BADDI UNIVERSITY OF EMERGING SCIENCES & TECHNOLOGY,BADDI vs. DEPUTY / ASSISSTANT COMMISSIONER OF INCOME TAX, EXEMPTIONS, CIRCLE - 2, CHANDIGARH

आयकर अपीलीय अिधकरण,च�ीगढ़ �ायपीठ “ए” , च�ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: HYBRID MODE �ी लिलत कुमार, �ाियक सद� एवं �ी मनोज कुमार अ�वाल, लेखा सद� BEFORE: SHRI. LALIET KUMAR, JM & SHRI. MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No. 1097/Chd/ 2026 िनधा�रण वष� / Assessment Year : 2026-27 Baddi University of Emerging बनाम The CIT(E) Sciences & Technology Chandigarh Baddi University, Makhru Majra, Baddi, Solan, Himachal Pradesh, Baddi-173205 �ायी लेखा सं./PAN NO: AABTB6735C अपीलाथ�/Appellant ��थ�/Respondent आयकर अपील सं./ ITA No. 1098/Chd/ 2026 िनधा�रण वष� / Assessment Year : 2020-21 Baddi University of Emerging बनाम The Deputy/ Assistant CIT(E) Sciences & Technology Circle-2, Chandigarh Baddi University, Makhru Majra, Baddi, Solan, Himachal Pradesh, Baddi-173205 �ायी लेखा सं./PAN NO: AABTB6735C अपीलाथ�/Appellant ��थ�/Respondent आयकर अपील सं./ ITA No. 1101, 1102 & 1103/Chd/ 2026 िनधा�रण वष� / Assessment Year : 2026-27, 2022-23 & 2022-23 Baddi University of Emerging बनाम The Deputy/ Assistant CIT(E) Sciences & Technology Circle-2, Chandigarh Baddi University, Makhru Majra, Baddi, Solan, Himachal Pradesh, Baddi-173205 �ायी लेखा सं./PAN NO: AABTB6735C अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Tejmohan Singh, Advocate & Shri Vineet Khurana, C.A राज� की ओर से/ Revenue by : Smt. Jaishree Sharma, CIT, DR (Virtual) सुनवाई की तारीख/Date of Hearing : 07/07/2026 उदघोषणा की तारीख/Date of Pronouncement : 27/07/2026 आदेश/Order PER LALIET KUMAR, J.M: The present bunch of appeals arises out of the order passed by the Ld. CIT(E), Chandigarh, whereby the application filed by the assessee, Baddi

University of Emerging Sciences & Technology, seeking registration under section 12AB of the Income-tax Act, 1961, was rejected. Consequentially, approval sought under section 80G of the Act was also denied. The connected quantum appeals arise from the assessment orders wherein the Assessing Officer has made additions substantially on the basis of the same allegations which formed the foundation of the order passed by the Ld. CIT(E).

3 assessee. Accordingly, the application was examined with specific reference to the financial transactions reflected in the bank accounts, ledger accounts and dealings with related and associated entities.

4.1 The Ld. CIT(E), on examination of the bank statements, noticed that the assessee had entered into frequent financial transactions with certain concerns which, according to him, were not apparently connected with educational activities. He observed that there were several back-to-back credit and debit entries in the bank accounts and, prima facie, the assessee appeared to be acting as a conduit for movement of funds. In view thereof, a detailed notice dated 12.12.2025 was issued requiring the assessee to furnish, inter alia, copies of ledger accounts, agreements, invoices and supporting documents relating to transactions with entities such as Fairdeal Supplies Limited, Aalps Equitrade LLP, Manisha Vyas, Jia Foundation, GA Renewable Energy Pvt. Ltd., Success Point and others. The assessee was also required to explain the transactions with specified persons, furnish detailed narration and supporting documents for bank transactions exceeding Rs. 5,00,000/-, justify large cash withdrawals and explain various transactions reflected in the bank statements.

4.2 The assessee filed its reply dated 02.01.2026, enclosing ledger accounts and various explanations regarding the transactions. It was stated that complete ledger accounts of the concerned entities had been furnished and that no transactions had taken place with some of the entities referred to in the notice. The assessee further explained that substantial cash withdrawals reflected in the bank statements pertained to legitimate day-to-day administrative expenditure, miscellaneous expenses and operational contingencies of the University, for which corresponding ledger accounts were also produced. 4.3 However, the Ld. CIT(E) was not satisfied with the explanation furnished. In paragraph 4.1 of the impugned order, he observed that although ledger accounts had been produced, no agreements or invoices had been filed to establish the nature of transactions with the aforesaid concerns and,

4 therefore, according to him, the nature of receipts and payments remained unexplained. Further, in paragraph 4.2, after referring to certain ledger accounts, the Ld. CIT(E) recorded that there were frequent receipts and payments on a back-to-back basis indicating that the accounts of the assessee had been used for routing of funds. Reference was made, inter alia, to transactions with Jia Foundation, wherein an amount of Rs. 28,90,000/- was received on 14.03.2024 and returned on 16.03.2024, and the Ld. CIT(E) observed that such transactions were "tainted transactions" without any rationale and were not permissible for a charitable institution engaged in educational activities.

4.4 The Ld. CIT(E) further observed that there were substantial cash deposits in multiple tranches in the names of different persons on the same day, which, according to him, raised serious doubts regarding the genuineness of the source of cash and the intentions of the assessee. He also noted that despite being required to furnish detailed narration and supporting evidence for transactions exceeding Rs. 5,00,000/-, the assessee had only submitted copies of the bank books and had not furnished sufficient supporting documentation explaining the purpose of such transactions. According to the Ld. CIT(E), several instances of immediate receipt and transfer of funds suggested that the accounts of the assessee were being used merely for routing of funds.

4.5 The Ld. CIT(E) also referred to certain transactions wherein amounts received from Fairdeal Supplies Limited were allegedly transferred immediately to Aalps Equitrade LLP and Manisha Vyas, observing that such transactions had no direct nexus with the charitable objects of the institution. Further, it was noticed that payments had been made to Success Point towards promotional activities and procurement of admissions, which, according to the Ld. CIT(E), were contrary to the guidelines of the University Grants Commission prohibiting admission through commission or referral arrangements.

5 4.6 After considering the above aspects, the Ld. CIT(E) concluded that the financial records reflected routing of funds through multiple entities, lack of transparency, unexplained related-party transactions, large cash deposits and withdrawals, and transactions resembling accommodation entries rather than genuine charitable activities. Holding that the assessee had failed to establish the genuineness of its activities as contemplated under section 12AB of the Act, the Ld. CIT(E) rejected the application for registration under section 12AB. The rejection of registration consequently resulted in denial of approval under section 80G of the Act as well.

6.1 The Ld. AR invited our attention to the replies filed before the Ld. CIT(E) in response to the notices issued during the proceedings and submitted that complete ledger accounts, bank statements, financial statements, books of account and detailed explanations regarding each of the financial transactions were duly furnished. It was argued that despite the availability of these documents on record, the Ld. CIT(E) neither discussed nor recorded any finding as to why the explanations furnished by the assessee were unacceptable. According to the Ld. AR, the impugned order merely reproduces the allegations but does not deal with the defence raised by the assessee.

6 6.2 The Ld. AR specifically drew our attention to paragraphs 4.1 and 4.2 of the impugned order, wherein the Ld. CIT(E) has observed that the assessee was involved in "tainted transactions" and had allegedly used its bank accounts for routing of funds. It was vehemently argued that such serious findings have been recorded without there being any specific show-cause notice confronting the assessee with the allegation that the transactions were tainted in nature or amounted to accommodation entries. It was submitted that although certain details were sought by the Ld. CIT(E), no notice was ever issued informing the assessee that its explanation was proposed to be rejected on the ground that the transactions were "tainted" or constituted routing of funds. Thus, the assessee was deprived of an effective opportunity to explain the circumstances leading to such transactions.

6.3 The Ld. AR further submitted that the Ld. CIT(E) has observed that agreements and invoices had not been furnished in respect of certain transactions. However, according to the Ld. AR, the authorities ignored the fact that complete ledger accounts, supporting books of account and financial records had already been placed before them and the nature of each transaction had been duly explained. It was argued that the Ld. CIT(E) could not have rejected the application merely because certain agreements or invoices were not enclosed, particularly when no adverse finding had been recorded regarding the correctness of the books of account or the authenticity of the financial records.

