COMMISSIONER OF INCOME TAX-II JALANDHAR vs. M/S APEEJAY EDUCATION SOCIETY

ITA/402/2014HC Punjab & HaryanaPHHC01109555201410 March 2015Author: MR. JUSTICE A.B. CHAUDHARI,MR. JUSTICE M.M. AGGARWAL9 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose and upheld the Tribunal's order. The Court noted that the Commissioner had initially granted registration under Section 12AA after satisfying himself about the genuineness of the Assessee's activities. While Section 12AA(3) allows cancellation if activities are not genuine or not in accordance with objects, the Court found that the Assessee runs 21 educational institutions across the country, demonstrating genuine educational activities. The Court emphasized that the alleged bogus software purchase from M/s. WSL, based on a statement by one individual, was insufficient grounds for cancelling registration granted in 1999. The Assessee had provided evidence of software installation and significant expenditure (91.71% of receipts for AY 2004-05). The Court relied on the principle that registration cannot be withdrawn on mere apprehension or presumption, citing Commissioner of Income Tax vs. Red Rose School, (2007) 163 TAXMAN 19 (All), which stated that genuineness of activities must be seen in consonance with the objects and not be mere camouflage. The Court concluded that the Commissioner was not justified in withdrawing the registration.

What were the facts?

The Commissioner of Income Tax-II, Jalandhar (Revenue) filed an appeal against the Income Tax Appellate Tribunal's (Tribunal) order. The Tribunal had set aside the Commissioner's order dated 25.03.2013, which had withdrawn the registration granted to M/s. Apeejay Education Society, Jalandhar (Assessee) under Section 12AA(3) of the Income Tax Act, 1961, effective from assessment year 2004-05. The withdrawal was based on the finding that the Assessee's activities were not genuine, citing alleged bogus purchase of software from M/s. Washington Software Ltd. (WSL) and siphoning of funds. The Assessee's registration under Section 12AA was initially granted on 13.05.1999, effective from 01.04.1998. The Revenue's grievance stems from the Tribunal's decision to restore this registration.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was correct in law in allowing registration rejected by the CIT under Section 12AA(3) of the Income-tax Act, 1961, given the activities of the society were found non-genuine due to alleged bogus software purchases and siphoning of funds? 2. Whether the Tribunal was correct in law in ignoring that the assessee society obtained accommodation entries from M/s. Washington Software Ltd. in the form of bogus software bills, rendering its activities non-genuine and not in accordance with its objects? 3. Whether the Tribunal was correct in law in holding that the assessee institute is eligible for registration under Section 12AA of the IT Act, despite the CIT needing to satisfy himself about the genuineness of all activities, not just the objects and primary activity of imparting education? The Revenue argued that the Assessee's consistent conduct from 2003-04 to 2010-11, including taking accommodation entries from M/s. WSL, justified the CIT's order. The Assessee contended that it runs 21 educational institutions, imparts education, and incurs expenses exceeding 85% of its receipts, aligning with Section 11(1) of the Act. The Tribunal found no adverse findings regarding the Assessee's educational activities or their alignment with its objects.

Which sections of the Income-tax Act were involved?

Section 260A,Section 12AA,Section 12AA(3),Section 13(1)(c),Section 13(3),Section 12A,Section 11,Section 12

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 10.03.2015 The Commissioner of Income Tax-II, Jalandhar ....Petitioner(s) Versus M/s. Apeejay Education Society, Jalandhar ...Respondent(s) CORAM: HON'BLE MR. JUSTICE S.J. VAZIFDAR, ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE G.S.SANDHAWALIA Present: Mr. Vivek Sethi, Advocate, for the appellant. G.S. SANDHAWALIA (J.) The present judgment shall dispose of two Income Tax Appeals i.e. ITA Nos. 402 and 403 of 2014, as common questions of facts and law are involved in both the appeals. For the purpose of convenience, the facts have been taken from ITA No. 402 of 2014, Commissioner of Income Tax- II, Jalandhar vs. M/s. Appejay Education Society.

The appeal by the revenue has been filed under Section 260A of the Income Tax Act, 1961 (in short 'the Act') against the order of the Income Tax Appellate Tribunal, Amritsar Bench passed in ITA No. 228 (ASR)/2013 dated 08.05.2014. The revenue is aggrieved against the order of the Tribunal whereby, the order dated 25.03.2013 passed by the Commissioner of Income Tax-II, Jalandhar withdrawing the registra

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