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TMI Blog2023 (3) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... approval only on the basis of some alleged rough jottings on a paper in respect of exchange of property, owning of cars and certain statements of teachers without any cross examination and as such withdrawal of approval in utter disregard of the explanations rendered is arbitrary, illegal and unjustified. 4. That the Ld. PCIT(Central) has further erred in holding that the activities of the assessee society are not being carried out in accordance with its aims and objects and also not in accordance with all or any of the conditions subject to which it is approved which is factually incorrect and as such order withdrawing the approval is arbitrary, illegal and unjustified. 5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 6. That the order of the Ld. Commissioner of Income Tax is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable." 2. Briefly the facts of the case are that the assessee society is engaged in the field of education and running a school in the name of St. Peter's School, Chandigarh. It is registered under the Societies Registration Act and was approved for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were being used by Mrs. Patricia Khanna, the Chairperson and her family members as their residence. It was further stated that an Exchange Deed dt. 15/12/2016 was found during the course of survey which was executed between the assessee society and Mr. Arun Kumar Dhir, wherein 100% of the property situated at Sector 18-B was exchanged for 80% share of another property situated at Sector 11A, Chandigarh and the assessee society has received Rs. 60 lakhs by way of cheques to equalize the value of the two properties. Further, a notepad was found in the bag of Mr. Shane John Khanna a member and Secretary of the society and on perusal of the noting therein, it was found that in addition to Rs. 60 lakhs, Rs. 2.50 crore was also paid in cash by Mr. Arun Kumar Dhir which was diverted and neither accounted for in the books of the assessee nor used for its objects. It was stated by the ld PCCIT that during the course of survey, it was found that the society owned a fleet of luxury cars which were being used by the Chairperson and her family members alongwith Ms. Vardhini Verma, a member of the society. It was further found during the course of survey that the society was paying lower salary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val originally granted under section 10(23C)(vi) by the then ld CCIT, Chandigarh vide his order dt. 14/02/2007 with effect from A.Y. 2003-04 was withdrawn by the ld PCIT(Central), Gurgaon vide the impugned order dated 21/10/2021. 8. Against the said findings and direction of the Ld. PCIT, the assessee society is in appeal before us. 9. During the course of hearing, various contentions have been advanced by both the parties. Firstly, we refer to the ld AR's contention regarding retrospective withdrawal of the exemption approval. The ld AR submitted that ld PCIT has withdrawn the exemption under Section 10(23C)(vi) with retrospective effective, i.e, with effect from A.Y 2003-04 which is clearly without requisite jurisdiction, arbitrary, unjust and without sanction of law. It was submitted that this is the second time when the exemption has been withdrawn unsettling the position in the earlier years. It was submitted that when the exemption was earlier withdrawn and thereafter, reinstated by the order of the Hon'ble Punjab and Haryana High Court which was affirmed by the Hon'ble Supreme Court, how the ld PCIT can invoke his jurisdiction to withdraw the exemption approval again right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), is approved by the prescribed authority and subsequently that Government or the prescribed authority is satisfied that- (i) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not- (A) applied its income in accordance with the provisions contained in clause (a) of the third proviso; or (B) invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso; or (ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution- (A) are not genuine; or (B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved; or (iii) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not complied with the requirement of any other law for the time being in force, and the order, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Commissioner or Commissioner shall (i) call for such documents or information from the fund or institution or trust or any university or other educational institution or ay hospital or other medical institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence of any specified violation; (ii) pass an order in writing cancelling the approval of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution, on or before the specified date, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violation has taken place (iii) pass an order in writing refusing to cancel the approval of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution, on or before the specified date, if he is not satisfied about the occurrence of one or more specified violations; (iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such fund or institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive in nature has been brought out more clearly in the amended provisions, however, the same was always intended and should be read into the existing provisions as well as held by the various Courts and different Benches of the Tribunal. 