6.4 It was further submitted that the financial transactions referred to by the Ld. CIT(E) was a genuine business and financial transaction undertaken for and on behalf of the University and for the benefit of the trust itself. The movement of funds between related entities was duly recorded in the books of account and was fully supported by corresponding ledger accounts. The Ld. AR submitted that merely because certain amounts were received and repaid within a short span of time could not automatically lead to an inference that the transactions were non-genuine or constituted accommodation entries.

6.5 The Ld. AR further argued that the observations made by the Ld. CIT(E) regarding routing of funds, accommodation entries and tainted transactions are serious allegations carrying civil consequences. Such conclusions could not have been drawn without first confronting the assessee with the precise allegations and thereafter objectively considering its explanation. It was submitted that the impugned order suffers from complete non-application of mind inasmuch as no independent examination of the assessee's explanation has been undertaken.

6.6 It was also contended that the assessee is a well-established educational institution imparting education and carrying on charitable activities for several years. Registration under section 12AB is the statutory recognition enabling the institution to continue claiming exemption under the Act. Therefore, before denying such registration, the prescribed authority was required to undertake a fair and objective enquiry strictly in accordance with law.

6.7 The Ld. AR further submitted that the consequential rejection of approval under section 80G is solely founded upon the rejection of registration under section 12AB. Therefore, once the order passed under section 12AB is found to be unsustainable, the order passed under section 80G also cannot survive independently.

6.8 Coming to the connected quantum appeals, the Ld. AR submitted that the additions made by the Assessing Officer are entirely based upon the same allegations regarding routing of funds and financial transactions which constitute the foundation of the order passed by the Ld. CIT(E). It was argued that if the very basis of those allegations is remitted back for fresh adjudication, the connected assessment orders also deserve to be restored to the file of the Assessing Officer.

6.9 The Ld. AR, therefore, prayed that the impugned order rejecting registration under section 12AB be set aside and the matter be restored to

8 the file of the Ld. CIT(E) with appropriate directions to consider all the documentary evidence and explanations furnished by the assessee after granting adequate and effective opportunity of hearing. It was further prayed that the consequential appeal under section 80G and the connected quantum appeals also be restored to the respective authorities for fresh adjudication in accordance with law.

7.1 The Ld. DR submitted that the bank statements and ledger accounts revealed repeated back-to-back receipts and payments involving several entities having no apparent nexus with the educational activities of the University. Such transactions, according to the Revenue, justified the doubts entertained by the Ld. CIT(E) regarding the genuineness of the activities carried on by the assessee.

7.2 The Ld. DR further submitted that despite being afforded several opportunities, the assessee failed to furnish complete supporting documents such as agreements, invoices and detailed narration of major financial transactions. According to the Revenue, the explanations furnished by the assessee were general in nature and did not satisfactorily explain the movement of substantial funds through different entities.

7.3 It was argued that the Ld. CIT(E) has categorically recorded findings regarding unexplained routing of funds, substantial cash deposits, back-to- back financial transactions and payments made to entities involved in promotional activities for admissions. Such findings, according to the Ld. DR,

9 were based upon the material available on record and, therefore, no interference was called for.

7.4 The Ld. DR further submitted that the registration under section 12AB is not a matter of right and the statutory authority is required to record satisfaction regarding the genuineness of the activities before granting registration. Since the Ld. CIT(E) was not satisfied on the basis of the material produced by the assessee, the rejection of the application was justified in law.

7.5 With regard to the appeal under section 80G, the Ld. DR submitted that once registration under section 12AB stood rejected, the consequential rejection under section 80G was legally sustainable.

7.6 Similarly, in respect of the connected quantum appeals, the Ld. DR relied upon the reasoning recorded by the Assessing Officer and submitted that the additions were made on the basis of material gathered during assessment proceedings. It was, therefore, prayed that the impugned orders passed by the authorities below be upheld and the appeals filed by the assessee be dismissed. 8. We have heard the rival submissions, perused the impugned orders passed by the authorities below, carefully examined the material available on record and have also considered the statutory provisions governing grant of registration under section 12AB of the Income-tax Act, 1961.

8.1 The present batch of appeals comprises (i) the appeal against rejection of registration under section 12AB of the Act, (ii) the consequential rejection of approval under section 80G of the Act, and (iii) the connected quantum appeals arising out of the assessment orders passed by the Assessing Officer. Since the issues involved in all the appeals arise from a common set of facts and are intrinsically inter-linked, all the appeals have been heard together and are being disposed of by this consolidated order.

10 8.2 At the outset, we may observe that the scope of enquiry while considering an application under section 12AB of the Act is well settled. The prescribed authority is required to satisfy itself regarding the charitable objects of the institution and the genuineness of its activities. Such satisfaction, however, is required to be arrived at on the basis of objective consideration of the material available on record and after complying with the principles of natural justice. The satisfaction contemplated under the statute cannot be founded merely upon suspicion, conjectures or presumptions, particularly when the authority proposes to record findings having serious civil consequences.

8.3 From a careful reading of the impugned order passed by the Ld. CIT(E), we notice that the rejection of registration has substantially been founded upon the observations that the assessee had entered into certain financial transactions with various entities; that there were back-to-back receipts and payments; that certain amounts were received and repaid within a short span of time; that there were cash deposits in multiple tranches; and that the assessee was allegedly routing funds through different entities. On the basis of these observations, the Ld. CIT(E) ultimately concluded that the assessee was engaged in "tainted transactions" and that its activities were not genuine.

8.4 However, after examining the record, we find that the assessee had furnished replies to the notices issued by the Ld. CIT(E) and had also produced ledger accounts, bank statements and other financial records in support of its explanation. The impugned order itself records that the assessee filed replies. Nevertheless, except for reproducing certain portions of the explanation, we do not find any meaningful discussion as to why the explanation offered by the assessee has been rejected. The order does not analyse the documentary evidence produced by the assessee, nor does it record any finding demonstrating that such evidence was either false, fabricated or otherwise unacceptable. A quasi-judicial authority is expected not only to notice the explanation furnished by a party but also to objectively deal with the same before recording adverse findings.

11 8.5 Further on careful examination of paragraphs 4.4, 4.5 and 4.6 of the impugned order, we are of the opinion that the Ld. CIT(E), after referring to certain bank transactions, has concluded that the applicant was receiving funds and immediately transferring them to other entities. The CIT€ has concluded that such transactions were not genuine and not relatable to the charitable objects, and the assessee was using its bank accounts for routing of funds. Further, these payments made to Success Point violated the UGC Guidelines relating to admissions, and finally the Ld. CIT(E) concluded that the pattern of transactions resembled fund circulation and accommodation entries. On the basis of the above, the Ld. CIT(E) has doubted the genuineness of the activities of the assessee and rejected registration under section 12AB.

8.6 However, from the material placed before us, we are unable to find that the assessee was ever specifically confronted with these proposed conclusions. The notice issued by the Ld. CIT(E) merely required the assessee to furnish ledger accounts, agreements, invoices, narration of transactions and supporting documents in respect of certain financial dealings. It did not disclose that the authority proposed to characterise the transactions as "routing of funds", "tainted transactions", "accommodation entries", or to infer that the assessee was acting as a conduit for the movement of funds. Likewise, no notice appears to have been issued proposing to hold that the payments made to Success Point were in violation of the UGC Guidelines or that such payments would disentitle the assessee from registration under section 12AB.

8.7 In our view, there has been a clear violation of the principles of natural justice. The learned CIT(E) was duty-bound to afford the assessee a reasonable opportunity to be heard before drawing conclusions from the documents. An assessee cannot be expected to rebut adverse inferences or allegations that were never confronted to it.

12 8.8 We further find that paragraphs 4.4 to 4.6 record categorical findings that the transactions were not genuine, that the accounts were being used for routing of funds, that the institution was engaged in activities resembling fund circulation or accommodation entries and that the payments to Success Point were impermissible under the UGC Guidelines. These are not tentative observations but definitive conclusions having serious civil consequences upon the statutory recognition of the assessee as a charitable institution. Before recording findings of such gravity, fairness demanded that the assessee be specifically confronted with each proposed adverse inference and be afforded an effective opportunity to explain the same with reference to the relevant agreements, correspondence, bank records, accounting entries and other contemporaneous evidence. The impugned order does not indicate that any such opportunity was afforded.

8.9 We also find merit in the contention of the learned Authorised Representative that the explanations furnished by the assessee were not objectively examined before the adverse conclusions were recorded, despite the fact that the document explaining the conduct of the assessee was available on record. In our view, the Ld. CIT(E) should have examined objectively

I. Whether the financial transactions were genuinely undertaken for and on behalf of the educational institution, II. Whether the transactions had any nexus with its charitable objects, III. Whether the payments to Success Point were in the nature of permissible promotional expenditure or otherwise, and IV. Whether the movement of funds through Fairdeal Supplies Ltd., Aalps Equitrade LLP, Jia Foundation and other entities was supported by lawful commercial or institutional arrangements.

8.10 In our view, the above-noted issues cannot be concluded merely on the basis of suspicion arising from the pattern of bank entries, particularly without first confronting the assessee with the precise allegations and

13 examining the supporting records. In fact thread bear examination of the facts and financials were required to record any adverse findings. Registration under section 12AB is a statutory recognition of the charitable character and genuineness of the activities of an institution. Rejection of such registration has serious legal and financial consequences. Therefore, the Ld. CIT(E) is required to adopt a fair, objective and judicious approach while recording satisfaction under the statute. Findings involving allegations of fund routing, accommodation entries or non-genuine activities must necessarily be preceded by due notice of the exact allegations and meaningful consideration of the assessee's explanation. The procedure adopted in the present case falls short of this requirement.

8.11 Having regard to the totality of the facts and circumstances, we are satisfied that the impugned order cannot be sustained on account of violation of the principles of natural justice. We, therefore, set aside the impugned order and restore the matter to the file of the Ld. CIT(E) for de novo adjudication. The Ld. CIT(E) shall specifically confront the assessee with every adverse material, allegation and inference proposed to be relied upon, including the allegations relating to routing of funds, accommodation entries, alleged violation of UGC Guidelines, and the genuineness of the impugned financial transactions; shall examine all documentary evidence, agreements, ledger accounts, bank statements and explanations furnished by the assessee; and thereafter pass a comprehensive, reasoned and speaking order strictly in accordance with law. We clarify that we have expressed no opinion on the merits of the allegations, and all issues are kept open for fresh adjudication. 9. Coming to the appeal relating to approval under section 80G of the Act, we notice that the rejection of approval under section 80G is purely consequential to the rejection of registration under section 12AB. Once the foundational order under section 12AB has itself been set aside and restored for fresh adjudication, the consequential order rejecting approval under section 80G cannot independently survive. Accordingly, the order passed

14 under section 80G is also set aside and the matter is restored to the file of the Ld. CIT(E) to decide the application afresh after passing an appropriate order in the proceedings under section 12AB. 10. We now advert to the connected quantum appeals. We find from the assessment orders that the additions made by the Assessing Officer substantially proceed on the very same allegations regarding routing of funds, genuineness of financial transactions, movement of money between related concerns and other financial dealings, which also constitute the foundation of the order passed by the Ld. CIT(E). Thus, the factual foundation in both the proceedings is substantially common.

10.1 If the findings recorded by the Ld. CIT(E), which constitute the very basis of the assessment proceedings, are themselves pending fresh adjudication, permitting the assessment orders to remain would inevitably result in inconsistent and conflicting findings by different authorities on the same factual issues. Judicial discipline and the interest of justice require that such inconsistency should be avoided.

10.2 Accordingly, we deem it appropriate to set aside the assessment orders also and restore the connected quantum appeals to the file of the Assessing Officer. The Assessing Officer shall re-adjudicate the issues afresh after the proceedings before the Ld. CIT(E) attain finality. While doing so, the Assessing Officer shall independently examine the material that may be produced by the assessee, afford adequate opportunity of hearing, consider the findings ultimately recorded by the Ld. CIT(E), and thereafter pass a fresh reasoned and speaking order strictly in accordance with law.

10.3 Needless to observe, the assessee shall extend full cooperation in the remand proceedings before both the authorities and shall produce all relevant books of account, agreements, supporting documents and evidences as may be required. In the event of failure on the part of the assessee to avail the opportunities so granted, the Ld. CIT(E) as well as the

15 Assessing Officer shall be at liberty to decide the respective proceedings on the basis of the material available on record and in accordance with law.

Order pronounced on 27/07/2026

Sd/- Sd/- मनोज कुमार अ�वाल लिलत कुमार (MANOJ KUMAR AGGARWAL) (LALIET KUMAR) लेखा सद�/ ACCOUNTANT MEMBER �ाियक सद� /JUDICIAL MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��थ�/ The Respondent 3. आयकर आयु�/ CIT 4. आयकर आयु� (अपील)/ The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR-9A CHANDIGARH