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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’, NEW DELHI Before Sh. N. K. Saini, AM And Ms. Suchitra Kamble, JM : Asstt. Year : M/s Uttrakhand Uthan V Principal Commissioner of Samiti, 32/4, E.C. Road, s Income Tax, Central Dehradun (Uttarakhand) Kanpur (APPELLANT) (RESPONDENT) PAN No. AAAAU1376N Assessee by : Sh. K. Sampath & V. Rajakumar, Advs. Revenue by : Sh. Sunil Chander Sharma, CIT DR Date of Hearing : 10.06.2016 Date of Pronouncement : 29.07.2016 ORDER Per N. K. Saini, AM:
This is an appeal by the assessee, directed against the order dated 27.03.2015 of Principal CIT(Central), Kanpur (in short Pr. CIT).
The only ground raised in this appeal reads as under:
“That on the facts and in the circumstances of the case and in law the order dated 27.03.2015 passed by the Principal Commissioner of Income-tax (Central), Kanpur u/s 12AA(3) & (4) of the Income- tax Act, 1961 cancelling the registration of the Samiti and that too retrospectively is wholly misconceived, palpably erroneous, totally 2 Uttrakhand Uthan Samiti precipitated and grossly unjust and so must be quashed.” 3. From the above ground, it is clear that only grievance of the assessee in this appeal relates to the cancellation of registration of the assessee society u/s 12AA(3) & (4) of the Income Tax Act, 1961 (hereinafter referred to as the Act).
Facts of the case in brief are that the assessee is running Educational Institutions, a search operation was carried out on 26.04.2012 at the premises of the assessee. During the course of search certain documents were found and seized. The ld. Pr. CIT issued a show cause notice dated 30.01.2015 u/s 12AA(3) of the Act to the assessee and asked to explain/clarify as to why the registration u/s 12AA of the Act granted by the CIT vide order dated 24.11.2007 not be cancelled. The ld. Pr. CIT observed that the documents seized during the course of search revealed that Sh. Sanjay Bansal had siphoned off the society’s fund and the funds so siphoned off were utilized for acquiring properties by him and by his family members. He further observed that his wife Smt. Seema Bansal had opened following bank accounts in the name of the employees:
• A/c No. 61059655944, State Bank of Bikaner and Jaipur, Dehradun 3 Uttrakhand Uthan Samiti • A/c No. 705020110000202, Bank of India, Dehradun • A/c No. 3898002100021547, Punjab National Bank, Roorkee • A/c No. 3898002100012538, Punjab National Bank, Ramnagar, Roorkee • A/c No. 469002100000119, Punjab National Bank, Dehradun • A/c No. 1175002100009790, Punjab National Bank, Kaulagarh, Dehradun 5. The ld. Pr. CIT was of the view that the said accounts were operated by the employees on behalf of Sh. Sanjay Bansal and there were huge deposits and withdrawals in those bank accounts for the purpose of claiming bogus expenditure. The ld. Pr. CIT was of the view that fictitious concerns and their bank accounts have been opened by Sh. Sanjay Bansal for booking bogus expenses in the books of the society to utilize the funds for personal purposes. He observed that the society had stated to have purchased computers/laptops from M/s Fortech computers, M/s Cad Arena and M/s Strategic Marketing for which it obtained term loan/overdraft facilities and all the aforesaid three concerns had furnished written reply detailing the actual transaction with society/Sh. Sanjay Bansal and had categorically denied of having issued the invoice and supplying anything. The ld. Pr. CIT observed that a term loan 4 ITA No. 2734/Del/2015 Uttrakhand Uthan Samiti of Rs.224.64 lakhs was sanctioned by the PNB, NAV, Saharanpur to the society to be reimbursed in lieu of 800 laptops worth Rs.299.52 lakhs for distributing to the students and the details furnished by the bank revealed that those laptops were purchased vide invoice No. 1984 dated 16.10.2008 of M/s Fortech Computer Systems by the assessee but the said company informed vide letter dated 25.07.2012 that they had received the payment of Rs.1,33,00,000/- on 29.08.2008 which was credited in their bank account and supplied 466 laptops as per following details:
• 450 laptops (HP-540) vide Invoice No. Rtl.Inv/1396 dt. 29.9.2008 for Rs.1,23,61,500/- • 16 laptops (HP-540) & 466 laptop bags vide Invoice No. Rtl.Inv./1514 dt. 16.10.2008 for Rs.9,05,516/- 6. The ld. Pr. CIT pointed out that the aforesaid company informed that the invoice No. 1984 dated 16.10.2008 was not issued by the company. He also pointed out that a fresh term loan of Rs.245.00 lakhs for purchase of 950 laptops worth Rs.355.68 lakhs to be distributed to the students was sanctioned / disbursed by the bank in favour of the assessee society who furnished an Invoice No. SM 09-10/1331 dated 04.12.2009 of M/s Strategic Marketing, Rajpur Road, Anekant Place, Dehradun to the bank for the purchase 5 Uttrakhand Uthan Samiti of 950 laptops worth Rs.355.68 lakhs and after sanctioning & disbursing the said term loan, the bank had not obtained the purchase bill from the assessee society in support of purchase of laptops/computers for which the loan was sanctioned and that the bank had waived the condition of insurance of laptops /business note books and moreover no inspection report in respect of end use of the term loan was available with the bank as stated in letter dated 27.07.2012 of Chief Manager, PNB, Avas Vikas Branch, Saharanpur.
