CMR EDUCATIONAL SOCIETY,HYDERABAD vs. DCIT., CENTRAL CIRCLE-2(1), HYDERABAD

Facts

CMR Educational Society, involved in education, had its registration under Section 12AA cancelled by the PCIT (Central) for A.Y. 2019-20 and 2022-23. This followed a search operation that allegedly revealed collection of capitation fees, diversion of funds for non-charitable purposes, and non-maintenance of proper books of account. The society contended that hostel fees were collected by individual trustees and declared in their personal returns, no capitation fees were collected, and they maintained proper books.

Held

The Tribunal quashed the PCIT's cancellation order, holding that it was based on suspicion and surmises rather than conclusive evidence of specified violations under Section 12AB(4). It noted that the cash seized was assessed in the trustees' individual hands, indicating the AO's uncertainty about ownership, and found no material proof that the society existed for non-charitable purposes or that its activities were not genuine. The Tribunal also observed that the retrospective application of amended provisions was inappropriate for the assessment year.

Key Issues

1. Whether the PCIT (Central) had sufficient grounds and jurisdiction to cancel the appellant society's registration under Section 12AB(4)(ii) based on alleged collection of capitation fees and diversion of funds. 2. Whether the cancellation order was valid when based on materials from a search operation, given the lack of concrete evidence and the assessee's claims of proper accounting and individual declarations by trustees.