M/s. Harpavat Charitable Trust, UDAIPUR V. CIT, UDAIPUR

ITA 186/JODH/2014

• Counselvise Citation: 18623314 RSA 2014
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 24-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DEEPAK SEHGAL
• Keywords: Charitable institution; Principle of natural justice; Corroborative evidences; Cancellation of registration
• Section: 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 186/JU/2014 [A.Y: 2006-07] M/S HARPAVAT CHARITABLE TRUST VS. THE C.I.T 30-C, MADHUBAN, UDAIPUR BEHIND BHARTIYA LOK KALA MANDAL UDAIPUR PAN NO. AAATH 0592 G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N.M. RANKA SHRI N.K. JAIN SHRI O.P. CHAPLOT DEPARTMENT BY : DR. DEEPAK SEHGAL, CIT-DR DATE OF HEARING : 05.05.2014 DATE OF PRONOUNCEMENT : 22.05.2014 ORDER PER HARI OM MARATHA, J.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE FOR A.Y 2006-2007 AGAINST THE ORDER OF THE CIT, UDAIPUR, DA TED 2 10.03.2014, PASSED U/S 12AA(3) R.W.S 293C OF THE IN COME TAX ACT, 1961 ['THE ACT', FOR SHORT]. 2. BRIEFLY STATED, THE FACTS LEADINGS TO THIS APPEA L ARE THAT DR. GANESH HARPAVAT AND DR. (SMT.) KIRAN HARPAVAT, BOTH NON-RESIDENT INDIANS [NRIS], RESIDING IN LEWISVILLE, DALLAS, TEX AS, USA, WITH THE AVOWED OBJECT PRIMARILY TO IMPART EDUCATION AND OTH ER MEDICAL AND CHARITABLE OBJECTS, SETTLED A PUBLIC CHARITABLE TRU ST IN THE NAME OF 'HARPAVAT CHARITABLE TRUST' WITH ITS PRINCIPAL OFFI CE AT BHANDARI MANSION, OPP. TOWN HALL, UDAIPUR, VIDE DEED OF DECL ARATION DATED FEBRUARY 11, 1991. AFTER EXECUTION OF A VALID DEED, AN APPLICATION FOR REGISTRATION U/S 12A IN FORM NO. 10A WAS MADE O N 13.3.1991 TO THE LD. CIT AS PRESCRIBED UNDER RULE 17A OF THE I.T . RULES, 1962. ORIGINAL INSTRUMENT WITH ITS COPY WAS ALSO FILED AL ONGWITH THE APPLICATION FOR REGISTRATION FILED U/S 12A OF THE A CT. THE REGISTERING AUTHORITY, AFTER VERIFICATION AND COMPLETE SATISFAC TION AS TO VALIDITY OF THE DEED, ACCORDED REGISTRATION ON 14.5.1991, AN D ALSO SENT A COPY TO THE INCOME-TAX OFFICER, WARD 2, UDAIPUR AND DY CIT, UDAIPUR. THIS REGISTRATION, AS PER THE ASSESSEE, RE MAINED INTACT. SUBSEQUENTLY, THE TRUST WAS ADVISED TO GET IT REGIS TERED WITH 3 DEVASTHAN DEPARTMENT. THIS DEPARTMENT WANTED THE A SSESSEE TO AFFIX STAMP DUTY AS APPLICABLE AS IN THE YEAR 2006. THEREFORE, NON- JUDICIAL STAMP OF RS.100/- WAS PURCHASED AND ORIGIN AL DEED WAS REWRITTEN AND EXECUTED AND NOTARIZED. FORM 6 ALONG WITH TRUST DEED WAS SUBMITTED ON 21.12.2006. THIS DEPARTMENT, AFTER DUE ENQUIRY, VERIFICATION AND COMPLETE SATISFACTION, GR ANTED REGISTRATION ON 11.5.2007 REGISTERING THE TRUST WITH THE DEVASTH AN DEPARTMENT, UDAIPUR ON 11.5.2007. A REGISTRATION CERTIFICATE WA S ISSUED ON 11.5.2007. SUBSEQUENTLY, THE TRUST PURCHASED/ACQUI RED CERTAIN AGRICULTURAL LAND, GOT IT CONVERTED AND CONSTRUCTED SCHOOL AND INSTITUTE AND ALL THE DOCUMENTS ARE IN THE NAME OF THE TRUST AND NONE HAS CHALLENGED VALIDITY OF INDENTURE OF TRUST. 2.1 SUBSEQUENTLY, DURING THE COURSE OF ASSESSMENT P ROCEEDINGS FOR THE A.Y. 2006-07 TO 20011-12 IT HAS BEEN OBSERVED B Y THE AO THAT THE TRUST IS ENGAGED IN THE ACTIVITIES FOR THE PERS ONAL INTEREST OF SOME SPECIFIED PERSONS AND NOT FOR PUBLIC CHARITABL E PURPOSE AS ENVISAGED IN THE OBJECTS OF THE TRUST. IN COMING T O THE ABOVE CONCLUSION, THE A.O. HAS NOTICED THE FOLLOWING VIOL ATIONS OF THE RELEVANT PROVISIONS: 4 (I) A MEMORANDUM OF UNDERSTANDING DATED 26.11.2006 HAS BEEN ENTERED INTO BETWEEN DR. GANESH HARPAVAT, WHO IS THE FOUNDER/SETTLOR OF THE TRUST A ND SHRI NIRMAL BHANDARI, WHO WAS THE CHAIRMAN/MANAGING TRUSTEE OF TRUST. FROM PERUSAL OF THE MOU IT IS ABSOLUTELY EVIDENT THAT THE TRUST'S ACTIVITIES WERE NOT FOR THE PURPOSE OF CHARITY AND THOUGH APPARENTLY OB JECT OF THE TRUST WAS NOT FOR PROFIT MOTIVE BUT IN REALI TY THE ACTIVITIES OF TRUST WAS TO RUN IN SUCH A MANNER SO AS TO PROVIDE PERSONAL BENEFIT TO SETTLER AND CHAIRMAN OF THE TRUST. (II) ON PERUSAL OF THE MOU BETWEEN LD DR. GANESH L. HARPAVAT AND SHRI NIRMAL BHANDARI IT IS SEEN THAT T HE SETTLOR AND THE MANAGING TRUSTEE/THE CHAIRMAN WILL BE 50-50% PARTNER IN THE PROJECT, WHICH FURTHER INDICA TES THAT (A) THE TRUST WAS ENGAGED IN THE ACTIVITIES NOT WITH THE CHARITABLE PURPOSE THEREBY IN VIOLATION OF OBJECT CLAUSES OF TRUST DEED. (B) THE TRUST WAS/IS NOT FORMED FOR CHARITABLE PURPOSE BUT FOR PERSONAL BENEFIT OF THESE TWO PERSONS WHICH WAS TO BE SHARED 50-50%. EVEN WHEN THERE IS NO PROFIT, THEN ALSO THE PERSONAL BENEFIT 5 WILL BE TAKEN BY WAY OF SO CALLED REMUNERATION BY SHRI NIRMAL BHANDARI AND INTEREST @ 9% ON INVESTMENT BY DR. GANESH HARPAVAT. THIS IS IN VIOLATION OF PROVISIONS OF SEC. 13(3) OF THE IT. AC T. III) ON PERUSAL OF COPY OF BANK ACCOUNT WITH AXIS B ANK LTD. AND ORIENTAL BANK OF COMMERCE, IT HAS BEEN OBSERVED THAT SUBSTANTIAL AMOUNT IS FOUND TRANSFERR ED IN THE NAME OF SHRI NIRMAL BHANDARI, WHICH IS IN VIOLATION OF SECTION 13(3) OF THE IT. ACT. IV) FURTHER IT HAS ALSO BEEN FOUND THAT THE TRUST H AS ACCEPTED LOAN OF RS. 12.55 CRORE FROM DR.GANESH HARPAVAT AND SMT. KIRAN HARPAVAT, THE NON-RESIDENT, IN VIOLATION OF PROVISIONS OF FCRA 1976 (NOW FCRA 2010 ). THE LOAN OF RS. 12.55 CRORE HAS NOW BEEN CLAIMED TO HAVE BEEN CONVERTED IN TO DONATION/CONTRIBUTION TOWARDS CORPUS FUND W.E.F. 02.03.2011. HOWEVER, THE ISSUE OF ACCEPTANCE OF FOREIGN FUNDS IN VIOLATION O F FCRA 1976 (NOW FCRA 2010) STILL EXIST. 2.2 ACCORDINGLY, THE LD. CIT ISSUED A SHOW-CAUSE NO TICE, IN THE FORM OF LETTER NO. 3619 DATED 15.01.2014, REQUIRING THE TRUST TO FURNISH REPLY OR EXPLANATION WITH PROPER SUPPORTING EVIDENCE IN RESPECT OF ABOVE MENTIONED ISSUES. THE SHOW CAUSE N OTICE WAS 6 REPLIED THROUGH SHRI O.P. CHAPLOT, LD. A.R. OF THE TRUST, WHO FILED SUBMISSIONS DATED 05.02.2014, 11.02.2014 AND 19.02. 2014. BUT THE COMMISSIONER DID NOT AGREE AND HAS REASONED THAT HO W THE TRUST DEED CAN BE EXECUTED ON 11.02.1991 PURCHASED ON 27. 11.2006 ON A STAMP PAPER OF THE DENOMINATION OF RS. 100/-. MORE OVER, HE HAS ALSO FOUND THAT THE STAMP PAPER WAS ISSUED BY THE T REASURY TO THE STAMP VENDOR AS LATE AS ON 16.11.2006. IT IS FOUND THAT DR. GANESH HARPAVAT & DR. KIRAN HARPAVAT HAVE EXECUT ED A MEMORANDUM OF UNDER -STANDING [MOU] ON 26.11.2006 WHICH IS DULY NOTARIZED BY NOTARY VIDE REGISTRATION NO. 662, UDAIPUR. FURTHER THIS MOU AND IRREGULARITY IN THE BOOKS OF A CCOUNTS HAVE BEEN CONFIRMED IN THE VARIOUS E-MAILS EXCHANGED BET WEEN SHRI NIRMAL BHANDARI AND DR. GANESH HARPAVAT. THIS MOU S O EXECUTED HAS, INTER-ALIA, THE FOLLOWING CLAUSES: 1. FIRST PARTY ALONGWITH WITH HIS WIFE DR. KIR AN HARPAVAT HAS FORMED TRUST IN 1991 VIZ., HARPAVAT CHARIT ABLE TRUST ; REGD. OFFICE BHANDARI MANSION, OPP. TOWN HALL, UD AIPUR (RAJ.) 2. THIS REGD. TRUST HAS BOUGHT AGRICULTURE LAND AT VILLAGE BALICHA, OPP. SNEH RESORTS IN 2003. FROM THE FUNDS SENT BY THE FIRST PARTY IN NAME OF THIS TRUST. 7 3. SECOND PARTY HAS DONE CHANGE OF LAND USE F ROM AGRICULTURE TO EDUCATIONAL PURPOSE, CONVERT THIS LA ND FROM AGRICULTURE TO EDUCATIONAL PURPOSE, DEVELOP THIS LAND, TAKE PERMISSION FOR FRONT SIDE ROAD CONSTRUCTION, APP ROVED THE MAP FOR SCHOOL BUILDING. 4. FIRST PARTY IS SENDING MONEY FROM USA IN NAM E OF THE TRUST AND SECOND PARTY IS LOOKING AFTER THE CONSTRU CTION OF SCHOOL BUILDING ON THAT I.E. FIRST PARTY IS FINANCE R & SECOND PARTY IS WORKING PARTY. 5.......................... 6. FIRST AND SECOND PARTY IS WILLING TO START SC HOOL ON THIS LAND AT BALICHA. 7. IT HAS BEEN MUTUALLY DECIDED BETWEEN FIRST AND S ECOND PARTY THAT THEY WILL BE 50-50% PARTNER IN THIS PROJ ECT AND FIRST PARTY WILL INVEST THE FUNDS REQUIRED FOR THAT AND SECOND PARTY WILL BE AS WORKING PARTNER, (EMPHASIS NOW SUP PLIED) 8. IT HAS ALSO BEEN DECIDED THAT SECOND PARTY W ILL DRAW THE FUNDS OUT OF THIS TRUST ACCOUNT AS ADVANCE AS AND W HEN REQUIRED OR ON MONTHLY BASIS NOT EXCEEDING RS. 50,0 00/- P.M. OR RS. 6,00,000/-P.A. TILL THE PROJECT DOES NOT BEC OME PROFITABLE, (EMPHASIS NOW SUPPLIED) 8 9. FIRST PARTY WILL CHARGE INTEREST ON THEIR IN VESTMENT @9% FROM THE DATE OF FUNDS REMITTED TO THIS TRUST ACCOU NT FROM USA AFTER 2003. BUT FIRST PARTY WILL NOT DRAW THIS INTEREST ON THEIR INVESTMENT TILL SCHOOL DOES NOT BECOME PROFIT ABLE, (EMPHASIS NOW SUPPLIED) 10. WHEN SCHOOL WILL BE IN PROFITABLE POSITION THEN FIRST PARTY'S ACCUMULATED INTEREST WILL BE PAID T O THEM IN INSTALLMENTS AS PER MUTUAL DISCUSSION BETWEEN FIRST AND SECOND PARTY SUBJECT TO AMOUNT OF PROFIT. 11. SECOND PARTY'S ADVANCE WILL BE ADJUSTED OUT O F PROFIT IN INSTALLMENTS AS PER MUTUAL DISCUSSION BETWEEN FIRST AND SECOND PARTY SUBJECT TO AMOUNT OF PROFIT. 12. IF IN ANY CASE TRUST SELL THIS LAND AND BUILD ING APARTMENT THERETO THEN PROFIT OUT OF THAT WILL BE SHARED BETW EEN FIRST AND SECOND PARTY AFTER ADJUSTING INTEREST ACCUMULAT ED PORTION OF FIRST PARTY AND SECOND PARTY ADVANCE AMO UNT OUT OF THAT. NET PROFIT WHATEVER IT COMES WILL BE DIVIDED 50-50% BETWEEN FIRST AND SECOND PARTY. 13. SECOND PARTY IS CHAIRMAN OF HARPAVAT CHARITAB LE TRUST AND FIRST PARTY IS AUTHOR OF THE TRUST. THIS RELATI ONSHIP WILL CONTINUE TILL THIS PROJECT IS IN OPERATION. 9 14. SECOND PARTY IS CHAIRMAN OF THIS TRUST SO HE WILL BE MANAGING TRUSTEE/ DIRECTOR FOR RUNNING OF THIS SCHO OL PROJECT. 15............................. 16........................... 17.. 18............................. 19. IF AT ANY TIME FIRST AND SECOND PARTY WANT TO TERMINATE THIS MEMORANDUM OF UNDERSTANDING BETWEE N EACH OTHER, THEN FINANCIAL SETTLEMENT BETWEEN EACH OTHER WILL BE ON MUTUAL BASIS, ON THE BASIS OF YEAR'S CONTRIBUTIO N FOR THIS PROJECT EITHER AS FINANCER AND AS WORKING PARTNER. IF ANY DISPUTE ON FINANCIAL MUTUAL SETTLEMENT ARISES THEN CLAUSE NO. 17 WILL APPLY TO THIS MOU. 20. THIS MEMORANDUM OF UNDERSTANDING WILL BE IN F ORCE TILL THIS SCHOOL PROJECT/EDUCATIONAL INSTITUTION ARE IN OPERATION. 2.3 AGAINST THIS, THE LD. A.R. HAS SUBMITTED THAT THE MOU DATED 26.11.2006 IS A WASTE PAPER, ILLEGAL AND VOID AB-I NITIO AS IT IS NOT FOR AND BEHALF OF THE ASSESSEE TRUST AND THE BOARD OF TRUSTEES HAVE NEITHER AUTHORIZED NOR APPROVED OR ACTED UPON THIS DOCUMENT. HE FURTHER SUBMITTED THAT THE SO-CALLED MOU WAS NOT BE TWEEN THE 10 SETTLER AND MANAGING TRUSTEE BUT WAS BETWEEN TWO IN DIVIDUALS, IN THEIR INDIVIDUAL CAPACITY. RATHER, THE ASSESSEE TRU ST WAS UNAWARE OF SUCH MOU. THERE WAS NO EVIDENCE OF ALLEGED SHARING OF INCOME OF THE SCHOOL. SUBSEQUENTLY, THIS MOU WAS CANCELLED BY SHRI NIRMAL BHANDARI, WHO ALSO RESIGNED ON 1ST MAY, 2010, BUT T HE SCHOOL IS STILL IN OPERATION. HOWEVER, THE LD. CIT AFTER MENTIONIN G THE ABOVE NOTED POINTS IN THE MOU HAS FOUND THAT THE SUBMISSI ONS OF AUTHORIZED REPRESENTATIVE IS NOT CORRECT AS PER THE OBTAINING FACTS ON RECORD. HE HAS GIVEN POINT-WISE REASONS IN PARA S 7 TO 10 OF HIS ORDER AND HAS FINALLY CANCELLED THE REGISTRATION DA TED 25.05.1991, FROM F.Y. 2006-07 ONWARDS VIDE THE IMPUGNED ORDER D ATED 10.3.2014. THE ASSESSEE-TRUST IS AGGRIEVED AND HAS FILED THIS APPEAL. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAR EFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. BOTH THE PAR TIES HAVE REITERATED THEIR EARLIER ARGUMENTS FOR AND AGAINST. THE ORAL SUBMISSIONS MADE BY THE LD. A.R. OF THE APPELLANT T RUST SHRI N.R. RANKA, SR. ADVOCATE, ARE CONCENTRATED IN THE FOLLOW ING WRITTEN SUBMISSIONS FILED BY HIM AND WHICH READS AS UNDER: 11 (I) THE SO CALLED 'MEMORANDUM OF UNDERSTANDING' (MOU) (PB 45-48) DATED 26.11.2006 IS A WASTE PAPER, IS BAD, ILLEGAL, IN-OPERATIVE, NON-EXISTENT AND VOID A B- INITIO. IT IS NOT WITNESSED BY TWO INDEPENDENT WITN ESSES AND IS NOT AN AGREEMENT OR CONTRACT. IT IS APPARENT THAT THE ALLEGED MOU IS IN BETWEEN (I) DR. GANESH HARPAV AT AND (II) MR. NIRMAL BHANDARI. IT IS NOT FOR AND ON BEHALF OF THE ASSESSEE TRUST AND THE BOARD OF TRUSTEES HAV E NEITHER AUTHORIZED NOR APPROVED OR ACTED UPON. THE BOARD OF TRUSTEES TOO HAD NO SUCH POWER AND COMPETENCE TO ENTER INTO SUCH MOU. DR. GANESH HARPAVAT, IN TERMS OF THE DEED OF DECLARATION OF TR UST, HAD NO RIGHT, POWER, COMPETENCE AND AUTHORITY TO EN TER INTO THE SAID MOU FOR AND ON BEHALF OF AND ON ACCOU NT OF THE ASSESSEE -TRUST. SIMILARLY, MR. NIRMAL BHAND ARI HAD NOT ENTERED INTO THE SO CALLED MOU FOR AND ON BEHALF OF AND ON ACCOUNT OF THE ASSESSEE -TRUST. HE HAD NO AUTHORITY, POWER OR COMPETENCE TO ENTER INTO SUC H MOU FOR AND ON BEHALF OF AND ON ACCOUNT OF THE ASSE SSEE TRUST. BOTH THE SIGNATORIES MIGHT HAVE ENTERED INTO SUCH MOU IN THEIR INDIVIDUAL CAPACITY WITH ITS NO E FFECT ON THE ASSESSEE TRUST. THE ASSESSEE-TRUST WAS UNAWA RE OF SUCH MOU AND HAS NOT APPROVED. IT HAS NOT BEEN A CTED UPON AND REMAINED AS A UNENFORCEABLE WASTE PAPER. 12 IT IS ASSERTED IN UNEQUIVOCAL WORDS THAT INDO AMERI CAN PUBLIC SCHOOL IS THE PRODUCT UNIT AND ACTIVITY OF T HE ASSESSEE TRUST ALONE. IT HAS BEEN ESTABLISHED BY TH E ASSESSEE TRUST IN ACHIEVEMENT OF ITS OBJECTS AND HA S BEEN AND IS CONTINUOUSLY RUN AND CARRIED ON BY THE BOARD OF TRUSTEES AND NOT BY MR. NIRMAL BHANDARI INDIVIDUALLY. AS RECORDED IN THE SO CALLED MOU, THE RE IS NO PARTNER IN INDO AMERICAN PUBLIC SCHOOL BUT IT IS A PROPRIETARY CONCERN OF THE ASSESSEE-TRUST. THERE IS NO EVIDENCE AS TO ALLEGED SHARING OF INCOME OF INDO AMERICAN PUBLIC SCHOOL. IN CASE THE ID. ASSESSING O FFICER OR YOUR HONOUR HAVE NOTICED ANY SHARING IN ACCORDAN CE WITH THE TERMS AND CONDITIONS OF THE SO CALLED MOU BY THE ASSESSEE TRUST, WE REQUEST TO PROVIDE THE SAME. WE AS SURE TO ADDUCE EVIDENCE IN REBUTTAL. HOWEVER, IT IS REASSERTED THAT NO PART OF INCOME/RECEIPT OF INDO AMERICAN PUBLIC SCHOOL HAS EVER BEEN PARTED WITH TH E SAID TWO PERSONS. WHATEVER AMOUNT HAS BEER, GIVEN TO THE CHAIRMAN OF THE TRUST. MR. NIRMAL BHANDARI. CHARTERED ACCOUNTAN T IS BY WAY OF REMUNERATION, AS AUTHORIZED BY THE TRUST AND NOT IN ACCORDANCE WITH THE TERM NO.8 OF THE SO CALL ED MOU. SIMILARLY, NO INTEREST WHATSOEVER HAS BEEN PROVIDED OR PAID OR CREDITED TO THE ACCOUNT OF DR. GANESH HARPAVAT. VERIFICATION MAY PLEASE BE MADE FR OM BOTH OF THEM DIRECTLY. THEIR ADDRESSES ARE ON RECOR DS. 13 IT MAY ALSO BE MENTIONED THAT MR. NIRMAL BHANDARI RESIGED FROM 1ST MAY, 2010 AND SINCE THEN IS NOT CHAIRMAN OF THE TRUST. PRESENT CHAIRMAN IS PROF. AV ENTI LAI HARPAVAT, AN EDUCATIONIST. IT MAY BE MENTIONED THAT INDO AMERICAN PUBLIC SCHOOL IS IN OPERATION TILL DA TE BUT WITHOUT MR. NIRMAL BHANDARI AS CHAIRMAN OF THE TRUS T. HE IS NOT MANAGING TRUSTEE/DIRECTOR FOR THE SCHOOL/INSTITUTE. WHATEVER APPOINTMENTS HAVE BEEN MADE, HAVE BEEN MADE BY THE BOARD OF TRUSTEES AND N OT BY DR. GANESH HARPAVAT AND MR. NIRMAL BHANDARI. WHEN DR. KIRAN HARPAVAT, CO-AUTHOR OF ASSESSEE-TRUS T CAME TO KNOW OF THE SO CALLED MOU, SHE WAS SURPRISE D AND IMMEDIATELY SENT A LETTER DATED MARCH S. 2010 ( PB 49) TO MR. NIRMAL BHANDARI STATING THEREIN THAT THE SO CALLED MOU HAS NO LEGAL STANDING AND IS CANCELLED A ND REVOKED IN ITS ENTIRETY AND IT IS NOT BINDING ON HA RPAVAT CHARITABLE TRUST IN WHATSOEVER MANNER POSSIBLE. SHE ALSO STATED: 'YOU MISLED DR. GANESH HARPAVAT IN SIG NING THIS ILL-PREPARED MOU FOR YOUR OWN PROFIT. DR. GANE SH HARPAVAT HAS NO PROFIT MOTIVE AND HE ONLY WANTS TO SERVE HIS MOTHERLAND WITHOUT ANY PROFIT DESIRE'. TH E SO CALLED MOU WAS DECLARED AS NULL AND VOID FROM ITS INCEPTION. IT IS DULY NOTARIZED BY NOTARY PUBLIC, T AXAS, USA. DR. GANESH HARPAVAT ALSO SENT A LETTER DATED 3.5.2010 (PB 50) TO MR. NIRMAL BHANDARI REVOKING AN D 14 CANCELLING THE MOU IN ITS ENTIRETY. HE ALSO DECLARE D IT AS NULL AND VOID AND NOT BINDING ON ANY ONE OF THEM AN D THE TRUST. HE RESTATED THAT THE ASSESSEE TRUST IS CHARITABLE, NOT FOR PROFIT ORGANIZATION AND IT HAS NO MOTIVE OF MAKING ANY KIND OF PROFIT. IT IS DULY NOT ARIZED BY NOTARY PUBLIC, TAXAS, USA. NO VERIFICATION WAS M ADE FROM BOTH, THOUGH REQUEST WAS MADE. AS STATED HEREIN ABOVE, THE SO CALLED MOU IS NOT BETWEEN THE SETTLER AND MANAGING TRUSTEE/CHAIRMAN O F THE TRUST BUT BY TWO INDIVIDUALS. FURTHER, THERE IS NO EVIDENCE OF PROFIT EARNING FROM THE SCHOOL AND SHAR ING BY THE TWO. IT IS DECLARED IN UNEQUIVOCAL WORDS THA T THE ASSESSEE-TRUST EXISTS SOLELY FOR EDUCATIONAL PURPOS ES AND NOT FOR PURPOSES OF PROFIT AND FURTHER THAT THE SOLE AND DOMINANT NATURE OF THE ACTIVITY OF THE ASSESSEE-TRUST HAS BEEN AND IS EDUCATION AND ASSESS EE- TRUST ALL THROUGHOUT EXISTS SOLELY FOR THE PURPOSE OF IMPARTING EDUCATION WITHOUT ANY PROFIT MOTIVE. THER E IS NO SHARING OF PROFIT AND THERE IS NO VIOLATION OF PROVISIONS OF SEC. 13(3) OF THE I.T. ACT. IN CASE Y OUR HONOUR HAVE ANY MATERIAL IN SUPPORT OF ALLEGED VIOL ATION OF PROVISIONS OF SEC. 13(3) OF THE ACT, WE HUMBLY REQUEST TO PIN POINTEDLY PROVIDE SUCH MATERIAL. WE RESERVE OUR RIGHT FOR REBUTTAL. NO SPECIFIC MATERIA L WAS PROVIDED. 15 ALONG WITH REPLY DATED 11.2.2014 (PB 86) A CERTIFIC ATE FROM MR. NIRMAL BHANDARI DATED 6.2.2014 (PB 87) WAS SUBMITTED WITH A REQUEST TO MAKE VERIFICATION DIREC TLY WHICH WAS INTENTIONALLY NOT DONE. COPY OF LETTER DA TED 11.2.2014 ALONG WITH CERTIFICATE OF MR. NIRMAL BHAN DARI (PB 86 - 87). (II) WITHDRAWALS FROM THE BANKS W ERE DULY EXPLAINED. WITHDRAWALS MADE HAVE BEEN DULY RECORDED IN THE REGULAR CASH BOOK AND HAVE BEEN UTILIZED FOR THE EDUCATIONAL PURPOSES OF THE TRUST. BOOKS ARE AUDITE D. CASH WITHDRAWALS FROM THE BANK ACCOUNT OF THE TRUST WITH ORIENTAL BANK OF COMMERCE HAVE BEEN RECORDED I N THE CASH BOOK AND HAVE BEEN UTILIZED FOR THE OBJECT S OF THE TRUST. BOOKS WERE CARRIED ON THE DATE