Puran Murti Educational Society vs CIT (E)-Chandigarh

PER SHRI ANUBHAV SHARMA, JUDICIAL MEMBER:

This appeal filed by the assessee against the order dated 27.02.2026 passed by the Ld. CIT(Exemption),Chandigarh (for short “Competent Authority”) against the rejection of registration u/s 12A(1)(ac) (ii) of the Act.

On hearing both sides we find that assessee’s application in Form 10AB u/s 12A(1)(ac)(ii) of the Act has been rejected primarily for the reason that appellant has failed to explain the source, utilization and necessity of huge unsecured loans. Ld. Prescribed authority had mentioned that in audit report it was seen that serious concern of non-compliance of TDS and PF contribution fraudulently obtained loan on behalf of assesse and siphoned off funds for which FIR has been registered. The case of the assesse is that unsecured loans were taken to repay secured loans and furnished copies of ITR and bank account statements of lenders. At the time of hearing ld. counsel has drawn our attention to assessment order dated 21.03.2024 u/s 143(3) of the Act for AY: 2022-23 in case of the assesse wherein the case of assesse was selected for scrutiny assessment and examining the issue of repayment of large amount on borrowed funds by trust and the assessment was completed at returned income. Thus, we are of the considered view that rejection of the application of the assesse by doubting the unsecured loans taken is not justified. Even otherwise at this stage the scope of examination is limited to see if the activity of the assesse are genuine in nature and otherwise there is no violation of specific law. Though, ld. DR has submitted that there is alleged violation of provident fund contribution law. However, to our mind such technical breach or violation cannot become the ground for rejection of application and primarily it is only when a law regulating the constitution and operation of the assesse or its charitable activities is violated then that can be considered to be giving rise to a situation of rejecting the application. There is no dispute of the fact that assesse in order to provide education is running various college and school at village Kami, Sonipat, Haryana at page No. 201 copy of criminal proceedings pending in the court of Judicial Magistrate First Class-01 West district, New Delhi dated 17.01.2026 are available which show that FIR No. 699/2024 u/s 420/468/471/34 IPC at PS: Punjabi Bagh Station registered against Shri Manoj Kumar and against whom non bailable warrant have been issued and there is report that he is absconding. Thus, in the aforesaid facts and circumstances, the grounds of rejection of application are not sustainable. We thus allow the appeal with a direction to the ld. prescribed authority to issue the registration in a period of 4 weeks.