Richmond Educational Society vs PCIT(Central)

“1 . That the order dated 30.03.2026 passed by t he Pri ncipal C ommissioner of Inc ome Tax (C entr al), Kanpur ("PC IT") i n Form No. 10AD rejecting the Appellant's rene wal application under S ecti on 12A(1)(ac )(ii) of the Income Tax Ac t, 1961 ("the Act") is i ll egal, bad i n law, contrary to the facts on re cor d, without j uri sdicti on and not i n accordance with the pro visions of the Ac t.

2.

That on the facts and in the circumstanc es of t he case and in law, the PCIT er r ed i n r ejecti ng the Appellant's applicati on for renewal sol ely on t he ground tha t the A ppellant's regist rati o n under S ecti on 12AB of the Act had earlier been cancel led vide order dat ed 26.06.2025, wit hout apprecia ting that, prior to the passi ng of the impugned rej ecti on ord er dated 30.03.2026, the Hon'ble ITA T, vide its order dated 11.03.2026, had already set aside a nd quashed the said cancellation order in its entir ety, thereby restori ng t he Appellant's registr ation under Section 12AB of the Act with full forc e a nd legal eff ect.

3.

That on the facts and in the circumstanc es of t he case and in law, the PCIT has erred i n not granting registr ati on to the Appellant for the period i.e. , A Y 2027-28 to AY 2031-2032 by placing reliance on alle gati ons pertai ning to tra nsacti o ns of t he prec edi ng years, which had no nexus or beari ng on the r elevant period under consideratio n.

4.

That on the facts and circumstanc es of t he cas e and in la w, t he order pass ed by PCIT rej ecti ng the rene wal applicatio n of tire Appellant is without jurisdi cti on as t he jurisdictio n to pass such or der is vested only with t he offic er who grante d t he r egistrati on.

5.

That on the facts and in the circumstanc es of t he case and i n law, t he PCIT erred in holdi ng t hat the provisions of Section 13(1)(c) of the Act wer e attr acted on the allegati o n that the i ncome of t he Appellant was applied for private benefit, sol ely by relying upon and mechanic ally reit erati ng t he fi ndi ngs r ecorded in the earlier order passed under Secti on 12AB of the Act pertai ning to prec edi ng years, without appreciati ng that the said earlier order had already been rej ected/set asi de and, ther efore, could not fo rm the basis for denial of registr ati on for t he r elevant peri od under consideration.

6.

That on the facts and in the circumstanc es of t he case and i n law, t he PCIT erred in holdi ng t hat the alleged violati ons were s ystemic, co nti nui ng, and un-rec tified and, t heref ore, applicable to the subseque nt ye ars in terms of Secti on 12AB(4)(ii) of t he Act, without bri ngi ng any i ndepe ndent material or evide nce o n record to s ubstantiate the c onti nuance of any suc h alle ged violati ons , and further er red i n mechanically applyi ng t he findi ngs contai ned in t he earlier cancellation or der dated 26.06.2025 to the pr esent rene wal proceedi ngs, d espite the said cancell ation order ha ving already been set aside/ quas hed by t he Hon'ble ITAT.

7.

That the explanations given, evi denc e pro duced, and material placed and made avai lable on r eco rd have not been properly consider ed and judicially int erpreted and t he same does not j us tify the canc ellati on of registr ati on.”

“The a ssesse e society has fil ed its renewal application u/s 12A(1 )(ac)(ii) of the Income Tax Act , 1961 in the For m 10AB on 30.09.2025.

2.

The assessee soci ety vide noti ce dat ed 10.02.2026 was give n opportunity of bei ng hear d by fi xing date of heari ng on 19.02.2026. On the fixed date , neither any reply nor any adj ourne ment was s ought by the ass esee soci et y. He nce, assessee was agai n provided opportunity of bei ng heard by issui ng notice dat ed 20.02.2026, fixing t he date for complianc e on 27.02.2026. In compliance to the same, the assessee soci et y has fil ed its r eply alongwit h wit h annexures on 27.02.2026.

3. Intr oduction and B ac kground

3.1

The assess ee society was granted registrati on u/s 12A(1)(ac)(i ) o f the Income -tax Act, 1961 (“the Act”) by the Commissioner of Income Tax (Ex emption), Lucknow from A.Y. 2022-23 to 2026-27 vide order For m 10AC dated 05.04.2022, thereby clai ming exempti on of its income under Secti ons 11 and 12 of t he Ac t.

3.2

Subseq uentl y, a search and sei zure action u/s 132 conducted on 11.07.2023 in t he case of assessee soci et y al ong with group cases re veal ed incrimi nati ng material indica ti ng se rious violations in the f uncti oning of the s ocie ty for A.Ys. 2017-18, 2019-20, 2020-21, 2021-22, 2022-23, 2023-24 & 2 024-25. The search action resulted in detec tion o f various incrimi na ting docum ents/evide nce i n the fo rm of l oos e shee ts, notebo oks and di gital devices like c omput er hard discs, mobile phones, What tsapp chat etc . whic h we re sei zed/cl oned. Duri ng the search, p ost search, assessment and pr ese nt proceedings, data/evidence found and s eized were duly exami ned, necessary verificati ons made and conf ront ed with the releva nt pers ons c onnec ted with the as sessee and the replies are dul y co nsider ed. Bas ed on such fi ndi ngs, proc eedings u/s 12AB(4 ) were initiated. T he undersi gne d, after exami ni ng s eized mate rial, ass ess ment r ecords, and replies of t he assessee, rec orded satisfac tion regarding occurre nce of “speci fied vi olati ons” as defi ned i n Explanati on to s ec tion 12AB (4), warranting cancell ation of registrati on.

3.3

Cons equent theret o, t he undersigne d vide order dated 26.06.2025 passed u/s 12AB(4 )(ii) cancelled the registrati on granted to t he assessee on account of est ablis hed “speci fied violations” wi thi n the meani ng of Explanati on to S ecti on 12AB(4 ) of t he Act for A.Ys. 2017-18, 2019-20, 2020-21, 2021-22, 2022-23, 2023-24 & 2024-25. The said rej ection o rder was passed aft er detaile d examination of s eized material, c onsideration of replies a nd submissi ons & affor di ng adequate opportunity of being heard to the assess ee soci ety. The findi ngs recorded i n the order dated 26.06.2025 are no t merely procedur al but are subs tantive, evidenc e-bas ed and concl usive, and are elaborated hereunder:

i.

Bogus Salary Payments (Diversi on to R elat ed Person): it is es tablished from s eized material and statements on oa th that t he ass essee paid salary aggrega ting to Rs.4.80 cror e t o Smt . Jas mi ne Gandhi without any act ual servic es being rendered, thereby creati ng a sham a rrangem ent to siphon off funds for the benefit of a specified pers on. The a bsence of any empl oye r-employ ee relatio nship, lack of s upporti ng documentation, and categorical stateme nts of key pers onnel clearly demons trate that suc h payments wer e not genui ne and w ere not i ncurred for the obj ects of the soci et y.

ii.

Bogus Bills & Cash Recycli ng (Rs.8.00 Crore+): The evidenc e further reve als that the ass ess ee soci et y was engaged in generati ng and utilizing bogus bills amounti ng to Rs.8,00,65,881/-, through which funds were r outed out of the books and r eceived back i n cash, thereby i ndicating a well-planned mec hanism for sipho ni ng of funds. The modus op erandi inv olvi ng fake i nvoices, R TGS transfe rs, a nd cash wi thdrawals, dul y corroborated by di gital evidence and statements, esta blishes that the transacti ons were fictitious and not i n furt heranc e of any c harita ble activity.

iii.

Direct Siphoni ng of Rs.20 Crore to Trust ee/Contr oller : It is also an admitte d fact that a s um of Rs.20 cr ore was t ransferred from t he soci et y to t he personal acc ount of Shri Parmjit Gandhi wit hout any val id aut horiz ati on or substantiati ng agreement, whic h wa s subsequently routed through group enti ti es f or non-c haritable pur poses. Such tra nsfer of funds to a related pers on constitutes a clear violati on of secti ons 13(1)(c), 13(2), a nd 13(3 ) of the Act, as the incom e of the t rust has been applied for t he benefit of sp eci fi ed persons .

iv.

Cas h pay ments & rec eipts : Further, sei zed loose shee ts and diari es clea rly i ndicate unaccounted cash transactio ns am ounti ng t o Rs.67,12,244/-, which were not recorded in the books of account , thereby re nderi ng the accounts unr eliable and nontransparent.

v.

Diversion to Sister Conc erns (Rs .28.23 Crore): The as sessee has also transferred substantial funds amounti ng to Rs.28.23 crore t o a sist er concern wi thout any doc ument ed purp ose or justificati on, whic h further evidenc es diversion of funds away from it s st ated c haritabl e objects.

vi.

Systemic Control & Misus e by Int ereste d Persons the c umul ative effect of these transacti ons est ablis hes t hat the acti vitie s of the assessee are neither genui ne nor carri ed out i n a ccordanc e with its objects. It is evident that the income of t he soci et y has been applied for p urposes other t han those for whic h i t was es tablished, thereby attracti ng the provisions of s ec tion 11, 12 and 13 of the Inc ome-tax Act, 1961.

4.

As per S ecti on 12AB(4)(ii): Cancellation appli es to suc h pre vious year and all subsequent y ears. The violations identifi ed are systemic, conti nui ng and not rec tifie d. No e vidence has been furnished to demonstrate change i n conduct and cess ati on of violations. The refore, fi ndi ngs of earlier order on canc ellation of registration u/s 12AB (4)(i i) of t he A ct dated 26.06.2025 squarely apply t o the pr esent renew al proc eedi ngs.

5.

Sinc e, the undersi gned has cancelled s ociety’s registrati on vide p roce edi ngs u/s 12AB(4 )(i i) of the A ct from A.Y. 2017-18, 2019-20, 2020-21, 2021-22, 2022-23, 2023-24 & 2024-25 vide order dat ed 26.06.2025, in my considered view, the said assess ee is not eligible to file renewal ap plication u/s 12A(1)(a c)(ii) of the Act.

6.

In my c onsidered view, the assessee has failed i n t he basic el igibility condition as per pr ovisions of secti o n 11 & 12 of the Ac t. Ev en otherwise sectio n 13(1)(c) is clearly attracted as income is applied for private benefit. Henc e, exempti on u/s 11 & 12 is not all owable to the as sessee soci ety. The ass ess ee has mi sused t he char itabl e structure as a condui t for diversion of funds.

7.

In view of the above facts, it is held that the society is not r unni ng for any charity and it is al so not bei ng run as per the objectives but it is making clear profi t, siphoning money, benefitti ng the related person and also inflati ng expe nses wi th a malafide a ttempt to camouflage the tax liability of t he socie ty’s fund. Accordi ngly, the renewal application filed by t he assesse e s ocie ty u/s 12A(1 )(ac)(ii) of the Act is her eby rej ect ed.”