M.M. PATEL PUBLIC CHARITABLE TRUST,SOLAPUR vs. PCIT- CENTRAL, PUNE, PUNE

ITA 1130/PUN/2024Status: DisposedITAT Pune21 February 202572 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the PCIT erred in cancelling the registration retrospectively from April 1, 2008, and also erred in cancelling the registration under Section 12AA(3) and 12AA(4) without placing material evidence to indicate that the assessee society was not running for its charitable objects or that its activities were not genuine. The Tribunal noted that issues arising from loose papers alleging misappropriation or ambiguity in expenses can be addressed during assessment proceedings, with additions made to income if necessary. However, the remaining income should not be affected by denying the benefit of exemption under Sections 11 and 12. The Tribunal found that the assessee's activities were genuine and satisfied the trust's objects. Therefore, even if additions were made regarding alleged cash receipts for stipend, doctors' salary, or capitation fees, the benefit of Section 11 could only be denied to the extent of such discrepancies, but the registration itself should not be cancelled. The Tribunal followed the decision in Shri Jairam Education Society Vs. PCIT, holding that the PCIT erred in cancelling the registration solely on the ground of alleged documents when the trust's activities were genuine. The finding of the PCIT was set aside, and grounds of appeal 5 to 9 were allowed. The Tribunal also held that the PCIT erred in cancelling the registration granted under Section 12A on February 16, 2001, and under Section 12A read with Section 12AB for the period from April 1, 2021, onwards. The registration stands restored. Grounds of appeal 1 and 2 were dismissed, while grounds 3 to 10 were allowed. Ground 10 was allowed because the 'specified violation' under Explanation clause (f) to Section 12AB(4) was based on documents from FY 2019-20 to 2021-22, prior to the amendment effective April 1, 2022.

What were the facts?

The assessee, M.M. Patel Charitable Trust, runs a Medical College and Hospital. It was granted registration under Section 12A of the Income-tax Act, 1961, on February 16, 2001, and later provisional registration under Section 12A(1)(ac)(i) from AY 2022-23 to 2026-27. A search and seizure action under Section 132 was conducted on August 25, 2022, covering the assessee. Incriminating documents were allegedly found. During the pendency of assessment proceedings under Section 153A, the Principal Commissioner of Income Tax (PCIT), Pune, issued a show cause notice on July 21, 2023, proposing cancellation of registration under Section 12A/12AA/12AB. The PCIT alleged issues arising from the search, including partial receipt of staff salary, doctors' salary, PG stipend, and capitation fees in cash. The PCIT cancelled the registration on March 27, 2024.

What were the issues?

1. Whether the PCIT (Central), Pune, erred in assuming jurisdiction under Section 12A/12AA/12AB of the Income-tax Act, 1961, and proceeding to cancel the registration, as the jurisdiction for Section 12A/12AA/12AB matters prior to the search resided with the CIT(Exemption) and could not be transferred via an order under Section 127. 2. Whether the PCIT (Central), Pune, erred in cancelling the registration under Section 12A/12AA for the period from April 1, 2019, to March 31, 2021, without cogent reasons. 3. Whether the registration under Section 12A read with Section 12AB for the period from April 1, 2021, onwards was cancelled without issuing a show cause notice and without cogent reasons. 4. Whether the PCIT (Central), Pune, erred in holding that the activities of the appellant were not genuine and funds were deployed for personal benefit, relying heavily on search statements despite their retraction. 5. Whether the PCIT (Central), Pune, erred in disregarding retraction affidavits and considering them 'planned', and in not considering the statement of Mehul Patel refuting allegations. 6. Whether the cancellation of registration was premature as assessment proceedings arising from the search had not concluded. 7. Whether the PCIT erred in concluding that the appellant made specified violations under Explanation clause (f) to Section 12AB(4) in the absence of any order or decree under the relevant act. Assessee's Contentions: The PCIT lacked jurisdiction to cancel registration under Section 12AB(4). Adverse decisions would pre-empt ongoing assessment proceedings. There was no valid proof of allegations regarding cash receipts or non-genuine activities. Section 12AB came into effect from April 1, 2021, so retrospective cancellation under Section 12A was not permissible. Cancellation under Section 12AA(3) requires satisfaction that activities are not genuine or not in accordance with objects. Even if additions are made in assessment, the benefit of Section 11 cannot be denied for the remaining income. Reliance was placed on various ITAT precedents regarding jurisdiction and cancellation of registration. The trust is engaged in imparting education and providing medical relief as per its objects. Revenue's Contentions: The judgment does not record specific contentions for the revenue regarding each ground.

Which sections of the Income-tax Act were involved?

Section 12,Section 12AA,Section 12AB,Section 12A,Section 127,Section 143(3),Section 153A,Section 132,Section 11,Section 12AA(3),Section 12AB(4),Section 12A(1)(ac)(i)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(15)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, PUNE BENCHES “B”, PUNE

Before: DR.MANISH BORAD & SHRI VINAY BHAMORE

PER DR. MANISH BORAD, ACCOUNTANT MEMBER :

This appeal at the instance of assessee is directed against the order dated 27.03.2024 passed by PCIT (Central), Pune u/s.12 r.w.s.12AA & 12AB(4) of the Income-tax Act, 1961 (in short 'the Act').

2.

Assessee has raised following grounds of appeal :

“1. The Learned PCIT (Central) erred in assuming juri iction u/s 12A/12AA/12AB of the ITAct, 1961 and proceeding to cancel the registrations u/s 12A/12AA/12AB. Learned PCIT (Central) Pune ought to have appreciated that, 12A/12AA/12AB related juri iction, existing with CIT(Exemption) prior to the search, could not be transferred through order u/s 127 of ITA, 1961 by one CIT

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 12

All 2,391 judgments and leading authorities on Section 12 →

Recent GST High Court judgments

Search GST case law →