M/S. DEVARAJ URS EDUCATIONAL TRUST FOR BACKWARD CLASSES (REGD),KOLAR vs. PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), BANGALORE

Date of hearing : 22.11.2021 : 22.11.2021 Date of Pronouncement O R D E R Per Chandra Poojari, Accountant Member

This appeal by the assessee is directed against the order of the Pr.CIT dated 31/3/2021, wherein application for grant of approval u/s 12AA is rejected.

2. The facts of the issue are that The assessee is a trust established for the purpose of providing education and medical relief. The assessee was registered u/s 12A of Income Tax Act 1916 (Act) by the Commissioner of Income Tax - 1 Karnataka vide Registration No.ACCTS.718/10A/ Vo1.B.i/D.113/CIT-1 dated 20.01.1992. It may be stated here that the Commissioner of Income Tax (Exemptions), Bangalore has jurisdiction over trusts claiming exemption u/s 11 of the Act. The assessee had been carrying on charitable activities by running, schools, engineering colleges and medical college. The assessee has been regularly filing the return and for various years the exemption u/s 11 was allowed.

3. A search was carried out in the premises of the assessee u/s 132 of the Act on 6.8.2015. Various documents were seized. Notice u/s 153A of the Act was issued for assessment years 2010-11 to 2015-16. For the assessment year 2016-17, a notice u/s 143(2) of the Act was issued. The assessments were completed u/s 153A of the Act up to assessment year 2015-16 and u/s 143(3) of the Act for the assessment year 2016-17. The assessee filed an appeal against the assessments before the learned CIT(A)- 11, Bangalore. The appeals were dismissed and the assessee filed further appeal before the Hon'ble Income Tax Appellate Tribunal, Bangalore. The Hon'ble Tribunal vide its order dated 16.8.2021 (ITA No.1463/13/2018) allowed the appeal on merits by holding that the assessee, has not collected any capitation fee from the students, has not violated S.13(1) and is carrying on its activities in accordance with the objects of the trust.

“i. Agents have been appointed to identify probable candidates who will pay capitation fees in cash. ii. Agents were also appointed to find candidates to enable the assessee to convert the merit seats into management quota seats. iii. The capitation fees were received in cash from students and not accounted. The fee collected are not in accordance with the norms laid down by the Fees Fixation Committee. iv. The fees collected in cash was routed into the accounts of the trust through dubious means. v. Based on the above findings, the learned Principal Commissioner rejected the registration u/s 12A of the Act.

9. Now the assessee is in appeal before us by way of following grounds:-

“1. That the order of the learned Principal Commissioner of Income Tax (Central) in so far it is prejudicial to the interests of the appellant, is bad and erroneous in law and against the facts and circumstances of the case.

2.3. That the learned Director of Income Tax (Exemptions) has no authority to transfer the application to Principal Commissioner of Income Tax and hence the impugned order is void ab initio.

3.1. That the finding of the learned Principal Commissioner of Income Tax (Central) in paragraphs 3.2 to 5 are perverse as being not supported by any evidences on records and in fact being contrary to the materials on records.

3.2. That the finding of the learned Principal Commissioner of Income Tax (Central) is violative of principles of natural justice as the assesseehad not been given an opportunity to cross examine some of the parties.

3.3. That the learned Principal Commissioner of Income Tax (Central) erred in law and on facts in relying on the proposals in the notice u/s. 142(1) even though such findings have not become final as the assessment order is yet to be passed.

3.4. In any case, that the learned Principal Commissioner of Income Tax (Central) could not have relied on the proposals in notice u/s 142(1) without conducting enquiry on his own after giving an opportunity to the assesseeincluding right to cross examine various witnesses.”

10. At the time of hearing, it was submitted that the assessee came in appeal before this Tribunal in vide order dated 20/10/2021. The Tribunal disposed of the appeal of the assessee by way of following observations:-

“8. We heard the rival contentions and perused the record. It is the contention of the assessee that the impugned order cancelling the registration granted to the assessee u/s 12A of the Act has been passed by the Ld Principal CIT on the basis of findings noticed by the search officials and also by the AO during the course of assessment proceedings. It is the contention of the Ld. A.R. that all the findings and additions have since been deleted by the Tribunal. Accordingly, it was submitted that the grounds on which the registration was cancelled no longer survive now. Besides, the above, the assessee is also questioning the validity of jurisdiction assumed by the Ld. Principal CIT while cancelling the registration u/s 12AA(3) of the Act and also challenging the validity of cancelling the registration with retrospective effect. On the contrary, it is the contention of the Ld.DR that the assessment orders passed by the AO were no entirely relied upon by Ld.PCIT.