PURAN MURTI EDUCATIONAL SOCIETY,SONEPAT vs. CIT E, CHANDIGARH

ITA 3120/DEL/2026Status: DisposedITAT Delhi30 September 20263 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the rejection of the assessee's application for registration under Section 12A(1)(ac)(ii) was not justified. The Tribunal found that the assessee's explanation regarding the unsecured loans, including the fraudulent actions of Manoj Kumar and the registration of an FIR, was credible. The provision of ITRs and bank statements of lenders further supported the assessee's claim. The Tribunal also noted that the assessment order for AY 2022-23 was completed at returned income, which did not raise adverse inferences on the borrowed funds. Regarding the alleged violation of PF contribution law, the Tribunal opined that such technical breaches, unless they pertain to laws regulating the constitution or charitable activities of the assessee, cannot be grounds for rejection. The Tribunal emphasized that the scope of examination at this stage is limited to the genuineness of the assessee's activities and the absence of violations of specific laws. The Tribunal allowed the appeal, directing the Competent Authority to issue registration within four weeks.

What were the facts?

The assessee, Puran Murti Educational Society, filed an appeal against the order dated 27.02.2026 passed by the learned CIT(Exemption), Chandigarh (Competent Authority). The Competent Authority rejected the assessee's application for registration under Section 12A(1)(ac)(ii) of the Income Tax Act, 1961. The rejection was primarily based on the assessee's failure to explain the source, utilization, and necessity of huge unsecured loans. The Competent Authority also noted concerns regarding non-compliance with TDS and PF contribution provisions as per the audit report. The assessee contended that one Manoj Kumar fraudulently obtained loans on their behalf and siphoned off funds, for which an FIR was registered. The assessee also claimed that unsecured loans were taken to repay secured loans and provided ITRs and bank statements of lenders. The assessee's counsel drew attention to an assessment order for AY 2022-23, where the scrutiny assessment was completed at returned income despite examining large borrowed funds.

What were the issues?

1. Whether the rejection of the assessee's application for registration under Section 12A(1)(ac)(ii) of the Income Tax Act, 1961, is justified on the grounds of unexplained unsecured loans and alleged non-compliance with TDS and PF provisions? Assessee's Contentions: - The unsecured loans were fraudulently obtained by one Manoj Kumar, who siphoned off funds, and an FIR has been registered in this regard. - Unsecured loans were taken to repay secured loans, and supporting documents (ITRs and bank statements of lenders) were furnished. - The assessment for AY 2022-23 was completed at returned income, indicating no adverse findings regarding borrowed funds. - Technical breaches like PF contribution violations should not be grounds for rejection unless they relate to laws regulating the constitution or charitable activities. Revenue's Contentions: - The Competent Authority rejected the application due to the assessee's failure to explain the source, utilization, and necessity of huge unsecured loans. - There were concerns regarding non-compliance with TDS and PF contribution provisions as noted in the audit report. - Alleged violation of provident fund contribution law was submitted as a ground.

Which sections of the Income-tax Act were involved?

Section 12A(1)(ac)(ii),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES, NEW DELHI

Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL

Pronounced: 30.09.2026

PER SHRI ANUBHAV SHARMA, JUDICIAL MEMBER:

This appeal filed by the assesse against the order dated 27.02.2026 passed by the Ld. CIT(Exemption),Chandigarh (for short “Competent Authority”) against the rejection of registration u/s 12A(1)(ac) (ii) of the Act.

ITA 3120/DEL/2026

2.

On hearing both sides we find that assessee’s application in Form 10AB u/s 12A(1)(ac)(ii) of the Act has been rejected primarily for the reason that appellant has failed to explain

The order continues below.

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