M/S ENNANUEL BIBLE INSTITUTE SAMITI, Kota V. COMMISIONER OF INCOME TAX, Kota

ITA 1395/JPR/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54226 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 07-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice; Cancellation of registration
• Section: 143(3); 12A; 12AA; 6; 12; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO. 1395/ JP/2010 ASSESSMENT YEAR 2007-08 PAN: AAATC 0245 R M/S EMMANUEL BIBLE INSTITUTE V THE C.I.T. KOTA SAMITI, DADWADA, KOTA (APPELLANT ) (RESPONDENT) ASSESSEE BY: SHRI MAHENDRA GARGIEYA DEPARTMENT BY : SHRI SUBHASH CHANDRA DATE OF HEARING: 10.10.2011 DATE OF PRONOUNCEMENT: 21 -10-2011 ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORD ER OF THE LD. CIT, KOTA DATED 26-11-2010. THE ASSESSEE IS AGGRIEVED AGAINST THE CANCELLATION OF REGISTRATION U/S 12AA(3) OF THE ACT. 2. THE SOCIETY WAS GRANTED REGISTRATION U/S 12A VID E ORDER DATED 17.10.81. THE LD. CIT ISSUED A SHOW CAUSE NOTICE F OR CANCELLATION OF REGISTRATION U/S 12AA VIDE LETTER DATED 29.4.2010. THE CANCELLATION WAS PROPOSED TO BE MADE ON ACCOUNT OF FOLLOWING REASON S:- (I) THE REGISTRATION GRANTED TO SAMITI BY THE REGIS TRAR OF SOCIETIES HAS BEEN CANCELLED VIDE ORDER DATED 27.2.2006. 2 (II) THE AO DURING THE COURSE OF ASSESSMENT PROCEE DINGS FOR ASSESSMENT YEAR 2007-08 HAS NOTICED THAT THE SAMITI HAS NOT CA RRIED OUT ACTIVITIES IN ACCORDANCE WITH THE OBJECTIONS OF THE SAMITI AND T HE ACTIVITIES OF THE SAMITI ARE NOT GENUINE. (III) THE AO WHILE PASSING THE ORDER FOR ASSESSMENT YEAR 2007-08 NOTICED THAT THE EXPENDITURE INCURRED BY THE SAMITI IS MAI NLY RELATED TO PROPAGATION OF A PARTICULAR RELIGION I.E. CHRISTIANITY. 3. IN THE SHOW CAUSE NOTICE EXPENDITURE UNDER VARIO US HEADS TO THE EXTENT OF RS. 2,02,21,283/- HAVE BEEN CONSIDERED TO HAVE BEEN INCURRED FOR THE PROPAGATION OF PARTICULAR RELIGION. 4 IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSE ES LD. AR FILED SUBMISSION AND SUCH SUBMISSIONS ARE SUMMARIZED AS U NDER:- (I) THE REGISTRATION WAS GRANTED U/S 12A AND THE FI NANCIAL BILL 2010 PROPOSED TO ALLOW THE CANCELLATION OF REGISTRATION U/S 12A W.E.F. 1.6.2010. THEREFORE, THE SHOW CAUSE ISSUED ON 29.4.2010 IS NO T VALID IN THE EYE OF LAW AS THE BILL HAS NOT BECOME ACT. (II) THE SHOW CAUSE NOTICE IS BASED ON THE FINDINGS OF THE AO RECORDED BY HIM IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 200 7-08 AND SUCH FINDINGS OF THE AO ARE THE SUBJECT MATTER OF APPEAL. THE LD . CIT IS NOT SUPPOSED TO INTERFERE WHEN ISSUES ARE PENDING BEFORE LD. CIT(A) . (III) SECTION 11 TO 13 PERMITS THE EXPENDITURE ON A NY RELIGION REFERENCE TO 42 TTJ 519 (AHD). THE OBJECTS OF THE SOCIETY ARE NO T MEANT OR CREATED FOR THE BENEFIT OF THE PARTICULAR COMMUNITY OR CASE. THE S OCIETY IS RUNNING SEVERAL 3 ORPHANAGES THROUGHOUT THE COUNTRY AND IT IS NOT DEN IED THAT THE ORPHANAGES BELONG TO DIFFERENT CASTE AND CREED AND ARE ACTING WITHOUT ANY DISCRIMINATION. 5. THE ACTIVITIES OF THE SOCIETY ARE SIMILAR TO THE ACTIVITIES DONE DURING THE EARLIER YEARS AND HENCE THERE WAS NO CASE OF CA NCELLATION OF REGISTRATION. REFERENCE WAS MADE TO THE DECISION OF THE HON'BLE J URISDICTIONAL HIGH COURT IN THE CASE OF CIT V. DIGAMBER JAIN MANDIR, CHAKSU (2009) 29 DTR 65 (RAJ) IN WHICH THE HON'BLE JURISDICTIONAL HIGH COUR T HELD THAT THE INSTITUTIONS OF RELIGIOUS NATURE AS WELL AS FOR CHA RITABLE PURPOSE CAN CLAIM REGISTRATION U/S 12A. 6 THE LD. CIT ISSUED FURTHER SHOW CAUSE NOTICE VIDE LETTER DATED 8.9.10. THE ASSESSEE WAS INTIMATED THAT LAW HAS BEEN AMENDE D BY FINANCE ACT, 2010 W.E.F 1.6.2010 AND AMENDED SECTION 12AA(3) PROVIDED FOR CANCELLATION/WITHDRAWAL OF REGISTRATION OBTAINED AT ANY TIME U/S 12A OF THE ACT AS IT STOOD BEFORE THE AMENDMENT BY THE FINANCE ACT, 2006. THE CANCELLATION CAN BE DONE IF THE COMMISSIONER IS SAT ISFIED THAT THE ACTIVITIES OF THE TRUST OR THE INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR THE IN STITUTION. IN RESPONSE TO THE SHOW CAUSE NOTICE, SHRI AJAY GODHA, LD. AR APPE ARED AND THE LD. CIT 4 HAS MENTIONED THE ARGUMENTS GIVEN BY THE LD. AR AT PAGE 4 & 5 OF THE ORDER. THE ARGUMENTS ARE SUMMARIZED AS UNDER:- (I) THE AO HAS BROUGHT TO THE NOTICE OF THE LD. CIT THAT THE SAMITI IS NOT CARRYING OUT ACTIVITIES IN ACCORDANCE WITH THE OBJE CTS OF THE SAMITI AND THE ACTIVITIES OF THE SAMITI ARE NOT GENUINE. THE FIN DINGS OF THE AO HAVE BEEN REVERSED BY THE LD. CIT, KOTO VIDE ORDER DATED 31.1 2.10. (II) THE ASSESSEE HAS NOT BEEN PROVIDED THE REPORT OF THE AO AND THEREFORE, EITHER COPY OF REPORT SHOULD BE SUPPLIED OR THE REPORT SHOULD NOT BE RELIEF FOR ARRIVING AT THE FINDING. (III) PERUSAL OF THE MAIN OBJECTS REVEAL THAT IN NO NE OF THE OBJECTS, THE SOCIETY WAS MEANT OR CREATED FOR THE BENEFIT OF THE PARTICULAR COMMUNITY OR CASTE. (IV) SECTION 11 TO 13 PERMITS THE EXPENDITURE ON AN Y RELIGION. FOR THIS PROPOSITION RELIANCE HAS BEEN PLACED ON THE DECISIO N OF AHMEDABAD BENCH IN THE CASE OF ITO V. SHRI SANDERAO JINENDRA BHUVAN JA IN DHARAMSHALA (1992) 42 TTJ 519 (AHD). (V) EVEN ASSUMING FOR THE SAKE OF ARGUMENTS BUT NOT CONCEDING THAT A TRUST IS PROHIBITED TO APPLY INCOME TOWARDS BENEFIT OF MEMBERS OF PARTICULAR CASTE OR COMMUNITY, THE FACTS OF THE PRESENT CASE C LEARLY SHOW THAT THE ASSESSEE-SOCIETY HAS APPLIED ITS INCOME FOR THE VAR IOUS ACTIVITIES RELATING TO CHRISTIAN RELIGION BUT IT IS ALSO ADMITTED FACT ON RECORD THAT THE ORPHANAGES OF THE CHURCHES, SCHOOLS AND OTHER INSTITUTES BELON GING TO THE SOCIETY WERE NOT CLOSED FOR THE MEMBERS OF DIFFERENT CASTE OR CO MMUNITY. (VI) THERE AFTER THE ASSESSEE GAVE EXPLANATION IN R ESPECT OF THE EXPENSES OF NINE DIFFERENT HEADS MENTIONED AT PAGE 1 OF THE ORDER OF THE LD. CIT. (VII) THE ORDER OF REGISTRAR OF SOCIETIES HAS BEEN STAYED BY THE RAJASTHAN HIGH COURT. 7. THE LD. CIT AFTER CONSIDERING THE REPLY AND ARGU MENTS GIVEN BY THE LD. AR RECORDED THE FINDINGS WHICH ARE SUMMARIZED A S UNDER:- 5 (I) THE NEW PROVISION CONTAINED IN SECTION 12AA(3) AUTHORIZES THE LD. CIT TO CANCEL THE REGISTRATION GRANTED U/S 12A OF T HE ACT. (II) AS PER SECTION 13(1) OF THE ACT, ANY PART OF THE INCOME FROM THE PROPERTY HELD UNDER A TRUST FOR PRIVATE RELIGIOUS P URPOSES WHICH DOERS NOT ENURE FOR THE BENEFIT OF THE PUBLIC WILL NOT BE EXE MPT U/S 12 & 11 OF THE ACT. IN VIEW OF SECTION 13(1)(A) THE ASSESSEE CANNOT BE GRANTED EXEMPTION U/S 11 OF THE ACT. (III) THE LD. CIT(A) HAS NOT CONSIDERED THE PROVISI ONS OF SECTION 13(1) WHILE DECIDING THE APPEAL OF THE ASSESSEE FOR ASSES SMENT YEAR 2007-08. (IV) THE REGISTRATION GRANTED TO SAMITI BY THE REGI STRAR OF SOCIETIES HAS BEEN CANCELLED FOR THE REASONS THAT THE SOCIETY IS RUNNING ITS ACTIVITIES NOT FOR FULFILLING THE OBJECTIVES LAID DOWN BY THE DEED. T HE FIRST APPEAL FIELD BY THE ASSESSEE SOCIETY TO SMB OF THE RAJASTHAN HIGH COURT WAS DISMISSED VIDE ORDER DATED 13.6.2006. THE ASSESSEE WENT FOR FURTH ER APPEAL TO THE DIVISION BENCH WHICH ONLY STAYED THE ORDER OF THE SMB WHILE NOT TAKING ANY DECISION IN THE MATTER. RAJASTHAN GOVERNMENT WENT TO THE HO N'BLE SUPREME COURT OF INDIA AND FILED SLP AGAINST THE ORDER OF DIVISIONAL BENCH OF RAJASTHAN HIGH COURT IN WHICH THE SUPREME COURT OF INDIA VIDE ITS ORDER DATED 11.9.2006 DIRECTED THE RAJASTHAN HIGH COURT TO IMMEDIATELY DE CIDE THE APPEAL AND THE MATTER IS SUB-JUDICE. THE MATTER HAS NOT BEEN DECID ED IN FAVOUR OF THE ASSESSEE BY THE RAJASTHAN HIGH COURT. (V) THE DECISION OF AHMEDABAD BENCH IN THE CASE OF ITO V. SHRI SANDERAO JINENDRA BHUVAN JAIN DHARAMSHALA (1992) 42 TTJ 519 (AHD) IS NOT APPLICABLE AS THE SOCIETY ADMITTEDLY IS A RELIG IOUS TRUST FOR RUNNING EXCLUSIVELY FOR THE BENEFIT OF CHRISTIAN AND CHRIST IANITY. THE MISCHIEF OF SECTION 13(1)(B) OF THE ACT IS ATTRACTED. 8. THE LD. CIT, THEREFORE, CANCELLED THE REGISTRATI ON GRANTED TO THE SOCIETY U/S 12A OF THE ACT. 9. BEFORE US, THE LD. AR HAS FIELD WRITTEN SUBMISSI ONS DATED 23.6.2011 IN 9 PAGES WRITTEN SUBMISSIONS DATED 3 PAGES ON 27.7.2 011, WRITTEN 6 SUBMISSIONS CONTAINING 81 PAGES WERE FILED ON 24.3. 2011 AND OTHER WRITTEN SUBMISSIONS FROM PAGES 82 TO 128 WERE FILED ON 5.9. 2011. 10. IN THE WRITTEN SUBMISSIONS, THE LD. AR HAS STAT ED AS UNDER FOR SCOPE OF POWER U/S 12AA(3): FROM A BARE READING OF THE RELEVANT PROVISIONS CON TAINED U/S 12AA (3), IT IS EVIDENTLY CLEAR THAT THE LD. CIT(ADM), W ITH A VIEW TO CANCEL THE REGISTRATION GRANTED TO TRUST/INSTITUTION, HAS TO BE SATISFIED THAT (I) THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR (II) ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. THEREFORE, BEFORE CANCELING THE REGIS TRATION, THE LD. CIT(ADM) WAS STATUTORILY OBLIGED TO HAVE CATEGORICA LLY RECORDED HIS SATISFACTION WITH RESPECT TO THE ABOVE TWO CONDITIO NS/ASPECTS. ON THIS, KINDLY REFER: CHATURVEDI HAR PRASAD EDUCATIONAL SOCIETY V. CIT (2 010) 46 DTR 121 (LUCKNOW) (DPB 49-52) (CHARITABLE TRUST REGISTRATION U/S 12AA CANCELL ATION U/S 12AA(3) AS PER SECTION 12AA(3), REGISTRATION GRANTED TO AN Y TRUST OR SOCIETY U/S 12AA (1)(B) CAN BE CANCELLED ONLY IF THE LD. CI T IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTIONS THEREOF IN THE INSTANT CASE, IT IS NOT THE CASE OF THE CIT THAT TH E ACTIVITIES OF THE ASSESSEE SOCIETY ARE NOT GENUINE OR ARE NOT BEING C ARRIED OUT IN ACCORDANCE WITH THE OBJECTIONS OF THE SOCIETY. THU S, BOTH THE CONDITIONS LAID DOWN IN SUB-SECTION (3) OF SECTION 12AA FOR CANCELING OF REGISTRATION ARE NOT IN NOT SATISFIED OBJECTS PER SE CANNOT BE RE-EXAMINED UNDER THE PROVISIONS OF SUB-S ECTION (3) OF SECTION 12AA ACTION TAKEN BY THE CIT DID NOT FALL WITHIN THE BY PARAMETERS OF SUB-SECTION (3) OF SECTION 12AA HEN CE, IMPUGNED ORDER IS ILLEGAL AND UNSUSTAINABLE. IN HP GOVERNMENT ENERGY DEVELOPMENT AGENCY V. CIT, 46 DTR 126 (CHD) (DPB 53 57) HELD THAT 7 POWER OF CIT TO CANCEL THE REGISTRATION IS CIRCUMSC RIBED BY THE CONDITIONS PRESCRIBED IN SECTION 12AA(3) SUCH POWER DOES NOT PERMIT WHOLESALE REVIEW OF THE INGREDIENTS WHICH HA VE BEEN CONSIDERED BY THE CIT WHILE GRANTING REGISTRATION U /S12AA AT THE TIME OF CANCELING THE REGISTRATION U/S 12AA(3), THE CIT ONLY TO SATISFIED HIMSELF ABOUT THE TWO CONDITIONS PRESCRIB ED THEREIN NAMELY, ACTIVITIES ARE NOT GENUINE OR THE ACTIVITIES ARE NO T BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTIONS OF THE TRUST OR INST ITUTION . ALSO REFER MAHARASHTRA ACADEMY OF ENGINEERING & EDU CATIONAL RESEARCH (MAEER) V. CIT (2010) 133 TTJ 706 (PUNE). M.K. NAMBYAR SAARC LAW CHARITABLE TRUST V. UNION OF INDIA (2004) 269 ITR 556 (DEL) HAS ALSO HELD THAT EH REJE CTION OF THE APPLICATION FOR REGISTRATION ON IRRELEVANT CONSIDER ATION CANNOT BE PERMITTED AND THE ORDER OF REJECTION PASSED BY THE COMMISSIONER WAS LIABLE TO BE QUASHED. HOWEVER, THE LD. CIT(ADM) NOWHERE RECORDED THAT ACT IVITIES OF THE SOCIETY WERE FOUND NON-GENUINE. HERE BY USING THE EXPRESSION GENUINE WHAT THE LEGISLATURE PERHAPS HAS INTENDED IS THAT THE ACTIVITIES OF THE INSTITUTION SHOULD NOT BE FAKE OR MAKE AND BELIEF ARRANGEMENT ONLY I.E. ON PAPERS ONLY WITH A VIEW TO SALE DONATION RECEIPTS IN CONSIDERATION OF COMMISSION ETC. THE LD. CIT(ADM) NOWHERE RECORDED A FINDING THAT THE EXPENDITURE INC URRED AND CLAIMED WERE FAKE/BOGUS AND FACTUALLY NO SUCH EXPENDITURE W AS INCURRED, THE SOCIETY WAS FOUND ENGAGED IN MAL PRACTICES OR ITS F UNDS WERE MISUTILIZED IN ANY MANNER OR THAT WERE UTILIZED FOR THE BENEFITS OF THE CERTAIN PERSON U/S 13. SIMILARLY, THE LD. CIT(ADM) HAS NEITHER LOOKED INTO THE OBJECTS OF THE SOCIETY NOR HAS HE RECORDED FINDINGS AS TO HOW THE ACTIVITIES CARRIED OUT BY THE SOCIETY WERE FOUN D NOT TO BE IN ACCORDANCE WITH THE OBJECTS OF THE SOCIETY. IT WAS STATED THAT THE LD. CIT HAS NOT CONFRONTED T HE REPORT OF THE AO. WHEN SUCH REPORT IS NOT CONFRONTED THEN NO ADVERSE INFERENCE CAN BE DRAWN. REFERENCE TO THE CASE OF HON'BLE JURISDICTIONAL HIG H COURT IN THE CAE OF VIMAL CHANDER GOLCHA V. ITO, 134 ITR 119. 8 11. THE LD. CIT HAS NOT RECORDED THE SATISFACTION. WITHOUT RECORDING OF REQUISITE SATISFACTION, THE LD. CIT(A) SHOULD NOT H AVE ASSUMED A JURISDICTION. 12. FINDINGS OF THE AO IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2007-08 WERE DELETED BY THE LD. CIT(A) AND THE ORDE R OF THE LD. CIT(A) HAS BEEN CONFIRMED BY THE TRIBUNAL. 13. SECTION 13 IS APPLICABLE TO TRUSTS FOR CHARITAB LE PURPOSES AND NOT ON TRUSTS CONSTITUTED FOR RELIGIOUS PURPOSES. FOR THI S PROPOSITION RELIANCE HAS BEEN PLACED ON THE FOLLOWING DECISIONS: CIT V. DAWOODI BOHAR JAMAT, 317 ITR 342 (M.P) CIT V. BARKATE SDAIFYAH SOCIETY, 213 ITR 492, (GUJ ARAT) CIT V. SOCIEL SERVICE CENTRE, 250 ITR 39 (A.P) CALICUT ISLAMIC CULTURAL SOCIETY V. ACIT, 28 SOT 14 8 (COCHIN) IT HAS BEEN SUBMITTED THAT THE SOCIETY IS A TRUST F OR RELIGIOUS PURPOSES. THE MATTER NOW RAISED IS COVERED BY THE ORDER OF THE TR IBUNAL DATED 20.4.2011. 14. ALTERNATIVELY IT HAS BEEN SUBMITTED THAT INCOME APPLIED FOR VARIOUS ACTIVITIES RELATING TO RELIGION AND DOORS OF CHURCH AND ORPHANAGE ARE OPEN FOR ALL THE PERSONS WITHOUT ANY CASTE OR COMMUNITY. 15. IT IS FURTHER STATED THAT CANCELLATION/REGISTRA TION CAN BE EFFECTIVE FROM THE ORDER OR ALTERNATIVELY SUCH CANCELLATION CAN NO T BE EFFECTIVE FOR THE 9 PERIOD BEFORE THE DATE OF AMENDMENT. RELIANCE HAS BEEN MADE ON THE FOLLOWING DECISIONS:- OXFORD ACADEMY FOR CAREER DEVELOPMENT V. CCIT, 315 ITR 382 (ALL) KAPOOR EDUCATIONAL SOCIETY V CIT, 44 DTR 97 (LUCKNL OW) 16. VIDE WRITTEN SUBMISSIONS DATED 27.7.2011, THE A SSESSEE STATED AS UNDER (SUMMARIZED AS UNDER):- GROUND OF APPEAL NO. 1 IS GENERAL AND GROUND OF APP EAL NO. 2 IS NOT PRESSED. THE LD. CIT HAS WRONGLY CONSIDERED THAT THE REGISTR ATION IS TO BE CANCELLED IN CASE THE REGISTRATION OF SOCIETY HAS BEEN CANCEL LED BY HON'BLE RAJASTHAN HIGH COURT. THE HON'BLE HIGH COURT HAS ALREADY DIR ECTED TO MAINTAIN STATUS QUO. OUR ATTENTION WAS DRAWN TO THE EXTRACT FROM T HE DECISION OF HON'BLE RAJASTHAN HIGH COURT AND WAS ARGUED THAT THE HON'BL E HIGH COURT WAS OF THE VIEW THAT REGISTRAR HAS NO AUTHORITY TO CANCEL REGISTRATION. 17. SECTION 13 SUGGEST THAT IT IS AN EXCEPTION TO S ECTION 11 & 12 ONLY BUT NOT SECTION 12A/12AA. 18. ON THE OTHER HAND, THE LD. DR HAS FILED THE WRI TTEN SUBMISSIONS WHICH ARE REPRODUCED AS UNDER:- IT IS HUMBLY SUBMITTED THAT THE PROVISIONS OF SECT ION 12AA(3) INSERTED WITH EFFECT FROM 1.10.2004 DULY EMPOWERS THE LD. CIT TO CANCEL THE REGISTRATION GRANTED U/S 12AA OF THE ACT . FURTHER BY WAY OF AMENDMENT BROUGHT IN BY THE FINANCE ACT 2010 W.E .F. 1.6.2010 THE 10 SAID PROVISIONS OF SECTION 12AA(3) WERE ALSO MADE A PPLICABLE TO ORDERS OF REGISTRATION GRANTED UNDER THE ERSTWHILE PROVISIONS OF SECTION 12A (I.E. REGISTRATIONS GRANTED PRIOR TO 1 .4.1997). UNDISPUTEDLY THE IMPUGNED ORDER HAS BEEN PASSED BY THE LD. CIT, KOTA ON 26.11.2010 WHICH FALLS AFTER 1.6.2010. THUS AFTER 1.6.2010 THE LD. CIT, KOTA HAS VALID JURISDICTION T O CANCEL THE ORDER OF REGISTRATION GRANTED TO THE ASSESSEE ON 17.10.1981 UNDER THE NOW OMITTED PROVISIONS OF SECTION 12A(A) OF THE ACT. T HEREFORE, THE GROUND RAISED BY THE ASSESSEE IN THIS REGARD IS WIT HOUT ANY SUBSTANCE. THE LD. CIT(A) HAS DULY EXERCISED THE POWERS U/S 12 AA(3) OF THE ACT FOR THE DETAILED REASONS MENTIONED IN THE O RDER AND HAS DULY SATISFIED HIMSELF ABOUT THE ACTIVITIES OF THE TRUST NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. THE LD. CIT KOTA, IN THE ORDER HAS CLEARLY ESTABLIS HED THAT THE ACTIVITIES OF THE ASSESSEE TRUST ARE NOT BEING CARR IED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST AS THE ACTUAL CONDUC T OF THE ASSESSEE CLEARLY SHOWS THAT ITS ACTIVITIES WERE SOLELY RELAT ED TO THE PROPAGATION OF A PARTICULAR RELIGION I.E. CHRISTIANITY WHICH IS PROSCRIBED IN LAW. AT PAGES 3-4 OF THE ORDER, THE LD. CIT HAS CLEARLY BRO UGHT OUT AS TO HOW SUBSTANTIAL INCOME OF THE TRUST IS BEING APPLIED ON VARIOUS ACTIVITIES SOLELY RELATED TO THE PROPAGATION OF PARTICULAR REL IGIOUS COMMUNITY. THE LD. CIT AT PAGE 9 OF THE ORDER HAS ALSO REPRODU CED THE PROVISIONS OF SECTION 13(1) OF THE ACT WHICH FOR TH E SAKE OF CONVENIENCE ARE BEING REPRODUCED HERE IN UNDER: SECTION 13(1) NOTHING CONTAINED IN SECTION 11 (OR SECTION 12) SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOM E OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THEREOF: 11 (A). (B) IN THE CASE OF A TRUST FOR CHARITABLE PURPOSES OR A CHARITABLE INSTITUTION CREATED OR ESTABLISHED AFTER THE COMMENCEMENT OF THIS ACT, ANY INCOME THEREOF IF THE TRUST OR INSTITUTION IS CREATED OR ESTABLISHED FOR THE BENEF IT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE. IT IS SUBMITTED THAT THE CASE OF THE ASSESSEE TRUST CLEARLY FALLS UNDER CLAUSE (B) ABOVE AS THE TRUST HAS BEEN ESTABL ISHED ONLY ON 13.9.1980 I.E. AFTER THE COMMENCEMENT OF I.T. ACT 1 961 (REFER PAPER BOOK PAGES 6 & 7 AND 7-19) IT IS FURTHER SUBMITTED THAT EVEN THE REGISTRAR OF SOCIETIES RAJASTHAN CANCELLED THE REGISTRATION GRANTED TO THE ASSESSEE TRUST AND THE WRIT PETITION FILED BY THE ASSESSEE BEFORE THE HON'BLE HIGH COURT OF RAJASTHAN WAS ALSO DISMISSED. (REFER PAPER BOOK PAGE 78-81). THOUGH IT HAS BEEN CONTENDED THAT THE SAID ORDER OF THE HON'BLE HIGH COURT HAS BEEN STAYED BY THE DIVISION BENCH OF HON' BLE HIGH COURT HOWEVER, IT IS SEEN THAT THE HON'BLE DIVISION BENC H HAS STAYED THE ORDER FOR CONSIDERING THE LEGAL PROPOSITION AS TO WHETHER THE ORDER PASSED BY ANY QUASI JUDICIAL AUTHORITY CAN BE CANCE LLED IN THE ABSENCE OF ANY EXPRESS PROVISION TO THAT EFFECT. THE SAID CONSIDERATION OF THE LEGAL POSITION BY THE HON'BLE DIVISION BENCH DOES NOT IN ANY MANNER TAKE AWAY THE MERITS OF THE ORDER PASSED BY THE REG ISTRAR OF THE SOCIETIES RAJASTHAN WHICH HAVE BEEN AFFIRMED BY THE SINCE JUDGE BENCH OF THE HON'BLE HIGH COURT. IN THE PRESENT CA SE, THE LD. CIT, KOTA HAS BEEN DULY EMPOWERED BY THE STATUS TO CANCE L THE ORDER U/S 12AA(3) OF THE ACT. THEREFORE, ON MERIT EVEN THE ORDER OF THE SINGLE 12 JUDGE BENCH OF THE HON'BLE HIGH COURT SUBSTANTIATES THE FINDINGS OF EH LD. CIT, KOTA. 19. INITIALLY, THE BENCH THOUGHT THAT THE MATTER IS COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSES SMENT YEAR 2007-08 BUT IT WAS NOTICED THAT THERE ARE SOME ASPECTS WHICH WERE NOT CONSIDERED AND THESE ARE: (I) CANCELLATION OF REGISTRATION OF SOCIETY BY THE REGISTRAR OF SOCIETY. COPY OF ORDER IS TO BE OBTAINED. (II) WHETHER SECTION 13(1) AND PROVISO TO SECTION 2 (15) WILL HAVE IMPACT FOR REQUIRING THE CANCELLATION. COPY OF ORDER OF REGISTRAR OF SOCIETY AND COPY OF W RITTEN PETITION FILED BEFORE HON'BLE HIGH COURT WAS FILED. 20. WE HAVE HEARD BOTH THE PARTIES. SECTION 12AA(3) REFERS TO THE POWER OF LD. CIT TO CANCEL THE REGISTRATION OF THE TRUST OR INSTITUTION. THE WORD CANCEL OF REGISTRATION HAS BEEN MENTIONED IN SECTIO N 186 OF THE IT ACT AND IN THAT PROVISION IT HAS BEEN MENTIONED AS UNDER:- IF WHERE A FIRM HAS BEEN REGISTERED OR IS DEEMED TO HAVE BEEN REGISTERED OR ITS REGISTRATION HAS EFFECT UNDER SUB -SECTION 7 OF SECTION 184 FOR AN ASSESSMENT YEAR, THE AO IS OF OP INION THAT THERE WAS DURING THE PREVIOUS YEAR NO GENUINE FIRM IN EXISTENCE AS REGISTERED, HE MAY, AFTER GIVING THE FIRM A REAS ONABLE OPPORTUNITY OF BEING HEARD CANCEL THE REGISTRATION OF THE FIRM FOR THAT ASSESSMENT YEAR. 21. THE DICTIONARY MEANING OF CANCELLATION IS TO AN NUL, ABROGATE OR TERMINATE. HENCE THE LEGISLATURE PROVIDED U/S 186 FOR CANCELLATION FOR 13 PARTICULAR ASSESSMENT YEAR BUT IN SECTION 12AA(3), IT IS MENTIONED THAT LD. CIT CAN CANCEL THE REGISTRATION. IT MEAN THE ORDER OF REGISTRATION PASSED BY THE LD. CIT IS CANCELLED AND HENCE ORDER U/S 12AA(3 ) WILL TERMINATE OR ANNUL THAT ORDER. 22. THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR TH E ASSESSMENT YEAR 2007- 08 (140 TTJ 508) HAS HELD THAT EXPENSES OF RS. 2.02 CRORE ARE TO BE CONSIDERED AS APPLIED FOR THE OBJECTS OF THE SOCIET Y. THE TRIBUNAL ALSO HELD THAT ASSESSEE IS ENTITLED TO REGISTRATION AS A RELI GIOUS TRUST. IT WILL BE USEFUL TO REFER TO HELD PORTION:- IT IS NOWHERE MENTIONED IN REGISTRATION CERTIFICAT E THAT THE SOCIETY IS BEING REGISTERED AS CHARITABLE SOCIETY. IF ONE GOE S THROUGH THE NATURE OF THE EXPENSES AND EXPLANATION GIVEN BEFORE THE AO , IT IS CLEAR THAT THE EXPENSES AT SERIAL NO. 1 AND THE EXPENSES GIVEN AT SERIAL NO. 8 CAN ONLY BE RELATED TO RELIGIOUS ACTIVITIES. OTHER EXP ENSES A RE NOT FOR RELIGIOUS PURPOSES AND HAVE BEEN INCURRED FOR SCHOO LS, ORPHANAGES, ETC. THE MAIN HEADING FOR SECTION 11 IS INCOME FR OM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES. SECTION 11( 1)(A) SAYS THAT INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLL Y FOR CHARITABLE OR RELIGIOUS PURPOSES IS TO BE ALLOWED EXEMPTION IN CA SE SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA. THE WORDS SUCH PURPOSES REFER TO THE CHARITABLE AS WELL AS RELIGIOUS PURPOSES. THIS ONE HAS TO SEE THE REQUIREMENT THAT APPLICATION OF INCOME FOR CHARITAB LE OR RELIGIOUS PURPOSES IS TO BE MADE TO THE EXTENT OF 85 PER CENT . CONSIDERING THE LEGAL POSITION, THE LD. CIT(A) WAS JUSTIFIED IN DEL ETING THE ADDITION BECAUSE THE ASSESSEE WAS A RELIGIOUS AND CHARITABLE SOCIETY AND THE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE FOR WHI CH SOCIETY WAS ESTABLISHED THE SOCIETY OF PRESENTATION SISTERS V . ITO (2009) 125 TTJ (COCH) (TM) 909: (2009) 30 DTR (COCH)(TRIBUNAL) (TM) 1 FOLLOWED. 14 CONCLUSION: ASSESSEE BEING A RELIGIOUS AND CHARITAB LE SOCIETY, THE EXPENSES INCURRED BY IT RELATING TO BOTH RELIGIOUS AS WELL AS CHARITABLE ACTIVITIES WERE FOR THE PURPOSE FOR WHICH THE SOCIE TY WAS ESTABLISHED AND, THEREFORE, THE EXPENSES INCURRED FOR RELIGIOUS PURPOSES COULD NOT BE DISALLOWED FOR THE PURPOSE OF EXEMPTION U/S 11. 23. IT IS TRUE THAT THE PRESENT APPEAL WAS NOT HEAR D ALONG WITH THE APPEAL AGAINST ORDER OF ITO U/S 143(3) FOR ASSESSME NT YEAR 2007-08 THOUGH MATTERS CONSIDERED BY LD. CIT SHOULD HAVE BE EN BROUGHT TO OUR KNOWLEDGE. IN RESPECT OF SATISFACTION OF THE L D. CIT IN PASSING ORDER U/S 12AA(3), IT IS CLEAR THAT THERE WAS A REP ORT FROM THE AO. SATISFACTION REQUIRES TO APPLY THE MIND AND CAME TO THE CONCLUSION THAT PRIMA FACIE THE ACTION IS NEEDED. HENCE REQUI REMENT OF SATISFACTION STANDS COMPLIED. 24. THE ASSESSEE IS SAYING THAT REPORT OF AO HAS NO T BEEN PROVIDED. THE LD. CIT IS USING THAT REPORT AND HENCE NATURAL JUSTICE DEMANDS THAT COPY OF SUCH REPORT TO BE PROVIDED TO ASSESSEE . ON THIS GROUND, THE ORDER IS REQUIRED TO BE SET ASIDE TO BE MADE AG AIN. 25. THE REGISTRAR OF SOCIETIES CANCELLED REGISTRATI ON ON ACCOUNT OF CERTAIN IRREGULARITIES AND THE FOLLOWING ARE RELEVA NT FOR INCOME TAX MATTER. 15 (A) WITHOUT AMENDING THE REGULATIONS, THE POSTS OF PRESIDENT AND CHAIRMAN WERE CREATED. FURTHERMORE, FATHER AND SON WERE SHOWN AS ELECTED FOR THESE TWO POSTS. (B) ENQUIRY COMMITTEE CONSTITUTE BY SOCIAL WELFARE DEPARTMENT HAS NOTICED SERIOUS ALLEGATIONS. A CASE ON THE BASIS O F THIS REPORT IS PENDING WITH POLICE DEPARTMENT. (C) THE SOCIETY IS RECEIVING HUGE SUMS FROM FOREIGN SERVICES AND THE SOCIETY IS REGISTERED UNDER FOREIGN CONTRIBUTIO N ACT. THE SUM IS NOT BEING SPENT FOR THE PURPOSE FOR WHICH THE FUNDS WERE RECEIVED. (D) THE SOCIETY IS DOING UNCONSTITUTIONAL ACTIVITIE S BY HURTING THE SENTIMENT OF PERSONS BELONGING TO OTHER RELIGIONS. IT IS TRYING TO CREATE HATRED AGAINST OTHER RELIGION. (E) THE IRREGULARITIES COMMITTED BY THE SOCIETY AND THE DOCUMENTARY EVIDENCES AVAILABLE SHOW THAT THE SOCIE TY IS INDULGING IN UNCONSTITUTIONAL ACTIVITIES AND SUCH ACTIVITIES ARE ALSO AGAINST THE NATIONAL SECURITY. 26. ON THE BASIS OF VARIOUS PROCEDURAL IRREGULARITI ES AND THE REGULARITIES REFERRED TO ABOVE, THE REGISTRAR OF SOCIETIES CANCE LLED THE REGISTRATION OF SOCIETIES VIDE ORDER DATED 27.2.2006. AGAINST THIS ORDER THE SOCIETY FIELD WRIT PETITION BEFORE THE RAJASTHAN HIGH COURT. THE WRIT PETITION WAS 16 DISMISSED BY THE SINGLE JUDGE OF THE HON'BLE HIGH C OURT. AGAINST THE ORDER OF THE SINGLE JUDGE, THE SOCIETY FILED AN APPEAL BE FORE THE DIVISION BENCH OF RAJASTHAN HIGH COURT. BEFORE THE DIVISION BENCH IT WAS SUBMITTED THAT THE REGISTRAR OF SOCIETIES ACTS QUASI JUDICIAL AND THER EFORE, HE HAS NO RIGHT TO CANCEL THE REGISTRATION UNLESS THE POWER OF CANCELL ATION IS PROVIDED UNDER THE PROVISION OF THE SOCIETIES ACT. THE COUNSEL APPEAR ING ON BEHALF OF THE STATE GOVERNMENT ADMITTED THAT THERE IS NO PROVISION TO C ANCEL THE REGISTRATION. HOWEVER, THE POWER CAN BE ASSUMED BY THE REGISTRAR UNDER THE GENERAL CLAUSE ACT. HON'BLE JURISDICTIONAL HIGH COURT WHIL E ADMITTING THE APPEAL OBSERVED THAT THE ORDER OF CANCELING THE REGISTRAT ION REQUIRES CONSIDERATION HAS PRIMA FACIE THE REGISTRAR HAS NO AUTHORITY TO DO THE SAME IN VIEW OF THE RATIO OF THE SUPREME COURT DECISION IN THE CASE OF INDIAN NATIONAL CONGRESS (I) VS. INSTITUTE OF SOCIAL WELFARE AND OTHERS (200 2) 5 SCC 685. THE HON'BLE JURISDICTIONAL HIGH COURT STAYED THE OPERAT ION OF THE ORDER OF THE SINGLE JUDGE. IT WILL BE USEFUL TO REPRODUCE THE R ELEVANT EXTRACT OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT:- IT IS NOWHERE MENTIONED IN REGISTRATION CERTIFICAT E THAT THE SOCIETY IS BEING REGISTERED AS CHARITABLE SOCIETY. IF ONE GOE S THROUGH THE NATURE OF THE EXPENSES AND EXPLANATION GIVEN BEFORE THE AO , IT IS CLEAR THAT THE EXPENSES AT SERIAL NO. 1 AND THE EXPENSES GIVEN AT SERIAL NO. 8 CAN ONLY BE RELATED TO RELIGIOUS ACTIVITIES. OTHER EXP ENSES ARE NOT FOR RELIGIOUS PURPOSES AND HAVE BEEN INCURRED FOR SCHOO LS, ORPHANAGES, ETC. THE MAIN HEADING FOR S. 11 IS INCOME FROM PR OPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES. SECTION 11(1)(B ) SAYS THAT INCOME 17 DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR C HARITABLE OR RELIGIOUS PURPOSES IS TO BE ALLOWED EXEMPTION IN CA SE SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA. THE WORDS SUCH PURPOSES REFER TO THE CHARITABLE AS WELL AS RELIGIOUS PURPOSES. THUS ONE HAS TO SEE THE REQUIREMENT THAT APPLICATION OF INCOME FOR CHARITAB LE OR RELIGIOUS PURPOSES IS TO BE MADE TO THE EXTENT OF 85 PER CENT . CONSIDERING THE LEGAL POSITION, THE LD. CIT(A) WAS JUSTIFIED IN DEL ETING THE ADDITION BECAUSE THE ASSESSEE WAS A RELIGIOUS AND CHARITABLE SOCIETY AND THE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE FOR WHI CH SOCIETY WAS ESTABLISHED THE SOCIETY OF PRESENTATION SISTERS V . ITO (2009_ 125 TTJ (COCH)(TM) 909: (2009) 30 DTR (COCH)(TRIBUNAL)( TM) 1 FOLLOWED. CONCLUSION: ASSESSEE BEING A RELIGIOUS AND CHARITA BLE SOCIETY, THE EXPENSES INCURRED BY IT RELATING TO BOTH RELIGIOUS AS WELL AS CHARITABLE ACTIVITIES WERE FOR THE PURPOSES FOR WHICH THE SOCI ETY WAS ESTABLISHED AND, THEREFORE, THE EXPENSES FOR RELIGIOUS PURPOSES COULD NOT BE DISALLOWED FOR THE PURPOSES OF EXEMPTION UNDER SECT ION 11. 27. THE HON'BLE JURISDICTIONAL HIGH COURT HAS LEFT OPEN THE AUTHORITIES TO TAKE ACTION UNDER THE PROVISIONS OF LAW IN CASE THE RE ARE IRREGULARITIES OR ANY ILLEGAL ACT BY THE SOCIETY. THE REGISTRAR HAS REFE RRED TO POLICE CASE AND HAS ALSO REFERRED THAT THE SOCIETY IS INDULGING IN ANTI -NATIONAL ACTIVITIES. THEREFORE, THE LD. CIT WILL HAVE TO ASCERTAIN THE NATURE OF THE CASES, IF ANY, FILED AGAINST THE SOCIETY AND IF THESE CASES HAVE I MPACT ON CANCELLATION OF REGISTRATION THEN SUCH FACTORS ARE TO BE CONSIDERED . WE, THEREFORE, FEEL THAT THE ORDER OF LD. CIT U/S 12AA(3) OF THE ACT IS REQU IRED TO BE SET ASIDE TO BE MADE AGAIN AFTER CONSIDERING OUR OBSERVATIONS GIVEN IN THE ORDER. THE 18 ASSESSEE WILL BE GIVEN AN OPPORTUNITY OF HEARING BE FORE PASSING THE FRESH ORDER. 28. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 21 -10.2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED: 21 -10-2011 SURESH COPY FORWARDED TO :- 1. EMMANUEL BIBLE INSTITUTE SAMITI 2 THE CIT , KOTA 3 THE LD. CIT BY ORDER 4 THE LD. CIT(A) 5 THE LD.DR 6 THE GUARD FILE (ITA NO.39/JP /11) A.R, ITAT, JAIPUR 19 20 21 22 23 24