V. C. Charantimath, Chairman, V. Commissioner of Income Tax, Belgaum

ITA 150/PAN/2010

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9310 (ITAT-PANAJI)
• Duration Of Justice: 9 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-10-2019
• Assessment Year: misc
• Appeal Filed On: 31-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80G; 12AA; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI (AT E-COURT, PUNE) BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.150/PAN/2010 / ASSESSMENT YEARS : 2008-09 & 2009-10 V.C. CHARANTIMATH, CHAIRMAN VIJAYAMAHANTESH VIDYAVARDHAK SANGHA, HUNGUND 587118 DIST. BAGALKOT KARNATAKA PAN : AAATV7701M VS. CIT, BELGAUM (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 28-03-2010 PASSED BY THE COMMISSIONER OF INCOME- TAX, BELGAUM REJECTING THE ASSESSEES APPLICATION FILED FOR RECOGN ITION U/S. 80G OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED TH E ACT). APPELLANT BY SHRI SANDEEP CHALAPATHY RESPONDENT BY SHRI TULJAPPA KALBURGI DATE OF HEARING 04-10-2019 DATE OF PRONOUNCEMENT 04-10-2019 ITA NO.150/PAN/2010 V.C. CHARANTIMATH 2 2. IT IS A SECOND ROUND OF PROCEEDINGS BEFORE THE TRIBUNAL. EARLIER THE TRIBUNAL HEARD AND DISPOSED OFF THE APPEAL. ON THE REVENUE PREFERRING APPEAL AGAINST THE ORDER OF THE TRIBUN AL, THE HONBLE KARNATAKA HIGH COURT HAS RESTORED THE MATTER BY OBSERVING THAT THE TRIBUNAL DID NOT ADVERT TO VARIOUS ASPECTS ON FACTUAL MATRICES WHICH RESULTED IN REJECTION OF APPLICATION BY TH E COMMISSIONER ON MERITS. IT IS PURSUANT TO SUCH RESTORATION THA T THE INSTANT PROCEEDINGS HAVE TAKEN PLACE. 3. THE FACTUAL PANORAMA IS THAT THE ASSESSEE FILED APPLICATION U/S.80G OF THE ACT IN THE PRESCRIBED FORM ON 26-02-2009. THE LD. CIT ON FIRST PAGE OF THE IMPUGNED ORDER HELD THAT HE O UGHT TO HAVE PASSED THE ORDER WITHIN A PERIOD OF SIX MONTHS FROM TH E DATE OF APPLICATION. HOWEVER, NOTING THAT THE DELAY WAS CAUSE D BY THE ASSESSEE, IT WAS OPINED THAT HIS ORDER, HAVING BEE N PASSED ON 28-03-2010, WAS WITHIN TIME. 4. THEREAFTER, HE CONSIDERED THE APPLICATION ON MERITS AN D NOTICED SEVERAL INFIRMITIES IN THE MAINTENANCE OF ACCOUNTS BY THE ASSESSEE AND OTHER RELATED ISSUES. HE FURTHER TOOK NOTE O F THE FACT THAT THE GRANT RECEIVED BY THE ASSESSEE WAS MISUTILIZED FOR TH E PURPOSE OTHER THAN THAT OF THE PROJECT, THEREBY HITTING SECTIO N ITA NO.150/PAN/2010 V.C. CHARANTIMATH 3 11(1) OF THE ACT. HE FURTHER OBSERVED FROM THE AUDIT RE PORT THAT THERE WERE SEVERAL IRREGULARITIES REPORTED BY THE AUDITOR. H E STILL FURTHER NOTICED THAT THE ASSESSEE GAVE HUGE LOANS TO CER TAIN PERSONS/CONCERNS REFERRED TO IN SECTION 13(3)(CC) OF THE ACT, THEREBY HOLDING THAT THE ASSESSEES CASE FELL U/S.13(3)(E) O F THE ACT. ONCE THE SAID SECTION WAS ATTRACTED, THE LD. CIT HELD TH AT THE ASSESSEE WOULD NOT BE ELIGIBLE FOR EXEMPTION U/S.11 AND HENCE APPLICATION FOR EXEMPTION U/S.80G WOULD NOT STAND. H E, THEREFORE, REJECTED THE ASSESSEES APPLICATION. 5. THE MATTER WAS BROUGHT BY THE ASSESSEE BEFORE THE TRIBUNAL. VIDE ORDER DATED 09-05-2011, THE TRIBUNAL IN ITA NO.150/PNJ/2010 HELD IN PARA 15 THAT THE CIT OUGHT TO HAVE DISPOSED OF THE ASSESSEES APPLICATION. THEREAFTER, IT EXAM INED THAT THE DELAY WAS CAUSED BY THE ASSESSEE FOR A MAXIMUM PERIOD OF 19 DAYS AND IF SUCH A PERIOD OF 19 DAYS WAS CONSIDE RED AS ATTRIBUTABLE TO THE ASSESSEE, THEN THE ORDER OUGHT TO HAVE BEE N PASSED BY 14-09-2009, BEING, A PERIOD OF SIX MONTHS FR OM THE DATE OF FILING OF APPLICATION PLUS DELAY OF 19 DAYS. AS THE CIT ACTUALLY PASSED THE ORDER ON 28-03-2010, THE TRIBUNAL HELD THAT THE SAME WAS BEYOND THE PRESCRIBED PERIOD UNDER RULE 1 1AA OF ITA NO.150/PAN/2010 V.C. CHARANTIMATH 4 THE I.T. RULES AND AS SUCH THE CERTIFICATE U/S.80G(5) IS DEE MED TO HAVE BEEN GRANTED TO THE ASSESSEE. 6. THEN FROM PARA 16 ONWARDS, THE TRIBUNAL DEALT WITH THE ISSUE ON MERITS AND HELD THAT THE CIT OUGHT TO HAVE GRANTED REGISTRATION TO THE ASSESSEE U/S.80G THEREBY ALLOWING THE ASSESSEES APPEAL. 7. THE REVENUE APPROACHED THE HONBLE HIGH COURT RA ISING THE FOLLOWING QUESTIONS OF LAW, WHICH WERE ADMITTED ON 10-12- 2012: 1. WHETHER THE TRIBUNAL IS CORRECT IN LAW AND FACT S, HOLDING THAT THE RESPONDENT ASSESSEE SOCIETYS ACTION IN MA INTAINING SEPARATE ACCOUNT IN RESPECT OF VERNACULAR PROJECT W ITHOUT BRINING INTO SOCIETYS ACCOUNT WHICH IS MANDATORY IN VIEW O F PROVISIONS OF SECTION 11 THAT ASSESSEE SHOULD MAINTAIN BOOKS OF A CCOUNT IN RESPECT OF GRANTS, INCOME RECEIVED BY IT AND ITS UT ILIZATION? 2. WHETHER THE TRIBUNAL IS CORRECT IN LAW AND FACTS , HOLDING THAT THE RESPONDENT ASSESSEE IS NOT REQUIRED TO TAK E THE GRANT OF MONEY RECEIVED FROM THE GOVT. OF INDIA, IN ITS BOOK S WHICH IS CONTRARY TO THE PROVISIONS OF SEC.80G(5)(IV) OF THE INCOME TAX ACT, 1961, WHICH REQUIRE MAINTENANCE OF REGULAR BOOKS OF ACCOUNT IN ORDER TO CLAIM EXEMPTION UNDER SEC.80G OF THE I.T. ACT, 1961?. 3. WHETHER THE ITAT IS CORRECT IN LAW AND FACTS, HO LDING THAT THE RESPONDENT ASSESSEE SOCIETY HAS NOT COMMITTED ANY F AULT OF NOT ACCOUNTING FOR SUCH MONEY AS INCOME OF THE ASSESSEE AND UTILIZE THE SAME TO THE EXTENT OF 85% WHICH IS MANDATORY IN VIE W OF PROVISIONS OF SEC.11(2) OF THE IT ACT, 1961? 4. WHETHER THE TRIBUNAL IS CORRECT IN LAW AND FACTS , IN HOLDING THAT RESPONDENT ASSESSEE SOCIETY CANNOT BE PUNISHED FOR THE MISAPPROPRIATION OF FUNDS BY THE CHAIRMAN AND THE S ECRETARY OF THE SOCIETY AT THE SAME WOULD DEFEAT THE VERY PURPOSE A ND INTENTION OF ITA NO.150/PAN/2010 V.C. CHARANTIMATH 5 THE LEGISLATURE IN BRINGING THE PROVISIONS OF SEC.1 3 OF THE I.T. ACT, 1961? 5. WHETHER THE TRIBUNAL IS CORRECT IN LAW AND FACTS , IN RELYING UPON THE DECISION OF RAJASTHAN HIGH COURT IN THE CA SE OF CIT V. COSMOPOLITAN EDUCATION SOCIETY REPORTED IN 244 ITR 495 WHEN THE FACTS AND CIRCUMSTANCES WERE TOTALLY DIFFERENT THAT OF THE CASE OF THE RESPONDENT IN WHOSE CASE HAS REPORTED VARIOUS DISCR EPANCIES AND VIOLATIONS WHICH INDICATE NOT ONLY THE CHAIRMAN AND SECRETARY BUT ALSO THE RESPONDENT ASSESSEE HAS VIOLATED IN DISCHA RGING ITS DUTIES AND AS SUCH THE DECISION RELIED UPON BY THE TRIBUNA L IS NOT APPLICABLE TO THE FACTS OF THE CASE?. 8. THE HONBLE HIGH COURT, VIDE ITS JUDGMENT DATED 23.7.2015, CONSIDERED THE QUESTIONS RAISED BEFORE IT AND THEN RESTORED THE MATTER FOR FRESH CONSIDERATION. SINCE THE QUES TIONS RAISED AND ADMITTED BY THE HONBLE HIGH COURT WERE ONLY ON MERITS AND NOT ON THE TIME LIMITATION, WHICH ISSUE WAS OTHERWISE DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, THE HON BLE HIGH COURT HAD NO OCCASION TO DEAL WITH SUCH ISSUE. 9. SECTION 80G DEALS WITH GRANT OF RECOGNITION. RULE 11AA CONTAINS REQUIREMENTS FOR APPROVAL OF AN INSTITUTION OR F UND U/S.80G. SUB-RULE (2) PROVIDES THAT THE APPLICATION FOR REGISTRATION SHALL BE ACCOMPANIED BY CERTAIN DOCUMENTS. SUB- RULE (3) STATES THAT THE COMMISSIONER MAY CALL FOR SUCH FUR THER DOCUMENTS OR INFORMATION FROM THE INSTITUTION OR FUND IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF SUCH INSTITUTION OR FUND. SUB-RULE (4) SAYS THAT WHERE THE ITA NO.150/PAN/2010 V.C. CHARANTIMATH 6 COMMISSIONER IS SATISFIED THAT ALL THE CONDITIONS HAVE BEEN SATISFIED, HE SHALL RECORD A SATISFACTION IN WRITING AND GRANT APPROVAL. SUB-RULE (5) STATES THAT IF THE COMMISSIONER IS SA TISFIED THAT ONE OR MORE OF THE CONDITIONS, AS LAID DOWN IN SECTION 80G(5) (1 TO 5), ARE NOT FULFILLED, HE SHALL REJECT THE APPLICA TION. SUB-RULE (6), WHICH IS MATERIAL FOR OUR PURPOSE, PROVIDES TH AT THE TIME LIMIT WITHIN WHICH THE COMMISSIONER SHALL PASS AN ORDER EITHER GRANTING THE APPROVAL OR REJECTING THE APPLICATION SHALL NOT EXCEED SIX MONTHS FROM THE END OF THE MONTH IN WHICH SUCH APPLICATION WAS MADE . THERE IS PROVISO TO THIS SUB-RULE WHICH STATES THAT IN COMPUTING THE PERIOD OF SIX MONTHS, ANY TIME TAKEN BY THE APPLICANT IN NOT COMPLYING WITH THE DIRECTIONS OF THE COMMISSIONER UNDER SUB-RULE (3) SHALL BE EXCLUDED. 10. ON AN OVERVIEW OF RULE 11AA, AS IT STANDS TODAY, IT BECOMES MANIFEST THAT THE CIT HAS EITHER TO GRANT APPROVAL OR REJECT APPROVAL WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH SUCH APPLICATION WAS MADE. AT THE MATERIAL TIME, THE PERIOD OF SIX MONTHS WAS TO BE RECKONED FROM THE DATE ON WHICH THE APPLICATION WAS MADE. IN CASE THE ORDER REF USING OR GRANTING APPROVAL IS NOT PASSED WITHIN A PERIOD OF SIX MONTHS , ITA NO.150/PAN/2010 V.C. CHARANTIMATH 7 THEN THE MOOT QUESTION ARISES AS TO WHETHER THE PASSING OF OR DER BELATEDLY WOULD BE CONSIDERED AS VALID. 11. IN THE CONTEXT OF SECTION 12AA WHEREIN AGAIN THERE IS A REQUIREMENT FOR GRANT OF APPROVAL U/S.12A WITHIN A PERIOD OF SIX MONTHS, THE HONBLE SUPREME COURT IN CIT AND ANOTHER VS. SOCIETY FOR THE PROMOTION OF EDUCATION (2016) 382 ITR 6 (SC) HAS HELD THAT ONCE APPLICATION FOR REGISTRATION U/S.12AA WAS MADE AND IN CASE THE SAME WAS NOT RESPONDED TO WITHIN SIX MONTHS, IT WOULD BE TAKEN THAT THE APPLICATION WAS REGISTERED UNDER THE PROVISION AND HENCE REGISTRATION/APPLICATION WOULD TAKE EFFECT ACCORDINGLY. THOUGH SUCH JUDGMENT OF THE HON BLE SUPREME COURT HAS BEEN RENDERED IN THE CONTEXT OF GRANT OF REGISTRATION U/S.12AA BUT ITS RATIO DECIDENDI WOULD EQUALLY APPLY TO THE GRANT OF REGISTRATION U/S.80G(5) OF THE ACT AS WE LL. 12. WHILE DISPOSING THE APPEAL OF THE ASSESSEE IN THE FIRST ROUND, THE TRIBUNAL CATEGORICALLY HELD THAT THE CIT PASSED THE ORDER BEYOND STIPULATED PERIOD OF SIX MONTHS IN ADDITION TO TH E PERIOD OF 19 DAYS WHICH COULD BE ATTRIBUTED TO THE ASSESSEE AND AS SUCH THE CERTIFICATE U/S.80G (5) IS DEEMED TO HAVE BEEN GRANTED TO THE ASSESSEE . THUS, IT BECOMES MANIFEST THAT THE ITA NO.150/PAN/2010 V.C. CHARANTIMATH 8 TRIBUNAL DECIDED THE LIMITATION ISSUE IN FAVOUR OF THE ASSES SEE, IN ADDITION TO THE MERITS. THE REVENUE APPEALED AGAINST THE O RDER OF THE TRIBUNAL ONLY ON MERITS BY IMPLIEDLY ACCEPTING THE DECISION OF THE TRIBUNAL ON LIMITATION ISSUE. SINCE THE HONBLE HIGH COURT HAD ONLY THE ISSUE ON MERITS BEFORE IT, NATURALLY IT WAS NOT OBLIGED TO CONSIDER THE ISSUE OF LIMITATION ALREADY DECIDED BY THE TRIBUNAL IN ASSESSEES FAVOUR. 13. THE LD. AR FAIRLY SUBMITTED THAT EVEN IF THE ISSUE ON M ERITS IS NOW DECIDED AGAINST THE ASSESSEE, STILL THE REGISTRATION WOULD BE SAVED BY VIRTUE OF THE ORDER PASSED BY THE TRIBUNAL ON THE LIMITATION ISSUE, WHICH ATTAINED FINALITY. WE ARE CONVINCED WITH THE SUBMISSION ADVANCED ON BEHALF OF THE ASSESSEE THAT EV EN IF THE ISSUE ON MERITS IS TO BE DECIDED AGAINST THE ASSESSEE, BU T THE SAME CANNOT COME INTO PLAY UNLESS THE INITIAL HURDLE OF LIMITATION IS CROSSED. ONCE THE TRIBUNAL HAS HELD THAT THE CERTIFICATE U /S. 80G(5) WAS DEEMED TO HAVE BEEN GRANTED ON THE EXPIRY OF PERIOD OF SIX MONTHS FROM THE DATE ON WHICH APPLICATION WAS FILED COUPLED WITH PERIOD OF DELAY OF 19 DAYS ATTRIBUTABLE TO THE ASSESSEE, NATURALLY THE ASSESSEE GETS ENTITLED TO REGISTRATION U/S.80G WITHOUT CONSIDERING THE MERITS AS DISCUSSED BY THE LD. CIT IN HIS ORDER PASSED BEYOND THE STIPULATED PERIOD. WE , ITA NO.150/PAN/2010 V.C. CHARANTIMATH 9 THEREFORE, HOLD THAT THE ORDER PASSED BY THE TRIBUNAL GRANTIN G DEEMED REGISTRATION U/S. 80G(5) SANS MERITS, STILL HOLDS THE FIE LD. 14. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS FILED A REVIE W PETITION BEFORE THE HONBLE HIGH COURT ON THIS VERY ISSUE OF DEEMED REGISTRATION, WHICH IS STILL PENDING. IN THIS REGARD, IT IS HELD THAT IF IN A SUBSEQUENT PROCEEDINGS, THE HONBLE HIGH COURT DECIDES THE QUESTION OF DEEMED REGISTRATION AGAINST OR IN FA VOUR OF THE ASSESSEE, THEN THE ASSESSEE OR THE REVENUE, AS THE CASE MAY BE, WOULD BE AT LIBERTY TO FILE APPLICATION FOR RECALLING OF THE INSTANT ORDER. 15. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH OCTOBER, 2019. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT PUNE; DATED : 04 TH OCTOBER, 2019 ITA NO.150/PAN/2010 V.C. CHARANTIMATH 10 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. , , PANAJI / DR, PANAJI ITAT, PANAJI; 4. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 04-10-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 04-10-2019 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER *