted to the assessee under section 12A of the Act, we deem it appropriate to set aside the impugned order and restore the matter to file of the learned CIT(E) for de novo adjudication, after consideration of the evidences as placed on record by the assessee before us. We order accordingly. Since the matter is restored to file of the learned CIT(E) for consideration afresh, if any other clause of Explanation to section 12AB(4) of the Act requires examination vis- à-vis the facts of the case, the learned CIT(E) shall be at liberty to do so for complete adjudication of this issue, after providing reasonable and adequate opportunity of hearing to the assessee. As regards, the submission of the assessee that the provisions of Explanation to section 12AB(4) of the Act were introduced by the Finance Act, 2022, and therefore the same are applicable from the assessment year 2023-24, we find that these submissions were not raised by the assessee before the learned CIT(E) and since the matter has already been restored to the file of the learned CIT(E) for de novo adjudication, we are of the considered view that apart from raising other pleas, which the assessee may have, this contention can also be raised before the learned CIT(E) for adjudication. Thus, all the other contentions of the Printed from counselvise.com ITA No. 4324/Mum/2025 (A.Y. 2022-23) 23 assessee, which are raised before us and have not been specifically dealt with in this order, are open to be raised before the learned CIT(E). Accordingly, all the other grounds raised by the assessee are allowed for statistical purposes. 24. In the result, the appeal by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 09/01/2026 Sd/- OM PRAKASH KANT ACCOUNTANT MEMBER S Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 09/01/2026 Prabhat Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "