Parkar Medical Foundation, Ratnagiri V. DCIT, Ratnagiri

ITA 1423/PUN/2012

• Counselvise Citation: 142324514 RSA 2012
• Duration Of Justice: 2 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-10-2013
• Assessment Year: misc
• Appeal Filed On: 25-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Search and seizure; Charitable institution; Cancellation of registration; Documents seized
• Section: 80G; 12A; 12AA; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS. 861 & 1423/PN/2012 PARKAR MEDICAL FOUNDATION, 828 PARKAR HOSPITAL, SHIVAJINAGAR, RATNAGIRI-415639 PAN NO.AAATP4632P .. APPELLANT VS. DY. COMMISSIONER OF INCOME TAX, RATNAGIRI CIRCLE, RATNAGIRI .. RESPONDENT ASSESSEE BY : SHRI SUNIL GANOO REVENUE BY : SHRI A.K. MODI DATE OF HEARING : 07-07-2014 DATE OF PRONOUNCEMENT : 31-07-2014 ORDER PER R.K. PANDA, AM : ITA NO. 861/PN/2012 FILED BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER DATED 29-03-2012 PASSED BY THE CIT-II, KOLHAP UR U/S. 12AA(3) OF THE INCOME TAX ACT, 1961 CANCELLING THE REGISTRATIO N GRANTED TO THE ASSESSEE TRUST U/S. 12A OF THE I.T. ACT. ITA NO. 1 423/PN/2012 FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 09 -05-2012 PASSED BY THE CIT-II, KOLHAPUR WITHDRAWING APPROVAL ACCORDED U/S. 80G(5)(VI) OF THE IT. ACT, 1961. FOR THE SAKE OF CONVENIENCE BOT H THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER. ITA NO. 861/PN/2012 : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A TRUST, ENGAGED IN PROVIDING MEDICAL FACILITY/AID. IT WAS CREATED BY DR. ALMIYA DAWOOD PARKAR, AND HIS WIFE DR. (MRS.) MUMTAJ ALIMIYA PARK AR, WHO WERE 2 ENGAGED IN MEDICAL PROFESSION IN THEIR PERSONAL CAP ACITY, PRIOR TO CREATION OF THE TRUST. LATTER ON THEY CREATED THE ASSESSEE TRUST VIDE TRUST DEED DATED 28-03-2002, APPOINTING THEMSELVES AS THE ONLY TRUSTEES, IN THE CAPACITY OF MANAGING TRUSTEES, AND SECRETARY & TREASURER, RESPECTIVELY. SUBSEQUENTLY, VIDE RESOLUTION DATED 10-09-2007, THREE NEW TRUSTEES WERE APPOINTED. 2.1 THE TRUST WAS GRANTED REGISTRATION U/S. 12A OF THE I.T. ACT, 1961 BY THE CIT, KOLHAPUR, VIDE CERTIFICATE NO. KOP/HQ.I II/217-P- 123/62/247/2002-03, ON 03-12-2002 AS A CHARITABLE T RUST. SUBSEQUENTLY, THE LD. CIT VERIFIED THE RECORDS AVAI LABLE AND NOTED THAT THE ASSESSEE TRUST WAS ENGAGED IN CARRYING ON MEDIC AL PROFESSION, I.E. MULTI-SPECIALITY HOSPITAL, ON COMMERCIAL BASIS WHER EIN FIXED AMOUNT OF FEES WAS CHARGED, ON THE BASIS OF TREATMENT GIVEN A ND FACILITIES PROVIDED, FROM ALL THE PATIENTS. SHE NOTED THAT TH E DISCOUNT GIVEN TO THE PATIENTS WERE CLAIMED AS CHARITY, AND THE SURPLUS W AS ACTUALLY DIVERTED TOWARDS THE TRUSTEES UNDER THE GUISE OF SALARY, REN T, PROFESSIONAL FEES, UTILIZATION FEES, ETC. AND WAS SUBSEQUENTLY UTILIZE D FOR PERSONAL BENEFITS, INCLUDING EDUCATION OF SON AND DAUGHTER-I N-LAW OF THE TRUSTEES. SHE, THEREFORE, ISSUED A SHOW-CAUSE NOTIC E TO THE ASSESSEE ON 19-12-2011 UNDER PROVISIONS OF SEC. 12AA(1)(B)(I I) OF THE I.T. ACT POINTING OUT THE ABOVE DISCREPANCIES AND ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE REGISTRATION GRANTED EARLIER SHOULD N OT BE WITHDRAWN. 3. THE ASSESSEE OBJECTED TO THE ABOVE SHOW-CAUSE NO TICE ON THE GROUND THAT THE SAME WAS BASED ON OBSERVATIONS OF T HE A.O IN THE ASSESSMENT ORDERS FOR A.YS. 2004-05, 2005-06 & 2008 -09. IT WAS EXPLAINED THAT THE ASSESSEE TRUST HAD ADVANTAGE OF WELL ESTABLISHED 3 HOSPITAL OF THE TRUSTEES, ALONG WITH FLOURISHING BU SINESS. THE FOUNDER TRUSTEES, BEING MOTIVATED BY PHILANTHROPIC CONSIDER ATION ARE TAKING ONLY NOMINAL PORTION OF FEES COLLECTED BY THE TRUST FOR THEIR SERVICES RENDERED. IT WAS ARGUED THAT THE SURPLUS OF THE TRUST IS NOT DISTRIBUTED AMONGST THE TRUSTEES BUT IS RETAINED FOR THE CHARITY AND EXPANS ION OF THE HOSPITAL. RELYING ON A NUMBER OF DECISIONS INCLUDING THE DECI SION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. PULIKKAL M EDICAL FOUNDATION (P) LTD. REPORTED IN 210 ITR 299 AND THE DECISION O F HONBLE BOMBAY HIGH COURT IN THE CASE OF VANITAL VISHRAM TRUST VS. CCIT REPORTED IN 327 ITR 121, THE ASSESSEE REQUESTED TO DROP THE PRO CEEDINGS. 4. HOWEVER, THE LD. CIT WAS NOT CONVINCED WITH THE SUBMISSION MADE BEFORE HER. SHE NOTED THAT THE SHOW-CAUSE NOT ICE WAS ISSUED ON THE BASIS OF EXAMINATION OF RECORDS BY HERSELF AND NOT ON THE BASIS OF OBSERVATION OF THE A.O. IN THE ASSESSMENT ORDER. S HE ALSO REJECTED THE SUBMISSION OF THE ASSESSEE THAT THE CHARITY COMMISS IONER HAS NOT OBJECTED TO THE REASONABLENESS OF CERTAIN EXPENDITU RE WHICH WERE PERTAINING TO THE TRUSTEES AND HELD THAT THE SAME I S NOT BINDING ON THE COMMISSIONER OF INCOME TAX AND SHE IS FREE TO ARRIV E AT HER OWN FINDINGS, PARTICULARLY WITH RESPECT TO PROVISIONS R ELATING TO INCOME TAX ACT, 1961. SHE NOTED THAT FOR THE A.Y. 2008-09 THE ASSESSEE HAS SHOWN THE FOLLOWING INCOME : (I) OTHER INCOME (MEDICAL & OTHER PROFESSIONAL FEES) R S.2,13,84,461 (II) BANK INTEREST RS.13,477/- ____ TOTAL RS.2,139,7,938/- --------------------- SIMILARLY, SHE NOTED THAT THE ASSESSEE HAS SHOWN TH E FOLLOWING AMOUNTS PAID TO THE TRUSTEES: 4 PROFESSIONAL FEES RS.3336000/- SALARIES RS.854881/- UTILIZATION CHARGES RS.160250/- BUILDING RENT RS.840000/- REMUNERATION TO SON OF THE TRUSTEES RS.120000/- REMUNERATION TO DAUGHTER-IN-LAW OF THE TRUSTEE RS.12 0000/-_ TOTAL RS.5431131/- ----------------- 4.1 FROM THE ABOVE DETAILS SHE NOTED THAT THE ASSES SEE HAS SIPHONED OUT ALMOST 26% OF THE TOTAL RECEIPTS UNDER ONE PRET EXT OR THE OTHER. IT IS FOR PURELY PERSONAL BENEFITS OF THE TRUSTEES WHICH SHOW THAT THE TRUSTEES OF THE ASSESSEE TRUST ARE RUNNING A COMMERCIAL MEDI CAL ESTABLISHMENT, WITH A PROFIT MAKING INTENTION, UNDER THE GUISE OF THE CHARITABLE TRUST. SHE FURTHER NOTED THAT THE TRUST HAS ALSO AGREED TO PAY FEES TO THE EXTENT OF RS.13.50 LAKHS FOR THE POST-GRADUATION STUDIES O F THE SON OF THE TRUSTEES, WHO IS ALSO WORKING WITH THE TRUST AS A R ESIDENTIAL DOCTOR. SIMILAR AMOUNT IS AGREED TO BE PAID IN THE CASE OF DAUGHTER-IN-LAW OF THE TRUSTEES FOR PURSUING THE POST-GRADUATION, WHO IS ALSO WORKING WITH THE TRUST. FURTHER THE ASSESSEE TRUST HAS GIVEN AD VANCE OF RS.6,48,216/- TO M/S. IMAGE DIAGNOSTICS, A FIRM WHERE THE CHIEF T RUSTEE IS ALSO A PARTNER, AND IS CONDUCTING ITS BUSINESS FROM THE SA ME PREMISES. ACCORDING TO HER THERE IS A CLEAR CONTRAVENTION OF PROVISIONS OF SEC. 11(5) OF THE I.T. ACT, 1961. SHE FURTHER NOTED THA T THE ASSESSEE TRUST IS CHARGING FIXED AMOUNT OF FEES, DEPENDING ON THE BAS IS OF TREATMENT GIVEN AND FACILITIES PROVIDED, FROM ALL THE PATIENT S. THERE IS A FIXED SCHEDULE FOR VARIOUS ITEMS OF PROFESSIONAL CONSULTA NCY PROVIDED. ACCORDING TO LD.CIT, THE SO CALLED DISCOUNT GIVEN B Y THE ASSESSEE IN THE BILLS CLAIMING TO BE CHARITY HAS NOT BEEN EXPLAINED BY THE ASSESSEE AS GENUINE CHARITY. THE ASSESSEE FAILED TO SUBSTANTIA TE ITS CLAIM BY PROVIDING CONCRETE FIGURES OF THE ACTUAL BILL AMOUN T, THE PERCENTAGE OF DISCOUNT PROVIDED, AND THE FINAL AMOUNT OF BILL COL LECTED FROM PATIENTS. 5 IT HAS NOT ESTABLISHED, WITH SUFFICIENT EVIDENCE TH AT SUCH DISCOUNT IS SUBSTANTIAL, WHEN COMPARED TO THE TOTAL TURNOVER, R UNNING INTO CORES OF RUPEES. FURTHER THERE ARE NO SET OF GOVERNING RULE S FOR PROVIDING SUCH DISCOUNTS. ACCORDING TO HER, IT IS NOT THE CASE TH AT SUCH DISCOUNTS ARE PROVIDED TO ALL THE PATIENTS, OR CERTAIN CLASS OF P ATIENTS, AT A FIXED RATE. SUCH DISCOUNT IS AVAILABLE TO RANDOM PATIENTS, AT T HE WILL AND WHIMS OF THE TRUSTEES, AND THEREFORE, THE SAME CANNOT BE TRE ATED TO BE CHARITY WITHIN THE MEANING OF SEC. 2(15) OF THE I.T. ACT. 4.2 AS REGARDS THE CLAIM OF THE ASSESSEE THAT THE T RUSTEES HAVE GIVEN A WELL EQUIPPED RUNNING HOSPITAL, ALONG WITH BUILDING AND INSTRUMENTS, FOR PHILANTHROPIC PURPOSES, AND FOR CHARITY OF PUBL IC AT LARGE, SHE NOTED THAT THE TRUST IS PAYING SUBSTANTIAL AMOUNT AS RENT AND USAGE CHARGES, WHICH ARE OVER AND ABOVE THE SALARY AND PROFESSIONA L FEES PAID TO ALL THE FOUR MEMBERS OF THE FAMILY BY THE TRUST. THERE FORE, SHE WAS OF THE OPINION THAT THE TRUSTEES HAVE NOT GIVEN ANYTHING I .E. IMMOVABLE PROPERTY, MEDICAL INSTRUMENTS, OR EVEN SERVICES, WI THOUT ANY CONSIDERATION. 4.3 IN VIEW OF THE ABOVE, SHE WAS OF THE OPINION TH AT THE ASSESSEE HAS NOT ONLY INFRINGED THE PROVISIONS OF SEC. 13(1) (C) & 11(5) OF THE I.T. ACT, BUT IS RUNNING A COMMERCIAL MEDICAL ESTABLISHM ENTS, WITH PROFIT MAKING INTENTION, AND IS TAKING UNDUE ADVANTAGE OF THE TAX CONCESSIONS GIVEN BY THE STATUTE TO THE INSTITUTIONS ENGAGED IN GENUINE CHARITABLE ACTIVITIES. THIS GOES AGAINST THE VERY SPIRIT OF T HE TERM CHARITABLE TRUST AS IS ENVISAGED FOR THE PURPOSE OF THE INCOME TAX A CT. IN VIEW OF THE ABOVE AND OBSERVING THAT THE ASSESSEE FAILED TO EST ABLISH ITS CLAIM WITH SUFFICIENT DOCUMENTARY EVIDENCE AS A CHARITABLE SOC IETY AND CHARITABLE 6 ACTIVITIES THEREIN, WITHIN THE MEANING OF SEC. 2(15 ) OF THE ACT. SHE CANCELLED THE REGISTRATION GRANTED EARLIER U/S.12AA OF THE I.T. ACT, 1961. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE IMPUGNED ORDER PASSED BY THE LEARNED C.I.T. BEING ARB ITRARY, PERVERSE, MALICIOUS AND PATENTLY ILLEGAL, BAD IN LAW AND LEGAL LY UNSUSTAINABLE THE SAME MAY PLEASE BE VACATED AND THE REGISTRATION GRANTE D U/S 12 A OF THE I.T. ACT 1961 TO THE APPELLANT TRUST VIDE ORDER DT.0 3/12/2002 MAY PLEASE BE RESTORED. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, SINCE THE IMPUGNED ORDER PASSED BY THE LEARNED C.I.T. IS BASED P URELY ON THE OBSERVATIONS OF THE LEARNED ASSESSING OFFICER DURING THE SCRUTINY ASSESSMENT PROCEEDINGS FOR A.Y.2004-05, A.Y.2005-06 AND A.Y.2008-09 [WHICH ASSESSMENTS ARE CHALLENGED BEFORE LEARNED C.I.T.