ZENITH CHARITABLE TRUST , MUMBAI V. CIT (E), MUMBAI

ITA 1153/MUM/2019

AI Insights

The case involves Zenith Charitable Trust, which appealed against the denial of registration under sections 12AA and 80G of the Income Tax Act, 1961 by the Commissioner of Income Tax (Exemptions), Mumbai. The primary issue was the rejection of the trust's application for registration under section 12A, which was initially denied due to concerns about the source of funds, lack of expenditure records, and misrepresentation in books of account. The Tribunal found that the Commissioner did not adequately consider the trust's activities post-2017-18, where the trust began maintaining records of charitable activities. The Tribunal directed a re-examination of the trust's application for registration under section 12A.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 299438 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 04-09-2022
• Assessment Year: misc
• Appeal Filed On: 27-05-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Charitable institution; Condonation of delay
• Section: 12; 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA no.1152/Mum./2019 AND ITA no.1153/Mum./2019 Zenith Charitable Trust Parth Business Plaza Gorund Floor, Mith Chowki Link Road, Malad (West) Mumbai 400 064 PAN – AAATZ1181H ................ Appellant v/s Commissioner of Income Tax (Exemptions), Mumbai ................Respondent Assessee by : Shri Poojan Mehta Revenue by : Shri Prabhat Kumar Gupta Date of Hearing – 05/09/2022 Date of Order – 02/12/2022 O R D E R PER SANDEEP SINGH KARHAIL, J.M. These two appeals have been filed by the assessee challenging the denial of registration under section 12AA and section 80G of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Exemptions), Mumbai, [“learned CIT(E)]. ITA no.1152/Mum./2019 2. This appeal has been filed by the assessee challenging the impugned order dated 27/08/2018, passed under section 12AA(1)(b)(ii) r/w 12A, of the Act by the learned CIT(E). Zenith Charitable Trust ITAs no.1152/Mum./2019 and 1153/Mum./2019 2 3. In its appeal, the assessee has raised the following grounds:– “1. On the facts and circumstances of the case and in law the Ld. CIT (Exemption) erred in rejecting the application of registration made by the appellant u/s 12A of the Income tax Act, 1961. 2. The Assessee craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing.” 4. The only grievance of the assessee is against the rejection of its application for registration made under section 12A of the Act. 5. The brief facts of the case as emanating from the record are: The assessee trust has been constituted by a trust deed dated 01/07/2013. The trust has been registered with Charity Commissioner, Mumbai on 07/12/2013 vide registration No. E – 29998 (Mumbai). The assessee filed an application for registration under section 12A of the Act in the prescribed Form No. 10B. Accordingly, notice was sent to the assessee requiring it to furnish account details/documents like PAN cards of trustees and settlor, copy of bank account(s), NOC in respect of its office premises, certificate of registration issued by the Charity Commissioner, copies of audited accounts and note on activities undertaken by it to duly substantiated with documentary evidence. The learned CIT(E) vide impugned order denied the registration under section 12AA of the Act, by observing as under: “5. The details filed by the applicant in response to the query raised are examined. The submission made is duly considered. (A) Following important points are emerging from it. a. Assessee has admittedly received Rs 25 to 30 lacs. However, source of the same has not been disclosed. Zenith Charitable Trust ITAs no.1152/Mum./2019 and 1153/Mum./2019 3 b. Some times large amounts like Rs.5,00,000/- in one instance have been received in cash. On being further probed, it is submitted that these amounts have been received from Political Party, without giving any confirmation or without even specifying the parties. c. On the contrary the amount received from unknown persons is shown as reflected in truystees account. Thus not only the source of receipts is not known, there is also misrepresentation of same in the books of account. d. In the books of account nothing is shown to have spent on charity by the Trust which is also evident from Income & Expenditure accounts: The amounts which have been spent from various sums deposited in the bank account of the Assessee Trust are shown to have been spent by the Trustee on charity in the submissions made. Importantly, no record of spending is maintained. e. Not only no record of spending on so claimed charity are maintained but as per chart given in reply dated 22.05.2018 substantial amount has been paid to Zenith Hospitals where Trustees are owners. Moreover, amount of Rs.88,000/- is spent on travelling of trustees which cannot be related to work of charity. Further substantial amount deposited in the bank account of the trustees has been withdrawn by the trustee claiming it for spending on patients but no record in respect of such expenditure has been maintained. The details of large withdrawals/expenditure are as under: Date Particulars Amount 07.07.15 Cash Self 5,00,000 16.07.15 Cash Self 5,00,000 22.01.15 Zenith Hospital 2,00,000 23.12.15 Chalet Hotels Pvt. Ltd. 1,00,000 30.12.15 Chalet Hotels Pvt. Ltd. 59,617 09.03.16 All Four Season Travels 89,150 02.05.16 Accurate Travels 88,000 01.08.16 Manorama Hopital 10,00,000 As mentioned above there is misrepresentation of all these transactions in books of account which do not show any activity and huge loans shown as outstanding from trustee without trustee having given any loans. Admittedly no permission of Charity Commissioner as required u/s 36A of BPT Act for taking loan has been taken. Al these facts are undisputed. 6. The facts highlighted above clearly show that Zenith Charitable Trust ITAs no.1152/Mum./2019 and 1153/Mum./2019 4 a) The source of receipts of the Trust is unknown. b) There is no record of expenditure incurred. Therefore, it cannot be verified that the amount has been spent towards objects. c) The benefits of Trustees from the funds of Trust is clearly visible. d) The books of accounts prepared by the Assessee Trust including the audit report do not show the correct picture. The Assessee Trust not having certificate under section 12A/80G cannot be an acceptable reason for showing transactions differently in the books of accounts though this is the reason given by the Assessee Trust for showing the transactions differently from they are. 7. As per the provisions of section 12AA (1)(b), a trust is to be granted registration if the Commissioner is satisfied about the objects of the trust and the genuineness of its activities. Both these requirements are cumulative and not alternative. The satisfaction of the registering authority cannot be a subjective satisfaction based on whim or caprice. It has to be a bona fide and objective satisfaction, based on due application of mind to a certain set of facts or materials before him. The satisfaction of the registering authority is not a presence or an empty formality but is the foundation of grant or refusal of registration. In other words, such satisfaction is the crux or essence of the registration proceedings. 8. In this case, the source of certain receipts is unknown, utilization of withdrawal is not substantiated by evidence and therefore not verifiable whether it is towards objective. The books of accounts and audit report donot give correct picture of the expenses of the Trust towards its objects. The Trustees are deriving benefit from the trust by meeting travel expenses and withdrawing large mounts without any accountability. Therefore, I am not satisfied with the genuineness of objects and activities of the Trust which are the primary conditions for grnating registration u/s 12AA of the I.T. Act, 1961.” Being aggrieved, the assessee is in appeal before us. 6. We have considered the rival submissions and perused the material available on record. It is the plea of the assessee that the trust was established for the purpose of treatment of tuberculosis patients and for the same it has also organised free medical camps and treated the patient at concessional rates. It has further been submitted that till the financial year 2017–18 the trustees could not maintain activity records, however, thereafter Zenith Charitable Trust ITAs no.1152/Mum./2019 and 1153/Mum./2019 5 activity of treating patients at concessional rates and giving medical facilities is mentioned in the income and expenditure account. In this regard, it is relevant to note the following reply of the assessee filed before the learned CIT(E): “4. In response to the above queries raised, Shri Pranay N Ingle, Authorized Representative of the assessee, vide letter dated 16.07.2018, submitted: 4.1 The Ledger Account of the Trustee from last 4 years attached hereby for your reference where the trustee has taken the money from a local party in the nature of donations but incurred at trustee level only. Hence from accounting point of view the transaction is not completed and since running from last 4 years as explained by me in detailed explanation sheet against credits and debits of bank statements. Hence accounted in trustee account only (a) YES The trust deed contains the directions of taking money in the nature of donations and the same way trustee has taken the money in the nature of donations in order to treat the TB patients in near future but since the transaction is still in process hence should be accounted either in trustee account or preliminary expenses and also trust does have 12 A so from Audit point of view I cannot give the trust expenses benefit nor the income counting. Hence it will be treated in trustee account only. (20) Further the transaction was not fully in the nature of any loan so trustee have not Approach the Charity commissioner and the same we have said during our hearing process before the ITO that we have not filed any information s before the charity commissioner and for the said purpose we have filed condonation of delay before you and request you to kindly accept out condonation for the same. (b) Regarding reply against other points of charity commissioner provisions are: 1. The money was voluntarily received by the trustee in good faith in order to spend some money on foreign delegates and Delhi people to get medical treatment methods and technology to treat the TB patients in near future and as well as to get some donations in near future from treatment of such patients. 2. They have unanimous in executing the transactions. 3. There were no relations with the party who has given money to the trustee. 4. Amount reed was Rs. Nearly about 25 to 30lacs 5. The said amount was nevermisused or misutilized and used for the purpose (Le.spent on foreign delegates and delhi people) of getting treatment medicines and treatment methods to treat the TB patients and giving them all kinds of medical aid which they should get. 6. The said money was never used for the construction of any building nor any immovable property. Zenith Charitable Trust ITAs no.1152/Mum./2019 and 1153/Mum./2019 6 4.2 During the hearing process before the Commissioner, the same point was raised and we have replied that we were doing the activities during last 4 years, thereby doing free medical camp. Treating patients at concession rates and giving medical facilities at also concessional rates but trustee could not maintain the activity records for which we request you to kindly accept this fact and in the Financial year 2017 -2018 there was activity mentioned in the Income and expenditure account and the documentary evidence indicating free medical camp. treating patients at concession rates and other photographs along with the bills and vouchers are attached in the file. Further during the hearing process before the CIT trustee had said that they want to merge Zenith Hospital and Zenith trust together so that their objectives of treating the poor patients and needy patients will be served at larger scale as well as the hospital will get the expansion in the form of MRI, Pathology dept etc. For special treatment space for TB patients so on Also substantial interest problem will also be solved if the trust gets 124 and 80 G as early as possible. Trust will get the Donations from local as well as other states once we received all the licenses of the said Trust and objective will definitely will be served ithout any default 4.3 As explained earlier, from Audit point of view trustee have incurred money on foreign and Delhi delegates in order to get the treatment methods for treating TB patients and I have attached the detailed explanations sheet against queries raised Once again I am attaching the same for your reference. Further, also attaching accounting treatment reason for treating such trustee transactions in to said account. 4.4 I have filed all the 4 years charity commissioner returns upto date and the acknowledgements have been attached. As far as filing with income tax ix concerned there was an option in ITR 7 under AOP /BOI category trust without 12A and we have filed ITR 7 by clicking AOP or BOI option without 12A option and the file was successfully accepted by the E-filingdept and hence was filed. Trust me there was not any motive nor our undue intention to take any benefit of 12 A expenses and income treatments. All the expenses were disallowed and accounting treatment treated accordingly The same you can check with respective income tax efiling web site.” 7. From the above, it is evident that the learned CIT(E) only took into consideration the events prior to the financial year 2017–18 in regard to which the assessee also accepted that the trustee could not maintain activity records properly. However, from the financial year 2017–18, the income and expenditure account indicates free medical camps, treating the patient at concessional rates being organised by the assessee. We further find that the Zenith Charitable Trust ITAs no.1152/Mum./2019 and 1153/Mum./2019 7 photographs along with the bills and vouchers produced before the learned CIT(E) of the Act have not been properly considered by the learned CIT(E). Further, the return filed with Charity Commissioner has also not been doubted by the learned CIT(E) of the Act. Thus, in view of the above, we are of the considered view that the details filed by the assessee have not been properly examined by the learned CIT(E) of the Act while denying the registration to the assessee under section 12AA of the Act. Therefore, we deem it appropriate to set aside the impugned order and direct the learned CIT(E) to de novo adjudicate upon the application for registration filed by the assessee under section 12A of the Act. The assessee shall be at liberty to file all the documents in support of its plea. If upon examination of all the documents, it is found that the object of the trust is charitable in nature and its activities are genuine then the registration under section 12AA of the Act be granted to the assessee as per law. We order accordingly. As a result, the grounds raised by the assessee are allowed for statistical purposes. 8. In the result, the present appeal by the assessee is allowed for statistical purposes. ITA No. 1153/Mum./2019 9. In this appeal, the assessee has challenged the rejection of its application for the grant of certificate under section 80G of the Act. As we have remanded the issue of grant of registration under section 12AA of the Act to the file of the learned CIT(E) for de novo adjudication, we are of the considered view that the present appeal is premature and the assessee shall Zenith Charitable Trust ITAs no.1152/Mum./2019 and 1153/Mum./2019 8 be at liberty to file a fresh application for grant of registration under section 80G of the Act after the receipt of registration under section 12AA of the Act. Hence, the present appeal is premature and therefore is dismissed. 10. In the result, the present appeal by the assessee is dismissed. Order pronounced in the open Court on 02/12/2022 Sd/- PRASHANT MAHARISHI ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 02/12/2022 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai