The assessee, a charitable trust engaged in imparting education in the field of construction management and research, was granted registration under Section 12A of the Income Tax Act. Subsequently, based on a reference made by the Assessing Officer under the second proviso to Section 143(3), proceedings under Section 12AB(4) were initiated for cancellation of registration.

The Commissioner of Income Tax (Exemptions) held that activities such as Company Based Programmes (CBP), Management Development Programmes (MDP), research and consultancy were not in the nature of “education” under Section 2(15) and amounted to business activities. It was further held that the assessee had not maintained separate books of account for such activities, constituting a “specified violation” under clause (b) of the Explanation to Section 12AB(4). Accordingly, the registration granted under Section 12A was cancelled with retrospective effect.

Before the Tribunal, the assessee contended that the show cause notice issued by the CIT(E) alleged only that the activities were “not genuine” but did not invoke or specify violation under clause (b) of the Explanation to Section 12AB(4). It was submitted that cancellation on grounds not mentioned in the show cause notice violated the principles of natural justice.

The ITAT observed that each clause of “specified violation” under the Explanation to Section 12AB(4) is distinct and requires a separate factual foundation. The Tribunal found that no opportunity was granted to the assessee to explain alleged non-maintenance of separate books of account, which formed the basis of cancellation. Therefore, the cancellation order suffered from procedural infirmity.

Accordingly, the Tribunal set aside the order cancelling registration under Section 12A and restored the matter to the file of the CIT(E) for de novo adjudication after considering additional evidence and after granting proper and specific opportunity of hearing to the assessee.

Source Link - https://itat.gov.in/public/files/upload/1768192075-WR8mKT-1-TO.pdf

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