Siddhant Educational Society, Firozabad V. C.I.T.-II, Agra

ITA 191/AGR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9963 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 18-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SH
• Keywords: Income from undisclosed sources; Charitable institution; Source of fund
• Section: 12A; 12AA; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.191/AG/2014 ASSESSMENT YEAR:2013-14 SIDDHANT EDUCATIONAL SOCIETY, VS. THE CIT-II 375/5 NEAR TO HOTEL MONARK AGRA BYE PASS ROAD, FIROZABAD PAN NO. AAGAS9853A (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PANKAJ GARGH RESPONDENT BY : SH. RAJARSHI DWIVEDY DATE OF HEARING : 03/02/2016 DATE OF PRONOUNCEMENT : 09/02/2016 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT-II, AGRA, DT.29/05/2014 REJECTING THE ASSESSES APPLICATION FO R THE REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX, II, AGRA (CIT) IS NOT JUSTIFIED ON FACTS AND LAW TO REJECT THE APPLICATIO N OF THE SOCIETY FOR REGISTRATION U/S 12AA(1)(B)(II)OF THE ACT ON THE GROUND OF ACTIV ITY OF THE SOCIETY. 2 2. BECAUSE THE LEARNED CIT HAS ERRED IN TAKING A WR ONG CONCLUSION ON TAKING UNSECURED LOANS BY THE SOCIETY FROM THE TRUSTEES AN D GENERAL DONATIONS FOR PURCHASING THE TWO LANDS FOR THE PURPOSE OF STARTIN G THE COLLEGE BY THE SOCIETY AT FIROZABAD AND AGRA. 3. BECAUSE THE LEARNED CIT HAS TERMED THE UNSECURE D LOANS AND GENERAL DONATIONS AS NON-GENUINE AND DUBIOUS WITHOUT ANY BA SIS AND MATERIAL ON RECORD. 4. BECAUSE THE CONCLUSION OF THE LEARNED CIT THAT T HE UNSECURED LOANS AND GENERAL DONATIONS ARE NON-GENUINE AND DUBIOUS ARE A GAINST THE GENERAL PRINCIPLES OF TAXATION. 5. BECAUSE THE INTERPRETATION OF THE LEARNED CIT TH AT THE DONATIONS HAVE BEEN RECEIVED N CASH AND THE SOCIETY COULD SUPPLY A DDRESS OF 130 DONORS OUT OF 231 DONORS IS WRONG AS THE TIME GIVEN TO THE SOCIET Y WAS ONLY 2 DAYS TO COLLECT THIS INFORMATION, THAT TOO, WHEN THE DONORS WERE SCATTER ED THROUGHOUT INDIA. 6. BECAUSE THE INTERPRETATION OF THE LEARNED CIT IN RESPECT OF UNSECURED LOANS THAT THEY ARE BOGUS IS ALSO WRONG AS ALL THE PERSONS ARE INCOME TAX PAYEE, HAVE FILED THEIR OWN INCOME TAX RETURN IN TIME AND ALL TRANSACTIONS ARE THROUGH BANKING CHANNELS. 7. BECAUSE THE LEARNED CIT HAS FAILED TO TAKE INTO CONSIDERATION THAT AT THIS TIME, ONLY OBJECT OF THE ENTRY AND ITS RELATED ACTI VITIES HAVE TO BE TAKEN INTO CONSIDERATION BUT LEARNED CIT HAS WORKED LIKE AN AS SESSING OFFICER ONLY. 8. BECAUSE THE LEARNED CIT HAS FAILED TO TAKE INTO CONSIDERATION THE PRINCIPLES OF VARIOUS JUDICIAL PRONOUNCEMENT WITH R ESPECT TO GENUINENESS OF ACTIVITIES AND OBJECTS OF THE TRUST. 9. BECAUSE THE LEARNED CIT HAS WRONGLY INTERPRETATE D SECTION 12AA OF THE INCOME TAX ACT WHICH CONFERS THE POWER TO COMMISSIO NER TO ENQUIRE ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST / SOCIETY AS THE POER HAS TO BE EXERCISED JUDICIALLY. 10. BECAUSE THE LEARNED CIT HAS NOT TO ASSUME ANYTH ING BUT HAS TO TAKE DECISION ON THE FACTS BEFORE HIM. 11. BECAUSE THE LEARNED CIT HAS BEEN WRONG WHEN HE SAYS THAT THE SOCIETY HAS HARDLY CARRIED OUT ANY CHARITABLE ACTIVITIES. 12. BECAUSE THE LEARNED CIT IS NOT CORRECT TO CONCL UDE THAT ACTIVITIES WHICH IT (SOCIETY) HAD CARRIED ON WERE ONLY FOR THE PURPOSE OF GENERATING INCOME FOR ITS MEMBERS AS THIS IS TOTALLY WRONG AND WITHOUT ANY CO GENT MATERIAL ON RECORD. 13. BECAUSE THE LEARNED CIT IS WRONG ON FACTS AND L AW TO CONCLUDE THAT THE APPLICANT TRUST IS , IN REALITY, ONLY A MEDIUM TO C HANNEL THE UNACCOUNTED / UNDISCLOSED INCOME OF THE TRUSTEES INTO THE BOOKS O F THE TRUST. 3 14. BECAUSE THE WHOLE OF THE ORDER IS BAD ON FACTS AND LAW. 3. BRIEF FACTS RELATING TO THE CASE ARE THAT THE AS SESSEE SOCIETY CAME INTO EXISTENCE ON 05/08/2010. ON 22/11/2013 THE ASSESSEE APPLIED FOR GRANT OF REGISTRATION UNDER SECTION 12A OF THE INCOME TAX AC T. LD. CIT AFTER CONDUCTING NECESSARY ENQUIRY AND CALLING FOR NECESSARY INFORMA TION AND DOCUMENTS, HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR GRANT OF REG ISTRATION UNDER SECTION 12AA FOR THE REASON THAT THE ASSESSEE SOCIETY HAD RAISED FUN DS THROUGH CLOAK OF DONATION AND UNSECURED LOANS WHICH WERE NOTHING BUT MEANS OF FUNNELING UNACCOUNTED OR UNDISCLOSED INCOME OF THE TRUSTEES OR OFFICE BEA RER OF THE ASSESSEE SOCIETY. THE LD. CIT HELD THAT THUS THE SOURCE OF FUNDS OF T HE ASSESSEE SOCIETY WAS DUBIOUS AND HIGHLY SUSPECT AND IN SUCH CIRCUMSTANCE S THE TRUST COULD NOT BE REGARDED AS GENUINE. LD. CIT HELD THAT QUESTION OF GENUINENESS OF THE ACTIVITY OF THE ASSESSEE TRUST COULD NOT BE DECIDED BY TURNING A COMPLETELY BLIND EYE TO THE WAYS AND MEANS OF RAISING ITS FUNDS. FURTHER LD . CIT HELD THAT DURING THREE YEARS OF ITS EXISTENCE THE ASSESSEE SOCIETY HAD HAR DLY CARRIED OUT ANY CHARITABLE ACTIVITY AS STATED IN ITS OBJECTS DESPITE RECEIVING SIGNIFICANT DONATION DURING THIS DURATION LD. CIT THEREFORE HELD THAT THOUGH THE ASS ESSEE SOCIETY HAD RAISED SIGNIFICANT FUNDS THROUGH DONATION BUT HAD FAILED T O CARRY OUT ANY WORTHWHILE CHARITABLE ACTIVITY AND THEREFORE THE INESCAPABLE C ONCLUSION WAS THAT THE ASSESSEE WAS NOT CARRYING OUT ANY EDUCATIONAL OR OT HER CHARITABLE ACTIVITY FOR ACHIEVING ITS STATED OBJECTS. IN SUCH CIRCUMSTANCES THE GENUINENESS OF THE ACTIVITY OF THE ASSESSEE SOCIETY COULD NEITHER BE I NQUIRED INTO NOR COULD BE SAID 4 TO BE IN CONSONANCE WITH ITS SAID OBJECTS. THEREFOR E FOR LACK OF ACTIVITIES THE LD. CIT REJECTED THE APPLICATION FOR GRANT OF REGISTRAT ION UNDER SECTION 12AA. 4. AGGRIEVED BY THE SAME THE ASSESSEE FILED THE PRE SENT APPEAL BEFORE US. 5. BEFORE US THE LD. AR STATED THAT THE ISSUE OF GE NUINENESS OR OTHERWISE OF DONATION AND UNSECURED LOANS TAKEN BY THE ASSESSEE WAS NOT A MATTER TO BE CONSIDERED FOR THE PURPOSE OF GRANTING REGISTRATION UNDER SECTION 12AA. LD. AR STATED THAT THESE ARE MATTERS TO BE EXAMINED DURING ASSESSMENT PROCEEDINGS BY THE CONCERNED AO AND FOR TAKING NECESSARY ACTION THEREON AT THAT STAGE. LD. AR STATED THAT THE LD. CIT HAD ONLY TO LOOK INTO TH E GENUINENESS OF THE OBJECT AND THE ACTIVITY BEING CARRIED OUT BY THE ASSESSEE TRUST AND IT IS ONLY FOR NON FULFILLMENT OF THESE TWO CONDITIONS THAT REGISTRATI ON CAN BE REFUSED BY THE LD. CIT. FURTHER LD. AR PLEADED THAT NON CARRYING OUT OF ACT IVITY BY THE ASSESSEE TRUST ALSO CANNOT BE A GROUND FOR REJECTING REGISTRATION UNDER SECTION 12AA AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF HARDAYAL C HARITABLE & EDUCATIONAL TRUST VS. CIT-II AGRA IN ITA NO. 107 OF 2012. LD. AR FUR THER STATED AS A MATTER OF FACT THE ASSESSEE HAD ACQUIRED LAND FOR THE PURPOSE OF CARRY ING OUT ITS STATED OBJECTS OF CONDUCTING EDUCATIONAL INSTITUTION AND HAD ALSO REC EIVED APPROVAL FOR CONSTRUCTION THEREON. CLEARLY THEREFORE THE ASSESSE E INTENDED CARRYING ON IT STATED CHARITABLE PURPOSES. LD. AR STATED THAT THE LD. CIT HAD FOUND NO INFIRMITY IN THE OBJECT OF THE ASSESSEE SOCIETY AND SINCE THE ASSESSEE SOCIETY HAD MADE A BEGINNING TO CARRY OUT ITS CHARITABLE ACTIVITY BY P URCHASING LAND AND TAKING 5 NECESSARY APPROVAL FOR CARRYING OUT CONSTRUCTION TH EREON, THE ASSESSEE FULFILLED ALL THE NECESSARY CONDITIONS REQUIRED FOR GRANT OF APPROVAL UNDER SECTION 12A. 6. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORD ER OF LD. CIT AND STATED THAT AS PER THE ENQUIRY CONDUCTED BY THE LD. CIT, I T WAS VERY MUCH EVIDENT THAT THE ASSESSEE ROUTED ITS OWN UNACCOUNTED INCOME / MO NEY INTO THE TRUST IN THE FORM OF DONATION AND UNSECURED LOANS AND WAS USING ASSESSEE SOCIETY AS A MEDIUM FOR CHANNELIZING ITS UNACCOUNTED MONEY. LD. DR HELD THAT NEITHER THE ASSESSEE HAD CARRIED ON ANY CHARITABLE ACTIVITY SIN CE THE DATE OF ITS INCEPTION NOR DID THERE APPEAR TO BE ANY INTENTION TO DO SO. LD. DR THEREFORE STATED THAT THE LD. CIT HAD RIGHTLY HELD THAT THE GENUINENESS O F THE ASSESSEE SOCIETY WAS NOT ESTABLISHED IN THE LIGHT OF THE ABOVE FACTS AND THE REFORE THE ASSESSEE SOCIETY HAD BEEN RIGHTLY DENIED REGISTRATION UNDER SECTION 12AA. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND ALSO THE DOCUMENTS PLACED BEFORE US. 8. THE ONLY ISSUE IN THE PRESENT APPEAL IS THE REFU SAL OF REGISTRATION UNDER SECTION 12AA OF THE INCOME-TAX ACT. 9. WE FIND THAT THE LD. CIT HAS REFUSED REGISTRATIO N TO THE ASSESSEE SOCIETY PRIMARILY FOR TWO REASONS: 1. THAT THE ASSESSEE HAS NOT COMMENCED ANY OF THE STAT ED OBJECTIVES FOR WHICH IT WAS FORMED. 6 2. THAT THE ASSESSEE SOCIETY HAS TAKEN DONATION AND UN SECURED LOANS THE GENUINENESS OF WHICH THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH. IT IS SETTLED LAW THAT FOR THE PURPOSE OF GRANT OF REGISTRATION UNDER SECTION 12AA, THE CIT HAS TO ONLY LOOK INTO THE GENUINENESS OF TH E OBJECTS AND THE GENUINENESS OF THE ACTIVITY BEING CARRIED ON BY THE SOCIETY. IN THE PRESENT CASE, WE FIND THAT THE OBJECTS OF THE ASSESSEE SOCIETY HAD BEEN DULY E XAMINED BY THE LD. CIT FROM THE MEMORANDUM OF THE SOCIETY AND IT WAS FOUND THAT THE SAME INCLUDED SETTING UP AND OPERATION OF EDUCATIONAL INSTITUTES, DISTRIBUTION OF EDUCATIONAL ITEMS TO POOR AND DESERVING STUDENTS, PROTECTION AN D CONSERVATION OF ENVIRONMENT, MEDICAL ASSISTANCE TO POOR, OLD AND DI SABLED AND OTHER SIMILAR OBJECTS. A PERUSAL OF THE SAME REVEALS THAT ALL THE OBJECTS ARE CHARITABLE AS PER THE DEFINITION OF CHARITY UNDER SECTION 2(15) OF TH E ACT. LD. CIT WE FIND HAS ALSO NOT COMMENTED ADVERSELY ON THE OBJECTS OF THE ASSES SEE SOCIETY. THEREFORE AS FAR AS THE GENUINENESS OF THE OBJECT OF THE ASSESSE E SOCIETY ARE CONCERNED, THEY ARE HELD TO BE GENUINE. COMING TO THE GENUINENESS OF THE ACTIVITY CARRIED O UT BY THE ASSESSEE SOCIETY LD. CIT HAS DOUBTED THE SAME FOR THE REASON THAT TH E UNSECURED LOANS AND DONATION TAKEN BY ASSESSEE SOCIETY APPEARS TO BE IN GENUINE. LD. CIT WE FIND HAS GIVEN FINDINGS THAT THE ASSESSE E SOCIETY HAD RECEIVED DONATION TOTALING RS. 33,69,900 IN THREE FYS FROM 2010-11 TO FY 2012-13. LD CIT 7 HAS FOUND THAT THE ENTIRE DONATION HAS BEEN RECEIVE D THROUGH CASH AND NONE OF CASH DONATION EXCEEDED RS. 20,000/-. LD. CIT FUR THER CARRIED OUT ENQUIRY AND FOUND THAT DETAILS FURNISHED BY THE ASSESSEE SOCIET Y OF A LARGE NUMBER OF DONORS WAS INCOMPLETE OR VAGUE AND THEIR VERIFICATION HENC E COULD NOT BE DONE. FURTHER NO CONFIRMATION WAS FILED OF THESE DONORS. LD. CIT THEREFORE HELD THAT THESE DONATIONS WERE IN INGENUINE. SIMILARLY LD. CI T FOUND THAT THE ASSESSEE SOCIETY HAD RAISED UNSECURED LOANS AMOUNTING TO RS. 39,50,000/- FROM FY 2011-12 TO FY 2012-13. ENQUIRY REGARDING THIS UNSECURED LOA NS WAS CARRIED OUT AND LD. CIT FOUND THAT THESE LOANS HAD BEEN PROVIDED FROM THE B ANK ACCOUNT OF VARIOUS PERSONS WHEREIN CASH WAS DEPOSITED IMMEDIATELY PREC EDING THE ISSUE OF CHEQUE FOR UNSECURED LOANS. THUS THE LD. CIT HELD T HAT THE UNSECURED LOANS WERE NOT GENUINE AND WERE ONLY COLORABLE DEVICE TO CHANNEL THE UNACCOUNTED OR UNDISCLOSED MONEY OF THE TRUSTEES / OFFICE BEARE R OF THE APPLICANT SOCIETY. 10. WE FIND THAT THE ISSUE OF GENUINENESS OF DONATI ON AND UNSECURED LOANS CANNOT BE A REFLECTION OR HAVE A BEARING ON THE GEN UINENESS OF THE ACTIVITY BEING CARRIED OUT BY THE ASSESSEE SOCIETY. EVEN IF IT IS PRESUMED THAT UNDISCLOSED INCOME OF THE TRUSTEES / OFFICE BEARER OF THE ASSES SEE SOCIETY IS BEING ROUTED THROUGH DONATION AND UNSECURED LOANS INTO THE ASSE SSEE SOCIETY, IT DOES NOT MEAN THAT THE ACTIVITY OF THE ASSESSEE SOCIETY ARE NOT GENUINE. THE ACTIVITY OF THE ASSESSEE SOCIETY ARE TO BE GAUGED FROM ITS COND UCT RELATING TO CARRYING OUT OF ITS CHARITABLE ACTIVITY. ADMITTEDLY THE ASSESSEE SOCIETY HAS PURCHASED LAND FOR 8 THE PURPOSE OF BUILDING A NURSERY SCHOOL THEREON. T HIS FACT IS EVIDENT FROM THE SALE DEED OF THE IMPUGNED LAND PURCHASED, WHEREIN T HE PROPERTY DESCRIPTION HAS BEEN STATED AS PLOT FOR NURSERY SCHOOL. FURTHER THE COPY OF ITS RECEIPT FOR APPROVAL OF CONSTRUCTION FILED BEFORE THE DEVELOPME NT AUTHORITY ALSO SHOWS THE INTENTION OF THE ASSESSEE SOCIETY TO CONSTRUCT THE SCHOOL AND THEREAFTER COMMENCE ITS ACTIVITIES OF IMPARTING EDUCATION. THE ISSUE THAT UNACCOUNTED MONEY HAS BEEN ROUTED INTO THE ASSESSEE SOCIETY DOE S NOT LEAD TO THE LOGICAL CONCLUSION THAT THE ACTIVITY OF THE ASSESSEE SOCIET Y ARE NOT GENUINE. IT IS ONLY IF IN THE GARB OF CARRYING OUT ITS STATED CHARITABLE OBJE CTS THE ASSESSEE WAS CONDUCTING SOME OTHER ACTIVITIES IT COULD BE HELD T HAT THE ACTIVITY OF THE ASSESSEE SOCIETY WERE NOT GENUINE. THIS WE FIND IS NOT THE MATTER. THE GENUINENESS OF LOANS TAKEN AND THE DONATION RECEIVE D ARE MATTERS TO BE EXAMINED DURING THE ASSESSMENT PROCEEDINGS AFTER GR ANT OF REGISTRATION AND NECESSARY ACTION RELATING TO THE SAME CAN BE TAKEN DURING THE ASSESSMENT PROCEEDING FOR WHICH THERE ARE SPECIFIC PROVISION O F LAW IN THIS REGARD. IT MUST BE REMEMBERED THAT THE PURPOSE OF GRANTING REGISTRATIO N UNDER SECTION 12AA OF THE INCOME TAX ACT IS ONLY TO ENSURE THAT THE ASSESSEE SOCIETY HAS BEEN FORMED FOR THE PURPOSE OF CARRYING OUT CHARITABLE ACTIVITY AND IS ALSO ACTUALLY CARRYING OUT THE SAME SO AS TO MAKE IT ELIGIBLE TO CLAIM EXEMPTI ON UNDER SECTION 11 OF THE ACT. AS LONG AS THE SAID OBJECTS OF AN ASSESSEE SOC IETY ARE FOUND TO BE CHARITABLE AND GENUINE AND AS LONG AS THE ASSESSEE SOCIETY IS CARRYING OUT THE SAID OBJECTIVES GENUINELY THE REGISTRATION UNDER SE CTION 12AA CANNOT BE DENIED. 9 THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RED ROSE SCHOOL (2007), 212 CTR 394, HAS DEALT EXHAUSTIVELY WITH THE SCOPE OF POWERS OF CIT U/S 12AA AND HAS CATEGORICALLY HELD THAT IT CAN INQUIRE ONLY INTO THE GENUINENESS OF ITS OBJECTS AND GENUINENESS OF ITS ACTIVITY. THE COURT HAS ALSO ELABORATED ON THE SCOPE OF INQUIRY TO BE CONDUCTED WHILE EXAMINING TH E GENUINENESS OF ITS ACTIVITIES. THE HONBLE HIGH COURT WHILE DEALING WI TH THE ISSUE HELD AS FOLLOWS: A READING OF PROVISIONS OF SUB-CLS. (A) AND (B) OF S. 12AA MAKES IT CLEAR THAT THE CIT HAS TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND ALSO ABOUT THE OBJECTS OF THE TRUST OR THE INSTITUTION. ON BEING SATISFIED ABOUT THE GENUINENESS OF THE ACTIVITIES O F THE TRUST OR THE INSTITUTION AND ALSO ABOUT ITS OBJECTS, THE CIT WOULD EITHER GRANT THE CERTIFICATE OR WOULD REJECT THE PRAYER. IN ORDER TO SATISFY HIMSELF ABOUT THE G ENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION, HE CAN CALL FOR SUCH DOCU MENTS OR INFORMATION FROM THE TRUST OR THE INSTITUTION, AS HE THINKS NECESSARY AND HE I S ALSO EMPOWERED TO MAKE SUCH ENQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF. THE OBJECTS OF THE TRUST CAN BE HAD FROM THE BYE-LAWS OR THE DEED OF TRUST, AS THE CASE MAY BE AND UNLESS, OF COURSE, THE OBJECTS OF THE TRUST APPARENTLY MAKE OU T THAT THEY WERE NOT IN CONSONANCE WITH THE PUBLIC POLICY OR THAT THEY WERE NOT THE OBJECTS OF ANY CHARITABLE PURPOSE, REGISTRATION CANNOT BE REFUSED ACCORDINGLY ON THIS GROUND. IN REGARD TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION, WHOSE OBJECTS DO NOT RUN CONTRARY TO PUBLIC POLICY AND AR E, IN FACT, RELATED TO CHARITABLE PURPOSES, THE CIT IS AGAIN EMPOWERED TO MAKE ENQUIR IES AS HE THINKS FIT. IN CASE THE ACTIVITIES ARE NOT GENUINE AND THEY ARE NOT BEI NG CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST/SOCIETY OR THE INSTIT UTION, OF COURSE, THE REGISTRATION CAN AGAIN BE REFUSED. BUT ON MERE PRESUMPTIONS AND ON SURMISES THAT INCOME DERIVED BY THE TRUST OR THE INSTITUTION IS BEING MI SUSED OR THAT THERE IS SOME APPREHENSION THAT THE SAME WOULD NOT BE USED IN THE PROPER MANNER AND FOR THE PURPOSES RELATING TO ANY CHARITABLE PURPOSE, REJECT ION CANNOT BE MADE. SEC. 12AA, WHICH LAYS DOWN THE PROCEDURE FOR REGISTRATIO N, DOES NOT SPEAK ANYWHERE THAT THE CIT, WHILE CONSIDERING THE APPLICATION FOR REGISTRATION, SHALL ALSO SEE THAT THE INCOME DERIVED BY THE TRUST OR THE INSTITUTION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSE OR SUCH INSTITUTION IS EARNING P ROFIT. THE LANGUAGE USED IN THE SECTION ONLY REQUIRES THAT ACTIVITIES OF THE TRUST OR THE INSTITUTION MUST BE GENUINE, WHICH ACCORDINGLY WOULD MEAN, THEY ARE IN CONSONANC E WITH THE OBJECTS OF THE TRUST/INSTITUTION, AND ARE NOT MERE CAMOUFLAGE BUT ARE REAL, PURE AND SINCERE, NOR AGAINST THE PROPOSED OBJECTS. THE PROFIT EARNING OR MISUSE OF THE INCOME DERIVED BY CHARITABLE INSTITUTION FROM ITS CHARITABLE ACTIV ITIES, MAY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT TO THAT PART OF THE INC OME BUT CANNOT BE TAKEN TO BE A SYNONYM TO THE GENUINENESS OF THE ACTIVITIES O F THE TRUST OR THE INSTITUTION. IT IS SIGNIFICANT TO MENTION THAT REGISTRATION UNDER S. 1 2AA DOES NOT NECESSARILY ENTITLE THE ASSESSEE TO GET THE INCOME EXCLUDED FROM THE IN COME OF THE PREVIOUS YEAR FOR THE PURPOSE OF DETERMINATION OF TAX LIABILITY B UT IT ONLY ENTITLES THE ASSESSEE TO CLAIM SUCH EXEMPTION, WHICH OTHERWISE COULD NOT BE CLAIMED IN THE ABSENCE OF 10 REGISTRATION. THE ENQUIRY BY THE CIT SHALL REMAIN R ESTRICTED TO THE EXAMINATION, AS TO WHETHER THE ASSESSEE, WHO HAS MOVED THE APPLICAT ION FOR REGISTRATION UNDER S. 12A, IS ACTUALLY IN THE ACTIVITIES WHICH ARE GENUIN E. GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION HAS TO BE SEEN, KEE PING IN MIND THE OBJECTS THEREOF, WHICH NECESSARILY MEANS THAT THE CIT SHALL SATISFY HIMSELF ABOUT THE FACT THAT THE ACTIVITIES ARE GENUINE AND IN CONSONANCE WITH THE O BJECTS OF THE TRUST OR THE INSTITUTION. IN OTHER WORDS, IF ESTABLISHING AND RU NNING A SCHOOL IS THE OBJECT OF THE SOCIETY, AS GIVEN IN ITS BYE-LAWS, IT HAS TO BE SAT ISFIED THAT THE SOCIETY HAS ESTABLISHED THE SCHOOL, WHERE EDUCATION IS BEING IM PARTED AS PER RULES AND THE FACTUM OF ESTABLISHMENT AND RUNNING SCHOOL IS A GEN UINE ACTIVITY. THE ENQUIRY REGARDING GENUINENESS OF THE ACTIVITIES CANNOT BE S TRETCHED BEYOND THIS. SUFFICIENT SAFEGUARDS HAVING BEEN GIVEN IN SS. 11, 12 AND 13 FOR ASSESSING THE INCOME WHICH HAS NOT BEEN APPLIED TO THE PURPOSE OF THE TRUST OR THE INSTITUTION, THE INTENTION OF THE LAW MAKER AND THE SCOPE AND PU RPORT OF THE PROVISION IS APPARENT WHILE CONSIDERING THE QUESTION OF REGISTRA TION. IN VIEW OF THE ABOVE WE HOLD THAT THE LD. CIT HAD E RRED IN REFUSING REGISTRATION TO THE ASSESSEE SOCIETY FOR THE REASON THAT THE DONATI ON AND UNSECURED LOANS RECEIVED BY IT WERE FOUND TO BE INGENUINE. 11. LD. CIT WE FIND HAS ALSO REFUSED REGISTRATION T O THE ASSESSEE SOCIETY FOR THE REASON THAT IT HAS NOT COMMENCED ANY CHARITABLE ACT IVITY IN THE PRECEDING THREE 3 YEARS. THIS ISSUE IS ALSO SETTLED IN FAVOUR OF THE ASSESSEE BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HARDAYAL CHARITABLE AND EDUCATIONAL TRUST VS. CIT WHEREIN THE COURT HAS HELD AS FOLLOWS : THE PREPONDERANCE OF THE JUDICIAL OPINION OF ALL THE HIGH COURT INCLUDING THIS COURT IS THAT AT THE TIME OF REGISTRATION UNDER SEC TION 12AA OF THE INCOME TAX ACT, WHICH IS NECESSARY FOR CLAIMING EXEMPTION UNDER SEC TION 11 AND 12 OF THE ACT, THE COMMISSIONER OF INCOME TAX IS NOT REQUIRED TO L OOK INTO THE ACTIVITIES, WHERE SUCH ACTIVITIES HAVE NOT OR ARE IN THE PROCESS OF I TS INITIATION. WHERE A TRUST, SET UP TO ACHIEVE ITS OBJECTS OF ESTABLISHING EDUCATIONAL INSTITUTION, IS IN THE PROCESS OF ESTABLISHING SUCH INSTITUTIONS, AND RECEIVES DONATI ONS, THE REGISTRATION UNDER SECTION 12AA CANNOT BE REFUSED, ON THE GROUND THAT THE TRUST HAS NOT YET COMMENCED THE CHARITABLE OR RELIGIOUS ACTIVITY. ANY ENQUIRY OF THE NATURE WOULD AMOUNT TO PUTTING THE CART BEFORE THE HORSE. AT THI S STAGE ONLY THE GENUINENESS OF THE OBJECTS HAS TO BE TASTED AND NOT THE ACTIVITIES , WHICH HAVE NOT COMMENCED. THE ENQUIRY OF THE COMMISSIONER OF INCOME TAX AT SU CH PRELIMINARY STAGE SHOULD BE RESTRICTED TO GENUINENESS OF THE OBJECTS AND NOT THE ACTIVITIES UNLESS SUCH ACTIVITIES HAVE COMMENCED. THE TRUST OR SOCIETY CA NNOT CLAIM EXEMPTION, UNLESS 11 IT IS REGISTERED UNDER SECTION 12AA OF THE ACT AND THUS AT THAT SUCH INITIAL STAGE THE TEST OF THE GENUINENESS OF THE ACTIVITY CANNOT BE A GROUND ON WHICH THE REGISTRATION MAY BE REFUSED. 12. IN THE PRESENT CASE WE FIND THAT THE ASSESSEE S OCIETY CAME INTO EXISTENCE ON 05/08/2010, FOR SETTING UP EDUCATIONAL INSTITUTE S AND OTHER CHARITABLE PURPOSE AND ACQUIRED LAND FOR SETTING UP A NURSERY SCHOOL O N 31/07/2013. ON 21/07/2014 IT PAID FEES FOR APPROVAL OF ITS CONSTRUCTION PLAN ON THE IMPUGNED LAND, TO THE CONCERNED AUTHORITY. IT IS EVIDENT THEREFORE THAT T HE ASSESSEE SOCIETY WAS IN THE PROCESS OF SETTING UP EDUCATIONAL INSTITUTION AND A S HELD BY THE JURISDICTIONAL HIGH COURT, IN SUCH CIRCUMSTANCES IT COULD NOT BE D ENIED REGISTRATION U/S 12AA FOR NOT CARRYING OUT ANY CHARITABLE ACTIVITY. RESPECTFULLY FOLLOWING THE ABOVE DECISION WE HOLD T HAT THE REGISTRATION UNDER SECTION 12AA COULD NOT HAVE BEEN REFUSED TO THE ASS ESSEE TRUST FOR THE REASON THAT IT HAD NOT COMMENCED ITS ACTIVITIES. 13. IN VIEW OF THE ABOVE ORDER OF THE LD. CIT IS SE T ASIDE AND IT IS DIRECTED THAT THE ASSESSEE BE GRANTED REGISTRATION UNDER SECTION 12AA. 14. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :09/02/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, THE CIT( A), THE DR