AND CAN B E REPRODUCED. THERE ARE NO IRREGULARITIES, EACH ENTRY IS FULLY EXPLAINABLE. NO VIOLATION WAS NOTICED BY THE CHARTERED ACCOUNTANTS. OTHERWISE ALSO NOTIFIED ENTR IES ARE ONLY FOR THE F.Y. 2006-07 AND NONE FOR THE SUBSEQUENT YEARS. DETAILS OF CASH BOOK FOR WITHDRAW ALS FROM THE BANKS AND ITS UTILIZATION FOR THE OBJECTS (PB 51 - 70) 16 (III) A SHOW CAUSE NOTICE FROM FERA WAS RECEIVED . REPLY DATED APRIL 20, 2011 WAS SENT BY SPEED POST T O THE UNDER SECRETARY CONTAINING ALL THE INFORMATION REQUIRED IN THE QUESTIONNAIRE. IN THE SAID REPLY, I T WAS ALSO STATED: 'IN MAY, 2007 OUR EX-CHAIRMAN MR. NIRM AL K. BHANDARI WHO IS A REGISTERED CHARTERED ACCOUNTAN T, HAD SUBMITTED OUR FC - 8 APPLICATION WITH THE MINIS TRY OF HOME AFFAIRS, NEW DELHI TO REGISTER AND SEEK PERMISSION TO ACCEPT FUNDS FROM DRS. GANESH AND KIR AN HARPAVAT FOR BUILDING THE INDO-AMERICAN PUBLIC SCHO OL IN VILLAGE BALICHA, UDAIPUR, RAJASTHAN. A COPY OF T HIS APPLICATION IS ATTACHED HEREWITH (ANNEXURE-1). MR. BHANDARI HAS RESIGNED FROM THE CHAIRMANSHIP W.E.F. MAY 1, 2010 AND AS OF TO DATE MR. BHANDARI HAS NOT GIVEN US ANY INFORMATION ABOUT THE STATUS OF THIS APPLICATION. THEREFORE, LAST MONTH WE HAVE RE-APPLI ED FOR THE FCRA REGISTRATION FC -8, PRIOR PERMISSION F C-1A AND CONDONATION FOR ANY POSSIBLE AND UNINTENDED OVERSIGHTS BY MR. BHANDARI WITH THE MINISTRY OF HOM E AFFAIRS. NEW DELHI'. THE AMOUNT SO RECEIVED HAS BEE N CHANALIZED BY THE BANKING CHANNEL IN ACCORDANCE WIT H THE LAW AS PER UNDERSTANDING OF THE THAN CHAIRMAN A T THE RELEVANT TIME. THOUGH IT IS MORE THAN 33 MONTHS , NO FURTHER ACTION HAS BEEN TAKEN BY THE CONCERNED AUTHORITY. WE HAVE REASONS TO BELIEVE THAT THE PROCEEDINGS HAVE BEEN DROPPED AND POST PERMISSION H AS 17 BEEN GRANTED. WE SUBMIT THERE WAS NO WILLFUL OR INTENTIONAL DEFAULT OR VIOLATION. THERE WAS NO MENS REA. ACT WAS BONAFIDE NOT MALAFIDE. TECHNICAL DEFAULT, I F ANY, IS HIGHLY REGRETTED. COPY OF SHOW CAUSE NOTICE (PB 71 - 74). DETAILED REPLY WAS FILED (PB 75 - 85). ON SATISFACTION, NO ACTION TAKEN THOUGH IT IS MORE THA N THREE YEARS. THE LOAN WAS CONVERTED INTO DONATION. 4. THE ASSESSEE-TRUST RECEIVED A LETTER DATED 12/2/ 2014 FROM THE INCOME-TAX OFFICER (TECH.) WHICH W AS DULY REPLIED BY REPLY DATED 19.2.2014, WHER EIN POINTED E-MAILS WERE EXPLAINED AND CLARIFIED. REQ UEST WAS MADE TO SEEK FURTHER CLARIFICATIONS FROM THE SENDERS WHICH WAS NOT DONE. COPY OF LETTER AND RE PLY (PB 88 - 97). 5. THE LEARNED COMMISSIONER OF INCOME-TAX IN PARA 7.5 OF THE IMPUGNED ORDER HAS REFERRED TO THE GENER AL POWER OF ATTORNEY DATED 27.11.2009, WHICH WAS NOT REFERRED TO IN THE SHOW CAUSE NOTICES OR/AND DURI NG THE PROCEEDINGS. DRAWING OF ADVERSE INFERENCE IS BAD. IT BE EXCLUDED, IS IN VIOLATION OF PRIN CIPLES OF NATURAL JUSTICE. OTHERWISE ALSO IT DOES NO T SUPPORTS THE CLAIM OF THE LEARNED COMMISSI ONER OF INCOME-TAX. THERE IS NO EVIDENCE OF ASSESSEE -TRUST BEING RUN FOR THE PERSONAL PROFIT OF DR. GANESH 18 HARPAVAT AND NIRMAL BHANDARI. THE ASSESSEE-T RUST SINCE COMMENCEMENT IS RUN FOR EDUCATION PURPOSES AND AS PER THE OBJECTS OF THE ASSES SEE- TRUST. FINDING TO THE CONTRARY IS WITHOUT MATERIAL AND BAD. THE ALLEGATION IS EMPHATICALLY DENIED AND OBJECTED TO. COPY OF GENERAL POWER OF ATTORNEY (P B98- 102). 6. THE TRUST IS REGISTERED U/S. 12A IN 19 91 AND NOT U/S. 12AA. SECTION 12A WAS INSERTED IN THE S TATUE BOOK BY THE FINANCE ACT, 1972 W.E.F. 1.4.1973. IT WAS OMITTED AND WAS AGAIN RESTORED W.E.F. 1.4.1989 . SECTION 12A, AS IT STOOD AT THE TIME WHEN IT PROVID ED FOR REGISTRATION OF TRUST, NOWHERE PROVIDED FOR CANCELLATION OF THE REGISTRATION ONCE GRANTED. IT I S ALSO PERTINENT TO NOTE THAT THE WORDS 'SUCH TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA' WERE ALSO SUBSTITUTED IN THIS SECTION WITH EFFECT FROM 1 ST APRIL 1997. IN FACT, THIS SECTION EVEN NOW NOWHERE STIPU LATES ABOUT THE CANCELLATION OR WITHDRAWAL OF THE REGISTRATION, ONCE GRANTED UNDER THE SAID SECTION. IT IS ONLY UNDER SECTION 12AA, WHICH CAME IN THE STATUTE BOOK WITH EFFECT FROM 1ST APRIL, 1997, THAT A FRESH PROCEDURE FOR REGISTRATION OF THE TRUST OR INSTITUT ION IS PRESCRIBED. EVEN UNDER THIS SECTION 12AA, THERE WAS NO PROVISION FOR CANCELLATION OF REGISTRATION ONCE GRA NTED 19 TILL THE ENACTMENT OF SUB-SECTION (3) WITH EFFECT F ROM OCTOBER 1, 2004. THERE IS NO DISPUTE WITH REGARD TO THIS FACT THAT THE PROVISION REGARDING CANCELLATION OF REGISTRATION CAME TO BE INTRODUCED FOR THE FIRST TI ME BY VIRTUE OF SUB-SECTION (3) IN SECTION 12AA WITH EFFE CT FROM OCTOBER 1, 2004. THIS SUB-SECTION (3) PROVIDES THAT WHEN A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AN D SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GEN UINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OB JECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATIO N OF SUCH TRUST OR INSTITUTION. A PLAIN READING OF THIS PROVISION WOULD SHOW THAT SECTION 12AA EMPOWERED THE COMMISSIONER OF INCOME- TAX TO GRANT THE REGISTRATION IN THOSE CASES WHERE THE ASSESSEE APPLIED FOR SUCH REGISTRATION UNDER SUBSEC TION (1) THEREOF. BUT THIS POWER OF CANCELLATION OF REGISTRATION OBTAINED UNDER SECTION 12A CAME TO BE INCORPORATED BY WAY OF AMENDMENT INTRODUCED BY THE FINANCE ACT, 2010, WITH EFFECT FROM JUNE 1, 201O. T HAT BEING THE INTERPRETATION OF SUB-SECTION (3), IT IS AMPLY CLEAR THAT THE POWER TO CANCEL THE REGISTRATION ONC E GRANTED WAS ONLY CONFINED TO THE REGISTRATION GRANT ED 20 UNDER CLAUSE (B) OF SUB-SECTION (1) OF SECTION 12AA TILL BEFORE JUNE 1, 2010. OF COURSE, NOW WITH EFFECT FRO M JUNE 1, 2010, THE POWER VESTS WITH THE COMMISSIONER EVEN TO CANCEL THE REGISTRATION GRANTED UNDER ANY O F THE CLAUSES OF SUB-SECTION (1) OF SECTION 12A. IN THAT VIEW OF INTERPRETATION, WE SUBMIT THAT THERE IS NO POWER VE STED WITH YOUR HONOUR TO CANCEL OR WITHDRAW THE REGISTRA TION GRANTED TO THE ASSESSEE UNDER SECTION 12A(A) IN THE YEAR 1994. THEREFORE QUESTION OF CANCELLATION PRIOR TO 1.6.2010 DOES NOT ARISE. IT WOULD BE WITHOUT JURISD ICTION AND IS OBJECTED TO. WE SUBMIT REGISTRATION SO GRANT ED CANNOT BE CANCELLED TILL 30.5.2010. (PLEASE REFER DIRECTOR OF INCOME-TAX(EXEMPTIONS) V. MOOL CHAND KHAIRATI RAM TRUST (2011) 339-ITR-622 (DEL.); C.I.T . V. MANAV VIKAS SEWA SANSTHAN - I.T.A. NO. 161 OF 2 009, DECIDED ON FEBRUARY 24, 2010 (2011) 336-ITR-250 (AI L). 4. PER CONTRA, THE LD. CIT-DR, DR. SEHGAL HAS REPEA TED ALL THE REASONS WHICH HAVE BEEN NARRATED BY THE LD. CIT(A) IN THE APPELLATE ORDER. 5. WE HAVE FOUND THAT THE BONE OF CONTENTION BETWEE N THE ASSESSEE-TRUST AND THE REVENUE, WHICH HAS PROPELLED THE LD. CIT(A) TO WITHDRAW/CANCEL REGISTRATION ALREADY GRANTED U/S 12A IS MAINLY 21 THE EXISTENCE OF MOU. THE OBJECTS OF THE TRUST ARE STILL CONSIDERED TO BE CHARITABLE IN NATURE. IT IS THE CONDUCT, AS PER THE DEPARTMENT, OF THE SETTLER AND THE MANAGING TRUSTEE , IN WHICH THEY CONDUCTED THEMSELVES IN EXECUTING THE ALLEGED MOU W HICH HAS CHANGED THE CHARITABLE PURPOSE TO NON CHARITABLE ON E. WE MAY MENTION THAT NO IRREGULARITY IN THE IMPARTING OF ED UCATION VIA ITS SECONDARY SCHOOL OR THE B ED. COLLEGE HAS BEEN ALLE GED. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS WITH REG ARD TO THE VALIDITY OF THE MOU [COPY ENCLOSED AT PAPER BOOK PA GES 4-48] DATED 26.11.2006, WE ARE ALSO CONVINCED THAT THIS IS SIMP LY A WASTE PAPER. THE MOU SUFFERS FROM VARIOUS REQUIREMENTS. IT HAS NOT BEEN WITNESSED BY THE TWO INDEPENDENT WITNESSES. THIS MOU IS BETWEEN DR. GANESH HARPAVAT AND MR. NIRMAL BHANDARI. THIS MOU HAS NOTHING TO DO WITH THE APPELLANT TRUST. WE ARE SAT ISFIED THAT THERE IS NO IOTA OF PROOF REGARDING THE FACT THAT THE BOA RD OF TRUSTEES HAVE NEITHER AUTHORIZED NOR APPROVED. THIS MOU HAS NOT EVEN BEEN ACTED UPON. WE HAVE FOUND THAT DR GANESH HARPAVAT HAD NO RIGHT, POWER COMPETENCE OR AUTHORITY TO EXECUTE SUCH A MOU FOR AND ON BEHALF OF AND ON ACCOUNT OF THE ASSESSEE-TRUST. TH IS MOU, 22 APPARENTLY, IS A DOCUMENT WHICH CAN, AT BEST, BIND TWO INDIVIDUALS BUT NOT THE ASSESSEE-TRUST. THERE IS NO EVIDENCE T O A WHIT TO ESTABLISH THAT THERE HAS BEEN SHARING OF INCOME OF INDO-AMERICAN PUBLIC SCHOOL. MOREOVER, SHRI NIRMAL BHANDARI HAD RESIGNED W.E.F. 1 ST MAY, 2014 AND SINCE THEN HE IS NOT THE CHAIRMAN OF THE TRUST. ON KNOWING ABOUT THIS MOU DR. KIRAN HARPAVAT THE CO-AU THOR OF THE TRUST DEED, HAS EXCLAIMED THE EXISTENCE OF THE SAME AND HAS EVEN ATTRIBUTED MOTIVES TO MR. NIRMAL BHANDARI. SUBSEQU ENTLY, VIDE LETTER DATED 3.5.2001. LD DR. GANESH HARPAVAT HAS ALSO REVOKED AND CANCELLED THIS MOU IN ITS ENTIRETY. THUS, WE A RE NOT CONVINCED THAT THROUGH THIS MOU THEY SHARED ANY PROFIT FROM T HE INCOME OF THE SCHOOLS. WE ARE CONVINCED THAT THE TRUST IS BE ING RUN FOR CHARITABLE PURPOSE ONLY. THE TRUST IS BEING RUN FO R IMPARTING EDUCATION WITHOUT ANY PROFIT MOTIVE. THEREFORE, TH ERE IS NO VIOLATION OF THE PROVISIONS OF SECTION 13(3) OF THE ACT. REGARDING THE SHOW CAUSE NOTICE FROM FERA SEEMS TO BE NON-ISS UE AS NO ACTION HAS BEEN TAKEN THEREON AFTER THE REPLY FILED FROM T HE SIDE OF THE TRUST. THE POST DATED STAMP PAPER ON WHICH THE DEE D WAS TYPED A FRESH SEEMS TO BE PALPABLE EXPLANATION AND NO ADVER SE INFERENCE SHOULD BE DRAWN FROM THIS FACT. THEREFORE, WE HAVE FOUND THAT THE 23 ACTIVITIES OF THE TRUST ARE BEING CARRIED OUT ONLY FOR CHARITABLE PURPOSE AND NOT FOR THE PERSONAL BENEFIT OF THE FOU NDER AND THE CHAIRMAN. WE HAVE FOUND THAT THERE IS NO VIOLATION OF SECTION 13(3) OF THE ACT. THE CASH WITHDRAWALS MADE HAVE ALSO BE EN PROPERLY EXPLAINED. WHY THE CASH WITHDRAWALS WERE NOT UTILI ZED TOWARDS THE ACTIVITIES OF THE TRUST HAS NOT BEEN WELL REASONED BY THE LD. CIT(A). THE DEFAULT UNDER FCRA HAS BEEN PROPERLY EXPLAINED TO THE CONCERNED AUTHORITY AND THE CIT. HAVING COME TO TH E ABOVE CONCLUSION, WE WILL NOT ENTER INTO THE NITTY-GRITTY OF WHETHER THE REGISTRATION GRANTED IN THE YEAR 1991 CAN BE CANCEL LED UNDER THE NEW PROVISION OR NOT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(ADMN.) DATED 10.3.2014 PASSED U/S 12AA(3) R.W.S . 293C CANCELLING THE REGISTRATION GRANTED U/S 12A VIDE OR DER DATED 25.05.1991. WE RESTORE THE REGISTRATION DATED 25.0 5.1991 AND ALLOW THE APPEAL OF THE ASSESSEE-TRUST. 24 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 22 ND MAY, 2014. SD/- SD/- (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 ND MAY, 2014 VL/- COPY TO: THE APPELLANT THE RESPONDENT THE CIT BY ORDER THE CIT(A) THE DR ASSISTANT REGISTRAR ITAT, JODHPUR