16. In this regard, our reference was drawn on the decision of Hon'ble Allahabad High Court in case of Agra Development Authority [2018] 407 ITR 562 (All), Hon'ble Rajasthan High Court in case of Indian Medical Trust Vs. Pr. CIT, Jaipur (2019) 108 taxman.com 93 (Raj), Hon'ble Madras High Court in case of Auro Lab vs ITO (2019) 102 taxmann.com 225, Indore Benches of the Tribunal in case of Shri Jairam Education Society Bhopal (in ITA Nos. 90 & 548/lnd/2019 dated 13/10/2021) and Hyderabad Benches of the Tribunal in case of Aurora Educational Society Vs. Pr. CIT(Central) (in ITA Nos. 318 to 321 (Hyd) of 2020 dt. 20/04/2021). 17. In his submissions, the ld Sr DR submitted that the exemption notification should be interpreted strictly as held by the Hon'ble Supreme Court in case of Commissioner of Customs (Import), Mumbai vs M/s Dilip Kumar and Company (Civil Appeal No. 3327 of 2007 dated 30/07/2018 and as per provisions at the relevant point in tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which have been relied upon during the course of hearing before us. 20. In case of Agra Development Authority (Supra), briefly the facts of the case before the Hon'ble Allahabad High Court were that the assessee had applied for registration under Section 12A of the Act which was granted to the assessee w.e.f. 1.4.2003 by an order in writing issued by the Commissioner of Income Tax-I Agra dated 24.9.2003. Thereafter, notice under Section 12AA(3) of the Act was issued to the assessee on 6.3.2012 whereby it was first proposed by the Commissioner to cancel the assessee's registration and in that background, the issue framed by the Hon'ble High Court was whether the Revenue having granted registration to the assessee way back, on 24.9.2003, could now cancel that registration with effect from a date prior to the date of issuance of the notice seeking to cancel the assessee's registration. It was held by the Hon'ble High Court that there is nothing in the language of Section 12AA(3) of the Act that may suggest registration of the assessee may be cancelled with retrospective effect. It was held by the Hon'ble High Court that the act of cancellation of registration has serious civ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up a contrary case. 42. Then, it is also not the case of the revenue that the assessee had obtained registration by practicing fraud /or collusion or concealment of any material fact. In absence of such allegation, the registration granted to the assessee could never be alleged to be a nullity. 43. In the instant case, undisputedly the registration had been granted much prior to the introduction of the first proviso to Section 2(15) of the Act. Therefore, on the date of grant of registration to the assessee, it was fully eligible for the registration. The registration thus granted did not suffer from any inherent or fundamental defect. 44. Then, the assessee continued to avail the benefit of the registration for all the assessment years subsequent to the grant of its registration. Such a registration order cannot be allowed to be cancelled with retrospective effect so as to affect past transactions that too in absence of any express legislative intent and without any adverse inference being first drawn against the assessee, in terms of Section 13(8) of the Act, during the relevant assessment year. 49. In the context of the Income Tax Act, 1961 it is undisputed that the gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situation, the same would have been clearly specified in the said provision. It was held by the Hon'ble Rajasthan High Court that the interpretation of the said provision has to be harmonious rather than being prejudicial to the institutions as it would instigate and create a fear of the Income Tax Department and has referred to earlier decisions of the Hon'ble Allahabad High Court in case of Oxford Academy for Career Development and Agra Development Authority. It would be relevant to refer to the findings of the Hon'ble Rajasthan High Court which read as under: "28. Indisputably, the order dated 16th Jan, 2018, made by the Commissioner of Income Tax thereby canceling the registration granted under section 12A and withdrawing the approval given under section 10 (23C) (v) & 10 (23A) (via) of the Act of 1961, to the petitioner Trust with retrospective effect from the date of 01 st April, 2006, was arbitrary in the face of the provisions of the Act of 1961; and therefore, cannot be deemed to be in consonance with any possible interpretation to be valid or legal. This court is of the opinion that the provisions of section 12AA (3) of the Act of 1961, empowers the Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng registration on 1st April, 1999, to the petitioner's society under Section 12A of the Act, is quashed. Consequently, the registration granted to the petitioner's society on 1st April, 1999, stands restored for the assessment years under consideration." B. In the case of Assistant Commissioner of Income Tax Vs. Agra Development Authority: (2018) 90 Taxman 288, it was observed thus: "50. In the context of the IT Act, 1961 it is undisputed that the grant of registration is a one time affair. The assessee is required to apply for registration under s. 12A of the Act. Once the assessee has been registered under s. 12A of the Act, by a specific order passed by the CIT, it stands established for the purpose of the Act that the activity being pursued by that assessee is for a "charitable purpose", under s. 2(15) of the Act. 51. Then, there is nothing in the language of s. 12AA(3) of the Act that may suggest registration of the assessee may be cancelled with retrospective effect. The use of the words 'or have obtained registration at any time under s. 12A of the Act' added by amendment w.e.f. 1st June, 2010, only indicate that the CIT was vested with the power to ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion at a distant date? 17.On a cursory glance at the periodical amendments to the Income Tax Act regarding the exemptions granted to the charitable trusts, it is seen that until 2004, when the new Section 12AA was amended, there was no power under the Income Tax Act, 1961 to the Commisisoner of Income Tax or any other authotity to revoke/cancel the registration once granted for such Charitable Trusts. Later, on 01.06.2010 vide Finance Act, 2010, Section 12AA(3) was further amended to include specifically the registrations granted under erstwhile Section 12A of the Income Tax Act, 1961 also within the ambit of revocation/ cancellation as contemplated under the 2004 amendment. 18.On perusal of the case laws relied by the parties to these Writ Petitions, it is clear that the questions raised in these Writ petitions have become a matter res judicata and no more res integra owing to the various Judicial decisions. Following the amendments to Section 12AA(3) and the subsequent actions of the Department on Section 12AA Companies, numerous cases came to be filed before various judicial forums. The vires of the amended section also came to be challenged http://www.judis.nic.in and cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows as a sequel to the decisions in the other three questions is an emphatic 'No'. Courts have categorically held that unless the assessee obtained registration by fraud, collusion or concealment of any material fact, the registration granted can never be alleged to be a nullity. In the case on hand, it is evident that fact of the cancellation of the registration triggered the proceedings and evidently forms the preamble of each of the impugned orders. And clearly, there is no allegation of fraud or misdeclaration on the part of the petitioners and the respondents were candid in confessing that the certificate was granted erroneously. Therefore, reopening the assessment for the past years on account of the cancellation order dated 30.12.2010 in the case of the petitioner by the assessing officer is not permissible under the law and the proceedings issued in AAATA1142P dated 12.08.2011 relating to the assessment year 2004-2005, 2005-2006, 2006-2007, 2007-2008 are liable to be quashed and accordingly quashed. Also, the the assessment order in AAATA1142P http://www.judis.nic.in dated 29.12.2011 relating to the assessment year 2010-11 disallowing exemptions on the basis of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charitable activity carried out by the assessee and the activities of imparting education to the students. 15c. It is also a settled issue that the registration u/s 12AA cannot be cancelled from retrospective effect. For this view we place reliance on the judgment of Hon'ble Madras High Court in the case of Auro Lab v. ITO (2019) 102 taxmann.com 225 dated 23.01.2019 wherein Hon'ble Court held that "Since the act of cancellation of registration has serious civil consequences and the amended provision is held to have only a prospective effect the effect of cancellation, in the event the pending Tax Appeal is decided in favour of the Revenue, will operate only from the date of the cancellation order, that is 30.12.2010. In other words, the exemption cannot be denied to the petitioner for and up to the Assessment Year 2010-11 on the sole ground of cancellation of the certificate of registration." [emphasis supplied] 15d. In view of the above discussion with regard to ground no.1 2 & 6 of the assessee's appeal, in light of the judgments and decisions referred herein above settled and judicial principles, we are of the considered view that firstly, Ld. Pr. CIT erred in cance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o account the provisions of sub-sections (2), (4) and (6) of the said section, be deemed to be the income of such fund or institution or trust or university or other educational institution or hospital or other medical institution of the previous year in which it is so applied." 25. In case of Aurora Education Society (Supra), we find that Co-ordinate Hyderabad Benches of the Tribunal has set-aside the cancellation of registration u/s 10(23C)(vi) firstly, on account of inherent lack of jurisdiction with the ld PCIT(Central) at the time of issue of first show-cause notice and secondly on account of fact that cancellation has been done retrospectively from the original date of grant of approval and has relied upon the decision of the Hon'ble Supreme Court in case of Commissioner of Customs (Import) v. Dilip Kumar (Supra) to hold that strict interpretation is applied in the given facts and circumstances of the case in the light of Rule2CA of the Income-tax Rules, 1962 to conclude that the impugned order withdrawing the assessee's approval is not sustainable for want of the Pr.CIT(Central)'s patent lack of jurisdiction. It has been held by the Coordinate Bench that the withdra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovember, 2019 vide CBDT Notification No. S03215(E)/No.60/2019 in F.No.370142/14/2018 -TPL. The CBDT vide such notification has amended Rules 2C and 2CA. 5. The amended Rule 2C is as under: '2C. (1) The prescribed authority under sub-clause(z'v),sub-clause(v), subclause( vz') and sub-clause(via) of clause (23C) of Section 10 shall be the Principal Commissioner of Commissioner whom the Central Board of Direct Taxes may authorise to act in this behalf. 6. Thus, as things stood as on the date of order, the CIT(Exemption), who no longer holds the jurisdiction over the case in view of the order u/s 127, cannot be taken as prescribed authority for the purpose Section 10(23)(C)(vz) In respect of aforesaid cases as the cases are centralised with PCIT(Central), Hyderabad and the person holding that charge will become the prescribed authority in view of the afore mentioned amendment. This is for your information and further necessary action". 8. After giving our thoughtful consideration to the foregoing facts on record, we find that the / Pr.CIT(Central)'s clarification extracted in preceding paragraphs seals the outcome of the assessee's grievance. This taxpayer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming but not accepting it as correct, has withdrawn the assessee's approval from the day which was granted the very relief i.e., from 27-03-2008 turning out to be well beyond the period of show cause notice itself. And that too, without even indicating as to how the assessee had violated the conditions of its approval granted earlier in all these intervening assessment years wherein it had also been assessed without any violation of the approval's conditions. 10. We therefore rely upon our foregoing detailed discussion and hold that Pr.CIT(Central) herein has erred in law and as on facts in withdrawing the assessee's approval granted u/s 10(23C)(vi) of the Act. The assessee has also filed a detailed case law paper book as well as citing various judicial precedents but we do not deem it appropriate to deal with any of them since it is an instance of the Pr.CIT(Central)'s lack of jurisdiction. The impugned order dt.26-12-2019 forming subject matter of ITA No. 320/Hyd72020 stands reversed. The assessee's impugned approval is restored as a necessary corollary." 26. In the instant case, survey at the premises of the assessee society was carried out on 23/01/2019, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions contained in clause (b) of the third proviso; or the activities of assessee society are not genuine; or the activities of the assessee society are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved; or the assessee society has not complied with the requirement of any other law for the time being in force. 29. In the following paragraphs, we shall now be discussing each of the matters raised by the Ld. PCIT, Gurgaon, the relevant facts and the submissions made by the assessee society before the Ld. PCIT, his findings, the rival contentions advanced by both the parties before us and our understanding and analysis thereof in order to determine whether the same satisfies the conditions so specified for withdrawal of approval u/s 10(23C)(vi) of the Act. 30. The first issue relates to utilization of the two immovable property of the assessee society situated at Sector 18-B and Sector 11A, Chandigarh by the Chairperson of the assessee society and her family members for their personal residence and in that context, whether such facility has been provided to the Chairperson in lieu of the services rendered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to retain the accommodation. It was submitted that the said property was subsequently exchanged for another property situated at Sector 11, Chandigarh and it is not a case where both the properties were used as an accommodation at the same time. It was submitted that both these properties were registered in name of the assessee society. It was submitted that the perquisite value of accommodation has been duly reflected in income tax returns of Mrs. Patricia Khanna. It was submitted that both Shri S.S. Khanna and Mrs. Patricia Khanna have devoted their whole time for the promotion of education and have rendered tireless services to the assessee society which is a full time job requiring continuous involvement and as part of the same, where the society is providing them accommodation, the same cannot be held against the society or against any of the objects being pursued by it as the same are clearly in furtherance of the said objects and nothing else. It was further submitted that the properties are registered in the name of assessee society and therefore the question of succession of the properties of the assessee society in favour of Mrs. Patricia Khanna or any of her family me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siderable debate and investigation. This will be evident from the official correspondence resting with the following letters; (i) CIT/CHD-II/2005-06/5200 dated 09-03-2006 Annexure-I (ii) Reply dated 21 -03-2006 Annexure-II (iii) CC/CHD/Judl/2006-07/3040 dated 26/27-12-2006. Annexure-III (iv) Reply dated 06-01 -2007. Annexure-IV 6.6 It was after deliberate consideration of facts, circumstances that the Society was granted approval. Facts and circumstances remaining the same as they existed at the time of grant of approval, the withdrawal of approval is not warranted at this stage." 35. Per contra, the Ld. Sr. DR submitted that both these properties admittedly are used by the Chairperson and her family members and therefore there is clearly a benefit/perquisite by way of accommodation which has been provided by the assessee society to them. It was further submitted that the fact that the chairperson is rendering services to the assessee society is not doubted by the ld PCIT(Central), at the same time, it is essential to determine whether the benefit so provided by the assessee society is in lieu of such services and whether the same has been offered to tax in the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... large. 12. To render free education to deserving pupils and to provide financial assistance to promote their education and other talents. 13. To provide educational, social and financial assistance to the handicapped or under-developed youth irrespective of caste, creed and colour. 14. To provide board and lodge to the orphans and aged persons in order to preserve their individual dignity. 15. To provide literary atmosphere to the retired educationists and other persons of distinction and also felicitate them for their achievements for the benefits of humanity. 16. To establish and administer and control the institutions and their branches at different stations; states for the proliferation of education, brotherhood, secularism and democratization. 17. To control as well as to develop the resources and funds to a sound financial position of the said society as of its institution at different stations/states through suitable means by accounting as well as to maintain genuine accounts of the donations collected through private individuals, semi-Govt. Organization, Govt agencies, missions in India or abroad or any other resources. 18. To arrange sponsor or hold discussio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade as per the aforesaid objects of the assessee society but the fact that the same were used as personal residential accommodation by the Chairperson is in violation of the asssessee's objects. Therefore, the limited issue under consideration is whether the usage of the assessee's society property by the Chairperson is in violation of its aforesaid objectives or not. In this regard, it has been contended that the said matter had already been examined at the time of grant of initial approval by the ld CCIT and after due examination, the approval under section 10(23C)(vi) has been granted and given that facts and circumstances remaining the same as they existed at the time of grant of approval, the withdrawal of approval is not warranted. 39. In order to appreciate the same, we refer to letter dated 9/03/2006 issued by the then ld CCIT, Chandigarh which was issued in context of examining the assessee society's application under section 10(23C)(vi) and one of the matter relates to use of residential house by then chairman Mr S.S Khanna and Mrs Patricia Khanna, Principal. It has been stated by the ld CCIT that as per audit report for the year ending 31/03/2002, residential house was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see society to retain and occupy the said residential accommodation and there is thus no dispute in this regard that a facility by way of residential accommodation has been provided by the assessee society to the Chairperson in lieu of her services. The question which remains is whether the same has been considered as perquisite in her hands by the assessee society for tax purposes and/or any rent has been recovered from her. 41. As per ld PCIT(Central), there is no evidence on record that the same has been offered to tax in her hands as perquisite under section 17(2) or any rent has been recovered from her. In his submissions, the ld AR has stated at the Bar that perquisite in form of residential accommodation has been computed and duly considered in the hands of the Chairperson for the purposes of tax deduction u/s 192 by the assessee society and the same has thereafter been duly offered to tax in individual tax returns filed by her. In support, copies of Form 16 issued by the assessee society for the financial years 2017-18 to 2020-21 as well as personal tax returns of the Chairperson have been placed on record. It thus appears that Form 16s and personal tax returns were availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds for taxation or they have reimbursed any money to the assessee society. It was finally held by the Ld. PCIT that although the investment in the luxury vehicles per se may not be in contravention of the objects of the assessee society but considering the surrounding circumstances and utilization of the vehicles by the Chairperson and her family members, it can be concluded that the funds of the society were diverted for buying luxury cars for personal use of Chairperson and her family members. 45. In this regard, the Ld. AR has submitted that these vehicles are owned and registered in the name of assessee's society and duly recorded in the books of assessee society. It was submitted that these vehicles are at the disposal of the society's executive committee members and other staff members. The vehicles are used exclusively for the official conduct and activities of the assessee society for interacting with various Government departments. Further, Mrs. Patricia Khanna , Mr. Shane John Khanna and Ms Verdhini Verma are wholly devoted towards the school activities of the assessee's society and they have been authorized by the assessee society to use these vehicles and are thus enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed of buying such a luxury car. As brought on record, this issue was subject matter of scrutiny in the assessment year 2009-10, wherein the Assessing Officer has invoked the provisions of section 13 to deny the exemption to the assessee trust. The matter had travelled up to the stage of first appellate proceedings, wherein the learned Commissioner (Appeals) has reversed the findings and the conclusion of the Assessing Officer by holding that the car was used for the purpose of the trust only and after recording detail reasons, he decided the issue in favour of the assessee trust by holding that there is no violation of section 13. It has also been brought on record that the said car was sold in the next year. Such an objection of the learned DIT(E) in the present case, cannot be the subject matter of cancellation of registration under section 12AA(3), firstly, it is still a dabatable matter which is subjudice, whether there is any violation of section 13 or any misuse of trust fund; secondly, even if the car has been purchased in the name of the trustee, then at the most, it needs to be examined within the scope of section 13, and if at all there is any violation, then the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. The grounds thus raised by the assessee are allowed." 47. The Ld. Sr DR submitted that the vehicles have been used by the Chairperson and her family members for their personal use and therefore there is clearly benefit by way of availability of these vehicles at the disposal of the members of the assessee society. It was further submitted that the fact that the chairperson and other members are rendering services to the assessee society is not doubted by the ld PCIT(Central), at the same time, it is essential to determine whether the benefit so provided by the assessee society is in lieu of such services and whether the same has been offered to tax in the hands of the Chairperson and other members and as per the order of the ld PCIT(Central), there is no evidence on record to this effect. He accordingly supported the order and findings of the ld PCIT(Central) in this regard. 48. We have heard the rival contentions and purused the material available on record. It is a fact that the matter relating to vehicles and its usage by then Chairperson Mr S.S Khanna and Mrs Patrica Khanna was subject matter of examination by the ld CCIT at the time of initial grant of approval. It is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to office and back and for other official purposes, however, to hold that the vehicles have been provided exclusive for personal purposes won't be correct. Basis the material available on record, we believe that not enough evidence has been brought on record by the Revenue to hold that these vehicles have been provided exclusively for personal purposes of members of the assessee society and funds to that extent have been diverted for personal benefit. At the same time, we believe that the Assessing officer is not precluded from examining the said matter during the course of regular assessment proceedings as to whether the vehicles have been used for official purposes alone or besides the official purposes, whether there is any personal usage as well and take appropriate action as per law. At the same time, in light of aforesaid discussions and in the entirety of facts and circumstances of the case and taking into consideration the decision of the Coordinate Mumbai Benches referred supra which support the case of the assessee, we are of the considered view that the provision of vehicles per se to the members of the assessee society cannot be a reason for withdrawal of exemption u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice. It was submitted that a description of the Chairman office is that it has a cabinet which has several drawers and most of the time, the Chairperson office is open and accessible to teaches and other staff members. It was submitted that Chairperson Mrs Patrica Khanna and Mr Shane John Khanna were totally unaware of existence of these cheque books. It has been alleged that some of the teachers have given signed blank cheque to the Chairperson, however, on perusal of the statements so recorded of the teachers, it doesn't indicate any such charge against chairperson or school management. It was further submitted that the statement of thirty teachers were recorded, out of which only two teachers have said that they have parted with part of their salary, without specifying the person to whom it is given. It was submitted that the teachers working with the Society are an educated lot and no one these days would be influenced by the management to part with their salary. The assessee society gave replies to the queries raised by the ld PCIT which though reproduced in the impugned order has not been appreciated and wrong inference has been drawn by the ld PCIT based on presumptions, sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices or deployed Mr. Mohan to collect the cheques on its behalf. The allegation is categorically denied. The explanation of the Society has not been faulted with or falsified." 56. It was further submitted that the department had collected various evidence from the banks from where it learnt that the cheques issued by various teachers were encashed by one Mr. Mohan. This material was collected at the back of the society and which was never allowed to be examined by the society. It was further submitted that the society has not asked or authorized Mr Mohan to withdraw or deal in any manner with the teacher's salary and it is the teachers who have availed the services of Mr. Mohan to withdraw money from the bank required for daily needs. It was submitted that there is no statement of Mr Mohan which has been recorded by the Revenue and it is merely basis conjectures that allegation of misappropriation and inflation of salary expenditure has been levied and which has formed the basis and reason for withdrawal of the approval. Further, reliance was placed on the Indore Benches decision in case of R Shri Jairam Education Society Bhopal (Supra) wherein similar allegation of misappropri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heques which were used during the different months in a year would be consecutive. There is no denial of the fact that the assessee society may be disbursing the salary to the teachers as prescribed by the rules in this regard but the evidences collected clearly indicated that part of the salary was taken back by the management of the school every month and the actual salary paid to them was less than the amount which was entered in the books of account kept by the school. The only conclusion which can be drawn is that the funds of the society by inflating the salary of the teachers and staff was misappropriated by the chairperson and the members for their personal purposes." 58. We have heard the rival contentions and purused the material available on record. We have carefully gone through the statements of thirty teachers recorded during the course of survey carried out at school premises on 23/01/2019 as available in assessee's paperbook pages 91-152 and we find that various questions have been raised by the survey team in a typewritten questionnaire in terms of their educational qualifications, experience, mode of selection, designation, payment of salary, TDS, working hrs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons. It is not a case where thirty persons have appointed two persons as their representative and whatever they say will represent the collective conscience of thirty persons. Each of the thirty persons represent their individual standing and carry creditability and where their's other part of the statement is not disputed in terms of their education, experience, how can one dispute the part of the statement where they categorically stated that they have not parted with part of their salary. As we have noted earlier, each of the teachers have been asked a specific question verbally as to whether they have parted with their cheque book and thereafter, they have been asked to confirm it in writing in their own handwriting. There is thus a conscious affirmation on part of these teachers that they have not parted with their salary. These negative statements therefore cannot be discarded and carries equally strength. Given that these negative statements outweigh the positive statements, the hypothesis which the Revenue has tried to establish that the whole of the salary figure has been inflated by the assessee society and funds of the assessee society have been misappropriated is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inate Bench that the loose papers don't establish that the activities of assessee society are not genuine and are not carried out in accordance with the objects and thus the same cannot form the basis for withdrawal of exemption. At the same time, it was further held by the Coordinate Bench that where there are allegations that funds of the assessee society have been misappropriated or there is any ambiguity in the claim of expenses, the same can be taken up during the assessment proceedings. We find that the facts in the instant case are similar where there are allegation of misappropriation of assessee society's fund by inflating the salary expenditure and withdrawal from teachers's bank account and the registration has been cancelled with retrospective effect though there is nothing on record wherein the genuineness of the activities of the assessee society has been challenged in terms of imparting education to school children. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, we are of the considered view that the same cannot form the basis for withdrawal of exemption u/s 10(23C)(vi) of the Act. 64. The next issue relates to the exch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able condition and therefore till the time, house at Sector 11A is not in a habitable condition, the society shall retain the house at Sector 18-B and chairperson shall continue to stay at the said house at Sector 18-B. 69. The ld. PCIT further referred to a notepad found from the bag of Mr. Shane John Khanna and his statement recorded under section 131 of the Act on 24/01/2019. Referring to the statement of Mr. Shane John Khanna, the Ld. PCIT stated that he has identified most of the hand writing in the notepad as his own. He has also admitted that notings at page no. 7 is in his handwriting. However he refused to identify the handwriting on page nos. 13 and 14. However from perusal of the contents of these pages, he noted that these are in the same handwriting as that of Mr Shane John Khanna. It was further observed by the ld. PCIT that from the perusal of the pages of the notepad, it is clear that these are notings about cheques of Rs. 60 lacs and cash components of Rs. 2.50 crores with respect to the same property transaction as per exchange deed. 70. In light of aforesaid facts and findings, and taking into consideration the submissions to the show cause submitted by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual value of H.No. 163, Sec. 11 A was adopted at Rs. 7,52,00,000/- as against the collector rate of Rs. 4,32,20,150/- and the difference in the exchange value was received by way of cheque payment which was duly accounted for in the books of accounts. 73. It was further submitted that the assessee society has dissociated itself with the contents of the "Note Pad" as this was a rough note pad, used by many persons which is not signed or authenticated by any person except to the extent of some figures appearing on the left hand side of page no. 7, which were in the handwriting of Mr. Shane John Khanna. This is a dumb note pad which has nothing to do with the working of the society. It is also an admitted fact that during the course of recording of statement of Mr. Shane John Khanna, he categorically stated that the handwriting on page 7 was in his handwriting and he did not know as to whose handwriting was there on Pages 13-14. It was submitted that ld PCIT has wrongly presumed that the amount of Rs 7,52,00,000/- was paid for a structure having a collector rate of Rs 4,32,20,150/- whereas the actual fact is that Rs 7,52,00,000/- is the reconstructed value of the house as on 15/12/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the same clearly established that there was payment of part consideration amounting to Rs. 2.5 crore by way of cash and since the same was not accounted for in the books of the account of the assessee society and the funds were diverted for the benefit of the Chairperson and members of the society. Further, our reference was drawn to the findings of the Ld. PCIT which are contained at para 7.4 of the impugned order which read as under: "7.4 I have considered the matter and perused the replies of the assessee society and page nos. 7. 1 3 and 1 4 of Annexure-A1. It is noted that the notepad marked as A1 was found in personal possession, in the bag of Mr. Shane J. Khanna. In the statement recorded and reply furnished by the assessee society it was admitted that the page no. 7 and jottings on the left-hand side of page no. 13 are in the handwriting- of Mr. Shane J. Khanna. Also, there is no doubt that the transaction mentioned therein is related to the Exchange Deed dated 15.12.2016 signed between Mrs. Patricia Khanna and Mr. Arun Kumar Dhir. The amount and dates of cheques mentioned on page no. 7 and 1 3 exactly matches with those of mentioned in page no. 4 of the Exchange Deed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the society The balance amount of Rs. 2.50 crore was paid in cash by Mr. Dhir to the society which was misappropriated by the chairperson and the members of the society. It is noted that the dates and the details of amount received are clearly mentioned on the page and these are not estimated figures. In fact, the amount of Rs. 40 lakh was paid by Mr. Dhir to the chairperson and member at the time of agreement as advance (Biana) . A number of payments in cash have been made before the date of signing of the Deed of Exchange on 15.12.2016. Hence, the explanation of the assessee society that the tentative cost of reconstruction was about Rs. 2.50 crore which was taken care of, while determining the value of the property at Rs.7,52,00.000/- as against the circle rate of Rs.4,32,20,150/- and the paper merely reflected the tentative value of property to be exchanged and there was no cash dealing between the parties to the Exchange Deed is baseless and not tenable in view of the clear notings as discussed supra. The Exchange Deed dated 15.12.2016 also does not mention about any such cost of reconstruction to be incurred and the same is also not supported by any evidence. The only co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Mr. Dhir to the society. It has been further held by the ld PCIT that the same has been done basically to equalize the value of the two properties and to show a lower amount of Rs. 60 lakh (Rs. 8.12 crore - Rs. 7.52 crore) as payable by Mr. Dhir to the society in the exchange deed. It has been further held by the ld PCIT that in reality, the assessee society has received Rs 3.10 crores whereby Rs 60 lakhs has been received by way of cheque, the remaining amount of Rs 2.50 crores (Rs 3.10 crores - Rs 60 lakhs) has been received in cash and the cash amount has not been reflected in the books of accounts of the assessee society and the same has been misappropriated by the Chairperson and members of the society. 80. We therefore have a situation where transacted value which is higher than the collector value is disputed by the ld PCIT and the ld PCIT is of the opinion that collector value should be considered and not the transacted value. We find that the same is in contrast to situations where the transaction value is generally found lower than the collector value and the Revenue challenges the same and invokes provisions of Section 56(2)(vii)(b) questioning the transaction value a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the property is concerned, we are therefore of the considered view that the transacted value of property at Rs 7,52,00,000/- could not be disturbed and substituted with the collector value as has been done by the ld PCIT whatever may be the apprehension in his mind. 81. Further, looking at the matter from another perspective, we are also intrigued by the fact that where the exchange deed was presented before the registering authority and the registering authority after examination of the transacted value of the both properties and taking into consideration the collector rate, has determined the quantum of stamp duty and which has been duly paid and deposited, how the ld PCIT can step-in and say that the transacted value is more than the collector rate and has been artificially inflated. In other words, where the higher transacted value has been accepted by the registering authority and stamp duty thereon has been determined by the registering authority and there is no dispute thereon raised by either of the parties or any higher appellate authority, can the ld PCIT still question the transacted value and substitute it with collector value and to our mind, the answer to the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of the "Note Pad" as this was a rough note pad which is not signed or authenticated by any person and has nothing to do with the working of the assessee society. It has been further stated that in his statement, Mr. Shane John Khanna has categorically denied his handwriting as so claimed by the Revenue on certain pages. 84. We therefore have a situation where a note pad has been found in personal possession of Mr. Shane John Khanna and therein, there are certain entries reflecting cheque payments and cash payments. The presumption therefore is that such note pad belongs to Mr. Shane John Khanna and the contents thereof are in his handwriting and he has to explain the contents thereof. He has however disputed and has stated that the entries of cash payments are not in his handwriting. Once he has objected and the note-pad is in possession of the Revenue authorities, the right course of action would have been to refer the matter to the handwriting expert in some government authorized forensic laboratory who could have confirmed whether the entries are in the handwriting of Mr. Shane John Khanna or not. However, no such reference has been made in the instant case and the ld PCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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