M/s. All India J.D. Educational Society, New Delhi V. Director of Income Tax, New Delhi

ITA 1647/DEL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3790 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-05-2011
• Assessment Year: misc
• Appeal Filed On: 22-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Assessee Lawyers: ASHWANI TANEJA; DR RAKESH GUPTA
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice; Retrospective amendment; Wrong claim; Cancellation of registration; Set aside
• Section: 143(3); 12A; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH A DELHI ] BEFORE SHRI R. P. TOLANI, JM AND SHRI K. D. RA NJAN, AM I. T. APPEAL NO. 1647 (DEL) OF 2009 ASSESSMENT YEAR : ----. M/S. ALL INDIA J. D. EDUCATIONAL SOCIETY, THE DIRECTOR OF INCOME-TAX, C/O. M/S. R R A TAXINDIA, D 28, SOUTH EXTENSION, PART I, VS. D E L H I. N E W D E L H I 110 049. P A N / G I R NO. AAB TA 2095 C. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : DR. RAKESH GUPTA, ADV.; & SHRI ASHWAN I TANEJA, ADV.; DEPARTMENT BY : MS. ANUSHA KHURANA, SR. D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL FILED BY THE ASSESSEE UNDER SECTION 12 -A OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] ARISES OUT OF ORDER OF THE LD. DIRECTOR OF INCOME-TAX [EXEMPTIONS], NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS :- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUM STANCES OF THE CASE LD. DIT HAS ERRED IN LAW AND ON FACTS IN ASSUMING JURISDICT ION TO CANCEL THE REGISTRATION UNDER SECTION 12-AA AND HAS ERRED IN LAW AND ON FAC TS IN CANCELING THE REGISTRATION GRANTED BY ORDER DATED 3/09/2004 AND T HAT TOO WITH EFFECT FROM 1/04/2003; 2 I. T. APPEAL NO. 1647 (DEL) OF 2009 2. THAT HAVING REGARD TO THE FACTS AND CIRCU MSTANCES OF THE CASE LD. DIT HAS ERRED IN LAW AND ON FACTS IN PASSING THE ORDER UNDER SECTION 12-AA(1)(B) R.W.S. 12-A BY RECORDING INCORRECT FACTS AND FINDIN G AND WITHOUT GIVING ADEQUATE OPPORTUNITY OF BEING HEARD; 3. THAT IN ANY VIEW OF THE MATTER AND IN ANY CASE, ACTION OF LD. DIT IN CANCELLING THE REGISTRATION UNDER SECTION 12-AA IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE ONLY ISSUE FOR OUR CONSIDERATION RELATES TO CANCELLING THE REGISTRATION GRANTED UNDER SECTION 12-AA OF THE ACT, WHICH WAS GRANTED VIDE OR DER DATED 3/09/2004. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE REGISTRATION WAS GRANT ED TO THE ASSESSEE VIDE ORDER DATED 03 RD SEPTEMBRER, 2004 WITH EFFECT FROM 1/04/2003. THE A SSESSEE FILED AN APPLICATION UNDER SECTION 10(23)(VI) ON 5/11/2007 SEEKING NOTIFICATION UNDER SECTION 10(23)(VI) FOR ASSESSMENT YEARS 2008- 09 TO 2010-11. THIS APPLICATION WAS REJECTED BY T HE DGIT (E) VIDE HIS ORDER DATED 28/11/2008 ON THE GROUND THAT THE ASSESSEE WAS MAKING FALSE CL AIM OF SALARY PAYMENTS TO CERTAIN EMPLOYEES WHEN THE SO-CALLED CONCERNED EMPLOYEES WERE NOT WOR KING WITH THE ASSESSEE AND HAD LEFT SERVICE. DGIT (E) ALSO HELD THAT THE ASSESSEE WAS NOT ABLE TO RECONCILE THE DETAILS OF CONTRIBUTION TO CORPUS FUNDS RECEIVED IN 2003-04. 4. SUBSEQUENTLY, THE AO COMPLETED THE ASSESSMENT FO R AY 2006-07 UNDER SECTION 143(3) ON AN INCOME OF RS.1,38,70,363/-. THE AO WHILE COMPLE TING THE ASSESSMENT HELD THAT THE ASSESSEE HAD INCURRED EXPENDITURE ON CONSTRUCTION AND HOSTEL EXPENSES FOR WHICH VOUCHERS HAVE NOT BEEN KEPT AND AS SUCH IT WAS APPARENT THAT MONEY HAD BEE N TAKEN OUT AND INCOME OF THE ASSESSEE HAD BEEN APPLIED FOR NON-CHARITABLE PURPOSES. THE EXPEN DITURE OF RS.85,25,300/- ON CONSTRUCTION AND EXPENDITURE OF RS.9,51,66/- ON HOSTEL EXPENSES WERE NOT HELD FOR CHARITABLE PURPOSES. 5. THE LD. DIT (E), THEREFORE, ISSUED NOTICE TO THE ASSESSEE FOR WITHDRAWAL OF REGISTRATION GRANTED UNDER SECTION 12-A OF THE ACT. THE CASE WA S FIXED FOR HEARING ON 18/12/2008 AT 11.30 AM. ON THIS DATE NEITHER ANYBODY ATTENDED NOR WAS ANY REQUEST FOR ADJOURNMENT RECEIVED. THEREAFTER ANOTHER SHOW CAUSE NOTICE AND ALSO A REM INDER DATED 29/1/2009 WAS ISSUED. THE CASE WAS FIXED HEARING ON 11/2/2009. ON11/02/2009, SHRI P. K. JAIN CA APPEARED. THE BOOKS OF 3 I. T. APPEAL NO. 1647 (DEL) OF 2009 ACCOUNTS WERE NOT PRODUCED. ONLY A WRITTEN REPLY D ATED 11/2/2009 WAS FILED. THE ASSESSEE REQUESTED FOR POSTPONING OF THE PROCEEDINGS REGARDI NG CANCELLATION OF REGISTRATION TILL THE ASSESSEES WRIT PETITION FILED AGAINST ORDER OF THE DGIT (E) UNDER SECTION 10(23C)(VI) OF THE ACT WAS DECIDED OR THE FIRST APPEAL AGAINST THE ASSESSM ENT ORDER WAS DECIDED BY THE LD. CIT (APPEALS). THE DIT (E), HOWEVER, MADE IT CLEAR TH AT IT WAS NOT POSSIBLE TO KEEP THE PROCEEDINGS IN ABEYANCE AND THE ASSESSEE WAS ASKED TO COMPLY WI TH THE NOTICES. THE CASE WAS ADJOURNED TO 20 TH FEB., 2009. THE ASSESSEE DID NOT ATTEND THE PROCE EDINGS AND FILED A LETTER IN DAK DATED 20 TH FEB, 2009 SEEKING ADJOURNMENT FOR THE FIRST WEEK OF MARCH, 2009 ON THE GROUND THAT HIS COUNSEL WAS OUT OF STATION. THE LD. DIT (E) FROM THE CONDU CT OF THE ASSESSEE CONCLUDED THAT THE ASSESSEE WAS NOT INTERESTED TO COMPLY WITH THE NOTICES ISSUE D. THE LD. DIT(E) AFTER CONSIDERING THE FACTS MENTIONED IN THE ORDER OF THE DGIT(E) REJECTING THE NOTIFICATION TO BE ISSUED UNDER SECTION 10(23)(VI) HELD THAT THE ASSESSEE WAS NOT RUNNING T HE INSTITUTION FOR CHARITABLE PURPOSES, BUT WAS BEING RUN FOR PROFITS. HE ALSO NOTED THAT THE ASSE SSEE HAD NOT PRODUCED EVEN SINGLE EVIDENCE DURING THE PROCEEDINGS BEFORE HIM TO CONTROVERT THE FINDINGS OF THE DGIT (E). THE ASSESSEE HAD ALSO NOT PRODUCED ANY EVIDENCE TO CONTROVERT THE FI NDINGS OF THE AO IN THE ASSESSMENT ORDER FOR AY 2006-07. THE LD. DIT (E) ALSO NOTED THAT THE AS SESSEE WAS NOT MAINTAINING EXTERNAL VOUCHERS FOR VARIOUS EXPENSES INCURRED AND WAS MAKING FALSE CLAIM FOR EXPENSES OR FALSE CLAIM OF DONATIONS RECEIVED. THE BOOKS OF ACCOUNTS WERE NOT MAINTAINED. THEREFORE THE INCOME OF THE TRUST WAS NOT APPLIED FOR CHARITABLE PURPOSES. THE LD. DIT (E), THEREFORE, CANCELLED THE REGISTRATION GRANTED UNDER SECTION 12-A OF THE ACT. 6. BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT SUB SECTION (3) OF SECTION 12-AA WAS INSERTED BY THE FINANCE ACT (NO.2) 2004 WITH EFFECT FROM 1/10/2004. THEREFORE, POWER TO WITHDRAW THE REGISTRATION GRANTED UNDER SECTION 12- A COULD NOT BE EXERCISED FOR THE PERIOD PRIOR TO 1/10/2004. THE LD. DIT (E) VIDE HIS ORDER DATED 16 TH MARCH, 2009 HAS WITHDRAWN REGISTRATION WITH EFFECT FROM 1/04/2003. SINCE SUB SECTION (3) OF SECTION 12-AA WAS INSERTED IN THE STATUTE WITH EFFECT FROM 1/10/2004 REGISTRATION COULD NOT B E WITHDRAWN WITH EFFECT FROM 1/4/2003. HE PLACED RELIANCE ON THE DECISION OF THE ITAT, LUCKNO W BENCH IN THE CASE OF KAPOOR EDUCATION SOCIETY VS. CIT 44 DTR (LUCK.) (TRIB.) 97. THE LD . AR OF THE ASSESSEE FURTHER SUBMITTED THAT ADEQUATE OPPORTUNITY WAS NOT GRANTED TO THE ASSESSE E. THE ASSESSEE MADE A REQUEST TO KEEP THE 4 I. T. APPEAL NO. 1647 (DEL) OF 2009 PROCEEDINGS IN ABEYANCE TILL THE WRIT PETITION WAS DECIDED BY HONBLE HIGH COURT OR THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER FOR AY 2006-07 WAS DECIDED BY THE LD. CIT (A). THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT T HE LD. DIT (E) HAS LEVELED ALLEGATIONS AGAINST THE ASSESSEE THAT THE EXPENSES WERE NOT SUPPORTED B Y THE EVIDENCE FOR WHICH HE HAD NO BASIS. THE LD. DIT (E) HAS CANCELLED THE REGISTRATION RELY ING ON THE DECISION OF THE DGIT (E) REFUSING NOTIFICATION UNDER SECTION 10(23)(VI). THE LD. DIT (E) OUGHT TO HAVE CONSIDERED THE EXPLANATION GIVEN BY THE ASSESSEE BEFORE THE AO. THEREFORE, OR DER PASSED BY THE LD. DIT (E) CANCELLING REGISTRATION UNDER SECTION 12-A OF THE ACT HAS BEEN MADE WITHOUT AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD. ON THE OTHER HAND, THE LD. SR. DR SUBMITTED THAT ADEQUATE OPPORTUNITIES WERE GIVEN TO THE ASSESSEE AS IS EVIDENT FROM THE ORDER OF DIT(E) BUT THE ASSESSEE HAD NEITHER PURPOSELY ATTENDED THE PROCEEDINGS AND GIVEN THE DE SIRED INFORMATION. HE ALSO SUBMITTED THAT SINCE THE ASSESSEE HAD NOT MAINTAINED PROPER VOUCHE RS FOR EXPENSES INCURRED, THE FUNDS OF THE ASSESSEE TRUST HAVE NOT BEEN UTILIZED FOR CHARITABL E PURPOSES. THEREFORE, IT IS NOT A CASE OF INADEQUATE OPPORTUNITY. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. FROM THE FACTS STATED ABOVE, IT IS CLEAR THAT THE ASSESSEE H AD NOT FILED DESIRED INFORMATION BEFORE THE LD. DIT(E). THE ASSESSEE MADE A REQUEST FOR KEEPING TH E PROCEEDINGS IN ABEYANCE TILL THE WRIT PETITION FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. DGIT (E) WAS DECIDED OR THE APPEAL AGAINST THE ASSESSMENT ORDER FOR AY 2006-07 WAS DEC IDED BY THE LD. CIT (A). DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE MADE STATEME NT AT BAR THAT THE WRIT PETITION FILED BY THE ASSESSEE HAS BEEN DISMISSED. IT IS ALSO A FACT THA T THE LD. DIT (E) HAS RELIED HEAVILY ON THE ORDER OF THE LD. DGIT (E) AND FINDINGS IN ASSESSMENT ORDE R. THE ASSESSEE HAD NOT SUBMITTED ANY REPLY TO THE SHOW CAUSE NOTICES ISSUED. FROM THE FACTS S TATED ABOVE IT IS NOT A CASE WHERE IT CAN BE SAID THAT ADEQUATE OPPORTUNITY WAS NOT PROVIDED TO THE A SSESSEE. AT THE SAME TIME THE ORDER PASSED BY LD DIT(E) IS BASED ON THE DECISIONS OF DGIT(E) AND AO. HONBLE DELHI HIGH COURT HAS DISMISSED(237CTR9) THE WRIT PETITION ON THE GROUND THAT THAT ASSESSEE WAS GIVEN OPPORTUNITY BY DGIT(E) OF BEING HEARD AND HENCE THERE WAS NO CONTR AVENTION OF FUNDAMENTAL RIGHTS OR VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. HOWEVER, CANCELLA TION OF REGISTRATION UNDER SECTION 12-A OF THE ACT IN THE ABSENCE OF ANY REPLY TO THE SHOW CAUSE N OTICES ISSUED IN OUR CONSIDERED OPINION WILL 5 I. T. APPEAL NO. 1647 (DEL) OF 2009 BE TOO HARSH AND DOES NOT COMMENSURATE PENALTY SUFF ERED BY ASSESSEE BY WAY OF WITHDRAWAL OF REGISTRATION U/S 12A AS COMPARED TO THE NON-COMPLIA NCE OF NOTICES MADE BY THE ASSESSEE. WE, THEREFORE, FEEL IT PROPER TO SET ASIDE THE MATTER T O THE FILE OF THE LD. DIT (E) WITH THE DIRECTIONS T O PROVIDE ANOTHER OPPORTUNITY OF BEING HEARD TO THE A SSESSEE TO PRESENT ITS CASE. THE ASSESSEE IS DIRECTED TO PRODUCE BOOKS OF ACCOUNTS AND ANY OTHER MATERIAL NECESSARY TO PROVE ITS CASE THAT THE ACTIVITIES OF ASSESSEE EXIST FOR CHARITABLE PURPOSE S. SINCE WE ARE SETTING ASIDE THE MATTER, TO BE DECIDED AFRESH, THE GROUND RAISED BY THE ASSESSEE T HAT THE LD. DIT (E) CANNOT WITHDRAW EXEMPTION WITH RETROSPECTIVE EFFECT, IS NOT BEING DECIDED. T HE ASSESSEE CAN TAKE THIS PLEA BEFORE THE LD. DIT (E) WHO WILL DECIDE THIS ISSUE ALSO AFTER GIVING TH E ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED, FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 17 TH JUNE, 2011. SD/- SD/- [ R. P. TOLANI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH JUNE, 2011. * MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 6 I. T. APPEAL NO. 1647 (DEL) OF 2009