[ A] KOLHAPUR] AND BEING AN OUTCOME OF NON APPLICATION OF MIND ON THE PART OF THE LEARNED C.I.T. THE SAME IS BAD IN LAW AND BEING WITHO UT JURISDICTION THE SAME MAY PLEASE BE VACATED. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE CONCLUSIONS DRAWN BY THE LEARNED C.I.T. THAT THE APPE LLANT TRUST HAS VIOLATED THE PROVISIONS OF SECTION 13[L][C] & 11 [5] OF THE I.T. ACT 1961 BEING ARBITRARY, PERVERSE, MALICIOUS AND BASED ON NO E VIDENCE THE SAME MAY PLEASE BE VACATED AND THE IMPUGNED ORDER MAY PLE ASE BE QUASHED. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE VARIOUS ALLEGED INSTANCES CITED BY THE LEARNED C.I.T. IN SUPPO RT OF THE ALLEGED VIOLATIONS OF THE PROVISIONS OF SECTION 13[L][C] & 11 [5] OF THE I.T. ACT 1961 BEING ARBITRARY, PERVERSE AND BASED ON NO EVIDEN CE THE SAME MAY PLEASE BE VACATED AND THE IMPUGNED ORDER MA Y PLEASE BE QUASHED. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE CONCLUSION DRAWN BY THE LEARNED C.I.T. THAT THE APPE LLANT TRUST IS RUNNING A COMMERCIAL MEDICAL ESTABLISHMENT BEING ARBI TRARY, PERVERSE, MALICIOUS AND BASED ON NO EVIDENCE THE SAME MAY PLEASE BE VACATED AND THE IMPUGNED ORDER MAY PLEASE BE QUASHED. 6. IT MAY PLEASE BE HELD THAT THE APPELLANT TRUST DOE S EXIST FOR CHARITABLE PURPOSE AND IS CARRYING OUT THE CHARITABLE ACTIVITIES AS ENVISAGED U/S 2[15] OF THE I.T. ACT 1961 AND CONSEQUEN TLY THE IMPUGNED ORDER MAY PLEASE BE ANNULLED AND THE REGISTRATION GRA NTED U/S 12 A OF THE I.T. ACT 1961 TO THE APPELLANT TRUST VIDE ORDER DT.03/12/2002 MAY PLEASE BE RESTORED. 7. THE APPELLANT MAY PLEASE BE AWARDED COST U/S 254 [2 B] OF THE I.T. ACT 1961 FOR ARBITRARY, PERVERSE AND MALICIOUS E XERCISE OF JUDICIAL POWERS BY THE LEARNED C.I.T. IN PASSING THE IMPUGNED ORDER, WHICH HAS TARNISHED THE IMAGE OF THE APPELLANT TRUST AND ITS TRU STEES IN THE MINDS OF COMMON PUBLIC AT RATNAGIRI AND THE NEARBY AREA W HEREIN THE 7 APPELLANT TRUST IS WELL KNOWN FOR ITS MAGNIFICENT CHAR ITABLE ACTIVITIES IN THE FIELD OF MEDICAL TREATMENT TO THE POOR AND NEED Y PERSONS. 8. THE APPELLANT CRAVES THE PERMISSION TO ADD, AMEND, MODIFY, ALTER, REVISE, SUBSTITUTE, DELETE ANY OR ALL GROUNDS OF APPEAL, IF DEEMED NECESSARY AT THE TIME OF HEARING OF THE APPEAL. 6. GROUNDS OF APPEAL NO.1, 5 AND 6 RELATE TO VALID ITY OF CANCELLATION OF REGISTRATION GRANTED EARLIER U/S.12A OF THE I.T. ACT. 6.1 THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALL ENGED THE ORDER OF THE LD.CIT CANCELLING THE REGISTRATION GRANTED EARL IER. AS REGARDS THE ALLEGATION OF THE LD.CIT THAT THE ASSESSEE TRUST IS RUNNING THE MULTI SPECIALTY HOSPITAL ON COMMERCIAL BASIS, HE SUBMITTE D THAT THE TRUST EXISTS SOLELY FOR CHARITY WHICH IS EVIDENT FROM THE AIMS A ND OBJECTS MENTIONED IN THE TRUST DEED. THE TRUST DOES NOT EXI ST FOR MAKING PROFITS AND THE APPLICATION OF THE TRUST FUNDS IS TO BE MAD E STRICTLY FOR ATTAINING THE AIMS AND OBJECTS OF THE TRUST. REFERRING TO THE COPY OF THE TRUST DEED HE SUBMITTED THAT THE PROFITS, IF ANY, OF THE TRUST CANNOT BE DISTRIBUTED DIRECTLY OR INDIRECTLY, BY WAY OF DIVIDEND OR OTHER WISE AMONGST CERTAIN GROUP OF INDIVIDUALS, SETTLERS OF THE TRUST OR DONO RS. HE SUBMITTED THAT MERELY BECAUSE SURPLUS IS GENERATED IT CANNOT BE SA ID THAT THE TRUST IS CARRYING OUT THE COMMERCIAL ACTIVITIES. REFERRING TO VARIOUS DECISIONS HE SUBMITTED THAT WHERE THE PURPOSE OF A TRUST OR I NSTITUTION IS RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF, THE REQUIREM ENT OF THE DEFINITION OF CHARITABLE PURPOSE AS GIVEN IN SECTION 2(15) OF THE I.T. ACT 1961 WOULD BE FULLY SATISFIED, EVEN IF AN ACTIVITY FOR P ROFIT IS CARRIED ON IN THE COURSE OF THE ACTUAL CARRYING OUT OF THE PRIMARY PU RPOSE OF THE TRUST. WHERE THE PREDOMINANT OBJECT OF THE ACTIVITY IS TO CARRY OUT THE CHARITABLE PURPOSE AND NOT TO EARN PROFIT, IT WOULD NOT LOSE ITS CHARACTER 8 OF A CHARITABLE PURPOSE MERELY BECAUSE SOME PROFIT ARISES FROM THE ACTIVITY. FOR THE ABOVE PROPOSITION, HE RELIED ON T HE FOLLOWING DECISIONS: I. ADDITIONAL CIT VS. SURAT ART SILK REPORTED IN 121 ITR PAGE 1 [SC] II. VANITA VISHRAM TRUST VS. CHIEF CIT REPORTED IN 32 7 ITR PAGE 121 [BOM] III. CIT VS. PULIKKAL MEDICAL FOUNDATION [P] LTD REP ORTED IN 210 ITR PAGE 299 [KER] IV. ITO VS. DHARAMSHILS CANCER FOUNDATION & RESEARCH CE NTRE REPORTED IN 128 ITD PAGE 1 [ITAT DELHI] V. GULAB DEVI MEMORIAL HOSPITAL TRUST VS. CIT REPORTED IN 132 TTJ PAGE 90 [ASR][UO] 6.2 HE SUBMITTED THAT THE CBDT IN ITS CIRCULAR NO. 11 OF DT. L9/12/2008 HAS CLARIFIED THAT WHERE THE PURPOSE O F A TRUST OR INSTITUTION IS RELIEF OF THE POOR, EDUCATION O R MEDICAL RELIEF, IT WILL CONSTITUTE 'CHARITABLE PURPOSE' EVEN IF IT INCIDENT ALLY INVOLVES THE CARRYING ON OF COMMERCIAL ACTIVITIES. HE SUBMITTED THAT THE CIT HAS LOST SIGHT OF THE FACT THAT FOR ATTAINING ITS OBJEC T, THE ASSESSEE TRUST IS NOT GETTING ANY GRANTS FROM ANY GOVT. THE TRUST IS FULL Y DEPENDENT UPON DONATIONS AND SURPLUS GENERATED FROM HOSPITAL ACTIV ITIES FOR DOING CHARITABLE WORK. THE ACT DOES NOT EXPECT THE TRUSTE ES TO SELL THEIR PROPERTIES AND FEED THE CHARITY. HE ACCORDINGLY SU BMITTED THAT THE CHARGE LABELLED AGAINST THE ASSESSEE TRUST THAT IT IS RUNNING THE HOSPITAL ON COMMERCIAL BASIS AND IN VIOLATION OF THE PROVISI ONS OF SECTION 2[15] OF THE I.T. ACT 1961 IS DEVOID OF MERITS AND BAD IN LAW. 6.3 AS REGARDS THE ALLEGATION OF LD.CIT THAT GIVING DISCOUNTS AND CONCESSION IN BILLS TO FEW PATIENTS DOES NOT AMOUNT TO CHARITY HE SUBMITTED THAT THE TERM CHARITY IS NOT DEFINED IN THE I.T. ACT 1961. 9 THE ASSESSEE TRUST IS GOVERNED BY THE PROVISIONS OF THE MAHARASHTRA PUBLIC TRUSTS ACT [PREVIOUSLY KNOWN AS THE BOMBAY P UBLIC TRUSTS ACT 1950] REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE WRIT PETITION [PIL] NO.3132 OF 2004 DECIDED ON 17/0 8/2006 IN THE CASE OF SANJIV GAJANAN PUNALEKAR V/S STATE OF MAHARASHTR A AND OTHERS HE SUBMITTED THAT THE HONBLE COURT HAS FRAMED THE SCH EME FOR TREATMENT TO INDIGENT PATIENTS AND WEAKER SECTION PATIENTS FOR T HE PURPOSES OF SECTION 41AA OF THE BOMBAY PUBLIC TRUST ACT 1950. THE ASSES SEE TRUST IS COVERED UNDER THE SAID SCHEME AND IS UNDER LEGAL OB LIGATION TO COMPULSORILY SPEND CERTAIN AMOUNT FOR CHARITY AS PE R THE SAID SCHEME AND ALSO HAS TO RESERVE AND EARMARK 10% OF THE TOTA L NUMBER OF OPERATIONAL BEDS FOR INDIGENT PATIENTS AND PROVIDE MEDICAL TREATMENT TO THE INDIGENT PATIENTS FREE OF COST AND RESERVE AND EARMARK 10 % OF THE TOTAL NUMBER OF OPERATIONAL BEDS AT CONCESSIONAL RA TE TO THE WEAKER SECTION PATIENTS AS PER THE PROVISIONS OF THE SECTI ON 41AA OF THE B.P.T. ACT 1950. HE SUBMITTED THAT THE ASSESSEE TRUST IS UNDER AN OBLIGATION TO SUBMIT PERIODICAL STATEMENTS TO THE CHARITY COMMISS IONER ABOUT THE AMOUNTS SPENT ON CHARITY AS PER THE AFORESAID SCHEM E FRAMED BY THE HONBLE BOMBAY HIGH COURT. HE SUBMITTED THAT THE AM OUNT SPENT ON CHARITY AND OBJECTS OF THE TRUST IS DULY REFLECTED IN THE FINAL ACCOUNTS OF THE TRUST, THE COPIES OF WHICH ARE ALREADY FILED ON RECORDS. THEREFORE, WHEN THE ASSESSEE TRUST IS COMPLYING WITH THE STATU TORY OBLIGATIONS, IT IS INCORRECT AND FALSE TO SUGGEST THAT THE APPELLANT T RUST IS NOT SPENDING ANY AMOUNT ON CHARITY AND GIVING ONLY DISCOUNTS AND CON CESSIONS IN FEW BILLS WHICH IS NOT A CHARITY. 10 6.4 AS REGARDS THE ALLEGATION THAT THERE IS CONTRAV ENTION OF PROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT 1961 WHICH WARR ANTS CANCELLATION OF REGISTRATION GRANTED TO THE TRUST U/S 12 AA OF THE I.T. ACT 1961, HE SUBMITTED THAT THERE ARE NO ALLEGED VIOLATIONS OF S ECTION 13(1)(C) OF THE I.T. ACT 1961. WITHOUT PREJUDICE TO ABOVE AND BY WA Y OF AN ALTERNATE SUBMISSION, HE SUBMITTED THAT UNDER THE PROVISIONS OF SECTION 12AA(3) OF THE I.T. ACT 1961, THE POWERS OF THE CIT ARE CON FINED TO ENQUIRE ABOUT THE ACTIVITIES OF THE TRUST AND ITS GENUINENE SS. THE C.I.T. CANNOT EXAMINE WHETHER THERE IS ANY VIOLATION OF THE PROVI SIONS OF SECTION 13(1)(C) OF THE I.T. ACT 1961. IN SUPPORT OF THIS CONTENTION HE RELIED ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN T HE CASE OF MAHARASHTRA ACADEMY OF ENGINEERING & EDUCATIONAL RE SEARCH [MAEER] V/S C.I.T. REPORTED IN 133 T.T.J. PAGE 706 6.5 AS REGARDS VARIOUS ALLEGED INSTANCES CITED BY T HE LEARNED C.I.T. IN SUPPORT OF ALLEGED VIOLATIONS OF THE PROVISIONS OF SECTION 13(1) (C) AND 11(5) OF THE I.T. ACT 1961, THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO CLAUSE 31 OF THE TRUST DEED AT PAGE 104 OF THE PAPE R BOOK WHICH READS AS UNDER : ANY TRUSTEE BEING A DOCTOR, LAWYER, ACCOUNTANT OR OTHER PERSONS ENGAGED IN ANY PROFESSION OR BUSINESS SHALL BE ENTITLED TO BE PAID ALL THE USUAL PROFESSIONAL FEES OR PROPER C HARGES FOR THE TIME EXPENDED, BUSINESS TRANSACTED AND ACTS DONE BY HIM OR BY ANY OF HIS PARTNERS, IN CONNECTION WITH THE TRUST T HEREOF INCLUDING ACTS WHICH A TRUSTEE NOT BEING IN ANY PROFESSION OR BUSINESS COULD HAVE DONE PERSONALLY INSPITE OF THE FACT THAT HE SHALL THEN BE A TRUSTEE OF THESE PRESENTS. REFERRING TO THE ABOVE, HE SUBMITTED THAT SINCE TH E CIT HAS GIVEN A SPECIFIC FINDING ABOUT THE ALLEGED VIOLATION OF THE PROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT 1961, THE ASSESSEE HAS RAI SED GROUND OF APPEAL 11 NOS.2 TO 4, HE SUBMITTED THAT IN ORDER TO AVOID MUL TIPLICITY OF PROCEEDINGS THE SAME SHOULD BE ADJUDICATED AS THE A PPEALS FOR A.Y.2004-05,A.Y.2005-06 AND A.Y.2008-09 ARE PENDING BEFORE LEARNED C.I.T.(A) KOLHAPUR WHEREIN IDENTICAL ISSUES ARE INVOLVED. HE SUBMITTED THAT THE PAYMENT OF PROFESSIONAL FEES OF RS.33,36,000/-, SALARY OF RS.9,54,881/-, UTILIZATION CHARGE OF RS.1 ,60,250/- AND BUILDING RENT OF RS.8,40,000/- TO THE TRUSTEES DURING A.Y. 2 008-09 DO NOT VIOLATE THE PROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT, 1961. 6.6 AS REGARDS THE POWERS OF CHARITY COMMISSIONER UNDER THE PROVISIONS OF THE MAHARASHTRA PUBLIC TRUST ACT IN C ASE OF MIS- UTILIZATION OF FUNDS BY THE TRUSTEES FOR THEIR PERS ONAL BENEFITS, HE SUBMITTED THAT VIDE SECTIONS 34, 36, 36A, 37,38,39, 40,41 OF THE MAHARASHTRA PUBLIC TRUST ACT, ADEQUATE SAFEGUARDS A RE PROVIDED FOR THE PROTECTION AND DUE AND PROPER UTILIZATION OF TRUST FUNDS. DURING ALL THESE YEARS THE CHARITY COMMISSIONER HAS NEVER RAISED ANY OBJECTION THAT THE TRUSTEES HAVE TAKEN UNDUE MONETARY ADVANTAGE OF THE IR POSITION. THE DECISION OF HON. BOMBAY HIGH COURT IN THE CASE REPO RTED IN 327 ITR PAGE 185 SUPPORTS THE CONTENTION THAT THE DECISION OF THE CHARITY COMMISSIONER ON THE FINANCIAL AFFAIRS OF THE TRUST IS BINDING ON THE TAX AUTHORITIES AND HAS EVIDENTIARY VALUE. HE ACCORDIN GLY SUBMITTED THAT THE ORDER OF LD.CIT CANCELLING THE REGISTRATION GRA NTED EARLIER U/S.12AA BE SET-ASIDE. 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSE E, IN THE INSTANT CASE, WAS RUNNING THE HOSPITAL ON A COMMERCIAL BASIS. IT IS CHARGING FIXED 12 AMOUNT OF FEE DEPENDING ON THE TREATMENT OF PATIENT S. THE ASSESSEE HAS FAILED TO SUBSTANTIATE WITH EVIDENCE THAT THE DOMIN ANT PART OF THE RUNNING OF THE HOSPITAL IS CHARITY. ON THE CONTRAR Y THE TRUSTEES WHO CONTROL THE TRUST ALONG WITH FAMILY MEMBERS ARE CHA RGING FOR EVERYTHING PROVIDED BY THEM. THE TRUST HAS EVEN SPONSORED THE PG MEDICAL STUDY OF THE SON AND DAUGHTER-IN-LAW OF THE TRUSTEES. RE LYING ON VARIOUS DECISIONS HE SUBMITTED THAT THE CIT WAS JUSTIFIED I N CANCELLING THE REGISTRATION GRANTED EARLIER U/S.12A OF THE I.T. AC T, 1961. HE ALSO RELIED ON THE FOLLOWING DECISIONS : 1. JACOB VS. TAHSILDAR (1989) 176 ITR 243 (KER)] 2. INDIAN CHAMBER OF COMMERCE VS. CIT 1975 CTR (SC) 271 : (1975) 101 ITR 796 (SC) 3. SOLE TRUSTEE, LOKA SHIKSHANA TRUST V. CIT [1975] 10 1 ITR 234 (SC). 4. SRI AUROBINDO ANNAI TRUST V.CIT-L, MADURAI MT AP PEAL NOS. 1773 AND 1774(MAD.)/2009 ORDER DATED 18-03-2011 (IT AT CHENNAI BENCH) 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND PERUSED THE RECORDS. WE HAVE ALSO CONSIDERED T HE VARIOUS DECISIONS RELIED ON BY BOTH THE SIDES. WE FIND IN THE INSTAN T CASE THE ASSESSEE TRUST WAS GRANTED REGISTRATION U/S.12A OF THE I.T. ACT BY THE CIT, KOLHAPUR VIDE CERTIFICATE NO. KOP/HQ.III/217-P-123/ 62/247/2002-03, ON 03-12-2002. WE FIND THE LD.CIT CANCELLED THE RE GISTRATION GRANTED EARLIER ON THE GROUND THAT THE ASSESSEE TRUST IS RU NNING THE HOSPITAL ON COMMERCIAL BASIS WITH PROFIT MOTIVE AND IS TAKING U NDUE ADVANTAGE OF TAX CONCESSION GIVEN BY THE STATUTE TO THE INSTITUT IONS ENGAGED IN GENUINE CHARITABLE ACTIVITIES. FURTHER, ACCORDING TO LD.CIT, THE ASSESSEE TRUST HAS VIOLATED THE PROVISIONS OF SECTION 13(1)( C) AND 11(5) AND THEREFORE NOT ENTITLED TO REGISTRATION U/S.12A OF T HE I.T. ACT. 13 8.1 AS PER THE PROVISIONS OF SECTION 12AA(3) THE CO MMISSIONER CAN CANCEL THE REGISTRATION GRANTED EARLIER IF HE /SHE IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GEN UINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE T RUST OR THE INSTITUTION. IN THE INSTANT CASE, THERE IS NO SUCH FINDING GIVEN BY THE LD.CIT THAT THE ACTIVITIES OF THE TRUST ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. WHILE GR ANTING REGISTRATION U/S.12A ON 03-12-2002, THE THEN CIT, KOLHAPUR HAS G ONE THROUGH THE OBJECTS OF THE TRUST AND THE GENUINENESS OF THE ACT IVITIES. THERE IS NO CHANGE IN THE OBJECTS OF THE TRUST IN THE MEANTIME. THE LD.CIT HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE ACT IVITIES OF THE TRUST ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OB JECTS OF THE TRUST OR THE INSTITUTION. THEREFORE, WE DO NOT FIND ANY REA SON AS TO HOW THE CIT CAN CANCEL THE REGISTRATION GRANTED EARLIER IN CONT RAVENTION OF THE PROVISIONS OF SECTION 12AA(3) OF THE I.T. ACT. ONC E REGISTRATION IS GRANTED TO THE TRUST/INSTITUTION AND IF SUBSEQUENTL Y THE AO FINDS DURING THE ASSESSMENT PROCEEDINGS THAT THE INCOME OF THE C HARITABLE TRUST IS APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF T HE PERSONS REFERRED TO IN SECTION 13(3), THEN HE HAS AMPLE POWER TO DENY EXEM PTION TO THAT EXTENT U/S.13(1)(C) OF THE I.T. ACT. THIS VIEW OF OURS FI NDS SUPPORT FROM THE DECISION OF JODHPUR BENCH OF ITAT IN THE CASE OF MO DERN DEFENCE SHIKSHAN SANSTHAN VS. CIT REPORTED IN 108 TTJ (JOD. ) 732. 8.2 WE FIND THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF HIMACHAL PRADESH ENVIRONMENT PROTECTION AND POLLUTI ON CONTROL BOARD VS. CIT REPORTED IN 125 TTJ (CHD.) 98 WHICH HAS BEE N RELIED ON BY THE PUNE BENCH OF THE ITAT IN THE CASE OF MAHARASHTRA A CADEMY OF 14 ENGINEERING AS EDUCATIONAL BOARD (MAEER) (SUPRA) HA S OBSERVED AS UNDER : 19. IN ANY EVENT, AS A PLAIN READING OF S. 12AA(3) W OULD INDICATE THAT A REGISTRATION GRANTED UNDER S. 12AA CAN ONLY BE WITHDR AWN WHEN THE CIT IS SATISFIED THAT (A) THE ACTIVITIES OF THE TRUST OR TH E INSTITUTION ARE NOT 'GENUINE'; OR (B) THE ACTIVITIES OF THE ASSESSEE ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR THE I NSTITUTION. THERE CANNOT BE ANY OTHER LEGALLY SUSTAINABLE REASON FOR CAN CELLING OR WITHDRAWING THE REGISTRATION GRANTED UNDER S. 12AA. BY NO STRETCH OF LOGIC, THE ACTIVITIES OF THE ASSESSEE CAN BE SAID TO BE N OT GENUINE AND THE ASSESSEE IS ADMITTEDLY PURSUING THE OBJECTS FOR WHICH IT WAS ESTABLISHED. WHEN THE ASSESSEE IS ENGAGED IN BONA FIDE ACTIVITIES, W ITH THE FRAMEWORK OF LAW, TO PURSUE ITS OBJECTIVES, IT CANNOT BE SAID THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT GENUINE. LEARNED CIT HAS ALSO NOT BROUGHT ON RECORD ANY MATERIAL TO DEMONSTRATE ACTIVI TIES OF THE ASSESSEE ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH T HE OBJECTS OF THE TRUST OR THE INSTITUTION. UNDER THESE CIRCUMSTANCES, THE WITHDRAWAL OF REGISTRATION GRANTED UNDER S. 12AA CANNOT BE SUSTAINED IN LAW. LEARNED CIT HAS EXTENSIVELY REFERRED TO AS TO WHY THE ASSESSEE IS N OT ELIGIBLE FOR EXEMPTION UNDER S. 11 AS THE ACTIVITIES OF THE ASSESSEE CA NNOT BE SAID TO BE FOR 'CHARITABLE PURPOSES' DEFINED UNDER S. 2(15), B UT THEN THIS ASPECT OF THE MATTER IS RELEVANT FOR THE ASSESSMENT PROCEEDINGS AND NOT IN THE CONTEXT OF EXERCISE OF CIT'S POWERS UNDER S. 12AA (3). THE IMPUGNED ORDER PASSED BY THE LEARNED CIT IS THUS VITIATED IN LAW ON THIS COUNT AS WELL. 8.3 SIMILAR VIEW HAS BEEN TAKEN BY VARIOUS OTHER DE CISIONS WHICH ARE PLACED IN THE PAPER BOOK. IN VIEW OF THE DISCUSSIO N ABOVE, WE HOLD THAT THE LD.CIT IS NOT JUSTIFIED IN CANCELLING THE REGIS TRATION GRANTED EARLIER TO THE ASSESSEE TRUST U/S.12A OF THE I.T. ACT, 1961 . 9. SINCE THE ASSESSEE SUCCEEDS ON THIS LEGAL ISSUE, THE GROUNDS RAISED BY THE ASSESSEE IN GROUND OF APPEAL NO. 2 TO 4 BECO ME ACADEMIC IN NATURE AND THEREFORE, DO NOT REQUIRE ADJUDICATION. IN ANY CASE, THESE MATTERS ARE SUBJECT MATTER OF SCRUTINY ASSESSMENT P ROCEEDINGS FOR A.YRS. 2004-05, 2005-06 AND 2008-09 BEFORE CIT(A). THEREFORE, ANY DECISION ON MERIT OF SUCH ISSUES WOULD RESULT IN PR EJUDGING THE OUTCOME OF THOSE APPEALS WHICH ARE SEPARATE PROCEEDINGS. T HEREFORE, THOSE GROUNDS BECOME INFRUCTUOUS. 15 10. IN GROUND APPEAL NO.7 THE ASSESSEE HAS REQUEST ED THE TRIBUNAL TO AWARD COST U/S.254(2B) OF THE I.T. ACT. 11. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT DUE TO CANCELLATION OF THE ASSESSEE TRUST, HUGE TAX DEMAND RUNNING INTO LAKHS OF RUPEES ARE RAISED AGAINST THE TRUST. THE BANK ACCO UNTS OF THE ASSESSEE TRUST ARE UNDER ATTACHMENT AND THE DEPARTMENT HAS M ADE THE WORKING OF THE ASSESSEE TRUST AS AN IMPOSSIBILITY. HE SUBMITT ED THAT THE ASSESSEE TRUST WAS THE ONLY TRUST OF ITS KIND IN THE DISTRIC T OF RATNAGIRI GIVING MEDICAL HELP TO THE POOR PATIENTS. THERE IS NO OTH ER BETTER EQUIPPED HOSPITAL IN THE AREA. THE ILLEGAL ACTION OF THE DE PARTMENT BY ABUSING JUDICIAL POWERS HAS CAUSED SERIOUS PREJUDICE AND IN JUSTICE TO THE ASSESSEE TRUST AS WRONG SIGNALS ARE TRANSMITTED IN THE SOCIETY THAT THE ASSESSEE TRUST IS A BIG FRAUD. IT HAS ADVERSELY AF FECTED THE REPUTATION OF THE TRUST AS WELL AS THE TRUSTEES WHO ARE EMINENT M EDICAL PRACTITIONERS. HE SUBMITTED THAT THERE EXISTS AN UNPLEASANT SOCIAL ENVIRONMENT IN RATNAGIRI WHICH IS A SMALL DISTRICT PLACE. SINCE T HE TRUSTEES ARE FROM THE MINORITY COMMUNITY, THE IMPUGNED ORDERS OF THE DEPA RTMENT HAVE EMBARRASSED THE TRUSTEES AND THE TRUST. REFERRING TO THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. RAJA MOHAMMED AMIR MOHAMMAD KHAN (COPY ENCLOSED) AND IN THE CASE OF URBAN IMPROVEMENT TRUST, BIKANER VS. MOHANLAL REPOR TED IN 2010 (001-SCC-0512 (SC) AND THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CHARANJILAL TAK SHYAM PARWANI & PARTY VS. UNION OF INDIA REPORTED IN 252 ITR 333 HE REQUESTED THAT COST OF THE APPEAL MAY PLEASE BE AWARDED TO THE ASSESSEE TRUST WHICH W ILL ACT AS DETERRENT 16 FOR ILLEGAL AND MALAFIDE ORDERS PASSED BY THE AUTHO RITIES CAUSING IRREPARABLE LOSS TO THE ASSESSEE AS WELL AS TO THE SOCIETY AT LARGE. 12. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND STRONGLY OPPOSED THE ARGUMENT OF THE LD. COUNSEL FOR THE ASS ESSEE. HE SUBMITTED THAT THE CIT-II, KOLHAPUR HAS PASSED A DE TAILED SPEAKING ORDER U/S.12AA(3) OF THE I.T. ACT IN THE COURSE OF DISCHARGING OF HER SOVEREIGN DUTY AS CIT. HE SUBMITTED THAT IN THIS C ASE THERE IS NO ELEMENT WHICH DISTINGUISHES ACTIVITIES OF COMMERCIA L RUN HOSPITAL WITH THIS FOUNDATION CLAIMED TO BE MEDICAL RELIEF AT LAR GE. REFERRING TO THE ORDER OF THE CIT HE REITERATED THAT THE ASSESSEE TR UST IS A PURELY COMMERCIAL ESTABLISHMENT WITH DOMINANT OBJECT BEING CHARITY OF SELF AND THEREFORE THE CIT WAS JUSTIFIED IN CANCELLING T HE REGISTRATION GRANTED EARLIER. HE FURTHER SUBMITTED THAT SINCE THE MATTE R UNDER CONSIDERATION IS QUASI-JUDICIAL AND HAS NOT REACHED FINALITY, THE REFORE, CALLING THE ORDER AS ARBITRARY, PERVERSE AND MALICIOUS WOULD AMOUNT T O PRE-JUDGING THE OUTCOME OF THE APPEAL. THERE IS NOTHING ON RECORD TO DEMONSTRATE ANY MALAFIDE ON THE PART OF THE CIT. FURTHER, THERE IS NOTHING ON RECORD THAT THE ASSESSEE TRUST OR THE TRUSTEES HAVE BEEN HARASS ED BECAUSE OF BELONGING TO THE MINORITY COMMUNITY. HE SUBMITTED THAT IT IS BEYOND COMPREHENSION TO GIVE COLOUR OF RELIGION TO TAX PRO CEEDINGS. SUCH UNSUBSTANTIATED AND BASELESS ALLEGATIONS REFLECT BI AS ON THE PART OF THE ASSESSEE AND SUCH ALLEGATIONS DESERVE TO BE CONDEMN ED AND REJECTED. HE ACCORDINGLY SUBMITTED THAT THE GROUND RAISED BY THE ASSESSEE TO AWARD COST SHOULD BE DISMISSED WITH A WARNING TO TH E ASSESSEE NOT TO RAISE SUCH EXTRANEOUS AND BASELESS ALLEGATIONS IN O RDER TO MAINTAIN DECORUM OF THE PROCEEDINGS BEFORE THE HONBLE TRIBU NAL. 17 13. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. IN OUR OPINION THE LD.CIT HAS PASSED AN ORDER U/S.1 2AA(3) OF THE ACT DURING THE COURSE OF DISCHARGE OF HER DUTY AS CIT. WHILE DISCHARGING HER DUTY, HER ACTION MIGHT HAVE CAUSED SOME HARDS HIP TO THE ASSESSEE DUE TO ERROR OF JUDGEMENT BUT THAT IN OUR OPINION D OES NOT WARRANT LEVY OF COST ON THE DEPARTMENT. THE HONBLE SUPREME COU RT IN THE CASE OF POORAN MAL VS. DIRECTOR OF INSPECTION (INVESTIGATIO N), INCOME TAX, NEW DELHI AND OTHERS REPORTED IN 93 ITR 505, WHILE ADJUDICATING RELIEF CLAIMED IN RESPECT OF ACTION TAKEN U/S.132 OF THE I .T. ACT HAS OBSERVED AS UNDER (AT PAGE 518 AND 519) : WE ARE, THEREFORE, TO SEE WHAT ARE THE INBUILT SAFE GUARDS IN SECTION 132 OF THE INCOME TAX ACT. IN THE FIRST PLACE, IT MUST BE NOTED THAT THE POWER TO ORDER SEARCH AND SEIZURE IS VESTED IN THE HIGHEST OF FICERS OF THE DEPARTMENT. SECONDLY, THE EXERCISE OF THIS POWER CAN ONLY FOLLOW A REASONABLE BELIEF ENTERTAINED BY SUCH OFFICER THAT AN Y OF THE THREE CONDITIONS MENTIONED IN SECTION 132(1) (A), (B) AND ( C) EXISTS. IN THIS CONNECTION IT MAY BE FURTHER POINTED OUT THAT UNDER SUB RULE (2) OF RULE 112, THE DIRECTOR OF INSPECTION OR THE COMMISSIONER, AS THE CASE MAY BE, HAS TO RECORD HIS REASONS BEFORE THE AUTHORISATION IS ISSU ED TO THE OFFICERS MENTIONED IN SUB SECTION (1). THIRDLY, THE AUTHORISATION FOR THE SEARCH CANNOT BE IN FAVOUR OF ANY OFFICER BELOW THE RANK OF AN INCOME TAX OFFICER. FOURTHLY, THE AUTHORISATION IS FOR SPECI FIC PURPOSES ENUMERATED IN (I) TO (V) IN SUB SECTION (1), ALL OF W HICH ARE STRICTLY LIMITED TO THE OBJECT OF THE SEARCH. FIFTHLY, WHEN M ONEY, BULLION, ETC., IS SEIZED THE INCOME TAX OFFICER IS TO MAKE A SUMMARY ENQ UIRY WITH A VIEW TO DETERMINE HOW MUCH OF WHAT IS SEIZED WILL BE RETAI NED BY HIM TO COVER THE ESTIMATED TAX LIABILITY AND HOW MUCH WILL HAVE TO BE RETURNED FORTHWITH. THE OBJECT OF THE ENQUIRY UNDER SUB SECTIO N (5) IS TO REDUCE THE INCONVENIENCE TO THE ASSESSEE AS MUCH AS POSSIBLE SO THA T WITHIN A REASONABLE TIME WHAT IS ESTIMATED DUE TO THE GOVERNMEN T MAY BE RETAINED AND WHAT SHOULD BE RETURNED TO THE ASSESSEE MAY BE IMMEDIATELY RETURNED TO HIM. EVEN WITH REGARD TO TH E BOOKS OF ACCOUNT AND DOCUMENTS SEIZED, THEIR RETURN IS GUARANTEED AFTER A REASONABLE TIME. IN THE MEANTIME THE PERSON FROM WHOSE CUSTODY TH EY ARE SEIZED IS PERMITTED TO MAKE COPIES AND TAKE EXTRACTS. SIXTHLY, WHERE MONEY, BULLION, ETC., IS SEIZED, IT CAN ALSO BE IMMEDIATELY R ETURNED TO THE PERSON CONCERNED AFTER HE MAKES APPROPRIATE PROVISION FOR TH E PAYMENT OF THE ESTIMATED TAX DUES UNDER SUB SECTION (5), AND, LASTLY, A ND THIS IS MOST IMPORTANT, THE PROVISIONS OF THE CRIMINAL PROCEDURE C ODE RELATING TO SEARCH AND SEIZURE APPLY, AS FAR AS THEY MAY BE, TO ALL SEARCHES AND SEIZURES UNDER SECTION 132. RULE 112 PROVIDES FOR THE A CTUAL SEARCH AND SEIZURE BEING MADE AFTER OBSERVING NORMAL DECENCIES OF BEHAVIOUR. THE PERSON IN CHARGE OF THE PREMISES SEARCHED IS IMMEDIATELY GIVEN A COPY OF THE LIST OF ARTICLES SEIZED. ONE COPY IS FORWARDED TO THE AUTHORISING OFFICER. PROVISION FOR THE SAFE CUSTODY OF THE ARTICLE S AFTER SEIZURE IS ALSO MADE IN RULE 112. IN OUR OPINION, THE SAFEGUARDS ARE ADEQUATE TO RENDER THE PROVISIONS OF SEARCH AND SEIZURE AS LESS ONEROUS AND RE STRICTIVE AS IS 18 POSSIBLE UNDER THE CIRCUMSTANCES. THE PROVISIONS, THEREFO RE, RELATING TO SEARCH AND SEIZURE IN SECTION 132 AND RULE 112 CANNOT BE REGARDED AS VIOLATIVE OF ARTICLES 19(1)(F) AND (G). A MINOR POINT WAS URGED IN SUPPORT OF THE ABOVE CONTE NTION THAT SECTION 132 CONTAINS PROVISIONS WHICH ARE LIKELY TO AFFECT EVE N INNOCENT PERSONS. FOR EXAMPLE, IT WAS SUBMITTED, AN INNOCENT PER SON WHO IS MERELY IN CUSTODY OF CASH, BULLION OR OTHER VALUABLES, ETC., NOT KNOWING THAT IT WAS CONCEALED INCOME IS LIKELY TO BE HARASSED B Y A RAID FOR THE PURPOSES OF SEARCH AND SEIZURE. THAT CANNOT BE HELPED. SINCE THE OBJECT OF THE SEARCH IS TO GET AT CONCEALED INCOMES, ANY PERSO N, WHO IS IN CUSTODY WITHOUT ENQUIRING ABOUT ITS TRUE NATURE, EXPO SES HIMSELF TO SEARCH. SUB SECTION (4) OF SECTION 132 SHOWS THE WAY HO W SUCH AN INNOCENT PERSON CAN MAKE THE IMPACT OF THE SEARCH ON HIM BEARABLE. ALL THAT HE HAS TO DO IS TO TELL THE TRUE FACTS TO THE SEAR CHING OFFICER EXPLAINING ON WHOSE BEHALF HE HELD THE CUSTODY OF THE VALUABLES. IT WILL BE THEN FOR THE INCOME TAX OFFICER TO ASCERTAIN THE PERSON CONCERNED UNDER SUB SECTION (5). 13.1 IN THAT CASE, IT WAS OBSERVED THAT IT CAUSES S ERIOUS INVASION OF THE PRIVACY OF A PERSON. STILL THE HONBLE COURT HELD THAT EVEN THOUGH THE INNOCENT IS LIKELY TO BE HARASSED BY A RAID FOR THE PURPOSE OF SEARCH AND SEIZURE THAT CANNOT BE HELPED. IN THE INSTANT CASE , THERE IS NO SUCH ACTION OF SEARCH AND SEIZURE WHICH CAUSES SERIOUS I NVASION IN THE PRIVACY OF THE PERSON. THE COMMISSIONER WAS DISCHA RGING HER QUASI- JUDICIAL DUTY. FURTHER, THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ACTION OF THE CIT WAS MALAFIDE. THEREFORE, WE DO N OT FIND ANY MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE TO AWARD COST FOR THE ACTION OF THE COMMISSIONER CANCELLING THE REGISTRAT ION GRANTED EARLIER U/S.12AA OF THE ACT. 13.2 THE TWO SUPREME COURT DECISIONS RELIED ON BY T HE LD. COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE AND NOT APPLIC ABLE TO THE FACTS OF THE CASE. THOSE CASES WERE RELATED TO PROPERTY DISPUTE FOR WHICH COST WAS AWARDED FOR DERELICTION OF DUTY BY GOVT. OFFICERS I N THEIR ADMINISTRATIVE CAPACITY. HOWEVER, IN THE INSTANT CASE THE OFFICER WAS DISCHARGING HER DUTY IN A QUASI-JUDICIAL MATTER. SO FAR AS THE DEC ISION OF THE HONBLE 19 RAJASTHAN HIGH COURT IN THE CASE OF CHARANJILAL TAK SHYAM PARWANI & PARTY (SUPRA) IS CONCERNED, THERE ALSO FACTS WERE D IFFERENT. IN THAT CASE, THE RESPONDENT ITO ISSUED ILLEGAL NOTICE TO THE PET ITIONER AND LATER WITHDREW THE SAME. UNDER THESE CIRCUMSTANCES, THE COURT DIRECTED THE RESPONDENT TO PAY FOR THE ADVOCATE FEE AND LITIGATI ON EXPENSES INCURRED BY THE PETITIONER IN PROSECUTING WRIT PROCEEDINGS. HOWEVER, IN THE INSTANT CASE, THERE IS NO PRIMA-FACIE ILLEGALITY IN ISSUING THE NOTICE. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE TO AWARD COST. THE GROUND RAISED BY T HE ASSESSEE IS ACCORDINGLY DISMISSED. ITA NO.1423/PN/2012 14. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE IMPUGNED ORDER PASSED BY THE LEARNED C.I.T. BEING ARB ITRARY, PERVERSE AND PATENTLY ILLEGAL, BAD IN LAW AND LEGALLY UNSUSTAI NABLE THE SAME MAY PLEASE BE VACATED AND THE APPROVAL U/S 80G [5][VI] OF THE I.T. ACT 1961 GRANTED TO THE APPELLANT TRUST VIDE ORDER DT.31/12/2 009 PASSED BY THE LEARNED C.I.T.II KOLHAPUR MAY PLEASE BE RESTORED. 2. THE APPELLANT MAY PLEASE BE AWARDED COST U/S 254 [2 B] OF THE I.T.ACT 1961 FOR ARBITRARY, PERVERSE AND MALICIOUS EX ERCISE OF JUDICIAL POWERS BY THE LEARNED C.I.T. IN PASSING THE IMPUGNED ORDER, WHICH HAS TARNISHED THE IMAGE OF THE APPELLANT TRUST AND ITS TRU STEES IN THE MINDS OF COMMON PUBLIC AT RATNAGIRI AND THE NEARBY AREA W HEREIN THE APPELLANT TRUST IS WELL KNOWN FOR ITS MAGNIFICENT CHAR ITABLE ACTIVITIES IN THE FIELD OF MEDICAL TREATMENT TO THE POOR AND NEED Y PERSONS. 3. THE APPELLANT CRAVES THE PERMISSION TO ADD, AMEND, MODIFY, ALTER, REVISE, SUBSTITUTE, DELETE ANY OR ALL GROUNDS OF APPEAL, IF DEEMED NECESSARY AT THE TIME OF HEARING OF THE APPEAL. 14.1 AFTER HEARING BOTH THE SIDES, WE FIND THE TRUS T WAS GRANTED APPROVAL U/S.80G(5)(VI) OF THE I.T. ACT. ON 30-12-2 009 FOR THE PERIOD FROM 23-02-2009 TO 31-03-2011 AND VALID IN PERPETUI TY UNLESS SPECIFICALLY WITHDRAWN IN VIEW OF BOARDS CIRCULAR NO.07/2010 ORDER DATED 27-10-2010. WE FIND THE LD.CIT SUBSEQUENTLY WITHDREW THE 20 APPROVAL GRANTED U/S. 80G(5)(VI) OF THE I.T. ACT ON THE GROUND THAT THE REGISTRATION GRANTED EARLIER U/S.12AA HAS BEEN CANC ELLED BY HER. WE HAVE ALREADY RESTORED THE REGISTRATION U/S.12A OF T HE I.T. ACT GRANTED EARLIER BY SETTING ASIDE THE ORDER OF THE CIT IN TH E PRECEDING PARAGRAPHS. THEREFORE, WE RESTORE THE APPROVAL GRANTED EARLIER U/S. 80G(5)(VI) OF THE I.T. ACT TO THE ASSESSEE TRUST. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 15. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED IN THE TERMS AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 31-07-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 31 ST JULY, 2014 RK/SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT-II, KOLHAPUR 4. THE D.R, B PUNE BENCH 5. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE