KMR Educational Society Vs DCIT (ITAT Hyderabad)
Cancellation of registration requires clear proof of “Specified Violations” and cannot rest on mere suspicion or pending assessments
The Hyderabad Bench of the ITAT heard appeals by KMR Educational Society against the Pr. CIT (Central), Hyderabad, who had cancelled its registration under section 12AB(4)(ii) for A.Ys. 2019-20 and 2022-23. The cancellation followed a search on the Malla Reddy Group, where the Department alleged that the society collected excess fees and capitation amounts, maintained unaccounted cash, and misused funds for non-charitable purposes. The Pr. CIT (Central) relied on seized materials and a diary of a trustee to conclude that the society’s activities were not genuine.
The assessee, represented by C.A. C. Maheswar Reddy, argued that hostel receipts belonged to individual trustees who had already offered them to tax, that proper books of account were maintained and audited, and that there was no evidence of diversion of funds. It was further contended that only the CIT (Exemptions) has jurisdiction to cancel registration and that the amended provisions of section 12AB(4) (effective from 01.04.2022) could not apply retrospectively.
The Tribunal held that cancellation of registration requires clear proof of “specified violations” and cannot rest on mere suspicion or pending assessments. It found that the society continued its genuine educational activities and that cancellation was premature. Accordingly, the ITAT set aside the Pr. CIT’s cancellation order.