The ld. Pr. CIT also pointed out that a further term loan of Rs.262 lakhs was sanctioned by the PNB, NAV, Saharanpur to the assessee society for purchase of 1050 laptops worth Rs.393.12 lakhs to be distributed to the students of the institute from M/s CAD ARENA, near Hostel Royal Palace, Roorkee. According to the ld. Pr. CIT, M/s CAD ARENA was not an authorized distributor of HPISPL for supply of laptops in North India and the said company had not issued the proforma invoice No.J9AD109932 dated 19.08.2010 for the value of Rs.3,93,12,000/- and that the letter issued by Sh. Naman Patil (Manager Sales-North India) of HPISPL confirming advance of Rs.59,99,500/- on behalf of M/s CAD ARENA was found to be not genuine and fabricated one. He also observed that the reply of HPISPL 6 Uttrakhand Uthan Samiti revealed that only 251 laptops were purchased by Devbhoomi Institute of Technology and no computer/laptops were supplied by them against the purchase order dated 09.08.2010. Therefore, the three documents namely Proforma Invoice No. J9AD109932, the alleged letter by Sh. Naman Patil and purchase order No.DBIT/Order/09-10/198 dated 09.08.2010 were the only documents made available by the bank in support of purchase of 1050 laptops in support of the end term loan of Rs.262 lakhs disbursed to the society. According to the ld. Pr. CIT, the assessee society had not purchased any laptop/computer and the invoice/other documents furnished by it to the bank were found to be fake and fabricated. He also observed that amount of term loans for purchase of laptop was ultimately credited in the bank accounts opened by Sh. Sanjay Bansal in the names of the following entities:
� M/s Fortech Computer Systems Proprietor Sh. Sunil Dandriyal R/o 194, Dharampur Danda, Dehradun with State Bank of Bikaner & Jaipur, Saharanpur Road, Dehradun � M/s Rana Steels Proprietor Sh. Rahul Kumar Rana, 22-Coop. Indl. Estate, Patel Nagar, Dehradun with State Bank of Bikaner & Jaipur, Saharanpur Road, Dehradun 7 Uttrakhand Uthan Samiti � M/s CAD ARENA Proprietor Sh. Sunil Dandriyal R/o 194, Dharampur Danda, Dehradun with Bank of India, Rajpur Road, Dehradun � M/s Pawan Kumar & Co. Proprietor Pawan Kumar R/o 194, Dharampur Danda, Dehradun with PNB, 45-Subhash Road, Dehradun � M/s Negi Builders & Suppliers Proprietor Mukesh Negi, R/o Dhalwala near Doon Steel, Rishikesh with PNB Kaulagarh Road, Dehradun 8. The ld. Pr. CIT observed that Sh. Sanjay Bansal in connivance with his trusted employees diverted funds of the society for investments in immovable properties and the funds of the society were siphoned off to the accounts of the trustees/members namely, Sh. Sanjay Bansal, Smt. Seema Bansal and the concerns in their proprietary capacity, namely, Saraswati Hostel and Shristi Sales, Tthereafter substantial funds had been transferred to M/s Ganga Realtors Pvt. Ltd. for purchase of plots by them in their individual names and on these plots they constructed flats under the partnership firm M/s Drishti Builders and Developers. He also pointed out that Sh. Sanjay Bansal had made a disclosure of Rs.4,02,25,780/- as undisclosed investment in the aforesaid funds in the return filed u/s 153A of the Act and that Sh. Sanjay Bansal and Smt. Seema Bansal had also disclosed Rs.86,00,000/- as undisclosed investments in purchase of properties which prima facie proved that the 8 ITA No. 2734/Del/2015 Uttrakhand Uthan Samiti funds of the assessee society had been utilized for personal/non charitable purposes. The ld. Pr. CIT also discussed the details of repayment of term loans/over drafts of the concerns mentioned in the former part of this order and in para 14 of the impugned order, he was of the view that the repayment had been made by way of the diversion of the funds belonging to the assessee society.
The ld. Pr. CIT also mentioned that the purchases were made by the assessee on the basis of fake and fabricated bills. The relevant discussion has been made in para 17 of the impugned order for the cost of repetition, the same is not reproduced herein. The ld. Pr. CIT also stated that the documents seized during the course of search revealed that Sh. Sanjay Bansal had made cash payments of about Rs.35 to 40 crores to the outgoing trustees for taking over the control and management of the institute and polytechnic college. He also mentioned that OD facility of Rs.30 crores from PNB, Saharanpur was channeled through Delhi Parties and an amount of Rs.292 lakhs was paid to the following parties by Sh. Sanjay Bansal mostly out of amount received from A/c No. 1709009300044883 by availing overdraft facility of Rs.30 crores to PNB: • Brij Mohan Goyal (Uncle) 50.00 9 Uttrakhand Uthan Samiti • Sunil Kumar Jalan (Anil) 500.00 + 50.00 = 550.00 • Santosh Timber (Anil) 300.00 • Aashwat Furniture Pvt. Ltd. (Vivek) 98.00 + 98.00 = 196.00 • Wonder International (Vivek) 300.00 • Chand Sons Pvt. Ltd. (Mamu) 308.27 • CKSR (Mamu) 290.00 • Manishi Towers (Ajay) 150.00 • Mind Soul & Fitness (Ajay) 75.00 10. He also pointed out that the aforesaid OD account was opened on 29.09.2010 and within a period of 20 days, the OD facility had been availed to the tune of Rs.30 crores and the said amounts had either directly been paid from the OD account/term loan account by issuing cheques in favour of the above named persons for transferring the amount to other accounts of the assessee society/DBIT/Saraswati Hostel, thereafter, issuing cheques from those accounts in favour of the above mentioned persons. The ld. Pr. CIT also mentioned that the interest free loans/advances were given for non- educational purposes to the following parties:
� M/s Wonder International Trading Pvt. Ltd., S- 556, 2nd Floor, Shakarpur, Delhi, Rs. 3 crores � Aashwat Furniture Pvt. Ltd., Furniture market, Kirti Nagar, Delhi, Rs.1.96 crores � M/s Chand Sons Education City Pvt. Ltd. and M/s CKSR Impex International Pvt. Ltd., Rs.3.66 crores and Rs.1.50 crores � M/s Santosh Timber Trading Pvt. Ltd., Rs.3 crores Sh. Brij Mohan Goyal Rs.50 lakhs � M/s Mind and Soul Fitness Pvt. Ltd., Rs.75 lakhs 10 Uttrakhand Uthan Samiti � Manishi Tower Pvt. Ltd., Rs.1.50 crores � Sh. Sunil Jalan, Rs.5.50 crores 11. The ld. Pr. CIT observed that the assessee not only had given the advances for business purposes but also had given the interest free loans to the aforesaid parities who had been known through Sh. Chand Kishore Aggarwal uncle of Sh. Sanjay Bansal, therefore, the funds of the assessee society had been diverted for non-educational purposes and also many fake bills/invoices had been submitted to the bank for sanctioning the term loan which has not been utilized for the purposes for which it was sanctioned. The ld. Pr. CIT also observed that the funds of the assessee society had been siphoned off by the Chairman Sh. Sanjay Bansal through fictitious concerns and it had been utilized for personal purposes for acquiring land/properties in individual name or in the name of family members and that the funds had also been misused by giving interest free loan/advances for non- educational purposes. Therefore, the affairs of the assessee trust were not being carried out as per objectives of the trust and moreover, the activities were carried out in a manner that the provisions of Section 11 & 12 of the Act did not apply to exclude either whole or part of income due to operation of sub-Section (1) of Section 13 of the Act. The ld. Pr. CIT asked the assessee to submit the explanation/clarification, if
12. In response the assessee submitted its reply dated 28.02.2015 which is reproduced verbatim as under:
“OBJECTS OF THE SOCIETY IN CONFORMITY WITH THE PROVISIONS OF SECTION 12AA OF THE INCME TAX ACT, 1961: a) The above mentioned society i.e. Uttarakhand Uthan Samiti was registered under the Societies Registration Act, 1860 vide Registration Certificate No. 81/2004-05 dated 14/05/2004 with the Registrar of Societies, Uttarakhand. Further, the society was renewed by Registrar of Societies on 13/08/2014 for 5 years w.e.f. 14/05/2014. A copy of Registration Renewal Certificate is attached herewith as Annexure "A" Page 1. b) The name of the society has been framed as "Uttarakhand Uthan Samiti" which indicates that this Society will always endeavor for the growth of Educational base of this state “Uttarakhand". Similary the name of the Institutes/Colleges have been titled as "Dev Bhoomi" because the state of Uttarakhand is full with such ancient institutions/Sites, which have been considered really as the seat of learning in a spiritual atmosphere like the land of Goddessses, and Gods.
12 Uttrakhand Uthan Samiti c) The following educational institutes are being run under "Uttarakhand Uthan Samiti" Society, Dehradun: i. Dev - Bhoomi Institute of Technology (DBIT) ii. Dev- Bhoomi Institute of Technology & Engineering. iii. Dev- Bhoomi Institute of Polytechnic. iv. Dev- Bhoomi Institute of Pharma & Research. v. Dev- Bhoomi Institute of Management & Studies. Saharanpur: i. Dev- Bhoomi Group of Institution (Engineering College) ii. Dev-Bhoomi Institute of Polytechnic iii. Dev-Bhoomi Institute of Professional Studies. d) The courses offered by the Institutes are B.Tech in CSE, Civil, EEE, ME and ECE, BBA, MBA, BCA, MCA, BSC-IT, M.Pharma, B. Pharma, D. Pharma, Diploma in polytechnic courses such as Civil, CSE, EC, EE, ME-A. All these courses offered at the colleges are duly approved and affiliated by statutory bodies such as Uttarakhand Technical University (UTU), All India Council of Technical Education (AICITE), PCI, GBTU, UBTER and BTE- Lucknow. We shall like to bring to your kind notice that all these courses are subject to annual approval and extension of affiliation by the guiding statutory authorities and their strict norms and regulations. e) It is submitted that the society has been complying with all the statutory norms of building, laboratory equipments, computers, peripherals and 13 ITA No. 2734/Del/2015 Uttrakhand Uthan Samiti all other miscellaneous requirements for annual extensions of approval and affiliation by respective statutory bodies. It is apparently evident that the society has been incurring recurring expenses along with incremental (developmental) expenses to meet the expansion requirement of all these courses as per the norms of aforesaid statutory bodies. f) We shall humbly like to submit that every year new construction, extension of Academic facilities, addition of laboratory and equipments, computers & peripherals are mandatory and binding for approval and extension of affiliation thereof. Therefore, it is pertinent to state that the society funds are being utilized in the above activities. The approximate year wise square feet construction and the cost incurred is given below: Sr. Year Dehradun & Saharanpur Campus 1 2005-06 34000 2 2006-07 71500 3 2007-08 40000 4 2008-09 115000 5 2009-10 80000 6 2010-11 193000 7 2011-12 76000 8 2012-13 18000 TOTAL 627500 Thus the total constructed area is approx 6,27,500 square feet and the cost incurred is approx Rs. 33 Crores, which is totally justified considering the average rate of construction per square feet which is in fact quite low as compared to what would 14 Uttrakhand Uthan Samiti have been charged by an outside Contractor, since the management has got the construction done themselves they have been able to keep the cost so low. Besides the above building construction lot of other construction like the following have also been done:
1. 1. Complete boundary wall of Dehradun Campus of 150 Bigha. 2. Complete boundary wall of Saharanpur Campus of 130 Bigha. 3. Complete Sewerage line of all compus in Dehradun & Saharanpur.
4. Fixing of wall tiles up to 6ft in all class room & labs in all Colleges of Dehradun Campus.
5. Under Ground water tankers in each college of approx 3000 Ltr. in Dehradun & Saharanpur = Total Nos. 10.
6. Under Ground sewerage Tank in each College hi Dehradun & Saharanpur = Total Nos.9.
7. Basket Ball Court in Dehradun & Saharanpur Campus:-4Nos. 8. Lawn Tennis Curt in Dehradun & Saharanpur Campus:- 2Nos. 9. Badminton Court in Dehradun & Saharanpur Campus:-7 Nos.
10. Cement Road at various places in Dehradun & Saharanpur Campus. We shall humbly like to submit that Uttarakhand Utthan Samiti has proposed and implemented a scheme for its employees whereby they can contribute to the growth and development of institution through petty building constructions and also to generate extra income for them. Businesses 15 ITA No. 2734/Del/2015 Uttrakhand Uthan Samiti like supply of materials, Lab equipments, PCs, Laptops and peripherals like UPS, Printers, networking equipments like switches, LAN cables to UUS at below market rates. In this regard, Sunil Dandriyal and Sushil Kumar approached the management to volunteer for this business proposition. A copy of resolution for the above scheme is attached herewith as Annexure D, Page No. 180 to 183. Since Mr. Sunil Dandriyal was an employee in M/s Bansal Associates & Engineers for several years, Sh. Sanjay Bansal acted as an introducer to get a bank account opened in the name of M/s Fortech Computers. Also Purchases of computers, laptops and accessories were made by the society from him because the rates offered by him were competitive than the other vendors dealing in the same industry. It was only incidental that the proprietor of M/s Fortech Computers happened to be Sh. Sanjay Bansal's employee. It was in the best interest of the society to place order with the person who provided minimum and reasonable rates. The decision of purchasing computers and accessories from M/s Fortech Computers was solely based on the principle of purchasing best quality at the lowest price, which is incidental to the attainment of the objectives of the society. The purchase consideration for the same was paid to him from the term loan Account No. 1175002100007941 with PNB Kaulagarh Raod, Dehradun, OD Account No. 1175009301046063 and Account No. 1175002100008302 of Dev Bhoomi Institute of Technology through account 16 Uttrakhand Uthan Samiti payee cheques. The computers/laptops and accessories were purchased from M/s Fortech Computers in bulk and later on the price quoted by the firm was paid through account payee cheques. Further, we shall like humbly submit that your goodself have mentioned in the notice that withdrawals from account of M/s Fortech Computers have been made by Sunil Dandriyal, Atul, Neeraj Tyagi and Sushil Kumar who have been alleged to be employees of Shri Sanjay Bansal in his concern M/s Bansal Associate & Engineers, however, this is not true. Only Mr. Sunil Dandriyal was an employee and the others were neither the employees of Sanjay Bansal nor worked in Bansal Associate & Engineers. In fact, Mr. Sushil Kumar was the employee of Society. These people had no connection with Sanjay Bansal or his concerns. As regards genuineness of business done by him, we shall like to submit that the society acted in good faith and we cannot comment on whether the books of accounts were maintained by him or not. That is best known to him only. The firm supplied computers, laptops and accessories to the society and payments were made through account payee cheques against bills issued by the vendor. The society had purchased computers/ laptops from the firm without going into the subject as to what is being done in the firm. The computers/laptops and accessories were received from the firm which have been accounted for in the books of society. Proper bills were entered in the books of accounts of the society. The expense has been incurred exclusively 17 Uttrakhand Uthan Samiti for main objects of the society and in the best interest of the society, hence.
Ourter Apron of all Buildings.
Lots of Renovation work.
13. Smart Class room Platform of all classrooms in Ground Floor.
14. Platform of Seminar Hall :-3 Nos. in Ground Floor.
Regular Rectification in Civil work after every inspection of AICTE as per their guidelines.
Tube wall room.
17. Generator Room & Platform.
18. Labor living room tin shaded.
19. Advertisement Boards (100Nos.) Grouting all over Uttarakhand.
Side Elevation Steps in Saharanpur Campus in each Building. Any contention of the Income Tax Department that some of the vendors bills are not verifiable is not at all justified because if the same are removed from the cost of construction then the building cannot be constructed at such low cost, without the material supplied by those alleged vendors the Building cannot be constructed. Similarly all PCs, Printers, UPSs & Peripherals are being purchased according to the norms of approval by AICTE and other affiliating bodies, if the same are removed from the cost of purchase of PCs, Printers, Peripherals & Accessories then without the material supplied by these vendors, the regular approval/affiliation is impossible and to give prover Lab and proper exposure of practical teaching is also impossible for 5700 students in 18 ITA No. 2734/Del/2015 Uttrakhand Uthan Samiti Dehradun and Saharanpur Campus. Copy for norms of AICTE norms for the same for FY 2005- 06, 2006-07, 2007-08, 2008-09, 2009-10, (same as 2008-09), 2010-11 (same as 2009-10)FY 2011-12, FY 2012-13, are attached herewith as Annexure B, Page No. 2 to 40. Further year wise Approval copy is dully attached for both DEHRADUN and SAHARANPUR Campus as Annexure C Page No. 41 to Page 179. We shall further like to submit that it has been alleged that Mr. Sanjay Bansal siphoned off society's funds which were alleged to have been utilized for acquiring properties by him and his family members. It is submitted that the allegations are incorrect and are without any basis, material and evidence. Detailed submission in this regard has also been made subsequently in the reply.”
The assessee also gave reply for the queries relating to the various firms from whom the assessee made the purchases. The ld. Pr. CIT has mentioned the submissions of the assessee relating to those firms at page nos. 20 to 29, for the cost of repetition these are not reproduced herein. As regards to the query relating to term loan and the investments in the property, the submissions of the assessee before the ld. Pr. CIT were as under:
19 Uttrakhand Uthan Samiti OBSERVATION REGARDING TERM LOAN As regards your query related to Term Loan A/c No. 1175001C00000378, we shall like to submit that as alleged, the society, Uttarakhand Uthan Samiti has not submitted any fabricated invoice to the bank. Computers, Peripherals & Accessories were purchased against it from M/s Fortech Computer Systems, Dharampur Danda, Dehradun (Prop. Mr. Sunil Dandriyal) and not from M/s Fortech Computer Systems, G-10 Siddhartha, 96 Nehru Place, New Delhi as alleged by your goodself. Further, as regards your statement that the bank did not receive any other documents in support of laptops, we shall like to submit that the bank did not ask for any other supportive for the sanctioning of loan so the society was under no obligation to submit the same. The society has rightfully used the loan for the purpose for which it was sanctioned i.e. purchase of laptops. As regards your query related to Term Loan A/C No. 117500IC00000411, we shall like to submit that as alleged, no bogus expenditure has been claimed by the society. Purchases have been genuinely made against invoice no. SM 09-10/1331 from M/s Strategic Marketing, 29/3, Rajpur Road, Anekat Palace, Dehradun and the same can be duly verified from the Photocopy of stock register maintained by the society, submitted above & then Laptops were issued to the students against scheme floated at the time of admission. We are not aware why the firm Strategic Marketing is denying the invoice as well as the bank account. It is already established above that no forgery has been done by the society in respect of Strategic Marketing. The 20 Uttrakhand Uthan Samiti invoice is genuine and has been issued by the said firm. The society has acted in good faith and has duly incorporated the said invoice in the regular books of accounts. As regards your query related to Term Loan A/c No. 117500IC00000448, we shall like to submit that as alleged, no forgery has been done by the society with the bank. The society has genuinely made purchase of laptops/computers from the firm M/s Cad Arena, Dharampur Danda, Dehradun (Prop. Mr. Sunil Dandriyal) amounting to Rs. 368.12 Lacs. The above invoices are genuine and are correctly incorporated in the regular books of the society. The society has submitted above invoices to the bank. We are not aware who had submitted the invoice no. J9AD109932 and fake purchase order of Uttarakhand Uthan Samiti as alleged by your goodself. Also no letter has been received by any such person on behalf of Hewlett Packard India Sales Private Limited to the Chairman, Uttarakhand Uthan Samiti. It is correctly mentioned by your goodself that only 251 laptops have been received by the society from M/s Hewlett Packard India Sales Private Limited, 24, Salarpuria, arena Hosur Main Road, Adugodi, Bangalore. Rest of the laptops have been received from M/s Cad Arena, Dharampur Danda, Dehradun. The allegation that the society has not purchased any laptops against the Term Loan of Rs. 262 Lacs is totally wrong and the sanctioning of loan by bank is totally justified. As regards your goodself’s allegation that the accounts have been opened by Mr. Sanjay Bansal, 21 Uttrakhand Uthan Samiti in the name of Fortech Computer Systmes, M/s Rana Steels, Cad Arena, Pawan Kumar & Co and Negi Builder & Suppliers we deny the said allegation and confirm that no such account has been opened by Mr. Sanjay Bansal. We have already clarified above that these accounts do not pertain to the society or to Sh. Sanjay Bansal. Moreover, the society is not concerned of these entities and it has acted in good faith. As already mentioned above, it was in the best interest of the society to place order with the person who provided minimum and reasonable rates and the society has done the same. Therefore the society has correctly utilized the term loans for the purposes for which it was sanctioned and for the furtherance of the objects of the society. 13) OBSERVATION REGARDING INVETSMENT IN PROPERTY In point no. 13 of your letter dated 30,01.2015, your goodself has alleged that Sanjay Bansal has diverted the fund of society for investment in immovable properties. Also it has been alleged that the funds have been transferred to M/s Ganga Realtors Pvt. Ltd. for purchase of plots in their individual names and on these plots construction of flats under the partnership firm M/s Drishti Builders & Developers was constructed. In this respect we shall like to submit that firstly we deny the allegation that any fund of the society has been diverted for investment in immovable property by the society or its members. Regarding purchase of plots for constructions of flats in Doon palm City, we shall like to submit that these plots were purchased by Mr. Sanjay Bansal & Mrs. Seema 22 Uttrakhand Uthan Samiti Bansal (Partners in M/s Drishti Builders & Developers) from their proprietorship firms namely Saraswati Hostel and Srishti Sales respectively. The payments for purchase of land have been made from their respective bank accounts. Mr. Sanjay Bansal runs a hostel under the name "Saraswati Hostel" from where hostel receipts are derived. These receipts are credited in the bank account of the proprietorship firm. Similarly Mrs. Seema Bansal runs a canteen under the name "Srishti Sales" and provides mess facilities to the students. The income received on this account is deposited in their bank. From the funds available in their respective bank accounts, the plots at Mauja Dehra Khaas were purchased by them on which construction of flats was carried out in their individual capacity. As regards the disclosure made by Mr. Sanjay Bansal and Mrs. Seema Bansal, we shall like to submit that the disclosure in respect of investment in construction of flats at Doon Palm City was made to cover the gaps in accounting and revenue leakage in the proprietorship firms of Sanjay Bansal and Seema Bansal. The disclosure made during search has no relation with society. Thus, the allegations imposed by your goodself that the society funds have been utilized for personal/non- charitable purposes are totally denied. 14) In point no. 14 of your notice dated 30.01.2015, your goodself have provide a list of loan account of society between period FY 2006-07 to FY 2010-11 and have alleged that the amounts credited in the bank accounts of the fictitious 23 Uttrakhand Uthan Samiti concerns are from the term loan and OD accounts of Uttarakhand Uthan Samiti and bank account of DBIT College. The allegation is completely denied in light of the fact that the term loans and ODs were taken by the society for the advancement of objects of the society. These loan accounts have been utilized for incurring all the expenditure necessary for fulfillment of the objects of the society. To substantiate, a list of utilization of term loans of ODs is attached herewith as Annexure P page No. 569 to 578: From the above details it is clear that all the loans and OD accounts have been used for furtherance of objects of the society. The allegations made are without any basis, material or evidence. There are no credits in the bank account of any fictitious concerns much less from the Term Loans and OD of the society nor any expenditure in the nature of alleged bogus purchases were booked from such non-existing concerns. 15) In point no. 15 of your notice dated 30.01.2015, your goodself have mentioned details of payments made to some concerns. In this regard we have already submitted the complete details in respect of each such party in the above points which clearly shows that the society has made genuine purchases from the mentioned concerns. 16) In respect of your query regarding SKIET, your goodself have alleged cash payments of Rs. 35 to 40 crores to the outgoing trustees of that trust. It is respectfully submitted that no payment of Rs. 40 Crores as mentioned in your notice has been paid 24 Uttrakhand Uthan Samiti and therefore the allegation is denied. The documents referred by your goodself are not clear in the notice and in any case do not show that any payment has been made. Therefore your goodself are requested to kindly let us know the basis of the allegation. In any case society has got nothing to do with the allegations mentioned in point no, 16 to your notice. 17)(a) Regarding your query related to M/s Universal Iron Store we shall like to submit that as alleged by your goodself, no forgery has been done by Mr. Sanjay Bansal. All the purchases recorded in the books of accounts are genuine and authentic. The bill Nos. 7547 and 7891 have been correctly recorded at Rs. 30,100/- and Rs. 33,597/- in the books of accounts and have been claimed as expense on repairs to building. The ledger accounts reflecting the above bill amounts are being attached herewith for your goodself’s reference. As alleged by your goodself, the society has not claimed the alleged Bill No. 7547 dated 01.11.2010 and alleged Bill No. 7891 dated 19.02.2011 for Rs. 1,38,597/- and no such expenditure has been recorded in books of accounts of the society. As aforesaid, bills amounting to Rs. 30,100/- and Rs, 33,597/- have only been claimed. Since both the bills have been correctly claimed in the books of society, the allegation that bogus expenses of Rs.2,30,100/- and Rs. 1,38,597/- have been claimed through these bills is completely denied.
25 Uttrakhand Uthan Samiti b) In reference to your query no. 17 on page 25 of questionnaire dated 09.10.2014 related to Shri Anuj Rana, Prop. Shree Jee Enterprises, we shall like to submit that we are not aware who has submitted these bills and for what purpose. Mr. Sanjay Bansal has not submitted any such invoice to the bank nor has it been recorded in the books of accounts of society. Thus the allegation that fraud has been committed by Shri Sanjay Bansal is denied. No such bills of Rs. 41.22 lacs as mentioned in point no. 17(b) of your notice have got anything to do with the society. c) In reference to Rishiraj Building Material Supplier, we shall like to submit that we are not aware who has submitted these bills and for what purpose. Mr. Sanjay Bansal has not submitted any such bill to the bank nor has it been recorded in the books of accounts of society. Thus, the allegation is denied. d) In reference to your query no 17(c) on page 13 of questionnaire dated 30.01.2015 related to Pawan Kumar, we shall like to submit that we are not aware who has submitted these bills and for what purpose. Mr. Sanjay Bansal has not submitted any such invoice to the bank nor has it been recorded in the books of accounts. Since no such expenditure has been incurred and neither claimed in the books of accounts, the allegation that the society has claimed any bogus expenditure is incorrect and there is no question of disallowance of the same. We shall further like to submit that no details of alleged various bill of Pawan Kumar have been given by your goodself in the impugned 26 Uttrakhand Uthan Samiti notice, society is not in position to make further submission in this regard. 18) In respect of your query no. 18 on page 13 of questionnaire dated 30.01.2015 regarding OD A/c 1709009300044883 of Rs. 30 crores and Term Loan A/c 170900IC00000025 of Rs. 8 crores, we shall like to submit that the above loans were taken for the furtherance of objects of the society and were utilized for the same. Payments to various parties of Delhi were made for the purpose of purchasing contiguous land in Gurgaon/Delhi for setting up Educational Institutions, University, Colleges and Schools. Also, it was planned to establish gymnasium, Exercise Centre and Health & Fitness centre in their institutions. The society entered into Memorandum of Understanding with the parties of setting up new Institutions/Colleges in joint venture. The amounts were paid as mobilization advance with the understanding that in case the agreement is not executed within specified time, the amounts paid would be returned interest-free to the society on expiration of the specified period. Since the projects could not be executed the advance given to parties was returned back to the society. The advance was paid for furtherance of the objects of the society and on non-execution of agreement the amount was returned back within prescribed time and thus no interest was charged. A copy of ledgers evidencing return of amount is attached subsequently. Therefore it is clearly evident that the payments were made only to promote the educational purposes of the society and the allegation that the 27 Uttrakhand Uthan Samiti funds have been siphoned off for personal purposes is not correct. As details in respect of each of the party is submitted as under: a) M/s Wonder International Trading Pvt. Ltd.: Rs. 3 crores was transferred to Wonder International vide account payee cheques from the Bank Account of the society. These were paid for purchase of land in Delhi/Gurgaon region for setting up new colleges. Further the amount has been received back from the Party. As also mentioned by your goodself, no cash withdrawals have been made from their accounts which prove it is genuine transaction. A copy of MOU executed with the party and ledger Account evidencing return of payment is attached herewith as Annexure Q, Page No 579 to 582. b) Ashwat Furniture: Rs. 1.96 crores were paid from bank accounts of society and Saraswati Hostel (Proprietorship concern of Sanjay Bansal) for purchase of land for setting up a new project in Delhi region. Your goodself have mentioned that the statement of account shows that Rs. 3 crores were further transferred to other accounts, however, in this respect we shall like to submit that the society paid amount for a project and it was not binding on the party to immediately utilize the amount for that project. When an advance is given, the party can utilize it for its business purpose. A copy of MOU executed with the parry and ledger Account evidencing return of payment is attached herewith as Annexure R, page No. 583 to 586.
28 Uttrakhand Uthan Samiti c) M/s Chand Sons Education City Pvt. Ltd. and M/s CKSR Impex International Pvt. Ltd.: The amounts of Rs. 3.66 crores and Rs. 3.44 crores were paid by Sh. Sanjay Bansal to M/s Chand Sons Education City Pvt. Ltd. and M/s CKSR Impax International Pvt. Ltd. respectively for setting up of school/college with the party. The MOU was executed for a time period and if the conditions were not fulfilled before the date of expiry of MOU, then only the party was required to return back the advance paid to it. A copy of MOU executed with the party and ledger Account evidencing return of payment is attached herewith as Annexure S, page No 587 to 598. d) M/s Santosh Timber Trading Pvt Ltd.: As regards advance of Rs. 3 crores given to M/s Santosh Timber trading Pvt. Ltd., we shall like to submit that the advance was given by the society for purchase of land in Gurgoan/Haryana, The terms of MOU provided that interest would be charged only if the party does not return back the amount within specified period of expiry of MOU. Since the amount was received back within the stipulated time, no interest was charged. The society cannot comment on utilization of funds by the parry. A copy of MOU executed with the party and ledger Account evidencing return of payment is attached herewith as Annexure T, page No 599 to 606. e) Birj Mohan Goyal: As regards advance of Rs. 50 lacs given to Sh. Brij Mohan Goyal, we shall like to submit that the advance was given by the 29 Uttrakhand Uthan Samiti society for purchase of land for setting of Educational Institutes, Colleges . The terms of MOU provided that interest would be charged only if the party does not return back the amount within specified period of expiry of MOU. Since the amount was received back within the stipulated time, no interest was charged. The society cannot comment on utilization of funds by the party. A copy of MOU executed with the party ledger Account evidencing return of payment is attached herewith as Annexure U, page No. 607 to 612. f) M/s Mind & Soul Fitness Pvt. Ltd. : As regards advance of Rs. 75 lacs given to M/s Mind & Soul Fitness Pvt. Ltd., we shall like to submit that the advance was given by the society for establishing gymnasium, purchasing lands in region of Delhi/Gurgaon. The terms of MOU Provided that interest would be charged only if the party does not return back the amount within specified period of expiry of MOU. Since the amount was received back within the stipulated time, no interest was charged. The society cannot comment on utilization of funds by the party. A copy of MOU executed within party and ledger account evidencing return of payment is attached herewith as Annexure V, Page No 613 to 621. g) Manishi Tower Pvt. Ltd.: An advance of Rs. 1.5 crores was given to Manishi Tower Pvt. Ltd., we shall like to submit that the advance was given by Mr. Sonjay Bansal for purchasing lands in region of Delhi/Gurgaon. The terms of MOU provided that interest would be charged only if the party does not return back the amount within stipulated time, no 30 Uttrakhand Uthan Samiti interest was charged. The society cannot comment on utilization of funds by the party. A copy of MOU executed with the party and ledger Account evidencing return of payment is attached herewith as Annexure W, page No. 622 to 625. h) Sh. Sunil Jalan: The advance of Rs. 5.5 crores was given for purchase of land in Delhi/Gurgaon region for setting up new colleges. It was only for the furtherance of objects of the society. A copy of MOU executed with the party and ledger Account evidencing return of payment is attached herewith as Annexure X, page No. 626 to 635. Based on the above submissions, we shall like to submit that the allegation imposed by your goodself that the funds of the society have been used for non-educational purposes is completely denied. No funds of the society have been siphoned off by Sh. Sanjay Bansal. It is evident from the above submissions that the society is being run in consonance with the objectives of the society for which it was established and all the conditions stipulated in section 11 & 12 of Income Tax Act, 1961 are being compiled by the society. Thus it is requested to your goodself that the registration granted u/s 12A by the CIT may not be cancelled,"
The ld. Pr. CIT after considering the submissions of the assessee observed that that assessee had not been able to indicate any justifiable evidence or document that the funds of the trust had been utilized for the aims and objectives of the trust. He further observed that in order to eligible for 31 Uttrakhand Uthan Samiti registration u/s 12A of the Act, the objectives have to be for the purpose of education or other charitable work and that Section 12AA of the Act provides for cancellation of this registration when the Pr. CIT is satisfied that the activities of such trust or Institution are not genuine or are not being carried out in accordance with the objective of the trust or institution. According to the Pr. CIT, the registration in this case had been granted for the purpose of education and therefore, in order to determine the genuine activity of education was being carried out or not, it was important to see what activities had been carried out, out of the funds, loan and admission fee received by the trust from various sources and if all the funds were used by the trust for the purpose of education it can be said that activities were being in accordance with the aims and objectives of the trust. The ld. Pr. CIT pointed out that the facts of this case as found during the course of search and seizure operation and on the basis of subsequent investigation indicated that the funds of the trust had been systematically siphoned off for activities other than objectives of the assessee trust and in this order various accounts had been opened to which payments had been diverted by the trustees as shown in item No. 1 to 18 of the show cause notice. The ld. Pr. CIT was of the view that the assessee had not been able to provide any justification for 32 Uttrakhand Uthan Samiti mis-management of the funds of the trust for the purpose other than education and when confronted with evidence which were found and were admissible in terms of Section 292C of the Act, the assessee had only pointed out that those documents did not belong to it or did not indicate any wrong doing on its part which was merely statement not substantiated by any evidence. The ld. Pr. CIT also pointed out that Sh. Sanjay Bansal might have not opened account but those accounts had been used to systematically siphoned out the funds of the trust and even loan of Rs.30 crores and Rs.8 crores raised by the trust had not been applied for the purpose of the objectives of the trust, it was, thus, clear that the trust was not being run in accordance with the aims and objectives for which registration was granted. The ld. Pr. CIT was of the view that the registration of the assessee can be cancelled even in the case when it is found that the certain income received by the assessee trust was not exempted u/s 11 of the Act, due to certain provisions of Section 13(1) of the Act becoming operative. The ld. Pr. CIT observed that the evidence found during the course of search were considered to be belonging to the assessee and the contents of such documents were true, the assessee had not been able to rebut any of the evidence or information found by the AO indicating that the funds of the assessee trust had been 33 ITA No. 2734/Del/2015 Uttrakhand Uthan Samiti siphoned out for activity other than the objectives and it was evident that the funds of the assessee trust had been used for the purpose of other than education and the objectives of the trust. The ld. Pr. CIT, therefore, cancelled the registration granted u/s 12A of the Act.
15. Being aggrieved the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the registration u/s 12A of the Act was cancelled and exemption was disallowed in arbitrary manner by the ld. Pr. CIT without providing adequate reasonable opportunity and in violation of the principle of natural justice. It was further submitted that the explanations and evidences furnished against the unfounded allegation were not given due consideration and findings were given unilateral, without material and evidences on record. It was also submitted that the assessee society had been running educational institutes in accordance with its objectives, rules etc. and complying with the conditions stipulated in Sections 11, 12 & 10(23C)(vi) of the Act and it continued to be eligible for exemption of its surplus income. It was further submitted that the ld. Pr. CIT’s conclusion that Sh. Sanjay Bansal and his wife Smt. Seema Bansal were introducers for opening accounts in the 34 Uttrakhand Uthan Samiti banks in the names of the employees, their fictitious concerns etc. and that the transactions between the assessee society and those concerns were bogus and payments of the assessee society to them for such bogus transactions were siphoned off money by Sh. Sanjay Bansal was nothing but a wild guess and fallacious allegations. It was further submitted that their bank accounts were opened with KYC documents etc. which had been duly accepted by the bank, regular operation of the bank accounts had taken place and none of those documents and realities was countered by the ld. Pr. CIT while cancelling the registration u/s 12AA of the Act. It was contended that merely because Sh. Sanjay Bansal was introducer for the bank account could not be termed as fictitious and Sh. Sanjay Bansal could not be treated as the owner and beneficiary of the bank accounts. Therefore, such a wild allegation made by the ld. Pr. CIT for cancelling the order u/s 12AA of the Act did not stand the test of legal scrutiny. It was submitted that the purchases from 11 concerns mentioned by the ld. Pr. CIT in his impugned order were genuine and were effected for the furtherance of the objects of the society. The funds were strictly used for the promotion of the objects of the society only, the building was constructed and the laptops were distributed among the students (numbering around 800) which also physically 35 Uttrakhand Uthan Samiti existed and were verifiable. It was further submitted that the bank loans were taken and utilized by the assessee for its objects of the assessee society as evidenced by the existing building, computers, laptops distributed to the students, inspection reports of the affiliating and approving authorities like AICTE etc. It was further submitted that the Bank loans were taken and utilized by the assessee for its object, were returned from the society’s own funds and this fact would not have been interpreted against the assessee. It was also submitted that interest free advances to certain concerns and individuals were given under proper agreements for certain work which was essential for the promotion of the objects of the assessee Society, like provision of Hostel accommodation for students etc. It was contended that the assessee furnished overwhelming evidences for purchase of 800 laptops from M/s Fortech Computer System including bills, payments by account payee cheques receipt of 800 laptops and their distributions amongst students, intimation to the bank regarding receipt of 800 laptops and payments to M/s Fortech for the same etc. The aforesaid evidences were not contradicted by the ld. Pr. CIT who did not say that the payments were not made for 800 laptops, still he believed the letter of M/s Fortech saying that only 467 laptops were sold. It was further contended that in view of the overwhelming 36 ITA No. 2734/Del/2015 Uttrakhand Uthan Samiti evidences furnished by the bank and assessee, the department should have taken action in the hands of M/s Fortech and should not have harmed the activities of a charitable institution. It was stated that the assessee society was running several educational institutions and complied with all the statutory norms of building, lab equipments, computers, accessories, peripherals and affiliation by statutory bodies like AICTE and that every year additional construction, extension of academic, addition to lab equipment, computers and peripherals were mandatory for approval and extension and affiliation. However, the ld. DIT(E) failed to appreciate these factual aspects and wrongly concluded that the construction of building, purchase of computers, laptops etc. were bogus and nonexistent, he ought to have realized that all those items were always physically existing and verifiable, but without verification it was wrong to hold that these were bogus and Bank loans were utilized for them. It was further submitted that even the AICTE had given clean reports post search. It was stated that merely because some transactions were with the concerns of Sh. Sanjay Bansal (a trustee of the assessee Society) or with his employees, it could not automatically be held that those transactions were fictitious or bogus, particularly when, those transactions were made with them in the interest of the 37 Uttrakhand Uthan Samiti society as the rates offered by them were reasonable and even lower than the rates of other concerns and the assessee Society did not want to take further burden at that stage because it was engrossed in several other tasks and also to ensure timely compliance, so as to be able to start the next session on time. It was further stated that even the assessee society had been benefited from the transactions with them and because of their indulgence the construction of the building, supply of computers etc. were made in time. It was also stated that neither the AO nor the ld. Pr. CIT considered the rates as unreasonable. Therefore, the cost incurred i.e. approximately Rs.33 crores for 627500 sq. ft. area of various educational institution of the assessee society was totally justified, considering the fact that the average rate of construction per sq. ft. was quite low as compared to what would have been charged by an outside contractor and similarly, the computers, accessories, peripherals were also purchased at reasonable rates and even lower than what would have been charged by other concerns. Therefore, the ld. Pr. CIT without looking into the aforesaid facts and without pointing out anything excessive, unreasonable or wrong, straightaway gave an unfounded and unsubstantiated findings that construction, purchases, etc. were bogus. It was submitted that even no benefit was derived by Sh. Sanjay 38 ITA No. 2734/Del/2015 Uttrakhand Uthan Samiti Bansal or his associates from the above transactions, therefore, the provisions of Section 13 of the Act were not applicable. It was pointed out that the distribution of the laptops were duly confirmed on stamp paper and receipted/acknowledged, paid periodically by the students over a period of 4 years and those documents were shown to the AO/Competent Authority in the course of the proceedings u/s 12AA of the Act and 10(23C)(vi) of the Act but no proper notice was taken thereof and ignored in order to pass an adverse order with pre-conceived notions and to justify the search conducted in this case. It was further stated that merely because certain statements were obtained from the owners of the supplier firms under duress, coercion, undue influence, threat etc, the denial of the transaction could not have resulted in the transaction being held as bogus. Particularly when, the transactions were supported by bills, payments by account payee cheques, entries in the audited books of accounts, their utilization by the society and the existence of the building constructed with the materials supplied etc. None of those material evidences had been disapproved and moreover, no opportunity for cross examination of those persons was allowed by the ld. Pr. CIT. Therefore, the statements relied while rejecting the registration u/s 12AA of the Act was not legally admissible 39 Uttrakhand Uthan Samiti evidence. It was contended that even if it was to be presumed that the various concerns were dummies of Sh. Sanjay Bansal who was the real owner then also the only way for the department was to add income from those transactions in his hands. It was submitted that Sh. Sanjay Bansal surrendered a substantial income which would cover any such addition. It was pointed out that the ld. Pr. CIT at page no. 10 of his order mentioned that he confronted Sh. Sanjay Bansal to all the aforesaid facts but he did not file any explanation, and then he proceeded to narrate one sided details and even did not take care to look into the replies of the assessee to the AO’s questionnaire on the same points which were on the record, therefore, the impugned order deserves to be quashed. It was also pointed out that there was an assessment order which was almost contemporaneous with the impugned order. However, the AO did not allege any failure in the conduct of the activities in terms of avowed objectives. It was submitted that the assessee trust had brought 8000 students on rolls apart from 100s of teachers to carry out the objectives, its campus spread out over an area of above 10,00,000 sq. ft. and nothing was brought on record to suggest that the activity was not genuine. It was further submitted that the allegations of abstraction of funds were fallacious and fictitious by ignoring clinching material and incontrovertible 40 ITA No. 2734/Del/2015 Uttrakhand Uthan Samiti evidences filed during the course of assessment proceedings. Therefore, the registration could not have been cancelled u/s 12AA of the Act. The reliance was placed on the following case laws:
� CIT Vs Varanasi Catholic Education Society (2014) 225 Taxman 81 (All) � CIT Vs Krishna Chandra Gandhi Jan Shiksha Nyas (2014) 222 Taxman 108 � Tamila Nadu Cricket Association Vs DIT(E) (2014) 360 ITR 633 � CIT Vs Babu Mohan Lal Arya Smarak Education Trust (2014) 42 Taxman.com 255 (All) � CIT Vs Ved Niketan Dham, Public Charitable Trust (2013) 219 Taxman 115 (P&H) 16. In his rival submissions the ld. CIT DR strongly supported the impugned order passed by the ld. Pr. CIT and reiterated the observations made in the said order. It was further submitted that the funds of the assessee Society were siphoned off by the promoters/trustee which was apparent from the documents found during the course of search. It was further submitted that the trustee of the assessee Society namely, Sh. Sanjay Bansal opened various bank accounts in the names of the employees or the concerns associated with them and all the withdrawals were through the bearer cheque which were diverted for activities other than the educational activities which was the main objectives of the assessee. It 41 Uttrakhand Uthan Samiti was also pointed out that Sh. Sanjay Bansal and his wife were the introducers for most of the bank accounts and the loans were given to the relatives for non-business purposes. Therefore, the funds were not used to achieve the objects of the assessee and even the invoices were fictitious and the loans which were diverted for non-charitable activities were repaid from the fees collected from the students and even the purchases were inflated. Therefore, the objectives for which the assessee Society was established were not fulfilled. It was pointed out that the trustee of the assessee Society surrendered the income during the course of search for the reasons that the unaccounted income was earned by the assessee society by violating the provisions of the Act, therefore, the registration was rightly cancelled under the provisions of Section 12AA of the Act.
We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee was engaged in running the educational institution which is a charitable activity and therefore, the registration was granted u/s 12A of the Act by the Commissioner of Income Tax, Dehradun on 24.11.2007. In the present case, a search and seizure operation was carried out u/s 132 of the 42 Uttrakhand Uthan Samiti Act on 26.04.2012 on various educational institutes belonging to the assessee society and during the course of search incriminating documents were found, on the basis of those incriminating documents, Sh. Sanjay Bansal one of the trustee surrendered the income. Thereafter, the ld. Pr. CIT initiated the proceedings for cancellation of the registration already granted u/s 12A of the Act by invoking the provisions of Section 12AA of the Act and issued show cause notice dated 30.01.2015 to the assessee u/s 12AA(3) of the Act. The ld. Pr. CIT was not convinced with the reasoning and explanation given by the assessee society and cancelled the registration u/s 12AA of the Act. The main allegation of the ld. Pr. CIT was that the trustees of the assessee Society, namely, Sh. Sanjay Bansal and his wife Smt. Seema Bansal opened various bank accounts in the names of their employees or the business concerns associated with them. The said view was taken by the ld. Pr. CIT on this basis that they were the introducer for opening the bank account. In our opinion, only on this basis that a person introduces someone to open the bank account cannot be held to be the owner of that bank account, particularly when, the said account is operated by the person in whose name the bank account was opened. In the present case, the assessee constructed the building which was in existence and nothing was brought on 43 Uttrakhand Uthan Samiti record to establish that the assessee was not in possession of the building constructed by obtaining the term loan from various banks, even the loan was sanctioned and disbursed by the bank after proper verification and there was no allegation form the concerned bank that the loan was obtained by the assessee by making mis-representation or furnishing inaccurate particulars or documents. The ld. Pr. CIT also alleged that the assessee Society purchased the computers and laptops from the associated concerns of the trustees but nothing is brought on record to substantiate that those computers/laptops etc. were purchased at a higher rate than the market rate rather the claim of the assessee was that those were purchased at a lesser ate then the market rate which benefited the assessee Society. In the present case, it is also noticed that no verification was made from the students to substantiate that laptops/computers claimed to be distributed amongst the students were not given to them and even the recovery from the students towards the cost of the said laptops/computers has not been doubted. In the present case, the trustee of the assessee Society namely Sh. Sanjay Bansal surrendered the undisclosed income detected during the course of search in his individual capacity which has been accepted by the department, in view of the above it cannot be said that funds of the assessee society were used 44 Uttrakhand Uthan Samiti for non-charitable purposes. In the instant case, there is no denial by the various concerns from which the assessee made the purchases for the building material or computers or laptops etc. Therefore, the allegations of the ld. Pr. CIT that the funds were siphoned off for the purpose other than the activities to achieve the objects of the assessee Society are not sustainable. In the present case nothing is brought on record to substantiate that the assessee was not running the educational institutions for imparting the education which is a charitable activity. The AICTE made the inspection and found that proper building was there to run the educational institutions and the computers/laptops were given to the students, thereafter, an approval was granted to the assessee Society which is evident from the inspection report dated 16.07.2015 (a certificate to this effect is available at page nos. 1 to 37 of inspection report furnished on 14.03.2016 and is placed on record). In the present case, the banks had given the term loans against the purchase of the computers/laptops and construction of the building, after proper verification and the assessee is also making the repayment of those term loan without making any default and there is no finding contrary to the above facts by the ld. Pr. CIT in the impugned order. It is an admitted fact that the registration is granted u/s 12A of the Act, if a trust/society is created 45 ITA No. 2734/Del/2015 Uttrakhand Uthan Samiti wholly for charitable purposes or an institution is established wholly for such purposes, the said registration can be cancelled u/s 12AA(3) of the Act if the ld. Pr. CIT or CIT is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the object of the trust or institution as the case may be. In the present case, it is an admitted fact that the assessee had been granted registration u/s 12A of the Act, since the assessee Society is engaged in running of educational institution and it is not brought on record at any stage that the assessee was not engaged in educational activity through various educational institution established by it and if the ld. Pr. CIT or the AO was not satisfied for various expenses incurred by the assessee than proper action would have been taken u/s 11 or 13 of the Act.
On a similar issue the Hon’ble Allahabad High Court in the case of CIT Vs Babu Mohan Lal Arya Smarak Educational Trust (supra) held as under: “Where in course of search carried out at assessee’s premises, certain documents were found indicating some receipt of cash against admission of students in various courses run by assessee trust, in view of act that presumption under section 292C was rebutted by denial of assessee as no evidence of actual receipt of donation or capitation fees was 46 Uttrakhand Uthan Samiti found in search, registration granted under section 12AA could not be cancelled on basis of seized documents.”
Similarly, the Hon’ble Allahabad High Curt in the case of CIT Vs Varansai Catholic Education Society (supra) held as under:
“From a perusal of section 12AA, it is clear that the Commissioner was required to satisfy himself about the genuineness of the trust by making necessary inquiries and if he was satisfied, he would grant registration. In the event, upon an inquiry, the Commissioner was not satisfied, he could refuse registration. Similarly, under sub- clause (3) of the section 12AA, the registration can be cancelled on the ground that the Commissioner was satisfied that the activities of such trust was not genuine or was not being carried out in accordance with the objects of the trust. The fact that some activities, which were not solely carried out for charitable purpose could not be a ground for cancelling the registration under section 12AA, though, such ground could be made available to the department to refuse exemption under section 10(23C).” It has further been held that: “There is no whisper that the assessee did not fulfill any of the conditions mentioned in section 12AA(3), namely, that the activities of such trust was not genuine or was not being carried out in accordance with the objects of the trust.”
47 Uttrakhand Uthan Samiti 20. Similarly, the Punjab & Haryana High Court in the case of CIT Vs Ved Niketan Dham, Public Charitable Trust (2013) 38 Taxmann.com 342 (supra) held as under: “6. A perusal of Section 12AA(3) of the Act, reveals that a precondition to cancellation of registration are findings that activities of the trust are not genuine or are not being carried out, in accordance with objects of the trust. Thus, before cancelling registration, a Commissioner is required to record a finding that activities of the trust are not genuine or are not being carried out, in accordance with objects of the trust. A perusal of the order passed by the Commissioner reveals that he did not record any finding as required by Section 12AA(3) of the Act. The Income Tax Appellate. Tribunal, therefore, rightly reversed the order passed by the Commissioner. We find no reason arising whether from arguments advanced or from the order passed by the Commissioner to take a different view.”
In the present case also a search was conducted at the assessee’s premises, however, no evidence of receipt of donation or capitation fee was found during the search and the presumption u/s 292C of the Act were rebutted by denial of the assessee that the purchases of the material for construction of the building and computers/laptops for distribution amongst the students were made through some of associated concerns of the trustees at the reasonable rate which were even lower than the market rate. The Banks 48 ITA No. 2734/Del/2015 Uttrakhand Uthan Samiti granted the term loans to the assessee trust for the construction of building and purchase of the computers/laptops after proper verification. The assessee also repaid the term loan by making the payments of the installment and no finding has been recorded by the ld. Pr. CIT that the activities of the assessee trust were not genuine or not being carried out in accordance with the objects of the assessee trust. Therefore, the ld. Pr. CIT was not justified in cancelling the registration already granted u/s 12A of the Act, by invoking the provisions of Section 12AA of the Act.
In the result, the appeal of the assessee is allowed. (Order Pronounced in the Court on 29/07/2016)