M/S SHREE JAIRAM EDUCATION SOCIETY,BHOPAL vs. PR. CIT (CENTRAL), BHOPAL

PER MANISH BORAD, A.M

The above captioned appeals filed at the instance of the Assessee are directed against the order of Ld. Pr. Commissioner of

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 Income Tax (in short ‘Pr. Ld. CIT],-(Central)-3 Bhopal dated

28.11.2018 & 05.03.2019 which are arising out of the order u/s

12AA(3) and 12AA(4)/147 r.w. s.143(3) of the Income Tax Act

1961(In short the ‘Act’).

assessee is a charitable society registered under the M. P.

Societies Registration Act, 1973 since 28.11.2016. The object of

the society is imparting education. Trinity Institute of Technology

and Research (Institute) is the college established under the

assessee society. This college imparts education by offering

various courses which include Bachelor of Engineering in various

branches like Civil Engineering, Mechanical Engineering,

Electronics and Telecommunication Engineering, Computer

Science and Information Technology. This Institute also offers

courses for MBA and M.Tech. A search and seizure action u/s

132 of the Act was conducted at the various premises of the 2

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 Ramani Group and associates, Bhopal on 30th August,2016.

During the course of search, many documents/loose papers

pertaining to the assessee society namely LPS-6, LPS-7, and LPS-

11 were found. Thereafter notice u/s 148 of the Act dated

29.11.2017 was served upon the assessee followed by serving of

notices u/s 143(2) & 142(1) of the Act along with questionnaire.

During the course of assessment proceedings the assessee was

confronted with the seized material and after considering the

submissions of the assessee assessment was completed on

29.12.2017, assessing the income at Rs. 286,69,615/- treating

the assessee to be carrying on business and not charitable

activity. Income over expenditure shown in the profit and loss

account at Rs. 1,96,50,937/- was treated as business income

and further based on the seized documents additions for bogus

expenses on salary at Rs.20,48,173/- were disallowed u/s 37 and

also addition of Rs.69,70,505/- was made for unexplained money

on account of business receipts. The assessee challenged the

action of the ld. AO before Ld. CIT(A) raising various legal ground

as well as challenging the additions but partially succeeded.

Group, all the cases of this group including the assessee were 3

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 transferred to ACIT-(Central)-2 Bhopal which comes under the

jurisdiction of Pr. CIT-(Central). Ld. Pr. CIT(Central) based on the

seized documents LPS-6, LPS-7 & LPS-11 and other information

commenced the proceedings u/s 12AA(3) and 12AA(4) of the Act

and asked the assessee that why not the registration u/s 12AA of

the Act issued to the assessee should be cancelled, as the

assessee society was found to be not carrying out affairs of the

trust in a genuine manner, and that the funds of the trust are

being used for the benefit of the members of the trust. During the

proceedings the assessee made detailed submissions rebutting

the charges leveled against it but was not able to succeed and the

registration u/s 12AA of the Act was cancelled with retrospective

effect from 01.04.2008.

ITANo.90/Ind/2019 assessee has challenged the finding of Ld. Pr.

CIT(Central) vide order dated 29.11.2018 framed u/s 12AA (3)

and 12AA(4) of the Act raising following grounds:

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 That on the facts & in the circumstances of the case and in (2) law, the learned Pr. CIT erred in withdrawing/cancelling the assessee's registration u/s.12AA and that too with retrospective effect from 01.04.2008. That on the facts & in the circumstances of the case and in (3) law, the findings of the learned Pr. CIT that, the affairs of the assessee are not genuine and are not being carried out in accordance with the objects and aims of the trust and the funds of the trust were being used for the benefits of the members of the trust, are wholly wrong, injudicious, unlawful and opposed to facts Hence such findings be quashed and the order of the learned Pr. CIT withdrawing/cancelling the registration be kindly cancelled.

(4) That on the facts & in the circumstances of the case and in law, the learned Pr. CIT is wholly wrong and injudicious in his findings that the provisions of section 13(l)(c)(ii) are applicable in this case. Such findings be quashed and it be held that the said provisions of section 13(1)(c)(ii) are not applicable at all. The order of the learned Pr. CIT U/s.l2AA(3) and 12AA(4) is unlawful and, therefore, be kindly cancelled. . That on the facts & in the circumstances of the case and in (5) law, that section 12AA(4) was inserted w.e.f. 01.10.2014 by Finance (No.2) Act, 2014. The said section has no retrospective application and, therefore, the order of learned Pr. CIT is unlawful and be quashed. That on the facts & in the circumstances of the case and in (6) law, the activities of the assessee are genuine and are being carried out in accordance with the objects of the trust and, therefore, the provisions of section 12AA(3) are not applicable. Hence the order of Pr. CIT is unlawful and, therefore, be quashed. That on the facts & in the circumstances of the case and in (7) law, the learned Pr. CIT erred in holding that :-

(i) That the assessee has paid salary to non existing employees.

(ii) That the employees of the assessee were paid higher salary be cheque and thereafter, difference amount is repaid by them to the members of the society and in this way, funds of the charitable trust were siphoned out and used by the members of the charitable society . (iii) That assessee is not showing its entire income in its hooks of accounts. This shows that funds of the charitable trust are being siphoned out and used 5

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 by the members of the charitable society. (iv) That the fee receipts were not being fully reflected in the audited accounts, leading to siphoning of the same and this way the funds of the trust were misappropriating by the members of the trust. All the above findings are wholly incorrect, injudicious and unlawful and, therefore, the same be quashed and it be held that the provisions of section 12AA(3) and 12AA(4) have been injudiciously and unlawfully invoked. All the findings, therefore, be quashed.

The assessee has further raised following additional legal

grounds on 28.05.2021:-

“1.On the facts and in the circumstances of the case and in law, impugned order dated 29.11.2018 passed by Ld. Pr. CIT(Central) Bhopal and the show cause notice dated 02.04.2018 issued by the Ld. Pr. CIT(Central) Bhopal both are bad in law, invalid, illegal and without jurisdiction. The registration so cancelled u/s 12AA(3) and 12AA(4) of the Income Tax Act, 1961 is contrary to the provisions of law and facts of the case and the order so passed be quashed.”

challenged the finding of Ld. CIT(A)-3 vide its order dated

26.02.2019 partly dismissing the assessee’s ground arising out of

the order of the Ld. AO for A.Y. 2010-11 order dated 29.12.2017

raising following grounds:

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 is running an educational institution and the income of the institution is the income u/s 11 of the I.T. Act. The finding of the ld. Lower authorities assessing the income u/s 28 be kindly quashed and it be held that income of the assessee is assessable as income u/s 11 of the I.T. Act. 3. That on the facts & in the circumstances of the case and in law, the learned lower authorities are wholly wrong and opposed to facts that the assessee has claimed bogus salary expenditure of Rs.20,48,173 such wrong and injudicious findings be quashed and be held that no bogus expenditure as alleged was claimed by the assessee. The disallowance made at Rs.2048173/- therefore, be kindly deleted. 4. That on the facts & in the circumstances of the case and in law, the learned lower authorities wholly wrong and opposed to fact that the society had paid Rs.561877 to Vijay Ramani who is the member of the society and therefore, there is violation of section 13(1)(c) of the I.T. Act and hence the society is not eligible for the deduction/exemption u/s 11 and 12 of the I.T. Act. Such injudicious and unlawful and wrong findings be quashed and it be held that there is no violation of section 13(1)(c) of the I.T. Act and hence the assessee is eligible for deduction u/s 11 of the Act. The deduction claimed in the return, therefore, be kindly allowed.

assessee has raised various grounds including the additional 7

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 grounds challenging the finding of ld. CIT(A) cancelling the

registration 12AA(3) & 12AA(4) of the Act, treating the assessee as

carrying out business and not carrying out charitable activities,

holding that funds of the society have been used for the benefit of

members of the trust and cancelling registration 12AA of the Act

with retrospective effect from 01.04.2008.

raised by the assessee, Ld. counsel for the assessee has

vehemently argued referring to the following written submissions:

A. Apropos additional ground of appeal – Impugned order and notice issued u/s 12AA both are bad in law, invalid, illegal and without jurisdiction 1. Assessee filed additional ground of appeal through a separate application dated 05.02.2021 which is a legal ground going to the root of the matter. Assessee requests that additional ground of appeal may please be admitted in the interest of justice and appropriate adjudication of the matter. 2. Assessee is a charitable society registered u/s 12A of the Act. Registration u/s 12A is granted by CIT (Exemption), Bhopal. Thus, the jurisdiction of registration is with CIT (Exemption), Bhopal. 3. Basis of jurisdiction under the Act has been provided by CBDT under section 120(3) of the Act, which reads – “In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income-tax authority authorised by it may have regard to any one or more of the following criteria, namely :— (a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (d) cases or classes of cases.” 4. Section 120(6) provides that CBDT may by notification in the Official Gazette direct that for the purpose of furnishing of return of 8

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 income or doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income tax authority shall exercise and perform powers and functions in relation to said person or class of persons as may be specified in the notification. 5. CBDT vide notification no. 52/2014 and 53/2014 dated 22.10.2014 has specifically mentioned the powers of the various income tax authorities under the Act.

In CBDT notification no. 52/2014 it is specifically mentioned that CIT(Exemption), Bhopal shall have the power for the jurisdiction of the territorial area of the states of Madhya Pradesh and Chhattisgarh for all the persons of these states “claiming exemption under clauses (21), (22), (22A), (22B), (23), (23A), (23AAA), (23B), (23C), (23F), (23FA), (24), (46) and (47) of section 10, section 11, section 12, section 13A and section 13B of the Income-tax Act, 1961 and assessed or assessable by an Income-tax authority at serial numbers 35 to 45 specified in the notification of Government of India bearing number S.O. _ dated the th October, 2014.” [CLPB 163-164] 1. This notification came into effect from 15th November 2014.

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 9. Subsequently, based on seized documents in case of Shri Prakash Hariramani, proceedings u/s 143(3) rws 147 were completed for AY 2010-11 on 29.12.2017 by Ld. ACIT(Central)-II, Bhopal. [PB 42-58]

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 transfer of cases relates to transfer of a case from one Assessing Officer to another Assessing Officer. Matters relating to granting and cancellation of registration u/s 12A/12AA are not the subject matters to be dealt by the Assessing Officer but by jurisdictional Commissioner / Director of Income Tax (Exemption). 15. The power of cancellation or withdrawal of registration allowed to a trust or institution can be invoked by the grantor of registration, viz., CIT(Exemption) only, on the limited grounds mentioned in section 12AA(3) of the Act and not on any other grounds.

According to section 12AA(3), if the CIT(Exemption) is satisfied that the activities of any trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, may cancel the registration. Provisions of section 12AA(3) do not empower Ld. Pr. CIT(Central), Bhopal to cancel the registration. 16. Above contentions of the assessee are squarely covered by the decision of Hon’ble Jaipur Bench of ITAT in the case of Wholesale Cloth Merchant Association – ITA No. 688/JP/2019 – order pronounced on 06.01.2021 – [CLPB 65-122] 2. Para 13 – “We also observe that, thereafter the ld. DCIT(CC) Kota, as sent a proposal to the Pr. CIT(C), Jaipur to cancel the 12A registration of the assessee vide letter dated 31.12.2018. On the basis of proposal from DCIT(CC) Kota, the ld. Pr. CIT has issued the show cause notice to the assessee u/s 12AA(3)/(4) dated 22.02.2019…………” 3. In the instant case, Ld. ACIT (Central)-2, Bhopal vide letter dated 07.02.2018 and on the recommendation of JCIT (Central), Bhopal requested Ld. Pr. CIT (Central), Bhopal to cancel registration u/s 12A of the assessee society. It was in view of this proposal that Ld. Pr. CIT (Central), Bhopal issued a show cause notice u/s 12AA dated 02.04.2018. [PCIT page 4 para 5 and 6, PB 01] 4. Para 14 – “We found that the above facts and proceedings of power of transfer U/s 127 was only for a limited purpose of Co- Ordinate Assessment. Neither any search & Seizure action nor any notice u/s 153A or 153C of the Act or assessment u/s 153A or 153C of the Act in the case of assessee were initiated and there was only a survey u/s 133A of the Act in the case of assessee. The assessment has been completed u/s 148/143(3) of the act vide order dated 19.12.2018………….” 5. In the instant case, no notice u/s 153A or 153C were issued. Assessment proceedings u/s 147 rws 143(3) were completed for AY 2010-11 on 29.12.2017. These proceedings for AY 2010-11 were centralized u/s 127 only for the limited purpose of co-ordinate assessment. [PB 42 – 58] 11

Shri Jairam Education Society ITA No.90 & 548/Ind/2019

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 It was held in the case of DIT(Exemption) v. Venkatesha Education Society (2012) 48 (I) ITCL 27 (Kar) that short comings in the functioning of a society cannot be considered as lack of genuineness of the activities of the society. [PB 76-94] 4. Ld. ACIT(Central)-2, Bhopal vide his letter dated 07.02.2018 and on the recommendation of JCIT(Central), Bhopal dated 15.02.2018 requested that the registration u/s 12A granted to the assessee be cancelled as the activities are not being carried out in accordance with the objects of the trust and the activities are not genuinely recorded in the books of accounts. [PCIT page 4 para 5] 9. Ld. Pr. CIT(Central), Bhopal ‘In view of the proposal as received from ACIT(Central)-2, Bhopal duly recommended by JCIT(Central), Bhopal’ issued show cause notice u/s 12AA dated 02.04.2018. [Pr. CIT Order page 4 para 6] 5. Section 12AA(3) requires Pr.CIT or CIT to record his satisfaction if the activities of the trust or institution are not genuine or are not carried out in accordance with the objects of the trust or institution. In the instant case, Ld. Pr. CIT(Central), Bhopal acted on a borrowed satisfaction for issuing show cause notice u/s 12AA. No independent enquiry was made to arrive at his own satisfaction.

To satisfy these twin conditions, CIT(Exemption) may call for such information as may be required. At the time of grant of registration to a trust or institution, the power of the CIT(Exemption) is limited to examination whether trust's objects are charitable or not and trust’s activities are genuine or not.

When CIT(Exemption) grants registration to trust or institution it means that he is satisfied about objects and genuineness of activities of trust or institution.

Ld. CIT(Exemption) having satisfied for the above twofold conditions, granted the registration fact of which is undisputed. It is not a case where the registration was obtained by the assessee under fraud or mis-representation. 7. In no other situation, the registration granted can be cancelled / withdrawn by the CIT(Exemption).

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 Thus, the finding of CIT(Exemption) cancelling registration has not only to be conceptual or contextual but should be within the four corners of law so that they are not surpassing the power granted u/s 12AA(3). 8. Following are the circumstances in which an institution can avoid breach of trust under the Act- i. Carrying on objects discretely for charitable or religious purposes ii. Complying with the terms as enumerated in the deed of trust iii. Maintaining proper books of accounts iv. Investing of income in a manner that is in accordance with the law v. No diversion of income or the assets of the trust vi. Applying income only for charitable or religious purposes in terms of the deed of trust. vii. Complying with all other provisions as required under the income tax or any other law. 10. The assessee has complied with all the above listed requirements and has not breached the trust entrusted by the Act while granting registration u/s 12A of the Act. 11. The apprehensions expressed on the basis of surmises and conjectures are incorrect, unjustified and against the facts of the instant case.

Thus, the factual and legal position as emerges from the foregoing submissions is that once the registration is granted to a trust or institution it can be cancelled only on breach of either of the two conditions mentioned in section 12AA(3). There is no breach of the above stated condition. Accordingly, the registration to the assessee ought to be continued u/s 12A of the Act. 9. The onus of the factors for cancelling the registration granted to a trust or institution is on the department and not on the institution as held in Para 30 in case of Guru Gobind Singh Educational Society v. CIT (2009) 118 ITD 207 (Amritsar). 12. It was further held in this case in Para 29 that – “for any irregularity or illegality committed by its members, a Society, which is a juridical entity having independent existence, cannot be held liable. Further, when there is no finding recorded that the income of the Society has flowed to its members, irregularities committed by members in their individual capacity cannot be held against the Society for the purpose of cancellation of registration.”

In the instant case, the seized material relied upon does not establish that activities of the assessee are not genuine and are not being carried out in accordance with the objects. It is merely on the basis of certain loose papers found and seized during the search operations 14

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 carried out in the case of Prakash Hariramani at his residence that Ld. Pr.CIT (Central) proceeded to cancel the registration granted earlier. 10. Strong reliance is placed on the following judicial precedents which squarely covers and fortifies the case of the assessee –

a) Hon’ble Jurisdictional Bench of Indore ITAT in the case of Chirayu Charitable Foundation – ITA No. 179/IND/2019 – dtd. 09.02.2021. 13. Facts of this decision are similar to that in the instant case of the assessee and are summarized in the table below –

Sr. Particulars Chirayu Charitable Shree Jairam Education No. Foundation Society [instant case ITA [ITA 179/Ind/2019 dtd 90/Ind/2019] 09.02.2021] 1. Order u/s 12AA 12AA(3) and 12AA(4) a. Pg a. Charitable 2. Facts and 2 para 2 – Society submissions Charitable Society registered under the M.P. registered under the M.P. Societies Registration Act, Societies Registration Act, 1973. Main object imparting 1973. Main object is to education. College ‘Trinity carry out educational College’ established. activities in medical and Approved by various education field. Medical Government bodies namely colleges and hospital run AICTE, NCTE and DTE. are approved by various Affiliated to Rajeev Gandhi Government bodies Prodhoygik Vishwavidyalay namely MCI, INC and and Barkartullah SNC, Director Medical University, Bhopal. Education, MP, MSU, Jabalpur and b. Registration granted Barkartullah University, u/s 12AA w.e.f. Bhopal 01.04.2008. Search & Seizure operations at the b. Pg 2 para 3 – residence of Shri Prakash Registration granted u/s Hariramani on 30.08.2016. 12AA on 29.11.2002 Certain documents in the w.e.f. 01.04.2002. Search form, of loose sheets were & Seizure operations – seized. Chirayu Group on c. Proposal for 04.11.2016. Cash and cancellation by Ld. ACIT jewellery were found at (Central), Bhopal duly the residence of the family recommended by JCIT members of Director and (Central), Bhopal. promoter of various entities of Chirayu Group. d. In view of this proposal received from Ld. ACIT 15

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 c. Pg 3 para 4 – Proposal (Central), Bhopal, show for cancellation by Ld. AO cause notice u/s 12AA was duly recommended by issued by Addl. CIT (Central), Ld.Pr.CIT(Central), Bhopal Bhopal. e. Regular assessment completed for AY 2010-11 u/s 143(3) rws 147. d. Pg 6 para 5 – On the Additions made on the basis of the proposal by basis of rough notings and Ld. AO show cause notice jottings on the loose sheets, u/s 12AA was issued by for which assessee is in Ld. Pr.CIT(Central), Bhopal appeal before your Honors. f. Ld. Pr. CIT (Central), e. Pg 9 1st para – Bhopal cancelled the Regular assessment registration by invoking conducted & completed provisions of section much prior to search. All 12AA(3) and 12AA(4) the documents with retrospectively w.e.f. regards to receipt of 01.04.2008 vide order donation were furnished. dated 29.11.2018. Ld. AO accepted the g. Issues referred in the documents without show cause notice u/s making any addition. 12AA are related to regular assessment proceedings f. Pg 10 1st para – Ld. and have no bearing on Pr. CIT cancelled the continuation of registration registration by invoking granted u/s 12AA provisions of section h. Section 13 applicable 12AA(3) retrospectively for assessment and not for w.e.f. 01.04.2011 vide cancellation of registration. order dated 26.12.2018. i. Presumption u/s 292C g. Pg 12 para 9 – Issues is applicable only on the referred in the show cause searched person. notice u/s 12AA are Documents were seized in related to regular the form of loose sheets assessment proceedings from the residence of Shri and have no bearing on Prakash Hariramani during continuation of his search. registration granted u/s 12AA h. Pg 17 last 3rd line – Section 13 applicable for assessment and not for registration i. Pg 53 para 30 – Presumption u/s 292C is applicable only on the searched person

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 3. Findings & a. Pg 35 para 12 – a. Ld. Pr. CIT (Central), Contentions Hon’ble Bench noted that Bhopal cancelled the of assessee the sole issue in appeal is registration granted u/s whether Ld. Pr.CIT is 12AA by invoking justified in invoking provisions of section provisions of section 12AA(3) and 12AA(4) b. Aims and objects of the 12AA(3) to cancel registration granted u/s assessee society are within 12AA the meaning of section b. Pg 37 para 14 – Aims 2(15) c. To achieve the aims and objects of the assessee society are and objects, assessee within the meaning of society has established section 2(15) and is consistently running c. Pg 37 para 15 – To the college in the name of achieve the aims and Trinity Institute of objects, assessee society Technology and Research. has established and is Allegation made only for AY consistently running 2010-11 and not in any colleges and hospitals other years. d. Pg 50 para 28 – Ld. d. No independent enquiry Pr. CIT has not made or investigation or evidence independent enquiry or collected by Ld. Pr. CIT investigation or collected (Central), Bhopal. evidence Satisfaction borrowed from 14. In our view the Ld. ACIT (Central), Bhopal. alleged irregularity in the Registration u/s 12AA admission in one of the cancelled by on the basis of colleges noted by CBI allegation by the Ld. AO in should not have been assessment for AY 2010-11 taken as a basis for that the funds are being cancelling registration u/s used for the benefit of the 12AA members of the trust. e. Pg 50 para 29 – e. Allegation that the Allegation on the funds are being used for genuineness of donors the benefit of the members and creditworthiness in of the trust cannot form doubt, we observe that basis for cancellation of this issue has no strength registration u/s 12AA(3). to form a basis for This issue to be dealt in cancellation of registration regular assessment u/s 12AA(3). This issue to proceedings. f. Registration be dealt in regular granted assessment proceedings. u/s 12AA cannot be f. Pg 61 para 36 – cancelled by invoking Consistently held by provisions of section Hon’ble Courts and Co- 12AA(3) unless it is ordinate Benches that established by material registration granted u/s evidence that the activities 17

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 12AA cannot be cancelled of such trusts or by invoking provisions of institutions are not genuine section 12AA(3) unless it or are not being carried out is established by material in accordance with the evidence that the activities objects of the trusts or of such trusts or reasonable opportunity of institutions are not being heard not granted genuine or are not being before cancelling carried out in accordance registration. with the objects of the trusts or reasonable opportunity of being heard g. Issues raised in show not granted before cause notice not relevant cancelling registration. for cancellation of g. Pg 73 point (iv) – registration u/s 12AA(3) Issues raised in show and 12AA(4). These issues cause notice not relevant to be examined in regular for cancellation of assessment proceedings. registration u/s 12AA(3). Registration granted u/s These issues to be 12AA can be cancelled only examined in regular if it is found that the assessment proceedings. activities of the Registration granted u/s society/trust are either not 12AA can be cancelled genuine or are not being only if it is found that the carried out in accordance to activities of the objects. h. No independent enquiry society/trust are either not genuine or are not conducted by Ld. Pr.CIT being carried out in (Central), Bhopal. accordance to objects. Proceedings u/s 12AA h. Pg 74 point (v) – No initiated on the basis of independent enquiry borrowed satisfaction. conducted by Ld. PCIT i. It is humbly submitted i. Pg 75 para 39 – Order that the registration of Ld. Pr. CIT cancelling granted u/s 12AA(1) registration granted u/s deserves to be quashed 12AA(1) deserves to be and the registration quashed. Hon’ble Bench granted u/s 12AA be directed the Revenue to restored w.e.f. 01.04.2008. restore the registration u/s 12AA(1) of the assessee society w.e.f. 01.04.2011.

b) Divine Shiksha Samiti – [2020] 121 taxmann.com 175 – Hon’ble Jurisdictional High Court of Madhya Pradesh – order pronounced on 06.01.2020 – HEAD NOTE – “…..Whether therefore, where there was no doubt about genuineness of objects of society for grant of registration under section 12AA, Tribunal 18

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 was correct in directing Commissioner (Exemption) to grant registration to society under section 12AA, irrespective of findings of Commissioner (Exemption) that there was diversion of income of assessee society for providing undue benefit to its office bearers and thus society existed for purpose of profit of office bearers and not for charitable purpose - Held, yes” [Para 7 and 8] [In favour of assessee] [CLPB 135-140] 11. Without prejudice to the additional ground, it is submitted that the power to cancel the registration is granted only with a prospective effect. It would not affect assessments in respect of earlier assessment years. Ld. Pr. CIT (Central), Bhopal has cancelled the registration u/s 12AA retrospectively w.e.f. 01.04.2008. Without prejudice, order of Ld. Pr. CIT (Central), Bhopal dated 29.11.2018 can at best take effect only from the date of order and cannot apply to completed assessments of earlier assessment years. It is a settled legal position that registration cannot be cancelled from retrospective effect. 12. Reliance is placed on the decision of Hon’ble Madras High Court in the case of Auro Lab – [2019] 102 taxmann.com 225 – dtd. 23.01.2019 – Para 16 – “The questions raised in these writ petitions are broadly summarised as under:—............................

(iii) What will be the effective date on which the petitioner will lose his registration and the entitlement to exemption on account of the cancellation order dated 30.12.2010?”

Para 21 – “On the third question of the effective date of operation of the cancellation order, it was held that the cancellation will take effect only from the date of the order/notice of cancellation of registration. Since the act of cancellation of registration has serious civil consequences and the amended provision is held to have only a prospective effect the effect of cancellation, in the event the pending Tax Appeal is decided in favour of the Revenue, will operate only from the date of the cancellation order, that is 30.12.2010. In other words, the exemption cannot be denied to the petitioner for and up to the Assessment Year 2010-11 on the sole ground of cancellation of the certificate of registration.” [emphasis supplied]

In the instant case, order u/s 12AA(3) and 12AA(4) was passed on 29.11.2018 by Ld. Pr.CIT(Central), Bhopal. The registration was cancelled w.e.f. 01.04.2008. In view of the above referred decision, it is submitted that exemption cannot be denied from 01.04.2008 by passing an order on 29.11.2018 on the sole ground of cancellation of certificate of registration. C. Apropos ground no. 3, 4 and 5 – funds of the assessee trust are used for the benefit of the members of the trust, applicability of 19

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 provisions of section 13(1)(c)(ii) and provisions of section 12AA(4) which are inserted w.e.f. 01.10.2014 1. Show cause notice issued u/s 12AA is based on the assessment completed in assessee’s own case for AY 2010-11 u/s 143(3) rws 147 in which addition is made by alleging that provisions of section 13(1)(c) are violated. 2. Ld. Pr. CIT(Central), Bhopal cancelled the registration u/s 12AA by invoking the provisions of section 12AA(4). [PCIT order page 20 para 23] 3. Section 12AA(4) was inserted w.e.f. 01.10.2014 which provides that the registration u/s 12AA can be cancelled for violation of provisions of section 13(1). In the instant case, as mentioned in the show cause notice, assessment for AY 2010-11 was completed u/s 143(3) rws 147 by alleging that provisions of section 13(1)(c) are violated. Assessment proceedings relate to AY 2010-11 i.e. a period prior to the insertion of provisions of section 12AA(4). Allegation of misappropriation of funds is made only for one year i.e. AY 2010-11 and not in any other years. Nothing negative has been observed by the Ld. Pr.CIT (Central), Bhopal from the date of grant of registration u/s 12A on 01.04.2008 except for only one year i.e. AY 2010-11. It is only for AY 2010-11 that Ld. Pr. CIT(Central), Bhopal has alleged that the funds of the assessee are being used for the benefit of the members of the assessee. 4. As mentioned above, section 12AA(4) is not applicable in the instant case for cancellation of registration u/s 12AA which Ld. Pr.CIT(Central), Bhopal has resorted to rendering the impugned order bad in law. 5. When the provisions of section 13(1)(c) are attracted, the benefits of exemption under section 11 and 12 are not available to the assessee which is a subject matter of the assessment proceeding of the assessee and it can in no way lead to cancellation of registration already on record. Nothing cogent and positive has been brought on record to establish if funds of the assessee trust were siphoned in violation of the provisions of law. 6. Provisions of section 13(1)(c) of the Act are not applicable in the present case which again is a subject matter of the assessment proceedings and not relating to granting or cancellation of registration u/s 12A/12AA of the Act. 7. If the provisions of section 13 are violated, it empowers the assessing officer to forfeit the exemption permissible u/s 11 and 12 that also only to the extent of amount not allowed u/s 11 and 12. However, such violation cannot form a ground for cancellation of registration u/s 12AA(3). 8. Reliance is placed on the decision of Hon’ble Mumbai Bench of ITAT in the case of Lilavati Kirtilal Mehta Medical Trust – [2019] 108 taxmann.com 272 –dtd. 12.06.2019 – 20

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 HEAD NOTE - Section 12AA of the Income-tax Act, 1961 - Charitable or religious trust - Registration procedure (Cancellation of registration) - Assessee-trust was formed with an object of runnig a hospital and research centre - It was granted registration under section 12A in year 1979 and since then assessee had been claiming benefit of exemption prescribed under sections 11 and 13 - Subsequently, Commissioner took a view that manner of investment of trust funds was in violation of provisions of section 13 - He thus passed an order under section 12AA(3) cancelling registration granted to assessee- trust - Whether violation of provisions of section 13 empowers an assessing authority to forfeit exemptions permissible under sections 11 and 12 but such a violation cannot form a ground to cancel registration by passing an order under section 12AA(3) - Held, yes - Whether in view of aforesaid legal position, impugned order cancelling registration granted to assessee-trust was to be set aside - Held, yes [Paras 11 and 12] [In favour of assessee] [CLPB 141-152]

In the instant case, registration granted u/s 12AA was cancelled by invoking provisions of section 12AA(3) and 12AA(4) read with sections 13(1)(c)(ii) and section 13(3). Violation of provisions of section 13 cannot be a basis for cancellation of registration u/s 12AA. Impugned order cancelling the registration u/s 12AA ought to be quashed. D. Apropos ground no. 7 – payment of excess salary, funds of the charitable trust were siphoned out and used by the members of the charitable society, fee receipts not fully reflected in the audited accounts 1. Ld. Pr. CIT(Central), Bhopal has made reference to various rough notings, jottings and calculations appearing in the various loose papers and has drawn inferences on the basis of such loose papers found in the search of Shri Prakash Hariramani from his residence. 2. Nothing corroborative has been brought on record to establish – a. Salary was paid to non existing employees b. Higher salary was paid by cheque and difference was repaid by the employees in cash c. Entire income is not shown in the books of accounts d. Fee receipts are not fully reflected in the books of accounts

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 indicate that one of the trustee has taken excess cash generated on account of booking bogus salary. 4. Nothing has been brought on record to establish that higher amount of salary was paid in cheque and thereafter the difference amount was repaid by them to the members of the assessee society. It is alleged merely on surmises and conjectures that trustees siphoned the funds of the institution by booking bogus salaries. 5. Reliance is placed on the following judicial precedents of the Hon’ble Supreme Court wherein it is held that in the absence of such independent and corroborative evidences, the rough notings and jottings have no evidentiary value, no addition is permissible on the basis of loose paper – a. Common Cause (A registered society) v. Union of India [2017] 77 taxmann.com 245 (SC) b. Central Bureau of Investigation v. V.C. Shukla & Others [1998] 3 SCC 410 (SC) 6. Assessee submitted the details of number of students enrolled and studying in various courses like M. Tech, MBA, BE, Diploma, etc. There are 1635 students studying in various courses in this institute. [PB 30] 7. Approvals from the various Government registered bodies namely [PB 32-41]: a. All India Council for Technical Education (AICTE) for academic year 2016-17 and 2017-18, b. National Council For Teacher Education (NCTE) which conducts physical verification c. Affiliated with Rajiv Gandhi Proudyogiki Vishwavidyala d. Affiliated with Barkatullah University, Bhopal 8. Recognition from National Council for Teacher Education, a statutory body of the Government of India requires inter alia, the applicant educational institute to clear physical inspection by way of input from the visiting team in the form of report and videography and recommendation of the State Government. Having gone through these processes for recognition from a statutory body of Government of India itself establishes the carrying out of education by the assessee. [PB 34] 9. It is submitted that the books of account of the assessee society are duly audited. No adverse remarks have been made by the auditor. Ld. Pr. CIT(Central), Bhopal without bringing on record cogent and positive material concluded that the fee receipts are not fully reflected in the audited financials. 10. The document seized from the residential premises of Shri Prakash Hariramani contains rough notings and jottings and the difference in no case can be treated as under recording of fee receipts. These notings and jottings are projections/estimation of the collection of fees and do not reflects the actual collection of fees. 22

Shri Jairam Education Society ITA No.90 & 548/Ind/2019

Considering the above facts, circumstances of the case, submissions made, documents on record and judicial precedents, cancellation of registration u/s 12AA(3) and 12AA(4) is bad in law, invalid, illegal, without jurisdiction and ought to be restored with effect from 01.04.2008 i.e. original date of granting of registration.

Act dated 23.11.2016 issued by CIT(E), Bhopal through which

group cases under CIT(E) were centralized under the CIT(Central)-

2, Bhopal for the purpose of meaningful investigation and

assessment in the case of Ramani Group, Bhopal. At the outset,

relevant contents of provision of section 127 of the Act are

reproduced hereunder for convenience:

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 Section 127 of the I. Tax Act [Power to transfer cases. 127. (1) The Director General or Chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Director General or Chief Commissioner or Commissioner,- a. where the Directors General or Chief Commissioners or Commissioners,. to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order; (b) where the Directors General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub- section (1) or sub- section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub- section (1) or sub- section (2) may be made at any stage of the proceedings, and shall not render necessary the re- issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation.- In section 120 and this section, the word" case", in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.]

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 the detailed finding of Ld. CIT(A) as also referred to the following

written submissions placed on record:

4.2) In support of grounds of appeal, the appellant has taken plea that CBDT notification no. 52 and 53 dt. 22110/2014 makes it clear that CIT(Exemption), Bhopal shall have the power for the jurisdiction of the territorial area of the states of MP and Chattisgarh and does not specify if the CIT(Exemption) can transfer its power or jurisdiction to other CIT or Pro CIT. In this connection it is submitted that a plain reading of clause (a) of sec 127(2), clearly indicates that any case can be transferred from one AO to another AO. Further also, the explanation to Sec 127 makes it clear that the word "case", in relation to any person whose name is specified in any order or direction issued there under, means all proceedings under this Act in respect of any year With the transfer of the case, PAN of the case is also transferred to the case receiving AO. And, resultantly, all proceedings pending on the date of such transfer order is also transferred. Hence, the appellant's plea that section 127 does not provide for transfer of power from one CIT to another CIT, does not hold strength and therefore, is not acceptable. 4.3) Appellant's submission that the proceedings U/S 127 are limited only for the purpose of co-ordinated assessments, is not at all acceptable as section 127 does not create any such binding. 4.4) The appellant has submitted that in the instant case, nothing is available on record to establish if any order/approval has been taken from higher authorities in writing for transferring the case to Ld. Pro CIT(Central) and if any opportunity of being heard was given. This plea of the appellant does not hold any strength in view of provision of sub sec 3 of 127 which emphasises that" Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing officer or Assessing Officers (whether with or without concurrent jurisdiction) and the of ices of all such officers are situated in the same city, locality or place. 4.5) The appellant has placed reliance in the ITAT, Indore's decision in the case of Chirayu Charitable Foundation I ITA no.l79 IIND/2019 , facts of which case does not squarely relates to the present case. Moreover, the additional ground raised by the appellant is regarding challenge of jurisdiction of the Pr.CIT(C), is not a subject in the citation referred. 4.6) The appellant has taken ground that instant exercise relating to revocation of registration of the assessee is without jurisdiction. Section 12AA read with rule 17 A and CBDT circular no. 584 dated 13.11.1990 requires that while seeking registration u/s 12A I 12AA, the application is ought to be made to jurisdictional Commissioner I Director of Income Tax (Exemption). Powers entrusted u/s 12A112AA are to be exercised 25

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 by the jurisdictional Commissioner I Director of Income Tax (Exemption) which include both, granting of the registration and the cancellation thereof. The one who cannot grant the registration also cannot transfer of cases relates to transfer of a case from one Assessing Officer to another Assessing Officer. Matters relating to granting and cancellation of registration u/s 12A112AA are not the subject matters to be dealt by the Assessing Officer but by jurisdictional Commissioner I Director of Income Tax (Exemption). Plea of the appellant that CBDT circular no. 584 dated 13.11.1990 requires that while seeking registration u/s 12A I 12AA, the application is ought to be made to jurisdictional Commissioner I Director of Income Tax (Exemption) is perused and it is found that contents mentioned therein apply to cases where the assessee concerned is a person claiming exemption under any of the provisions mentioned above and was assessed by any income-tax authority having headquarters at four metropolitan cities of Delhi, Bombay, Calcutta and Madras. So, on this ground, appellant's ground is rejected. Further, reference has been made by the appellant to Rule 17 A. In this connection, it is submitted that Rule 17 A of the 1. Tax Rules, lays the procedural guidelines as to how to submit application for registration of charitable or religious trusts and does not say anything as to whom the application for registration is to be made. However, it is clearly mentioned under sec 12 AA as to who can pass the order granting registration. In the said section, it is clearly mentioned that Pr. CIT or CIT shall pass the requisite order granting registration. Further, under sub sec 3 and 4 of sec 12AA, it is clearly written that Pr. CIT or CIT shall pass .he order of cancellation of registration already granted, if other conditions are fulfilled. Hence, in view of the above findings, appellant's plea that matters relating to granting and cancellation of registration U/S 12A112AA are the subject matters to be dealt by the jurisdictional Commissioner / Director of Income Tax (Exemption) does not hold any strength and is unacceptable. B. Another ground of the appellant is regarding cancellation of registration based on the applicability of provision of section 13(1 )( c), retrospective cancellation of registration by application of provisions of section 12AA( 4) and on applicability of section 12AA(3). In regard to the above, the appellant has resorted to different grounds which are as under: 5.1) In the instant case allegation of misappropriation of funds made only for one year i.e. A.y. 2010-11 and not in any other years. However, for the entire period from the date of grant of registration U/S 12A on 01.04.2008, Ld. Pr. CIT(Central), Bhopal has observed that the affairs of the assessee are not genuine and are not being carried out in accordance of the objects of the appellant and also the funds of the assessee are being used for the benefits of the members of the assessee. 5.2) Pr. CIT(Central), Bhopal has cancelled the registration U/S 12AA 26

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 with effect from 01.04.2008 (with retrospective effect). 5.3) If the provision of section 13 are violated, then the Assessing Officer is empowered to forfeit the exemption permissible U/S 11 & 12 and that also to the extent of amount not allowed U/S 11 & 12 it is also added by the appellant that such violation cannot form a ground for cancellation of registration U/S 12AA(3). The appellant has placed reliance on various decisions in support of his ground. Comments: 6.1) Though, the case of the appellant was reopened for assessment pertaining to A.Y. 2010- 11 and subsequent to that, on the basis of discrepancies and irregularities noticed by the A.O. during the course of assessment, proposal for cancellation of registration granted to the appellant U/S 12A was made. That the order U/S 12AA(3) and 12AA(4) 'as passed by the Ld. Pr. CIT(Central), Bhopal with retrospective effect, is totally based on discrepancies found by the Pro CIT (Central), Bhopal and it is clearly made part of the order also. 6.2 The appellant has made submission that if the provision of section 13 are violated, then the Ld. AO is empowered to forfeit the exemption permissible U/S 11 & 12 and that also to the extent of amount not allowed U/S 11 & 12 it is also added by the appellant that such violation cannot form a ground cancellation of registration U/S 12AA(3). The appellant has placed reliance on various decisions in support of his ground. The appellant submission that for the violation of section 13, the A.O. is empowered to forfeit tee exemption U/S 11 & 12 limited to the extent of amount not allowed U/S 11 & 12, has no base, as nowhere, in section 11 & section 12, such things are mentioned. The appellant has resorted to various decisions in this regard, however, it is found that the facts of the case in these citations are not identical to the present case.

placed before us and carefully gone through decisions referred

and relied by the ld. counsel for the assessee and the paper book

and submission made by the ld. DR.

Apropos to the additional ground of appeals raised by the

assessee contending that both the impugned order and notice

issued u/s 12AA of the Act are bad in law, invalid, illegal and

without jurisdiction, the crux of the arguments and submissions 27

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 made before us by the Ld. counsel for the assessee is that in view

of the provisions of sections 127 & 129 of the Act and the

notification issued by Central Board of Direct Taxes No.52/2014

& 53/2014 dated 22.10.2014, Ld. CIT(E) cannot be transfer his

powers and duty to another CIT of the same rank to cancel the

registration granted u/s 12AA of the Act.

u/s 132 of the Act at Ramani Group. It is also not in dispute that

various loose papers alleged to be incriminating in nature were

found during the course of search. It is a normal procedure that

subsequent to search all the cases relating to the group are

centralized with central circle for making assessment by this

process of centralization, it also becomes easy for the Ld.

Assessing Officer to assess the income along with referring the

seized material which interconnected and relating to group

concerns/associates/individuals.

23.11.2016 was passed by the CIT(E), Bhopal. Copy of this order

is reproduced below:

Shri Jairam Education Society ITA No.90 & 548/Ind/2019

of the assessee has been transferred from DCIT(E), Bhopal to

ACIT(Central)-2 Bhopal. We also note that the Permanent Account

No. of the assessee have been migrated to the ACIT(Central)-2

Bhopal. This order came to force w.e.f. 23.11.2016. Though 29

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 assessee has referred to various judicial pronouncements in its

reports but the same will not be of any support to the assessee

since the jurisdiction has been transferred after following the

procedure provided under the Act and Rules of the Income Tax

Act, along with passing an official order u/s 127(2) of the Act

which finds no ambiguity with regard to the correct assumption of

jurisdiction by Ld. Pr. CIT(Central) for conducting the proceedings

u/s 12AA of the Act. After going through this office order dated

23.11.2016 given u/s 127(2) of the Act, submission made by the

Ld. DR through which revenue has rebutted to all the contentions

made by the assessee, we find no merit in the additional grounds

raised by the assessee before us challenging the jurisdiction of Ld.

Pr. CIT(Central), Bhopal, since this jurisdiction has been assumed

by the official order given by the Ministry of Finance Department

of Revenue u/s 127(2) of the Act along with transferring PAN of

the assesse society from DCIT(E), Bhopal to ACIT(central) -2

Bhopal. Once the PAN is migrated then CIT(E) seize to have any

jurisdiction over the assessee with regard to any of proceedings

under the Act. We accordingly dismiss the additional grounds

raised by the assessee.

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 15. Apropos to Ground no.1, 2 & 6 assessee has challenged the

cancellation of registration u/s 12AA of the Act retrospectively

w.e.f. 01.04.2008 by invoking provisions of section 12AA(3) &

12AA(4) of the Act. We observe that the assessee society is

registered under M.P. Society Registration Act 1973 and enjoying

the benefit of section 12AA of the Act vide order u/s 12AA of the

Act dated 20th March 2008. The proceedings u/s 12AA(3) &

12AA(4) of the Act were initiated subsequent to search proceeding

carried out on Ramani Group on 30th August 2016. Certain loose

papers were found having some details of salary payments,

calculation of higher salary, cash payment, hand written details of

income and expenditure which have been claimed by the assessee

to be dumb documents and the detailed discussion with regard to

these documents will be dealt by us in the subsequent paras.

Based on these documents Ld. Pr. CIT has alleged that the funds

of the society have been used for the benefit of members of the

society and bogus expenditure has been claimed. Apart from

these allegation based on the alleged loose papers no doubt has

been raised at any point of time by the revenue authorities about

the genuineness of charitable activity carried out by the assessee

and the activities of imparting education to the students.

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 15a. For granting registration u/s 12AA of the Act ld. Pr. CIT/CIT

has to be satisfied that the trust of society or institutions is

running for charitable objects and activities is carried out are

genuine in nature. In the instant case, the seized material relied

upon does not establish that the activities of the assessee are not

genuine and are not being carried out in accordance with objects.

It is merely on the basis of certain loose papers found and seized

during the search operation carried out in the case of Prakash

Hari Ramani(related to Ramani group) at his residence that Ld.

Pr. CIT(Central) preceded to cancel the registration granted

earlier.

15b.We find that recently this Tribunal in the case of Chirayu

Charitable Foundation (ITANo.179/Ind/2019 dated 09.02.2021

dealing with similar issue of cancellation of registration u/s 12AA

of the Act on the allegation of genuineness of donation and their

creditworthiness. This tribunal after placing reliance on various

judicial pronouncements held that registration u/s 12AA of the

Act cannot be cancelled unless it is established by material

evidence that the activities of such trust or institutions or society

are not genuine or are not being carried out in accordance with

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 objects of the trust. The relevant portion of this order is

reproduced below:-

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 Herbal Research Foundation itself. This allegation is totally untrue as nothing of this sort has been written or mentioned in the confirmation, given by M/s Herbicure Health Care Bio Herbal Research Foundation. Till date no evidence to the contrary has been made available to the assessee which could substantiate your honour's allegation that the amount ofRs.1,00,00,000/- was paid by the assessee in cash to the donor in exchange of donation received by cheque. However, in case, there is any authentic material available with your honour which could throw some light on this issue, the same may be given to the assessee so that a specific reply on the same could be submitted on it"

(ii) The Co-ordinate Bench of Mumbai in the Case of Lilavati Kirtilal Mehta Medical Trust, Bandra V. CIT (Central) –I, Mumbai [2019] 108 taxmann.com 272 (Mumbai - Trib.) the Hon’ble ITAT, Mumbai Held that :- Now, we may go back to section 12AA(3) of the Act, which prescribes only two conditions under which the Commissioner is empowered to cancel the registration earlier granted u/s. 12A of the Act. In our view, the points brought out by the Commissioner in the impugned order are not in the context of the conditions prescribed u/s. 12AA(3) of the Act, but are relevant for the purposes of making an assessment of income. 11. In the present case, the case sought to be made out by the Commissioner is that the violation carried out by the assessee would lead to denial of exemption u/s. 11 & 13 of the Act and, therefore, the pre-requisite of section 12AA(3) of the Act is satisfied. In para 9 of the impugned order, the Commissioner records that the violation of section 11 & 13 of the Act would result in forfeiture of exemption not only for the year in which such transactions occur but also for the years when such arrangement continues to be in force. In our considered opinion, such an approach of the Commissioner is quiet misdirected and is inconsistent with the legal position on the subject contemplated u/s. 12AA(3) of the Act so as to cancel registration already granted. We may add here that we are not shutting out the case of the Revenue to examine whether or not there has been a violation of section 13 of the Act, but we are only trying to say that the same is not relevant for the purpose of cancellation of registration u/s. 12AA(3) of the Act. Of course, such matters can be dealt with in the course of assessment proceedings and, in our view, the same ought to be dealt with, if the situation so warrants. Presently, we are confining ourselves with examining the efficacy or otherwise of the action of the Commissioner in invoking section 12AA(3) of the Act and 34

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 we find that the reasons advanced by the Commissioner are not germane. On this point, the learned representative for the assessee has relied on the following decisions to say that section 12AA(3) cannot be invoked by Commissioner for cancellation of registration merely for violation of provisions of section 11 and 13 of the Act by the assessee :— ♦ CIT v. Apeejay Education Society [2015] 59 taxmann.com 102 (Punj. Har.)

♦ Cancer Aid & Research Foundation v. DIT (Exemption) 86/49 taxmann.com 537 (Mum. - Trib.)

♦ CIT (Exemptions) v. Cancer Aid & Research Foundation Incom Tax Appeal No.505 of 2015

♦ Prabodhan Shikshan Prasarak Sanstha v. Dy. CIT taxmann.com 33/[2015] 152 ITD 473 (Pune - Trib.)

♦ Tamil Nadu Cricket Association v. DIT (Exemption) 633/221 Taxman 275/[2013] 40 taxmann.com 250 (Mad.)

(iii)The Hon’ble Karnataka High Court in the case of CIT Vs. Islamic Academic of Education reported in 229 Taxman 274 (Karn) held as under :- In the instant case, the material on record shows that the Trust has established educational institution and imparting medical education. Every year, students are admitted. Huge investment is made for construction of buildings for housing the college, hostel and to provide other facilities to the students who are studying in the College. The College is recognized by the Medical Council of India, State of Karnataka and all other statutory authorities. Therefore, it cannot be said that the Trust is not genuine. Admittedly, the students are being admitted every year. Students are studying in all courses. Thus the object of the constitution of the Trust namely imparting of education is going on uninterruptedly. Therefore, it cannot be said that the activities of the Trust are not being carried out in accordance with the objects of the Trust. When the aforesaid two conditions are fully satisfied, on the ground that the trustees are misappropriating the funds of the Trust the 35

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 registration of the Trust cannot be cancelled. If the trustees are misappropriating the funds, if they are maintaining false accounts, it is open to the authorities to deny the benefit under section 11 of the Income Tax Act, but that is not a ground for cancelation of registration itself. That is precisely what the Tribunal has held. Therefore, the substantial question of law is answered in favour of the assessee and against the revenue. There is no merit in this appeal. (iv)The Hon'ble Allahabad High Court in the case of Red Rose School reported in (2007) 163 Taxman 19 (All.), wherein it is observed that:- "CIT is entitled to see only the genuineness of objects and activities : It has been held that while refusing application under section 12A the Commissioner has to examine only two aspects, i.e., genuineness of the activities of the trust / institution and object of the trust / institution. Once there is no dispute about the genuineness of the activities; the Commissioner cannot take shelter of any other outer source for refusing registration under section 12A. The issue of registration under section 12A and the scope of enquiry at the stage of section 12AA was discussed, it was categorically held in the said decision that section 12AA does not speak anywhere that the CIT, while considering the application for registration, shall also see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit. Profit earning or misuse of the income derived by charitable institution from its charitable activities may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. While considering the registration under section 12AA, the scope of enquiry of the Commissioner would be limited to the aforesaid extent only."

(v)The decision of Krupanidhi Educational Trust Vs. DIT (E) – 152 TTJ 673, wherein it is held as under :- The DIT(E) in the order u/s 12AA(3) of the Act, do not make out any case, which can show the activities of the assessee are not genuine or that the activities of the assessee are not being carried out in accordance with the objects of the trust or institution. The fact that the Assessee was paying commission to persons who solicit students for studying in the Assessee’s institution cannot lead to the conclusion that the Assessee is not imparting education. Similarly purchase of a BMW car, borrowing of loans from Sindhi Financiers, 36

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 non maintenance of regular books of accounts, violations of provisions of Sec.13(1)( c) of the Act in as much as the trustees were paid enormous salary are all by way of passing reference having norelevance to whether or not the Assessee was pursuing education as its main object. There are no facts brought out in the impugned order regarding the genuineness of the activities of the trust or as to whether the object of education was not pursued by the Assessee as its main and predominant activity. In fact, the order of the DIT(E) does not anywhere show that the assessee is not imparting education. The complaint of the revenue seems to be that education is being imparted but on commercial lines. The definition of Charitable Purpose is given in Sec.2(15) of the Act. The same refers to "relief to poor, medical relief, education and the advancement of any other object of general public utility". The proviso to Sec.2(15) of the Act introduced by the Finance Act, 2008 w.e.f. 1.4.2008 regarding excluding organizations where there is profit motive from the definition of charitable purpose applies only to the category of trusts which has as its object, the object of "advancement of any other object of general public utility". It does not apply to the other categories of charitable purpose viz., "relief to poor, education and medical relief". As rightly pointed out by the learned counsel for the assessee, eleemosynary element is not essential element of charity. It is also not a necessary element in a charitable purpose that it should provide something for nothing or for less than it costs or for less than the ordinary price. The surplus generated, if it is held for charitable purpose and applied for charitable purpose of the assesse, and then the Assessee has to be considered as existing for a charitable purpose. There are enough safeguards provided in Sec.12 and 13 of the Act to ensure that personal benefits of thepersons in control of the trusts are not treated as having applied for charitable purpose and for being brought to tax like provisions of Sec.13(1) (c ) of the Act which restricts unreasonable and excessive payments to certain category of persons connected with a trust or other institution. In such circumstances, the order u/s 12AA(3) of the Act, cannot be sustained. (vi)The decision of Prabodhan Prasarak Shikshan Santhan Vs. DCIT–152 ITD 473 (Pune), wherein it is held as under :- The Hon'ble Bombay High Court in the case of Sinhagad Technical Education Society v. CIT (Central) 2012) 343 ITR 23 (Bom) has held that "Every statutory provision which operates in respect of a trust, which has already been registered in the past is not necessarily retrospective. A

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 provision is retrospective when it takes away a right which has vested or accrued in the past. The effect of the provision is to empower the commissioner to cancel the registration of the trust where he is satisfied that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the trust or Institution. This could not by any stretch of imagination be regarded as retrospective alternation of the law. In the case before us, as per the amendment by the Finance Act, 2010, the Commissioner has claimed to be empowered to initiate steps for the cancellation of the registration of a trust or Institution where the activities of the trust or institution are not genuine or are not being carried out in accordance with the objects thereof even in relation to a trust which was registered under S. 12A as it then stood." So basic requirement for invoking S. 12AA(3) is that the activities of the trust are not genuine and are not being carried out in accordance with the objects of the trust. The CIT has recorded her findings in the order u/s 12AA(3) that the trust is imparting knowledge at cost and therefore, not a charitable Trust within the purview of S. 2(15) of the Act, secondly, the appellant trust has contravened the provisions of Ss. 11(5) and 13(1) (c) of the Act. Thirdly, the trust is treated by the Chairman and family members /relatives as their private property and enjoyed by them for their benefits only. There is nothing on record to suggest that the Trust is not 'genuine'. In fact, the trust is carrying on Educational activities they are charitable in nature. The activities are carried out as per its objects. There is no infringement of any of the provisions contained in Ss.1 1(5) and 13 of the Act. The provisions of S.12AA(3) for cancellation/withdrawal of registration granted to it w.e.f. 11-2-1998 u/s 12A of the Act are not retrospective and therefore, the impugned order of the CIT passed u/s 12AA(3) is nothing but a review of its earlier order which is impermissible in law. (vii)The decision of Rajasthan Vikas Sansthan Vs. CIT reported in 78 DTR 411 (Raj), wherein it is held as under :-

The registration can be cancelled on the ground that the activity of the trust are not genuine or are not being carried out in accordance with the object of the trust. In case there are violations as mentioned in s. 11 and 13 of the Act. Thus the AO while making assessment can deny the exemption to the trust. For getting the exemption u/s 11, registration is pre-requisite. However, registration is not a guarantee for exemption. In case the Trust fails to comply with the requirements as mentioned in s. 11 and 13 of the Act then

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 exemption can be denied. In respect of failure mentioned in s. 11 and 13 in a particular year, it cannot be said that registration is to be cancelled. Surplus in educational activities is not relevant for cancelling the registration. The education itself is charitable object and if the surplus is utilized for the purpose of charitable activities then it cannot be said that registration is to be disallowed. The ground on which the registration cannot be refused, cannot be considered as a ground for cancelling the registration.

(viii) The Co-ordinate Bench of Cochin in the Case of M/s Kunhitharuvai Memorial Charitable Trust, KMCT Corporate office, Malabur Christian College Cross Road, Calicut V CIT (Central), Kochi (Order dated 16/01/2017 in Appeal No. 246/Coch/14) it was held that :-

Para 16. Having said so, let us examine the powers of the Commissioner to grant registration u/s 12AA and cancellation of registration u/s 12AA (3) of the Act. The power to cancel registration already granted u/s.12AA of the Act is contained in Sec. 12AA(3) of the Act and it reads as follows: "(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard." The provisions of section 12AA of the Act, deals with procedure for registration of trust/institutions. As per said section, the Commissioner shall look into the objects of the trust and its activities and satisfy himself about that the objects of the trust are charitable in nature and its activities are genuine and such activities are carried out in accordance with its objects. Sub-section (3) inserted with effect from 1st Oct., 2004 empowers the Commissioner to cancel the registration of a trust or institution granted under clause (b) of sub-section (1) when subsequent to grant of registration the Commissioner is satisfied that activities of trust or institution are not genuine or are not being carried out in accordance with objects of the trust or institution.Basic purpose of s. 12AA(3) is to check misuse of exemption under pretext of carrying out charitable activities when the same are not so. The CIT has to make out clear case for exercising powers u/s. 12AA(3). In this case, so far as object of trust is concerned, it is nowhere disputed that assessee is engaged in imparting education. Once an institution came 39

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 within the phrase "exists solely for educational purpose and not for profit" no other condition like application of income was required to be complied with. The mere existence of profit/surplus did not disqualify the institution. Breach of the conditions of the trust deed would not disentitle the institution from getting the benefit which the institution had been granted earlier being a charitable trust. Nowhere in her order, the CIT has taken any objection to the charitable and educational nature of the institution. In fact, the objects of the institution as declared in the trust deed do reflect that all are philanthropic or benevolent in nature, precisely, for the purpose of imparting education. Strange enough, there is no finding recorded by the CIT contrary to this fact.Rather, this is also not the case of the CIT that the institution is doing some other activity of earning profit other than the activity of running educational institutions. The established factual position is that the institution is not doing any other activity except running educational institutions. In such circumstances, the action of cancellation of registration cannot be upheld. As far as the object of the assessee is concerned, this is not the case of the Revenue that the assessee was not imparting education. Since the question about the imparting of education has not been doubted or challenged by the Revenue, the impugned order passed by the CIT is unsustainable in law. Strange enough again, there is nothing on record to prove even sightlessly that the purpose of imparting education was not fulfilled by this institute, thus the Revenue Department has failed to establish that there was any illegal activity or infringement of law so as to doubt the genuineness of the activities. 38. On perusal of the judgments and decisions referred herein above, we find that they are squarely applicable on the facts of the instant appeal and the issue raised before us and thus favours the assessee. Before concluding we would like to summarise our findings and observations in following manner:- (i) As regards the alleged donations received from various concerns mentioned in the impugned order, we are satisfied with the identity of the alleged donors, genuineness of the transaction of giving donatiion to the assessee trust since most of the alleged donors are either charitable trusts or known to the Directors/ Promoters and the transactions being carried out through banking channel and we are also satisfied with the creditworthiness of the alleged donors as they have sufficient financial strength to provide the donation to the assessee trust, (ii) As regards the alleged irregularity in education process noted by CBI the matter is still subjudice with the court and the order of Regulatory Authority namely Admission Fee Regulatory Committee stand stayed by the Hon'ble jurisdictional High Court vide stay order dated 23.7.2015 which is effective till date. The alleged irregularity is for one 40

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 of the year in only one of the college run by the trust amongst other hospitals and colleges which are undisputedly providing charitable services in the field of medical and education. (iii) The issue of irregularity in admission process is not part of the show cause notice dated 6.12.2018 issued to the assessee in connection with the cancellation of registration u/s 12AA(3) of the Act which shows that assessee was not granted reasonable opportunity of being heard on this issue which in itself makes the proceedings bad in law. (iv) The issues raised in the show cause notice dated 6.12.2018 issued by Ld. PCIT are not relevant for cancellation of registration u/s 12AA(3) of the Act. Such types of issues can be examined by the Assessing Officer during the course of regular assessment proceedings wherein on the basis of his examination/ investigation necessary view as permissible in law can be taken if violation of Section 11 and Section 13 of the Act by the assessee are observed. Ld. PCIT can only cancel the registration u/s 12AA(3) of the Act if it is found that the activities of the society/trust are either not genuine or are not being carried out in accordance with its object provided in bye laws. (v) We also find that nothing on record has been brought before us by way of an independent enquiry by Ld. PCIT thereby collecting necessary evidence which can show that the activities of the assessee society are either not genuine or are not being carried out as per the objects of the society which were filed before the registering authority at the time of granting registration u/s 12AA of the Act. It is therefore established that the activities carried out by the appellant assessee society by way of running hospitals and medical colleges for the benefit of public at large and for the students are for charitable purposes only as provided in Section 2(15) of the Act. 39. We therefore in view of our above finding arrived at after examining the facts of the instant case and in the light of judgments referred herein above which are squarely applicable on the facts and issue raised before us are of the considered view that the impugned order of Ld. PCIT cancelling the assessee’s registration granted u/s 12AA(1) of the Act deserves to be quashed. We accordingly order so and direct the revenue authorities to restore the registration u/s 12AA(1) of the Act granted to assessee society w.e.f. 1.4.2011. Accordingly all the grounds raised by the assessee are allowed.

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 15c. It is also a settled issue that the registration u/s 12AA

cannot be cancelled from retrospective effect. For this view we

place reliance on the judgment of Hon'ble Madras High Court in

the case of Auro Lab v. ITO (2019) 102 taxmann.com 225 dated

23.01.2019 wherein Hon'ble Court held that “Since the act of

cancellation of registration has serious civil consequences and the

amended provision is held to have only a prospective effect the

effect of cancellation, in the event the pending Tax Appeal is

decided in favour of the Revenue, will operate only from the date of

the cancellation order, that is 30.12.2010. In other words, the

exemption cannot be denied to the petitioner for and up to the

Assessment Year 2010-11 on the sole ground of cancellation of the

certificate of registration.” [emphasis supplied]

15d. In view of the above discussion with regard to ground no.1 2

& 6 of the assessee’s appeal, in light of the judgments and

decisions referred herein above settled and judicial principles, we

are of the considered view that firstly, Ld. Pr. CIT erred in

cancelling the registration with retrospective effect from

01.04.2008 and secondly, we are also of the view that Ld. Pr. CIT

erred in cancelling the registration u/s 12AA(3) and 12AA(4) of

the Act without placing any material evidences which could 42

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 indicate that the assessee society was not running for the

charitable objects for which it was established and nor any doubt

has been raised about genuineness of the activities carried out by

the assessee society with regard to imparting of education and

carrying out charitable activities. So far as, the issue arising out

of the loose papers is concerned in this case alleging that the fund

of the assessee society have been misappropriated by the

members of the society or there is any ambiguity in the claim of

expenses, it can well be taken care of at the time of assessing the

income and if needed the additions can be made to the income of

the assessee and the same should be restricted only to the issue

involved. However in no case the remaining income of the

trust/society should be affected by way of denying the benefit of

exemption u/s 11 & 12 of the Act. We accordingly allow ground

no.1 2 & 6 of the assessee’s appeal.

Pr. CIT erred in invoking the provisions of section 12AA(4) of the

Act as it was not applicable in the case of assessee because

section 12AA(4) of the Act was inserted w.e.f. 01.10.2014. We

however, find this ground to be infructuous in nature firstly

because the ld. Pr. CIT has carried out the proceeding u/s 43

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 12AA(3) of the Act as well as 12AA(4) of the Act. Though rightly

contended that amended provision i.e. section 12AA (4) of the Act

were inserted from 01.04.2014 but it in itself cannot challenge the

validity of the impugned order because Ld. Pr. CIT has also

invoked the provisions of sections 12AA(3) of the Act. Had Ld. Pr.

CIT carried out the proceedings only u/s 12AA(4) of the Act the

assessee may had case. However, in the instant case both sub-

section (3) & (4) of section 12AA of the Act were invoked and Ld.

Pr. CIT(A) was well within in his jurisdiction to carry out the

impugned proceedings. We accordingly dismiss ground no.5

raised by the assessee.

contended that Ld. Pr. CIT erred in invoking the provision of

section 12AA(3) of the Act merely on the basis of his finding that

the provisions of section 13(1)(c)(ii) are applicable on the assessee.

We find that the alleged seized documents only pertains to

financial year 2009-10 i.e. A.Y. 2010-11 and not for any other

year. Nothing adverse has been observed by Ld. Pr. CIT(Central)

from the date of registration u/s 12AA of the Act i.e. 01.04.2008

till the date of passing impugned order except for A.Y. 2010-11. It

is judicially settled that if provisions of section 13(1)(c) of the Act 44

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 are attracted, the benefits of exemption under section 11 & 12 of

the Act are not available to the assessee, it is subject matter of

the assessment proceedings as to whether the exemption u/s 11

& 12 of the Act is to be denied or forfeited to the extent of

violation of provision of section 13(1)(c) of the Act is formed by the

Ld. AO but it can in no way lead to cancellation of registration

granted u/s 12AA of the act unless any cogent and positive

material is brought on record to establish that the society is not

carrying out genuine charitable activities as per the objects for

which it has established. If the provisions of section 13 are

violated, it empowers the assessing officer to forfeit the exemption

permissible u/s 11 & 12 of the act only to the extent of amount

not allowed u/s 11 & 12 of the Act. However, such violation

cannot form a ground for cancellation of registration u/s 12AA(3)

of the Act. Reliance placed on the decision of Coordinate Bench,

Mumbai in the case of Lilavati Kirtilal Mehta Medical Trust (2019)

108 taxmann.com 272 dated 12.06.2019.

17a. We therefore, respectfully following the same, are of the

considered view that the violation of u/s 13 of the Act cannot be

the basis for cancellation of registration 12AA of the Act. On this

legal ground itself the impugned order cancelling registration 45

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 12AA of the act deserves to be quashed. Accordingly ground no.3

& 4 of the assessee’s appeal are allowed.

17b. Apropos to ground no.7 pertaining to alleged bogus salary

expenses and misappropriation of funds by the trust society, the

same will be dealt while dealing with the assesee’s appeal in

ITANo.548/Ind/2019 wherein the assessee has challenged the

finding of Ld. CIT(A) confirming the action of the Ld. AO of making

certain additions based on the loose papers and treating the

assessee as carrying out business and not carrying out charitable

activities. So far as the instant appeal is concerned this ground

becomes infructuous. In view of the fact that we have already

quashed the impugned order since the ld. Pr. CIT has invoked

the provisions of section 12AA(3) & 12AA(4) of the Act only on the

basis of invoking provisions of section 13(1)(c)(ii) of the Act for

cancelling the registration u/s 12AA of the Act which in our view

was not correct since only the amount of benefit of exemption can

be a subject matter but continuing of registration u/s 12AA of the

Act cannot be challenged. Accordingly ground no.7 is dismissed

as infructuous.

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 Now we take up ITANo.548/Ind/2019

search u/s 132 of the Act on 30th August 2016 at Ramani Group

wherein loose papers pertaining to assessee were found and

seized and the same were confronted to the assessee during the

course of assessment proceedings for A.Y. 2010-11 and Ld. AO

being not satisfied with the submissions of assessee completed

the assessment treating the assessee as running business and

not for carried out charitable activity, treated the net income over

expenditure of Rs.1,96,50,937/- as business income, disallowed

bogus salary expenses at Rs.20,48,173/-, made addition for

unexplained money on account of business receipts at

Rs.69,70,505/- and also denied the deduction for capital

expenditure claimed by the assessee having been applied for

charitable purposes. Income assessed at Rs.2,86,69,615/-.

Assessee challenged all the finding of the ld. AO before the Ld.

CIT(A) and partly succeeded. Ld. CIT(A) held that proceedings u/s

148 of the Act are valid Ld. CIT(A) also held that in view of the

seized loose papers and the finding of the ld. AO the assessee

society is not running for charitable purpose and therefore, not

entitled for claiming deduction u/s 11 & 12 of the Act. Ld. CIT(A) 47

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 allowed claim of expenditure of at Rs.3,52,94,416/- denied by the

ld. AO and held that the real income of the assessee is loss at

Rs.1,56,43,479/- as against the income of Rs.1,96,50,937/-

considered by the ld. AO. Ld. CIT(A) also confirmed the addition

for bogus salary expenditure of Rs. 20,48,173/-. However, Ld.

CIT(A) granted partial relief with regard to addition of

Rs.69,70,505/- made by the Ld. AO on account of suppression of

fee by calculating the difference at Rs. 8,47,694/- thereby giving

relief of Rs.61,22,811/-. Ld. CIT(A) also dismissed the assessee’s

claim of deduction for capital expenditure since the assessee was

held to be engaged in the business profession and not carrying on

charitable activity.

revenue is NOT in appeal before us and its only assessee who has

challenged the finding given against it by Ld. CIT(A).

following synopsis:-

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 Enginnering, Computer Science and Information Technology. This Institute also offers courses for MBA and M.Tech. [PB 01 – 18] 2. It is also submitted that the assessee society is approved by various bodies like All India Council of Technical Education (AICTE), New Delhi, National Council for Teachers Education (Statutory body of Government of India) and Director of Technical Education, Government of India. The institute is also affiliated to Rajiv Gandhi Prodhoygik Vishwavidyalay and Barkartullah University, Bhopal. 1635 students are studying various courses in its Institute. Thus, the assessee is carrying out the activities genuinely and in accordance to the objects of the society. [PB 09-18] 3.Recognition from National Council for Teacher Education, a statutory body of the Government of India requires inter alia, the applicant educational institute to clear physical inspection by way of input from the visiting team in the form of the form of report and videography and recommendation of the State Government. Having gone through these processes for recognition from a statutory body of Government of India itself establishes the carrying out of education by the assessee. [PB 11, third para] 4.Notice u/s 148 was issued on 28.03.2017. Reasons recorded for issuance of notice u/s 148 refer to the search conducted in the Hariramani Group, Bhopal on 30.08.2016. During the course of conduct of search, certain documents were found and seized from the residence of Shri Prakash Hariramani which relate to the assessee. These documents are LPS -6, LPS-7 and LPS-ll. [PB 38] 5. Nowhere it has been provided in section 13 that if some part of the income is applied for the benefit of persons mentioned in section 13(3), then the income of the institution will take colour of business and it will become automatically assessable u/s 28 of the Act. Section 13 provides that only the said part of the income will not be qualified for the purpose of exemption/deduction u/s 11 and 12 of the Act. [PB 45] 6. By applying the provisions of section 11 and 12, computation of income was submitted by assessee according to which, loss of Rs. 4,82,20,098 was claimed by the assessee, including claim for capital expenditure. [PB 46] 7.Without prejudice to the claim of assessee u/s 11 & 12, loss of Rs. 1,56,43,480 was arrived at by applying the provisions of section 28 for which computation was submitted. [PB 41] 8.In the reasons recorded, reference has been made to various loose papers on which various rough noting, jottings, calculations are made. It is onthis basis that inference has been drawn by the Ld. AO. It is submitted that such rough noting, jottings, calculations have no evidentiary value in the absence of corroborative and independent evidences. Reliance is placed on the decisions of the Hon'ble Supreme Court in the case of Common Clause - 30 ITJ 197 and V C Shukla. [PB 47] 9. No enquiry has been conducted by Ld. AO from the employees who are alleged to have been paid higher salary by cheques and amount 49

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 is received back from them in cash. No such corroborative and independent evidence exists to authenticate the noting and jottings on the loose documents seized. [PB 48] 10. It is a settled law that no addition can be made merely on the basis of loose sheets without any corroborative and independent evidence. Loose sheets do not form "Books of Accounts" and entries in such loose sheets are irrelevant and not admissible u/s 34 of the Evidence Act. Only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, those are admissible. In the case of V C Shukla (supra), it has been held that independent evidence is necessary as to the trustworthiness of those entries which is a requirement to fasten the liability. It also held that meaning of account books would be spiral note book/pad but not loose sheets. [PB 48] 11. In the instant case, the documents referred in the reasons recorded were seized from the residential premises of Shri Prakash Hariramani. It is not evident from the documents so seized if these are related assessee or are just the rough noting and jottings done by him for his personal references. [PB 49] 12. There is no cogent and positive material on record in the form of statement of any employee to substantiate that the assessee had claimed bogus salaries in Income & Expenditure account. There is no statement of any employee saying that they were paid higher amounts in cheque and thereafter difference amount was repaid by them to the members of the society. Ld. AO also failed to bring on record any cogent material to support his allegations. [PB 49] 13. There is no evidence on record to establish that one of the trustee, Shri Vijay Hariramani has taken the excess cash generated from booking of alleged bogus salary. Ld. AO has made addition without bringing on record any cogent and positive material found during the course of conduct of search. [PB 49] 14. Shri Vijay Hariramani was also covered by the search conducted in the Hariramani Group. No evidence/document was found to establish corroboratively that he had siphoned off the funds of the institution by booking of the alleged bogus salary and taking extra cash. [PB 49] 15.The seized paper does not reflect if any amount was paid to Shri Vijay Hariramani. Assessee submits that the author of the paper is not known and the basis of tabulation is not appearing in the paper. Search was also conducted in the premises of Shri Vijay Hariramani but nothing corroborative was found to establish that he received an amount of Rs. 5,61,877 from the assessee institution. Further there is no corroborative evidence to establish the flow of money from the assessee institution to Shri Vijay Hariramani. Addition based merely on surmises and conjectures is bad in law, unsustainable and ought to be deleted. [PB 50] 16.Without prejudice, denial of whole exemption is unlawful and bad in law. Exemption under section 11 & 12 may be limited only to the

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 amount which has been considered for section 13(1). Reliance is placed on the following ludicial precedents - [PB 50-54] a.Working Women's Forum - [2014] 365 ITR 353 - Madras High Court b.Sheth Mafatlal Gagalbhai Foundation Trust - 249 ITR 533 - Bombay High Court c.Lokmanya Tilak Jankalyan -ITA No. 384/NAG/2012 d.Audyogik Shikshan Mandai [2019] 101 taxmann.com 247 (Born), dated 18.12.2018 17.Assessee submits that the difference of the fees is not on account of under recordings of fee receipts but it is due to projections, jottings, etc. These figures are merely for estimation of collection of fee. The document contains broad noting of various items and does not reflect the actual figures. [PB 55]

written submissions:

A. Apropos Ground no.1 – initiation of proceedings u/s 148 is bad in law, without jurisdiction 1. Notice u/s 148 was issued on 28.03.2017. In the reasons recorded reference has been made to the various documents seized from the residence of Shri Prakash Hariramani during the course of conduct of search on 30.08.2016. These documents are LPS -6, LPS-7 and LPS- 11. [PB 38] 2. The seized documents so referred in the reasons recorded are the various loose papers. On these loose papers various rough noting, jottings, calculations are made. It is on this basis that adverse inferences have been drawn by the Ld. AO. 3. Nothing corroborative, cogent, positive and independent evidences have been brought on record to negate the submissions made by the assessee. It is submitted that such rough noting, jottings, calculations found from the residence of Shri Prakash Hariramani during his search have no evidentiary value in the absence of corroborative and independent evidences. Reliance is placed on the decisions of the Hon’ble Supreme Court in the case of Common Clause – 30 ITJ 197 and V C Shukla. [PB 47] 4. The sole basis on which notice u/s 148 has been are the loose documents seized from the residence of Shri Prakash Hariramani during the course of conduct of search operations. It is not evident from the documents so seized if these are related assessee or are just the rough noting and jottings done by him for his personal references. Proceedings initiated on the basis of such loose papers ought be quashed. B. Apropos Ground no.2 – Income of the assessee society assessed as business income u/s 28 51

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 1. It is submitted that assessee is a charitable society registered under the M. P. Societies Registration Act, 1973 since 28.11.2016. Registration u/s 12A was granted on 20.03.2008. The object of the society is imparting education. Trinity Institute of Technology and Research (Institute) is the college established under the assessee society. This college imparts education by offering various courses which include Bachelor of Engineering in various branches like Civil Engineering, Mechanical Engineering, Electronics and Telecommunication Enginnering, Computer Science and Information Technology. This Institute also offers courses for MBA and M.Tech. [PB 01 – 18] 2. It is also submitted that the assessee society is approved by various bodies like All India Council of Technical Education (AICTE), New Delhi, National Council for Teachers Education (Statutory body of Government of India) and Director of Technical Education, Government of India. The institute is also affiliated to Rajiv Gandhi Prodhoygik Vishwavidyalay and Barkartullah University, Bhopal. 1635 students are studying various courses in its Institute. Thus, the assessee is carrying out the activities genuinely and in accordance to the objects of the society. [PB 09-18] 3. Recognition from National Council for Teacher Education, a statutory body of the Government of India requires inter alia, the applicant educational institute to clear physical inspection by way of input from the visiting team in the form of report and videography and recommendation of the State Government. Having gone through these processes for recognition from a statutory body of Government of India itself establishes the carrying out of education by the assessee. [PB 11, third para] 4. Ld. AO alleged that the assessee society has paid bogus salary of Rs. 20,48,173 and cash payment of Rs. 5,61,877 to one of the trustees Shri Prakash Hariramani. Thereby, Ld. AO concluded that the assessee has violated the provisions of section 13(1)(c) rws 13(2). 5. In view of the above mentioned alleged bogus salary payment and cash payment, Ld. AO concluded that assessee society is not for charitable purpose but is engaged in business or profession. Thus the income earned is to be taxed under the head ‘Profits and Gains from Business or Profession’. [AO page 10 para 17] 6. It is submitted that if in any case the provisions of section 13 are not complied with then that part of the income of the said trust or institution shall not qualify for the purpose of exemption u/s 11 and 12 of the Act. 7. Section 13 has nowhere provided that if the said provisions are not complied with then the income of the said trust or institution shall be assessed u/s 28 as profit and gains from business or profession. 8. Both Ld. AO and Ld. CIT(A) erred in applying the provisions of section 13 and assessing the income of the assessee trust u/s 28.

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 9. By applying the provisions of section 11 and 12, computation of income was submitted by assessee according to which, loss of Rs. 4,82,20,098 was claimed by the assessee, including claim for capital expenditure. [PB 46] 10. Without prejudice to the claim of assessee u/s 11 & 12 and strictly in alternate, loss of Rs. 1,56,43,480 was arrived at by applying the provisions of section 28 for which computation was submitted. Ld. CIT(A) granted relief vide ground no. 3 by accepting the fact that assessee has incurred expenses of Rs. 3,52,94,416 for running and managing the educational institute. [PB 41 & CIT(A) Page 21 Para 4.3] 11. Assessee submits that despite relief granted by Ld. CIT(A) for which Department is not in appeal, entire claim of exemption u/s 11 & 12 cannot be disallowed by re-characterizing it as “income under the head Profits and Gain of Business or Profession”. Only that part of the income of the assessee shall not qualify for the purpose of exemption u/s 11 and 12 of the Act which is held to be covered u/s 13 and not otherwise. C. Apropos Ground no.3 – Allegation of bogus salary expenditure of Rs. 20,48,173 1. In the reasons recorded, Ld. AO has made reference to the document seized from the residential premises of Shri Prakash Hariramani at para (iii), page 60 to 63 of LPS -11. On the basis of this document, Ld. AO has inferred that assessee has paid bogus salary of Rs. 20,48,173. [AO Page 4 to 7 and Page 10 Para 12 to 14] 2. Loose papers on the basis of which Ld. AO has alleged that assessee has paid bogus salary of Rs. 20,48,173 is some working done by a person not known which contains name of employee, cash, cheque and difference for months from April 2009 to Feb 2010 and then total. There are two categories – teaching staff and non-teaching staff. For each of the employee for each month, there is a difference calculated in this working between cash and cheque figures. What this difference denotes is difficult to decipher.

For the very first line item with employee name ‘Bande’, Cash in April ’09 is noted as ‘10000’, cheque is noted as ‘13000’ and difference is noted as ‘3000’. Such a noting can be read in multiple ways. Ld. AO read and inferred these noting as cheque is paid to the employee of 13000 and difference of 3000 is taken back from the employee in cash. Such a unilateral inference without any corroborative evidence, cross- verification from any of the employees is devoid of any merit, arbitrary, baseless and absurd. For the same employee, in the months of Sep ’09 to Feb ’10, the difference is noted as ‘0’. However, figure of ‘14000’ is noted in the row of cash.

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 From one such above sample reading of the loose paper, it is evidently demonstrated that it was some unknown exercise done by a person not know to the assessee and which was not found in the possession of the assessee. 3. As per the loose paper, the salary paid both by cheque and in cash to teaching and non-teaching staff amounts to Rs. 1,22,56,751. Out of this, Ld. AO has alleged that an amount of Rs. 20,48,173 is bogus and the balance salary payment of Rs. 1,02,08,578 is accepted. Total amount of salary reported in the audited Income and Expenditure account of the assessee is Rs. 1,00,02,326. It is a settled law that any document can be either accepted as a whole or denied in its entirety. Addition made on the basis of such partly accepted document is bad in law and ought to be deleted. [AO Page 10 Para 12-13-14 and PB 32] 4. There is no cogent and positive material on record in the form of statement of any employee to substantiate that the assessee had claimed bogus salaries in Income & Expenditure account. There is no statement of any employee saying that they were paid higher amounts in cheque and thereafter difference amount was repaid by them to the members of the society. Ld. AO also failed to bring on record any cogent material to support his allegations for which he had all the powers and where whittle. He chose not to take appropriate actions for cross-checking the same from the concerned employees. [PB 48-49] 5. Nothing corroborative has been brought on record to establish that the there is shortage of cash and that one of the trustees has siphoned this excess cash generated on account of booking of alleged bogus salary expenses. It is submitted that one of the trustees, Shri Vijay Hariramani was also subjected to the search but no documents or material was seized to establish that the said trustee siphoned the funds of the assessee society by booking bogus salary expenses. 6. It is a settled law that no addition can be made merely on the basis of loose sheets without any corroborative and independent evidence. Loose sheets do not form “Books of Accounts” and entries in such loose sheets are irrelevant and not admissible u/s 34 of the Evidence Act. Only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, those are admissible. Hon’ble Apex Court in the case of V C Shukla and Common Cause (A Registered Society) 30 ITJ 197, has been held that independent evidence is necessary as to the trustworthiness of those entries which is a requirement to fasten the liability. It is also held that meaning of account books would be spiral note book/pad but not loose sheets. [PB 48] 7. Considering the above facts and circumstances of the case and the applicable law, it is humbly submitted that the addition of Rs. 20,48,173 made on account of alleged payment of bogus salary ought to be deleted.

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 D. Apropos Ground nos. 4 and 5 – payment of Rs. 5,61,877 to Shri Vijay Hariramani, one of the trustees and thus provisions of section 13(1)(c) are violated. Thereby, the entire exemption claimed u/s 11 and 12 denied. 1. Merely on the basis of one seized loose paper with the date “AS ON 30.06.2010”, Ld. AO has concluded that cash of Rs. 5,61,877 has been paid one of the trustees of the assessee society, Shri Vijay Hariramani, violating the provisions of section 13(1)(c). [AO Page 9, bottom] 2. It is submitted that the seized paper does not relate to the assessment year under consideration i.e. AY 2010-11. In the very first line of this loose paper, period noted is “(01.04.2009 TO 30.06.2010)”. Also, in the last line, for shortage of cash, it is noted “AS ON 30.06.2010”. It is evident that these noting on the said loose paper are beyond the period covered by AY 2010-11 and cannot be relied upon for taking an adverse view in the assessment for AY 2010-11. [AO Page 9] Also, noting does not in any manner reflect if any amount was paid to Shri Vijay Hariramani. Also the author of the paper is not known and the basis of tabulation is not appearing in the paper. Search was also conducted in the premises of Shri Vijay Hariramani but nothing corroborative was found to establish that he received an amount of Rs. 5,61,877 from the assessee institution. [PB 49] 3. Nothing corroborative has been brought on record to establish the flow of money from the assessee institution to Shri Vijay Hariramani. Ld. AO has made the addition of Rs. 5,61,877 merely on surmises and conjectures which is bad in law, unsustainable and ought to be deleted. [PB 50] 4. Considering the above facts and circumstances of the case and the applicable law, it is humbly submitted that the addition of Rs. 5,61,877 made on account of alleged payment to one of the trustees, Shri Vijay Hariramani ought to be deleted, more particularly when the period / date noted on the said loose paper does not relate to the impugned assessment year i.e. AY 2010-11. E. Apropos Ground no. 6 – addition of Rs. 8,47,694 sustained as unrecorded fees 1. The addition has been made merely on the basis of the loose paper. It is submitted that the difference of the fees is not on account of under-recordings of fee receipts but it is due to projections, jottings, etc. These figures are merely for estimation of collection of fee done by some person not known to assessee. The document contains broad noting of various items and does not reflect the actual figures. [AO Page 12 and PB 55] 2. It is a settled law that no addition can be made merely on the basis of loose sheets without any corroborative and independent evidence. Loose sheets do not form “Books of Accounts” and entries in such loose sheets are irrelevant and not admissible u/s 34 of the Evidence Act. Only where the entries are in the books of accounts regularly 55

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 kept, depending on the nature of occupation, those are admissible. In the case of V C Shukla (supra), it has been held that independent evidence is necessary as to the trustworthiness of those entries which is a requirement to fasten the liability. It also held that meaning of account books would be spiral note book/pad but not loose sheets. [PB 48] 3. Actual collection of fees after taking into account advance receipts at the beginning and close of the year was tabulated. There was a small difference of Rs. 8,47,694 between the rough jotting on the loose paper and this tabulation. Ld. CIT(A) granted the relied and sustained the addition for this amount of Rs. 8,47,694. [PB 55] In this connection it is submitted that the figure appearing on the loose paper is a rough noting in a broad manner with the use of words ‘Major Expenses’, etc. The difference of Rs. 8,47,694 in no way represents the real receipts of the assessee in absence of any corroborative material brought on record by the Ld. AO which ought to be deleted. F. Apropos Ground no. 7 – Capital expenditure of Rs. 3,25,76,619 incurred towards application of income u/s 11 and 12 be allowed 1. While disposing ground no. 3, Ld. CIT(A) has accepted the fact of incurring of expenses of Rs. 3,52,94,416 for running and managing the educational institute and given the relief, for which the Department is not in appeal. Conduct of educational activity which is in accordance with the objects of the assessee is not in dispute with this finding given by Ld. CIT(A) and attains finality. [CIT(A) Page 21, Para 4.3] 2. It is evidently demonstrated that assessee is a charitable society registered under the M. P. Societies Registration Act, 1973 since 28.11.2016. Registration u/s 12A was granted on 20.03.2008. The object of the society is imparting education. Trinity Institute of Technology and Research (Institute) is the college established under the assessee society. This college imparts education by offering various courses which include Bachelor of Engineering in various branches like Civil Engineering, Mechanical Engineering, Electronics and Telecommunication Enginnering, Computer Science and Information Technology. This Institute also offers courses for MBA and M.Tech. Assessee is also registered u/s 12AA of the Act. 3. As per the provisions of the Act, assessee is eligible to claim exemption u/s 11 and 12. These provisions allow the amount incurred towards capital expenditure as application of funds within the meaning of section 11. Accordingly, it is most humbly submitted that the amount of Rs. 3,25,76,619 incurred by the assessee society towards capital expenditure be allowed as application of funds u/s 11. [PB 46] 4. It is submitted that the provisions section 11 were amended according to which the capital expenditure incurred were not considered as application of fund applicable from AY 2015-16 and only depreciation was to be considered as application of funds. This amendment is applicable prospectively. The year under consideration 56

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 is AY 2010-11 hence the amended provisions are not applicable. Accordingly, amount of capital expenditure of Rs. 3,25,76,619 be kindly allowed as application of funds u/s 11 and 12. Considering the above facts, circumstances of the case, submissions made, documents on record and judicial precedents, additions/disallowance made and re-characterisation done by Ld. AO ought to be deleted.

authorities and also submitted that seized loose papers indicates

that the assessee society is involved in diverting the funds of the

society to the benefit of its members and also claimed excess

expenditure by issuing salary cheque of higher amount to the

employees and taking the cash back from them.

placed before us and carefully gone through the submissions

made by both the sides.

proceedings u/s 148 of the Act the contention of the assessee is

that nothing corroborating cogent/positive and independent

evidence has been brought on record which could support the

adverse influence drawn by the Ld. AO. We, however find no merit

in the contention of Ld. counsel for the assessee because there

were loose papers found during the course of search bearing No.

