M/S THE FOUNDATION TRUST, JAMMU & KASHMIR V. COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH

ITA 122/ASR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9324 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 06-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DEVENDRA SING H LD
• Assessee Lawyers: M A MIR L D COST ACCOUNTANT
• Keywords: Opportunity of being heard; Onus to prove
• Section: 12A; 12AA; 12

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. N.S.SAINI, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.122(ASR)/2018 ASSESSMENT YEAR:201 6-17 M/S. THE FOUNDATION TRUST UPPER HUMHAMA, TEHSIL & DISTRICT BUDGAM. [PAN:AACTT 5212B] VS. THE CIT (EXEMPTIONS), CHANDIGARH. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. M.A. MIR (L D. COST ACCOUNTANT) RESPONDENT BY: DR. DEVENDRA SING H (LD. CIT-DR) DATE OF HEARING: 21.05.2019 DATE OF PRONOUNCEMENT: 21.06.2019 ORDER PER N.K.CHOUDHRY, JM: THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE TRUST AGAINST THE ORDER DATED 26.05.2016 IMPUGNED PASSED BY THE LD. CIT(EXEMPTIONS), CHANDIGARH U/S 12AA OF THE I.T. ACT, 1961 (HEREINAFTER CALLED AS THE ACT) , WHEREBY THE APPLI CATION OF THE ASSESSEE HAS BEEN REJECTED WHILE DENYING THE REGISTRATION U/S 12AA OF THE ACT BY OBSERVING AS UNDER: 4. THE APPLICANT WAS ALSO INTIMATED THAT IN THE AB SENCE OF BALANCE SHEET, INCOME EXPENDITURE, RECEIPTS & PAYMENTS ACCOU NTS, IT WAS DIFFICULT TO VERIFY GENUINENESS A: NATURE OF ACTIVITIES. THE APPLICANT WAS FURTHER ASKED TO PROVIDE A RATIONALE WHY REGISTRATION SHOUL D BE GRANTED IN THE ABSENCE OF ANY APPARENT CHARITABLE ACTIVITY BEING P URSUED. NO ONE ATTENDED ON THE DATE FIXED. GIVEN THE NON-COMPLIANC E ON THE SEVERAL OCCASIONS AFFORDED THE ASSESSEE, IT BECOMES EVIDENT THAT THE APPLICANT APPEARS NOT INTERESTED IN PURSUING THE MATTER. IN T HE ABSENCE OF SUBMISSIONS REGARDING THE ACTIVITIES, IT IS DIFFICU LT TO VERIFY BOTH THE OBJECTS & GENUINENESS OF ACTIVITIES OF THE TRUST THAT ARE P RIME ESSENTIALS FOR ANY REGISTRATION U/S12A. ITA NO.122/ASR/2018 (A.Y.2017- 18) M/S THE FOUNDATION TRUS T VS. CIT(E) 2 5. FURTHER KEEPING INTO VIEW THE INDIFFERENT ATTITUDE OF THE APPLICANT, IT IS SAFE CONCLUDE THAT THE ASSESSEE HAS FAILED TO DI SCHARGE ITS ONUS TO PROVE THAT ITS INCOME IS FROM EXIGIBILITY OF TAXES. IN LI GHT OF THE ABOVE, I HAVE NO OPTION BUT TO PROCEED ON MERITS AND DENY THE REGIST RATION, TO THE APPLICANT U/S 12AA OF INCOME-TAX ACT, 1961. 2. AGGRIEVED AGAINST THE ORDER IMPUGNED HEREIN, THE ASSESSEE PREFERRED THE INSTANT APPEAL. 3. HAVING HEARD THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LET US TO PERUSE THE RELEVANT PROVISIONS OF LAW, WHICH DEALS WITH THE CONSIDERATI ON OF APPLICATION FOR REGISTRATION U/S 12A OF THE ACT. SECTION 12AA (1) THE CHIEF COMMISSIONER OR COMMISSIONER, ON RECE IPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR IN STITUTION MADE UNDER CLAUSE (A) [OR CLAUSE (AA) OF SUB-SECTIO N (1)] OF SECTION 12A, SHALL (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDE R TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF T HE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE - (I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDE R IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTI ON, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD . ITA NO.122/ASR/2018 (A.Y.2017- 18) M/S THE FOUNDATION TRUS T VS. CIT(E) 3 FROM THE CONTENTS OF THE SEC.12AA, IT ENCOMPASS THAT THE LD. CIT(E) IN ORDER TO SATISFY HIMSELF ABOUT THE GENUI NENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION CAN CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY AND ALSO EMPOWERED TO MAKE SUCH ENQUIRY AS HE MAY DEEM FIT NECESSARY IN THIS BEHALF. SECOND CLAUSE DEALS WITH THAT AFTER SATISFYING HIMSELF ABOUT THE OBJECT OF THE TRUST OR INSTITUTION AND THE G ENUINENESS OF THE ACTIVITIES, HE SHALL PASS ORDER IN WRITING EITHE R TO REGISTER OR REFUSING TO REGISTER THE TRUST OR INSTITUTIONS. 3.1 LET US TO QUOTE CERTAIN JUDICIAL VERDICTS ON THE ISSUES I N HAND. DELHI HIGH COURT IN THE CASE OF DIT VS. FOUNDATION OF OPTHALMIC & OPTOMETRY RESEARCH EDUCATION CENTER, IN ITA NO.1687/2010, DECIDED ON DATED 16.08.2012 DEALT WIT H THE SAME SITUATION AND OBSERVED AS UNDER: THAT THE CONCERN CIT IS NOT REQUIRED TO EXAMINE THE QUESTION WHETHER THE TRUST HAS ACTUALLY COMMENCED AND HAS, IN FACT, CARRIED ON CHARITABLE ACTIVITIES ? GUJRAT HIGH COURT IN THE CASE OF CIT -1, VS. KUTCHI DASA OSWAL MOTO PARIWAR AMBAMA TRUST (2014 271 CTR 0595 WA S PLEASED TO HELD AS UNDER:- ' WHILE CONSIDERING THE APPLICATION U/S 12AA, THE COMMISSIONER HAS TO SATISFY HIMSELF ABOUT THE OBJEC TIVES OF THE TRUST AND GENUINENESS OF ITS ACTIVITIES AND FOR SUCH PURPOSES, HE HAS THE POWER TO CALL FOR SUCH DOCUMEN TS OR INFORMATION FROM THE TRUST AS HE THINK ARE NECESSAR Y. HOWEVER, THIS DOES NOT MEAN THAT IF THE ACTIVITIES OF THE TRUST HAVE NOT COMMENCED THE COMMISSIONER HAS AUTHORITY TO REJECT ITS APPLICATION FOR REGISTRATION ON THE GROUND THAT THE TRUST HAS FAILED TO CONVINCE HIM ITA NO.122/ASR/2018 (A.Y.2017- 18) M/S THE FOUNDATION TRUS T VS. CIT(E) 4 ABOUT THE GENUINENESS OF THE ACTIVITIES. THAT IS WHAT UNFORTUNATELY THE COMMISSIONER DID IN THE PRESET CA SE '. ALLAHABAD HIGH COURT IN THE CASE OF HARDAYAL CHARITABLE & EDUCATIONAL TRUST VS. COMMISSIONER OF INCOME TAX-II, AG RA DECIDED ON 15 MARCH, 2013 OBSERVED AS UNDER:- ' THE PREPONDERANCE OF THE JUDICIAL OPINION OF HIGH COURTS AS WELL AS ITAT IS THAT AT THE TIME OF REGIST RATION U/S 12AA OF THE ACT, THE CIT IS NOT REQUIRED TO LOOK INTO THE ACTIVITIES, WHERE SUCH ACTIVITIES HAVE NOT OR ARE I N THE PROCESS OF ITS INITIATION. WHERE A TRUST, SET UP TO ACHIEVE ITS OBJECTS OF ENABLING EDUCATIONAL INSTITUTION, IS IN THE PROCESS OF ESTABLISHING SUCH INSTITUTION AND RECEIVES DONATIONS, THE REGISTRATION U/S 12AA CANNO T BE REFUSED, ON THE GROUND THAT THE TRUST HAS NOT YET COMMENCED THE CHARITABLE OR RELIGIOUS ACTIVITY ' . CO-ORDINATION BENCH OF ITAT, AMRITSAR IN THE CASE OF EK UMEED WELFARE SOCIETY, FAZIKA VS. ASSESSEE IN ITA NO.615(ASR)/2013 , DIRECTED TO GRANT REGISTRATION TO T HE SOCIETY WHERE THE REGISTRATION WAS DENIED BY THE CIT ON GROU ND OF NEGLIGIBLE ACTIVITY TILL THE DATE OF REGISTRATION'. 3.2 LET US TO CONSIDER REASONS FOR REJECTION OF APPLICATION FO R GRANT OF REGISTRATION U/S 12 AA OF THE ACT. FIRST REA SON FOR DENIAL OF REGISTRATION BY THE LD. CIT IS THAT IN THE ABSENCE O F BALANCE SHEET, INCOME EXPENDITURE, RECEIPTS & PAYMENTS ACCOUNTS, IT WAS(IS) DIFFICULT TO VERIFY GENUINENESS AND NATURE OF A CTIVITIES. SECOND REASON THAT THE ASSESSEE TRUST WAS FURTHER ASKED TO PROVIDE A RATIONALE WHY REGISTRATION SHOULD BE GRANT ED IN THE ABSENCE OF ANY APPARENT CHARITABLE ACTIVITY BEING PURSUE D. IN OUR VIEW, THE TRUST THAT AT THE TIME OF FILING APPL ICATION FOR REGISTRATION WAS UN-DOUBTLY AT NASCENT STAGE AND HAS NOT CARRIED OUT ANY ACTIVITY THEREFORE, ONE CAN NOT EXPECT FROM TH E TRUST TO DO ACTIVITY OF THE CHARITY IMMEDIATELY. ITA NO.122/ASR/2018 (A.Y.2017- 18) M/S THE FOUNDATION TRUS T VS. CIT(E) 5 3.3 ON PERUSAL OF PROVISIONS OF LAW AND JUDGMENTS, IT I S CLEAR THAT AT THE TIME OF REGISTRATION U/S 12AA OF THE ACT, THE L D. CIT(E) IS REQUIRED TO SEE THE OBJECTS OF THE TRUST OR INSTITUTIONS AND GE NUINENESS OF ITS ACTIVITIES, HOWEVER, IF WE COME TO THE INSTANT CASE, THEN IT IS NOT DISPUTED THAT THE TRUST WAS FORMED AND CREATED ONLY ON 22.01.2015 AND IMMEDIATELY WITHIN ONE YEAR OF ITS CREATION, THE APPLICATION FOR R EGISTRATION U/S 12AA OF THE ACT HAS BEEN FILED ON 30.11.2015 WHICH HAS BEEN REJECTED VIDE IMPUGNED ORDER DATED 26/05/2016 SO IT IS NOT IN CONTROVERSY THAT THE ASSESSEE TRUST AT THE TIME OF APPLYIN G THE REGISTRATION WAS AT NASCENT STAGE, THEREFORE, COULD NOT CARRY OUT ANY ACTIVITY AND ACCORDING TO AFORESAID JUDGMENTS IT IS CLEAR THAT STATUTE DOES NOT PRESCRIBE A WAITING PERIOD FOR A NEWLY REGISTERED TRUST TO QUALIFY ITSELF FOR REGISTRATION UNDER SECTION 12AA OF THE ACT AND WAIT TILL THE ACTIVITY COMMENCE. FROM THE CONJOI NT READING OF THE AFORESAID JUDGMENTS, IT CAN BE SAFELY CON CLUDED THAT EVEN OTHERWISE IF NO ACTIVITY WAS CARRIED OUT BY A TRUST OR INSTITUTION, STILL REGISTRATION CAN BE GRANTED BY THE CIT(E) AND EVEN OTHERWISE IT IS NOT THE CASE OF THE REVENUE THAT AT THE TIME OF CONSIDERATION OF APPLICATION OF THE ASSESSEE , THE ASSESSEE HAS CARRIED OUT MANY ACTIVITIES AND THEIR GENUINENESS WERE IN DOUBT. 3.4 BEFORE US THE ASSESSEE TRUST HAS PROVIDED CERTAIN DETAILS ABOUT CHARITABLE ACTIVITIES (PAGE NO.54 TO 61 OF PB) A ND ALSO FILED AUDIT REPORT ALONG WITH THE BALANCE SHEET FOR THE FIN ANCIAL YEARS:2016-17 TO 2017-18 & 2018-19 BEFORE US, THEREFO RE THOUGH WE ARE INCLINED TO REMAND THE CASE WITH DIRECT ION TO THE ASSESSEE TO APPROACH THE LD. CIT(E) WITH THE DOCUMENTS AS SUBMITTED BEFORE US, BECAUSE THE DOCUMENTS WERE NOT AVAIL ABLE BEFORE THE CIT(E), HOWEVER, CONSIDERING THE PRINCIPLES LAID DOWN BY THE VARIOUS COURTS AS IT IS NOT IN CONTROVERSY THAT TI LL THE ITA NO.122/ASR/2018 (A.Y.2017- 18) M/S THE FOUNDATION TRUS T VS. CIT(E) 6 ADJUDICATION OF APPLICATION U/S 12AA OF THE ACT, THE TR UST WAS AT NASCENT STAGE AND ALL THE ACTIVITIES WHICH ARE REFLECTING FROM THE DOCUMENTS SUBMITTED HEREIN ARE OF THE LATER STAGE, HOW EVER, IN OUR CONSIDERED OPINION AT THE TIME OF DISPOSAL OF APPLI CATION, THE LD. CIT(E) IN ORDER TO SATISFY HIMSELF ABOUT THE GENU INENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION CAN CALL FOR SU CH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY AND ALSO EMPOWERED TO MAKE SUCH ENQUIRY AS HE MAY DEEM FIT NECESSARY IN THIS BEHALF , SECONDLY THAT AFTER SATISFYING HIMSELF ABOUT THE OBJECT OF THE TRUST OR INSTI TUTION AND THE GENUINENESS OF THE ACTIVITIES, HE SHALL PASS THE ORDE R IN WRITING EITHER TO REGISTER OR REFUSING TO REGISTER THE TRUST OR INSTITUTIONS. IN THE INSTANT CASE NO ACTIVITY WAS CARRIED OUT THEREFORE QUESTION OF GENUINENESS DID NOT ARISE. 3.5 FINALLY IN OUR CONSIDERED OPINION AS AT THE TIME OF A PPLYING THE REGISTRATION THE ASSESSEE TRUST HAS NOT CARRIED OUT MAN Y ACTIVITIES AND EVEN OTHERWISE IT CANNOT BE EXPECTED SO AT THE NASCENT STAGE, THEREFORE, THE ASSESSEE TRUST IS ENTITLED TO GET REGISTRATION U/S 12AA OF THE ACT FROM THE DATE OF APPL ICATION, HENCE, WE DIRECT THE LD. CIT(E) TO GRANT THE REGISTRAT ION U/S 12A OF THE ACT TO THE ASSESSEE . IT IS CLARIFIED IF THE ASSESSEE TRUST DOES NOT QUALIFY/SATISF Y THE OBJECTS OF THE TRUST AND/OR INVOLVED IN INGENUINE ACTIVITIES AND THE LD. CIT(E) FOUND ANY DISCREPANCY AND/OR NON- COMPLIANCE OF ANY STATUTORY PROVISIONS OF LAW BY THE A SSESSEE TRUST IN FUTURE THEN THE LD. CIT(EXEMPTION) SHALL BE AT LIBERTY TO WITHDRAW/CANCEL THE REGISTRATION U/S 12A OF THE ACT . ITA NO.122/ASR/2018 (A.Y.2017- 18) M/S THE FOUNDATION TRUS T VS. CIT(E) 7 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.06.2019. SD/- SD/- (N.S.SAINI) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED:21.06.2019 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) M/S. THE FOUNDATION TRUST, UPPER HUMHAMA, TEHSIL & DISTRICT BUDGAM. (2) THE CIT(EXEMPTIONS), CHANDIGARH. (3) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER