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Facts
Maruthi Educational Society, running educational institutions, was subjected to a search and seizure operation which revealed alleged collection of excess fees (capitation/donation) and diversion of funds. Based on these findings, the PCIT (Central) cancelled the society's registration under Section 12AB(4)(ii) of the Income Tax Act for AY 2019-20 and AY 2022-23, effective retrospectively, citing specified violations related to non-genuine activities and application of income for non-charitable objects.
Held
The Tribunal quashed the PCIT's order, holding that the cancellation of registration was based on suspicion and surmises rather than concrete evidence of specified violations under Section 12AB(4) of the Act. It noted that the seized material and cash were either disowned by individuals or assessed in their hands, indicating uncertainty of ownership by the society. The Tribunal found no complaints from students or regulatory bodies regarding capitation fees and affirmed that the society maintained proper books of accounts, concluding that the conditions precedent for cancellation of registration were not satisfied.
Key Issues
Whether the PCIT (Central) was justified in cancelling the society's registration under Section 12AB(4)(ii) of the Income Tax Act, 1961, based on allegations of collecting excess fees and diverting funds, and whether the conditions precedent for such cancellation were adequately met and proven by the revenue.
Sections Cited
12AB(4)(ii), 12AA, 132, 143(3), 11, 12, 13, 119, 139(1), 148, 115TD, 10(22), 10(22A), 13(1)(d)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘A‘ Bench, Hyderabad
PER BENCH: These appeals filed by the appellant society are directed against the orders of the learned Principal Commissioner of Income Tax-(Central), Hyderabad, dated 27.03.2025 pertains to A.Y. 2019-20 and dated 21.03.2025 pertains to A.Y. 2022-23 u/s 12AB(4)(ii) of the Income Tax Act, 1961 (for short “the Act”). Since common issues are involved in these two appeals, these appeals were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity. First, we take up appeal in ITA.No.873/Hyd/2025 for the assessment year 2019-20 as “lead” appeal.
The appellant/assessee has raised the following grounds in the instant appeal : 1. “The order passed by the Learned Pr. Commissioner of Income Tax (Central), Hyderabad, is incorrect both on facts and law.
The Ld. PCIT(Central) fails to understand that the society is running the educational institutions on independent basis and the trustees /management of the society are not related in the affairs of society in running the educational institutions.
The Ld. PCIT (Central) erred in considering the fact that the hostel receipts belong to the society, when the same is already assessed in the hands of the individual trustees. Such action of the Ld. PCIT (Central) is contradictory and not valid.
The Ld. PCIT (Central) failed to consider that the Assessing Officer (AO) had completed assessment by treating the receipts as