LPS-6, LPS-7 & LPS-11which contained the details of salary of

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 teaching staff and non-teaching staff, person wise details of salary

payment, summery of source of funds, sundry creditors and also

hand written documents showing the amount of fees collection

and other details. So far as these documents are concerned they

are having connection to the assessee society and it cannot be

said that Ld. AO proceeded without having any adverse material

in its possession. We, therefore, find no merit in this ground no.1

raised by the assessee and the same stands dismissed.

CIT(A) erred in confirming the finding of Ld. AO treating the

assessee of carrying out business and thus assessing income u/s

28 of the Act. We find that assessee society is registered under the

M.P. Society Registration Act,1973, holds registration u/s 12AA of

the Act since 20.03.2008. The object of the society is imparting

education. Trinity Institute of Technology and Research (institute)

is the college established under the assessee society offering

various courses to the students. The assessee society is approved

by various bodies like All India Counsel of Technical Education

(AICTE), National Council for Teachers Education (Statutory body

of Government of India) and also approved by Director of

Technical Education, Government of India. It is also affiliated to 58

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 Rajiv Gandhi Pradhoygik Vishwavidyalay and Barkatullah

University, Bhopal. Except for the allege seized loose papers

which only indicates some accounting figures that also for a

particular period nothing else has been brought before us which

could question the genuineness of the activity of imparting

education being carried out by the assessee society. All the

discussion are only confined to the loose papers. Revenue

authorities have not disputed the fact that the college owned by

the society are running regularly for imparting education under

various streams for last many years, under the approval of related

organizations of Central Government.

26a. We, therefore, under the given facts and circumstances, are

of the considered view that both lower authorities erred in

treating income of assessee as business income. We are of the

view that assessee is not carrying out any business of profession

and it is established that the assessee is a charitable society

running for charitable purpose and imparting education through

its colleges and institutions and the objects of the assessee

society failed under the provisions of section. 2(15) of the Act and

is not in the nature of advancement of any other object of general

public nor it is involved in carrying out of any activity in the 59

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 nature of trade, commerce or business. Therefore neither the

proviso to section 2(15) are applicable to the assessee nor it can

be held that assessee is carrying out business of profession.

Thus, ground No.2 of the assessee appeal is allowed.

salary expenditure of Rs.20,48,173/- we find that based on the

seized loose papers LPS-11, the Ld. AO alleged that the assessee

has paid bogus salary of Rs.20,48,173/-. On the basis of this

addition which is a working done on a unsigned paper prepared

by an unknown person contains the name of employee, cash,

cheque and details for months from April 2009 to Feb 2010. We

also find that salary paid both by cheque and in cash to teaching

and non-teaching staff amounts to Rs.1,22,56,751/- and out of

this amount of the alleged bogus salary of Rs.20,48,173/- is

reduced, the balance salary payment of Rs. 1,02,08,578/-.

However in the audited income and expenditure account of the

assessee salary expenses is shown at Rs.1,00,02,326/-. It is a

settled law that any document can be either accepted as a whole

or denied in its entirety. When the salary expenditure showing in

the income and expenditure account is less than the alleged amount shown in the loose sheets, there remains no justification of disallowing the

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 salary expenditure. Even otherwise except these loose papers no

other incriminating material was found. There is no statement of

any employee stating that they were paid higher amount in

cheque and difference amount was repaid by them to the

members of the society. No appropriate account was taken by the

ld. AO for cross checking contents of seized loose sheets with the

concerned employee. Hon'ble Apex Court in the case of V.C.

Shukla and Common Cause (A registered society) 30 ITJ 197 has

held that independent evidence is necessary as to the

trustworthiness of those entries which is a requirement to fasten

the liability. It is also held that meaning of account books would be

spiral note book/pad but not loose sheets.” In the instant case,

the alleged seized documents on the basis of which disallowance

of bogus salary has been made are merely loose sheets which are

not corroborated any other evidence to prove the contents of such

loose papers. We, accordingly are of the considered view that Ld.

CIT(A) erred in sustaining the disallowance of bogus salary of Rs.

20,48,173/- and the same deserves to be set aside. Ground no.3

raised by the assessee is allowed.

5,61,877/- to Mr. Vijay Hariramani, (one of the trustees) based 61

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 on the seized loss sheet and violation of provisions of section

13(1)(c) of the Act. Assessee has also challenged that both the

lower authorities erred in denying exemption claimed u/s 11 & 12

of the Act based on the observation that the payment of

Rs.5,61,877/- has been made to the trustees from the funds of

the society.

28a. We find that in the alleged loose sheets placed at page 9 of

assessment order there is a summary of transactions for the

period 01.04.2009 to 30.06.2010 including consolidated figures

for assets expenses, liabilities source of funds etc. In the last line

of the sheet is mentioned that “shortage of cash, (Vijay Sir) as on

30.06.2010” and an amount of Rs.5,61,877/- is mentioned

against it. Prima facie, it seems that the alleged figure of

Rs.5,61,877/- is linked to Vijay sir and the date is 30th June 2010

which falls under the A.Y. 2011-12. However, Ld. AO has made

the addition for A.Y. 2010-11. This fact in itself proves that the

action of the Ld. AO of making addition during A.Y. 2010-11 was

wrong. Also it is evident from the assessment order that this

particular issue placed at page 9 of the assessment order, there

are various other items with figures mentioned in front of them.

Ld. AO had not made any comment nor made any efforts to 62

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 examine the correctness of these figures, Ld. AO has merely

picked up some figures as per his comfort which shows that

either the remaining entries are not material or they are merely

rough jottings. It is also not proved that Mr. Vijay Hariramani has

taken money because in the alleged loose sheets only says

shortage of cash with mentioned to Vijay Sir. It nowhere indicates

that the alleged sum of Rs. 5,61,877/- has been taken by Mr.

Vijay Hariramani from the society. Under these given facts and

circumstances of the case, we are of the view that the alleged

addition of Rs.5,61,877/- has been made by the Ld. AO merely on

surmises and conjectures which deserves to be deleted. We

accordingly order so and set aside the finding of Ld. CIT(A)

pertaining to this issue and delete the addition of Rs. 5,61,877/-

and allow ground no.4 & 5 raised by the assessee.

29.Apropos to ground no.6 pertaining to addition of Rs.

8,47,694/- for suppressed unrecorded fees, we find that Ld. AO

based on loose sheets seized during the search, copy of which is

placed at page 12 of the assessment order, came to conclusion

that the society has suppressed its income received from fees

collection to the tune of Rs. 69,70,505/-. To arrive at this figure

Ld.AO reduced the fees collection of Rs.1,96,50,938/-shown in the 63

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 income and expenditure account against fees of Rs. 2,66,21,443/-

appearing in the alleged loose sheets. Thereafter when the matter

travelled before Ld. CIT(A), he sustained the addition of Rs.

8,47,694/- observing as follows:-

Ground No.7: through this ground of appeal the appellant has challenged the addition of Rs.69,70,505/- on account of suppression of fees. The AO made the addition by adopting the fees collection at Rs.2,66,21,443/- instead of Rs.1,96,50,938/-. A per the income and expenditure the total fees collection of the appellant is at Rs.1,96,50,938/- from the figures of loose papers. The actual receipts comes at Rs.2,57,73,749/- instead to Rs. 2,66,21,443/- as adopted by AO. The actual receipt of the appellant is as under:- Particular Amount Tuition fee & development fee 19012937 Allied fees 57250 Other income 174900 Bus receipts 2781375 Hostel fees 21000

Advance fees as on 31.03.2010 6325612 Less: opening advance fees as on 31.03.2009 2930825 3394787

Caution money as on 31.3.2010 694500 Less: opening caution money as on 31.3.2009 363000 331500 25773749 Therefore, the difference come at Rs.847694/-(Rs.2,66,21,443- Rs.2,57,73,749). Therefore the addition made by AO to the extent of Rs.8,47,694/- is confirmed the appellant will get relief of Rs.61,22,811/- . Therefore, the appeal on this ground is partly allowed.

29a. From perusal of the alleged loose sheet which is neither

signed no the author of it is known we observe that some jottings

of fees collection, major expenses, bank loan, unsecured loan,

assets are written. Prima facie, it looks to be a some estimate or

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 projection or rough jottings which may have been carried out at

any particular time. It in itself indicates that this sheet is a dumb

document/rough jottings which cannot be correlated to the actual

figures for F.Y. 2009-10, in view of the judgment of Hon'ble

Supreme Court in the case of V.C. Shukla and Common Cause

(supra). Such loose sheets are not signed and author of such

sheet is not known. The same cannot be treated as part of the

regular books of accounts of assessee, therefore, entries in such

loose sheets are irrelevant. Even otherwise the Ld. AO has taken a

particular version whereas as Ld. CIT(A) has taken another

version which raises doubts on the correctness of the loose sheets

and it further lays emphasis that this sheets is merely a rough

jotting. We, therefore, in absence of any corroborative evidence

brought on record by both lower authorities and Ld. CIT(DR) find

no justification in finding of Ld. CIT(A) sustaining the addition of

Rs. 8,47,694/- on account of unrecorded fees of the assessee and

the same is directed to be deleted. Thus, ground no.6 of the

assessee’s appeal is allowed.

challenged the finding of Ld. CIT(A) not allowing the deduction for

capital expenditure of Rs. 3,25,76,619/- incurred towards 65

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 application of income. We are of the view that since we have

already held that Ld. Pr. CIT erred in cancelling the registration of

the assessee society u/s 12AA(3) & 12AA(4) of the Act, and also

held that the assessee is not carrying out any business or

profession nor it is falling under the proviso to u/s 2(15) of the

Act. We have also held that the assessee is a charitable society

carrying out genuine activities for its charitable objects falling

under the provision of section 2(15) of the Act and is therefore

eligible for benefit of exemption u/s 11 & 12 of the Act. We have

already held that the ld. AO erred in making the additions for A.Y.

2010-11 on the basis of loose sheets and all these disallowance

and additions have already been deleted by us. Therefore, under

the given facts and circumstances of the case, the assessee is

eligible to claim the deduction for capital expenditure of Rs.

3,25,76,619/- u/s 11 & 12 of the Act on an application of

societies fund for charitable activity. Thus relevant finding of Ld.

CIT(A) is set aside. Ground No.7 of the assessee’s appeal is

allowed.

31.In the result, appeal of the assessee in ITANo.548/Ind/2019

for A.Y. 2010-11 is partly allowed.

Shri Jairam Education Society ITA No.90 & 548/Ind/2019 548/Ind/2019 are partly allowed.

The order pronounced as per Rule 34 of ITAT Rules, 1963

on 13.10.2021.

Sd/- Sd/-

(RAJPAL YADAV) (MANISH BORAD) VICE PRESIDENT ACCOUNTANT MEMBER

�दनांक /Dated : 13.10. 2021 Patel/PS Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore